Y2K ACT
(Senate - April 27, 1999)

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[Pages S4218-S4231]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                Y2K ACT

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
proceed to the consideration of S. 96. The clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 96) to regulate commerce between and among the 
     several States by providing for the orderly resolution of 
     disputes arising out of computer-based problems relating to 
     processing data that includes a 2-digit expression of that 
     year's date.

  The Senate proceeded to consider the bill, which had been reported 
from the

[[Page S4219]]

Committee on Commerce, Science, and Transportation, with an amendment 
to strike all after the enacting clause and inserting in lieu thereof 
the following:

     SECTION 1. SHORT TITLE; TABLE OF SECTIONS.

       (a) Short Title.--This Act may be cited as the ``Y2K Act''.
       (b) Table of Sections.--The table of sections for this Act 
     is as follows:

Sec. 1. Short title; table of sections.
Sec. 2. Findings and purposes.
Sec. 3. Definitions.
Sec. 4. Application of Act.
Sec. 5. Punitive damages limitations.

             Title I--OPPORTUNITY TO RESOLVE Y2K PROBLEMS.

Sec. 101. Pre-filing notice.
Sec. 102. Pleading requirements.
Sec. 103. Duty to mitigate.
Sec. 104. Proportionate liability.

        Title II--Y2K ACTIONS INVOLVING CONTRACT-RELATED CLAIMS.

Sec. 201. Contracts enforced.
Sec. 202. Defenses.
Sec. 203. Damages limitation .
Sec. 204. Mixed actions.

             Title III--Y2K ACTIONS INVOLVING TORT CLAIMS.

Sec. 301. Damages in tort claims.
Sec. 302. Certain defenses.
Sec. 303. Liability of officers and directors.

                      Title IV--Y2K CLASS ACTIONS.

Sec. 401. Minimum injury requirement.
Sec. 402. Notification.
Sec. 403. Forum for Y2K class actions.

     SEC. 2. FINDINGS AND PURPOSES.

       The Congress finds that:
       (1) The majority of responsible business enterprises in the 
     United States are committed to working in cooperation with 
     their contracting partners towards the timely and cost-
     effective resolution of the many technological, business, and 
     legal issues associated with the Y2K date change.
       (2) Congress seeks to encourage businesses to concentrate 
     their attention and resources in short time remaining before 
     January 1, 2000, on addressing, assessing, remediating, and 
     testing their Y2K problems, and to minimize any possible 
     business disruptions associated with the Y2K issues.
       (3) It is appropriate for the Congress to enact legislation 
     to assure that Y2K problems do not unnecessarily disrupt 
     interstate commerce or create unnecessary caseloads in 
     Federal courts and to provide initiatives to help businesses 
     prepare and be in a position to withstand the potentially 
     devastating economic impact of Y2K.
       (4) Y2K issues will potentially affect practically all 
     business enterprises to at least some degree, giving rise 
     possibly to a large number of disputes.
       (5) Resorting to the legal system for resolution of Y2K 
     problems is not feasible for many businesses, particularly 
     small businesses, because of its complexity and expense.
       (6) The delays, expense, uncertainties, loss of control, 
     adverse publicity and animosities that frequently accompany 
     litigation of business disputes can only exacerbate the 
     difficulties associated with the Y2K date change, and work 
     against the successful resolution of those difficulties.
       (7) Congress recognizes that every business in the United 
     States should be concerned that widespread and protracted Y2K 
     litigation may threaten the network of valued and trusted 
     business relationships that are so important to the effective 
     functioning of the world economy, and which may put 
     unbearable strains on an overburdened and sometime 
     ineffective judicial system.
       (8) A proliferation of frivolous Y2K lawsuits by 
     opportunistic parties may further limit access to courts by 
     straining the resources of the legal system and depriving 
     deserving parties of their legitimate rights to relief.
       (9) Congress encourages businesses to approach their Y2K 
     disputes responsibly, and to avoid unnecessary, time-
     consuming and costly litigation about Y2K failures, 
     particularly those that are not material. Congress supports 
     good faith negotiations between parties when there is a 
     dispute over a Y2K problem, and, if necessary, urges the 
     parties to enter into voluntary, non-binding mediation rather 
     than litigation.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Y2K action.--The term ``Y2K action'' means a civil 
     action commenced in any Federal or State court in which the 
     plaintiff's alleged harm or injury resulted directly or 
     indirectly from an actual or potential Y2K failure, or a 
     claim or defense of a defendant is related directly or 
     indirectly to an actual or potential Y2K failure.
       (2) Y2K failure.--The term ``Y2K failure'' means failure by 
     any device or system (including any computer system and any 
     microchip or integrated circuit embedded in another device or 
     product), or any software, firmware, or other set or 
     collection of processing instructions to process, to 
     calculate, to compare, to sequence, to display, to store, to 
     transmit, or to receive date-related data, including 
     failures--
       (A) to deal with or account for transitions or comparisons 
     from, into, and between the years 1999 and 2000 accurately;
       (B) to recognize or accurately process any specific date in 
     1999, 2000, or 2001; or
       (C) accurately to account for the year 2000's status as a 
     leap year, including recognition and processing of the 
     correct date on February 29, 2000.
       (3) Actual damages.--The term ``actual damages'' means 
     direct damages for injury to tangible property, and the cost 
     of repairing or replacing products that have a material 
     defect.
       (4) Economic loss.--Except as otherwise specifically 
     provided in a written contract between the plaintiff and the 
     defendant in a Y2K action (and subject to applicable State 
     law), the term ``economic loss''--
       (A) means amounts awarded to compensate an injured party 
     for any loss other than for personal injury or damage to 
     tangible property (other than property that is the subject of 
     the contract); and
       (B) includes amounts awarded for--
       (i) lost profits or sales;
       (ii) business interruption;
       (iii) losses indirectly suffered as a result of the 
     defendant's wrongful act or omission;
       (iv) losses that arise because of the claims of third 
     parties;
       (v) losses that must be pleaded as special damages; and
       (vi) consequential damages (as defined in the Uniform 
     Commercial Code or analogous State commercial law); but
       (C) does not include actual damages.
       (5) Material defect.--The term ``material defect'' means a 
     defect in any item, whether tangible or intangible, or in the 
     provision of a service, that substantially prevents the item 
     or service from operating or functioning as designed or 
     intended. The term ``material defect'' does not include a 
     defect that--
       (A) has an insignificant or de minimis effect on the 
     operation or functioning of an item or computer program;
       (B) affects only on a component of an item or program that, 
     as a whole, substantially operates or functions as designed; 
     or
       (C) has an insignificant or de minimis effect on the 
     efficacy of the service provided.
       (6) Personal injury.--The term ``personal injury''--
       (A) means any physical injury to a natural person, 
     including death of the person; but
       (B) does not include mental suffering, emotional distress, 
     or like elements of injury that do not constitute physical 
     harm to a natural person.
       (7) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, Commonwealth of 
     Puerto Rico, the Northern Mariana Islands, the United States 
     Virgin Islands, Guam, American Samoa, and any other territory 
     or possession of the United States, and any political 
     subdivision thereof.
       (8) Contract.--The term ``contract'' means a contract, 
     tariff, license, or warranty.
       (9) Person.--
       (A) In general.--The term ``person'' has the meaning given 
     to that term by section 1 of title 1, United States Code.
       (B) Government entities.--The term ``person'' includes an 
     agency, instrumentality, or other entity of Federal, State, 
     or local government (including multijurisdictional agencies, 
     instrumentalities, and entities) when that agency, 
     instrumentality, or other entity is a plaintiff or a 
     defendant in a Y2K action.
       (10) Alternative dispute resolution.--The term 
     ``alternative dispute resolution'' means any process or 
     proceeding, other than adjudication by a court or in an 
     administrative proceeding, in which a neutral third party 
     participates to assist in the resolution of issues in 
     controversy, through processes such as early neutral 
     evaluation, mediation, minitrial, and arbitration.

     SEC. 4. APPLICATION OF ACT.

       (a) General Rule.--This Act applies to any Y2K action 
     brought in a State or Federal court after February 22, 1999.
       (b) No New Cause of Action Created.--Nothing in this Act 
     creates a new cause of action under Federal or State law.
       (c) Actions for Personal Injury or Wrongful Death 
     Excluded.--This Act does not apply to a claim for personal 
     injury or for wrongful death.
       (d) Written Contract Controls.--The provisions of this Act 
     do not supersede a valid, enforceable written contract 
     between a plaintiff and a defendant in a Y2K action.
       (e) Preemption of State Law.--This Act supersedes State law 
     to the extent that it establishes a rule of law applicable to 
     a Y2K action that is inconsistent with State law.

     SEC. 5. PUNITIVE DAMAGES LIMITATIONS.

       (a) In General.--In any Y2K action in which punitive 
     damages may be awarded under applicable State law, the 
     defendant shall not be liable for punitive damages unless the 
     plaintiff proves by clear and convincing evidence that the 
     defendant acted with conscious and flagrant disregard for the 
     rights and property of others.
       (b) Caps on Punitive Damages.--
       (1) In general.--Punitive damages against a defendant in 
     such a Y2K action may not exceed the larger of--
       (A) 3 times the amount awarded for actual damages; or
       (B) $250,000.
       (2) Special rule.--In the case of a defendant--
       (A) who--
       (i) is sued in his or her capacity as a individual; and
       (ii) whose net worth does not exceed $500,000; or
       (B) that is an unincorporated business, a partnership, 
     corporation, association, unit of local government, or 
     organization with fewer than 25 full-time employees,

     paragraph (1) shall be applied by substituting ``smaller'' 
     for ``larger''.
       (c) Government Entities.--Punitive damages in such a Y2K 
     action may not be awarded against a person described in 
     section 3(8)(B).

              TITLE I--OPPORTUNITY TO RESOLVE Y2K PROBLEMS

     SEC. 101. PRE-FILING NOTICE.

       (a) In General.--Before commencing a Y2K action, except an 
     action that seeks only injunctive relief, a prospective 
     plaintiff with a Y2K

[[Page S4220]]

     claim shall serve on each prospective defendant in that 
     action a written notice that identifies with particularity--
       (1) the manifestations of any material defect alleged to 
     have caused harm or loss;
       (2) the harm or loss allegedly suffered by the prospective 
     plaintiff;
       (3) the remedy sought by the prospective plaintiff;
       (4) the basis upon which the prospective plaintiff seeks 
     that remedy; and
       (5) the name, title, address, and telephone number of any 
     individual who has authority to negotiate a resolution of the 
     dispute on behalf of the prospective plaintiff.
       (b) Delay of Action.--Except as provided in subsection (d), 
     a prospective plaintiff may not commence a Y2K action in 
     Federal or State court until the expiration of 90 days from 
     the date of service of the notice required by subsection (a).
       (c) Response to Notice.--Within 30 days after receipt of 
     the notice specified in subsection (a), each prospective 
     defendant shall serve on each prospective plaintiff a written 
     statement acknowledging receipt of the notice, and proposing 
     the actions it has taken or will take to address the problem 
     identified by the prospective plaintiff. The written 
     statement shall state whether the prospective defendant is 
     willing to engage in alternative dispute resolution.
       (d) Failure To Respond.--If a prospective defendant--
       (1) fails to respond to a notice provided pursuant to 
     subsection (a) within the 30 days specified in subsection 
     (c); or
       (2) does not describe the action, if any, the prospective 
     defendant will take to address the problem identified by the 
     prospective plaintiff,

     then the 90-day period specified in subsection (a) will 
     terminate at the end of the 30-day period as to that 
     prospective defendant and the prospective plaintiff may 
     commence its action against that prospective defendant.
       (e) Failure To Provide Notice.--If a defendant determines 
     that a plaintiff has filed a Y2K action without providing the 
     notice specified in subsection (a) and without awaiting the 
     expiration of the 90-day period specified in subsection (b), 
     the defendant may treat the plaintiff's complaint as such a 
     notice by so informing the court and the plaintiff. If any 
     defendant elects to treat the complaint as such a notice--
       (1) the court shall stay all discovery and all other 
     proceedings in the action for 90 days after filing of the 
     complaint; and
       (2) the time for filing answers and all other pleadings 
     shall be tolled during this 90-day period.
       (f) Effect of Contractual Waiting Periods.--In cases in 
     which a contract requires notice of nonperformance and 
     provides for a period of delay prior to the initiation of 
     suit for breach or repudiation of contract, the period of 
     delay provided in the contract is controlling over the 
     waiting period specified in subsections (a) and (e).
       (g) State Law Controls Alternative Methods.--Nothing in 
     this section supersedes or otherwise preempts any State law 
     or rule of civil procedure with respect to the use of 
     alternative dispute resolution for Y2K actions.

     SEC. 102. PLEADING REQUIREMENTS.

       (a) Nature and Amount of Damages.--In all Y2K actions in 
     which damages are requested, the complaint shall provide 
     specific information as to the nature and amount of each 
     element of damages and the factual basis for the damages 
     calculation.
       (b) Material Defects.--In any Y2K action in which the 
     plaintiff alleges that a product or service is defective, the 
     complaint shall contain specific information regarding the 
     manifestations of the material defects and the facts 
     supporting a conclusion that the defects are material.
       (c) Required State of Mind.--In any Y2K action in which a 
     claim is asserted on which the plaintiff may prevail only on 
     proof that the defendant acted with a particular state of 
     mind, the complaint shall, with respect to each element of 
     that claim, state with particularity the facts giving rise to 
     a strong inference that the defendant acted with the required 
     state of mind.

     SEC. 103. DUTY TO MITIGATE.

       Damages awarded in any Y2K action shall exclude 
     compensation for damages the plaintiff could reasonably have 
     avoided in light of any disclosure or other information of 
     which the plaintiff was, or reasonably could have been, 
     aware, including reasonable efforts made by a defendant to 
     make information available to purchasers or users of the 
     defendant's product or services concerning means of remedying 
     or avoiding Y2K failure.

     SEC. 104. PROPORTIONATE LIABILITY.

       (a) In General.--A person against whom a final judgment is 
     entered in a Y2K action shall be liable solely for the 
     portion of the judgment that corresponds to the relative and 
     proportional responsibility of that person. In determining 
     the percentage of responsibility of any defendant, the trier 
     of fact shall determine that percentage as a percentage of 
     the total fault of all persons, including the plaintiff, 
     who caused or contributed to the total loss incurred by 
     the plaintiff.
       (b) Several Liability.--Liability in a Y2K action shall be 
     several but not joint.

        TITLE II--Y2K ACTIONS INVOLVING CONTRACT-RELATED CLAIMS

     SEC. 201. CONTRACTS ENFORCED.

       In any Y2K action, any written term or condition of a valid 
     and enforceable contract between the plaintiff and the 
     defendant, including limitations or exclusions of liability 
     and disclaimers of warranty, is fully enforceable, unless the 
     court determines that the contract as a whole is 
     unenforceable. If the contract is silent with respect to any 
     matter, the interpretation of the contract with respect to 
     that matter shall be determined by applicable law in force at 
     the time the contract was executed.

     SEC. 202. DEFENSES.

       (a) Reasonable Efforts.--In any Y2K action in which breach 
     of contract is alleged, in addition to any other rights 
     provided by applicable law, the party against whom the claim 
     of breach is asserted shall be allowed to offer evidence that 
     its implementation of the contract, or its efforts to 
     implement the contract, were reasonable in light of the 
     circumstances for the purpose of limiting or eliminating the 
     defendant's liability.
       (b) Impossibility or Commercial Impracticability.--In any 
     Y2K action in which breach of contract is alleged, the 
     applicability of the doctrines of impossibility and 
     commercial impracticability shall be determined by applicable 
     law in existence on January 1, 1999, and nothing in this Act 
     shall be construed as limiting or impairing a party's right 
     to assert defenses based upon such doctrines.

     SEC. 203. DAMAGES LIMITATION.

       In any Y2K action for breach or repudiation of contract, no 
     party may claim, nor be awarded, consequential or punitive 
     damages unless such damages are allowed--
       (1) by the express terms of the contract; or
       (2) if the contract is silent on such damages, by operation 
     of State law at the time the contract was executed or by 
     operation of Federal law.

     SEC. 204. MIXED ACTIONS.

       If a Y2K action includes claims based on breach of contract 
     and tort or other noncontract claims, then this title shall 
     apply to the contract-related claims and title III shall 
     apply to the tort or other noncontract claims.

              TITLE III--Y2K ACTIONS INVOLVING TORT CLAIMS

     SEC. 301. DAMAGES IN TORT CLAIMS.

       A party to a Y2K action making a tort claim may not recover 
     damages for economic loss unless--
       (1) the recovery of such losses is provided for in a 
     contract to which the party seeking to recover such losses is 
     a party;
       (2) such losses result directly from a personal injury 
     claim resulting from the Y2K failure; or
       (3) such losses result directly from damage to tangible 
     property caused by the Y2K failure (other than damage to 
     property that is the subject of the contract),

     and such damages are permitted under applicable Federal or 
     State law.

     SEC. 302. CERTAIN DEFENSES.

       (a) Good Faith; Reasonable Efforts.--In any Y2K action 
     except an action for breach or repudiation of contract, the 
     party against whom the claim is asserted shall be entitled to 
     establish, as a complete defense to any claim for damages, 
     that it acted in good faith and took measures that were 
     reasonable under the circumstances to prevent the Y2K failure 
     from occurring or from causing the damages upon which the 
     claim is based.
       (b) Defendant's State of Mind.--In a Y2K action making a 
     claim for money damages in which the defendant's actual or 
     constructive awareness of an actual or potential Y2K failure 
     is an element of the claim, the defendant is not liable 
     unless the plaintiff, in addition to establishing all other 
     requisite elements of the claim, proves by clear and 
     convincing evidence that the defendant knew, or recklessly 
     disregarded a known and substantial risk, that the failure 
     would occur in the specific facts and circumstances of the 
     claim.
       (c) Foreseeability.--In a Y2K action making a claim for 
     money damages, the defendant is not liable unless the 
     plaintiff proves by clear and convincing evidence, in 
     addition to all other requisite elements of the claim, that 
     the defendant knew, or should have known, that the 
     defendant's action or failure to act would cause harm to the 
     plaintiff in the specific facts and circumstances of the 
     claim.
       (d) Control Not Determinative of Liability.--The fact that 
     a Y2K failure occurred in an entity, facility, system, 
     product, or component that was within the control of the 
     party against whom a claim for money damages is asserted in a 
     Y2K action shall not constitute the sole basis for recovery 
     of damages in that action.
       (e) Preservation of Existing Law.--The provisions of this 
     section are in addition to, and not in lieu of, any 
     requirement under applicable law as to burdens of proof and 
     elements necessary for prevailing in a claim for money 
     damages.

     SEC. 303. LIABILITY OF OFFICERS AND DIRECTORS.

       (a) In General.--A director, officer, trustee, or employee 
     of a business or other organization (including a corporation, 
     unincorporated association, partnership, or non-profit 
     organization) shall not be personally liable in any Y2K 
     action making a tort or other noncontract claim in that 
     person's capacity as a director, officer, trustee, or 
     employee of the business or organization for more than the 
     greater of--
       (1) $100,000; or
       (2) the amount of pre-tax compensation received by the 
     director, officer, trustee, or employee from the business or 
     organization during the 12 months immediately preceding the 
     act or omission for which liability was imposed.
       (b) Exception.--Subsection (a) does not apply in any Y2K 
     action in which it is found by clear and convincing evidence 
     that the director, officer, trustee, or employee--
       (1) intentionally made misleading statements regarding any 
     actual or potential year 2000 problem; or
       (2) intentionally withheld from the public significant 
     information there was a legal duty to disclose to the public 
     regarding any actual or potential year 2000 problem of that 
     business or organization which would likely result in 
     actionable Y2K failure.
       (c) State Law, Charter, or Bylaws.--Nothing in this section 
     supersedes any provision of

[[Page S4221]]

     State law, charter, or a bylaw authorized by State law, in 
     existence on January 1, 1999, that establishes lower limits 
     on the liability of a director, officer, trustee, or employee 
     of such a business or organization.

                      TITLE IV--Y2K CLASS ACTIONS

     SEC. 401. MINIMUM INJURY REQUIREMENT.

       In any Y2K action involving a claim that a product or 
     service is defective, the action may be maintained as a class 
     action in Federal or State court as to that claim only if--
       (1) it satisfies all other prerequisites established by 
     applicable Federal or State law or applicable rules of civil 
     procedure; and
       (2) the court finds that the alleged defect in a product or 
     service is material as to the majority of the members of the 
     class.

     SEC. 402. NOTIFICATION.

       (a) Notice by Mail.--In any Y2K action that is maintained 
     as a class action, the court, in addition to any other notice 
     required by applicable Federal or State law, shall direct 
     notice of the action to each member of the class by United 
     States mail, return receipt requested. Persons whose receipt 
     of the notice is not verified by the court or by counsel for 
     one of the parties shall be excluded from the class unless 
     those persons inform the court in writing, on a date no later 
     than the commencement of trial or entry of judgment, that 
     they wish to join the class.
       (b) Contents of Notice.--In addition to any information 
     required by applicable Federal or State law, the notice 
     described in this subsection shall--
       (1) concisely and clearly describe the nature of the 
     action;
       (2) identify the jurisdiction where the case is pending; 
     and
       (3) describe the fee arrangement of class counsel.

     SEC. 403. FORUM FOR Y2K CLASS ACTIONS.

       (a) Jurisdiction.--The District Courts of the United States 
     have original jurisdiction of any Y2K action, without regard 
     to the sum or value of the matter in controversy involved, 
     that is brought as a class action if--
       (1) any member of the proposed plaintiff class is a citizen 
     of a State different from the State of which any defendant is 
     a citizen;
       (2) any member of the proposed plaintiff class is a foreign 
     Nation or a citizen of a foreign Nation and any defendant is 
     a citizen or lawful permanent resident of the United States; 
     or
       (3) any member of the proposed plaintiff class is a citizen 
     or lawful permanent resident of the United States and any 
     defendant is a citizen or lawful permanent resident of a 
     foreign Nation.
       (b) Predominant State Interest.--A United States District 
     Court in an action described in subsection (a) may abstain 
     from hearing the action if--
       (1) a substantial majority of the members of all proposed 
     plaintiff classes are citizens of a single State;
       (2) the primary defendants are citizens of that State; and
       (3) the claims asserted will be governed primarily by the 
     laws of that State.
       (c) Limited Controversies.--A United States District Court 
     in an action described in subsection (a) may abstain from 
     hearing the action if--
       (1) the value of all matters in controversy asserted by the 
     individual members of all proposed plaintiff classes in the 
     aggregate does not exceed $1,000,000, exclusive of interest 
     and costs;
       (2) the number of members of all proposed plaintiff classes 
     in the aggregate in less than 100; or
       (3) the primary defendants are States, State officials, or 
     other governmental entities against whom the district court 
     may be foreclosed from ordering relief.
       (d) Diversity Determination.--For purposes of applying 
     section 1322(b) of title 28, United States Code, to actions 
     described in subsection (a) of this section, a member of a 
     proposed class is deemed to be a citizen of a State different 
     from a corporation that is a defendant if that member is a 
     citizen of a State different from each State of which that 
     corporation is deemed a citizen.
       (e) Removal.--
       (1) In general.--A class action described in subsection (a) 
     may be removed to a district court of the United States in 
     accordance with chapter 89 of title 28, United States Code, 
     except that the action may be removed--
       (A) by any defendant without the consent of all defendants; 
     or
       (B) any plaintiff class member who is not a named or 
     representative class member of the action for which removal 
     is sought, without the consent of all members of the class.
       (2) Timing.--This subsection applies to any class before or 
     after the entry of any order certifying a class.
       (3) Procedure.--
       (A) In general.--Section 1446(a) of title 28, United States 
     Code, shall be applied to a plaintiff removing a case under 
     this section by treating the 30-day filing period as met if a 
     plaintiff class member who is not a named or representative 
     class member of the action for which removal is sought files 
     notice of removal within 30 days after receipt by such class 
     member of the initial written notice of the class action 
     provided at the trial court's direction.
       (B) Application of section 1446.--Section 1446 of title 28, 
     United States Code, shall be applied--
       (i) to the removal of a case by a plaintiff under this 
     section by substituting the term ``plaintiff'' for the term 
     ``defendant'' each place it appears; and
       (ii) to the removal of a case by a plaintiff or a defendant 
     under this section--

       (I) by inserting the phrase ``by exercising due diligence'' 
     after ``ascertained'' in the second paragraph of subsection 
     (b); and
       (II) by treating the reference to ``jurisdiction conferred 
     by section 1332 of this title'' as a reference to subsection 
     (a) of this section.

       (f) Application of Substantive State Law.--Nothing in this 
     section alters the substantive law applicable to an action 
     described in subsection (a).
       (g) Procedure After Removal.--If, after removal, the court 
     determines that no aspect of an action that is subject to its 
     jurisdiction solely under the provisions of section 1332(b) 
     of title 28, United States Code, may be maintained as a class 
     action under Rule 23 of the Federal Rules of Civil Procedure, 
     the court shall strike the class allegations from the action 
     and remand the action to the State court. Upon remand of the 
     action, the period of limitations for any claim that was 
     asserted in the action on behalf of any named or unnamed 
     member of any proposed class shall be deemed tolled to the 
     full extent provided under Federal law.

  The PRESIDING OFFICER. The Chair recognizes the Senator from Arizona.
  Mr. McCAIN. Mr. President, I am going to offer a compromise amendment 
that is at the desk, and I further ask unanimous consent that debate 
only be in order following the offering of that amendment until 2:15 
today.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                     Committee Amendment Withdrawn

  Mr. McCAIN. Mr. President, as chairman of the Commerce Committee and 
with the authority of the committee, I withdraw the committee 
amendment.
  The PRESIDING OFFICER. The committee amendment is withdrawn.
  The committee amendment was withdrawn.


                           Amendment No. 267

   (Purpose: To regulate interstate commerce by making provision for 
  dealing with losses arising from Year 2000 problem-related failures 
 that may disrupt communications, intermodal transportation, and other 
                 matters affecting interstate commerce)

  Mr. McCAIN. I send a substitute amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the substitute 
amendment.
  The assistant legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain], for himself, Mr. 
     Wyden, Mr. Gorton, Mr. Abraham, Mr. Lott, Mr. Frist, Mr. 
     Burns, Mr. Smith of Oregon, and Mr. Santorum proposes an 
     amendment numbered 267.

  Mr. McCAIN. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. McCAIN. Mr. President, I am pleased to offer, with my friend and 
colleague from Oregon, Senator Wyden, a substitute amendment to S. 96, 
the Y2K Act. The substitute amendment we offer is truly a bipartisan 
effort. We have worked diligently with our colleagues on both sides of 
the aisle and will continue to do so to address concerns, narrow some 
provisions, and assure that this bill will sunset when it is no longer 
pertinent and necessary.
  Senator Wyden, who said at our committee markup that he wants to get 
to ``yes,'' has worked tirelessly with me to get there. He has offered 
excellent suggestions and comments, and I think the substitute we bring 
today is a better piece of legislation for his efforts.
  Specifically, this substitute would provide time for plaintiffs and 
defendants to resolve Y2K problems without litigation. It reiterates 
the plaintiff's duty to mitigate damages and highlights the defendant's 
opportunity to assist plaintiffs in doing that by providing information 
and resources. It provides for proportional liability in most cases 
with exceptions for fraudulent or intentional conduct or where the 
plaintiff has limited assets.
  It protects governmental entities, including municipalities, school, 
fire, water and sanitation districts from punitive damages, and it 
eliminates punitive damage limits for egregious conduct while providing 
some protection against runaway punitive damage awards. It provides 
protection for those not directly involved in a Y2K failure.

  The bill as amended does not cover personal injury and wrongful death 
cases. It is important to keep in mind the broad support this bill has 
from virtually every segment of our economy. This bill is important not 
only to the high-tech industry or to big business but carries the 
strong support of small business, retailers and wholesalers. Many of 
those supporting the

[[Page S4222]]

bill will find themselves as both plaintiffs and defendants. They have 
weighed the benefits and drawbacks of the provisions of this bill and 
have overwhelmingly concluded that their chief priority is to prevent 
and fix Y2K problems and make our technology work and not divert the 
resources into time-consuming and costly litigation.
  Mr. President, I would like to interrupt my prepared statement at 
this time to mention that when we passed this legislation through the 
Commerce Committee, unfortunately, on one of the rare occasions in the 
more than 2 years that I have been chairman of the committee, it was 
passed on a party line vote, on a vote of 11 to 9.
  At that time Senator Wyden, Senator Kerry, Senator Dorgan and others 
expressed a strong desire to work in a bipartisan fashion so that we 
could pass this legislation. Most of us are aware that when legislation 
goes to the floor along party lines and is divided on party lines, the 
chances of passage are minimal, to say the least.
  We worked with Senator Wyden and others, and we made eight major 
compromises in the original legislation, sufficient in the view of many 
to enhance the ability of this legislation to be passed and, very 
frankly, satisfy at least some of the concerns of the trial lawyers and 
others that had been voiced about the legislation.
  Last night, Senator Wyden and the Senator from Connecticut, Senator 
Dodd, and I met, and we discussed three major concerns that Senator 
Dodd had, which two we could agree to, and on the third there was some 
discussion about language. It was my distinct impression at that time 
that we had come to an agreement on these three particular additional 
items.
  Apparently this morning that is not the case. On the third item there 
is still not agreement between ourselves and Senator Dodd and his 
staff. I hope we can continue to work on that language.
  Mr. President, I have been around here now for 13 years. I have seen 
legislation compromise after compromise made to the point where the 
legislation itself becomes meaningless. We are approaching that point 
now.
  I will be glad to negotiate with anyone. My friend from 
Massachusetts, Senator Kerry, and I have been in discussions as well. 
But we cannot violate some of the fundamental principles that I just 
articulated as the reason for this legislation. If we weren't facing a 
very severe crisis in about 7 or 8 months from now--7 months, I guess--
then there would not be a need for this legislation.
  Our object is to protect innocent business people, both large, medium 
and small, from being exposed to the kind of lawsuits which we know 
will transpire if we do not do something about the problem.
  It is not only important that we receive the support of the ``high-
tech community,'' which is very important to the future of our Nation's 
economy, but the medium-size businesses, the small businesses, the 
retailers and others are all in support of this legislation.
  I am aware of the power of the American Trial Lawyers Association. I 
have been beaten by them on several occasions. They have a string of 
victories to their credit. They are also, among others, another 
argument for campaign finance reform, which is a diatribe I will not 
enter in today. The fact is this issue needs to be resolved. I would be 
very disappointed if over a couple of points we cannot agree and this 
legislation fails to proceed.
  Did my friend from Oregon have a question or a comment?
  Mr. WYDEN. Yes.
  Mr. McCAIN. Mr. President, I ask unanimous consent to yield to the 
Senator from Oregon, without losing my claim to the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Oregon is recognized.
  Mr. WYDEN. Thank you, Mr. President. I thank the chairman of the 
Commerce Committee for his comments. I will just advise my colleagues 
where I think we are.
  First, I think it is important to note that the chairman of the 
Commerce Committee has made nine major changes in the legislation--all 
of them proconsumer, proplaintiff--since the time this legislation left 
the Commerce Committee. I and other Democrats felt it was important. I 
want the Record to show that those are major, substantive changes, and 
as the chairman indicated, we had some discussions with Senator Dodd 
last night and I am hopeful they are going to bear fruit as well, 
because Senator Dodd has tackled this in a very thoughtful way as well.
  I also think it is important that our leadership, Senator Lott and 
Senator Daschle, continue, as they have tried to do, to help us work 
through some of the procedural issues which are not directly relevant 
to this legislation, so that it is possible to vote on the McCain-Wyden 
substitute expeditiously.
  I want to tell the Senate that now is the time when this can be done 
in a thoughtful and deliberative way. I don't think the Senate wants to 
come back next January, when there is a state of panic, as I believe 
there well could be, over this problem. The time to do it is now. That 
is what we have been working on in committee.
  This is not a partisan issue. It affects every computer system that 
uses date information, and I want it understood how this happened. Y2K 
is not a design flaw; it was an engineering tradeoff. In order to get 
more space on a disc and in memory, the precision of century indicators 
was abandoned. Now, it is hard to believe today that disc and memory 
space used to be at a premium, but it was. The tradeoff became an 
industry standard, and computers cannot work at all without these 
industry standards. The standards are the means by which programs and 
systems exchange information, and it was recently noted: ``The near 
immortality of computer software came as a shock to programmers. Ask 
anybody who was there. We never expected this stuff to still be 
around.''
  One way to solve the problem might be to dump all the old layers of 
computer code, but that is not realistic. So our goal ought to be to 
try to bring these systems into compliance as soon as possible and, at 
the same time--and this is what the McCain-Wyden substitute does--have 
a safety net in place.
  This is a bipartisan effort. I would like to briefly wrap up by 
outlining several of the major changes. The first is that there is a 3-
year sunset provision. There are a number of individuals and groups who 
said, ``Well, this is just an effort to rewrite the tort law and make 
changes that are going to stand for all time.'' This provision says 
that any Y2K failure must occur before January 1, 2003, in order to be 
eligible to be covered by the legislation.
  Second, there were various concerns that there were vague defenses in 
the legislation, particularly terms that involve a reasonable effort. 
We said that that ought to be changed, we ought to make sure there 
aren't any new and ill-defined Federal defenses. That has been changed.

  Finally, and especially important, for truly egregious kinds of 
conduct and fraudulent activity, where people simply misrepresent the 
facts in the marketplace, we ensure that punitive damages and the 
opportunity to send a deterrent to egregious and fraudulent activity 
are still in place.
  So I think these are just some of the major changes we are going to 
outline in the course of the debate. I also say that the latest draft 
also restores liability for directors and officers, which was again an 
effort to try to be responsive to those who felt that the legislation 
was not sufficiently proconsumer.
  I only say--and I appreciate that the chairman of the committee 
yielded me this time--that I think after all of these major changes, 
which have taken many hours and, in fact, weeks since the time this 
legislation came before the Committee on Commerce, we have now produced 
legislation that particularly Democratic Members of the Senate can 
support.
  This is not legislation where, for example, if someone had their arm 
cut off tragically in a tractor accident, they would not have a remedy. 
We make sure that all personal injuries which could come about--say an 
elevator doesn't work and a person is tragically injured. This 
legislation doesn't affect that. That person has all the remedies in 
the tort law and the personal injury laws that are on the books. This 
involves ensuring that there is not chaos in the marketplace early next 
year, that we don't tie up thousands of our

[[Page S4223]]

businesses in frivolous suits and do great damage to the emerging 
sector of our economy that is information driven.
  I thank the chairman for the many changes he has made, and I am 
especially hopeful that over the next few hours the two leaders, 
Senator Lott and Senator Daschle, can help us work through the 
procedural quagmire the Senate is in, so we can pass this legislation 
now, at a time where there is an opportunity to pursue it in a 
deliberative way.
  I yield the floor.
  Mr. McCAIN. Mr. President, I thank the Senator from Oregon for his 
enormous work on this legislation. I think it bears repeating what we 
have been able to do here. I believe any objective observer would agree 
that what Senator Wyden has brought to the bill represents a tremendous 
movement from the bill we originally passed in the Commerce Committee.
  These discussions with Senator Wyden and others resulted in at least 
eight major changes. The biggest change was that we eliminated the so-
called good-faith defense, because we could not define good faith and 
reasonable efforts.
  We also put in, as Senator Wyden mentioned, a sunset of January 1, 
2003. There is no cap on punitive damages when the defendant has 
intentionally caused harm to the plaintiff. It clarifies that if a 
plaintiff gives 30 days notice of a problem to the defendant, the 
defendant has 60 days to fix it. This doesn't result in a 90-day delay 
for litigation but does offer a critical opportunity to solve problems 
rather than litigate.
  Language regarding the state of mind and liability of bystanders was 
significantly narrowed, redrafted, and clarified in order to assure 
that the provisions are consistent with the Year 2000 Information and 
Readiness Disclosure Act of 1998.
  The economic loss rule was likewise rewritten and narrowed to reflect 
the current law in the majority of States.
  Proportionate liability was significantly compromised to incorporate 
exceptions to the general rule to protect plaintiffs from suffering 
loss.
  Class action language was revised and narrowed, and language 
respecting the effect of State law on contracts and the rules with 
respect to contract interpretation was also revised to address concerns 
that Senator Wyden raised.
  In other words, I believe we have gone a long way.
  Mr. President, the opponents of this legislation will make several 
arguments. I respect those arguments. One will be that we are changing 
tort law--that we are somehow fundamentally changing the law despite 
the fact that this has a sunset provision in it of January 1, 2003.
  Also, they will say it is not a big problem; it is not nearly as big 
a problem as you think it is; there are going to be suits dismissed; 
that the manufacturers and the high-tech community and the 
businesspeople are setting up a straw man here because it is not that 
huge an issue despite the estimates that there can be as much as $300 
billion to $1 trillion taken out of the economy.
  Let me quote from the Progressive Policy Institute backgrounder of 
March 1999. They state:

       As the millennium nears, the year 2000 computer problem 
     poses a critical challenge to our economy. Tremendous 
     investments are being made to fix Y2K problems with U.S. 
     companies expected to spend more than $50 billion. However, 
     these efforts could be hampered by a barrage of potential 
     legislation as fear of liability may keep some businesses 
     from effectively engaging in Y2K remediation efforts.

  Trial attorneys across the country are actually preparing for the 
potential windfall. For those who doubt the emergence of such leviathan 
litigation, one only needs to listen to what is coming out of certain 
quarters of the legal community. At the American Bar Association annual 
convention in Toronto last August, a panel of experts predicted that 
the legal costs associated with Y2K will exceed that of asbestos, 
breast implants, tobacco, and Superfund litigation combined. That is 
more than three times the total annual estimated cost of all civil 
litigation in the United States.
  That is what was propounded at the American Bar Association 
convention in Toronto last August.
  Mr. President, it isn't the Bank of America that is saying that. It 
isn't the high-tech community. It is the American Bar Association.

       Seminars on how to try Y2K cases are well underway, and 
     approximately 500 law firms across the country have put 
     together Y2K litigation teams to capitalize on the event. 
     Also, several lawsuits have already been filed making trial 
     attorneys confident that a large number of businesses, big 
     and small, will end up in court as both a plaintiff and a 
     defendant. Such overwhelming litigation would reduce 
     investment and slow income growth for American workers.
       Indeed, innovation and economic growth will be stifled by 
     the rapacity of strident litigators. In addition to the 
     potentially huge costs of litigation, there is another unique 
     element to the Y2K problem. In contrast to past cases of 
     business liability where individual firms or even industries 
     engaged in some wrongful and damaging practices, the Y2K 
     problem potentially affects all aspects of the economy as it 
     is for all intents and purposes a unique one-time event. It 
     is best understood as an incomparable societal problem rooted 
     in the early stages of our Nation's transformation to a 
     digital economy. Applying some of the existing standards of 
     litigation to such a distinct and communal problem is simply 
     not appropriate.
       Legislation is needed to provide incentives for businesses 
     to fix Y2K problems, to encourage resolution of Y2K conflicts 
     outside of the courtroom, and to ensure that the problem is 
     not exploited by untenable lawsuits.

  The Progressive Policy Institute goes on to say at the end:

       In order to diminish the threat of burdensome and 
     unwarranted litigation, it is essential that any legislation 
     addressing Y2K liability do the following:
       Encourage remediation over litigation and the assignment of 
     blame;
       Enact fair rules that reassure businesses;
       That honest efforts at remediation will be rewarded by 
     limiting liability while enforcing contracts and punishing 
     negligence;
       Promote alternative dispute resolution;
       And, finally discourage frivolous lawsuits while protecting 
     avenues of redress for parties that suffer real injuries.

  Mr. President, on those four principles we acted in this legislation, 
and then we moved back to, if not the principles of it, some of what, 
in my view, were the most desirable parts of the legislation on the 
nine major issues which I just described in our negotiations with 
Senator Wyden and others. Then we even made concessions in two 
additional areas with Senator Dodd. And now it is not enough.
  Mr. WYDEN. Mr. President, will the Senator yield?
  Mr. McCAIN. Does the Senator from Oregon have a question?
  Mr. WYDEN. I do. I think there is one other important point that 
needs to be made. It seems to me that the legislation as it stands now 
makes it very clear that what is really going to govern the vast 
majority of cases is the written contractual terms between businesses.
  If you look at page 11 of the subcommittee report, it makes it very 
clear that the act doesn't apply to personal injuries or to wrongful 
deaths. What is going to apply are the written contractual terms 
between businesses.
  As I recall, the chairman of the Commerce Committee thought 
originally that in this and other major changes there ought to be a 
Federal standard in this area. There was a concern that was, again, 
writing new law and tort law. The chairman decided to make it clear 
that it was going to be written in contractual terms that were going to 
govern these agreements between businesses.
  What is the chairman's understanding of how that came about, and why 
those written contractual terms were important in this reform?
  Mr. McCAIN. I say to my friend from Oregon that he has pretty well 
pointed out that there were several standards which could be used for 
both legal as well as the sense of how the people who are involved in 
the Y2K situation are involved. To have one standard, I think, was 
clearly called for, although perhaps I would have liked to have seen a 
tougher standard. But the fact is that this was a process of how we 
develop legislation. We also wanted to respect the individual 
contracts, as the Senator from Oregon knows.
  Mr. President, I just want to say again that my dear friend from 
South Carolina has been very patient, and I know that he wants to speak 
at some length. I appreciate both his compassion and commitment and 
knowledge of the issue.
  We have tried to compromise. We will continue to try to compromise. 
We

[[Page S4224]]

are now reaching close to a point where the legislation would be 
meaningless.
  I am all in favor of a process where amendments are proposed, where 
they are debated and voted on. I think that is the way we should do 
business.

  If the Senator from South Carolina has a problem with this 
legislation, I hope he will propose an amendment to this legislation. I 
will be glad to debate it, and we will be glad to have votes.
  It is important that we resolve this legislation. I would not like to 
see, nor do I think the people of this country deserve, a gridlock 
where blocking of any legislation to move forward on this issue takes 
place. I don't think that is fair. I don't think it is fair or 
appropriate on an issue of this magnitude of which time is of the 
essence. We can't have a blockage of this issue and take this 
legislation up several months from now.
  I respect the views of others who oppose this legislation. But let's 
go through a legislative process. I am willing to stay here all day and 
all night to debate the amendments, whatever they may be. I don't want 
to introduce a cloture motion, because obviously that cuts off people's 
ability to debate this issue because of the timeframe and time limits 
involved in a cloture motion.
  But I also urge my colleagues who oppose this legislation, let's not 
engage in extraneous amendments on minimum wage, or violence on TV, or 
guns, or anything else. That, frankly, in all due respect to my 
colleagues, is avoiding this issue. This issue needs to be addressed.
  In the eyes of every American, there is a huge problem arising at 
12:01, January 1 of the year 2000. We have an obligation to address 
that problem.
  For us to now be sidetracked with other issues and extraneous 
amendments, or others, is doing a great disservice to those men and 
women, small businesses and large and medium size, which will be 
affected by this serious problem, of which, by the way, even with a 
select committee we really haven't gotten a good handle on the 
magnitude of the problem. It depends on what part of our economy, what 
part of government, et cetera.
  But there is no one who alleges that there is no problem. It is our 
obligation to try to address this problem. Let's do it in an orderly 
fashion with debate, with amendments, and then vote on final passage.
  I urge my colleagues to respect such a process.


                      Unanimous-Consent Agreement

  Mr. McCAIN. Mr. President, I ask unanimous consent when the Senate 
reconvenes at 2:15 it be in order for the Senate Chaplain to offer a 
prayer in honor of the moment of silence being observed in Colorado, 
and following the prayer the junior Senator from Colorado be recognized 
to speak, to be followed by the senior Senator from Colorado who, after 
some remarks, will offer a moment of silence.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from South Carolina.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent that the order 
for the 12:30 recess be extended 10 minutes, until 12:40.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, I will go right to the point with 
respect to the compromise. I have in hand a letter from Craig R. 
Barrett, the distinguished CEO of Intel. Without reading the entire 
letter, the consensus is that what they would really need is a 
settlement or compromise regarding four particular points. One is 
procedural incentives; another is with respect to the provisions of 
contracts, that they have specificity; third, threshold pleading 
provisions and the amount of damages in materiality of defects which 
would help constrain class action suits; and, of course, the matter of 
proportionality, or joint and several.

  I contacted Mr. Grove and told him we would yield on three points, 
but we didn't want to get into tort law with a contract provision--all 
triable under the Uniform Commercial Code. He didn't think he could 
yield on that fourth one.
  Since that time, I understand that the downtown Chamber of Commerce 
says they are not yielding at all with respect to the test in tort law.
  My colleague from Oregon says there are nine points and that we have 
gotten together. That is garbage. That is not the case at all, I can 
say that right now.
  They are determined to change the proof of neglect by ``the greater 
weight of the preponderance of evidence'' to ``clear and convincing.'' 
I thought that was compromise. Reviewing the McCain-Wyden amendment 
that is now under debate, Members will find on that page scratched out 
and written in, ``clear and convincing evidence.'' They want to change 
the burden in tort cases from ``the greater weight of the preponderance 
of evidence'' to ``clear and convincing.''
  How can you do that when you do not have the elements before you? You 
do not have control of the manufacturer; you do not have control of the 
software. If you are like me and other professionals like our doctor 
friends or CPAs, they don't know those kinds of things. They have to do 
the best they can by the greater weight of the preponderance of 
evidence--not clear and convincing.
  So they stick to punitive, they stick to clear and convincing, they 
stick to joint and several, but they come on the floor of the Senate 
and exclaim how reasonable they are and then allude, of course, to the 
trial lawyers and talk about campaign financing, but say as an aside, 
We don't want to get into it--as if the Senator from South Carolina is 
paid by trial lawyers to do this.
  I represented corporate America, and I will list those companies. I 
was proud of the Electric and Gas. I was proud of the wholesale grocer, 
Piggly Wiggly firm. We had 121 stores. I was their chief counsel on an 
antitrust case which I took all the way to the U.S. Supreme Court. I 
won. I had good corporate clients, too. I am proud of trial lawyers. We 
don't have time for frivolous cases.
  This downtown crowd will never see the courtroom. They sit there in 
the mahogany rooms with the Persian rugs. Their colleagues call and 
say, Let's get a continuance, I want to play golf this afternoon--the 
clock runs on billable hours. The clock is running and the clients 
never know the difference. And they pay $450 to $500 an hour.
  The distinguished Senator from Ohio who sat in front of me, now a 
national hero, is indebted to a case for billable hours.
  We know about downtown. I don't understand aspersions with respect to 
the trial bar--we are looking out for the injured parties.
  I want these matters in the Record. The case is clear cut, in this 
Senator's mind. For example, I talked for about an hour in the office 
with the distinguished head of Intel, Andy Grove, some weeks back. I 
don't want anyone to be misled, he is for proportionality. That is 
explained in the letter. However, he said it wasn't a real problem.
  I ask unanimous consent that an article in the March issue of 
Business Week entitled ``Be Bug-Free or Get Squashed'' be printed in 
the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                 [From the Business Week, Mar. 1, 1999]

Be Bug-Free or Get Squashed--Big Companies May Soon Dump Suppliers That 
                            Aren't Y2K-Ready

       Lloyd Davis is feeling squeezed. In 1998, his $2 million, 
     25-employee fertilizer-equipment business was buffeted by the 
     harsh winds that swept the farm economy. This year, his 
     Golden Plains Agricultural Technologies Inc. in Colby, Kan., 
     is getting slammed by Y2K. Davis needs $71,000 to make his 
     computer systems bug-free by Jan. 1. But he has been able to 
     rustle up only $39,000. His bank has denied him a loan 
     because--ironically--he's not Y2K-ready. But Davis knows he 
     must make the fixes or lose business. ``Our big customers 
     aren't going to wait much longer,'' he frets.
       Golden Plains and thousands of other small businesses are 
     getting a dire ultimatum from the big corporations they sell 
     to: Get ready for Y2K, or get lost. Multinationals such as 
     General Motors, McDonald's, Nike, and Deere are making the 
     first quarter--or the second at the latest--the deadline for 
     partners and vendors to prove they're bug-free. A recent 
     survey by consultants Cap Gemini America says 69% of the 
     2,000 largest companies will stop doing business with 
     companies that can't pass muster. The National Federation of 
     Independent Business figures more than 1 million companies 
     with 100 workers or less won't make the cut and as many as 
     half could lose big chunks of business or even fail.
       Weak Links. Cutting thousands of companies out of the 
     supply chain might strain supply lines and could even crimp 
     output. But most CEOs figure it'll be cheaper in the long run 
     to avoid bugs in the first place.

[[Page S4225]]

       Some small outfits are already losing key customers. In the 
     past year, Prudential Insurance Co. has cut nine suppliers 
     from its ``critical'' list of more than 3,000 core vendors, 
     and it continues to look for weak links, says Irene Dec, 
     vice-president for information systems at the company. At 
     Citibank, says Vice-President Ravi Apte, ``cuts have already 
     been made.''
       Suppliers around the world are feeling the pinch. Nike Inc. 
     has warned its Hong Kong vendors that they must prove they're 
     Y2K ready by Apr. 1. In India, Kishore Padmanabhan, vice-
     president of Bombay's Tata Consultancy Services, says repairs 
     are runing 6 to 12 months behind. In Japan, ``small firms are 
     having a tough time making fixes and are likely to be the 
     main source of any Y2K problems,'' says Akira Ogata, general 
     research manager for Japan Information Service Users Assn. 
     Foreign companies operating in emerging economies such as 
     China, Malaysia, and Russia are particularly hard-pressed to 
     make Y2K fixes. In Indonesia, where the currency has 
     plummeted to 27% of its 1977 value, many companies still 
     don't consider Y2K a priority.
       A December, 1998 World Bank survey shows that only 54 of 
     139 developing countries have begun planning for Y2K. Of 
     those, 21 are taking steps to fix problems, but 33 have yet 
     to take action. Indeed, the Global 2000 Coordinating Group, 
     an international group of more than 230 institutions in 46 
     countries, has reconsidered its December, 1998 promise to the 
     U.N. to publish its country-by-country Y2K-readiness ratings. 
     The problem: A peek at the preliminary list has convinced 
     some group members that its release could cause massive 
     capital flight from some developing countries.
       Big U.S. companies are not sugar-coating the problem. 
     According to Sun Microsystems CEO Scott G. McNealy, Asia is 
     ``anywhere from 6 to 24 months behind'' in fixing the Y2K 
     problem--one he says could lead to shortages of core 
     computers and disk drives early next year. Unresolved, says 
     Guy Rabbat, corporate vice-president for Y2K at Solectron 
     Corp. in San Jose, Calif., the problem could lead to price 
     hikes and costly delivery delays.
       Thanks to federal legislation passed last fall allowing 
     companies to share Y2K data to speed fixes, Sun and other 
     tech companies, including Cisco Systems, Dell Computer, 
     Hewlett-Packard, IBM, Intel, and Motorola, are teaming up to 
     put pressure on the suppliers they judge to be least Y2K-
     ready. Their new High-Technology Consortium on Year 2000 and 
     Beyond is building a private database of suppliers of 
     everything from disk drives to computer-mouse housings. He 
     says the group will offer technical help to laggard firms--
     partly to show good faith if the industry is challenged later 
     in court. But ``if a vendor's not up to speed by April or 
     May,'' Rabbat says ``it's serious crunch time.''
       Warnings. Other industries are following suit. Through the 
     Automotive Industry Action Group, GM and other carmakers have 
     set Mar. 31 deadlines for vendors to become Y2K-compliant. In 
     March, members of the Grocery Manufacturers of America will 
     meet with their counterparts from the Food Marketing 
     Institute to launch similar efforts. Other companies are 
     sending a warning to laggards--and shifting business to the 
     tech-savvy. ``Y2K can be a great opportunity to clean up and 
     modernize the supply chain,'' says Roland S. Boreham, Jr., 
     chairman of the board of Baldor Electric Co, in Fort Smith, 
     Ark.
       In Washington, Senators Christopher S. Bond (R-Mo.) and 
     Robert F. Bennett (R-Utah) have introduced separate bills to 
     make it easier for small companies like Davis' to get loans 
     and stay in business. And the World Bank has shelled out $72 
     million in loans and grants to Y2K-stressed nations, 
     including Argentina and Sri Lanka. But it may be too little 
     too late: AT alone has spent $900 million fixing its 
     systems.
       Davis, for one, is not ready to quit. ``I've survived 
     tornadoes, windstorms, and drought,'' he says. ``We'll be 
     damaged, yes, but we'll survive.'' Sadly, not everyone will 
     be able to make that claim.

  Mr. HOLLINGS. Through the Automotive Industry Action Group, GM and 
other carmakers have set a March 31 deadline for vendors to become Y2K 
compliant. In March, members of the Grocery Manufacturers of America 
will meet with their counterparts from the Food Marketing Institute to 
launch similar efforts. Other companies are sending warnings to 
laggards and shifting business, so the text-savvy Y2K can be a great 
opportunity to clean up and modernize the supply system.
  The market is working. We pointed that out. In a report by none other 
than Bill Gates at the World Economic Forum, they believe the 
millennium bug, aside from some possible glitches in delivery and 
supply, may pose only modest problems. Mr. Gates talked about it not 
being a real problem.
  I ask unanimous consent to have printed in the Record an article from 
the New York Times, dated April 12, entitled ``Lawsuits Related to Y2K 
Problem Start Trickling Into the Courts.''
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                [From the New York Times, Apr. 12, 1999]

    Lawsuits Related to Y2K Problem Start Trickling Into the Courts

                         (By Barnaby J. Feder)

       A trickle of new lawsuits in recent months is expanding the 
     legal landscape of the Year 2000 computer problem. But so 
     far, the cases offer little support for the dire predictions 
     that courts will be choked by litigation over Y2K, as the 
     problem is known.
       Some major equipment vendors, including IBM, AT and 
     Lucent Technologies Inc., for example, have joined the ranks 
     of those being sued for not forewarning customers that 
     equipment they sold in recent years cannot handle Year 2000 
     dates and for not supplying free upgrades.
       A California suit claims that Circuit City Stores Inc., 
     CompUSA Inc. and other mass-market retailers violated that 
     state's unfair business practices law by not warning 
     customers about Year 2000 problems in computers and other 
     equipment they sold. And an Alabama lawyer sued the state of 
     Alabama on behalf of two welfare recipients, asking that the 
     state be ordered to set aside money to upgrade its computer 
     systems to ensure that benefits will be delivered without 
     interruption.
       Despite such skirmishes, though, which lawyers say only 
     offer hints of the wide variety of cases yet to come, there 
     is no sign yet of the kind of high-stakes damage suits that 
     some have projected could overwhelm courts with $1 trillion 
     in claims.
       In fact, while Congress and many state legislatures are 
     suddenly awash in proposed laws meant to prevent such a tidal 
     wave, many lawyers actively involved with Year 2000 issues 
     now question just how big the litigation threat really is.
       ``There was more reason to be alarmed a year ago,'' said 
     Wynne Carvill, a partner at Thelen, Reid & Priest in San 
     Francisco, one of the first law firms to devote major 
     resources to Year 2000. ``People are finding things to fix 
     but not many that would shut them down.''
       The work and the litigation stems from the practice in 
     older computers and software programs of using two digits to 
     denote the year in a date; some mistakenly read next year's 
     ``00'' as meaning 1900, and others do not recognize it as a 
     valid number.
       Somewhere between 50 and 80 cases linked to the Year 2000 
     problem have been filed so far, according to various 
     estimates. The vast majority focus on whether hardware and 
     software vendors are obligated to pay for fixing or replacing 
     equipment and programs that malfunction when they encounter 
     Year 2000 dates.
       When such cases involve consumer products, a key issue has 
     been whether lawsuits could be filed before any malfunctions 
     have actually occurred. Plaintiff's lawyers have likened the 
     situation to a car known to have a safety hazard; Detroit 
     would be expected to take the initiative, send out recall 
     notices to car owners and pay for the fix before an accident 
     occurred, they say.
       But in the major rulings so far, courts in California and 
     New York have concluded that the law in those states does not 
     treat the fast-changing, low-cost world of consumer software 
     like cars.
       Actions against Intuit Inc., the manufacturer of Quicken, a 
     popular financial package, have been dismissed because 
     consumers were unable to demonstrate that they had already 
     been damaged.
       Intuit has promised to make free software patches available 
     before next Jan. 1, but is fighting efforts by plaintiffs' 
     lawyers in California to force the company to compensuate 
     consumers who dealt with the problem by purchasing upgrades 
     before learning of the free fix.
       The case against mass retailers, filed in Contra Costa 
     County, Calif., in January, argues that the stores violated a 
     state consumer protection statute by selling a wide array of 
     software, including Windows 98 and certain versions of 
     Quicken, Microsoft Works, Peachtree Accounting and Norton 
     Anti-Virus, without warning customers about potential Year 
     2000 problems or supplying free patches from the 
     manufacturers.
       In cases where consumers were told of software defects, the 
     complaint contends, they were sometimes told that the least 
     expensive solution was to buy an upgrade from the store, even 
     though the manufacturers had a stated policy of providing 
     free patches.
       The complaint also cites hardware with Year 2000 defects 
     that was sold in the stores without warning, including 
     equipment from Compaq Computer, NEC and Toshiba from 1995 to 
     1997. it also contends that as recently as this year, the 
     stores have been packaging a wide variety of new computers 
     with software that contains Year 2000 defects.
       The stores have moved to dismiss the suit, arguing among 
     other things that failing to warn consumers about defects 
     does not amount to misleading them under the California law.
       Many other cases have involved business software, services 
     and computer equipment, but lawyers describe them largely as 
     ``plain vanilla'' contract disputes.
       The first case to result in a settlement paying damages to 
     a plaintiff involved Produce Palace International, a Warren, 
     MI., grocery that had complained that its business had been 
     repeatedly interrupted by the failure of a computerized 
     checkout scanning system to read credit cards expiring in the 
     Year 2000. In the settlement, reached last November, the 
     vendor, TEC America Inc., an Atlanta-based unit of the TEC 
     Corp. of Japan, paid Produce Palace $250,000.

[[Page S4226]]

       Several software manufacturers have settled suits on terms 
     that provide free upgrades and payments to the lawyers that 
     sued them. Last month, for example, a magistrate for U.S. 
     District Court in New Jersey approved a settlement that 
     provided up to $46 million in upgrades and $600,000 in cash 
     to doctors who had purchased billing management software from 
     Medical Manager Corp.
       That is not the end of Year 2000 problems for Medical 
     Manager, which is based in Tampa, FL. It still has to contend 
     with a shareholder lawsuit filed in U.S. District Court in 
     Florida last fall after its stock tumbled on the news of the 
     New Jersey class-action suit. Several other shareholder suits 
     have been filed against other software companies based on 
     claims linking Year 2000 problems to stock declines.
       In general, defendants have fared well in Year 2000 
     business software cases. Courts have strictly interpreted 
     contracts and licenses to prevent plaintiffs from collecting 
     on claims for upgrades or services unless they were 
     specifically called for in the contract.
       In December, an Ohio court threw out a potential class-
     action claim against Macola Inc., a software company, 
     contending that early versions of its accounting program with 
     Year 2000 defects should be upgraded for free because the 
     company advertised it as ``software you'll never outgrow.''
       The court ruled that anyone actually licensing the software 
     accepted the explicit and very limited terms of the warranty 
     as all that Macola had legally promised. That decision has 
     been appealed.
       One closely watched case involves the Cincinnati Insurance 
     Co.'s request that a U.S. District Court in Cedar Rapids, 
     Iowa, declare that the company is not obligated to defend or 
     reimburse a client that has been sued on an accusation that 
     it failed to provide hospital management software free of 
     Year 2000 defects.
       It is the first case to raise the question of whether 
     insurance companies may be ultimately liable for much of the 
     hundreds of billions spent on Year 2000 repairs, if not 
     damages from breakdowns in the future. But lawyers say the 
     actual insurance policy at issue may not cover the crucial 
     years in the underlying suit against Cincinnati Insurance's 
     client. That wrinkle, they say, could let the insurer off the 
     hook without the court's shedding light on the larger issues.
       ``The results in the initial cases have dampened the fervor 
     somewhat,'' said Charles Kerr, a New York lawyer who heads 
     the Year 2000 section of the Practicing Law Institute, a 
     legal education group. ``Legislation could change the 
     landscape dramatically.''
       Many lawyers say the momentum for some kind of action in 
     Congress looks unstoppable. Seven states have already barred 
     Year 2000 damage suits against themselves and similar 
     proposals were filed in 30 other legislatures this year. Some 
     states have already passed bills limiting private lawsuits as 
     well. A recent example, signed last Tuesday in Colorado, 
     gives businesses that attempt to address their Year 2000 
     risks stronger defenses against lawsuits; it also bans 
     punitive damages as a remedy in such litigation.

  Mr. HOLLINGS. I ask unanimous consent to have printed in the Record 
an article entitled ``Liability for the Millennium Bug'' from the New 
York Times, dated April 26.
  The being no objection, the article was ordered to be printed in the 
Record, as follows:

                  [The New York Times, Apr. 26, 1999]

                    Liability for the Millennium Bug

       With 249 days to go until the year 2000, many experts are 
     alarmed and others are only mildly concerned about the danger 
     of computer chaos posed by the so-called millennium bug. One 
     prediction seems safe, however. Whatever the damage, there 
     will be lots of lawsuits. In anticipation, some in Congress, 
     mainly Republicans, want legislation to limit the right of 
     people and businesses to sue in the event of a Y2K disaster. 
     Their reasoning is that the important thing is to get people 
     to fix their computer problems now rather than wait and sue. 
     But the legislation is misguided and potentially unfair. It 
     could even lessen the incentive for corrective action.
       As most people know by now, the millennium bug arises from 
     the fact that chips and software have been coded to mark the 
     years with only two digits, so that when the date on 
     computers moves over to the year 2000, the computers may go 
     haywire when they register 1900 instead. A recent survey by a 
     Senate Special Committee on the Year 2000 found that while 
     many Government agencies and larger companies have taken 
     action to correct the bug, 50 percent of the country's small- 
     and medium-size businesses have not. The failure is 
     especially worrisome in the health sector, with many 
     hospitals and 90 percent of doctors' offices unprepared.
       If hospitals, supermarkets, utilities and small businesses 
     are forced to shut down because of computer problems, 
     lawsuits against computer and software manufacturers will 
     certainly result. Some experts estimate that liability could 
     reach $1 trillion. Legislation to protect potential 
     defendants, sponsored by Senator John McCain of Arizona, is 
     expected to be voted on in the Senate this week. The bill 
     would impose caps on punitive damages and tighter standards 
     of proof of liability, and provide for a 90-day waiting 
     period in which the sued company would be allowed to cure the 
     problem. The bills would also suspend ``joint and several 
     liability,'' under which wealthy defendants, like chip or 
     software companies, could have to pay the full cost of 
     damages if other parties could not be sued because they were 
     overseas or unable to pay.
       These provisions would curtail or even suspend a basic 
     protection, the right to sue, that consumers and businesses 
     have long enjoyed. The White House and the Congressional 
     Democratic leadership are right to view such a step as 
     unnecessary. Existing liability laws offer plenty of 
     protections for businesses that might be sued. Proponents of 
     the legislation argue, for example, that companies that make 
     good-faith efforts to alert customers of Y2K problems should 
     not be punished if the customers ignore the warning, or if 
     the companies bear only a small portion of the 
     responsibility. But state liability laws already allow for 
     these defenses. The larger worry is that the prospect of 
     immunity could dissuade equipment and software makers from 
     making the effort to correct the millennium-bug problem.
       It might make sense to have a 90-day ``cooling off'' period 
     for affected businesses to get help to fix as many problems 
     as possible without being able to file lawsuits. But it would 
     be catastrophic if stores, small businesses and vital 
     organizations like hospitals and utilities were shut down for 
     90 days. They should have the same recourse to relief from 
     the parties that supplied them with faulty goods that any 
     other customer has.
       Government can certainly help by providing loans, subsidies 
     and expertise to computer users and, perhaps, by setting up 
     special courts to adjudicate claims. Congress can also 
     clarify the liability of companies once it becomes clear how 
     widespread the problem really is. But before the new year, 
     the Government should not use the millennium bug to overturn 
     longstanding liability practices. A potential crisis is no 
     time to abrogate legal rights.

  Mr. HOLLINGS. This article says a potential crisis is no time to 
abrogate legal rights. They come out in opposition of this particular 
legislation.
  My colleague from Oregon says that has all been cleaned up by his 
particular amendment. Not at all. I ask unanimous consent an article 
from the Oregonian, dated March 22, be printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                           Y2K Escape Clause

                            (By Paul Gillin)

       Faced with an almost certain flood of year 2000-related 
     litigation, industry groups are banding together to try to 
     limit their liability. Users should oppose those efforts with 
     all their power. This legal debate is tricky because the 
     combatants are equally opportunistic and unpleasant. On one 
     side is the Information Technology Association of America, in 
     alliance with various other industrial groups. They have 
     proposed a law that, among other things, would limit punitive 
     damages in year 2000 cases to triple damages and give 
     defendants 90 days to fix a problem before being named in a 
     suit. On the other side are lawyers' associations that 
     anticipate a bonanza of fees, even if the year 2000 problem 
     doesn't turn out to be that serious.
       Hard as it is to find a good guy, you have to give the 
     lawyers their due. Year 2000 may be their opportunity, but it 
     isn't their problem.
       The problem belongs--hook, line and sinker--to the vendors 
     that capriciously ignored warnings from as long ago as the 
     late '70s and that now are trying to buy a free pass from 
     Congress. It's appalling to look at the list of recent 
     software products that have year 2000 problems. It has been 
     five years since year 2000 awareness washed over the computer 
     industry, which makes it difficult to believe that products 
     such as Office 97 aren't fully compliant.
       The industry players behind this legislation package are 
     the same ones that helped push through the Trojan horse 
     called the Year 2000 Information and Readiness Disclosure Act 
     last October. That bill provides vendors with a cloak of 
     legal protection based on past statements about efforts to 
     correct the problem. The industry players have tried to color 
     the bills as reasonable hedges against frivolous lawsuits 
     that will sap the legal system post-new year. Yet defendants 
     in personal injury and class-action suits enjoy no such 
     protections.
       Vendors have had plenty of time to prepare for 2000. The 
     fact that some were more preoccupied with quarterly earnings 
     and stock options than in protecting their customers is no 
     excuse for giving them a get-out-of-jail-free card now.

  Mr. HOLLINGS. One line in the article reads,

       Sponsoring GOP Senators say this bill would provide 
     incentives for solving technical issues before failures 
     occur, but in fact it does just the opposite. It eliminates 
     the threat of lawsuits as a negative incentive for companies 
     that might otherwise neglect their responsibilities in 
     addressing their Y2K problems or reimbursing consumers for 
     their losses. Federal legislation that overrides

[[Page S4227]]

     State courts is a serious infringement on States' rights that 
     merits only rare application, while a massive computer 
     meltdown meets that criteria. Congress passed the tightly-
     crafted bipartisan bill to help companies work through the 
     problem.

  As you can see from the Business Week article, they worked through 
that problem.
  Mr. President, there was some interesting testimony that we received 
before our committee a few weeks back from a Dr. Robert Courtney. It is 
talking about the cases.
  Incidentally, I ask unanimous consent to print in the Record a letter 
of yesterday from the Honorable Ronald N. Weikers.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                 Philadelphia, PA, April 26, 1999.
     Re Y2K Legislation Unnecessary.
     Mr. Moses Boyd,
     Office of the Honorable Fritz Hollings, Washington, DC.

       Dear Mr. Boyd: Thank you for speaking with me earlier. 
     Thirteen (13) of the 44 Y2K lawsuits that have been filed to 
     date have been dismissed entirely or almost entirely. Twelve 
     (12) cases have been settled for moderate sums or for no 
     money. The legal system is weeding out frivolous claims, and 
     Y2K legislation is therefore unnecessary.
       Thirty-five (35) cases have been filed on behalf of 
     corporate entities, such as health care providers, retailers, 
     manufacturers, service providers and more. Nine (9) cases 
     have been filed on behalf of individuals. This trend will 
     continue. Thus, the same corporations that are lobbying for 
     Y2K legislation may be limiting their own rights to recover 
     remediation costs or damages.
       I have studied the Y2K problem carefully from the legal 
     perspective, and have written a book entitled ``Litigating 
     Year 2000 Cases'', which will be published by West Group in 
     June. I frequently write and speak about this subject. I do 
     not represent any clients that have an interest in the 
     passage or defeat of any proposed Y2K legislation. Feel free 
     to call me, should you have any questions. Thank you very 
     much.
           Very truly yours,
                                                Ronald N. Weikers.

  Mr. HOLLINGS. This letter is addressed to my staff, Mr. Moses Boyd. 
It says:

       Dear Mr. Boyd: Thank you for speaking with me earlier. 
     Thirteen (13) of the 44 Y2K lawsuits that have been filed to 
     date have been dismissed entirely or almost entirely. Twelve 
     (12) cases have been settled for moderate sums or for no 
     money. The legal system is weeding out frivolous claims, and 
     Y2K legislation is therefore unnecessary.
       Thirty-five (35) cases have been filed on behalf of 
     corporate entities, such as health care providers, retailers, 
     manufacturers, service providers, and more. Nine (9) cases 
     have been filed on behalf of individuals. This trend will 
     continue. Thus, the same corporations that are lobbying for 
     Y2K legislation may be limiting their own rights to recover 
     remediation costs or damages.
       I have studied the Y2K problem carefully from the legal 
     perspective, and have written a book entitled ``Litigating 
     Year 2000 Cases,'' which will be published by West Group in 
     June. I frequently write and speak about the subject. I do 
     not represent any clients that have an interest in the 
     passage or defeat of any proposed Y2K legislation. Feel free 
     to call me, should you have any questions. Thank you very 
     much. Very truly yours, Ronald N. Weikers, Attorney at Law, 
     Philadelphia, Pennsylvania.

  Mr. President, there are things in here to emphasize. One is: ``I do 
not represent any clients that have an interest in the passage or 
defeat of any proposed Y2K legislation.'' And I emphasize that his book 
will be published by the West Group in June. The month after next, in 
about 5 or 6 weeks, this book will be coming out. I can tell you as a 
practicing attorney that the West Group is not going to publish any 
partisan political book or edition. It would not sell to the lawyers on 
both sides. We like to look up and find the authorities, not political 
arguments. The West Group is in that particular field professionally of 
documenting in a research fashion the matter of Y2K cases in this 
particular interest. I can tell you right now they have pretty good 
evidence about what has been occurring.
  What has been occurring is best evidenced by the testimony of Dr. 
Robert Courtney before the Committee on Commerce, Science, and 
Transportation on February 9 on S. 96, the Y2K Act. I ask unanimous 
consent that his testimony be printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

 Testimony of Dr. Robert Courtney at the Senate Committee on Commerce, 
Science, and Transportation Hearing on S. 96, the Y2K Act, February 9, 
                                  1999

       Good morning, my name is Bob Courtney, and I am a doctor 
     from Atlantic County, New Jersey. It is an honor for me to be 
     here this morning, and I thank you for inviting me to offer 
     testimony on the Y2K issue.
       As a way of background, I am an ob/gyn and a solo 
     practitioner. I do not have an office manager. It's just my 
     Registered Nurse, Diane Hurff, and me, taking care of my 2000 
     patients.
       These days, it is getting tougher and tougher for those of 
     us who provide traditional, personalized medical services. 
     The paperwork required by the government on one hand, and by 
     insurance companies on the other is forcing me to spend fewer 
     hours doing what I do best--taking care of patients and 
     delivering their babies.
       But it was a Y2K problem which recently posed a serious 
     threat to my practice, and that is why I am here this 
     morning.
       As a matter of clarification, although I am a doctor, I am 
     not here to speak on behalf of the American Medical 
     Association. Although I am also a small businessman, I am not 
     here to speak on behalf of the Chamber of Commerce. I cannot 
     tell you who these organizations feel about the legislation 
     before the Committee. But I can tell you how it would have 
     affected my practice and my business.
       I am one of the lucky ones. While a potential Y2K failure 
     impacted my practice, the computer vendor that sold me the 
     software system and I were able to reach an out-of-court 
     settlement which was fair and expedient. From what my 
     attorney, Harris Pogust, who is here with me today tells me, 
     I doubt I would have been so lucky had this legislation been 
     in effect.
       In 1987, I purchased a computer system from Medical 
     Manager, one of the leading medical systems providers in the 
     country. I used the Medical Manager system for tracking 
     surgery, scheduling due dates and billing. The system worked 
     well for me for ten years, until the computer finally crashed 
     from lack of sufficient memory.
       In 1996, I replaced my old system with a new, state of the 
     art pentium system from Medical Manager for $13,000. This was 
     a huge investment for a practice of my size.
       I remember joking with the computer salesman at the time 
     that this was a big purchase for me, and that I was counting 
     on this system to last as long as the last one did.
       I remember the salesman telling me that he was sure that I 
     would get at least ten years out of it. He showed me a list 
     of how many of his local customers had used the Medical 
     Manager for longer than ten years.
       And, the salesman pointed me to this advertising brochure 
     put out by Medical Manager. It states that their product 
     would provide doctors with ``the ability to manage [their] 
     future.''
       In truth, I never asked the salesman about whether the new 
     system that I was buying was Y2K compliant. I honestly did 
     not know even to ask the question. After all, I deliver 
     babies. I don't program computers. Based on the salesman's 
     statements and the brochure, I assumed the system would work 
     long into the future. After all, he had promised me over ten 
     years' use, which would take me to 2006.
       But just one year later, I received a form letter from 
     Medical Manager telling me that the system I had just 
     purchased had a Y2K problem. It was a problem that would make 
     it impossible for me to schedule due dates or handle my 
     administrative tasks--as early as 1999.
       Medical Manager also offered to fix the problem that they 
     had created--but for $25,000.
       I was outraged, as I suspect anyone sitting around this 
     table would be. The original system had cost me $15,000 when 
     I purchased it in 1986. The upgraded system cost me $13,000 
     in 1996. Now, a year later, they wanted another $25,000. They 
     knew when they sold me the $13,000 system that it would need 
     this upgrade--but of course, they didn't tell me.
       I wrote back to the company that I fully expected them to 
     fix the problem for free, since I had just bought the system 
     from them and I had been promised that it would work long 
     into the future.
       The company ignored my request, however, and several months 
     later, sent me an estimate for fixing the problem--again, for 
     over $25,000.
       At this point, I was faced with a truly difficult dilemma. 
     My practice depends on the use of a computer system to track 
     my patients' due dates, surgeries and billings--but I did not 
     have $25,000 to pay for an upgrade. Additionally, I was 
     appalled at the thought of having to pay Medical Manager for 
     a problem that they had created and should have anticipated. 
     If I had to pay that $25,000, that would force me to drop 
     many of my indigent patients that I now treat for free.
       Since Medical Manager insisted upon charging me for the new 
     system, and because my one year-old system was no longer 
     dependable, I retained an attorney and sued Medical Manager 
     to fix or replace my computer system at their cost.
       Within two months of filing our action, Medical Manager 
     offered to settle by providing all customers who bought a 
     non-Y2K compliant system from them after 1990 with a free 
     upgrade that makes their systems Y2K compliant by utilizing a 
     software ``patch.''
       This settlement gave me what I wanted from Medical 
     Manager--the ability to use my computer system as it was 
     meant to be used. To my great satisfaction, the legal system 
     worked for me and the thousands of other doctors who bought 
     Medical Manager's products since 1990. In fact, since I 
     brought

[[Page S4228]]

     my claim against Medical Manager, I have received numerous 
     telephone calls and letters from doctors across the country 
     who had similar experiences.
       Additionally, even Medical Manager has stated that it was 
     pleased with the settlement. According to the Medical Manager 
     president who was quoted in the American Medical News, 
     ``[f]or both our users and our shareholders, the best thing 
     was to provide a Y2K solution. This is a win for our users 
     and a win for us.'' [pick up article and display to Senators]
       I simply do not see why the rights of doctors and other 
     small businesses to recover from a company such as Medical 
     Manager should be limited--which is what I understand this 
     bill would do. Indeed, my attorney tells me that if this 
     legislation had been in effect when I bought my system, 
     Medical Manager would not have settled. I would still be in 
     litigation, and might have lost my practice.
       As an aside, at roughly the same time I bought the non-
     compliant system from Medical Manager, I purchased a sonogram 
     machine from ADR. That equipment was Y2K compliant. The 
     Salesman never told me it was compliant. It was simply built 
     to last. Why should we be protecting the vendors or 
     manufacturers of defective products rather than rewarding the 
     responsible ones?
       Also, as a doctor, I also hope the Committee will look into 
     the implications of this legislation for both patient health 
     and potential medical malpractice suits. This is an issue 
     that many doctors have asked me about, and that generates 
     considerable concern in the medical community.
       In sum, I do appreciate this opportunity to share my 
     experiences with the Committee. I guess the main message I 
     would like to leave you with is that Y2K problems affect the 
     lives of everyday people like myself, but the current legal 
     system works. Changing the equation now could give companies 
     like Medical Manager an incentive to undertake prolonged 
     litigation strategies rather than agree to speedy and fair 
     out-of-court settlements.
       I became a doctor, and a sole practitioner, because I love 
     delivering babies. I give each of my patients my home phone 
     number. I am part of their lives. This Y2K problem could have 
     forced me to give all that up. It is only because of my 
     lawyer, and the court system, that I can continue to be the 
     doctor that I have been. This bill, and others like it, would 
     take that away from me. Please don't do that. Leave the 
     system as it is. The court worked for me--and it will work 
     for others.
       Thank you.

  Mr. HOLLINGS. Mr. President, he is a doctor from Atlantic County, NJ. 
I will not read it in its entirety, but he said:

       . . . But it was a Y2K problem which recently posed a 
     serious threat to my practice, and that is why I am here this 
     morning.
       . . . Although I am a doctor, I am not here to speak on 
     behalf of the [AMA]. Although I am a small businessman, I am 
     not here to speak on behalf of the Chamber of Commerce. I 
     cannot tell you how these organizations feel. . . . But I can 
     tell you how it would have affected my business.
       I am one of the lucky ones. While a potential Y2K failure 
     impacted my practice, the computer vendor that sold me the 
     software system and I were able to reach an out-of-court 
     settlement which was fair and expedient.
       . . . In 1987, I purchased a computer system from Medical 
     Manager, one of the leading medical systems providers in the 
     country. I used the Medical Manager system for tracking 
     surgery, scheduling due dates and billing.

  Incidentally, that is very important for a doctor. If he gets sued 
for malpractice, it might be based on his computer and not on his 
professional treatment.
  I go on to read:

       . . . The system worked well for me for ten years, until 
     the computer finally crashed from lack of sufficient memory.
       In 1996, I replaced my old system with a new, state of the 
     art pentium system from Medical Manager for $13,000. This was 
     a huge investment for a practice my size.
       I remember joking with the computer salesman at the time 
     that this was a big purchase for me, and I was counting on 
     this system to last as long as the last one did--

  which was over 10 years--

       I remember the salesman telling me that he was sure that I 
     would get at least ten years out of it. He showed me a list 
     of how many of his local customers had used the Medical 
     Manager for longer than ten years.

  Jumping down:

       . . . one year later, I received a form letter from Medical 
     Manager telling me the system I had just purchased had a Y2K 
     problem. It was a problem that would make it impossible for 
     me to schedule due dates or handle my administrative tasks--
     as early as 1999.
       Medical Manager also offered to fix the problem that they 
     had created--but for $25,000.

  He only paid $13,000.

       I was outraged, as I suspect anyone sitting around this 
     table would be. The original system had cost me $15,000 when 
     I purchased it in 1986. The upgraded system cost me $13,000 
     in 1996. Now, a year later, they wanted another $25,000. They 
     knew when they sold me the $13,000 system that it would need 
     this upgrade--but, of course, they didn't tell me.
       The company ignored my request, however, and several months 
     later, sent me an estimate for fixing the problem--again, for 
     $25,000.

  But he said he didn't have the $25,000.

       . . . I was appalled at the thought of having to pay 
     Medical Manager for a problem that they had created and 
     should have anticipated.
       . . . I had to pay that $25,000. . .[so] I retained an 
     attorney and sued Medical Manager [under the present law].
       . . . To my great satisfaction, the legal system worked for 
     me and the thousands of other doctors who bought Medical 
     Manager's products since 1990. In fact, since I brought my 
     claim against Medical Manager, I have received numerous 
     telephone calls and letters from doctors across the country 
     who had similar experiences.

  I can go down the letter, Mr. President. The point is that he settled 
the case that was for some $1,455,000 for 17,000 doctors.
  I ask unanimous consent to print in the Record a note from Jack Emery 
of the American Medical Association.
  There being no objection, the note ordered to be printed in the 
Record, as follows:

                      American Medical Association

     Memo to: Washington Representatives, National Medical 
         Specialty Societies
     From: Jack Emery 202/789-7414
     Date: March 4, 1999
     Subject: Legislation Addressing Y2K Liability

       Several specialties have called to ask about the American 
     Medical Association's (AMA) position on H.R. 455 and S. 461. 
     The AMA is opposed to this legislation which would limit Y2K 
     liability. I've attached a copy of testimony the AMA 
     presented to the Ways and Means Committee last week on Y2K. I 
     call your attention to page nine of that testimony where we 
     address our specific concerns with this type of legislation.
       We understand that Barnes Kaufman, a PR firm, is attempting 
     to schedule a meeting on this issue later this week to mount 
     opposition to such legislation. Someone from this office will 
     attend the meeting whenever it is scheduled.

  Mr. HOLLINGS. Mr. President, this is dated March 4, 1999:

       Several specialities have called to ask about the American 
     Medical Association's (AMA) position on H.R. 455 and S. 461. 
     The AMA is opposed to this legislation which would limit Y2K 
     liability.
       I've attached a copy of testimony the AMA presented to the 
     Ways and Means Committee last week on Y2K. I call your 
     attention to page nine of that testimony where we address our 
     specific concerns with this type of legislation.

  I ask unanimous consent to have printed in the Record that testimony 
which was prepared before the committee on the House side.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

    Statement of Donald J. Palmisano, M.D., J.D., Member, Board of 
 Directors, and Chair, Development Committee, National Patient Safety 
Foundation, and Member, Board of Trustees, American Medical Association

(Testimony Before the House Committee on Ways and Means--Hearing on the 
  Year 2000 Conversion Efforts and Implications for Beneficiaries and 
                     Taxpayers, February 24, 1999)

       Mr. Chairman and members of the Committee, my name is 
     Donald J. Palmisano, MD, JD. I am a member of the Board of 
     Trustees of the American Medical Association (AMA), a Board 
     of Directors member of the National Patient Safety Foundation 
     (NPSF) and the Chair of the Development Committee for the 
     same foundation. I also practice vascular and general surgery 
     in New Orleans, Louisiana. On behalf of the three hundred 
     thousands physician and medical student members of the AMA, I 
     appreciate the chance to comment on the issue of year 2000 
     conversion efforts and the implications of the year 2000 
     problem for health care beneficiaries.


                              Introduction

       The year 2000 problem has arisen because many computer 
     systems, software and embedded microchips cannot properly 
     process date information. These devices and software can only 
     read the last two digits of the ``year'' field of data; the 
     first two digits are presumer to be ``19.'' Consequently, 
     when data requires the entry of a date in the year 2000 or 
     later, these systems, devices and software will be incapable 
     of correctly processing the data.
       Currently, nearly all industries are in some manner 
     dependent on information technology, and the medical industry 
     is no exception. As technology advances and its contributions 
     mount, our dependency and consequent vulnerability become 
     more and more evident. The year 2000 problem is revealing to 
     us that vulnerability.
       By the nature of its work, the medical industry relies 
     tremendously on technology, on computer sytems--both hardware 
     and software, as well as medical devices that have embedded 
     microchips. A survey conducted last year by the AMA found 
     that almost 90% of the nation's physicians are

[[Page S4229]]

     using computers in their practices, and 40% are using them to 
     log patient histories.\1\ These numbers appear to be growing 
     as physicians seek to increase efficiency and effectiveness 
     in their practices and when treating their patients.
---------------------------------------------------------------------------
     See footnotes end of article.
---------------------------------------------------------------------------
       Virtually every aspect of the medical profession depends in 
     some way on these systems--for treating patients, handling 
     administrative office functions, and conducting transactions. 
     For some industries, software glitches or even system 
     failures, can, at best, cause inconvenience, and at worst, 
     cripple the business. In medicine, those same software or 
     systems malfunctions can, much more seriously, cause patient 
     injuries and deaths.


                              Patient Care

       Assessing the current level of risk attributable 
     specifically to the year 2000 problem within the patient care 
     setting remains problematic. We do know, however, that the 
     risk is present and it is real. Consider for a minute what 
     would occur if a monitor failed to sound an alarm when a 
     patient's heart stopped beating. Or if a respirator delivered 
     ``unscheduled breaths'' to a respirator-dependent patient. Or 
     even if a digital display were to attribute the name of one 
     patient to medical data from another patient. Are these 
     scenarios hypothetical, based on conjecture? No. Software 
     problems have caused each one of these medical devices to 
     malfunction with potentially fatal consequences.\2\ The 
     potential danger is present.
       The risk of patient injury is also real. Since 1986, the 
     FDA has received more than 450 reports identifying software 
     defects--not related to the year 2000--in medical devices. 
     Consider one instance--when software error caused a radiation 
     machine to deliver excessive doses to six cancer patients; 
     for three of them the software error was fatal.\3\ We can 
     anticipate that, left unresolved, medical device software 
     malfunctions due to the millennium bug would be prevalent and 
     could be serious.
       Medical device manufacturers must immediately disclose to 
     the public whether their products are Y2K compliant. 
     Physicians and other health care providers do not have the 
     expertise or resources to determine reliably whether the 
     medical equipment they possess will function properly in the 
     year 2000. Only the manufacturers have the necessary in-depth 
     knowledge of the devices they have sold.
       Nevertheless, medical device manufacturers have not always 
     been willing to assist end-users in determining whether their 
     products are year 2000 compliant. Last year, the Acting 
     Commissioner of the FDA, Dr. Michael A. Friedman, testified 
     before the U.S. Senate Special Committee on the Year 2000 
     Problem that the FDA estimated that only approximately 500 of 
     the 2,700 manufacturers of potentially problematic equipment 
     had even responded to inquiries for information. Even when 
     vendors did respond, their responses frequently were not 
     helpful. The Department of Veterans Affairs reported last 
     year that of more than 1,600 medical device manufacturers it 
     had previously contacted, 233 manufacturers did not even 
     reply and another 187 vendors said they were not responsible 
     for alterations because they had merged, were purchased by 
     another company, or were no longer in business. One hundred 
     two companies reported a total of 673 models that were not 
     compliant but should be repaired or updated this year.\4\ 
     Since July 1998, however, representatives of the 
     manufacturers industry have met with the Department of 
     Veterans Affairs, the FDA, the AMA and others to discuss 
     obstacles to compliance and have promised to do more for the 
     health care industry.


                             administrative

       Many physicians and medical centers are also increasingly 
     relying on information systems for conducting medical 
     transactions, such as communicating referrals and 
     electronically transmitting prescriptions, as well as 
     maintaining medical records. Many physician and medical 
     center networks have even begun creating large clinical data 
     repositories and master person indices to maintain, 
     consolidate and manipulate clinical information, to increase 
     efficiency and ultimately to improve patient care. If these 
     information systems malfunction, critical data may be lost, 
     or worse--unintentionally and incorrectly modified. Even an 
     inability to access critical data when needed can seriously 
     jeopardize patient safety.
       Other administrative aspects of the Y2K problem involve 
     Medicare coding and billing transactions. In the middle of 
     last year, HCFA issued instructions through its contractors 
     informing physicians and other health care professionals that 
     electronic and paper claims would have to meet Y2K compliance 
     criteria by October 1, 1998. In September 1998, however, HCFA 
     directed Medicare carriers and fiscal intermediaries not to 
     reject or ``return as unprocessable'' any electronic media 
     claims for non-Y2K compliance until further notice. That 
     notice came last month. In January 1999, HCFA instructed both 
     carriers and fiscal intermediaries to inform health care 
     providers, including physicians, and suppliers that claims 
     received on or after April 5, 1999, which are not Y2K 
     compliant will be rejected and returned as unprocessable.
       We understand why HCFA is taking this action at this time. 
     We genuinely hope, however, that HCFA, to the extent 
     possible, will assist physicians and other health care 
     professionals who have been unable to achieve Y2K compliance 
     by April 5. We have been informed that HCFA has decided to 
     grant physicians additional time, if necessary, for 
     reasonable good faith exceptions, and we strongly support 
     that decision. Physicians are genuinely trying to comply with 
     HCFA's Y2K directives. In fact, HCFA has already represented 
     that 95% of the electronic bills being submitted by 
     physicians and other Medicare Part B providers already meet 
     HCFA's Y2K filing criteria. HCFA must not withhold 
     reimbursement to, in any sense, punish those relatively few 
     health care professionals who have lacked the necessary 
     resources to meet HCFA's Y2K criteria. Instead, physicians 
     and HCFA need to continue to work together to make sure that 
     their respective data processing systems are functioning 
     properly for the orderly and timely processing of Medicare 
     claims data.
       We also hope that HCFA's January 1999 instructions are not 
     creating a double standard. According to the instructions. 
     HCFA will reject non-Y2K compliant claims from physicians, 
     other health care providers and suppliers. HCFA however 
     has failed to state publicly whether Medicare contractors 
     are under the same obligation to meet the April 5th 
     deadline. Consequently, after April 5th non-compliant 
     Medicare contractors will likely continue to receive 
     reimbursement from HCFA while physicians, other health 
     care providers, and suppliers that file claims not meeting 
     HCFA's Y2K criteria will have their claims rejected. this 
     inequity must be corrected.
       Medicare administrative issues are of critical importance 
     to patients, physicians, and other health care professionals. 
     In one scenario that took place in my home state of 
     Louisiana, Arkansas Blue Cross & Blue Shield, the Medicare 
     claims processor for Louisiana, implemented a new computer 
     system--intended to be Y2K compliant--to handle physicians' 
     Medicare claims. Although physicians were warned in advance 
     that the implementation might result in payment delays of a 
     couple of weeks, implementation problems resulted in 
     significantly longer delays. For many physicians, this became 
     a real crisis. Physicians who were treating significant 
     numbers of Medicare patients immediately felt significant 
     financial pressure and had to scramble to cover payroll and 
     purchase necessary supplies.\5\
       We are encouraging physicians to address the myriad 
     challenges the Y2K dilemma poses for their patients and their 
     practices, which include claims submission requirements. The 
     public remains concerned however that the federal government 
     may not achieve Y2K compliance before critical deadlines. An 
     Office of Management and Budget report issued on December 8, 
     1998, disclosed that the Department of Health and Human 
     Services is only 49% Y2K compliant.\6\ In a meeting last 
     week, though, HCFA representatives stated that HCFA has made 
     significant progress towards Y2K compliance, specifically on 
     mission critical systems. In any case, we believe that HCFA 
     should lead by example and have its systems in compliance as 
     quickly as possible to allow for adequate parallel testing 
     with physician claims submission software and other health 
     care professionals. Such testing would also allow for further 
     systems refinements, if necessary.


                reimbursement and implementation of BBA

       To shore up its operations, HCFA has stated that it will 
     concentrate on fixing its internal computers and systems. As 
     a result, it has decided not to implement some changes 
     required under the Balanced Budget Act (BBA) of 1997, and it 
     plans to postpone physicians' payment updates from January 1, 
     2000, to about April 1, 2000.
       In the AMA's view, the Y2K problem is and has been an 
     identifiable and solvable problem. Society has known for many 
     years that the date problem was coming and that individuals 
     and institutions needed to take remedial steps to address the 
     problem. There is no justification for creating a situation 
     where physicians, hospitals and other providers now are being 
     asked to pay for government's mistakes by accepting a delay 
     in their year 2000 payment updates.
       HCFA has indicated to the AMA that the delay in making the 
     payment updates is not being done to save money for the 
     Medicare Trust Funds. In addition, the agency has said that 
     the eventual payment updates will be conducted in such a way 
     as to fairly reimburse physicians for the payment update they 
     should have received. In other words, the updates will be 
     adjusted so that total expenditures in the year 2000 on 
     physician services are no different than if the updates had 
     occurred on January 1.
       We are pleased that HCFA has indicated a willingness to 
     work with us on this issue. But we have grave concerns about 
     the agency's ability to devise a solution that is equitable 
     and acceptable to all physicians.
       Also, as it turns out, the year 2000 is a critical year for 
     physicians because several important BBA changes are 
     scheduled to be made in the resource-based relative value 
     scale (RMRVS) that Medicare uses to determine physician 
     payments. This relative value scale is comprised of three 
     components: work, practice expense, and malpractice expense. 
     Two of the three--practice expense and malpractice--are due 
     to undergo Congressionally-mandated modifications in the year 
     2000.
       In general, the practice expense changes will have 
     different effects on the various specialities. Malpractice 
     changes, to some modest degree, would offset the practice 
     expense

[[Page S4230]]

     redistributions. To now delay one or both of these changes 
     will have different consequences for different medical 
     specialties and could put HCFA at the eye of storm that 
     might have been avoided with proper preparation.
       To make matters worse, we also are concerned that delays in 
     Medicare's reimbursement updates could have consequences far 
     beyond the Medicare program. Many private insurers and state 
     Medicaid agencies base their fee-for-service payment systems 
     on Medicare's RBRVS. Delays in reimbursement updates caused 
     by HCFA may very well lead other non-Federal payers to follow 
     Medicare's lead, resulting in a much broader than expected 
     impact on physicians.


                     Current Level of Preparedness

       Assessing the status of the year 2000 problem is difficult 
     not only because the inventory of the information systems and 
     equipment that will be affected is far from complete, but 
     also because the consequences of noncompliance for each 
     system remain unclear. Nevertheless, if the studies are 
     correct, malfunctions in noncompliant systems will occur and 
     equipment failures can surely be anticipated. The analyses 
     and surveys that have been conducted present a rather bleak 
     picture for the health care industry in general, and 
     physicians' practices in particular.
       The Odin Group, a health care information technology 
     research and advisory group, for instance, found from a 
     survey of 250 health care managers that many health care 
     companies by the second half of last year still had not 
     developed Y2K contingency plans.\7\ The GartnerGroup has 
     similarly concluded, based on its surveys and studies, that 
     the year 2000 problem's ``effect on health care will be 
     particularly traumatic . . . [l]lives and health will be at 
     increased risk. Medical devices may cease to function.'' \8\ 
     In its report, it noted that most hospitals have a few 
     thousand medical devices with microcontroller chips, and 
     larger hospital networks and integrated delivery systems have 
     tens of thousands of devices.
       Based on early testing, the GartnerGroup also found that 
     although only 0.5-2.5 percent of medical devices have a year 
     2000 problem, approximately 5 percent of health care 
     organizations will not locate all the noncompliant devices in 
     time.\9\ It determined further that most of these 
     organizations do not have the resources or the expertise to 
     test these devices properly and will have to rely on the 
     device manufacturers for assistance.\10\
       As a general assessment, the GartnerGroup concluded that 
     based on a survey of 15,000 companies in 87 countries, the 
     health care industry remains far behind other industries in 
     its exposure to the year 2000 problem.\11\ Within the health 
     care industry, the subgroups which are the furthest behind 
     and therefore at the highest risk are ``medical practices'' 
     and ``in-home service providers.'' \12\ The GartnerGroup 
     extrapolated that the costs associated with addressing the 
     year 2000 problem for each practice group will range up to 
     $1.5 million per group.\13\


                   Remediation Efforts--AMA's Efforts

       We believe that through a united effort, the medical 
     profession in concert with federal and state governments can 
     dramatically reduce the potential for any adverse effects 
     with the medical community resulting from the Y2K problem. 
     For its part, the AMA has been devoting considerable 
     resources to assist physicians and other health care 
     providers in learning about and correcting the problem.
       For nearly a year, the AMA has been educating physicians 
     through two of its publications, AMNews and the Journal of 
     the American Medical Association (JAMA). AMNews, which is a 
     national news magazine widely distributed to physicians and 
     medical students, has regularly featured articles over the 
     last twelve months discussing the Y2K problem, patient safety 
     concerns, reimbursement issues, Y2K legislation, and other 
     related concerns. JAMA, one of the world's leading medical 
     journals, will feature an article written by the 
     Administrator of HCFA, explaining the importance for 
     physicians to become Y2K compliant. The AMA, through these 
     publications, hopes to raise the level of consciousness among 
     physicians of the potential risks associated with the year 
     2000 for their practices and patients, and identify avenues 
     for resolving some of the anticipated problems.
       The AMA has also developed a national campaign entitled 
     ``Moving Medicine Into the New Millennium: Meeting the Year 
     2000 Challenge,'' which incorporates a variety of 
     educational seminars, assessment surveys, promotional 
     information, and ongoing communication activities designed 
     to help physicians understand and address the numerous 
     complex issues related to the Y2K problem. The AMA is 
     currently conducting a series of surveys to measure the 
     medical profession's state of readiness, assess where 
     problems exist, and identify what resources would best 
     reduce any risk. The AMA already has begun mailing the 
     surveys, and we anticipate receiving responses in the near 
     future. The information we obtain from this survey will 
     enable us to identify which segments of the medical 
     profession are most in need of assistance, and through 
     additional timely surveys, to appropriately tailor our 
     efforts to the specific needs of physicians and their 
     patients. The information will also allow us to more 
     effectively assist our constituent organizations in 
     responding to the precise needs of other physicians across 
     the country.
       One of the many seminar series the AMA sponsors is the 
     ``Advanced Regional Response Seminars'' program. We are 
     holding these seminars in various regions of the country and 
     providing specific, case-study information along with 
     practical recommendations for the participants. The seminars 
     also provide tips and recommendations for dealing with 
     vendors and explain various methods for obtaining beneficial 
     resource information. Seminar participants receive a Y2K 
     solutions manual, entitled ``The Year 2000 Problem: 
     Guidelines for Protecting Your Patients and Practice.'' This 
     seventy-five page manual, which is also available to hundreds 
     of thousands of physicians across the country, offers a host 
     of different solutions to Y2K problems that physicians will 
     likely face. It raises physicians' awareness of the problem, 
     year 2000 operational implications for physicians' practices, 
     and identifies numerous resources to address the issue.
       In addition, the AMA has opened a web site (URL: www.ama-
     assn.org) to provide the physician community additional 
     assistance to better address the Y2K problem. The site serves 
     as a central communications clearinghouse, providing up-to-
     date information about the millennium bug, as well as a 
     special interactive section that permits physicians to post 
     questions and recommended solutions for their specific Y2K 
     problems. The site also incorporates links to other sites 
     that provide additional resource information on the year 2000 
     problem.
       On a related note, the AMA in early 1996 began forming the 
     National Patient Safety Foundation or ``NPSF.'' Our goal was 
     to build a proactive initiative to prevent avoidable injuries 
     to patient in the health care system. In developing the NPSF, 
     the AMA realized that physicians, acting alone, cannot always 
     assure complete patient safety. In fact, the entire community 
     of providers is accountable to our patients, and we all have 
     a responsibility to work together to fashion a systems 
     approach to identifying and managing risk. It was this 
     realization that prompted the AMA to launch the NPSF as a 
     separate organization, which in turn partnered with other 
     health care organizations, health care leaders, research 
     experts and consumer groups from throughout the health care 
     sector.
       One of these partnerships is the National Patient Safety 
     Partnership (NPSP), which is a voluntary public-private 
     partnership dedicated to reducing preventable adverse medical 
     events and convened by the Department of Veterans Affairs. 
     Other NPSP members include the American Hospital Association, 
     the Joint Commission on Accreditation of Healthcare 
     Organizations, the American Nurses Association, the 
     Association of America Medical Colleges, the Institute for 
     Healthcare Improvement, and the National Patient Safety 
     Foundation at the AMA. The NPSP has made a concerted effort 
     to increase awareness of the year 2000 hazards that patients 
     relying on certain medical devices could face at the turn of 
     the century.


                            Recommendations

       As an initial step, we recommend that the Administration or 
     Congress work closely with the AMA and other health care 
     leaders to develop a uniform definition of ``compliant'' with 
     regard to medical equipment. There needs to be clear and 
     specific requirements that must be met before vendors are 
     allowed to use the word ``compliant'' in association with 
     their products. Because there is no current standard 
     definition, it may mean different things to different 
     vendors, leaving physicians with confusing, incorrect, or no 
     data at all. Physicians should be able to spend their time 
     caring for patients and not be required to spend their time 
     trying to determine the year 2000 status of the numerous 
     medical equipment vendors with whom they work.
       We further suggest that both the public and private sectors 
     encourage and facilitate health care practitioners in 
     becoming more familiar with year 2000 issues and taking 
     action to mitigate their risks. Greater efforts must be made 
     in educating health care consumers about the issues 
     concerning the year 2000, and how they can develop Y2K 
     remediation plans, properly test their systems and devices, 
     and accurately assess their exposure. We recognize and 
     applaud the efforts of this Committee, the Congress, and the 
     Administration in all of your efforts to draw attention to 
     the Y2K problem and the medical community's concerns.
       We also recommend that communities and institutions learn 
     from other communities and institutions that have 
     successfully and at least partially solved the problem. 
     Federal, state and local agencies as well as accrediting 
     bodies that routinely address public health issues and 
     disaster preparedness are likely leaders in this area. At the 
     physician level, this means that public health physicians, 
     including those in the military, organized medical staff, and 
     medical directors, will need to be actively involved for a 
     number of reasons. State medical societies can help take a 
     leadership role in coordinating such assessments.
       We also must stress that medical device and software 
     manufacturers need to publicly disclose year 2000 compliance 
     information regarding products that are currently in use. Any 
     delay in communicating this information may further 
     jeopardize practitioners' efforts at ensuring compliance. A 
     strategy needs to be developed to more effectively motivate 
     all manufacturers to promptly provide compliance status 
     reports. Additionally, all compliance information should be 
     accurate, complete, sufficiently detailed and readily 
     understandable to physicians. We

[[Page S4231]]

     suggest that the Congress and the federal government enlist 
     the active participation of the FDA or other government 
     agencies in mandating appropriate reporting procedures for 
     vendors. We highly praise the Department of Veterans Affairs, 
     the FDA, and others who maintain Y2K web sites on medical 
     devices and offer other resources, which have already helped 
     physicians to make initial assessments about their own 
     equipment.
       We are aware that the ``Year 2000 Information and Readiness 
     Disclosure Act'' was passed and enacted into law last year, 
     and is intended to provide protection against liability for 
     certain communications regarding Y2K compliance. Although the 
     AMA strongly believes that information must be freely shared 
     between manufacturers and consumers, we continue to caution 
     against providing liability caps to manufacturers in exchange 
     for the Y2K information they may provide, for several 
     reasons. First, as we have stated, generally vendors alone 
     have the information about whether their products were 
     manufactured to comply with year 2000 data. These 
     manufacturers should disclose that information to their 
     consumers without receiving an undue benefit from a liability 
     cap.
       Second, manufacturers are not the only entities involved in 
     providing medical device services, nor are they alone at risk 
     if an untoward event occurs. When a product goes through the 
     stream of commerce, several other parties may incur some 
     responsibility for the proper functioning of that product, 
     from equipment retailers to equipment maintenance companies. 
     Each of these parties, including the end-user--the 
     physician--will likely retain significant liability exposure 
     if the device malfunctions because of a Y2K error. However, 
     none of these parties will typically have had sufficient 
     knowledge about the product to have prevented the Y2K error, 
     except the device manufacturer. To limit the manufacturer's 
     liability exposure under these circumstances flies in the 
     face of sound public policy.
       We also have to build redundancies and contingencies into 
     the remediation efforts as part of the risk management 
     process. Much attention has been focused on the vulnerability 
     of medical devices to the Y2K bug, but the problem does not 
     end there. Patient injuries can be caused as well by a 
     hospital elevator that stops functioning properly. Or the 
     failure of a heating/ventilation/air conditioning system. Or 
     a power outage. The full panoply of systems that may break 
     down as our perception of the scope of risk expands may not 
     be as easily delineated as the potential problems with 
     medical devices. Building in back-up systems as a fail-safe 
     for these unknown or more diffuse risks is, therefore, 
     absolutely crucial.
       As a final point, we need to determine a strategy to notify 
     patients in a responsible and professional way. If it is 
     determined that certain medical devices may have a problem 
     about which patients need to be notified, this needs to be 
     anticipated and planned. Conversely, to the extent we can 
     reassure patients that devices are compliant, this should be 
     done. Registries for implantable devices or diagnosis- or  
     procedure-coding databases may exist, for example, which 
     could help identify patients who have received certain 
     kinds of technologies that need to be upgraded and/or 
     replaced or that are compliant. This information should be 
     utilized as much as possible to help physicians identify 
     patients and communicate with them.
       As we approach the year 2000 and determine those segments 
     of the medical industry which we are confident will weather 
     the Y2K problem well, we will all need to reassure the 
     public. We need to recognize that a significant remaining 
     concern is the possibility that the public will overreact to 
     potential Y2K-related problems. The pharmaceutical industry, 
     for instance, is already anticipating extensive stockpiling 
     of medications by individuals and health care facilities. In 
     addition to continuing the remediation efforts, part of our 
     challenge remains to reassure patients that medical treatment 
     can be effectively and safely provided through the transition 
     into the next millennium.


                               conclusion

       We appreciate the Committee's interest in addressing the 
     problems posed by the year 2000, and particularly, those 
     problems that relate to physicians. Because of the broad 
     scope of the millennium problem and physicians' reliance on 
     information technology, we realize that the medical community 
     has significant exposure. The Y2K problem will affect patient 
     care, practice administration, and Medicare/Medicaid 
     reimbursement. The AMA, along with the Congress and other 
     organizations, seeks to better educate the health care 
     community about Y2K issues, and assist health care 
     practitioners in remedying, or at least reducing the impact 
     of, the problem. The public and private sectors must 
     cooperate in these endeavors, while encouraging the 
     dissemination of compliance information.


                               footnotes

       \1\ ``Doctors Fear Patients Will Suffer Ills of the 
     Millennium Bug; Many Are Concerned That Y2K Problem Could 
     Erroneously Mix Medical Data--Botching Prescriptions and Test 
     Results,'' Los Angeles Times, Jan. 5, 1999, p. A5.
       \2\ Anthes, Gary H., ``Killer Apps; People are Being Killed 
     and Injured by Software and Embedded Systems,'' 
     Computerworld, July 7, 1997.
       \3\ Id.
       \4\ Morrissey, John, and Weissenstein, Eric, ``What's 
     Bugging Providers,'' Modern Healthcare, July 13, 1998, p. 14. 
     Also, July 23, 1998 Hearing Statement of Dr. Kenneth W. 
     Kizer, Undersecretary for Health Department of Veterans 
     Affairs, before the U.S. Senate Special Committee on the Year 
     2000 Technology Problem.
       \5\ ``Year 2000 Bug Bites Doctors; Glitch Stymies Payments 
     for Medicare Work,'' The Times-Picayune, June 6, 1998, page 
     C1.
       \6\ ``Clinton Says Social Security is Y2K Ready,'' Los 
     Angeles Times, December 29, 1998, p. A1. See ``Government 
     Agencies Behind the Curve on Y2K Issue,'' Business Wire, 
     January 28, 1999 (stating that Computer Week on November 26, 
     1998 reported only a 34% Y2K compliance level for the 
     Department of Health and Human Services).
       \7\ ``Health Care Not Y2K-Ready--Survey Says Companies 
     Underestimate Need For Planning; Big Players Join Forces,'' 
     Information Week, January 11, 1999.
       \8\ GartnerGroup, Kenneth A. Kleinberg, ``Healthcare 
     Worldwide Year 2000 Status,'' July 1998 Conference 
     Presentation, p. 2 (hereinafter, GartnerGroup).
       \9\ Id. at p. 8.
       \10\ Id.
       \11\ Id. at p. 10.
       \12\ Id. at p. 13.
       \13\ Id

  Mr. HOLLINGS. I do not want to mislead. As I understand, as of this 
morning my staff contacted Mr. Emery. And they said that the AMA is not 
openly opposing the legislation, but if there is going to be 
legislation, they want to be taken care of. They want all the tort 
things to take care of them, too.
  Mr. WYDEN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. I ask unanimous consent to speak for 3 minutes just to 
briefly respond to several of the points made by the Senator from South 
Carolina.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. WYDEN. Thank you, Mr. President. I will be very brief.
  I specifically want to talk on this matter with respect to the 
evidence which would be considered in these suits. The sponsors of the 
substitute have made it very clear in the Senate that we will strike 
the clear and convincing evidence standard. It is an important point 
that the Senator from South Carolina has made.
  What we have indicated is that we think it is in the public interest 
to essentially use the standard the Senate adopted in the Year 2000 
Information and Readiness Disclosure Act which passed overwhelmingly in 
the Senate. So we have something already with a strong level of 
bipartisan support, and it is an indication again that the sponsors of 
the substitute want to be sympathetic and address the points being made 
by the Senator from South Carolina.
  But at the end of the day, this is not legislation about trial 
lawyers or campaign finance. And I have not mentioned either of those 
subjects on the floor of the Senate. But this is about whether or not 
the Senate is going to act now, when we have a chance to address this, 
in a deliberative way, and produce good Government--something which 
will make sense for consumers and plaintiffs who are wronged and at the 
same time ensure that we do not have tumult in the marketplace early 
next year.
  I am very hopeful we can go forward with this legislation.
  I thank the Presiding Officer for the opportunity to respond. I yield 
the floor.
  Mr. HOLLINGS. Mr. President, I ask unanimous consent I may address 
the Senate for 1 minute.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. HOLLINGS. Mr. President, I am reading page 30. The language 
there--the last 3 lines; 23, 24, and 25--``The defendant is not liable 
unless the plaintiff establishes that element of the claim in 
accordance with the evidentiary standard required,'' which is the 
greater weight by the preponderance of the evidence. That is lined out. 
And written--and I understand in Chairman McCain's handwriting--here, 
``by clear and convincing evidence.''
  Again on page 31 of the particular bill under consideration, on lines 
19 and 20, ``in accordance with the evidentiary standard required'' is 
lined out; and inserted in lieu thereof ``by clear and convincing 
evidence.''
  That is why I addressed it that way. That is what we have before us.
  I thank the Chair.




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