[Congressional Record (Bound Edition), Volume 145 (1999), Part 6] [SENA] [Pages 7628-7629] [From the U.S. Government Publishing Office, www.gpo.gov]Y2K Mr. LEAHY. Mr. President, there has been some discussion about Y2K and the Y2K liability bill. It seems every moment I settle down in my office to do other work, I get calls for another meeting on Y2K. I thought it might be good to let my colleagues and the public know what is in the Y2K bill we will be discussing this afternoon. I have a chart; we like charts in this place. This chart shows how simple this bill is not. It illustrates the detours, roadblocks, and dead ends the bill would impose on innocent plaintiffs in our State- based legal system. I have a real-life example so we can see what will happen. A small business owner from Warren, MI, Mark Yarsike, testified before the Commerce and Judiciary Committees about his Y2K problems. A few years ago, he bought a new computer cash register system for his small business, Produce Palace. However, they didn't tell him it wasn't Y2K compliant. This brand-new, high-tech cash register system, which the company was happy to sell him for almost $100,000, kept crashing. The computer cash register system kept breaking down. After more than 200 service calls, it was finally discovered why; it couldn't read credit cards with an expiration date in the year 2000--like the credit card I have in my wallet right now. That is a Y2K computer defect that would be covered under this bill and the company would be protected, not Mark Yarsike. The company that sold him this defective piece of equipment for $100,000 would be protected. At the top of this chart is how the State-based court system works today for Mark Yarsike, whose business buys a new computerized cash register system and, because of a Y2K defect, the system crashes. I will in a moment speak to what happens if we pass this legislation before the Senate. Assume we show some sense and reject the legislation; if Mark Yarsike asks the company to fix the system, if the company knows they have to do something for the owner, they will either agree to fix the problem--which is really what he wants; he doesn't want to sue, he just wants his problem fixed--they agree to fix it and make a quick, fair settlement for his damages. That is it. Or they could fail to fix it, he could go into court, and a trial would decide who is at fault. Now, that is basically what happens today. In fact, that is what happened to Mark Yarsike. He was forced to buy a new computer cash register system from another company. He sued the first company which sold him the computer that wasn't Y2K compliant, that caused him to lose so much business. He recouped his losses through a fair settlement, and the court system worked for him. Now, say ``Joe's'' business--not Mark Yarsike, who went through the normal court process--buys a computer cash register system under the bill before the Senate. Assume we pass this bill, assume the President signs it into law. All of a sudden, instead of this very simple straight line as indicated on the chart, the Congress of the United States is saying: We are from the Government and we are here to help you, we will make life simpler for you. Instead of giving the nice straight line, which is what the law is today, this is what he is presented: first he has to wait 30 days, during which nothing happens; during that time, he still has to turn away business because every customer with a new credit card can't use it, and they will say, to heck with this place, I will go somewhere else. Even if after the 30 days, the company may send a written response and just say that we have another 60 days you will have to wait; if that doesn't put you out of business, then you can also file a lawsuit to recover damages if you are not already out of business anyway. If he files a lawsuit, under the bill's contract preservation provision we get to our first dead end on the road to justice. The cash register company may be able to enforce unconscionable limits on any recovery if it is in a written contract. Under this bill before the Senate, the unconscionable limits in the written contract are strictly enforced unless the enforcement of that term would manifestly and directly contravene State law and statute in effect January 1999 specifically addressing that term. In other words, if the State legislatures had not known by January 1 of this year what the U.S. Congress, in its infinite wisdom, was going to do in May of this year when enacting a statute that specifically anticipated what we might do, Joe is out of luck. If the small business owners can't recover the losses from the Y2K defective cash register system because of this contract preservation provision, then he does have other alternatives: He can go bankrupt; he can fire his employees, lay them off; or if somehow he was able to get past these roadblocks, he could actually file a suit. We have another detour. The company gets another 30-day extension to respond to the complaint. Their business isn't hurting, but Joe is barely able to hang on. When the small business owner files that lawsuit, he has to meet special pleading requirements under this bill. He has to file with complaints specific statements on the defendant's state of mind, the nature of the amount of damage, and the material Y2K defect. So he has three more roadblocks--all of which can lead to this dead end. If he misses any one of those hurdles we have put in his way, he is right back to a dead end. The cash register company can say, bye bye, see you; tough, Joe; we will send you a postcard when you are at the bankruptcy court. Now, suppose the cash register company had sold others of these $100,000 system with a Y2K defect. Should we all join together and bring a class action? No, we come into a new roadblock, back to a dead end, back to bankruptcy again. So let's move on to the next roadblock that is put in the bill--the roadblock we are putting in the way of small businesses. That is something the business lobbyists are not telling the small businesses about, all the roadblocks that are in this special interest legislation. This bill has a ``duty to mitigate'' section that turns traditional tort law on its head. It requires the plaintiff to anticipate and avoid any Y2K damage before it occurs, not after. Almost all the States have adopted the traditional duty to mitigate tort law, which requires the injured party to mitigate his damages once the harm occurs. That makes some sense. But this requires mitigation before the harm occurs. If the owners bought this $100,000 cash register and didn't anticipate that a lot of its customers are going to leave because the cash register does not work as he was told it was going to, how does he mitigate? He wants to run his business. He doesn't make cash registers. He expects them, for $100,000, to do it right. But if he didn't try to mitigate before the system crashed, then he could be caught in another dead end, end of the road here, and right back down to bankruptcy, and employees are out. I do not understand how he could have known his cash register system was not going to be able to read credit cards with the year 2000 expiration date after he paid $100,000 for it, but that doesn't matter. This case would be dismissed because of the bill's duty to mitigate provision. So, roadblock after roadblock--in fact, there is another one. Let's assume somehow Joe is driving a humvee of some sort through the legal system and [[Page 7629]] he is getting it past these roadblocks. He has another one. Because what he does not know is that the Senate has overridden the 50 State legislatures. We have said to the legislators: Boy, you guys are dumb. The men and women in these State legislatures are not as smart as we are. So we are just going to throw your laws out and we will just pass our laws and override you. Because the bill would override State contract law and could even preempt existing implied warranties under State law. For the small business owner, the bill's Federal preemption contract clauses may override the State common law claims of breach of implied warranties. Again, here he is at another roadblock, another dead end leading back to bankruptcy. Then, say he somehow got through all of these roadblocks and dead ends that we put in, basically to make it impossible for a small business owner; everything that we have done to put roadblocks and dead ends in. Let's say he gets through all of them. He still has more limits on his legal rights at the jury verdict point. There are severe limits on recovery. In fact, if it is a small business, then $250,000 is the ceiling for any punitive damages award. If he can prove they intentionally defrauded him, then there is an exemption from these punitive damage caps. This bill is saying: If you can prove intention to defraud, we might give you a chance. This is a meaningless exception in the real world. Nobody is going to be able to meet this exception, proving the injury was specifically intended. How in the world is our small business owner, who is just trying to keep the place alive at this point, going to prove the cash register company intentionally tried to injure him by selling him a Y2K defective cash register system? Let's get real here. It is not going to happen. Again, the best thing for him is bankruptcy. The big company can breathe a sigh of relief and they are out. And on and on. Severe joint liability limits; for directors and officers, partial immunity; severe caps on recovery--all of these things end up protecting the companies, overriding State laws, and saying to the small business owner we are not going to do anything for you. You know, directors and officers are already protected by the business judgment rule adopted by each of the 50 States. But we put a special legal protection for them in this bill. I think that sends the wrong message to the business community. We want to encourage decision makers to be overseeing aggressive year 2000 compliance measures. Instead, we say: Don't worry, be happy. I want those corporate officers motivated to fix their company's Y2K problems now. After their corporation is Y2K compliant and they have worked with their suppliers and customers and business partners and we have avoided Y2K problems is the time to be happy. A few of these detours, roadblocks and dead ends may be justified to prevent frivolous Y2K litigation. But certainly not all of them. This bill makes seeking justice for the harm caused by a Y2K computer problem into a game of chutes and ladders--but there are only chutes for plaintiffs and no ladders. The defendant wins every time under the rigged rules of this game. Unfortunately, this bill overreaches again and again. It is not close to being balanced. In addition, this bill preempts all 50 state consumer protection laws and makes ordinary consumers face the bill's legal detours, road blocks and dead ends on the road to justice. That is not fair. Today, I filed a consumer protection amendment to exclude ordinary consumers from the legal restrictions in the bill. I hope the majority will permit amendments to be brought up on this legislation soon. I remain open to continuing to work with interested members of the Senate on bipartisan, consensus legislation that would deter frivolous Y2K lawsuits and encourage responsible Y2K compliance. Those of us in Congress who have been active on technology-related issues have struggled mightily, and successfully, to act in a bipartisan way. It would be unfortunate, and it would be harmful to the technology industry, technology users and to all consumers, if that pattern is broken over this bill. I hope Members will look at what we are doing here. Here is the system we have today for Y2K. Here is the system we are suggesting with all these dead ends, all these roadblocks: Roadblock, roadblock, roadblock, roadblock, all leading to small businesses going bankrupt and all because we stand up here and say to 50 State legislatures: You are not smart enough. You are not as smart as we are. We are going to override you. I think that is wrong. I think we ought to go back to the drawing boards. I think we ought to do what we did last year when we passed good Y2K legislation because we did it in a bipartisan fashion where we had businesses, Members of Congress, lawyers, those in the high-tech field--we came together and passed legislation that worked and the President signed it into law. This maze, this unnecessary trampling of State legislatures, will not be signed into law by the President of the United States. The PRESIDING OFFICER. The Senator from Alabama. ____________________