Ethics & Law: Y2K … A bonanza for lawyers

A lot of dates are mentioned when the subject of the Year 2000 gremlin comes up…but one that isn’t on most “watch” lists is Aug. 4, 1997. . . the day on which the first Y2K lawsuit was filed.

The Y2K litigation docket is still in its infancy, with less than two dozen cases filed, but like the first grain of sand through an hourglass, Produce Palace International v. Tec-America Corp. promises to be followed by a steady flow of Y2K legal disputes.

The plaintiffs in Produce Palace had a simple complaint that will likely be replicated.

The fruit-and-vegetable vendor purchased a cash register system from the defendants. But each time a customer paid for a purchase with a credit card that contained an expiration date ending in “00,” the computerized system crashed.

The lawsuit was settled in September 1998 for $250,000. To date, it’s the only case on record where the outcome is known.

Although few if any schools run software-dependent cash registers, many checked with consultants before installing Information Technology (IT) hardware and software.

In the case of Young v. Baker, a partner in the firm of Andersen Consulting recently filed suit in response to a claim by J. Baker Inc. that the computer software merchandising system recommended by Young is not Y2K/OK (Year 2000 compliant).

Young responds that none of the available mainframe systems were capable of Y2K operation, and he has no liability for the cost of repairing the faulty code. In seeking to have the Massachusetts court declare that all contractual obligations were met, the lawsuit raises the proactive defense that where Y2K-compliant alternatives did not exist, which was (and still is) true of many mainframe and PC-based systems, there can be no Y2K liability. It remains to be seen whether Young can get around the thorny question of whether there was a duty to inform the customer that the system would need renovation less than 10 years later.

The bottom line in most lawsuits filed to date (and most that are yet to be filed) is who is going to pay for fixing non-Y2K/OK systems.

The closer we get the millennium, the more expensive it will be to purchase a fix, so the potential damages are staggering if makers are liable.

On the other hand, if there is no financial responsibility for selling software that becomes useless after Y2K unless repaired, the cost to purchasers will be similarly enormous. Unless there is a clear warranty for Y2K compliance or explicit Y2K language in a purchase contract, the legal exposure of manufacturers and sellers is far from settled.

For those Y2K-afflicted schools that cannot (and should not) wait for the outcome of these lawsuits, one alternative is to offer to split the cost of remediation with the vendor.

Not only is this likely to be a quick way to get Y2K/OK, but in the long run, what you save on legal fees (plus the risk of losing on the claim) might make compromise a sound management decision

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