Y2K legislation limits school liability: Disputing parties would have 90 days to settle grievances; schools cannot be sued for punitive damages

A bill aimed at preventing a flood of lawsuits stemming from year 2000 (Y2K) computer malfunctions was approved by Congress in July and awaited the president’s signature at press time. The bill, passed after both sides hammered out a compromise that would win White House support, also shields school districts and other government entities from punitive damages in the event of a Y2K-related suit.

The legislation seeks to limit lawsuits by giving disputing parties a 90-day cooling-off period to settle their grievances out of court. It also puts limits on class-action lawsuits, ensures that, in most cases, companies will be held responsible only for the damage they cause, and caps the amount that plaintiffs can collect in punitive damages from companies with fewer than 50 employees.

School districts would be exempt from paying such damages. In the event that a parent or employee sues a school district for Y2K-related computer failure, such as if the payroll system goes down or a transcript is delayed, the district would be required to pay only compensatory damages—and only after the district has had a chance to get its systems in order.

“This gives schools some breathing room before the lawyers get involved,” eSchool News ethics and law columnist David Splitt said. “What it really means is that schools have an opportunity to protect themselves and to enact contingency plans if something does go wrong.”

The legislation was passed after a lengthy debate about how to limit what some consider a potential flood of lawsuits because of the problem. Experts have estimated that the cost of potential damages from Y2K-related failures could total more than $1 trillion.

The Y2K problem, also called the millennium bug, stems from an old programming shortcut that used only the last two digits of the year. Because these programs could read the digits “00” as 1900 instead of 2000, some computer systems—especially older ones—might fail when the date changes to 2000.

The bill, said Sen. Ron Wyden, D-Ore., chief Senate sponsor along with Sens. John McCain, R-Ariz., and Christopher Dodd, D-Conn., will “make sure that America’s prosperity does not screech to a halt when the calendar pages slip over to start a new millennium.”

Business groups and the high-tech industry lobbied hard for the legislation, saying it would allow companies to focus on solving the problem without worrying about the threat of a lawsuit if their systems fail.

But some consumer groups see the legislation as an infringement on basic legal rights. President Clinton repeatedly threatened to veto the originally passed House and Senate bills, saying they went too far in restricting the rights of Americans to go to court and win full compensation for company negligence.

Wyden and Dodd led intense negotiations that gave consumers some added protections in the bill and won the White House’s reluctant acceptance. For example, the compromise legislation increases the monetary cap for class-action lawsuits from $1 million to $10 million before a case can be moved to the more expensive federal courts.

White House Chief of Staff John Podesta said it was only because of the “unique and unprecedented” nature of the Y2K problem that the president would sign the bill. Normally, he said, “the administration would oppose many of the extraordinary steps taken in this legislation to alter liability and procedural rules.”

To satisfy critics who fear it will open the doors to further efforts by Congress to change liability laws, the legislation will go off the books after three years.

Here’s a summary of the legislation’s key points:

• It requires a 30-day notice to the defendant of the plaintiff’s intention to sue, along with a description of the problem. If the defendant responds with a plan to remediate, then an additional 60 days is allowed to resolve the problem before a suit can be brought. If the defendant doesn’t agree to fix the problem, the plaintiff can sue on the 31st day.

• Municipalities and government entities (including school districts) are exempt from punitive damages. For small businesses with fewer than 50 employees, punitive damages are capped at $250,000 or three times the amount of compensatory damages, whichever is less.

• The law does not interfere with parties who have already agreed on Y2K terms and conditions. It ensures that, in most cases, defendants pay only for damages they are responsible for (proportional liability).

• Personal injury and wrongful death claims aren’t covered by the law.

Senate Commerce Committee’s Y2K site

http://www.senate.gov/~commerce/issues/ y2k.htm

Dennis Pierce

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