Lawyer advises gearing up now for Y2K suits

Lawyer advises gearing up now for Y2K suits

From a legal standpoint, the most important Y2K activity over the next month is to get ready to initiate or respond to a year 2000 lawsuit.

The US federal Year 2000 Readiness and Responsibility Act, which supersedes most state legislation, limits liability and certain types of damages, provided that the parties follow proper procedures in a timely manner, said Dan Hassett, a partner at the law firm Williams Mullin Clark & Dobbins in Vienna, Va.

A summary of the act is available at the Information Technology Association of America's Web site (

The law calls for a company that experiences a Y2K failure to send a detailed notice to the prospective defendant before filing a lawsuit. The notice must describe the failure and the remedy sought and give the defendant the opportunity to make things right. The defendant has 30 days to respond with an offer to fix the problem or go to arbitration. Then the defendant has 60 days to come up with a plan for the fix or begin arbitration.

With this kind of timetable in mind, Hassett said, "today you need procedures in place and an idea of how you will respond." That means knowing the process specified in the Y2K law, having all the information you need to initiate an action - including contact people and addresses for each vendor - and keeping the boilerplate parts of a letter ready to go so that you can fire it off quickly in the event of a failure and start the clock ticking, he said.

Taking Action

Remember, too, that the clock may be ticking at your expense. If someone sends your company a notice alleging that a system failure on your part caused harm, you need to make sure that the complaint gets to your legal department immediately. With only 30 days to respond, you don't want it sitting in an "in" basket.

You should also have a boilerplate response ready and a process in place to assure that you respond within 30 days.

"If you respond on the 31st day, you lose your rights," Hassett said.

Businesspeople also need to understand the legal concepts of "duty to mitigate" and "proportionate liability" as they affect Y2K cases, Hassett said.

"These are two separate issues, but they get back to the same action item," he said. Both are based on the principle that holds when a baseball batter gets hit by a wild pitch: He gets a free base only if he tried to get out of the way.

"If you're a plaintiff, you can't sit around and let the business fall to pieces and bring a claim," he said. It is the responsibility of your company to have a contingency plan, go to alternate vendors and do whatever it can to mitigate the damage. If the defendant can show that your company didn't do those things, the company may be found responsible for a portion of the damages.

To escape being assessed proportionate liability, your company needs to be able to tell the story of how it prepared for Y2K. If you haven't already done so, collect contemporary documents to show your Y2K assessment, remediation, validation and contingency-planning activities.

"It's a lot harder to document five months down the road," Hassett said.

Then keep the documentation up-to-date moving forward, and be sure to carefully document any failures that occur as well as how you've tried to mitigate the damages.

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