The Virtual Lawyer - More Fear and Loathing on the Way to Y2K

by David Crocker

Published 1998-10-01    Printer-friendly version

In last month's column ("The Millennium Shrug"), I meekly suggested (1) that the Y2K problem, while serious, was not the stuff of which apocalypses are made, and (2) that certain lawyers who had morphed into locusts for the occasion should morph back into responsible professionals. Far be it from me to criticize my brethren, you understand. Rather, I was simply writing as a humble observer with eyes that can see in daylight and a nose that can tell the difference between Shinola and that other stuff. Although this should have been my last comment on the subject, popular demand forces me to take another drive through the swarm of locusts to see what splatters on the windshield. Music maestro, please.

Buck Fever

Every hunter (or predator, for that matter) has suffered from buck fever at least once. When you see that very first deer though the sights, the tendency is to "jump the gun" and fire too soon. When Intuit crossed Alan Issokson's sights in April, the software maker apparently dodged the bullet. Issokson, you see, was the nominal plaintiff in a class action lawsuit filed in the California superior court. Issokson alleged that the meanies at Intuit grievously wounded him when they failed to provide a free patch for the Quicken 5.0 package that he purchased in 1995. It doesn't matter, of course, that Intuit is now into Version 6.0 and 7.0 and that it only costs thirty-five dollars to upgrade to a new and enhanced version that is also Y2K compliant. Will someone heat up this guy's bottle? This is shrinkwrap software!

It's Not 2000 Yet, Stupid

There was only one problem with Issokson's little scam: it isn't the year 2000 yet! While his old version of Quicken may not function properly after 1999, it certainly works just fine now. The California court threw out the suit in early September because the plaintiffs and their locust-lawyers were not able to demonstrate any damages in the here and now. Funny how that works.

Intuit has still to deal with four other such class action lawsuits (including one in New York) all alleging the same thing. Presumably these buck fever suits will get flushed as well. Having sales of $300 million per year, after all, makes Intuit an inviting target. Also in the class action cross-hairs is Symantec (older versions of the Norton Antivirus are not compliant) and Software Business Technologies, Inc. (earlier versions of its SBT Pro Series accounting software are not compliant). Both offer upgrades that provide enhancements for the money spent and are compliant to boot. Trust me, this sort of fun is just beginning.

The Social Cost

But these games do have a social cost: When the California court threw out the Intuit suit, Intuit's counsel noted correctly that the case was merely an attempt to exploit a crisis and, that by filing such suits, "plaintiffs and their lawyers are prompting some companies to conceal their products' Year 2000 problems instead of fully disclosing them." A good point, that, and one that is prompting a legislative response to anticipated liabilities. Bear in mind that none of this stuff is law just yet, but it probably will be by the time you see this in print.

The Congress Reacts

Two similar bills are in play before the Congress. The first is a bill proposed by the Clinton administration; the second was introduced by Rep. Drier of California. The administration bill would provide a safe harbor from liability for any future public "statements" about Y2K compliance of a company's products that turns out to be inaccurate or incomplete. This bill would not address liability for incomplete remediation efforts arising from "true" Y2K failures in products or services sold by the company.

Drier's bill goes a bit further along this road: First, it prohibits introduction into evidence in litigation, state or federal, of any written statement explicitly labeled as a "Year 2000 Readiness disclosure." Second, Drier's bill provides legal immunity for Y2K "statements" under a more generous standard than the administration bill. While the administration proposal provides a "safe harbor" for statements unless they (1) are material and (2) were made in gross negligence, with knowledge of falsity or with an intent to deceive, the Drier bill eliminates the negligence standard altogether and requires a plaintiff to prove fraud. Under Drier's bill, unless a plaintiff can prove mendacity (and not mere empty-headedness) in connection with a public statement about Y2K compliance, he would be out of luck.

Love That Retroactivity

Finally, the administration's bill would protect Year 2000 statements made after July 14, 1998 and before July 14, 2001 and would not be applicable to lawsuits filed before July 14 of this year. Drier's effort is broader still: statements would be protected if made after January 1, 1998. Further, the bill contains no restriction on pending lawsuits. Under Drier's bill, companies could designate as protected any Year 2000 statement made after January 1, 1998 and prior to the law's effective date. Retroactivity is great, ain't it?

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