I. Introduction to Y2K Litigation
A.
U.S. v Mark Shkolir, et al.
B. AAA – The American Arbitration Association
II. What could go wrong?
A.
FAA test on a radar system
B. Belgium Stock Exchange error in 1997
C. Undetected progressive data corruption
D. "Internal" compliance
E. Recession
1. domestic 60%
2. global 70%
F. Railroad Crossings, pacemakers
G. Prisoners released too soon!
H. Corned beef manufacturer destroyed new inventory b/c
the computer thought it was over 100 years old!
I. Special Problems for Lawyers – exposure to liability
1. trial dates after 2000
2. conflict of interest systems
3. archiving systems
4. billing problems – fee disputes
5. statute of limitations problems
6. time to draft disclaimers for yourself and clients
7. the due diligence checklist
8. Professional liability coverage?
J. GPS satellites will all cease functioning
K. Microsoft: Windows and IE are non-compliant
III. Squashing the bug
A.
Worldwide fix à estimated between
600 billion to 4 trillion
B. 68% are working on the problem, April ’98
C. Federal Reserve
D. FAA, Medicare – Medicaid, IRS
E. Airlines have announced reduced flights, or no flights
for the millennium
IV. Theories of Y2K Liability
A.
Securities
1. companies that make material expenditures on the fix
2. mutual funds invested in unfixed companies
3. across the board losses due to big market correction
4. poor predications of Y2K losses
5. Fiduciaries – liable for losses if they don’t steer
clear of non-compliant companies?
6. Fraud – when a company claims to be compliant but
is not, or fails to disclose
B. Contract based claims
1. breach of express, implied warranties
2. merchantability
C. Class Actions – Milberg, Weiss, Bershad, Hynes &
Lerach, LLP
D. Negligent misrepresentation, intentional
E. Strict products liability
V. Defending against the Y2K suit
A.
Inform clients
B. Is the client a "technologically sophisticated investor?"
C. The problem is so big; there is no way to avoid it!
D. Proof of disclosures
E. Recommendations to reposition
F. Internal Y2K problems à
make an effort to fix
G. Torts
1. unforseeability
2. state of the art
3. customer knowledge of an open and obvious defect
H. Force Majure
I. Exculpatory provisions
VI. Lawsuits
A.
Produce Palace International v TEC-American Corp. (cash registers
not taking credit cards) – the 1st case
1. Mediated for $250K
B. Typical Y2K lawsuit – Paul Pacemaker
1. Defendants (pacemaker manufacturer, software designers
of pacemaker and related diagnostic equipment, the
software consultant who did not succeeded in fixing the problem, cardiologist,
hospital, pacemaker vendor,
HMO)
C. Personal Injury – product is made after Y2K problem
discovered but still isn’t remedied
D. Atlaz, Issokson cases – no free upgrades for
non-compliant software
E. Medical Manager cases: new upgrade software
requires new computers with Pentium II processors; breach of
warranties; unfair trade statutes; NY, CA, FL, PA, NJ
F. Against Gravity Apparel, Intuit: knew software
wasn’t Y2K compliant, sold it anyway, no free upgrades
1. CA Intuit case demurred because damages have
yet to occur
VII. Legislation
A.
Nevada –state officials are immune from Y2K suits, sovereign immunity
B. FL, NH, CA (now defeated) have proposed legislation
C. GA, CT, ME, NY, WA all have bills to provide funds
for compliance or incentives for people to work on the
problems
D. Federal – passed both houses. HR 4455
1. Does not protect from all liability, but will help
to solve the problem faster, hopefully
2. ATA opposes
3. It’s about disclosure
LINKS:
http://www.y2ksurvive.com/ Can we Survive?
http://www.y2k.com/whosresp.htm/ Who is Liable?
http://www.2000law.com/html/lawsuits.html/ The Lawsuits
http://www.salonmagazine.com/21st/feature/1998/06/cov_11feature.html IT’S THE END OF THE WORLD AS WE KNOW IT!
http://cio.gov/y2k6q.htm Lengthy government report (bottom has links)