Washington politicos are already hailing 2000 as the Year of the Bridge to the Future and the Year of the Woman Voter. Now some of them are also hustling to make sure that Jan. 1 doesn't usher in The Year of the Lawyer.

Some Republicans, with a sprinkling of Democrats, are promoting bills in both the Senate and the House that would divert potential lawsuits stemming from the Year-2000 computer bug. The proposals come at a sensitive time for Y2K policymakers. While business and the federal government appear to be making headway against Y2K, Congress must still acknowledge the danger that computer blackouts could snarl the economy. Republicans are speculating that this could spawn lawsuits seeking some $1 trillion in damages -- dwarfing the combined costs of asbestos, tobacco, breast-implant, and Superfund toxic waste litigation.

It's a huge number but not unthinkable, contend supporters of the legislation, who argue that legal blame for Y2K failures could spread to millions of U.S. businesses. "We don't think the trial bar should view this as their next field of dreams," snipes R. Bruce Josten, vice-president of governmental affairs at the U.S. Chamber of Commerce.

Current Senate proposals -- offered by Senators Orrin Hatch (R-UT), Christopher Dodd (D-CT), and John McCain (R-AZ) -- would require Y2K lawsuits to navigate around a number of obstacles before they hit the courts. While each proposal has its own wrinkles, they all share some common ideas. Chief among them is a 90-day waiting period, during which businesses would be encouraged to fix their Y2K problems before a suit went to court. Plaintiffs would also have to provide highly-detailed complaints, specifying the exact damage they suffered, and who they believe caused it.

ANGRY LAWYERS. Defendants would be granted special rights, such as the ability to mount a "reasonable efforts" defense crediting them for all the measures they had taken to guard against Y2K failures. The legislation also would create rules for pre-screening class-actions (which allow multiple parties to join into one large lawsuit). And it would sanction so-called proportionate damages, in which courts would assign a percentage share of liability to each party determined to have caused harm. This set of rules would only apply to economic-based claims, not to Y2K-related personal-injury suits.

"Businesses would rather work things out than sit down and wait for a court to decide on a case," says Jan Amundson, general counsel at the National Association of Manufacturers and co-chair of the Year-2000 Coalition, a group of business interests supporting the legislation. "That could take one to three years. What's the utility in that?"

Many lawyers, and some businesses, are fuming. They claim that the proposed bills would slap unfair limits on the fundamental rights of businesses harmed by Y2K to sue. Further, they add, the 90-day waiting period would hurt small cash-strapped companies. And they claim that proportionate liability and reasonable-effort rules would essentially grant amnesty to well-heeled software makers responsible for the Y2K glitch. "These bills would largely coddle companies that fail to take the appropriate, corrective actions...," says Mark Mandell, president of the Association Of Trial Lawyers of America, obliquely referring to Microsoft, IBM, and Oracle, all of whom have produced Y2K-deficient products.

Indeed, the legislation could end up in a political pressure cooker: Republican business leaders have long lobbied for wide-ranging tort reform, the barest hint of which could dissuade Democrats from ever coming to terms. If legislation did pass, moreover, it might have to survive a presidential veto. In particular, the White House and Democrats fiercely object to Republican plans to install Y2K punitive-damage caps and liability limits for corporate directors and officers.

DOUBLE-EDGED SWORD. As the Republican bills stand now, small businesses would be protected by a $250,000 limit on punitive damages (which are awarded on top of basic damages, and are meant to discourage wrongdoers from repeating their behavior.) Large firms' punitive damages would, in fact, be held to three times basic damages. Directors and officers would only be personally liable for the greater of $100,000 or the amount of cash compensation they received the previous year.

That might be good news for small businesses that were sued. But the issue isn't clear-cut. After all, many small companies stand to be both defendants and plaintiffs in Y2K suits. And those who might want to rely on Y2K protections may bristle when it's time to file their own claims. "It's a double-edged sword," says Jerry McBride, president of the Mississippi Manufacturers Assn. "Frivolous lawsuits are going to take away money used to cure the (Y2K) problem. On the other hand, if someone is supplying you and they have taken no action and cost you a great deal of money, then they have harmed you."

There are other unknowns: Because courts have addressed few Y2K suits to date, legal experts are unsure how judges and juries might interpret new laws. What would be considered "reasonable efforts" for small companies, for example? How would the courts apply the proposed "duty to mitigate" in the proposed bills, which would bar damages for losses plaintiffs could reasonably have avoided on their own?

"I don't see where Congress is going to stick the fine line between one policy and the other," says Dillon Jackson, a bankruptcy attorney specializing in Y2K at Seattle law firm Foster, Pepper and Shefelman. That may be answered when Congress returns to the issue over the next few weeks. Along with a bigger question: will any of these proposals be made into law? That will likely hinge on the language in the bills on punitive damages and the personal liability of company officials, say Senate staffers. "We have spoken to a number of Democrats who want to be able to support a bill," says Marni Albright, general counsel for the Senate Commerce Committee. "We are narrowing the language and the issues. I'm very optimistic we'll arrive at something."

Both sides already agree on one thing: Any Y2K laws than do make it through the gauntlet won't protect those who failed to act before the New Year, either to save their own computer systems or to ensure the reliability of their products and services. "Companies who sit on their hands are not going to have any protection," warns Albright. "The ones who get protection are the ones out there trying to prevent the problem."

By Dennis Berman in New York
dennis_berman@businessweek.com

To: LAW