By Daniel Nugent
Companies wishing to share information with competitors about fixing the Year 2000 problem will soon receive guidance from the Department of Justice, Antitrust Division ("DoJ"). DoJ representatives recently acknowledged that they had received a formal request for an advisory opinion from an industry group hoping to collaborate on Year 2000 solutions. DoJ would not discuss details of the formal request or identity the requesting party. Representatives, however, indicate that the advisory opinion should be informative to all industry groups considering similar joint efforts. This opinion, expected to be released for public consumption in mid-July of 1998, is receiving expedited treatment due to the impending Year 2000 deadline.
Antitrust concerns arise anytime competitors seek to share information that could result in a restraint on trade. Year 2000 information is no different. Competitors denied access to the shared information can be placed at a competitive disadvantage to those companies participating in the group effort. This is commonly called a horizontal restraint of trade and it can be illegal. The implication is to be mindful of excluding direct competitors from any industry group that will be exchanging competitive information, such as solutions to the Year 2000 problem.
Customers and suppliers might also be harmed from collaborative efforts that result in price controls or preferred customer/supplier lists. This is referred to as a vertical restraint on trade and also may be illegal. In the Year 2000 context, competitors are most likely to exchange information concerning vendors of non-compliant systems, uniform compliance standards, and Year 2000 solution products. Standardization and certification programs can create antitrust problems if a standard or test unreasonably favors some vendors and discriminates against others (e.g. "black lists"). Provided such decisions are reached on the merits of the products and services available, these practices hopefully would be upheld.
DoJ representatives commented that information exchanges on the Year 2000 fix probably would be allowed. DoJ cautions,though, that industry groups not discuss taboo subjects such as price, customer relationships, and boycotts. If your particular industry group is uncertain about a proposed course of action, the DoJ encourages an independent request for an advisory opinion. In the interim, we will all wait for the DoJ's guidance in its much anticipated advisory opinion.
Advisory opinions are available from both DoJ and the Federal Trade Commission ("FTC") to obtain the antitrust enforcers' views on a proposed course of action. This first Year 2000 related request was submitted to DoJ. While the two antitrust agencies work in concert on business reviews, it appears for now that the DoJ will be taking the lead in shaping antitrust policies impacting the Year 2000 fix.
Two More Lawsuits Filed Against Intuit
Two more Year 2000 class actions were filed against Intuit concerning its Quicken versions 5 or 6 software packages. The actions were filed on May 13 and May 26, respectively, in the State of New York. The action filed on May 13, styled Chilelli v. Intuit, Inc. is pending in Nassau County. The Chilelli complaint alleges that Intuit knew or should have known that the Quicken versions at issue were unable to process dates after December 31, 1999 and that Intuit has not offered free software to correct this defect. The lawsuit alleges Intuit violated the Magnuson Moss Consumer Protection Warranty Act (15 U.S.C. 2301 et seq.), New York's Consumer Protection from Deceptive Acts and Practices Act, and the implied warranties of merchantability and fitness for a particular purpose.
The action filed on May 26 Faegenburg v. Intuit, Inc. is pending in the County of New York. It generally contains the same allegations and causes of action as in the Chilelli action. This latest complaint, however, includes some additional allegations not found in the prior suits against Intuit. Among other things, the plaintiff contends that "[t]he Computer Industry in general has been aware of the Year 2000 problem. . . since the early 1970s." The plaintiff also alleges that "[c]omputer manufacturers of financial software and other programs, knew about the Year 2000 problem for over twenty years but ignored it because it was simply too expensive to reconfigure two digit date recognition commands to 4 digit date recognition commands." The complaint further contends that despite knowing, or having been in a position where it should have known of the Year 2000 defect inherent in its Quicken versions 5 and 6, Intuit nevertheless aggressively continued to market and sell these defective Quicken versions.
Update on California Legislation
The legislative efforts in California have been put on temporary hold. Three separate efforts are underway, each bringing a different approach to the problem on Year 2000 liability.
First, California had taken the lead on liability limiting legislation with the introduction of A.B. 1710, Assemblyman Brooks Firestone's bill. The bill was to limit damage awards from computer date failures if the computer vendor met certain guidelines, including giving notice to customers of anticipated failures and, for off the shelf software sold after 1997, by offering to repair the software for free. If the vendor met these guidelines, the measure would have prevented punitive damages and would have limited other damages to computer replacement costs and other losses dictated by contract law (as opposed to tort law). Opposed by the plaintiffs' bar, the bill did not made it out of committee and is not likely to be re-introduced this year.
Second, Senator MacPherson introduce S.B. 2000 which would immunize the State of California from liability arising out of Year 2000 failures. Like A.B. 1710, the bill did not have support from either the plaintiffs' bar or, in its current form, from the tort reformers' bar. It is currently unclear whether an effort to revive S.B. 2000 will be made this year.
Finally, A.B. 1934, sponsored by Assemblyman Mike Honda would have limited non-economic damages arising out of a Year 2000 failure to $250,000. Assemblyman Honda is considering carrying a substitute bill that would eliminate the damages cap but would approach the litigation problem from another perspective. Among concepts being considered, the substitute bill would address shareholder derivative litigation by strengthening the requirement of a demand on the corporation before initiating action for those companies which have made a meaningful Year 2000 disclosure. The bill would eliminate the futility exception for such companies. The bill also would provide a blanket extension of the statute of limitations for Year 2000 actions, in order to focus efforts away from litigation in the short term and towards resource allocation to fix the problem. Wording has yet to be proposed, but we expect Assemblyman Honda to introduce substitute legislation before year's end.
The final word has yet to be written on California legislation in 1998. We will continue to keep our readers advised.
New Federal Y2k Legislation Introduced
Senator Bennett (R-Utah), chairman of the new Senate Committee on the Year 2000 Technology Problem, has introduced S.2000 to help protect employee benefit plans for Year 2000 risks and to require the federal government to ensure that essential services, like utilities, water and telecommunications, are Year 2000 ready. Among other things, the bill would emend ERISA to require that fiduciaries of employee benefit plans consider Year 2000 problems when making investment decisions.
Professional notes
Public Speaking Engagements
Vito Peraino is scheduled to speak at the following speaking engagements:
SPG's Year 2000 Conference & Exposition June 29-July 1, 1998 Natick, MA California CPA/ Education Foundation July 7, 1998 Redwood City, CA Year 2000 Computer Liability Conference for Technology Transfer Institute July 9-10, 1998 Santa Monica, CA PLI's Understanding, Preventing, Litigating Y2k Issues: "What Every Lawyer Needs to Know" July 20, 1998 Chicago, IL Year 2000 Computer Liability Conference for Technology Transfer Institute July 20-21, 1998 Washington,D.C International Business Communications Conference "Claims Management & Litigation Cost Control" July 22-24, 1998 Southbourough, MA California CPA/ Education Foundation July 24, 1998 Irvine, CA The Year 2000 Computer Crisis for Fulcrum July 30-31, 1998 New York, NY PLI's Understanding, Preventing, Litigating Y2k Issues: "What Every Lawyer Needs to Know" September 11, 1998 San Francisco, CA PLI's Understanding, Preventing, Litigating Y2k Issues: What Every Lawyer Needs to Know" September 16, 1998 New York, NY SPG's Year 2000 Conference & Expo September 16-18, 1998 Los Angeles, CA
Deborah Pitts is scheduled to speak at the following speaking engagements:
SPG's Year 2000 Conference & Expo Series June 29 - July 1 Fulcrum conference July 30 - 31, 1998 San Francisco. SPG Year 2000 Conference Sept. 17, 1998 Los Angeles. Fulcrum conference Sept. 24 - 25, 1998 Chicago.
Savannah Lichtman is scheduled to speak at the following conference:
National Association of Insurance Woman (NAIW) July 21, 1998 San Francisco
Hot Internet Links
Click Contact Link Hancock Rothert & Bunshoft LLP's Year 2000 Liability Website. This site provides a resource to year 2000 legal information. Click Contact Link This is the top technical/vendor site. This site contains information on current events and Year 2000 topics. Click Contact Link Federal Reserve Year 2000 website. Click Contact Link California State Government Year 2000 site. Click Contact Link House Subcommitte on government management, information and technology. Click Contact Link Government agencies' resources for small businesses. Click Contact Link FCC and related industry activities including industry associations. Click Contact Link Congressional information on federal agencies and links. Click Contact Link SEC site regarding the Year 2000 problem. Click Contact Link Sen. Bob Bennett site regarding the Technology Problem Committee Please refer to our website at Click Contact Link for more links
Projected Year 2000 Problem Costs
The charts below provide an updated tally of several published Year 2000 budgets. If you are aware of a published budget, please e-mail Janki Nayar at Click Contact Link and include the published reference. For a complete listing of Year 2000 projected costs, please refer to the Hancock Year 2000 page at Click Contact Link
Aetna, Inc. Alberta $140M $100M The Wall Street Journal Maclean's Altanta's Life of Georgia American Greetings Corp. $3.5M $35M Atlanta Business Chronicle Crain's Cleveland Business Ameritech Corp. Ames Department Stories Inc $200M $2 M Reuters Reuters Amoco Corp. Arkansas Employment Security Dept. $100M $4.9M Atlanta Business Chronicle Business Wire Army AXA Canada $366 $10M The Defense Daily The Gazette BankAmerica Corp. BankBoston $380M $75M American Banker American Banker BCE Inc. Belgium $450M $12M The Gazette International Market, Insight Resources Bell-Atlantic Corporation Bell Helicopter Textron Canada $300M $1.1M RichmondTimes Dispatch The Gazette Calgary Canada $1.5M $12.B The Ottowa Citizen Maclean's Charlotte County, FL Chase Manhattan Corp. $1.8M $300M Sarasota-Herald Times American Banker City of St. Petersberg Clearwater, FL $1.5M $2.7M St. Petersberg Times St. Petersberg Times Cobb County, GA Columbia/HCA Healthcare $3.2M $60M The Atlanta Journal Constitution Atlanta Business Chronicle Corpus Christi, TX DeKalb County, GA $8M $14M Corpus Christi Caller Times Atlanta Constitution Dominion Resources Domtar $150M $5M Richmond Times Dispatch The Ottawa Citizen FAA First Commercial Corp. of Little Rock $50M $10M Air Safety Week Business Dateline FirstEnergy Corp. Fleet Financial Group $72M $150M Crain's Cleveland Business American Banker Florida Power Fulton County, GA $10M $12M St. Petersberg Times Atlanta Journal Constitution Georgia-Pacific Gwinnett, GA $55M $8.8M Atlanta Journal Constitution American Banker Hydro-Quebec J.P. Morgan & Co. $60M $250M The Gazette American Banker KeyCorp Massachusetts Bay Transit Authorities $40M $6.6 M Crain's Cleveland Business The Patriot Ledger NationBank Corp New Zealand National Library $120M $10M American Banker New Zealand Infotech Weekly Oakland City Council Ottawa-Carleton Regional Trust $19M $4.9M The Oakland Post The Ottowa Citizen Pinellas County, FL Raymond James & Associates $30M $10M St. Petersberg Times St. Petersberg Times Reuters Thai Farmers Bank $200M $2.55M Daily Mail The Nation Unilever Wal-Mart Stores, Inc $500M $22M Journal of Commerce Business Dateline
Visit the Year 2000 website at Click Contact Link
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
