The Year 2000 Problem: Finally Some Good News


On October 19, 1998, the President signed into law the Year 2000 Information and Readiness Disclosure Act, S.2392 (the "Act"). The Act is designed to encourage businesses, both IT and non-IT suppliers of goods and services, to voluntarily share information regarding the extent of their Year 2000 readiness as well as their strategies, tools and solutions for Year 2000 compliance with other public and private entities.

Prior to the Act's passage, concern about the potential for legal liability associated with disclosing such information impeded businesses from collaboratively attacking the Year 2000 problem. Congress found in passing the Act that "[r]eprogramming or replacing affected systems before the problem incapacitates essential systems is a matter of national and global interest" (emphasis added), and that "prompt, candid, and thorough disclosure and exchange of information related to year 2000 readiness" would greatly enhance the prospects for Year 2000 readiness. The Act attempts to minimize the risks involved in sharing information by (i) preventing qualifying Year 2000 statements from being used as a basis for civil actions arising under Federal or State laws, and (ii) protecting those who make qualifying Year 2000 statements from liability for inadvertently false, inaccurate, or misleading statements.

Who is protected by the Act.

The Act protects "makers" of Year 2000 statements. Makers are defined broadly to include not only the originator of the statements but also anyone who participated in any manner in the development, review, and publication of the statements. The Act also protects those republishing Year 2000 statements as long as notice is given that the statements are based on information supplied by another person or entity and have not been verified.

Qualifying statements under the Act.

The Act protects two kinds of Year 2000 information: (1) a broad category of information called Year 2000 statements; and (2) a narrower category of information called Year 2000 readiness disclosures.

Year 2000 statements are defined to include any communications relating to Year 2000 processing capabilities. For example, they may concern (i) an assessment, projection or estimate of Year 2000 processing capabilities; (ii) the plans, objectives, or timetables for implementing or verifying Year 2000 processing capabilities; (iii) a general discussion of issues directly or indirectly related to Year 2000 processing capabilities; or (iv) the test plans, test dates, test results, or operational problems or solutions relating to the Year 2000 processing capabilities of particular products or services that use particular products.

Year 2000 readiness disclosures are Year 2000 statements which have been put into writing. The statements must be clearly labeled as Year 2000 readiness disclosures; they must be written on a tangible medium or stored in electronic or other medium and be retrievable in perceivable form; and they must be issued or published by or with the approval of the person or entity to whom or about which the statements relate.

Scope of protections afforded under the Act.

The Act affords broad protections. For example:

  1. The Act prevents Year 2000 readiness disclosures from being admissible in any civil action to prove the truth or accuracy of any Year 2000 statements contained therein unless the disclosure is being admitted to show anticipatory breach, repudiation of a contract, or a similar claim against a maker;
  2. The Act limits liability under Federal or State laws for allegedly false, inaccurate, or misleading Year 2000 statements. A claim will only be viable if, in addition to the elements of the claim, clear and convincing evidence establishes that the statements at issue were material and that in making the statements the maker (i) actually knew that the Year 2000 statements were false, inaccurate, or misleading, (ii) had an intent to deceive or mislead, or (iii) acted with a reckless disregard as to their accuracy. Where the claim is based on republication, the maker can avoid liability if it discloses that the statements are based on information supplied by another person or entity and have not been verified;
  3. The Act protects makers from defamation or similar claims arising under Federal or State laws based on Year 2000 statements. Such claims can only be brought upon establishing by clear and convincing evidence, in addition to the elements of the claim, that the maker (i) actually knew that the Year 2000 statements were false or (ii) acted with reckless disregard as to their truth or falsity; and
  4. The Act protects makers from antitrust liability for agreements made or conduct engaged in, after the date of enactment (October 19, 1998) and before July 14, 2001, for the purposes of helping to correct or avoid the effects of a Year 2000 processing failure. This antitrust protection, however, does not extend to agreements or conduct resulting in boycotts, allocations of markets, or price or output fixing.

Limitations of the Act.

The Act does not:

  1. create new causes of action or expand any existing causes of action;
  2. create new duties or obligations;
  3. change or reduce any underlying duty, standard of care, or liability for a Year 2000 failure;
  4. affect, abrogate, amend, or alter any previous contract, warranty, or intellectual property right or preclude a party from bringing an action in connection with such a right;
  5. preclude the bringing of any claim that is not based exclusively on a Year 2000 readiness disclosure or statement;
  6. prevent any underlying facts regarding a failure from being demonstrated in court;
  7. preclude any Year 2000 readiness disclosures from being put into evidence to prove something other than the truth of the statements contained therein;
  8. prevent any Year 2000 readiness disclosures from being used in contract litigation to show anticipatory breach, repudiation, or other actions again a maker as long as they are not the sole evidence supporting liability;
  9. apply to actions brought by a Federal, State, or other public entity, agency, or authority acting in a regulatory, supervisory, or enforcement capacity;
  10. apply to actions brought under the securities laws regarding Year 2000 statements contained in any documents or materials filed with the Securities and Exchange Commission or with Federal banking regulators;
  11. prevent a consumer from bringing an action against a seller, manufacturer, or provider who has made a Year 2000 disclosure as part of a solicitation, advertisement or offer to sell the consumer a product;
  12. preclude any governmental entity from requiring the disclosure of any information; or
  13. cover Year 2000 statements made in connection with a third party solicitation or offer to sell software or a service designed to detect or correct Year 2000 processing problems unless, during the course of the solicitation or offer to sell, notice is provided that any Year 2000 statements made in connection with the sale are subject to the Year 2000 Information and Readiness Disclosure Act, and thus, may be of limited use in the event of a legal dispute.

Notice Requirements under the Act.

The Act does not create a duty to provide notice about Year 2000 processing, defined as the processing, transmitting, or receiving of date data from, into, and between the 20th and 21st centuries and during the years 1999 and 2000. Nor does the Act regulate the content, timing, or medium of any notice given.

The Act does, however, state that in most civil actions, except those involving personal injury or serious physical damage to property, where adequacy of notice is at issue, the Internet is an adequate mechanism for providing notice. The Internet will not be an adequate mechanism for notice, however, if Internet notice is contrary to the parties' express prior representations or is materially inconsistent with the regular course of dealing between the parties, or if actual notice is the most commercially reasonable means of providing notice under the circumstances.

Applicability of the Act.

The Act became effective on the date of its enactment - October 19, 1998. The Act applies to any Year 2000 statement made beginning on July 14, 1998 and ending on July 14, 2001. The Act applies to any Year 2000 readiness disclosures made after enactment, and to those readiness statements grandfathered in accordance with the law (see below). The Act also applies to any lawsuits filed after July 14, 1998.

The Act also has a retroactivity or selective grand-fathering provision, which allows an entity or person who published written Year 2000 statements about its own products or services after January 1996 but before the date of enactment to designate those statements now as Year 2000 readiness disclosures under the Act. The entity or person must take the appropriate actions, however, within 45 days of the date of the Act's enactment.

The entity or person seeking to designate its Year 2000 statements as Year 2000 readiness disclosures must first draft a notice. This notice must state that the subject Year 2000 statements are being designated as Year 2000 readiness disclosures under the Act. This notice must also include a copy of the subject Year 2000 statements with a legend labeling them as Year 2000 readiness disclosures. The person or entity must then disseminate this notice by contacting recipients of the prior statements directly, or prominently posting the notice on the Internet before the end of the 45 day period, in addition to contacting recipients of the prior statements using the same method of notification that was used for the prior statements.

Anyone receiving such a notice has a short period of time in which to prove prejudicial reliance and seek to overcome the protection of the Act.

The retroactivity provision does not affect or apply to any lawsuit pending on July 14, 1998.

Other important provisions of the Act.

Special data gathering.

The Act contains a special data gathering provision which states that federal entities, agencies, or authorities may request the voluntary provision of information relating to Year 2000 processing, including Year 2000 statements. Generally, any Year 2000 statements provided by a party in response to such a request are exempt from disclosure requirements under the Freedom of Information Act and, subject to certain limitations, may not be used by any federal entity, agency, authority or third party in any civil action arising under Federal or State laws.

Year 2000 council working groups

The Act authorizes the establishment of Year 2000 council working groups which engage outside organizations in discussions to address Year 2000 problems and to share information related to Year 2000 readiness.

National website.

The Act authorizes the creation of a national Year 2000 website, designed to assist consumers, small businesses, and local governments in obtaining information from other governmental websites, hotlines, or information clearinghouses about Year 2000 processing of computers, systems, and products and services, including websites maintained by independent agencies and other departments.