Y2K and the price of procrastination.Business leaders could have prevented the current Y2K See Y2K problem and Y2K compliant.
Y2K - Year 2000 crisis by acting responsibly. Those who did not should be held accountable.
On New Year's Eve, most of the world's population will be preparing to celebrate the dawn of a new year, a new century, and a new millennium. But not everyone will be celebrating this historic milestone. Many people will be in fear of what the first day of the year 2000 will bring.
This fear is well founded, for deeply embedded in the programming code of most computers, including the microprocessor chips that run everything from toasters to medical devices, is a technical glitch A temporary or random hardware malfunction. It is possible that a bug in a program may cause the hardware to appear as if it had a glitch in it and vice versa. At times it can be extremely difficult to determine whether a problem lies within the hardware or the software. See glitch attack. widely known as the Millennium Bug millennium bug: see Year 2000 problem.
See Y2K Problem.
millennium bug - Year 2000 . Also called the Y2K problem Y2K problem or Y2K bug: see Year 2000 problem.
(Year 2000 problem) The inability of older hardware and software to recognize the century change in a date. , this technical time bomb is likely to cause computer failures that may launch the third millennium in a most memorable, but inauspicious in·aus·pi·cious
Not favorable; not auspicious.
inaus·pi , fashion.
Some disruptions caused by Y2K will be substantial--possibly catastrophic, potentially deadly. Capers Jones Capers Jones is a specialist in software engineering methodologies, and is often associated with the function point model of cost estimation. His many computer science publications have been widely used by many organizations and educators. , a leading Y2K expert who has analyzed and quantified the potential costs of Y2K failures, has indicated that the greatest single expense from this glitch will be wrongful death The taking of the life of an individual resulting from the willful or negligent act of another person or persons.
If a person is killed because of the wrongful conduct of a person or persons, the decedent's heirs and other beneficiaries may file a wrongful death action and personal injury damages.(1)
Estimates of the cost of the legal consequences range from $100 billion to $1 trillion. The latter estimate, promulgated prom·ul·gate
tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates
1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce.
2. without empirical basis by groups seeking protective legislation for Y2K wrongdoers, is astronomically high. The $100 billion estimate is closer to reality. But under either scenario, the legal fallout of this crisis will demand the attention of corporate leaders and members of the trial bar for at least the next decade.
The seeds of the crisis were planted years ago. In the 1960s, the early days of computer programming, computer memory was expensive and the year 2000 was in the distant future. Computer programmers decided to minimize memory usage by using only two numbers to represent the year. For example, a computer recognizes the digits 99 in a date code as 1999. The computer "assumes" the first two digits are 19. Consequently, when the clock rolls over to 12:01 a.m. on January 1, 2000, the computer will read the date as 01/01/1900.
Three possible scenarios will follow this erroneous reading. First, if the year is irrelevant to the functions of the computer or the system it serves, these functions will simply continue unabated un·a·bat·ed
Sustaining an original intensity or maintaining full force with no decrease: an unabated windstorm; a battle fought with unabated violence. with no deleterious deleterious adj. harmful. consequences. Second, the device or system may cease to function with potentially disastrous results. Third, the device or system may continue to function in some hazardous fashion or provide erroneous data. This is potentially the most dangerous scenario because there may be no warning that the device or system is malfunctioning mal·func·tion
intr.v. mal·func·tioned, mal·func·tion·ing, mal·func·tions
1. To fail to function.
2. To function improperly.
1. Failure to function.
2. until adverse results occur.
January 1 may bring infrastructure failures, including power grid blackouts and water or food supply disruptions; product failures in homes and businesses; and loss of essential services like medical treatment and banking. What actually occurs on that day will depend on the success of current remediation efforts.
Responsible business and government leaders have been addressing the problem aggressively. Many corporations and government agencies have spent hundreds of millions of dollars to avoid Y2K problems. For example, the Social Security Administration, which recognized the impending im·pend
intr.v. im·pend·ed, im·pend·ing, im·pends
1. To be about to occur: Her retirement is impending.
2. problem in 1989 and began remediation in 1994, is now the highest rated government agency in Y2K preparedness.(2)
There is no reason why other businesses and government agencies could not have done the same. There were ample computer programmers qualified to solve the problem in the early 1990s, the technology needed for remediation was available, and the cost of remediation was considerably cheaper than it is in the current crisis crunch. If corporate leaders had timely addressed the problem, there would be no Y2K crisis. Y2K is not a computer crisis. It is a crisis in corporate leadership. As Capers Jones wrote in his 1998 book, "The only apparent reason for not solving the year 2000 problem Year 2000 problem, Y2K problem, or millennium bug, in computer science, a design flaw in the hardware or software of a computer that caused erroneous results when working with dates beyond Dec. 31, 1999. is because executives and top officials did not perform their duties in a conscientious and capable manner, and would seem to have violated their fiduciary duty Noun 1. fiduciary duty - the legal duty of a fiduciary to act in the best interests of the beneficiary
legal duty - acts which the law requires be done or forborne to their corporations."(3)
Business of procrastination
The fiduciary duty to which Jones refers is the duty of due care that directors and officers owe to a corporation and its shareholders in carrying out their managerial roles. The time-honored standard by which the conduct of corporate officers and directors is measured is the business judgment rule. This standard requires officers and directors to take informed, honest, good faith actions in the best interest of their companies. Absent an abuse of discretion, courts will respect the judgment of officers and directors in making business decisions.(4)
The U.S. Senate Special Committee on the Year 2000 Technology Problem recently concluded that "leadership at the highest levels is lacking. A misconception pervades corporate boardrooms that Y2K is strictly a technical problem that does not warrant executive attention."(5) "Many organizations critical to Americans' safety and well-being are still not fully engaged in finding a solution."(6) And "most affected industries and organizations started Y2K remediation too late."(7)
In discussing why many business leaders have been reluctant to "champion difficult and complex issues," the committee found that "Y2K competes poorly against issues such as ... market share and product development. It lacks familiarity, and in a results-driven economy, Y2K remediation costs are difficult to justify to ... shareholders. Additionally, few wished to be associated with the potential repercussions repercussions npl → répercussions fpl
repercussions npl → Auswirkungen pl of a failed Y2K remediation attempt."(8)
This procrastination provides a basis for shareholder derivative and consumer protection actions and claims based on negligence and breach of contract, express warranty, implied warranty A promise, arising by operation of law, that something that is sold will be merchantable and fit for the purpose for which it is sold.
Every time goods are bought and sold, a sales contract is created: the buyer agrees to pay, and the seller agrees to accept, a certain price of fitness for ordinary use, and implied warranty of fitness for a particular use. Most of the current class action litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.
When a person begins a civil lawsuit, the person enters into a process called litigation. is against manufacturers who marketed products as recently as 1998 knowing they were not Y2K compliant Capable of correctly processing any data that deals with a date beyond the year 1999. See Y2K problem. and who are now charging exorbitant prices for "Y2K upgrades."(9) This type of business versus business dispute will be the gravamen The basis or essence of a grievance; the issue upon which a particular controversy turns.
The gravamen of a criminal charge or complaint is the material part of the charge. of much of the Y2K litigation to come.
Timing is everything
Responsible business and government leaders who timely addressed the issue of remediation have set the standard against which the conduct of procrastinating business leaders may be measured.
A brief examination of the Y2K time line indicates that the problem was recognized by some technology experts as long as 40 years ago. And while the discussion of Y2K has recently reached crescendo cres·cen·do
n. pl. cres·cen·dos or cres·cen·di
1. Abbr. cr. Music
a. A gradual increase, especially in the volume or intensity of sound in a passage.
b. level in the public forum, corporate technology experts, or chief information officers, have been on notice of the need for remediation and the potential for disastrous consequences for at least 20 years.
In 1960, Robert Bemer, a pioneering computer scientist, advocated use of a four-digit rather than a two-digit year code. He was joined by 47 industry specialists in an effort to devise computer programming standards that would use a four-digit field.
In 1964, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) had the opportunity to correct the problem when the revolutionary system/360 mainframe came on line and set standards for mainframes for years to come. However, IBM chose to maintain the two-digit field.
In 1970, Bemer and 86 technical societies urged the U.S. Bureau of Standards Bureau of Standards
since 1988 U.S. National Institute of Standards and Technology (NIST)
Agency of the U.S. Department of Commerce responsible for the standardization of weights and measures, timekeeping, and navigation. to adopt the four-digit date field in order to avoid the otherwise inevitable Y2K problems. The Bureau of Standards, at the urging of the Department of Defense and other of the same entities now grappling with compliance problems, adopted the two-digit code.
In February 1979, writing in Interface Age, Bemer again reminded the computer world that a Y2K crisis was inevitable unless the year field was expanded to four digits.(10) His warnings were again ignored.
Notice again went out to the industry in 1984 when Jerome and Marilyn Murray published Computers in Crisis: How to Avoid the Coming Worldwide Computer Collapse.(11) The Murrays recognized the problem when Mrs. Murray, an insurance company executive, attempted to calculate annuities beyond the year 2000 and was unable to do so because of the year field problem.
In 1986, a South African programmer, Chris Anderson Chris Anderson may mean:
In 1993, two events placed both the federal government and the business world on notice that the Y2K problem needed immediate attention. The first was a test of the North American Aerospace Defense Command A bi-national command of the US and Canada that provides aerospace surveillance, warning and assessment of aerospace attack, and maintains the sovereignty of US and Canadian airspace. Also called NORAD. (NORAD NORAD
North American Aerospace (formerly Air) Defense Command ) Early Warning System. As the engineers set computer clocks forward to simulate 12:01 a.m. on January 1,2000, every NORAD Early Warning System computer screen froze.
That same year, Y2K consultant Peter De Jager wrote an article in Computer-world concerning the potential for a Y2K disaster. In this article, he said, "We and our computers were supposed to make life easier. This was our promise. What we have delivered is a catastrophe."(14)
By the late 1980s, any person in charge of company technology certainly should have been well aware of the Y2K problem and how it could affect company operations. The last date at which successful remediation could have been responsibly undertaken depends upon the size of the problem within each company. But remediation could have been started, even in large corporations, as late as 1994, when the Social Security Administration began to successfully fix 35 million lines of code The statements and instructions that a programmer writes when creating a program. One line of this "source code" may generate one machine instruction or several depending on the programming language. A line of code in assembly language is typically turned into one machine instruction. .
In litigating Y2K cases, early discovery should focus on when the chief information officer first knew of Y2K generally, first realized the specific impact of Y2K on the company, first reported the problem to company leadership, and first sought funds for remediation. Other considerations include when funds were budgeted, when remediation was undertaken, what problems were encountered in remediation, and what difference the delay in starting remediation caused.
Unfortunately, a large contingent of corporate leaders consciously chose to ignore the repeated warnings, thus converting a manageable technical problem into a corporate crisis. These leaders neglected to follow the business judgment rule and act with due care for the best interests of their corporations. Many of these corporate officers are now lobbying for federal and state legislation to shield them from the legal consequences of their procrastination.
The Y2K problem can potentially affect any software, firmware A category of memory chips that hold their content without electrical power. Firmware includes flash, ROM, PROM, EPROM and EEPROM technologies. When holding program instructions, firmware can be thought of as "hard software." See flash memory, ROM, PROM, EPROM, EEPROM and FOTA. , or hardware that is programmed with date/time logic. However, most of the failures that will precipitate precipitate /pre·cip·i·tate/ (-sip´i-tat)
1. to cause settling in solid particles of substance in solution.
2. a deposit of solid particles settled out of a solution.
3. occurring with undue rapidity. litigation will arise from failures of either embedded microprocessor Embedded microprocessors are essentially microprocessors that are used in everyday electronic devices, such as cellular telephones, household appliances, automobiles, or virtually any electronic device you could think of. chips, systems software, or management information systems software.
Embedded microprocessor chips. Embedded software Instructions that permanently reside in a ROM or flash memory chip. Embedded software may be immediately available to the CPU or, for faster execution, may be transferred to RAM first and then executed. is defined as software that is contained within a physical device and is used to control or modify its operation.(15) A miniature microprocessor, it is generally placed inside a device or product at the time of manufacture with the intention that it is to remain there, in a protected environment, throughout the working life of the product.
Forty billion embedded chips exist in the world, 25 billion of which are in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The good news is that about only 2 percent to 5 percent are encoded with date/time logic and susceptible to Y2K failure. The bad news is that those figures amount to 800 million to 2 billion potential failures. Even worse news is that we have no idea which or how many chips may fail, where many of them are located, or how to gain access to replace them.
The ubiquitous nature of embedded chips exacerbates the repair problem and increases the potential danger of their failure. They control vital functions (Physiol.) those functions or actions of the body on which life is directly dependent, as the circulation of the blood, digestion, etc.
See also: Vital in satellites, underground pipelines, airplanes, fire alarms, security systems, and industrial machinery plants.
In most cases, the date/time logic function is stamped onto the chip. To prevent Y2K dysfunction, one must either replace the chip or the device that contains it.
Systems software. This is defined as software that controls a physical device.(16) Examples include computer operating systems Operating systems can be categorized by technology, ownership, licensing, working state, usage, and by many other characteristics. In practice, many of these groupings may overlap. like DOS, telecommunications switching systems Switching systems (communications)
The assemblies of switching and control devices provided so that any station in a communications system may be connected as desired with any other station. , manufacturing control systems, and process control systems. To fix systems software, programmers must rewrite code, which must be meticulously reviewed for date/time logic. Systems software failures pose the greatest potential problem to the public at large, ranging from the mere nuisance of the inability to use automatic teller machines See ATM. to the deadly threat of traffic light synchronization (1) See synchronous and synchronous transmission.
(2) Ensuring that two sets of data are always the same. See data synchronization.
(3) Keeping time-of-day clocks in two devices set to the same time. See NTP. malfunctions on crowded public streets.
Management information systems software. Potential failure of this software is an area of major concern to financial institutions because it deals with numeric and alphabetical information.(17) Examples include payroll systems, banking applications, tax calculations, stock brokerage trading software, and insurance claims processing programs. Remediation involves rewriting code, which is difficult because an estimated 36 million management information systems are in use and the software may be programmed in one of 500 programming languages. There are 1.2 trillion lines of code that require flawless remediation to avoid failures. The task of finding programmers who have the talent to understand and remediate the programming language is overwhelming.
Y2K failures have the potential to create a huge body of tort-related litigation within the next year. The following is a brief discussion of only a few of the types of claims that are likely to be brought.
Negligence. If the projections of respected analysts are correct, Y2K failures are likely to cause numerous deaths and personal injuries. Planes, trains, ships, buses, air traffic control systems, railroad crossing lights, rail switching systems, and traffic light synchronization are but a few of the products and systems that rely heavily on date/time logic-based microprocessor chips and computer systems. Additionally, fire alarms, 911 systems, burglar alarms, and a plethora of other safety-related devices rely on embedded chips and systems software for proper function.
Fraud and negligent misrepresentation misrepresentation
In law, any false or misleading expression of fact, usually with the intent to deceive or defraud. It most commonly occurs in insurance and real-estate contracts. False advertising may also constitute misrepresentation. . Given the mass distribution of software and hardware products that are identically defective, plaintiffs who own these products will likely pursue class action lawsuits class action lawsuit
A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax against the manufacturers. Early class actions have been filed by small business owners and consumers against vendors who are seeking excessive prices for Y2K upgrades on products that should have been Y2K compliant at the time they were sold.
For example, in 1987, Robert Courtney Robert Ray Courtney (born 1952 in Hays, Kansas) was a pharmacist who owned and operated Research Medical Tower Pharmacy in Kansas City, Missouri. Over a period of about 9 years he diluted an estimated 98,000 prescriptions of medications, affecting some 4,200 patients; many , a New Jersey obstetrician/gynecologist, bought a computer medical system from Medical Manager, Inc., to keep track of surgery scheduling and patient billing. In 1996, the computer crashed from lack of sufficient memory. At that time, Courtney replaced his old system with a new state-of-the-art Pentium system from Medical Manager for $13,000, a sizeable investment for a small town doctor.
The salesman assured Courtney the new system would last at least 10 years. One year later, Courtney received a letter from Medical Manager telling him that the system was not Y2K compliant and would not be useful to him after January 1, 2000. To avoid this problem, Courtney was told he would have to pay an additional $25,000 for a new compliant system.
After the company ignored Courtney's request for a free upgrade, he retained an attorney and sued Medical Manager, seeking to have the company either repair or replace his computer system at its cost. The attorney learned that Medical Manager was demanding $25,000 from about 17,000 other small business owners and medical practitioners for new systems. A class action was filed, and Courtney was designated as class representative.
Not surprisingly, within two months after the class action was filed, Medical Manager offered to settle by providing all 17,000 customers who bought a noncompliant system after 1990 with a free "patch" that would make their old systems Y2K compliant.
The sudden appearance of the previously unmentioned "patch" rendered it unnecessary for the 17,000 doctors to buy an upgraded system at the cost of $25,000 each. The lawsuit not only saved $425 million in unnecessary costs to small businesses but also prevented profiteering prof·it·eer
One who makes excessive profits on goods in short supply.
intr.v. prof·it·eered, prof·it·eer·ing, prof·it·eers
To make excessive profits on goods in short supply. by the company through the sale of unnecessary new compliant systems.
Small businesses will be a large segment of the plaintiffs in Y2K litigation. Courtney's case is an excellent example of how well the current civil justice system works in these cases.
Medical malpractice Improper, unskilled, or negligent treatment of a patient by a physician, dentist, nurse, pharmacist, or other health care professional. . Ironically, the greatest threat of injury and death resulting from Y2K failures may arise from the health care industry. According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the current report of the U.S. Senate Special Committee on the Year 2000 Technology Problem, "The health care industry lags significantly in its Y2K preparations compared to other sectors. Because of limited resources and lack of awareness, rural and inner city hospitals have particularly high Y2K risk exposure."(18)
The committee also said that according to reputable reports, "64 percent of hospitals have no plans to test their Y2K remediation efforts" and "90 percent of physicians' offices are unaware of their Y2K exposure"(19)
The Gartner Group (company) Gartner Group - One of the biggest IT industry research firms.
Address: Connecticut, USA. , a survey research company, has stated that the health care industry lags behind others in dealing with the problem in managerial attention, technical resources available, financial resources committed, and remediation monitoring.(20) Y2K "failures could compromise patient care, disrupt core business functions, and create substantial liability."(21)
The industry is especially susceptible to Y2K problems because of its dependence on devices containing embedded chips, on information management systems, and on numerous systems that are run by vulnerable systems software.
Professional malpractice. The Millennium Bug could bite several professions.
Lawyers who either fail to advise clients or advise them in error regarding Y2K liability are susceptible. For example, lawyers who sat on corporate boards and failed to warn board members of Y2K consequences or failed to warn fellow directors of their potential for personal liability may soon find themselves in court as defendants. Lawyers may also be liable for document drafting errors if they failed to include Y2K considerations in contracts or failed to accurately or completely define terms like "Y2K compliance."
Large law firms This list of the world's largest law firms by revenue is taken from The Lawyer and The American Lawyer and is ordered by 2006 revenue:
1. The act of disqualifying or the condition of having been disqualified.
2. Something that disqualifies: illness as a disqualification for enlistment in the army. of the larger firms.
Accountants, tax advisers, stockbrokers, and others who rely on number-crunching software may be bitten by the bug if the crunched numbers are wrong. Architects who designed and engineers who built without considering the Y2K compliance of building materials Building materials used in the construction industry to create .
These categories of materials and products are used by and construction project managers to specify the materials and methods used for . may face liability. Technical experts who designed noncompliant programs or remediation experts who failed to timely correct them may face professional malpractice claims.
A variety of professionals and experts who failed to familiarize themselves with the impact of the Y2K computer problems on their field of expertise will be on the hot seat if the anticipated failures occur.
Products liability. The two-digit year field was not a design defect at the time it was initiated to save memory space and money. But the continued design, manufacture, and marketing of products with two-digit year fields that had an expected use past January 1,2000, raises issues of design defect, failure to warn, and marketing defect.
From 1995 to the present, at a time when Y2K remediation should have been fully implemented, millions of new products with noncompliant microprocessor chips and systems were manufactured and marketed. Thus, corporate leaders who ignored timely remediation not only failed to correct the problems within their own companies but also continued to load the shelves of retail stores with millions of additional noncompliant products. These products may fail because of their Y2K faults, causing personal injury, wrongful death, or economic loss.
Contract-based litigation. Generally, software is considered "goods" under the Uniform Commercial Code (UCC An abbreviation for the Uniform Commercial Code. ).(22) Accordingly, standard UCC contract law will apply to many contractual disputes involving Y2K.
Companies that have initiated remediation efforts probably will be deemed to have accepted their software products and waived their rights of rejection under the UCC. While it is unlikely these companies can reject the goods now, they are not precluded from prosecuting their UCC claims for breach of contract, breach of implied warranty of merchantability mer·chant·a·ble
Suitable for buying and selling; marketable.
merchant·a·bil , and breach of implied warranty of fitness for a particular purpose.(23)
Remedies for a breach of these contracts may have been limited by the manufacturer. Common limitations in contracts include liquidated damages Monetary compensation for a loss, detriment, or injury to a person or a person's rights or property, awarded by a court judgment or by a contract stipulation regarding breach of contract. clauses and provisions that exclude incidental and consequential damages Injury or harm that does not ensue directly and immediately from the act of a party, but only from some of the results of such act, and that is compensable by a monetary award after a judgment has been rendered in a lawsuit. . These damage limitations are construed against the party that is seeking to enforce them, and they are subject to being deemed unenforceable Adj. 1. unenforceable - not enforceable; not capable of being brought about by compulsion; "an unenforceable law"; "unenforceable reforms"
enforceable - capable of being enforced because they are either ambiguous or unconscionable Unusually harsh and shocking to the conscience; that which is so grossly unfair that a court will proscribe it.
When a court uses the word unconscionable to describe conduct, it means that the conduct does not conform to the dictates of conscience. , or both.(24)
Insurance claims. Several insurance companies have indicated they have no intention of covering damages arising from Y2K problems. Most are adding specific exclusions to policies as they are renewed this year. Once litigation is completed between businesses, consumers, and personal injury victims, there may be a final wave of litigation against insurance companies for denial of coverage.
A comprehensive general liability policy typically provides coverage for unexpected occurrences resulting in bodily injury or property damage. The insurance industry plans to exclude coverage on the basis that the Y2K crisis is an expected event.
Many of the costs of correcting Y2K problems are going to be associated with investigation, remediation, and testing. Under a standard comprehensive liability policy, only sums that qualify as damages from property loss or bodily injury are potentially covered.
Insurers are likely to claim that the costs of remediation do not fit within this definition.(25) It is possible that losses associated with the Y2K problem will be considered purely economic loss, which is not covered not covered Health care adjective Referring to a procedure, test or other health service to which a policy holder or insurance beneficiary is not entitled under the terms of the policy or payment system–eg, Medicare. Cf Covered. , rather than property damage or bodily injury, which are.(26)
Much of the litigation over comprehensive liability policies will be over the triggering event Triggering Event
A certain milestone or event that a participant in a qualified plan must experience in order to be eligible to receive a distribution from a qualified plan. . If the policies are triggered when the failures actually occur, then it is likely that insureds are going to find that policy language either excludes or limits coverage. However, if insureds can successfully argue that the triggering event was the manufacture or sale of the noncompliant product, then long-expired policies containing no Y2K limitations will be in effect.
Three areas in which the insurance industry has not yet indicated that no coverage will be afforded in Y2K cases are malpractice, officers and directors liability, and negligence actions. However, as insurance policies of every type are being renewed in 1999, specific exclusions are being added to preclude Y2K coverage.
Shareholder derivative actions A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do.
A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the . If corporate directors fail to comply with the business judgment rule, a shareholder has a right to bring a shareholder derivative lawsuit on behalf of the corporation for the decrease in shareholder value caused by the director's malfeasance The commission of an act that is unequivocally illegal or completely wrongful.
Malfeasance is a comprehensive term used in both civil and Criminal Law to describe any act that is wrongful. . Since the "crisis" aspect of the Y2K problem was precipitated by the procrastination of corporate officers and directors in failing and refusing to timely address remediation, the potential for shareholders derivative actions is enormous.
No one can reliably predict what will happen at midnight on January 1, 2000. Long-overdue remediation is proceeding at a feverish feverish /fe·ver·ish/ (fe´ver-ish) febrile.
1. Having a fever.
2. Relating to or resembling a fever.
3. Causing or tending to cause a fever. pace but some of this will be too little, too late. The attitude of the irresponsible portion of the business community during the time that remediation efforts should have occurred can be regarded as cavalier at best and grossly negligent at worst.
From 1990 to 1998, instead of timely solving the problem, many companies exacerbated it. When they finally turned their attention to the inevitable need for remediation, they found that remediation costs had greatly increased and that there was neither enough time nor talent to correct the problem.
Now they are asking Congress and state legislatures for a "Procrastinators Protection Act" to shield them from liability for their own misconduct. But passing protective legislation would go against a basic principle of fairness at the core of our justice system: Responsible companies and consumers are entitled to the protections of existing tort and contract law. Wrongdoers should be held accountable for their actions.
Failing to prevent personal injury and property damage to others through timely remediation of the Y2K problem was wrong. Those who are responsible for this should compensate those who are injured. It's that simple.
(1.) CAPERS JONES, THE YEAR 2000 SOFTWARE PROBLEM: QUANTIFYING THE COSTS AND ASSESSING THE CONSEQUENCES 73 (1998).
(2.) Subcommittee Chairman Stephen Horn (R-Cal.), of the Subcommittee on Government Management, Information, and Technology, prepared the Year 2000 progress table, which illustrates each federal government department's Y2K progress. The subcommittee issued the report on Feb. 22, 1999, based on agency data through Feb. 12,1999. The subcommittee's home page is at http://www.house.gov/ reform/gmit.
(3.) JONES, supra A relational DBMS from Cincom Systems, Inc., Cincinnati, OH (www.cincom.com) that runs on IBM mainframes and VAXs. It includes a query language and a program that automates the database design process. note 1, at 7.
(4.) Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
(5.) STAFF OF SENATE SPEC. COMM. ON THE YEAR 2000 TECHNOLOGY PROBLEM, 106TH CONG., 1ST SESS., INVESTIGATING THE IMPACT OF THE YEAR 2000 PROBLEM 3 (Comm. Print 1999) [hereafter In the future.
The term hereafter is always used to indicate a future time—to the exclusion of both the past and present—in legal documents, statutes, and other similar papers. STAFF OF SENATE SPEC. COMM.].
(6.) Id. at 1.
(7.) Id. at 2.
(8.) Id. at 7.
(9.) The term "Y2K compliant" is not precisely defined. Therefore, businesses seeking to ascertain whether their vendors or those with whom they do business are "Y2K compliant" should make sure all parties agree on a definition. A considerable amount of confusion and possibly litigation could be avoided by the adoption of a standard definition, like the one found in Federal Acquisition Regulation (FAR), part 39.002, published in Federal Acquisition Circular (FAC FAC - Functional Array Calculator. An APL-like language, but purely functional and lazy. It allows infinite arrays.
["FAC: A Functional APL Language", H.-C. Tu and A.J. Perlis, IEEE Trans Soft Eng 3(1):36-45 (Jan 1986)]. ) 90-45. "Year 2000 compliant a. 1. (Computers) having dates fully and properly represented, and not susceptible to failure due to the year 2000 bug. means information technology that accurately processes date/time data (including, but not limited to, calculating, comparing, and sequencing) from, into, and between the 20th and 21st centuries, and the years 1999 and 2000 and leap year leap year: see calendar. calculations. Furthermore, year 2000 compliant information technology, when used in combination with other information technology, shall accurately process date/time data if the other information technology properly exchanges date/ time data with it."
(10.) Robert Bemer, Don't Drop the First Two Digits, INTERFACE AGE, Feb. 1979, at 37.
(11.) JEROME MURRAY & MARILYN MURRAY, COMPUTERS IN CRISIS: HOW TO AVOID THE COMING WORLDWIDE COMPUTER COLLAPSE (1984).
(12.) Robert Sam Anson, The Y2K Nightmare, VANITY FAIR, Jan. 1999, (visited May 26, 1999), http://www.wild2k.com/database/vanityfair.html.
(14.) Peter De Jager, Doomsday 2000, COMPUTER-WORLD, Sept. 6, 1993.
(15.) JONES, supra note 1, at 225.
(18.) STAFF OF SENATE SPEC. COMM., supra note 5, at 3-4.
(19.) Id. at 4.
(20.) Id. at 45.
(21.) Steven H. Goldberg, Managing "Year 2000" Business and Legal Risks for Hospitals and Healthcare Systems, (visited May 7, 1999), http://www. year2000.com/y2klawcenter.html.
(22.) See, e.g., Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 675-76 (3d Cir. 1991); W.R.. Weaver Co. v. Burrows Corp., 580 S.W. 2d 76, 80 (Tex. Civ. App. 1979).
(23.) U.C.C. [subsections]2-314, 2-315.
(24.) U.C.C. [sections]2-719.
(25.) Debra A. Pitts, Beyond Compute: Don't Expect Year 2000 Losses to Be Covered Under CGL See Carrier Grade Linux. Policies, (visited May 26, 1999), http://www.2000law. com/my_html/beyond.htm.
(26.) James A. Pabarue & Randy J. Maniloff, Insurers Can Expect a Swarm of Millennium Bugs, NAT'L L.J., June 29, 1998, at B8.
RELATED ARTICLE: Y2K legislation: a pardon for procrastinators
It isn't often that a disaster can be both predicted and prevented. Most catastrophic events--earthquakes, tornadoes, floods--provide their victims with little or no warning. "Morningafter" interviews with rescuers and survivors almost always include similar versions of the same lament: "If only we'd known it was coming, we could have prepared."
The event that will trigger Y2K problems--which the most pessimistic technology experts, economists, and political leaders say could cause worldwide depression and devastation--can be timed to within a nanosecond (1) One billionth of a second. Used to measure the speed of logic and memory chips, a nanosecond can be visualized by converting it to distance. In one nanosecond, electricity travels approximately a foot in a wire. . It's the moment the clock rolls over to January 1, 2000. Ironically, many people who could have prevented this impending catastrophe did either nothing or much too little too late.
In recent months, members of Congress have been debating legislation that would shield from liability people or organizations who created or worsened injuries that have been and will be caused by the Y2K defect. As TRIAL went to press, pending legislation (S. 96 and H.R. 775) included provisions that except with regard to claims based on physical injury would:
* eliminate joint liability;
* limit punitive damages--assessed only in cases of the most flagrant fla·grant
1. Conspicuously bad, offensive, or reprehensible: a flagrant miscarriage of justice; flagrant cases of wrongdoing at the highest levels of government. See Usage Note at blatant.
2. misconduct--to either three times the compensatory damages A sum of money awarded in a civil action by a court to indemnify a person for the particular loss, detriment, or injury suffered as a result of the unlawful conduct of another. or $250,000, whichever is greater (if the defendant is an individual with a net worth of less than $500,000 or a business with fewer than 25 employees, the limit would be the lesser of three times the actual damages Noun 1. actual damages - (law) compensation for losses that can readily be proven to have occurred and for which the injured party has the right to be compensated
compensatory damages, general damages or $250,000);
* immunize im·mu·nize
1. To render immune.
2. To produce immunity in, as by inoculation.
im from tort liability defendants who can show they made reasonable efforts to fix the Y2K defect;
* require that injured parties provide potential defendants with written notice describing in detail the nature of the defect causing the injury, the injury suffered or risked, and the relief or action sought;
* require injured parties to wait 90 days after giving the above notice before filing an action in any state or federal court;
* in the event of a defense verdict, force the plaintiff to pay the defendant's costs and attorney fees from the time of any previously rejected offer of settlement from the defendant;
* exclude potential members of class actions from the class if they fail to respond to notices sent through the mail; and
* create a new federal cause of action for Y2K class actions, further straining the already overburdened o·ver·bur·den
tr.v. o·ver·bur·dened, o·ver·bur·den·ing, o·ver·bur·dens
1. To burden with too much weight; overload.
2. To subject to an excessive burden or strain; overtax.
1. federal court system.
ATLA ATLA Association of Trial Lawyers of America
ATLA American Theological Library Association
ATLA American Trial Lawyers Association
ATLA Air Transport Licensing Authority (Hong Kong)
ATLA Avatar: The Last Airbender opposes these bills. Howard Nations, an ATLA member and the author of the accompanying article, recently appeared before several congressional committees to argue against passage of both bills.
"It seems appropriate to inquire how a grant of immunity to procrastinators and irresponsible business leaders who seek to avoid accountability for their own bad business judgment would solve the Y2K problem," Nations said. "How can a grant of immunity from such liability motivate such leaders to suddenly act responsibly, function within the business judgment rule, and meet their duty of care?"
An overview of the pending bills and information about what ATLA members and other interested parties can do to prevent their passage can be obtained by visiting the association's Web site at http://www.atlanet.org; or by calling ATLAs director of media relations, Carlton Carl, at (800) 424-2725, ext. 334. Local callers should dial (202) 965-3500, ext. 334.