Y2K Bug Promises Legal Firestorms

Article excerpt

Estimates of the cost of correcting the Year 2000 computer problem worldwide range from $300 billion to $600 billion. But that's just the beginning. Y2K-related lawsuits may well flood the courts, with a total expense in legal fees that no one seems to have a clue about. Legal expense estimates range from $100 billion to a $1 trillion estimate from Lloyd's of London.

Lawsuits may come from consumers, shareholders or other businesses. And no one knows for sure how the courts may rule on who should be held legally responsible for Y2K problems.

"It seems to me one of the key issues being fought over right now is whether it's the end user of the computer system vs. the vendor or the supplier or the consultant -- whoever put the system in -- or whether it's insurance litigation -- whether these claims are covered under insurance policies," notes Eric Eissenstat, a partner with experience in computer law at the firm of Fellers, Snider, Blankenship, Bailey & Tippens. "Do you have a duty to disclose the fact that your system might not be Y2K compliant and, if so, when did that duty arise? Because you've got people who say nobody really knew about it until `96, `97, `98. And insurance companies are saying it's been a problem since the early `90s. People have known about it and therefore it's not covered." At the heart of the issue is the two-digit system used by many older computers and software programs to denote years. When the year 2000 rolls around, analysts fear such computers will view "00" as 1900 rather than 2000, potentially causing all sorts of havoc. The starting line for legal action is not at the stroke of midnight New Year's Eve. Several suits have already been filed, although Eissenstat says it's hard to estimate how many. In the middle of January, he heard there had been 40 Y2K-related lawsuits filed nationwide -- a number he feels is a great underestimate. The America Bar Association Intellectual Property Committee has taken the problem seriously enough to arrange a series of roundtable discussions in cities nationwide. The committee selected Eissenstat to host the Oklahoma City event last month, which was attended by about 20 representatives of banks, utilities, government agencies and other sectors. Eissenstat himself began advising clients in a couple of potential cases in January. The cases are similar. Both clients have leased computer systems that are not Y2K ready. The clients wish to get out of their lease obligations by claiming the companies providing the computer systems failed to divulge their lack of Y2K-preparedness. But one case may provide a bit of hope for at least buying time. A series of suits against Intuit -- the maker of the financial software Quicken -- have been dismissed. "Quicken said they were trying to fix the problem and may provide that fix for free," explains Eissenstat, "and no one knows if there's been any quantifiable economic harm to the user of Quicken. So they said it's too soon. They're going to give Quicken a chance to prepare." Nonetheless, the situation is very serious and the time is short. Eissenstat's advice is clear: Perform a "legal audit. …

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