HR 775 IH

To establish certain procedures for civil actions brought for damages relating to the failure of any device or system to process or otherwise deal with the transition from the year 1999 to the year 2000, and for other purposes.

February 23, 1999

Mr. DAVIS of Virginia (for himself, Mr. DREIER, Mr. COX, Mr. MORAN of Virginia, Mr. CRAMER, and Mr. DOOLEY of California) introduced the following bill; which was referred to the Committee on the Judiciary, and in addition to the Committee on Small Business, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To establish certain procedures for civil actions brought for damages relating to the failure of any device or system to process or otherwise deal with the transition from the year 1999 to the year 2000, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Year 2000 Readiness and Responsibility Act'.

SEC. 2. FINDINGS.

The Congress finds the following:

(1) The Congress seeks to encourage businesses to concentrate their attention and resources in the short time remaining before January 1, 2000, on addressing, assessing, remediating, and testing their Year 2000 problems, and to minimize any possible business disruptions associated with Year 2000 issues.

(2) It is appropriate for the Congress to enact legislation to assure that Year 2000 problems do not unnecessarily disrupt interstate commerce or create unnecessary case loads in Federal courts and to provide initiatives to help businesses prepare and be in a position to withstand the potentially devastating economic impact of the Year 2000 problem.

(3) Year 2000 issues will affect practically all business enterprises to some degree, giving rise to a large number of disputes.

(4) Resorting to the legal system for resolution of Year 2000 problems is not feasible for many businesses, particularly small businesses, because of its complexity and expense.

(5) The delays, expense, uncertainties, loss of control, adverse publicity and animosities that frequently accompany litigation of business disputes can only exacerbate the difficulties associated with the Year 2000 date change, and work against the successful resolution of those difficulties.

(6) The Congress recognizes that every business in the United States should be concerned that widespread and protracted Year 2000 litigation may threaten the network of valued and trusted business relationships that are so important to the effective functioning of the world economy, and which may put unbearable strains on an overburdened judicial system.

(7) A proliferation of frivolous Year 2000 actions by opportunistic parties may further limit access to courts by straining the resources of the legal system and depriving deserving parties of their legitimate rights to relief.

(8) The Congress encourages businesses to approach their Year 2000 disputes responsibly, and to avoid unnecessary, time-consuming and costly litigation based on Year 2000 failures. Congress supports good faith negotiations between parties when there is a dispute over a Year 2000 problem, and, if necessary, urges the parties to enter into voluntary, non-binding mediation rather than litigation.

SEC. 3. DEFINITIONS.

In this Act:

(1) ACTUAL DAMAGES- The term `actual damages' means damages for injury to tangible property, and the cost of repairing or replacing defective products.

(2) CONTRACT- The term `contract' means a contract, tariff, license, or warranty.

(3) DEFENDANT- The term `defendant' means any person against whom a year 2000 claim has been asserted.

(4) ECONOMIC LOSS- The term `economic loss'--

(A) means any damages other than damages arising out of personal injury or damage to tangible property;

(B) includes, but is not limited to, damages for lost profits or sales, for business interruption, for losses indirectly suffered as a result of the defendant's wrongful act or omission, for losses that arise because of the claims of third parties, for losses that must be pleaded as special damages, or for items defined as consequential damages in the Uniform Commercial Code or analogous State commercial law; and

(C) does not include non-economic damages.

(5) MATERIAL DEFECT- The term `material defect' means a defect in any item, whether tangible or intangible, or in the provision of a service, that substantially prevents the item or service from operating or functioning as designed or intended. Defects that have an insignificant or de minimis effect on the operation or functioning of an item, or that affect only a component of an item that, as a whole, substantially operates or functions as designed, or that have an insignificant or de minimis effect on the efficacy of the service provided, are not material defects within the meaning of this definition.

(6) PERSON- The term `person' means any natural person and any entity, organization, or enterprise, including but not limited to corporations, companies, joint stock companies, associations, partnerships, trusts, and governmental entities.

(7) PERSONAL INJURY- The term `personal injury' means any physical injury to a natural person, including death of the person. It does not include mental suffering, emotional distress, or like elements of injury that do not constitute physical harm to a natural person.

(8) PLAINTIFF- The term `plaintiff' means any person who asserts a year 2000 claim.

(9) PUNITIVE DAMAGES- The term `punitive damages' means damages that are awarded against any person to punish such person or to deter such person, or others, from engaging in similar behavior in the future.

(10) STATE- The term `State' means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, the United States Virgin Islands, Guam, American Samoa, and any other territory or possession of the United States, and any political subdivision thereof.

(11) YEAR 2000 ACTION- The term `year 2000 action' means any civil action of any kind brought in any court under Federal or State law, in which--

(A) a year 2000 claim is asserted; or

(B) any claim or defense, other than a claim or defense based on personal injury, is related, directly or indirectly, to an actual or potential year 2000 failure.

(12) YEAR 2000 CLAIM- The term `year 2000 claim' means any claim or cause of action of any kind, other than a claim based on personal injury, whether asserted by way of claim, counterclaim, cross-claim, third-party claim, or otherwise, in which the plaintiff's alleged loss or harm resulted, directly or indirectly, from an actual or potential year 2000 failure.

(13) YEAR 2000 FAILURE- The term `year 2000 failure' means any failure by any device or system (including, without limitation, any computer system and any microchip or integrated circuit embedded in another device or product), or any software, firmware, or other set or collection of processing instructions, however constructed, in processing, calculating, comparing, sequencing, displaying, storing, transmitting, or receiving date-related data, including, without limitation, failure in accurately dealing with or failure in accurately accounting for transitions or comparisons from, into, and between the years 1999 and 2000, failure to recognize or accurately process any specific date, and failure accurately to account for the year 2000's status as a leap year.

SEC. 4. EXCLUSION OF PERSONAL INJURY CLAIMS.

None of the provisions of this Act shall apply to any claim based on personal injury.

TITLE I--UNIFORM PRELITIGATION PROCEDURES FOR YEAR 2000 ACTIONS

SEC. 101. NOTICE PROCEDURES TO AVOID UNNECESSARY YEAR 2000 ACTIONS.

(a) NOTIFICATION PERIOD- Before filing a year 2000 action, except an action that seeks only injunctive relief, a prospective plaintiff shall provide to each prospective defendant a written notice that identifies, with particularity--

(1) any symptoms of a material defect alleged to have caused injury;

(2) the injury allegedly suffered by the prospective plaintiff;

(3) the facts that lead the prospective plaintiff to hold such person responsible for both the defect and the injury; and

(3) the relief or action sought by the prospective plaintiff.

Except as provided in subsection (c), the prospective plaintiff shall not commence an action in Federal or State court until the expiration of 90 days after the date on which such notice is provided. Such 90-day period shall be excluded in the computation of any applicable statute of limitations.

(b) RESPONSE TO NOTICE- Not later than 30 days after receipt of the notice specified in subsection (a), each prospective defendant shall provide to each prospective plaintiff a written statement acknowledging receipt of the notice and describing the actions it will take or has taken, if any, to address the problem identified by the prospective plaintiff.

(c) FAILURE TO RESPOND- If a prospective defendant fails to respond to a notice provided pursuant to subsection (a) within the 30-day period specified in subsection (b) or does not describe the action, if any, that the prospective defendant will take to address the problem identified by the prospective plaintiff, the 90-day period specified in subsection (a) shall terminate at the end of that 30-day period as to that prospective defendant and the prospective plaintiff may thereafter commence its action against that prospective defendant.

(d) FAILURE TO PROVIDE NOTICE- If a defendant determines that a plaintiff has filed a year 2000 action without providing the notice specified in subsection (a) and without awaiting the expiration of the 90-day period specified in subsection (a), the defendant may treat the plaintiff's complaint as such a notice by so informing the

court and the plaintiff. If any defendant elects to treat the complaint as such a notice--

(1) the court shall stay all discovery and all other proceedings in the action for 90 days after filing of the complaint; and

(2) the time for filing answers and all other pleadings shall be tolled during this 90-day period.

(e) EFFECT OF CONTRACTUAL WAITING PERIODS- In cases where a contract requires notice of nonperformance and provides for a period of delay prior to the initiation of suit for breach or repudiation of contract, the period of delay provided in the contract is controlling over the waiting period specified in subsections (a) and (d).

(f) SANCTION FOR FRIVOLOUS INVOCATION OF THE STAY PROVISION- In any action in which a defendant acts pursuant to subsection (d) to stay the action, and the court subsequently finds that the defendant's assertion that the suit is a year 2000 action was frivolous and made for the purpose of causing unnecessary delay, the court may award sanctions to opposing parties in accordance with the provisions of Rule 11 of the Federal Rules of Civil Procedure.

(g) COMPUTATION OF TIME- For purposes of this section, the rules regarding computation of time shall be governed by the applicable Federal or State rules of civil procedure.

SEC. 102. ALTERNATIVE DISPUTE RESOLUTION TO AVOID UNNECESSARY YEAR 2000 ACTIONS.

(a) IN GENERAL- (1) At any time during the 90-day period specified in section 101(a), either party may request the other to use alternative dispute resolution. If, based upon that request, the parties enter into an agreement to use alternative dispute resolution, they may also agree to an extension of the 90-day period.

(2) At any time after expiration of the 90-day period specified in section 101(a), whether before or after the filing of a complaint, either party may request the other to use alternative dispute resolution.

(b) PAYMENT OF MONEYS DUE- If the parties resolve their dispute through alternative dispute resolution as provided in subsection (a), the defendant shall pay all monies due within 30 days, unless another period of time is agreed to by the parties or established by contract between the parties.

SEC. 103. PLEADING REQUIREMENTS.

(a) NATURE AND AMOUNT OF DAMAGES- In any year 2000 action that seeks the award of money damages, the complaint shall state with particularity the nature and amount of each element of damages, and the factual basis for the damages calculation.

(b) MATERIAL DEFECTS- In any year 2000 action in which the plaintiff alleges that a product or service was defective, the complaint shall identify with particularity the symptoms of the material defects and shall state with particularity the facts supporting the conclusion that the defects were material.

(c) REQUIRED STATE OF MIND- In any year 2000 action in which a claim is asserted as to which the plaintiff may prevail only on proof that the defendant acted with a particular state of mind, the complaint shall, with respect to each element of the claim, state with particularity the facts giving rise to a strong inference that the defendant acted with the required state of mind.

(d) MOTION TO DISMISS; STAY OF DISCOVERY-

(1) DISMISSAL FOR FAILURE TO MEET PLEADING REQUIREMENTS- In any year 2000 action, the court shall, on the motion of any defendant, dismiss the complaint with or without prejudice if the requirements of subsection (a), (b), or (c) are not met with respect to any claim asserted therein.

(2) STAY OF DISCOVERY- In any year 2000 action, all discovery shall be stayed during the pendency of any motion to dismiss, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or prevent undue prejudice to that party.

(3) PRESERVATION OF EVIDENCE-

(A) IN GENERAL- During the pendency of any stay of discovery entered pursuant to this subsection, unless otherwise ordered by the court, any party to the action with actual notice of the allegations contained in the complaint shall treat all documents, data compilations (including electronically stored or recorded data), and tangible objects that are in the custody or control of such person and that are relevant to the allegations, as if they were a subject of a continuing request for production of documents from an opposing party under applicable Federal or State rules of civil procedure.

(B) SANCTION FOR WILLFUL VIOLATION- A party aggrieved by the willful failure of an opposing party to comply with subparagraph (A) may apply to the court for an order awarding appropriate sanctions.

SEC. 104. DUTY OF ALL PERSONS TO MITIGATE YEAR 2000 COMPUTER FAILURES AND RESULTING DAMAGES.

There shall be no recovery in any year 2000 action on account of injury that the plaintiff could reasonably have avoided in light of any disclosure or other information of which the plaintiff was, or reasonably could have been, aware, and the damages awarded in any such action shall exclude any amount that the plaintiff reasonably could have avoided in light of any such disclosure or information.

TITLE II--YEAR 2000 ACTIONS INVOLVING CONTRACTS

SEC. 201. CERTAINTY OF CONTRACT TERMS FOR PREVENTION OF YEAR 2000 DAMAGES.

Notwithstanding any other provision of Federal or State statutory or common law, in any year 2000 action all written contractual terms, including limitations or exclusions of liability or disclaimers of warranty, shall be fully enforceable, except that--

(1) if the contract is silent as to a particular issue, the interpretation of the contract as to that issue shall be determined by applicable law in force at the time that the contract was entered into; and

(2) this section does not apply if a court determines that the contract as a whole is unenforceable due to an infirmity in the formation of the contract under applicable law in force at the time the contract was entered into.

SEC. 202. DEFENSES.

(a) REASONABLE EFFORTS- In any year 2000 action in which breach of contract is alleged, in addition to any other rights provided by applicable law, the party against whom the claim of breach is asserted shall be allowed to offer evidence that its implementation of the contract, or its efforts to implement the contract, were reasonable in light of the circumstances for the purpose of limiting or eliminating the defendant's liability.

(b) IMPOSSIBILITY OR COMMERCIAL IMPRACTICABILITY- In any year 2000 action in which breach of contract is alleged, applicability of the doctrines of impossibility and commercial impracticability shall be determined by applicable law in existence on January 1, 1999, and nothing in this Act shall be construed as limiting or impairing a party's right to assert defenses based upon such doctrines.

SEC. 203. PROTECTION OF PERSONS FROM LIABILITY NOT ANTICIPATED IN YEAR 2000 CONTRACTS.

In any year 2000 action involving a breach of contract or a claim related to the contract, the court shall not award any damages unless such damages are provided for by the express terms of the contract, or, if the contract is silent on such damages, then by operation of the applicable Federal or State law that governed interpretation of the contract at the time the contract was entered into.

TITLE III--YEAR 2000 ACTIONS INVOLVING TORT AND OTHER NONCONTRACTUAL CLAIMS

SEC. 301. PROPORTIONATE LIABILITY.

(a) IN GENERAL- Except with respect to claims involving personal injury, a person against whom a final judgment is entered in a year 2000 action shall be liable solely for the portion of the judgment that corresponds to the percentage of responsibility of that person, as determined under subsection (b).

(b) DETERMINATION OF RESPONSIBILITY-

(1) IN GENERAL- In any year 2000 action, the court shall instruct the jury to answer special interrogatories, or if there is no jury, shall make findings, with respect to each defendant and plaintiff, and each of the other persons claimed by any of the parties to have caused or contributed to the loss incurred by the plaintiff, including (but not limited to) persons who have entered into settlements with the plaintiff or plaintiffs, concerning the percentage of responsibility of the defendant, the plaintiff, and each such person, measured as a percentage of the total fault of all persons who caused or contributed to the total loss incurred by the plaintiff.

(2) CONTENTS OF SPECIAL INTERROGATORIES OR FINDINGS- The responses to interrogatories, or findings, as appropriate, under paragraph (1) shall specify the total amount of damages that the plaintiff is entitled to recover and the percentage of responsibility of each person found to have caused or contributed to the loss incurred by the plaintiff or plaintiffs.

(3) FACTORS FOR CONSIDERATION- In determining the percentage of responsibility under this subsection, the trier of fact shall consider--

(A) the nature of the conduct of each person alleged to have caused or contributed to the loss incurred by the plaintiff; and

(B) the nature and extent of the causal relationship between the conduct of each such person and the damages incurred by the plaintiff or plaintiffs.

(4) NONDISCLOSURE TO JURY- The standard for allocation of damages under paragraph (1) shall not be disclosed to members of the jury.

SEC. 302. PROTECTION OF GOOD FAITH EFFORTS TO PREVENT YEAR 2000 DAMAGES.

(a) DEFENDANT'S STATE OF MIND AS TO YEAR 2000 FAILURE- With respect to any year 2000 claim for money damages in which the defendant's actual or constructive awareness of an actual or potential year 2000 failure is an element of the claim under applicable law, except for a claim based upon personal injury, the defendant shall not be liable unless the plaintiff, in addition to establishing all other requisite elements of the claim, proves by clear and convincing evidence that the defendant actually knew, or recklessly disregarded a substantial risk, that such failure would occur in the specific facts and circumstances of such claim.

(b) INJURY TO PLAINTIFF- With respect to any year 2000 claim for money damages in which the defendant's actual or constructive awareness of actual or potential harm to the plaintiff is an element of the claim under applicable law, except for a claim based upon personal injury, the defendant shall not be liable unless the plaintiff, in addition to establishing all other requisite elements of the claim, proves by clear and convincing evidence that the defendant actually knew, or recklessly disregarded a known and substantial risk, that the plaintiff would suffer such harm.

(c) FORESEEABILITY- With respect to any year 2000 claim for money damages, except for a claim based upon personal injury, the defendant shall not be liable unless the plaintiff establishes by clear and convincing evidence, in addition to all other requisite elements of the claim, that the defendant knew or reasonably should have known that its actions would cause harm to the plaintiff in the specific facts and circumstances of such claim.

(d) PRESERVATION OF EXISTING LAW- Nothing in subsections (a), (b), or (c) shall be deemed to relieve the plaintiff in any year 2000 action of its obligation to establish any element of its cause of action under applicable law.

SEC. 303. REASONABLE EFFORTS DEFENSE.

In any year 2000 action involving a claim for money damages, except with respect to claims asserting breach or repudiation of contract--

(1) the fact that a year 2000 failure occurred in an entity, facility, system, product, or component that was within the control of the party against whom the claim is asserted shall not constitute the sole basis for recovery; and

(2) the party against whom the claim is asserted shall be entitled to establish, as a complete defense to the claim, that it took measures that were reasonable under the circumstances to prevent the year 2000 failure from occurring or from causing the damages upon which the claim is based.

SEC. 304. DAMAGES LIMITATION.

(a) YEAR 2000 RECOVERY FUND- There is established in the Treasury a Year 2000 Recovery Fund. In any year 2000 action in which punitive damages are awarded under applicable law, including this Act, the entire amount of such damages shall be paid into the Year 2000 Recovery Fund. Amounts in the Fund shall be used for the assistance of small businesses, State and local governments, and nonprofit organizations, that are affected by Year 2000 failures.

(b) STANDARD FOR AWARDS- In any year 2000 action in which punitive damages may be awarded under applicable law, the defendant shall not be liable for punitive damages unless the plaintiff proves by clear and convincing evidence that the defendant specifically intended to cause injury to the plaintiff. This requirement is in addition to any other requirement in applicable law for the award of such damages.

(c) CAPS ON PUNITIVE DAMAGES-

(1) IN GENERAL- In any year 2000 action, if a defendant is found liable for punitive damages, the amount of punitive damages that may be awarded to a claimant shall not exceed the greater of--

(A) 3 times the amount awarded to the claimant for actual damages; or

(B) $250,000.

(2) SPECIAL RULE-

(A) IN GENERAL- Notwithstanding paragraph (1), in any year 2000 action, if the defendant is found liable for punitive damages and the defendant--

(i) is an individual whose net worth does not exceed $500,000,

(ii) is an owner of an unincorporated business that has fewer than 25 full-time employees, or

(iii) is--

(I) a partnership,

(II) corporation,

(III) association,

(IV) unit of local government, or

(V) organization,

that has fewer than 25 full-time employees,

the amount of punitive damages shall not exceed the lesser of 3 times the amount awarded to the claimant for actual damages, or $250,000.

(B) APPLICABILITY- For purposes of determining the applicability of this paragraph to a corporation, the number of employees of a subsidiary of a wholly owned corporation shall include all employees of a parent corporation or any subsidiary of that parent corporation.

(3) APPLICATION OF LIMITATIONS BY THE COURT- The limitations contained in paragraphs (1) and (2) shall be applied by the court and shall not be disclosed to the jury.

SEC. 305. RECOVERY OF ECONOMIC DAMAGES IN YEAR 2000 ACTIONS.

(a) LIMITATION ON RECOVERY OF ECONOMIC LOSSES- Subject to subsection (b), a party to a year 2000 action making a tort claim may recover economic losses only upon establishing, in addition to all other elements of the claim under applicable law, that any one of the following circumstances exists:

(1) The recovery of such losses is provided for in a contract to which the party seeking to recover such losses is a party.

(2) Such losses are incidental to a claim in the year 2000 action based on personal injury caused by a year 2000 failure.

(3) Such losses are incidental to a claim in the year 2000 action based on damage to tangible property caused by a year 2000 failure (other than damage to property that is the subject of the contract).

(b) RECOVERY MUST BE PERMITTED UNDER APPLICABLE LAW- Economic losses shall be recoverable in a year 2000 action only if applicable Federal law, or applicable State law embodied in statute or controlling judicial precedent as of January 1, 1999, permits the recovery of such losses in the action.

SEC. 306. LIABILITY OF OFFICERS AND DIRECTORS.

(a) IN GENERAL- A director, officer, or trustee of a business or other organization (including a corporation, unincorporated association, partnership, or non-profit organization) shall not be personally liable in any year 2000 action in his or her capacity as a director or officer of the business or organization for an aggregate amount that exceeds the greater of--

(1) $100,000; or

(2) the amount of cash compensation received by the director or officer from the business or organization during the 12-month period immediately preceding the act or omission for which liability was imposed.

(b) RULE OF CONSTRUCTION- Nothing in this section shall be deemed to impose, or to permit the imposition of, personal liability on any director, officer, or trustee in excess of the aggregate amount of liability to which such director, officer, or trustee would be subject under applicable State law in existence on January 1, 1999 (including any charter or bylaw authorized by such State law).

TITLE IV--YEAR 2000 CLASS ACTIONS

SEC. 401. MINIMUM INJURY REQUIREMENT.

(a) IN GENERAL- In any year 2000 action involving a claim that a product or service is defective, the action may be maintained as a class action in Federal or state court as to that claim only if it satisfies all other prerequisites established by applicable Federal or State law and the court also finds that the alleged defect in the product or service was a material defect as to a majority of the members of the class.

(b) DETERMINATION BY COURT- As soon as practicable after the commencement of a year 2000 action involving a claim that a product or service is defective and that is brought as a class action, the court shall determine by order whether the requirement set forth in paragraph (1) is satisfied. An order under this subsection may be conditional, and may be altered or amended before the decision on the merits.

SEC. 402. NOTIFICATION.

(a) NOTICE BY MAIL- In any year 2000 action that is maintained as a class action, the court, in addition to any other notice required by applicable Federal or State law, shall direct notice of the action to each member of the class by United States mail, return receipt requested. Persons whose actual receipt of the notice is not verified by the court or by counsel for one of the parties shall be excluded from the class unless those persons inform the court in writing, on a date no later than the commencement of trial or entry of judgment, that they wish to join the class.

(b) CONTENTS OF NOTICE- In addition to any information required by applicable Federal or State law, the notice described in this subsection shall--

(1) concisely and clearly describe the nature of the action;

(2) identify the jurisdiction whose law will govern the action;

(3) identify any potential claims that class counsel chose not to pursue so that the action would satisfy class certification requirements; and

(4) describe the fee arrangement of class counsel.

SEC. 403. DISMISSAL PRIOR TO CERTIFICATION.

Before determining whether to certify a class in a year 2000 action, the court may decide a motion to dismiss or for summary judgment made by any party if the court concludes that decision will promote the fair and efficient adjudication of the controversy and will not cause undue delay.

SEC. 404. FEDERAL JURISDICTION IN YEAR 2000 CLASS ACTIONS.

(a) REFERENCE- Whenever in this section an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of title 28, United States Code.

(b) DIVERSITY JURISDICTION- Section 1332 is amended by redesignating subsections (b), (c), and (d) as subsections (c), (d), and (e), respectively, and by inserting after subsection (a) the following:

`(b)(1) The district courts shall have original jurisdiction of any year 2000 action, regardless of the sum or value of the matter in controversy therein, which is brought as a class action and in which--

`(A) any member of a proposed plaintiff class is a citizen of a State different from any defendant;

`(B) any member of a proposed plaintiff class is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or

`(C) any member of a proposed plaintiff class is a citizen of a State and any defendant is a citizen or subject of a foreign state.

As used in this paragraph, the term `foreign state' has the meaning given that term in section 1603(a).

`(2)(A) In a year 2000 action described in paragraph (1) in which--

`(i) the substantial majority of the members of all proposed plaintiff classes are citizens of a single State of which the primary defendants are also citizens, and

`(ii) the claims asserted will be governed primarily by the laws of that State,

the district court should abstain from hearing such action.

`(B) In a year 2000 action described in paragraph (1) in which--

`(i) all matters in controversy asserted by the individual members of all proposed plaintiff classes in the aggregate do not exceed the sum or value of $1,000,000, exclusive of interest and costs,

`(ii) the number of members of all proposed plaintiff classes in the aggregate is less than 100, or

`(iii) the primary defendants are States, State officials, or other governmental entities against whom the district court may be foreclosed from ordering relief,

the district court may, in its discretion, abstain from hearing such action.

`(3)(A) Paragraph (1) and section 1453 shall not apply to any class action that is brought under the Securities Act of 1933.

`(B) Paragraph (1) and section 1453 shall not apply to a class action described in subparagraph (C) that is based upon the statutory or common law of the State in which the issuer concerned is incorporated (in the case of a corporation) or organized (in the case of any other entity).

`(C) A class action is described in this subparagraph if it involves--

`(i) the purchase or sale of securities by an issuer or an affiliate of an issuer exclusively from or to holders of equity securities of the issuer; or

`(ii) any recommendation, position, or other communication with respect to the sale of securities of an issuer that--

`(I) is made by or on behalf of the issuer or an affiliate of the issuer to holders of equity securities of the issuer; and

`(II) concerns decisions of those equity holders with respect to voting their securities, acting in response to a tender or exchange offer, or exercising dissenters' or appraisal rights.

`(D) As used in this paragraph, the terms `issuer', `security', and `equity security' have the meanings given those terms in section 3 of the Securities Exchange Act of 1934.

`(4) As used in this subsection, the term `year 2000 action' has the meaning given that term in section 3 of the Year 2000 Readiness Act.'.

(c) CONFORMING AMENDMENT- Section 1332(c) (as redesignated by this section) is amended by inserting after `Federal courts' the following: `pursuant to subsection (a) of this section'.

(d) DETERMINATION OF DIVERSITY- Section 1332, as amended by this section, is further amended by adding at the end the following:

`(f) For purposes of subsection (b), a member of a proposed class shall be deemed to be a citizen of a State different from a defendant corporation only if that member is a citizen of a State different from all States of which the defendant corporation is deemed a citizen.'.

(e) REMOVAL OF CLASS ACTIONS- Chapter 89 is amended by adding after section 1452 the following:

`Sec. 1453. Removal of class actions

`(a) IN GENERAL- A year 2000 action which is a class action may be removed to a district court of the United States in accordance with this chapter, except that such action may be removed--

`(1) by any defendant without the consent of all defendants; or

`(2) by any plaintiff class member who is not a named or representative class member of the action for which removal is sought, without the consent of all members of such class.

`(b) WHEN REMOVABLE- This section shall apply to any year 2000 action before or after the entry of any order certifying a class.

`(c) PROCEDURE FOR REMOVAL- The provisions of section 1446(a) relating to a defendant removing a case shall apply to a plaintiff removing a case under this section. With respect to the application of subsection (b) of such section, the requirement relating to the 30-day filing period shall be met if a plaintiff class member who is not a named or representative class member of the action for which removal is sought files notice of removal within 30 days after receipt by such class member, through service or otherwise, of the initial written notice of the class action provided at the trial court's direction.

`(d) DEFINITION- As used in this section, the term `year 2000 action' has the meaning given that term in section 3 of the Year 2000 Readiness Act.'.

(f) REMOVAL LIMITATIONS- Section 1446(b) is amended in the second sentence--

(1) by inserting after `has become removable' the following: `, or, in the case of an action removable on the basis of jurisdiction under section 1332(b), from which it may first be ascertained, by exercising due diligence, that the case is one which is or has become removable'; and

(2) by inserting `(a)' after `section 1332'.

(g) TECHNICAL AND CONFORMING AMENDMENTS- The table of sections for chapter 89 is amended by adding after the item relating to section 1452 the following:

`1453. Removal of class actions.'.

(h) APPLICATION OF SUBSTANTIVE STATE LAW- Nothing in this section or the amendments made by this section shall alter the substantive law applicable to an action to which the amendments made by subsection (b) of this section apply.

(i) PROCEDURE AFTER REMOVAL- Section 1447 is amended by adding at the end the following new subsection:

`(f) If, after removal, the court determines that no aspect of an action that is subject to its jurisdiction solely under the provisions of section 1332(b) may be maintained as a class action under Rule 23 of the Federal Rules of Civil Procedure, the court shall strike the class allegations from the action and remand the action to the State court. Upon remand of the action, the period of limitations for any claim that was asserted in the action on behalf of any named or unnamed member of any proposed class shall be deemed tolled to the full extent provided under Federal law.'.

TITLE V--CLIENT PROTECTION IN CONNECTION WITH YEAR 2000 ACTIONS

SEC. 501. SCOPE.

This title applies to any year 2000 claim or year 2000 action asserted or brought in Federal or State court.

SEC. 502. DEFINITIONS.

In this title:

(1) ATTORNEY- the term `attorney' means any natural person, professional law association, corporation, or partnership authorized under applicable State law to practice law.

(2) ATTORNEY'S SERVICES- The term `attorney's services' means the professional advice or counseling of or representation by an attorney, but such term shall not include other assistance incurred, directly or indirectly, in connection with an attorney's services, such as administrative or secretarial assistance, overhead, travel expenses, witness fees, or preparation by a person other than the attorney of any study, analysis, report, or test.

(3) CONTINGENT FEE- The term `contingent fee' means the cost or price of an attorney's services determined by applying a specified percentage, which may be a firm fixed percentage, a graduated or sliding percentage, or any combination thereof, to the amount of the settlement or judgment obtained.

(4) HOURLY FEE- The term `hourly fee' means the cost or price per hour of an attorney's services.

(5) INITIAL MEETING- The term `initial meeting' means the first conference or discussion between a client and an attorney, whether by telephone or in person, concerning the details, facts, or basis of the plaintiff's claim.

(6) RETAIN- The term `retain' means the act of a client in engaging an attorney's services, whether by express or implied agreement, by seeking and obtaining the attorney's services.

SEC. 503. CONSUMER'S RIGHT TO ELECT HOURLY OR CONTINGENT FEE ARRANGEMENT.

(a) ELECTION OF TERMS- A plaintiff who retains an attorney with respect to a year 2000 claim or a year 2000 action may elect whether to compensate the attorney's services in connection with the year 2000 claim or the year 2000 action on an hourly basis or a contingent fee basis, except that--

(1) in no event shall an attorney that has been retained on a contingent fee basis be paid a fee greater than the lesser of the attorney's hourly rate or rates disclosed under section 505 multiplied by the total number of hours spent by the attorney in connection with the claim or action or an agreed upon percentage of the total recovery which does not exceed one-third of the total recovery; and

(2) in no event shall such an attorney be paid a contingent fee based on a percentage of a settlement or judgment obtained for that portion of damages claimed which the defendant offered prior to, or within 90 days after, the filing of the relevant year 2000 action.

(b) ADDITIONAL LIMITATION- In no event shall an attorney representing a client in connection with a year 2000 claim or a year 2000 action be paid a fee greater than the attorney's hourly rate or rates disclosed under section 505 multiplied by the total number of hours spent by the attorney in connection with the claim or action.

SEC. 504. CONSUMER'S RIGHT TO UP-FRONT DISCLOSURE OF INFORMATION REGARDING FEES AND SETTLEMENT PROPOSALS.

An attorney retained by a client shall, at the initial meeting (or in the instance of an attorney retained before the effective date of this Act, 30 days after the date of the enactment of this Act), disclose to the client the client's rights under this title and the client's right to receive a written statement of the information described under sections 505 and 506.

SEC. 505. INFORMATION AFTER INITIAL MEETING.

(a) WRITTEN DISCLOSURE OF FEES- Within 30 days after the disclosure described under section 504, an attorney retained by a client shall provide a written statement to the client setting forth--

(1) the estimated number of hours of the attorney's services that will be spent--

(A) settling or attempting to settle the year 2000 claim or year 2000 action; and

(B) handling the year 2000 claim or year 2000 action through trial;

(2) the attorney's hourly fee for services in pursuing the year 2000 claim or year 2000 action and any conditions, limitations, restrictions, or other qualifications on the fee, including likely expenses and the client's obligation for those expenses and stating that in no event shall such hourly fee for services exceed $1,000 per hour; and

(3) in the case of an attorney retained on a contingent fee basis, the attorney's contingent fee for services in pursuing the year 2000 claim or year 2000 action and any conditions, limitations, restrictions, or other qualifications on the fee, including likely expenses and the client's obligation for those expenses and stating that in no event shall such contingent fee exceed one third of the total recovery.

(b) CONSUMER'S RIGHT TO TIMELY UPDATED INFORMATION ABOUT FEES- In addition to the requirements contained in subsection (a), the attorney shall also render monthly statements to the client containing a description of hourly charges and expenses incurred in the pursuit of the client's year 2000 claim or year 2000 action by each attorney assigned to the client's matter.

SEC. 506. CONSUMER'S RIGHT TO TIMELY UPDATED INFORMATION ABOUT SETTLEMENT PROPOSALS AND DETAILED STATEMENT OF HOURS AND FEES.

An attorney retained by a client shall immediately transmit all settlement offers to the client with an estimate of the likelihood of achieving a more or less favorable resolution to the year 2000 claim or year 2000 action, the likely timing of such resolution, and the likely attorney's fees and expenses required to obtain such a resolution. An attorney retained by a client shall, within a reasonable time not later than 30 days after the date on which the year 2000 claim or year 2000 action is finally settled or adjudicated, provide a written statement to the client containing--

(1) the actual number of hours expended by each attorney on behalf of the client in connection with the year 2000 claim or year 2000 action and such attorney's hourly rate; and

(2) the total amount of the hourly fees or total contingent fee for the attorney's services in connection with the year 2000 claim or year 2000 action.

SEC. 507. CLASS ACTIONS.

An attorney representing a class in a year 2000 action shall make the disclosures required under this title to the presiding judge. The presiding judge shall, at the outset of the year 2000 action, determine the appropriate hourly rate, which in no event shall exceed $1,000 per hour, and the maximum percentage of the recovery to be paid in attorney's fees, which in no event shall exceed one third of the recovery. Notwithstanding any other provision of law or agreement to the contrary, the presiding judge shall award attorney's fees only pursuant to this title.

SEC. 508. ENFORCEMENT OF CONSUMER PROTECTION RULES IN YEAR 2000 CLAIMS AND ACTIONS.

A client whose attorney fails to comply with this title may file a civil action for damages in the court in which the year 2000 claim or year 2000 action was filed or could have been filed or other court of competent jurisdiction. The remedy provided by this section is in addition to any other available remedy or penalty.

TITLE VI--ASSISTANCE TO SMALL BUSINESSES FOR PREVENTING YEAR 2000 COMPUTER FAILURES

SECTION 601. SHORT TITLE.

This title may be cited as the `Small Business Year 2000 Readiness Act'.

SEC. 602. FINDINGS.

Congress finds that--

(1) the failure of many computer programs to recognize the year 2000 will have extreme negative financial consequences in the year 2000 and in subsequent years for both large and small businesses;

(2) small businesses are behind larger businesses in implementing corrective changes to their automated systems-85 percent of businesses with 200 employees or fewer have not commenced inventorying the changes they must make to their automated systems to avoid year 2000 problems;

(3) many small businesses do not have access to the capital necessary to fix mission critical automated systems; and

(4) the failure of a large number of domestic small businesses will have a highly detrimental effect on the American economy in the year 2000 and subsequent years.

SEC. 603. YEAR 2000 COMPUTER FAILURE LOAN GUARANTEE PROGRAM.

(a) PROGRAMS ESTABLISHED- Section 7(a) of the Small Business Act (15 U.S.C. 636(a)) is amended by adding at the end the following:

`(27) YEAR 2000 COMPUTER FAILURE PILOT PROGRAM-

`(A) DEFINITIONS- In this paragraph--

`(i) the term `eligible lender' means any lender designated by the Administration as eligible to participate in--

`(I) the program (commonly referred to as the `Preferred Lenders Program') authorized by the proviso in section 5(b)(7); or

`(II) the program (commonly referred to as the `Certified Lenders Program') authorized in paragraph (19); and

`(ii) the term `year 2000 computer failure' means any failure by any device or system (including, without limitation, any computer system and any microchip or integrated circuit embedded in another device or product), or any software, firmware, or other set of collection of processing instructions, however constructed, in processing, calculating, comparing, sequencing, displaying, storing, transmitting, or receiving date-related data, including, without limitation, failure in accurately dealing with or failure in accurately accounting for transitions or comparisons from, into, and between the 20th and the 21st centuries, or during the years 1999 and 2000, failure to recognize or accurately process any specific date, and failure to accurately account for the year 2000's leap year status.

`(B) ESTABLISHMENT OF PROGRAM- The Administration shall--

`(i) establish a pilot program, under which the Administration shall guarantee loans made by eligible lenders to small business concerns in accordance with this subsection to allow such concerns to address year 2000 computer failures; and

`(ii) notify eligible lenders of the establishment of the program under this paragraph.

`(C) USE OF FUNDS- A small business concern that receives a loan guaranteed under this paragraph shall use the proceeds of the loan solely to address year 2000 computer failures, including the repair or acquisition of information technology systems and other automated systems.

`(D) MAXIMUM AMOUNT- The total amount of a loan made to a small business concern and guaranteed under this paragraph shall not exceed $50,000.

`(E) GUARANTEE LIMIT- The guarantee percentage of a loan guaranteed under this paragraph shall not exceed 50 percent of the balance of the financing outstanding at the time of disbursement of the loan.

`(F) REPORT- The Administration shall annually submit to the Committees on Small Business of the House of Representatives and the Senate a report on the program authorized by this paragraph. Such report shall include information relating to--

`(i) the number and amount of loans guaranteed under this paragraph;

`(ii) whether the loans guaranteed were made to repair or replace information technology and other automated systems; and

`(iii) the number of eligible lenders participating in the program.'.

(b) REGULATIONS- Not later than 60 days after the date of enactment of this title, the Administrator of the Small Business Administration shall issue final regulations to carry out the program established by section 7(a)(27) of the Small Business Act, as added by this section.

(c) REPEAL- Effective on October 1, 2001, this section and the amendment made by this section are repealed.

SEC. 604. PILOT PROGRAM REQUIREMENTS.

Section 7(a)(25) of the Small Business Act (15 U.S.C. 636(a)(25)) is amended by adding at the end the following:

`(D) NOTIFICATION OF CHANGE- Not later than 30 days before initiating any new pilot program or making any change in a pilot program under this subsection that may affect the subsidy rate estimates for the loan program under this subsection, the Administration shall notify the Committees on Small Business of the House of Representatives and the Senate. Such notification shall include--

`(i) a description of the proposed new program or the change to a program; and

`(ii) an estimation, which shall be developed by the Administration in consultation with the Director of the Office of

Management and Budget, of the effect that the new program or the change to a program will have on the subsidy rate.

`(E) REPORT ON PILOT PROGRAMS- The Administration shall annually submit to the Committees on Small Business of the House of Representatives and the Senate a report on each pilot program under this subsection. Such report shall include information relating to--

`(i) the number and amount of loans made under the pilot program;

`(ii) the number of lenders participating in the pilot program; and

`(iii) the default rate, delinquency rate, and recovery rate for loans under the pilot program, as compared to those rates for other loan programs under this subsection.'.

SEC. 605. SUSPENSION OF PENALTIES FOR CERTAIN YEAR 2000 FAILURES BY SMALL BUSINESS CONCERNS.

(a) DEFINITIONS- In this section--

(1) the term `agency' means any executive agency, as defined in section 105 of title 5, United States Code, that has the authority to impose civil penalties on small business concerns;

(2) the term `first-time violation' means any first-time violation, resulting from a year 2000 failure, of a Federal requirement regarding the collection of information; and

(3) the term `small business concern' has the meaning given such term in section 3 of the Small Business Act (15 U.S.C. 632).

(b) ESTABLISHMENT OF LIAISON- Not later than 30 days after the date of enactment of this title, the Administrator of the Small Business Administration shall establish 1 point of contact in the Administration to act as a liaison between the Administration and small business concerns with respect to problems arising out of year 2000 failures and compliance with Federal requirements regarding the collection of information.

(c) GENERAL RULE- Subject to subsection (d), no agency shall impose any civil penalty on a small business concern for a first-time violation.

(d) EXCEPTIONS- An agency may impose civil penalties authorized under Federal law on a small business concern for a first-time violation if--

(1) the agency determines that the violation has caused actual serious harm to the public;

(2) the agency determines that failure to impose a civil penalty would impede or interfere with the detection of intentional wrongful activity;

(3) the violation is a violation of an internal revenue law or a law concerning the assessment or collection of any tax, debt, revenue, or receipt;

(4) the small business concern fails to correct the violation not later than 6 months after receiving written notification of the violation from the agency; or

(5) the agency determines that the violation presents an imminent and substantial danger to the public health or safety.

(e) DANGER TO PUBLIC HEALTH AND SAFETY-

(1) WAIVER OF PENALTIES- An agency may waive any civil penalty imposed pursuant to subsection (d)(5) if the violation for which the penalty is imposed is corrected not later than 30 days after the agency provides written notice of the violation to the small business concern.

(2) STANDARDS FOR WAIVER- In making a determination whether to waive a civil penalty under paragraph (1) the agency shall take into account all of the facts and circumstances regarding the first-time violation, including--

(A) the nature and seriousness of the violation, including whether it is technical or inadvertent or involves willful criminal conduct;

(B) whether the small business concern has made and is making a good faith effort to comply with applicable laws and to remedy the violation in the shortest practicable period of time; and

(C) whether the small business concern has obtained a significant economic benefit from the violation.

(3) CONGRESSIONAL NOTIFICATION REQUIREMENT- If an agency imposes on a small business concern a civil penalty pursuant to subsection (d)(5) without providing the small business concern with the 30 days to correct the violation authorized under paragraph (1), the agency shall notify Congress of the penalty not later than 60 days after it is imposed.

(f) STATE PENALTIES TO CONFORM- Notwithstanding any other provision of law, no State may impose on a small business concern any civil penalty inconsistent with this section.

END