John Kerry

Mr. KERRY

Mr. KERRY. I want to make this clear, Mr. President. Under the McCain bill, if a party is induced by fraud to enter into a contract, they can't recover damages for that. So what if in a conversation they say to the salesperson of the company: Is your product Y2K compliant? And the person says: Oh, absolutely, our product has been Y2K compliant. We are terrific, blah, blah, blah. If they intentionally were to induce them into the contract on misrepresentation and they lose business as a result of that, they are being denied the ability to sue for that by S. 96. I think that is wrong. I don't know, again, what public policy interest is served by suggesting that fraud and misrepresentation ought to be protected. Why should they be protected?

Mr. KERRY. In a moment I will yield.

Mr. KERRY. Let me say to my colleague, he has just confirmed what I said. He is insinuating that we are creating a new tort. I want to make it very clear, what the Senator and Senator McCain and others are doing is taking away the right of State law, with respect to existing contract law, to be applied. They are saying that if a State allows a particular tort with respect to economic loss, they can't do it. I will be very specific about it. My provision with respect to economic loss does exactly what the provision of the Senator from Oregon and the Senator from Arizona does. We are both trying to hold on to contracts, to avoid contract limitations on liability, and not to have people move into tort. Neither of us want contract law to become tort. So we both prevent that. Here is the distinguishing feature. What we do that Senator McCain and company do not do is, we say the following: If the defendant committed an intentional tort, you are not going to void the contract law, except--and this is the only exception--where the tort involves misrepresentation or fraud regarding the attributes or capabilities of the product that is the basis of the underlying claim.

Mr. KERRY. Mr. President, let me come back to the remarks of the Senator from Arizona, because I appreciate everything he just read. I would like to be associated with putting it into the Record. However, I don't associate myself with the notion that the consequences of what he just read ought to be automatically given a bye, a pass, if you will, without some duty to make the determination of what he just read. Any company that is going to be subject to what the Senator from Arizona just read would answer the standard I have put forth about a potential for failure in the affirmative in 10 seconds. The Senator from Arizona has acknowledged that. We are almost fighting about a difference that is not a huge distinction here, but it is significant enough because of what we want to do to achieve the mitigation we want to get out of this bill. There isn't a company in good standing in this country that cannot answer affirmatively the two-step qualification for proportional damages. To suggest that we will give every company an automatic bye without requiring them to do that is to actually adopt a bill that doesn't go as far as it can to achieve the purpose that the Senator from Arizona states we are trying to achieve. That is why there is a fundamental difference here.

Mr. KERRY. Mr. President, I hate to say this. I say it again with affection and respect. But the Senator didn't actually completely answer the question, because he didn't tell me of any company in the country that wouldn't do what I have said or that hasn't done what I have said.

Mr. KERRY. Mr. President, let me respond to that because it is very important. May I also respond by saying this, and, again, I say this with great respect and affection for both of my colleagues. But to be on the floor of the Senate using as a justification the passage of something that does somebody a lot of good, the fact that they like that it does them a lot of good, is kind of a strange argument. If the fox is there to guard the chicken coop and you are going to put a big fence around the chickens, and you ask the fox, ``Do you like it?'' and he says, ``No,'' that is no surprise. It is the same thing here. Who is going to be surprised that the companies are going to say: Of course, we support your bill, because it gives us more than we really properly ought to get. Having said that, let me say to my friend that our bill does everything the Senator from Arizona just said. We could do all of the things the Senator listed. The only difference is, we asked them to identify the potential for the failure and provide information that is calculated to reach the people. We don't even require that it reach the people. My colleague just said this is going to open up a whole lot of litigation. I ask my colleague, has he asked companies? Does he know of a company that isn't trying to identify their Y2K failure? Does he know of a company that, having done that, would not tell the people to whom they sold it?

Mr. KERRY. I am happy to let my colleague go first, and I will come back.

Mr. KERRY. Will my colleague yield for a question?

Mr. KERRY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. KERRY. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. KERRY. Mr. President, I intend to send my amendment to the desk. It is more inadvertence than anything else, and enthusiasm. I am not going to delay it whatsoever. I agree with him. We want to get on with this and make an effort. Let me just make a couple of comments and address this. First of all, with respect to what the Senator from Oregon just said, the woman in the hypothetical I used would be precluded from the very kind of damages, because your bill limits it to physical injury. She is not physically injured. The fact is, the property damage and other damage would, in fact, not be subject to it. Secondly, under the economic losses in the bill from the Senator from Arizona--and I think this is important for the Senator from Arizona to understand--data processing would not be included in the definition that you have with respect to economic loss. You speak to the question of property and you allow certain kinds of property, but you don't include in the definition of ``property'' intellectual property. What happens if a company has a loss as a consequence of an entire software system that went down and their data being lost and, therefore, they do not provide a service to somebody? You could have a huge economic interruption as a result of that, and you don't include that as an economic loss. I will give you the precise language. There are serious, real consequences here. Secondly, the Senator from Oregon just said that we are just precluding small businesses from punitive damages. Again, I just spoke at a graduation of a law school. I hate to say it, I had to stand up and say in front of the graduates of the law school, welcome to the most hated profession in America. They understood what I was saying. You can't come to the floor of the Senate and quote me defending lawyers. That is not what I am doing. I am defending a principle. I am defending a cherished notion within America about how we redress problems. I know people do not like being hauled into court. I almost laughed when I heard the Senator from Arizona say that all the big businesses and all the business community are united behind this bill. Of course, they are. Big surprise. They are about to get out from under an accountability system that suggests to them that they ought to behave some way. The Senator from Oregon has just said to me, small businesses will only be held accountable for the proportion that they are liable. OK. What happens in this example? The small businesses in Oregon and the people served are in Oregon, but they are only 20 percent of the problem. The people who sold them the hardware and the rest of the equipment are in Japan. You cannot reach them, because you are a small lawyer and you don't have the long reach. You don't have jurisdiction, and you cannot get them conceivably. There are a lot of companies out there right now operating like that. So all you have is 20 percent of the person being made whole. The theory of law for years, under joint and several, has been that in America we care first about the victim, and we are going to make the victim whole. Then the companies that have the power and the clout will sort out between each other who gets what. That has been a very efficient and effective distribution system. It is efficient. What we are now saying is, sorry, average American, sorry, we are going to give the power back to the corporate entities and you, the little average person, you are going to have to go to Japan and chase them, or you are going to have to just stomach your loss. Small businesses are most of the business in the country. I am also pretty sensitive to that, because I am the ranking member of the Small Business Committee. I take great pride in the things that I have done to try to further small business efforts. I believe in it. I am the only Senator I know who has a zero capital gains tax bill here for targeted investments in the high, critical technologies. I would love to empower small business to do better. But all that punitives apply to are willful, wanton, reckless, destructive, irresponsible, unacceptable behavior. And what my colleagues are doing is coming to the floor, as a matter of public policy, and saying the Senate ought to go on record saying that we don't care how you behave. We are going to take away the capacity to make the average citizen whole, and we are going to give it to the corporate entity. Now, I love these corporations. Look, I represent them and I respect the leaders of them. They are doing great work for America. We have created 18 million jobs in the last 10 years or so because of their virtues and capacities. I will come back here and labor on their behalf on encryption and a host of other things. But, fair is fair. Fair is fair. Are you telling me we should not have these companies do two simple things? My colleague said the language is too vague on those two simple things. Well, let's talk about that for a minute. The bill says ``identify the potential.'' What does that mean, ``identify the potential''? Does anybody have trouble with that? It means to identify whether the product the defendant made or sold had the potential for Y2K failure. How would you know that? You know you have an embedded chip in it. You know whether or not in the digitalization process you use two or four digits. I am not technically competent enough to tell you all of them, but there are people who are; they are running around the country fixing these things. The IRS has invested $1.3 billion and several years of effort in order to be Y2K compliant, and they are today. How did they get there? They got there because they asked this very question. Do we have the potential for failure? And if we do, what are we going to do to fix it? My colleagues come to the floor and they are trying to tell us that this bill is to encourage people to fix it. But what do they do? They let them right out from underneath it, give them an upfront, blanket exemption saying: We are not going to require that you be subject to joint and several; you don't have to do anything; you just walk. And that is wrong as a matter of policy. All we ought to ask them to do is the very thing this bill's purpose is about: Look and see if you have the potential for failure and tell the people you sold it to. If we can't ask them to do that, then we are not standing up for the average citizen in this country. It is that simple. Amendment No. 610 to Amendment No. 608 (Purpose: To regulate interstate commerce by making provision for dealing with losses arising from Year 2000 Problem-related failures that may disrupt communications, intermodal transportation, and other matters affecting interstate commerce)

Mr. KERRY. It says: Keane believes the most recent draft of the Kerry language is a politically viable solution, because it serves the purpose of protecting against frivolous Y2K litigation and would be signed by the President. Opponents of the Kerry bill argue that it does not adequately address the distribution of damages to the responsible parties. However, Keane believes that the proportional liability language in the Kerry bill addresses this issue. Specifically, your staff has assured us that your language would protect defendants who demonstrate that the plaintiff restricted access to or failed to notify the defendant about any function that could corrupt other Y2K vulnerable systems and defendants who (1) performed a reasonable assessment with a defined methodology for resolution of the plaintiff's Y2K vulnerability prior to implementing the solution, or, (2) implemented the Y2K solution with coordinated comprehensive testing and quality assurance processes. . . . Keane can endorse the Kerry language without reservation. I believe that is reasonable, and I believe it is reasonable because they have looked at the reality of the language we have put forward. I want to go through a little bit of this now. The McCain bill does not protect the individual consumer. They are requiring the individual person to go through the same hoops and the same requirements as a corporation. Again one has to ask: What is the public policy rationale for asking one--let's say one of these people sitting up in the gallery is assured, when they buy an alarm system for their house, that the alarm system is Y2K compatible. But they leave to go on vacation, the alarm system fails in the year 2000, their house is robbed, and they want recoupment. They have to go through every hoop of a large corporation. They cannot go right in, file their suit, and get redress. They are going to have to be treated like the other corporate entities, and they cannot even get the discovery. They are left as powerless as, unfortunately, the average consumer is in our society today. Again, when one looks at public policy rationale, it is hard to discern, and this is the main reason: Most of the Y2K problems that people are envisioning are corporation to corporation. We are talking about contract law. Most of this is contract law, and what we are talking about are companies that are going to have an interest conceivably in suing another company because the product they bought from that company does not do what the company that sold it to them said it would do. Maybe under their warranties, just under the contract, it will be taken care of. But what the McCain bill wants to do is say to every American consumer: You are going to have to wait 3 months; you are going to have to wait the 30 days for the filing; you are going to have to refile if you were not filing with pleadings that were specific enough, according to what the corporation had to go through. It is a remarkable thing, in my judgment, to thrust that kind of burden on a lot of situations that would be very difficult. Let me give you an example. This is very specific, and I apologize, it will take a minute, but I want to go through it. Let's take a Mrs. Barnes who owns a home several streets away from the Acme Chemical Company. There are 85 million Americans who live or work within a 5-mile radius of one or more of the 66,000 facilities that handle or store high-hazard chemicals. Let me repeat that: 85 million of our fellow citizens live in homes near a chemical company. On January 1, 2000, let's assume Acme's safety system fails and hazardous chemicals are released into the air and on to the land in the neighborhood. It forces Mrs. Barnes and others to evacuate their homes. People are allowed back into their homes after 2 days, but Mrs. Barnes' property is contaminated, including her well. She retains an attorney and she files a tort claim for recovery. Acme Chemical claims that a Y2K computer failure was partially at fault for the safety system malfunctioning. Mrs. Barnes did not know that Y2K was a defense, of course, because most average citizens will not know this. Under the new law, the Acme Company will treat the complaint as the notice. She has to wait 30 days for Acme to respond. In 30 days, they respond by saying: We can't pay for the cleanup and lost value. But she has to wait another 60 days to refile her lawsuit, notwithstanding that they tell her that. Now the average American consumer is out 90 days and does not know where they are going, because we have protected the entity. All discovery is stayed during this period. There is not anybody in our system of justice who does not know what happens when you stay discovery for 90 days. In 2 months, Mrs. Barnes refiles her suit. She refiles it against the company that installed the safety system. Under the McCain bill, she has to plead her case with a particularity in the complaint. She can state her damages as required, but she is going to have a lot of trouble specifying the materiality effect because she will not know what that is because there has been no discovery. The case is dismissed because the complaint failed to meet the pleadings requirements. Assume somehow she can meet the pleadings requirement. She comes back, she finds other information to survive another motion to dismiss, and finally gets her day in court. After hearing the case, the jury finds both defendants acted recklessly and outrageously for not identifying and fixing the problem, and it awards her $300,000 compensation for the property and the need to replace her water supply. They may find that Acme is 70 percent responsible and the safety system 30 percent liable under the proportionality. The total amount of her award might be $1.3 million, with the compensatory and punitive adjusted and reduced by the number of people according to the cap, because they only have 40 people who work for them. Under the cap in S. 96, that would be an adjusted award of $550,000. We find that Acme cannot pay for all of the damage and files for bankruptcy. The safety system pays Mrs. Barnes $90,000 under their percentage, but that is not enough to clean up her property. She cannot get a new water supply, especially after she pays the legal bills. She tries to collect from Acme but without success. In the end, under the State law she would have received her $1.3 million, but because we are going to take that away, at the end, because of the Senate bill that is contemplated being passed here that does not protect this individual consumer, she will be left with only $135,000--not nearly enough to compensate for her loss, pay her legal fees, replenish her well and make her whole. What is the public policy here? That is literally how this bill would work. That is taking us step by step through the requirements that are being put on the average American here, even though what we are really talking about doing here is protecting companies from lawsuits by companies. To the degree that my colleagues say: Wait a minute, Senator. We know about those naughty things called class actions, and we don't want to have a class action brought against us, I say to my colleagues, I agree. We want to have a tough standard for the potential of any class action. So we have put in our bill something lawyers do not like; we have put in our bill a materiality requirement that means they have to show that very specificity of defect, and it has to be specifically material to the impact on that particular damage that took place for that person. The majority of the people who make up the class have to have the same linkage to the materiality. That makes it very hard to go out and just construct a class. So I think class actions would, in fact, be seriously reduced and impacted in an appropriate way, I might add. So we are raising the bar. We are raising the standard. Our bill, therefore, in my judgment, protects consumers. The McCain bill would apply all of its procedural burdens and damage limitations to individual consumers. I know that this is one of the things that the White House, the President, is particularly concerned about. We need to try to find some kind of reasonable compromise. We have not. And that begs a veto. In addition, I have talked about the proportionality issue. It is hard to believe that colleagues would not be willing to vote that a company ought to engage in good citizen behavior of a two-step effort to identify mere potential--I underscore that mere potential; the company does not have to find the problem; the company does not have to cure the problem--they have to find the mere potential that something that they have created may have done it; and, two, let people know that they have done that. It is hard to believe that we would not vote to do that. In addition to that, we impose an additional duty on the plaintiff. My colleague from Arizona said this is to keep the revenue stream going. We impose an additional duty on the plaintiff because existing State law generally requires plaintiffs to mitigate their losses in the case of a breach of contract. S. 96 puts on the plaintiff an additional burden to mitigate that isn't part of additional contract law, which allows a defendant to argue that the plaintiff should have avoided the damages based on information that was in the public domain. So what we have done, to encourage information sharing and in order to encourage the remediation that we want, we leave the existing State law duties in place, supplementing them with an additional mitigation requirement if the defendant itself made the information available. Why is that good policy? Because, again, it encourages the good behavior that our colleagues are saying everybody is going to engage in but for which there is no certainty and there is no leverage. Here you have an additional burden on the plaintiff if the company undertook to share the information. What does that do? That means that the company is going to say: Oh, boy, if we go out and get the information and we put it out to the people we have sold it to, they are going to have the burden of showing that we somehow did not do what we were supposed to. We have shifted the burden to the people who then would be the plaintiffs. It makes it harder to bring a case. It also does more to encourage the mitigation that we want to get in this particular effort. I want to make it very clear, I think it was back in April the Senator from Arizona, the chairman, put a letter in the Record from Andy Grove of Intel. The letter that was part of Mr. Grove's communication to the chairman. I will read the relevant portion of it: Dear Senator McCain . . . The consensus text that has evolved from continuing bipartisan discussions would substantially encourage [bipartisan] action and discourage frivolous lawsuits. He cited several key measures that are essential to ensure fair treatment of all parties under the law. One was procedural incentives, the requirement of notice and an opportunity to cure defects before a suit is filed. Senator McCain has that in his bill. We have that in our bill: The same procedural requirement to cure, the same procedural effort to have alternative dispute resolution. We both encourage alternative dispute resolution and mitigation. Second point: A requirement that courts respect the agreements of the parties on such matters as warranty obligations and definition of recoverable damages. Senator McCain does that; we do that. We provide the exact provision of contract protection except where there is an intentional-- intentional--injury to a party. I ask my colleagues, what is the public policy rationale for exempting a company from an intentional wrongdoing to an individual that is not a specific intent to that individual but nevertheless fits under the concept of a reckless, willful, or wanton act? Third, Mr. Grove said he wanted threshold pleading provisions requiring particularity as to the nature, amount, and factual basis for damages and materiality of defects. We do the same thing. Senator McCain does that; we do that. Finally, appointment of liability according to fault, on principles approved by the Senate in two previous measures. That is the securities reform bill. I have already spoken to that. Senator McCain gives it to them no matter what, forget it. You just get it because you are who you are. We give it to them if they take two steps: Identify the potential for a Y2K problem, which is what this bill is all about, and let the people they have dealt with know about that potential. Again, we do not require that they fix it. We do not require with a certainty that they find it. We require that they just say there is a potential. That is what they have to go out and fix. The fact is that is a minimalist standard that most companies ought to be prepared to live by. Every company I have talked to tells me they are doing that. Of course, they are going to do that. They would have no reason to be concerned about that. So the real fight here, I suppose, is over punitive damages and over the breadth of reach that some people are making with respect to some other efforts which I can go into later as they arise in the course of the debate. We have a consumer carveout. We have a duty to mitigate. We have proportionate liability. The McCain bill also creates jurisdiction for almost all Y2K class actions in Federal court. We do not do that. First of all, the Federal bar has told us they cannot handle it. They do not have room for whatever that might mean. Secondly, I cannot think of anything less respectful of States rights, of the States' abilities to manage their own affairs with respect to how they want to proceed. There is no showing that that is, in fact, necessary. So the reach of the bill, in fact, goes further than that which is necessary to fix Y2K. I want to emphasize that I still hope maybe we can find some medium where people will come together. It may be that the Senate isn't in the mood to do that right now, so it will just go ahead and pass S. 96--it will go to conference, come back, and then go to the President, and he will veto it, and we will come back. Or maybe when the President gets into the negotiations in the conference committee, the very things I am talking about will be resolved, and it will come back to us in a way that people of good conscience can say: This is good public policy because it protects consumers even as it creates a fair process for the avoidance of frivolous suits and the avoidance of the burdening of an industry that we all respect and care about. I think our bill does that. I think our bill justifiably protects the capacity of companies to be free from frivolous lawsuits. It increases the pleading requirements. It provides a cure period. It provides a duty to mitigate. It shifts a greater duty to the plaintiffs, and it does so, I think, in a reasonable and fair-minded way. I regret that, unfortunately, this debate has been so caught up in a larger agenda of entities that are very forceful outside of the Senate. I yield the floor.

Mr. KERRY. Mr. President, I ask my colleague if he might yield during the course of his statement so that we may have a good dialogue with respect to some of the issues he raises as he raises them.

Mr. KERRY. Will my colleague yield for a question?

Mr. KERRY. Mr. President, over the course of the day, there has been a lot of argument about what we seek to do and do not seek to do. I want to make it very clear. Both sides are seeking a fair and sensible way to address the Y2K problem. There is no argument that one side wants frivolous suits, the other does not. There is no argument that one side somehow wants to keep business from flourishing. We are all on the same side of the high-tech industry and of the capacity of that industry to flourish. The question is, what is the fairest, most balanced way to effectively approach the question of how we will do that. Senator Edwards from North Carolina has very effectively demonstrated one of the real flaws in the bill as presented by the Senator from Arizona. The economic losses will be denied in a way, particularly in a situation where there is fraud or misrepresentation, that no American deems to be fair. Equally important, when you balance the fundamental components of this bill on the question of proportional damages and who gets them and when, there is a difference between us in what we assert is the appropriate qualification for businesses to merit the proportional damages. The McCain bill automatically makes available, with a few small exceptions, those proportional damages to businesses without any fundamental mitigation requirement; that is the essence of this bill. On the other hand, the proposal I submit with Senator Daschle, Senator Reid, Senator Robb, Senator Akaka, Senator Mikulski, and others, is a proposal that embraces 90 days for a cure period, just as the McCain bill does. It embraces a responsibility to mitigate, just as the McCain bill does. It preserves contract law, just as the McCain bill does. But it also requires a good citizenship standard, an effort by companies to determine the potential--not the reality--the potential, not to find to a certainty, but to declare the potential that they may have a Y2K problem, and then in good faith to make available to the people with whom they have dealt the information about that potential. It is hard to believe the Senate would not be willing to embrace the notion that companies ought to embrace the full measure of the purpose of this bill, which is mitigation, by making that good effort in order to determine what their liability may be. Our bill encourages remediation. It requires notice and opportunity to cure. It imposes additional duty on plaintiffs when the defendant does act responsibly. It requires the plaintiff to undertake certain mitigation efforts which is fairly unprecedented. It discourages frivolous lawsuits by encouraging alternative dispute resolution. It increases the pleading requirements. None of these, incidentally, are things the lawyers have asked for and none of them are things the lawyers like. It asserts an increased materiality requirement so that the complaint has to identify with specificity the basis of the complaint which they make. We discourage frivolous class action lawsuits with a minimum injury requirement for any class action and a materiality requirement. We protect business with contract preservation, with strict limitations on damages awarded for economic loss, and also, unlike the McCain bill, we embrace the notion that individual consumers should not be cut out from their capacity to redress their problems. In the end, I believe the real issue is: Do we want to accomplish what we have set out to do, which means, will the President of the United States sign the bill? The President has made it clear the McCain bill will not be signed into law without the kinds of changes Senator Edwards and I and others have articulated. So we can go through the Pyrrhic exercise or we can try to fully legislate. I think it is clear that we are offering an alternative that is fair, sensible, protects consumers, and at the same time protects businesses in this country.

Mr. KERRY. Will the Senator yield?

Mr. KERRY. No, he is referring--excuse me, yes, I am, at this point. But that is a similar complication here of what the Senator is eliminating without being aware that is, in fact, being eliminated.

Mr. KERRY. Will the Senator yield for a question?

Mr. KERRY. Mr. President, at an appropriate time I may send an amendment to the desk. But I want to begin at least talking about where we are, where this bill currently puts us, and I have a number of points I would like to make in the effort to do that. I am struck by one thing that has just happened, which is why I am a little less hesitant. A few moments ago, the Senator from Colorado put in an amendment that preserved the State law; but at the same time the Senator from Oregon previously had made it very clear that their bill leaves in place the existing State law protections for consumers in both tort law and contract, but, in fact, what has happened is by virtue of the amendment just passed by the Senator from Colorado, they have actually changed that so that we have a different law for both contract and for tort. It seems to me the bill has already, suddenly, by acceptance, moved to a significantly different place from what they had intended. Maybe this will be worked out later. I think it certainly makes this bill more complicated in many regards and will probably give yet another reason for the White House to veto this. Let me state where I think we are with respect to this legislation. I supported willfully, happily, and with a sense of pride the securities reform legislation. Senator Dodd was a leader on that, and I voted for it and voted to override the veto of the President because I thought it was important to address what was an egregious overreach within the legal community where we saw a pattern of abuse. We took action as a result of that. I think it was the right action. In addition, I also voted for tort reform with respect to the aircraft industry, because Senator Kassebaum appropriately brought legislation to the Senate that made it clear that liability issues with respect to manufacturers--and she represented a State which is the home base for Cessna, among other aircraft manufacturers--and we made an appropriate change in liability law in the capacity of lawyers to bring these so-called dreaded lawsuits that we hear a lot about on the Senate floor. I voted for that and we changed it. It was for the better. I say that because I want to make it as clear as I can in an atmosphere where people are quick to try to paint Members into a corner or sweep Members into one position of ideology or another. I am approaching this from a perspective of what I hope is common sense and fairness. I heard the distinguished Senator from Arizona--who is a great personal friend of mine and a man for whom I have enormous respect and a great relationship--say a few minutes ago, and I will certainly pass it off merely as rhetoric, that the amendment I will offer is ``form over substance'' and it is designed to ``protect the income stream of the trial lawyers.'' It is exactly that kind of polarization in the rhetoric that is preventing Members from looking at what the Senate may or may not do here, what the Congress may or may not do, and what may happen to the American citizens that we represent. I challenge my colleagues to show me one piece of language in the amendment that I will submit that makes it easier for a lawyer to bring a lawsuit. There is not one. In point of fact, every point raised by the high-technology community that they wanted Members to address is addressed in their favor--in favor of the high-tech community. They wanted a period to cure; we provide a period to cure. They wanted mitigation; we put a responsibility on plaintiffs to mitigate. They wanted economic loss and contract preserved; we preserve contract law. Finally, they wanted proportionality; all we require for them to qualify for proportionality is that they act as a good citizen and do two things: We ask they identify the potential in the product they make for a Y2K failure, and having done so, we ask that they let their purchasers, their clients, know of that potential. That is all we ask. We don't ask that they fix it. They have a duty; they have a period of cure within which they can fix it. If they fix it within the duty, a period of cure, as the McCain bill, they would be free from any lawsuit. That doesn't help plaintiffs. That is not a plaintiff's bill. That is not an effort to maintain the revenue stream for lawyers. Let's talk about the reality of what is happening here. The reality is that an industry is coming to the Congress for the first time in American history and asking for prospective anticipatory relief from liability for something they make--the first time ever. What would happen if Ford Motor Company came in here and said: Gee, we produced a car that instead of turning right while turning the wheel right, turns left. Forgive us. We will fix it. Don't worry. There are similar ways in which companies could come to a Senator and say they don't want to be held liable because they ``kind of overlooked something.'' As the Senator from South Carolina said a little while ago, 20 years ago people knew about this. The founder and executive director of RX 2000 Solutions Institute said: I am a former computer programmer who used two digits instead of four to delineate the year. Granted, this was more than 20 years ago, but even then I was aware of the anomaly posed by the year 2000. When I expressed concern to my supervisor, he laughed and told me not to worry. The Y2K bug is not something that just fell out of the sky. The Y2K bug is not a freak occurrence that happened as a God-given act. The Y2K problem is a result of conscious choices that people made or didn't make, deliberate decisions made to delay fixing a problem. They have led us to where we are now. I represent high-technology companies, and I am very proud of them. I have had the support of high-technology CEOs, workers, and employees. I truly have a respect for the entrepreneurial capacity and the extraordinary path they are leading us on that is second to nobody in the Senate, and I understand the nature and complexity of this Y2K problem that suggests we don't want to have a wholesale slug of lawsuits that clog the courts, that create the capacity for small companies to tie up their capital, to diminish further entrepreneurial effort, to reduce creativity. I understand all of those arguments. Together with Senator Robb, Senator Daschle, Senator Reid, Senator Mikulski, and Senator Akaka, I am offering a compromise. It is not everything that the Chamber of Commerce wants, and it sure isn't everything the lawyers want. However, it is common sense, and it will be signed by the President of the United States into law. The bill that is being offered by Senator McCain and others will not in its current form be signed into law. If Members are really concerned about the Y2K problem and want to do something about it, we have an opportunity to legislate on the floor of the Senate in a way that is fair, that makes sense, and that will help the companies deal with Y2K, and at the same time, it doesn't turn around and ignore common sense about how to leverage good behavior within the community. People ask, What are the real differences between this bill and Senator McCain's bill? I will get to that. I will explain that. Two of the most important are on the issue of proportionality. That takes a little bit of explanation. Not everybody in the Senate is a lawyer. There are 55 Members who are, but even among lawyers there has always been a great tension on this issue of joint and several liability versus proportional damages. Under the bill that Senator McCain, Senator Dodd, and Senator Wyden are offering the Senate, a company will automatically get proportional liability. They don't have to be a good citizen. They don't have to go out and remediate, even though they say that remediation is the purpose of their legislation. There is no leverage in getting out of joint and several liability that encourages them to remediate. They automatically get proportional damages. The bill gives it to them right up front-- automatic. So they could display the most negligent, the most reckless behavior, and still they get it. Is that possible? Some people will sit here and say no, that is not going to happen. Look at the instance the Senator from South Carolina talked about. Ford Motor Company is historically recorded as having made a conscious business decision to measure how much it cost them to move the gas tanks and fix the gas tank problem versus the potential of damages. They chose not to move it and ultimately it caught up to them in a famous, famous case and they paid the price. That is why we have had something called punitive damages. Punitive damages are not, as the Senator from Arizona said, simply to deter. Punitive damages are punitive. They are to punish in addition to deter. The deterrence is not just as to the behavior of the entity that is creating the problems. The deterrent is as to other potential entities, in the future. The reason we have the potential of punitives within the legal system is not just to deter behavior among a particular set of actors engaged in a particular behavior at a particular time. It is to say to other actors at a future time: If you do not heed the warning that the products you make could subject you to particular kinds of damages, then you, too, may be subject to them in the future. That is why, today, young kids have pajamas that don't catch on fire. That is why, today, people have all kinds of products in their homes where people are sensitive to what the impact of that product may be on a user. My colleagues come in here and say we don't want punitives. These outrageous lawyers are going to come in and maybe get a punitive damage verdict. Let me tell you what my colleagues, either inadvertently or willfully, are doing. They are protecting companies from a requirement that the behavior they engage in has to be--let me make this very clear. Punitive damages are only awarded if a plaintiff can show the defendant acted in the worst activity possible, worse than mere negligence. We are talking about a defendant who has to commit either an intentional tort or otherwise here, because in their bill they have a very narrow limitation as to who will qualify for joint and several, very narrow. The fact is, they will exempt anybody who acts willfully, wantonly, maliciously, recklessly or outrageously. I ask a simple question: What is the public policy rationale for coming in here and saying that a company that acted maliciously, willfully, recklessly, outrageously should somehow be completely exempted from the potential of joint and several liability and have a blanket exemption even before the fact? I do not understand that. I do not understand the public policy. Just because we do not like lawyers, just because on a few occasions there have been a couple of bad jury verdicts of punitive damages--which in every occasion, I say to my friends, have been reduced by the court on appeal. Those never get paid. They are great for headlines. They are wonderful for bad reputations for lawyers. But they don't get paid because the courts reduce them. So I do not want to come here to the floor of the Senate and battle phantoms. I don't want to battle dragons that do not exist. I want to deal with the real problem of Y2K, and we deal with the real problem of Y2K because we make it tougher for lawyers to bring cases. I agree with what my colleague, the Senator from Connecticut, said a few minutes ago. He said we, in a litigious society, do not want a lot of frivolous lawsuits. We do not want to be caught up in court with a whole lot of lawsuits that are inappropriate. I agree with that. I was outraged when I heard about lawyers automatically triggering lawsuits by computer when stocks changed and so forth. That is an abuse of the system. We ought to do everything in our power to require that the Federal courts, through the rules that are available to them, hold lawyers accountable so that frivolous lawsuits are denied and so forth. But we go farther than that. In my amendment, on Y2K we in fact lay out a series of requirements that make it much tougher for any lawyer to bring a case. Just like the legislation of Senator McCain, ours is a 3-year bill. But ours is a 3- year bill that does not harm consumers. Ours is a 3-year bill that has a fair balance between this interest for remediation or mitigation and what we are prepared to contribute to the well-being of the whole industry, to blanket the whole industry. Let me be specific about what I mean by that. The Y2K bill of Senator McCain and company provides you automatically get proportionality, proportional damages. Ours says you have to do two things. You have to make the effort to identify the potential for a Y2K failure and then put out the information to the people you have dealt with about that potential. The purpose of this legislation is to get companies to fix the problem ahead of time. In order to get a company to fix the problem ahead of time, you want to have the maximum incentive to the company. So if you say to the company: Look, you can have the lower standard. You can have what you want--which is you can get out from under joint and several; you can have proportional liability--but we want you to do something so you will encourage the very remediation and mitigation we are looking for. We want you to look at your products and see what the potential is for one of them to have a Y2K failure. When you find the potential, we want you to be a good citizen and tell the people who bought the things from you about it. Why is that better than Senator McCain's bill? It is better because of the Pinto principle. Some companies may look at the situation and say: Hey, the Senate just gave us proportional liability and we don't even have to worry about paying the full 80 percent if we think we have only 20 percent liability because we don't have to do anything. They gave it to us. It is cheaper for us not to fix it and wait and see if anybody comes after us. And when they do come after us, all we are going to have to do is do the 20 percent, not the 80 percent. I ask my colleagues, how is that an incentive for the good fixing of the problem beforehand that we are seeking? The answer is, it is not. It will have exonerated people before the fact from the very thing we are trying to encourage, which is the incentive to fix it. I find it very hard to believe that my colleagues in the Senate want to vote against asking companies to be good citizens. I find it hard to believe that my colleagues are unwilling to say a company ought to just look for the potential of failure. We do not require that they absolutely find it. We do not require that they identify it. They have to make a good-faith effort to look for it. Every company with whom I have talked tells me they have already done that. Most companies tell me they qualify today and they would accept that standard. I am proud to say that a company--I have a letter received today from Brian Keane who is co-president of the Keane Company headquartered in Boston, MA. It is a $1.1 billion information technology corporation and has over 12,000 employees located in 26 States. I quote from part of the letter, which I ask unanimous consent be printed in the Record.

Mr. KERRY. I yield myself 30 seconds. If there is an illegal provision in a legal contract, you have the same problem I just defined. I do not want to get arcane, either. But you have, in the language of this bill, superseded the capacity of that illegality to be either a defense or a problem. That is all we are saying. These ought to be curable issues. We are passing a bill where they have not been cured. I promise you, if you want to create litigation problems, there they are.

Mr. KERRY. With all due respect to my colleague, under the language in this bill, you will have given it life because you have, in fact, made it a contract that is binding.

Mr. KERRY. I have no objection.

Mr. KERRY. The managers, plural?

Mr. KERRY. Reserving the right to object. I actually didn't hear it.

Mr. KERRY. Let my say to my colleague, with all due respect, that he is dead wrong. He is even more so dead wrong, because moments ago they adopted an amendment by the Senator from Colorado, the Allard amendment, which makes it very clear that State law is superseded. That is the amendment they adopted. So State law takes precedence, period, end of issue. You cannot protect people from misrepresentation or fraud, and there is no public policy rationale for that. I yield the floor.