John McCain

Mr. McCAIN

Mr. McCAIN. I yield to the Senator from Oregon for a question.

Mr. McCAIN. The Senator from Massachusetts has asked me to yield first.

Mr. McCAIN. In a second. The Progressive Policy Institute of the Democratic Leadership Counsel says: Despite the number of lawsuits avoided during a 90-day cure period, or the number of disputes settled through ADR, the cost of Y2K litigation will remain exorbitantly high as long as opportunities remain for people to abuse our legal system. However, there are a number of Y2K-specific reforms that can be enacted to curb that abuse and the subsequent costs. To begin with, responsibly strengthening pleading standards would keep many baseless suits out of the systems. Plaintiffs seeking money awards for damages should be required to state the particular nature and effects of material Y2K defects and how they figured into calculating those damages. In addition, to insure fairness, rejected plaintiffs should be allowed to refile their suits with the required specifics in order to protect legitimate claims that are not initially apparent. Furthermore, legislation should deny awards for damages that could reasonably have been avoided. Class action suits are normally the most expensive and wasteful of product liability lawsuits and often contain enormous numbers of groundless complaints. Legislation should insure that the majority of members in class action suits have truly experienced Y2K-related failures and deserve redress. By reducing the number of invalid claims, waste and fraud could be significantly eliminated from the adjudication of class action suits. The effects of abusive litigation could be further curbed by restricting the award of punitive damages. That is what this legislation does. That is where the Senator's amendment will open a loophole wide enough to drive a truck through. Punitive damages are meant to punish poor behavior and discourage it in the future. However, because this is a one-time event, the only thing deterred by excessive punitive damages in Y2K cases would be remediation efforts by businesses. I say again to the Senator from Massachusetts--and we have had this dialog for hours on the floor, and for hours in the committee, and I will continue because of the enormous affection I have for the Senator from Massachusetts. We will continue this dialog. We are in fundamental disagreement on the interpretation of the Senator's proposed amendment. It is as simple as that. So I would be----

Mr. McCAIN. Mr. President, again, I find the logic of my friend from Massachusetts somewhat tortured. He maintains that these ``two simple things'' will meet the approval of the high-tech community. Yet, it doesn't. So in his mind, of course, clearly it should. But the fact is, it doesn't. So we are in a very interesting kind of hyperbole here that the Senator from Massachusetts keeps saying the high-tech community supports this and this is perfectly acceptable to them. Yet, they don't support it or agree with it--and for good reason--because these ``two simple things'' are directed at the high-tech defendants, not the rest of the business community that will be defendants. When a wholesaler fixes their systems within their company, yet it leases a trucking group to deliver whatever that product is, and then they are subject to joint and several liability, then, of course, it opens the floodgates. The Senator from Massachusetts seems surprised that, or somehow casts doubt about the motivation of business in supporting this legislation. Of course they are supporting it, because they don't want to be subject to a flood of litigation. That is the whole purpose of the legislation. The whole purpose, I tell my friend from Massachusetts, is to stop a flood of litigation.

Mr. McCAIN. Mr. President, I continue to respect the views of the Senator from Massachusetts. He makes some very persuasive arguments. I strongly recommend to the Senator from Massachusetts that he put his objections in the form of an amendment or amendments and we vote. We have been through, I think the Senator from Massachusetts would agree, literally weeks, if not months, of negotiations with the Senator from Massachusetts. At no time have we been able to agree. I strongly recommend that he just propose an amendment, and we have a vote on it. The Senate will be on record. We will be then able to move forward, as is the legislative process. I will make a parliamentary point. I have asked the Democratic side to try to get an agreement within about an hour or so on remaining amendments that will be proposed of the 12. We now have about 6 or 7. I think the same is true on the other side. We want to give everybody ample opportunity to propose their amendments. Then I will also ask that we get those amendments in so we can start negotiating time agreements. I see no reason why we can't finish this bill by tomorrow evening. I urge my colleagues, again, if you have an amendment on either side of the aisle, tell Senator Hollings or me so we can get those 12 nailed down on either side so we can start negotiating. I think it is very important to recognize that there has been amazing solidarity shown on the part of big, medium, and small business on this legislation, including the parts of it that were just addressed by the Senator from Massachusetts. They do not accept his remedy. I strongly admire the knowledge, the information, and the incredible tenacity that Senator Kerry has shown on this issue. The reality is--and every once in awhile we have to face reality, I say to my friend from Massachusetts--we are going no further. However, if we are going no further in the process of negotiation, that does not change in the slightest the fact that the Senator from Massachusetts can propose 1 of these 12 amendments, or 2 or 3 or 4 of them, I think there is room, and we can debate and vote on them. I yield for the Senator from Oregon.

Mr. McCAIN. I will tell my friend from Colorado that I believe we are going to accept the amendment. So the yeas and nays will not be necessary. So I request that he retract his request.

Mr. McCAIN. May I ask the Senator from Colorado to yield to me?

Mr. McCAIN. Mr. President, I am pleased to start out by offering a substitute amendment to S. 96, the Y2K Act. This substitute amendment is truly a bipartisan effort. It represents spirited discussion, hard fought compromise, and agreement with a number of my colleagues on both sides of the aisle, led by Senators Dodd, Wyden, Hatch, Feinstein, Bennett, Lieberman, Gorton, Lott, Abraham, Santorum, and Smith of Oregon. The substitute is at the desk, and I ask for its immediate consideration.

Mr. McCAIN. Mr. President, I don't believe there is any further debate on the amendment.

Mr. McCAIN. Mr. President, I thank Senator Wyden for being one of the true leaders on this bill. Senator Wyden said at our committee markup that he wanted to get to ``yes.'' He has worked tirelessly with me and others to get there. Having not only the necessary majority vote but the 60 votes necessary to move forward is directly related to his efforts. I also thank Senator Dodd of Connecticut. He has offered an important perspective and has provided excellent suggestions and comments which I think make this substitute we offer today a better piece of legislation. I am grateful to my colleagues, especially the senior Senator from Connecticut, for their unflinching dedication to dialogue, to working through our differences and remaining focused on the common goal of enacting this critical piece of legislation. Without the leadership of Senators Dodd and Wyden, this bipartisan effort would not have been possible. Before I talk about the legislation and the language of the substitute itself, I would like to note that there was a unanimous consent agreement that 12 amendments would be in order on both sides. We are now in the process of working with the sponsors of those amendments, some of which we can agree to, some of which may require votes. But I hope my colleagues will also come over here ready to offer those amendments so that in a very short period of time we can begin to dispense with them. We all know the very heavy schedule of legislation that lies before us between now and the next recess on the Fourth of July. So I am hopeful we can take up and dispense with these amendments in a timely fashion. The first effort, obviously, will be to get time agreements on those amendments that we are unable to get agreement on, although I believe, from a first look at many of these amendments, we will be able to work out language so that we can accept a number of them. In fact, I think some of them will improve the legislation. I want to walk through the details of this substitute amendment and the background and history of this bill. First, let me summarize what this substitute contains. Specifically, the substitute amendment: Provides time for plaintiffs and defendants to resolve Y2K problems without litigation. It reiterates the plaintiff's duty to mitigate damages and highlights the defendant's opportunity to assist plaintiffs in doing that by providing information and resources. It provides for proportional liability in most cases, with exceptions for fraudulent or intentional conduct or where the plaintiff has limited assets. It protects governmental entities, including municipalities, school, fire, water, and sanitation districts, from punitive damages. It eliminates punitive damage limits for egregious conduct while providing small businesses some protection against runaway punitive damage awards. And it provides protection for those not directly involved in a Y2K failure. The substitute, as the original bill, does not--I emphasize, does not--cover personal injury and wrongful death cases. The specific changes the substitute makes from the version of the bill which Senator Wyden and I offered in April are those proposed by Senator Dodd. It eliminates the director and officer liability caps, it eliminates the punitive damages caps for businesses with more than 50 employees, it provides that State evidentiary standards will be used in specific situations, and it preserves the protections provided in the Year 2000 Information and Readiness Disclosure Act. Let me be quite blunt. These revisions represent significant compromise. They move this bill a considerable distance from the Y2K bill passed by the House. Even with these compromises, I believe the bill will accomplish the goals for the legislation--to encourage remediation and prevention of Y2K problems and eliminate frivolous and opportunistic litigation which can only serve to damage our economy. However, I do not believe any additional compromises are necessary or warranted. I want to reemphasize that point. There have been additional efforts made to have us accept or work on additional changes to the bill. We run the risk right now of compromising to the degree where it makes these protections, if not meaningless, so reduced that we are not able to achieve the goal we seek. So I do not intend--nor do, I believe, the majority of my colleagues, including those on the other side of the aisle--to continue to work behind the scenes towards a compromise. If there is a change that Members believe needs to be made to this legislation, then let's go through the amending process, let's have a time limit on debate, and vigorously debate and educate our colleagues, and then have votes. We have, thanks to Senator Wyden, moved a significant way, and also thanks to Senator Dodd; we have done that. We cannot move from our position further. Yet we do obviously have 12 amendments in order on that side, 12 amendments on this side, which is ample opportunity for debate and discussion about this issue and further amending, obviously, with majority rule. So I point out again, these are significant compromises that have already been made, some of them to the dissatisfaction of some of our constituents. It has not made everybody happy. But having been around here now for some years, it is my firm belief that we have to make compromises, because that is the essence of legislation. But we have made enough compromises that we can no longer make any further changes without compromising the fundamental principles behind this legislation. Let me make one other point. Time is of the essence here. We cannot dally. We cannot wait until the end of the year when Y2K is upon us. Already lawsuits have been filed, some of them pretty interesting, and emphasize, at least to my mind, the necessity of this legislation. But we need to move. I fully intend, once we pass this legislation, to move to conference as quickly as possible. There are differences between the House-passed legislation and this legislation. I am absolutely convinced we will be able to reach agreement in conference and come back here before the recess with a final conference report and bill to be approved by both Houses. I am committed to passing legislation which is effective. I am not interested in passing a meaningless facade. We will do the public a great disservice to claim victory in passing legislation which leaves loopholes for spurious litigation. If we aren't going to legitimately fix the problem, then we must be forthright with the public and tell them it could not be done. I think that would be a disastrous result, but it would be more honest than to pretend to provide a solution and not. This bill deserves the support of every Member of the Senate. It is fair, practical, and legally justifiable. It is important not only to the high-tech industry or only to big businesses but carries the strong support of small businesses, retailers, and wholesalers. The coalition of support for this bill is compelling. Yesterday a press conference was held to reiterate the support of the overwhelming majority of the Nation's gross national product: the U.S. Chamber of Commerce; the National Association of Manufacturers; the National Retail Federation; virtually every high-tech industrial association, including the ITAA, the Business Software Alliance, and others who participated, to emphasize the need for the bill and their support for the compromises which have been made. Many of those supporting this legislation will find themselves as both plaintiffs and defendants. They have weighed the benefits and drawbacks of the provisions of this legislation and have overwhelmingly concluded that their chief priority is to prevent and fix Y2K problems and make our technology work, not to divert their resources into time- consuming and costly litigation. The estimated cost of litigation associated with fixing the Y2K problem is really quite enormous. In the view of some, it is as high as $1 trillion. I do not know if it is that high, but already major corporations in America have spent millions and millions, in some cases tens of millions, of dollars in fixing existing problems. If we throw into the mix the litigation we have already seen the beginnings of, it could really have an effect, not only on the ability of our businesses to do business, not only on the ability of our high-tech corporations to continue investing in research and development and improvements in technology, but it really would have a significant effect on our overall economy. You take that much money out of our economy in the form of litigation, you are going to feel the economic impacts of it. Let me remind my colleagues how this legislation came to be, its genesis and rationale. The origin, as we all know, of the Y2K problem was in the 1950s and 1960s, when computer memory was oppressively expensive. According to the February 24, 1999, report of the Senate Special Committee on the Year 2000 Technology Problem, headed by Senators Bennett and Dodd, in the IBM 7094 of the early 1960s, core memory cost around $1 per byte. By comparison, today's semiconductor memory costs around $1 per million bytes. Thus, there was a strong incentive to minimize the storage required for a program and data. A two-digit data code became the industry standard in order to economize on storage space. It was presumed that sometime during the 40 or 50 years before the end of the millennium, the coding would be changed as computer memory became more accessible. Unfortunately, although memory costs fell dramatically, the interface requirements of old software with new discouraged and slowed the changeover process. The computer equipment and software that was expected to become obsolete survived many layers and programming updates. The result is that the two-digit programs are not designed to recognize dates beyond 1999 and may not be able to process data-related operations beyond December 31 of this year. Although some who oppose this litigation charge that the solutions are simple and should have been completed long ago, the reality is not that simple. First, there are over 500 programming languages in use today. A universally compatible Y2K solution would have to be compatible with most or many of these languages. Embedded processors in embedded chips have to be found and replaced. There are also several ways to reprogram causing additional interfacing issues. Technical approaches to solving the problem include reprogramming all two-digit date codes with a four-digit date code; windowing the date codes to make programs think that the two-digit codes are applicable to the year 2000 and beyond; and encapsulation which, like the windowing method, tricks the computer program into thinking that the two-digit date code is applicable beyond 1999. Unless the same approach is taken in all computers, additional programming is required to allow interface of four-digit codes with two-digit codes which have been windowed or encapsulated. Let me read from a recent publication of the National Legal Center for the Public Interest, the Year 2000 Challenge, Legal Problems and Solutions, which summarizes why the year 2000 problem is so difficult to solve. I quote from the article from the National Legal Center for the Public Interest: One of the most insidious characteristics of the Year 2000 problem is that the difficulty of solving it in any particular organization often is so underestimated. Since both the nature of the problem and the actions needed to fix it are relatively easy to explain, people who are not familiar with IT projects in general and the peculiar difficulties of Year 2000 projects in particular tend to think of Year 2000 projects as less difficult and risky than they really are. The unfortunate fact is that there is no ``silver bullet'' solution to the Year 2000 problem in any organization, and the risks and difficulties in any Year 2000 project of even moderate size and complexity can be enormous. None of the remediation techniques described above is without disadvantage, and for many IT users the time and resources required to accomplish Year 2000 remediation far exceed what is available. Most major remediation programs involve finding and correcting date fields in millions of lines of poorly documented or undocumented code. There is no single foolproof method of finding date fields, no assurance that all date fields will be found, corrected, or corrected accurately, and no assurance that corrections will not produce unintended and undesirable consequences elsewhere in the program. In many cases it will be necessary to rely on information or assurances from third-party vendors regarding the Year 2000 compliance of their products, even though experience teaches that many such representations are inaccurate or misleading. Comprehensive end-to-end system testing of remediated systems in a simulated Year 2000 ``production'' environment is often impractical or impossible, and less intensive testing may fail to detect uncorrected problems. And even when an IT user has succeeded in making its own system Year 2000 ready, Year 2000 date handling programs of external programs or systems (such as the systems of customers or suppliers) can often have a devastating effect on internal operations. In addition to the technical problems with solving the problems, we must consider the cost dimension of the Y2K problems. From the ITAA, Information Technology Association of America, Year 2000 website, I have the following information: At $450 to $600 per affected computer program, the Gartner Group has estimated that a medium-sized company will spend between $3.6-$4.2 million to convert its software. The cost- per-line-of-code has been estimated between $1.00-$1.50. Viasoft estimates cost-per-impacted-programs between $572- $1,204. Estimates place correcting the problem for businesses and the public sector in the United States alone between $100- $200 billion. If you accept the premise that the total information technology services marketplace in America approaches $150 billion annually; that means Year 2000 Software Conversion could represent anywhere from 33%-50% of dollars spent for information systems in one year. Some ITAA Year 2000 Task Group members report estimates placing the worldwide total to correct the problem between $300 to $600 billion. In addition, the Senate Year 2000 Committee in its report cites figures for several specific companies, as well as total costs which include estimated litigation costs. There is no generally agreed upon answer to this question. The Gartner Group's estimate of $600 billion worldwide is a frequently cited number. Another number from a reputable source is that of Capers Jones, Software Productivity Research, Inc. of Burlington, MA. Jones' worldwide estimate is over $1.6 trillion.\5\ Part of the difference is that Jones' estimate includes over $300 billion for litigation and damages but Gartner's does not. A sense of the scale of the cost can be gained from looking at the Y2K costs of six multinational financial services institutions; Citicorp, General Motors, Bank America, Credit Suisse Group, Chase Manhattan and J.P. Morgan. These six institutions have collectively estimated their Y2K costs to be over $2.4 billion. Mr. President, the point here is that this is a complex technical problem with no easy, cheap solution. Although the opponents of this legislation would have us believe that Y2K failures can only result from negligence or dereliction on the part of the technology industry, and all those who use computer hardware and software, in truth, massive efforts are underway, and have been for some time, to prevent the Y2K problem from occurring. Even with the nearly incomprehensible amounts of money being devoted to reprogramming date codes in virtually every business and industry in our country, there are going to be failures. Well-intentioned companies, acting in good faith, are nevertheless going to encounter problems in their systems, or in the interface of their systems with other systems, or as a result of some other company's system. But what experts are also concluding is that the real problems and costs associated with Y2K may not be the January 1 failures, but the lawsuits filed to create problems where none exist. An article in USA Today on April 28 by Kevin Maney sums it up: Experts have increasingly been saying that the Y2K problem won't be so bad, at least relative to the catastrophe once predicted. Companies and governments have worked hard to fix the bug. Y2K-related breakdowns expected by now have been low to nonexistent. For the lawyers, this could be like training for the Olympics, then having the games called off. The concern, though, is that this species of Y2K lawyer has proliferated, and now it's got to eat something. If there aren't enough legitimate cases to go around, they may dig their teeth into anything. . . . In other words, lawyers might make sure Y2K is really bad, even if it's not. Mr. President, the sad truth in our country today is that litigation has become an industry. While there are many fine, scrupulous attorneys representing their clients in ethical fashion, there are also many opportunistic lawyers looking for new ``inventories'' of cases. The Y2K problems provide these attorneys with a lottery jackpot. Let me read from an article published in March of this year, by the Public Policy Institute of the Democratic Leadership Council, written by Robert D. Atkinson and Joseph M. Ward: As the millennium nears, the Year 2000 (Y2K) computer problem poses a critical challenge to our economy. Tremendous investments are being made of fix Y2K problems, with U.S. companies expected to spend more than $50 billion. However, these efforts could be hampered by a barrage of potential litigation, as fear of liability may keep some businesses from effectively engaging in Y2K remediation efforts. Trail attorneys across the country are actually preparing for the potential windfall. For those who doubt the emergences of such a litigation leviathan, one only needs to listen to what is coming out of certain quarters of the legal community. At the American Bar Association annual convention in Toronto last August, a panel of experts predicted that the legal costs associated with Y2K will exceed that of asbestos, breast implants, tobacco, and Superfund litigation combined.\1\ That is more than three times the total annual estimated cost of all civil litigation in the United States.\2\ Seminars on how to try Y2K cases are well underway and approximately 500 law firms across the country have put together Y2K litigation teams to capitalize on the event.\3\ Also, several law suits have already been filed, making trail attorneys confident that a large number of businesses, big and small, will end up in court as both a plaintiff and defendant. Such overwhelming litigation would reduce investment and slow income growth for American workers. Indeed, innovation and economic growth would be stifled by the rapacity of strident litigators. I want to point out that is from the Public Policy Institute of the Democratic Leadership Council. Mr. President, already at least 65 lawsuits--some report as many as 80--have been filed, and we are still 6 months away from January 1. Most of these lawsuits involve potential problems that have not even occurred yet. Our nation's legal system is not designed to handle the tidal wave of litigation which will undoubtedly occur if we do not act to prevent it. We must reserve the courts for the cases with real harm, real factual support, and which cannot be otherwise resolved through mediation and resolution. Probably the classic example of opportunistic litigation is a class action suit filed in California by Tom Johnson against six major retailers. Tom Johnson, acting as a ``private attorney general'' under California consumer protection laws, has brought an action against a group of retailers, including Circuit City, Office Depot, Office Max, CompUSA, Staples, Fryes, and the good guys, inc. for failing to warn consumers about products that are not Y2K compliant. He has not alleged any injury or economic damage to himself, but, pursuant to state statute, has requested relief in the amount of all of the defendants' profits from 1995 to date from selling these products, and restitution to ``all members of the California general public.'' Although he claims that ``numerous'' products are involved, he has not specified which products are covered by his allegations, but has generally named products by Toshiba, IBM, Compaq, Intuit, Hewlett Packard, and Microsoft. It is crystal clear that the real reason for this lawsuit is not to fix a problem that Mr. Johnson has with any of his computer hardware or software, but to see whether he can convince the companies involved that it's cheaper to buy him off in a settlement than to litigate--even if the case is eventually dismissed or decided in their favor. And, even more interesting, is the history of how this case came to be filed. The Wall Street Journal carried a story on Friday, May 14, 1999 in its Politics and Policy column by Robert S. Grernberger. It says: Michael Verna, a California lawyer, is warning a group of technicians about the dangers ahead if they don't get the gliches out of their companies' computers by the end of the year. Here in Seattle, Mr. Verna is explaining how writing internal memos or careless e-mail could hurt a firm in a Y2K lawsuit. Loretta Pirozzi of Data Dimensions Inc., a consulting firm, complain that most bosses aren't budgeting enough money to fix the problems. A knowing chuckle sweeps the room. Mr. Verna warns that memos on such budget disputes become smoking guns in court. ``What can we do?'' asks another woman. ``Have lawyers show you how to protect your documents, for one thing,'' he says. ``By the way,'' he adds, ``that isn't a sales pitch.'' But, of course, it is. Bowles & Verna, a 21-member firm in Walnut Creek, Calif., has a Y2K game plan. It starts with semimars that help develop new clients. The millennium itself will usher in the ``failure litigation phase'' of court fights. And in about five years, just when it seems like everyone has sued everyone else, comes the ``insurance- coverage phase,'' when companies go after their insurers to pay some of their Y2K losses. ``You want to be on the leading edge of the tort of the millennium,'' Mr. Verna says. Bowles & Verna's journey to 2000 began almost by chance, in 1997, while Kenneth Jones, then a third-year law student, was playing a computer football game. It is wife, Sandy, was telling him that people were stocking up on canned goods and bottled water for the expected chaos of Y2K. At that moment, Mr. Jones recalls, he had an epiphany. A new area of law, involving future failures due to Y2K bugs, was being born, and Mr. Jones, a law student comfortable with technology, was perfectly positioned for it. He also was headed for a job at Bowles & Verna, where he had been a summer law clerk. ``I decided the firm could be the experts. With Mr. Verna's strong encouragement, the 28-year-old Mr. Jones proded his colleagues, giving some of the firm's techno-challenged lawyers a book, ``Year 2000 Solutions for Dummies.'' Gradually, the firm formed a Y2K team. All it lacked was a client. Then, late last year. Mr. Jones's friend Torn Johnson, a Walnut Creek swimming coach, went shopping for a laptop computer--and Bowles & Verna found its first Y2K lawsuit. But with no apparent injury to Mr. Johnson, the firm needed a legal theory. California's Unfair Business Practices Act came to the rescue. The statute permits citizen lawsuits on behalf of the people of the state to stop unfair or deceptive business practices. And so Mr. Johnson is suing about half a dozen retailers for injunctive relief to require disclosure for Y2K compliance, but not for damages. And, under the state law, Bowles & Verna would collect attorney's fees. This is precisely the type of frivolous and opportunistic lawsuit which would be avoided by S. 96. Rather than have all of these named companies wasting their time and resources preparing a defense for this case, S. 96 would direct the focus to fixing real problems. In this instance, Mr. Johnson does not have an actual problem, but if he did, he would need to articulate what is not working due to a Y2K failure. The company or companies responsible would then have an opportunity to address and fix the specific problem. If the problem isn't fixed, then Mr. Johnson would be free to bring his suit. This case is the tip of the iceberg--if thousands of similar suits are brought after January 1, the judicial system will be overrun--and the nation's economy will be thrown into turmoil. This is a senseless and needless abuse that we can avoid by passing S. 96. Mr. President, let me turn to the substance of the substitute amendment offered today. Without going through every paragraph of the bill, let me highlight the most important provisions. Certainly the centerpiece of the bill are the provisions of Section 7 regarding notice. This section requires plaintiffs to give defendants 30 days notice before commencing a lawsuit. This provides an opportunity for someone who has been harmed by a Y2K failure to make the person responsible aware of the problem and to fix it. If the defendant doesn't agree to fix the problem, then the plaintiff can sue on the 31st day. If the defendant does agree to fix the problem, 60 days are permitted to accomplish the remediation before a lawsuit can be filed. This offers a reasonable time and opportunity for people to work out legitimate problems with sincere solutions, without cost of litigation. It focuses on the fact that most people want things to work--they don't want to sue. A corresponding critical element of this legislation is the requirement for specificity in pleadings found in Section 8. Not written nor intended to cause loopholes for lawyers, the thrust of this requirement is that there must be a real problem in order to sue. Our judicial system should not be clogged with possible Y2K failures, nor novel complaints to ensure the payment of lottery style settlements and attorneys fees. We must reserve our judicial resources for real problems which have caused real injury which can be redressed by the court. The Duty to Mitigate in Section 9 is also important. While it is in some respects merely a statement of current law, it highlights the emphasis to be placed on preventing problems and injury to the maximum extent possible, and articulates the role that prevention information made available by the affected industries can play in limiting injury to product users. The economic loss rule found in Section 12 is also a restatement of law in the majority of states. It is critical, however, because it confirms that damages not available under contract theories of law cannot be obtained through tort theories. This is particularly important here where personal injury claims have been excluded. Punitive damages caps have been retained for small businesses, defined as those with 50 fewer than 50 employees. Punitive damages are permitted under some state laws in certain egregious situations primarily as a deterrent from a repetition of the conduct. Punitive damages are awarded primarily as punishment to a defendant. They are intended to deter a repeat of the offensive conduct. Punitive damages are not awarded to compensate losses/damage suffered by a plaintiff. The Y2K cases are unusual in that the conduct is not likely to occur again, thus there is little deterrent value in awarding punitive damages. Without a deterrent effect, punitive damages serve only as a windfall to plaintiffs and attorneys. Additionally, since we have eliminated personal injuries from coverage of the bill, the only harm caused by defendants will be economic damage, which can be appropriately compensated without the need for punitive awards. Further, excessive punitive damage awards will simply compound the economic impact of Y2K litigation and the costs will be passed along to the public/consumers through higher prices. In this situation, punitive damages truly become a ``lottery'' for the plaintiff, thus they should be limited. S. 96 provides an exception to the caps for intentional injury to the plaintiff, which is most likely to be conduct worthy of additional punishment. S. 96 protects all governmental entities so that taxpayers are asked to provide compensation for actual damages, but not provide windfalls to plaintiffs. This is especially important to municipalities and special districts (school, fire, water and sanitation). This is strongly supported by National League of Cities. Let me speak to some of the points raised by the proposal of Senators Kerry, Robb, Daschle, Reid, Breaux, and Akaka. While it is encouraging that they agree the Y2K problem is one which must be addressed, it is unfortunate that they continue to reject some of the most important goals of the legislation. First, their proposal applies only to ``commercial losses.'' It excludes consumer actions from the scope of the bill. I think this exclusion is misguided and merely strengthens the hand of the opportunistic lawyers. It denies the consumer the protections afforded by S. 96, including the ability to have problems fixed quickly and without the need for expensive litigation. It places a burden on those least able to afford legal counsel. Notwithstanding the purported attempt to cover consumer claims brought as class actions, in fact it provides a ``lawyers' loophole'' by permitting individual claims to be brought and consolidated or aggregated to avoid the notice and pleading requirements of the class action section. There are no punitive damage limitations or protections, either for business (large or small) or for governmental entities. Punitive damages are intended to punish poor behavior and deter a repeat of it in the future. Punitive damages do not have such an effect in Y2K litigation because of the uniqueness of the problem. Thus, in Y2K litigation, punitive damages become an incentive for ``jackpot justice'' and abusive litigation. The proportionate liability provisions are ineffective in preventing ``deep pocket'' companies from being targeted by mass litigation. The approach of requiring a defendant to prove itself innocent in order to be assured proportionate liability is misguided and ignores the vast array of potential defendants and the myriad of factual situations which may be encompassed in a Y2K action. In particular, defendants who are in the middle of the supply chain may be sued for a breach of a contract caused not by the failure of the defendant's computers but by those elsewhere in the supply chain. Requirements in the Kerry proposal would result in that defendant being jointly and severally liable--an injustice. The result is, the deep-pocketed defendants will face needless and abusive litigation and will be subjected to either defending or settling such cases, regardless of their share of responsibility for causing the plaintiff's problems. The Kerry proposal also fails to encourage settlement of cases before trial. Defendants who do settle with the plaintiff should not be subjected to continued liability or responsibility for other defendants. This defeats the purpose of incentive for early settlement in mediation. The Kerry proposal rejects the protections for settling defendants contained in S. 96. The fair rule in this situation is that each defendant pays for the portion of the problem which that defendant causes. S. 96 provides that clear rule, with exceptions patterned after the Securities Act, as proposed by Senator Dodd. There are important differences as well. The Kerry proposal does not protect contracts as negotiated but permits them to be revised and overturned by uncertain common law. This results in the parties being uncertain of their duties and obligations under their contracts and will increase the likelihood of litigation. The proposal also too narrowly applies the economic loss rule, subjecting defendants to broader damages available under current law in most States. Taken as a whole, the Kerry proposal simply does not provide the solutions which are needed to the Y2K problem. It is a meager attempt to provide lip service to the business community while protecting the trial lawyers' income stream. I urge my colleagues to carefully review the details of the proposal and reject this form-over-substance amendment. I have taken a long time on this legislation. This is a very important issue, to say the least. It has a profound impact on our economy, on our country, and the lives of men and women who are engaged in small, medium, and large business throughout America. This substitute amendment is a good piece of legislation that deserves the support of the Senate. It is not perfect. It certainly does not provide a wish list of product liability or tort reform. The business community certainly would like more than what is in this compromise. The House passed a bill that contained many of the provisions we have eliminated to reach this bipartisan compromise. As in any negotiation process, there must be give and take. We have given a great deal. I remain convinced that the Y2K problem is real and must be addressed now. I believe that this substitute offered will achieve a just and reasonable approach to Y2K: Fair prevention, remediation, and litigation. This bill should not be further emasculated. It has the support of the broadest possible cross section of our Nation's economy. It is a bill which is good for our country. It will ensure that our economy is not derailed with opportunistic litigation. It is critical that it pass without further delay. I ask each of my colleagues for their support in bringing this bill to its final successful conclusion and enacting it into law. I thank the Senator from South Carolina, who I know has the very strongest views on this issue. He is a fierce fighter for the principles he believes in, which are obviously in opposition to this legislation. However, the Senator from South Carolina has allowed this bill to come to the floor. He could easily have blocked it further. I appreciate his cooperation in doing so. We have 12 amendments that are in order on each side. We would like to see those amendments, and we would like to start work on them so we can resolve those and perhaps get time agreements or accept those amendments on both sides. I thank my two dear friends who are on the floor today, Senator Wyden and Senator Dodd, without whose cooperation and effort we would never have reached this stage nor would we reach enactment of this legislation. The essence of doing business in this body on these kinds of issues is a bipartisan coalition. That is why we have a 60-vote rule, which many times I decry when I am pushing issues which have no more than 50 votes, such as campaign finance reform. I think it also compels Members to work in a bipartisan fashion so we can work together. I argue that at the end of the day the legislation is probably much better for it. If it is agreeable with the Senator from South Carolina, I will begin with colleagues on our side and then the other side of the aisle to begin addressing the amendments, so we can get agreement and time agreements so we can dispatch this legislation as soon as possible, although I know that the Senator from South Carolina will have a great deal to say on this issue, as he has in the past. I yield the floor.

Mr. McCAIN. That is my understanding. Obviously, I would like to include the Senator from Massachusetts in this dialog. Under his amendment--and I will be glad to respond to his question--isn't it true that defendants who are in the middle of the supply chain may be sued for a breach of contract caused not by the failure of the defendant's computers but by those elsewhere in the supply chain? That is the fundamental problem we have with Senator Kerry's amendment. I yield to the Senator from Massachusetts.

Mr. McCAIN. My answer is, I know of no company or corporation in America that would not want to have the problem fixed.

Mr. McCAIN. If I could respond very quickly about one aspect of this, I have confessed with great pride and sometimes with pleasure that I am not a member of the legal profession. But I am afraid the Senator from Massachusetts does not quite comprehend what we are dealing with here. This is a book, ``Year 2000 Challenge, Legal Problems and Solutions,'' from the National Legal Center for the Public Interest. Let me quote for the Senator what we are facing so we can really put this in the proper perspective. The unfortunate fact is there is no ``silver bullet'' solution to the year 2000 problem in any organization, and the risks and difficulties in any Year 2000 project of even moderate size and complexity can be enormous. None of the remediation techniques described above is without disadvantages, and for many IT users the time and resources required to accomplish Year 2000 remediation far exceed what is available. Most major remediation programs involve finding and correcting date fields in millions of lines of poorly documented or undocumented code. There is no single foolproof method of finding date fields, no assurance that all date fields will be found, corrected, or corrected accurately, and no assurance that corrections will not produce unintended and undesirable consequences elsewhere in the program. In many cases it will be necessary to rely on information or assurances from third party vendors regarding the Year 2000 compliance of their products, even though experience teaches that many such representations are inaccurate or misleading. Comprehensive end-to-end system testing of remediated systems in a simulated Year 2000 ``production'' environment is often impractical or impossible, and less intensive testing may fail to detect uncorrected problems. And even where an IT user succeeded in making its own systems Year 2000 ready. Year 2000 date handling problems in external systems (such as the systems of customers or suppliers) can have a devastating effect on internal operations. With all due respect to my friend from Massachusetts, this is what we are trying to get in our legislation and this is what the Senator's amendment basically prevents us from doing. Here is the problem. I don't claim to have the expertise that the Senator does on punitive damage or on joint and several liability. I know the problem pretty well. We have had extensive hearings in the Commerce Committee, and we have talked to all the experts. This is really what we are trying to take care of--not as the Senator from Massachusetts asked me, in good faith, do I believe there is any company or corporation that is not trying to fix a problem. I don't know of any. I think what I read to the Senator from Massachusetts explains how difficult and enormously complex solving this problem is. This is why, although I respect and admire the Director of the FAA who will fly all day long on January 1, the year 2000, I intend to remain at home that day. However, I encourage others, as the Senator from Massachusetts, to fly around the country. I say seriously to my friend from Massachusetts, I hope this explains to him the complexity of the problem. We not only can take care of the individual manufacturer, but all the systems and subsystems that are connected with it are not addressed, in my view, adequately, in the Senator's amendment. Before I yield to both Senators, could we agree to some time on this amendment?

Mr. McCAIN. If the Senator from Massachusetts and his staff will work on that, I appreciate that. I yield the floor.

Mr. McCAIN. Mr. President I ask unanimous consent we return to the pending Kerry amendment.

Mr. McCAIN. One of the irate staff just came over here. I saw no harm associated with that process. If there were an objection, I would be glad to remove those amendments. They were simply amendments to be numbered in case when we get an agreement on both sides of the aisle. I ask unanimous consent to withdraw those amendments, and we will leave everything as it was before.

Mr. McCAIN. The amendment under Senator Graham will now be listed under Senator Torricelli.

Mr. McCAIN. Mr. President, I ask for the yeas and nays.

John McCain

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