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CALIFORNIA / News and Insight on Business in the
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'Millennium Bug' Bill Gets Squished in First Hearing

April 24, 1998|Capitol Alert News Service

No pending legislation has received more fanfare this year than the "millennium bug" bill proposing to limit damages against computer companies if their hardware or software can't handle the date change on Jan. 1, 2000.

Backed by numerous business interests, including a Silicon Valley trade association, the legislation had been billed as a means to stem a flood of "frivolous" lawsuits against product manufacturers.

Assembly Bill 1710 would have allowed businesses whose computers fail because they cannot distinguish between the years 1900 and 2000 to recoup actual damages, but prevent firms from suing for punitive damages. Personal injury claims would have been exempted from such limitations.

But AB 1710 was defeated 7-6 in its hearing in the Assembly's Judiciary Committee this week. It had been opposed by the Motion Picture Assn. of America and California trial lawyers.

The trial lawyers characterized the proposal as a way to let companies that profited from marketing defective products off the hook. The attorneys were in turn accused by the bill's author, Assemblyman Brooks Firestone (R-Los Olivos), of seeking "to exploit the issue via predator lawsuits to go after jackpot settlements."

The vote fell along partisan lines, except Silicon Valley Democrat Liz Figueroa joined Republicans to vote for the measure. The bill was ultimately rejected as offering overly broad protection to the industry and inadequate recall procedures for defective products. Critics also termed the bill "confused" over provisions that sought to limit shareholders' suits against corporate boards of directors.

Others called it a badly written bill that didn't protect consumers enough. So even though the bill will reappear in an amended version before the committee on May 5, its chances of passage are considered nil.

"If any Year 2000 solution gets out this year, it will be a Democratic bill," predicted Ruben Pulido, an aide to Assemblyman Mike Honda (D-San Jose), who is redrafting and expanding his own millennium bug bill, AB 1934. In its current form, the measure proposes a tax credit for small businesses to fix their Year 2000 problems and presumably eliminate the need for future lawsuits.

That provision, however, is likely to be spun off in a separate bill, while Honda's original measure is rewritten to extend the statute of limitations for lawsuits. That scenario would offer a large bone to the trial lawyers, but Honda's office is characterizing it as a way to give companies more time to fix their computer problems while forestalling a tide of lawsuits.

Honda's office is also negotiating with officials from chip maker Intel Corp. and the Assn. of Californians for Tort Reform--both backers of the original bill--about including a key provision on limiting shareholder lawsuits.

Intel and the lawyers group will also continue to push "to protect companies making a good-faith effort to work on the Year 2000 problem," said John H. Sullivan, president of the tort reform association, which sponsored the Firestone bill.

The players are scheduled to meet with Honda next week in Sacramento to continue talks on reshaping the legislation.

"We're trying to craft something neither side is happy with, a balanced bill that understands consumers have a lot at risk," said Keith Honda, the assemblyman's cousin and chief of staff.

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Please send comments or suggestions to annette.haddad@latimes.com

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