REPORT TITLE:
Year 2000 immunity


DESCRIPTION:
Creates a dispute resolution process for Year 2000 disputes and
limits liability for the private sector regarding Year 2000
errors.  (HB1111 HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1111
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
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                   A  BILL  FOR  AN  ACT

RELATING TO YEAR 2000 ERRORS BY COMPUTER-BASED SYSTEMS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that virtually every
 
 2 business and consumer in the State of Hawaii is potentially
 
 3 affected by the practice in many computer-based systems of
 
 4 utilizing the two low order digits to represent a four digit
 
 5 year.  While this is common practice for handwriting dates, such
 
 6 as 1/1/98 as an abbreviation of January 1, 1998, it will lead to
 
 7 errors in computer-based systems that handle date data in and
 
 8 after the year 2000.  This practice, along with the use of other
 
 9 erroneous date-related computer logic, came to be known as the
 
10 "Year 2000 problem."
 
11      The legislature further finds that in the absence of
 
12 remedial legislation, the usual methods of determining
 
13 responsibility and providing remedies for year 2000-related
 
14 errors through the courts are likely to result in a multitude of
 
15 lawsuits and the expenditure of substantial time and money in the
 
16 litigation process.  Additionally, the legislature finds that
 
17 businesses are diverting money and other resources away from
 
18 programs to remedy the year 2000 problem at this critical time to
 
19 work on litigation defense and claims preservation strategies.
 

 
Page 2                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 This diversion of resources has the potential to impair
 
 2 completion of these essential year 2000 compliance programs.
 
 3      The pervasive nature and fixed deadline of the year 2000
 
 4 problem creates a unique situation which justifies a modification
 
 5 to the usual legal rights, remedies, and dispute resolution
 
 6 procedures available under the law.
 
 7      This Act is intended to provide protection for persons who
 
 8 exercise commercially reasonable efforts to identify and find
 
 9 solutions for computer-based systems that may be affected by year
 
10 2000 errors.
 
11      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
12 a new chapter to be appropriately designated and to read as
 
13 follows:
 
14                             "CHAPTER
 
15            YEAR 2000 ERRORS IN COMPUTER-BASED SYSTEMS
 
16          -1  Definitions.  Whenever used in this chapter, unless
 
17 the context otherwise requires:
 
18      "Claimant" means the plaintiff in a lawsuit or a person
 
19 otherwise asserting a claim.
 
20      "Computer-based system" includes any computer or other
 
21 information technology system, and any electronic device that
 
22 controls, operates, monitors, or assists in the operation or
 
23 functioning of equipment, machinery, plant, or a device using an
 
24 embedded or installed microprocessor or chip.
 

 
Page 3                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      "Consumer" means a natural person who, primarily for
 
 2 personal, family, or household purposes, purchases, attempts to
 
 3 purchase, or is solicited to purchase goods or services.
 
 4      "Core activities" means those business activities of a
 
 5 person that are supported by computer-based systems and which
 
 6 have been identified by the person, based on reasonable internal
 
 7 criteria, as being central to the continued operation of the
 
 8 business.
 
 9      "Government employee" means an officer or employee of the
 
10 State, any county, or board, including a person acting on behalf
 
11 of a board in an official capacity, temporarily or permanently,
 
12 whether with or without compensation.
 
13      "Joint tortfeasors" means joint tortfeasors as defined in
 
14 section 663-11.
 
15      "Noneconomic damages" means damages including physical and
 
16 emotional pain, suffering, physical impairment, emotional
 
17 distress, mental anguish, disfigurement, loss of enjoyment, loss
 
18 of companionship, services, and consortium, and other
 
19 nonpecuniary losses.
 
20      "Remediation steps" for a person addressing potential year
 
21 2000 errors generally consist of awareness, assessment,
 
22 renovation, validation, and implementation.  The reasonableness
 
23 of those steps is determined by the circumstances, including the
 

 
Page 4                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 sophistication of and resources available to the person carrying
 
 2 them out.  Where applicable, the person's highest level of
 
 3 management should determine what efforts are to be made and what
 
 4 resources are to be used in carrying out the remediation steps,
 
 5 and the person should monitor progress in taking the remediation
 
 6 steps.
 
 7      (1)  The awareness step generally includes providing any
 
 8           supervisory personnel with information about the year
 
 9           2000 problem and the designation of personnel to deal
 
10           with the person's potential for year 2000 errors;
 
11      (2)  The assessment step generally includes:
 
12           (A)  A determination of the impact of potential year
 
13                2000 errors on the person, including those caused
 
14                by computer-based systems controlled by the person
 
15                and those controlled by others;
 
16           (B)  Identification of core activities;
 
17           (C)  A physical inventory of potentially affected
 
18                computer-based systems supporting core activities;
 
19           (D)  Prioritization of items with potential year 2000
 
20                errors to create a remediation schedule;
 
21           (E)  Determining whether the item records dates or
 
22                processes date information;
 

 
 
 
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                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           (F)  Identifying and obtaining resources to address
 
 2                potential year 2000 errors;
 
 3           (G)  The development of a remediation strategy for each
 
 4                item with the potential for year 2000 errors; and
 
 5           (H)  The development of a recovery plan to handle those
 
 6                year 2000 errors which are reasonably likely to
 
 7                occur;
 
 8      (3)  The renovation step generally includes the conversion,
 
 9           upgrade, replacement, or elimination of computer-based
 
10           systems supporting core activities which are subject to
 
11           year 2000 errors;
 
12      (4)  The validation step generally includes validating
 
13           existing, converted, or replaced computer-based systems
 
14           supporting core activities; and
 
15      (5)  The implementation step generally includes the placing
 
16           of renovated or replaced computer-based systems into
 
17           production use.  Where a computer-based system cannot
 
18           reasonably be renovated, the implementation step
 
19           generally includes the implementation of a work-around
 
20           designed to avoid the effect of the potential year 2000
 
21           error.  Additionally, this step includes the
 
22           implementation of contingency or recovery plans for
 
23           those year 2000 errors which are reasonably likely to
 
24           occur.
 

 
Page 6                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      "Respondent" means the defendant in a lawsuit or a person
 
 2 otherwise defending against a claim, and includes those persons
 
 3 who are liable on a claim, but who were not made a party to the
 
 4 lawsuit or other assertion of the claim.
 
 5      "Validating" means:
 
 6      (1)  Testing the item to:
 
 7           (A)  Actually simulate the transition from December 31,
 
 8                1999, to January 1, 2000;
 
 9           (B)  Process other date data which may reasonably be
 
10                expected to trigger a year 2000 error; and
 
11           (C)  Determine that no year 2000 error occurs;
 
12           and
 
13      (2)  Where an item has been renovated to correct known or
 
14           suspected year 2000 errors, testing to assure that the
 
15           item properly performs its functions without error.
 
16           This testing includes integration and acceptance
 
17           testing.  When testing is not reasonably possible, the
 
18           validation step consists of securing documentation from
 
19           the developer or vendor of a computer-based system
 
20           supporting core activities that it is free of potential
 
21           year 2000 errors.  This includes vendors of core
 
22           business functions, services, or supplies to understand
 
23           the risk posed by the person's supply chain.
 

 
Page 7                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      "Year 2000 error" means a failure of a computer-based system
 
 2 to accurately store, display, transmit, receive, process,
 
 3 calculate, compare, or sequence date and time data from, into, or
 
 4 between the years 1999 and 2000 and beyond, and leap year
 
 5 calculations.
 
 6          -2  Applicability.(a)  Claims properly filed by
 
 7 consumers in the small claims division of the district courts
 
 8 shall be excluded from the error dispute resolution process and
 
 9 the limitations on liability provisions contained in sections
 
10   -5 and   -6.
 
11      (b)  Claims alleging physical injury as the direct and
 
12 proximate result of a year 2000 error shall be excluded from the
 
13 error dispute resolution process provisions contained in section
 
14   -5.
 
15      (c)  This chapter shall not apply to claims asserted by or
 
16 against the State, any county, a board, or a government employee,
 
17 arising out of or relating to a year 2000 error produced,
 
18 calculated, or generated by a government computer system or other
 
19 government computer-based system, regardless of the cause for the
 
20 year 2000 error; provided that nothing in this subsection shall
 
21 be deemed to apply to any claim asserted against a government
 
22 employee to enforce a mortgage obligation or other similar
 
23 personal obligation of the government employee which is unrelated
 
24 to the government employee's employment.
 

 
Page 8                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      As used in this subsection "board" means any agency, board,
 
 2 commission, authority, or committee of the State or any county
 
 3 that is created by the state constitution, statute, ordinance,
 
 4 rule, or executive order to have supervision, control,
 
 5 jurisdiction, or advisory power over specific matters.
 
 6      (d)  Sections    -5 and    -6 may be modified or waived by
 
 7 express agreement of the parties.  Any such modification or
 
 8 waiver shall be explicit, and no intent to modify or waive these
 
 9 protections shall be inferred.
 
10          -3  Blanket protections.(a)  No punitive or exemplary
 
11 damages, and no statutory minimum or treble damages shall be
 
12 awarded under any theory of recovery, including contract and tort
 
13 law, for claims arising out of a year 2000 error unless one of
 
14 the following is found to have occurred in addition to the other
 
15 facts necessary for the award of such damages:
 
16      (1)  The year 2000 error was intentionally created by the
 
17           respondent with the intent to cause damage or injury;
 
18      (2)  The respondent had entered into an agreement to
 
19           discover or remedy year 2000 errors with the intent to
 
20           defraud the claimant; or
 
21      (3)  The damage or injury was caused by the dissemination of
 
22           corrupted data to recipients:
 

 
 
 
Page 9                                                     1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           (A)  With actual knowledge that errors were occurring;
 
 2           (B)  Without reasonable efforts at warning; and
 
 3           (C)  Without reasonable efforts to correct the cause of
 
 4                the errors.
 
 5      (b)  Noneconomic damages shall not be awarded under any
 
 6 theory of recovery for any claim arising out of a year 2000 error
 
 7 except for physical injury directly and proximately caused by a
 
 8 year 2000 error.  In any physical injury claim, the amount
 
 9 recoverable for noneconomic damages shall be limited to a maximum
 
10 award of $375,000.
 
11      (c)  Joint tortfeasors shall not be held jointly and
 
12 severally liable under any theory of recovery for any claim
 
13 arising out of a year 2000 error.
 
14          -4  Limitation of actions.  Any other provision of law
 
15 notwithstanding, all claims arising out of a year 2000 error
 
16 shall be brought no later than two years after the claimant
 
17 discovers, or through the use of reasonable diligence should have
 
18 discovered, the damage or injury, but in any event not more than
 
19 four years after the date of the alleged year 2000 error.
 
20          -5  Error resolution requirement.(a)  At the request
 
21 of any party, disputes in which a year 2000 error is alleged in
 
22 good faith as a claim or a defense shall be submitted to
 
23 nonbinding arbitration or mediation; provided that if mediation
 

 
Page 10                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 is chosen as the method of dispute resolution, all parties to the
 
 2 dispute must consent to mediation.  If the dispute goes to
 
 3 arbitration and unless the parties agree otherwise, the
 
 4 arbitrator shall be bound by the substantive and procedural
 
 5 provisions of this chapter, but shall not be bound by rules of
 
 6 evidence, whether or not set out by statute, except for
 
 7 provisions relating to privileged communications.  The arbitrator
 
 8 shall permit discovery as provided for in the Hawaii rules of
 
 9 civil procedure; provided that the arbitrator may restrict the
 
10 scope of such discovery for good cause to avoid excessive delay
 
11 and costs to the parties.
 
12      (b)  At any time within twenty days of being served with a
 
13 written demand for arbitration, any party so served may apply to
 
14 the circuit court in the judicial circuit in which a respondent
 
15 resides or has its principal place of business for a
 
16 determination that the subject matter of the dispute is
 
17 unsuitable for disposition by arbitration.  In determining
 
18 whether the subject matter of a dispute is unsuitable for
 
19 disposition by arbitration, a court may consider:
 
20      (1)  The magnitude of the potential award, or any issue of
 
21           broad public concern raised by the subject matter
 
22           underlying the dispute;
 
23      (2)  Claims where court-regulated discovery is necessary;
 

 
Page 11                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (3)  The fact that the matter in dispute is a reasonable or
 
 2           necessary issue to be resolved in pending litigation
 
 3           and involves other matters not covered by or related to
 
 4           this chapter;
 
 5      (4)  The fact that the matter to be arbitrated is only part
 
 6           of a dispute involving other parties or issues which
 
 7           are not subject to arbitration; or
 
 8      (5)  Any matters of dispute where disposition by arbitration
 
 9           would not afford substantial justice to one or more of
 
10           the parties.
 
11 Any such application to the circuit court shall be made and heard
 
12 in a summary manner and in accordance with procedures for the
 
13 making and hearing of motions.  If the application is denied, the
 
14 prevailing party shall be awarded its attorneys' fees and costs
 
15 in an amount not to exceed $750.
 
16      (c)  Selection of arbitrator:
 
17      (1)  Once the parties have agreed to suitability or if
 
18           suitability has otherwise been determined, the parties
 
19           shall proceed to select one arbitrator to hear the
 
20           case.  If the parties cannot agree on an arbitrator,
 
21           they shall proceed under chapter 658 to have the
 
22           circuit court select the arbitrator.  The parties and
 
23           court shall endeavor to select the best qualified
 

 
Page 12                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           arbitrator for the issues to be tried, which arbitrator
 
 2           need not be an attorney.  The parties may also select
 
 3           an administering agency such as the American
 
 4           Arbitration Association, at the discretion of the
 
 5           parties;
 
 6      (2)  Once selected, the arbitrator and parties shall
 
 7           cooperate to process the arbitration expeditiously and
 
 8           as informally as possible so that the arbitration
 
 9           hearing commences within six months after selection of
 
10           the arbitrator.  The arbitrator shall have the power
 
11           and authority to sanction any party who does not so
 
12           cooperate; and
 
13      (3)  The parties shall supply the estimated fee and expenses
 
14           of the arbitrator, as estimated by the arbitrator,
 
15           prior to the commencement of the arbitration hearing in
 
16           equal pro rata amounts.
 
17      (d)  Award; confirming award; attorneys' fees and costs:
 
18      (1)  Within seven days after the conclusion of the
 
19           arbitration hearing, the arbitrator shall serve copies
 
20           of the award on the parties or their attorneys of
 
21           record.  Awards shall be in writing and signed by the
 
22           arbitrator. The arbitrator shall determine all issues
 
23           raised by the pleadings that are subject to arbitration
 

 
Page 13                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           under this chapter, including a determination of
 
 2           comparative fault, if any, damages, if any, and costs.
 
 3           Findings of fact and conclusions of law are not
 
 4           required.  After an award is made, the arbitrator shall
 
 5           return all exhibits to the parties who offered them
 
 6           during the hearing; and
 
 7      (2)  The award of any costs of arbitration, expenses, and
 
 8           legal fees shall be in the sole discretion of the
 
 9           arbitrator, and the determination of costs, expenses,
 
10           and legal fees shall be binding upon all parties.
 
11      (e)  If no party has served a written request for a trial de
 
12 novo within ten days after the award is served upon all parties,
 
13 any party may apply under chapter 658 to have a judgment entered
 
14 on the award.  Once a judgment is so entered, it shall have the
 
15 same force and effect as a final judgment, but may not be
 
16 appealed.
 
17      (f)  Trial de novo:
 
18      (1)  The submission of any dispute to arbitration shall in
 
19           no way limit or abridge the right of any party to a
 
20           trial de novo;
 
21      (2)  Written demand for a trial de novo by any party
 
22           desiring a trial de novo shall be made upon the other
 
23           parties within ten days after service of the
 
24           arbitration award upon all parties;
 

 
Page 14                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (3)  All discovery permitted during the course of the
 
 2           arbitration proceedings shall be admissible in the
 
 3           trial de novo subject to all applicable rules of civil
 
 4           procedure and evidence;
 
 5      (4)  The award of arbitration shall not be made known to the
 
 6           court at a trial de novo, except that the award shall
 
 7           be made available to the court by the clerk of court
 
 8           upon the rendering of judgment by the trier of fact for
 
 9           the purpose of determining whether the party which
 
10           demanded trial de novo must pay costs, expenses, and
 
11           fees under paragraph (6);
 
12      (5)  No arbitration award shall be admitted into evidence in
 
13           any subsequent trial, nor shall any party to the
 
14           arbitration, or the counsel or other representative of
 
15           such party, refer to or comment on the award or any
 
16           statement or testimony made in the course of the
 
17           arbitration hearing in an opening statement, an
 
18           argument, or at any other time, to the court or jury;
 
19           and
 
20      (6)  In any trial de novo, if the party demanding a trial de
 
21           novo does not improve its position by thirty per cent
 
22           or more, the party demanding the trial de novo shall be
 
23           charged with all reasonable costs, expenses, and
 

 
Page 15                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1           attorneys' fees of the trial.  When there is more than
 
 2           one party on one or both sides of an action, or more
 
 3           than one issue in dispute, the court shall allocate its
 
 4           award of costs, expenses, and attorneys' fees among the
 
 5           prevailing parties and tax such fees against those
 
 6           nonprevailing parties who demanded a trial de novo in
 
 7           accordance with the principles of equity.
 
 8          -6  Limitation of liability.(a)  All arbitration
 
 9 awards and all judgments in a court proceeding that award damages
 
10 on a claim arising out of a year 2000 error shall state whether
 
11 the claimant and the respondent engaged in commercially
 
12 reasonable efforts to avoid the impact of year 2000 errors.
 
13      (b)  The trier of fact shall make an independent
 
14 determination that the actions taken by a claimant or respondent
 
15 constitute commercially reasonable efforts, based on the totality
 
16 of the circumstances, and notwithstanding that the respondent's
 
17 efforts failed to avoid all year 2000 errors affecting its
 
18 computer-based systems.  In making the determination, the trier
 
19 of fact shall examine the respondent's efforts as a whole, and
 
20 shall take into consideration the sophistication of and resources
 
21 available to the respondent.  The burden of proof shall be on the
 
22 respondent, claiming to have engaged in commercially reasonable
 
23 efforts, and the standard of proof shall be a preponderance of
 
24 the evidence.
 

 
Page 16                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (c)  A claimant or respondent shall be presumed to have
 
 2 undertaken commercially reasonable efforts if the claimant or
 
 3 respondent has, at a minimum:
 
 4      (1)  Implemented the remediation steps; and
 
 5      (2)  Complied with any data formats established by a
 
 6           government regulation, a governing body, such as the
 
 7           National Automated Clearing House Association for
 
 8           certain financial transactions, or reasonably made a
 
 9           request to the other party, resulting in the exchange
 
10           of electronic information which was impacted by the
 
11           alleged year 2000 error.
 
12      (d)  Except for claims where physical injury was directly
 
13 and proximately caused by a year 2000 error, upon a finding that
 
14 either:
 
15      (1)  A claimant did not engage in commercially reasonable
 
16           efforts; or
 
17      (2)  The respondent engaged in commercially reasonable
 
18           efforts;
 
19 the respondent's liability shall be limited to recovery of the
 
20 claimant's actual out-of-pocket damages directly caused by the
 
21 year 2000 error, and no consequential damages, such as loss of
 
22 business opportunities or loss of profits, or other special
 
23 damages shall be awarded under any theory of recovery.
 

 
Page 17                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1      (e)  The amount awarded to any claimant shall be reduced to
 
 2 the extent that the claimant's failure to engage in commercially
 
 3 reasonable efforts contributed in whole or part to the damages
 
 4 sustained.  Where two or more respondents are found liable for
 
 5 the claimant's damages, the proportion of liability assessed
 
 6 against each respondent shall be proportionately adjusted based
 
 7 on the extent to which it engaged in commercially reasonable
 
 8 efforts."
 
 9      SECTION 3.  Nothing in this Act is intended to affect the
 
10 indemnity and defense coverage rights and obligations under any
 
11 contract of insurance.
 
12      SECTION 4.  If any provision of this Act, or the application
 
13 thereof to any person or circumstance is held invalid, the
 
14 invalidity does not affect other provisions or applications of
 
15 the Act which can be given effect without the invalid provision
 
16 or application, and to this end the provisions of this Act are
 
17 severable.
 
18      SECTION 5.  If any portion of this Act is found to be
 
19 preempted by federal law or regulation, the remainder shall
 
20 remain in full force and effect to the fullest extent consistent
 
21 with the preemption.
 
22      SECTION 6.  This Act shall not be deemed to impose any
 
23 increased obligation, duty, or standard of care than is otherwise
 

 
Page 18                                                    1111
                                     H.B. NO.           H.D. 2
                                                        
                                                        

 
 1 applicable under federal or state law.  It is not intended to
 
 2 create any new cause of action or remedy.
 
 3      SECTION 7.  The intention of this Act is to protect the
 
 4 people of the State of Hawaii against harm that is pervasive and
 
 5 that was generally unknown to businesses and consumers.  For that
 
 6 reason, its provisions are remedial, and shall be construed to
 
 7 provide the greatest level of protection.
 
 8      SECTION 8.  This Act does not affect rights and duties that
 
 9 matured, penalties that were incurred, and proceedings that were
 
10 begun, before its effective date.
 
11      SECTION 9.  This Act shall not affect any claim which has
 
12 been filed in the courts on the date of its enactment.  
 
13      SECTION 9.  This Act shall take effect upon its approval;
 
14 provided that section 2 of this Act shall be repealed on December
 
15 31, 2010.