Year 2000 immunity

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

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 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
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;

Page 5                                                     1111
                                     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.