President Clinton Signs Year 2000 Disclosure Law To Facilitate Cooperation About The Y2K Problem

April 23, 2002

President Clinton signed the Year 2000 Information and Readiness Disclosure Act on Monday, October 19, 1998 to create new rules for the use of Y2K compliance statements. The Act promotes business to business information sharing, without limiting the legal rights of consumers.

The Act is intended to encourage businesses and organizations to:

Share information on how to avoid massive computer malfunctions in the Year 2000
Disclose the status of their own Year 2000 readiness and provide solutions and test results for Year 2000 computer problems. However, the Act will not affect liability that may arise from Y2K failures of systems or devices

The Act protects companies by allowing them to issue written statements about their Y2K readiness to their customers, for example, with the guarantee that the statements could not be used against them in court unless they were provided recklessly or with the intent to deceive. Under limited circumstances, however, such a statement still may permit the recipient to terminate the contract with the company issuing the statement. Therefore, if one of your suppliers states that it is not Year 2000 compliant, you may wish to determine if the supplier's contract can be terminated.

The Act will not offer protections for inaccurate statements made in the direct marketing of products to consumers. The bill will also not offer protections to businesses trying to sell Y2K solutions to other businesses unless the offer includes a notice required by the Act.

Antitrust Exemption for Y2K Preparation Activities

The limited antitrust exemption provided by the Act will make it easier for firms to cooperate with one another to solve the Y2K problem without the usual fear of liability that often accompanies collaborative action among competitors. The antitrust laws are relaxed through July 14, 2001 to permit cooperation among competitors to facilitate Year 2000 disclosures and the resolution of Year 2000 problems.

Protecting Your Company

The Act's requirements are detailed and the utility of the Act's protections will vary from company to company. Businesses will have 45 days to bring previously made disclosures within protections of the Act. In order to do so, the Act generally requires that a follow-up notice referring to the Act be sent to prior recipients in the same manner the prior notice was delivered. The 45-day grace period will end on December 3, 1998.

Going forward, any statement about your Year 2000 readiness should clearly be identified as a "Year 2000 Readiness Disclosure" in order to take advantage of the evidentiary exclusions provided by the Act.

This Alert provides a brief summary of the Year 2000 Information & Readiness Disclosure Act and should not be viewed as a full analysis of the Act and its application.

For additional information on what the Act means to your organization, customers, and vendors, please contact Neil Siegel at 412.297.4980 (nsiegel@cohenlaw.com) or Mark Stabile at 412.297.4966 (mstabile@cohenlaw.com).