August 26, 1998, 8:30 AM EST

 

Government Witness

 

By John Moore, Sm@rt Reseller

 

A Y2K bill promises protection for resellers, but the measure may not cut it in Congress.

 

     The White House last month unveiled its Year 2000 legal liability legislation, which offers resellers and other high-tech firms some protection against potential Y2K lawsuits.

 

     The essence of the bill, the Year 2000 Information Disclosure Act, is to protect companies from claims that might arise if published statements regarding Y2K compliance turn out to be inaccurate. The legislation says claimants must prove that an IT vendor knowingly published false information or was grossly negligent in failing to verify the information (Anti-Tax Measure Inches Ahead). The bill also protects companies that republish information provided by its suppliers regarding Y2K compliance.

 

     This all may sound good, but legal experts say the Administration's Y2K bill is so broad that it would invite a series of legal challenges. Gregory Cirillo, a partner and Y2K specialist at the Richmond, Va.-based law firm Williams, Mullen, Christian & Dobbins, calls the Y2K bill a legal Rubik's Cube. That is, the bill in trying to solve one problem may actually create more difficulties.

 

     For one, experts say, the legislation will be very difficult to reconcile with numerous state and federal liability laws, making litigation over its applicability a likely event. Cirillo says he believes the bill may even raise constitutional questions to the extent that the measure would pre-empt state liability laws.

 

     The federal bill's authors did make some attempt to narrow its scope. The legislation, for example, is strictly a business-to-business affair and does not apply to consumer claims. But observers believe the bill's broad-brush approach will hurt its chances of getting out of Congress and into law.

 

     Still, Daniel R. Mummery, a partner in the New York law firm Milbank, Tweed, Hadley & McCloy, says the bill is a "step in the right direction," although it is probably not workable in its current form. Mummery says a much more narrow piece of legislation can be crafted to provide guidance on liability issues. And some kind of guidance is needed, because the millennium-related lawsuits filed to date have yet to provide any real indication of how the courts will treat Y2K claims.

 

     Mummery says his clients have "been holding their breath" for a law that clarifies Y2K liability. Federal lawmakers have their work cut out for them. And the clock is ticking.

 

Heard on the Hill

 

     The Securities Litigation Reform Act will be headed for conference when Congress gets back in session. The Senate has already appointed conferees, which include Alfonse D'Amato (R-N.Y.) and Phil Gramm (R-Texas). . .The legislatores will reconcile differences in reform bills approved by the Senate in May and the House in July. The bills aim to extend securities litigation reforms from federal to state courts. High-tech firms have been particularly susceptible to securities litigation. . .The Information Technology Association of America is working with the Small Business Administration to host a Y2K Summit, which will focus on the Y2K concerns of small businesses