Year 2000 Information and Readiness Disclosure Act
On October 19, 1998, President Clinton signed into law the Year 2000 Information and Readiness Disclosure Act ("the Act"). The Act intends to promote the voluntary sharing of information needed to discover, avoid, or fix Y2K problems. To accomplish this goal, the Act provides companies with limited protection for statements made about Y2K readiness or processing. The Act applies to both previously made and prospective disclosures, provided that affirmative action is taken by December 3.
The Benefits of the Act
Limited Admissibility. The Act provides limited protection against the admissibility into evidence of Year 2000 statements,1 and greater protection for a narrower category of Year 2000 statements designated as "Year 2000 Readiness Disclosures."2 Year 2000 statements can be admitted into evidence for any purpose, but may be the basis for a finding of liability only where the maker: (i) knew the statement was false; (ii) made the statement with an intent to deceive; or (iii) made it with reckless disregard of its truth or falsity. The Act also limits the introduction of Year 2000 Readiness Disclosures to actions involving anticipatory breaches, repudiations, or similar actions. In essence, the Act eliminates liability for inaccurate Year 2000 statements that were innocently or even negligently made.
No Alteration of Contracts or Warranties. The Act further protects companies by preventing Year 2000 statements from being construed as amendments or alterations to existing contractual or warranty rights. Thus, a company issuing a Year 2000 statement does not have to be concerned about the creation or modification of warranty or contractual rights. However, certain exceptions exist where: (i) the Year 2000 statement was made in conjunction with the formation of the contract or warranty; (ii) the contract or warranty provides for amendment or alteration through such a statement; or (iii) the parties have agreed in writing to amend the contract or warranty.
Limited Antitrust Exemption. The Act also establishes a limited antitrust exemption for the communication or disclosure of information intended to correct or avoid a Y2K processing failure. This exemption applies only to conduct that occurs between October 19, 1998 and July 14, 2001. This exemption does not apply to conduct that involves or results in agreements to boycott any person, allocate markets, or fix prices.
Your Next Step
Companies interested in obtaining the maximum protection under the Act must move quickly to designate Year 2000 statements as Year 2000 Readiness Disclosures. Under the provisions of the Act, this requirement applies to any statement made on or after October 19, 1998. In addition, Year 2000 statements made before October 19, 1998 may be entitled to statutory protection if the maker of the statement fulfills the statutory requirements by December 3, 1998.
While the Act offers substantial protection for Year 2000 Readiness Disclosures, there is no guarantee that protection will be afforded in all circumstances. For example, in the case of Year 2000 statements made prior to October 19, 1998, recipients can claim that they have detrimentally relied on the statement and object to its retroactive designation as a Year 2000 Readiness Disclosure.
The Act contains numerous exceptions and exclusions which may vary its application from company to company. Accordingly, legal counsel should review all Year 2000 statements to determine if they qualify for protection under the Act and whether they should be designated as Year 2000 Readiness Disclosures.
1 The Act defines a Year 2000 statement as "any communication or other conveyance of information by a party to another or to the public, in any form or medium - (i) concerning an assessment, projection, or estimate concerning year 2000 processing capabilities of an entity, product, service, or set of products and services; (ii) concerning plans, objectives, or timetables for implementing or verifying the year 2000 processing capabilities of an entity, product, service, or set of products and services; (iii) concerning test plans, test dates, test results, or operational problems or solutions related to year 2000 processing by - (I) products; or (II) services that incorporate or utilize products; or (iv) reviewing, commenting on, or otherwise directly or indirectly relating to year 2000 processing capabilities."
2 The Act defines Year 2000 Readiness Disclosures as "any written Year 2000 statement (a) clearly identified on its face as a Year 2000 Readiness Disclosure; (b) inscribed on a tangible medium or stored in an electronic or other medium and retrievable in perceivable form; and (c) issued or published by or with the approval of a person or entity with respect to Year 2000 processing of that person or entity or with products or services offered by that person or entity."