Editorial: "When the Lit Comes Down"

The Legal Repercussions of Y2K

Maybe, just maybe, nothing will happen. Maybe systems will keep running, schedules will be kept, power will remain on, telephones will work, bank accounts will be accessible, corporations won’t fold and the economy won’t collapse. And juuuuust maybe your firm won’t get its pants sued off in the process. Maybe. But then again, maybe not. While many companies are only now seriously visiting their Year 2000 readiness position, the thought of the legalities that are to come remains barely a blur. For example, did you know that the first Year 2000 suit has already been tried and ruled in favor of the plaintiff for over $285,000?

To get an idea of what was in store legally on January 2, 2000, I met with some of the leading Year 2000 litigation and business experts at Fulcrum’s Year 2000 Computer Crisis: The Litigation Summit in Chicago.

In our exclusive Round Table discussion, beginning on page 24, respected legal, technical, financial and business experts shine some light on the still dark recesses of Year 2000 litigation. Our panel compares Year 2000 litigation with the monumental scale of environmental pollution litigation that lasts for ten to fifteen years. With some indicting it will be larger than the tobacco settlement.

So, if you thought the cost and aggravation of technically preparing for the Year 2000 were overwhelming, wait until afterwards, when the lit hits the fan.

Vito C. Peraino, Partner at Hancock Rothert & Bunshoft LLP, and Chairman of the firm’s Year 2000 Working Group, covered the legal liabilities and responsibilities for which corporations and their officers will be held accountable. Mr. Peraino has testified before the United States Congress on legal issues associated with Y2K, as well as before a joint hearing of committees of the California Senate and Assembly, and he has appeared on National Public Radio’s "Morning Edition." Mr. Peraino co-chaired the first nationwide legal seminar on Year 2000 and has addressed Y2K issues before the Electronic Banking Economics Society of New York, Underwriters at Lloyds, London, the California Society of CPAs and the Institute of Internal Auditors to name a few.

Providing a legislative perspective was Barbara M. Wheeler, Legislative Advocate, Association for California Tort Reform (ACTR). Prior to joining the ACTR, Ms Wheeler worked as in house counsel for Yamaha Motor Corporation, as well as an associate with an insurance defense firm in Los Angeles. According to Ms Wheeler, the home PC user is probably the only non-potential defendant in the Year 2000 litigation that will ensue.

Revealing the extensive investigative work engulfing the Year 2000 was James E. Gordon, a Managing Director of The Investigative Group International (IGI) and Chair of the IGI’s Year 2000 Team. Mr. Gordon has expertise in conducting internal, corporate compliance, environmental, cost and insurance recovery investigations. He specializes in the development and application of business and financial management systems to investigate complex multiparty litigation. One such litigation is the subject of a book and forthcoming movie "A Civil Action," in which he is prominently featured.

Dennis G. Grabow, founder and CEO of The Millennium Investment Corporation (a Chicago-based financial advisory service), is a leading authority on global financial implications and the investment opportunities offered by the technological, management and operations issues surrounding the Year 2000.

His 30 years of investment management and corporate restructuring include work in the electric and gas, nuclear power, transportation, technology, manufacturing, shipping and banking industries. He was a member of the White House Staff, where he served as Staff Assistant to President Gerald Ford.

Thomas Costello, Jr., Vice President, General Counsel of Compuware Corporation (a worldwide provider of software and services that support business applications) represented the Year 2000 vendor community in our Round Table. Mr. Costello has been the Chairperson of the Computer Law Section of the State Bar of Michigan, and has written articles on a range of intellectual property law topics that affect the computer industry. Mr. Costello correctly warns that the would be plaintiffs, or users, have as strong an obligation as the vendor to community to ensure that they are adequately prepared for the Year 2000 crisis.

The overall message of the Round Table was that although no one can completely predict the level of destruction caused by the Year 2000 crisis, the defects are there. It’s really just a matter of how reliant we are on computers. Make no mistake, there will be system failures. There will be losses as a result of these failures. There will be cases of fraud and negligence - and even though the priority should be on finding solutions, someone, somewhere is going to pay. Read this Round Table and try to get a good night sleep.