Briefing to Clients and Industry -- Clinton’s “Good Samaritan” Act - Golden Opportunity or Unnecessary Risk?
Article by Sprecher Grier Halberstam and Jonathan D.C. Turner
Introduction
The Year 2000 ("Y2K") problem has been the object of enormous media attention over the last year. The central issues involved are technical, commercial and legal. In general terms, it is true to say that with sufficient time, money and technical resources, the vast majority of the potential consequences could be averted. However, time is ebbing away and technical resources are scarce. This means that many businesses who have woken up to the problem relatively late find that there is no longer sufficient time for them to "remediate" all the potential implications.
The only realistic option open to them is known as "triage". This means that they must concentrate on addressing the problems in those parts of their business which are neither beyond salvation from the problem nor immune to it.
Information
One of the fundamental pre-conditions for the successful implementation of any Y2K project is knowledge as to which parts of one's business are exposed to the problem. Ideally, suppliers would volunteer the information. However, it has been a great struggle to elicit this information from suppliers who fear that any admission which they make may subsequently be used as ammunition in litigation against them.
Hence the proliferation of questionnaires which have been the bane of Y2K project managers in recent times. The questionnaires pose a dilemma for recipients - they do not want to lull the sender into a false sense of reassurance by painting an excessively rosy picture and thereby risk worsening their legal position should their products fail. However, failure to respond or a negative response could result in the loss of business.
Breaking the Deadlock
In an attempt to encourage the open release of information by suppliers, the US government introduced President Clinton signed the "Year 2000 Information and Readiness Disclosure Act", signed by the President on October 19th 1998. Under this legislation, written year 2000 statements which are clearly identified on their face as "year 2000 readiness disclosures" cannot be used as evidence against the person who made them in civil actions in US Federal and State Courts.
The Act applies to "readiness disclosures" made between 19 October 1998 and 14 July 2001. However there is also a grandfather clause for statements made between 1 January 1996 and 19 October 1998. These can be designated as "readiness disclosures" under the Act if the maker either gives individual notice to all recipients of the earlier statement or does both of the following: (a) prominently posts a notice on its year 2000 website and (b) uses the same method of notification as was used to make the original statement. In each case the designation notice must repeat the statement, specify that it is being designated as a "year 2000 readiness disclosure" and be given/posted by 3 December 1998.
Even if these requirements are met, the designation will not be binding on the original recipient if he relied on the original statement to his detriment or objects to the designation within 45 days of receipt.
The aim of the Act is to provide protection from liability for certain types of Y2K disclosures made after January 1, 1996, and before the date of enactment of the Act.
To benefit from the Act, an entity has until December 3rd 1998 to register any "year 2000 readiness disclosure". No part of such disclosures are to be admissible in any relevant action against the maker of such disclosure o prove the accuracy or truth of any year 2000 statement set forth in that disclosure.
Year 2000 Readiness Disclosure
To qualify as such a disclosure the statement must be written and
- clearly identified on its face as a year 2000 readiness disclosure;
- inscribed on a tangible medium or stored in an electronic or other medium and retrievable in perceivable form; and
- 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 of products or services offered by that person or entity.
Many US companies have therefore rushed to put statements up on their website which are either candid admissions of their products' non-compliance or replicate any statements made by them at any time since the start of 1996 which could be taken to have affirmed Y2K compliance. Should the question has been raised as to whether UK suppliers with US customers should follow suit?. It might, at first glance, anything which may be a shield against potential US litigation must look like a good thing seem attractive to avail oneself of a potential shield against potential US litigation. However, it is important to consider the following before rushing to post Year 2000 Readiness Disclosures on your websites.
First, you do not get the protection of the US Act unless you comply with all of its requirements. The above summary is not a definitive statement and you should make sure that you find out all of the details and conditions which apply in your situation.
Second, the US Act only applies to civil suits in the US. It does not protect you in litigation which may be brought in the UK or other countries by American or other customers. , companies should Therefore you need to consider carefully whether the extent to which compliance with Clinton's inducement to full and frank disclosure may in doing so, they might be add to your exposureing outside the US.themselves to litigation in the UK or elsewhere. Such litigation might be initiated by customers in courts outside the US and are not bound by US law.
Any decision by a UK company as to whether to make such disclosures must be carefully assessed in the light of its particular circumstances and the potential benefits and disadvantages which might flow from any specific disclosure.
© This article is copyright Sprecher Grier Halberstam LLP.2008 and should not be construed as legal advice or opinion in any specific facts or circumstances. The contents are intended for general information purposes only. You are urged to contact a suitably qualified lawyer for specific advice.