1-1 By: Duncan, Fraser S.B. No. 598 1-2 (In the Senate - Filed February 18, 1999; February 22, 1999, 1-3 read first time and referred to Committee on Economic Development; 1-4 March 22, 1999, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 7, Nays 0; March 22, 1999, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 598 By: Fraser 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to actions regarding certain computer date failures. 1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-12 SECTION 1. FINDINGS AND PURPOSE. (a) Whereas, in the early 1-13 years of the computer and information technology industries, 1-14 programmers adopted conventions to use limited and expensive 1-15 computer memory and computer processing capacity as efficiently as 1-16 possible. Among those conventions was the widely adopted 1-17 representation of years by the last two digits of the year. 1-18 Programmers and designers of products containing computer 1-19 processors continued to use this convention for a variety of 1-20 reasons, including compatibility with existing products and 1-21 databases, the desire to save expenses by adapting existing 1-22 programs to new uses, and the anticipation that computers, 1-23 programs, and products would be replaced as outdated or obsolete 1-24 before 2000. 1-25 (b) Whereas, many computers, computer products, and computer 1-26 services are and will be unable to distinguish or process properly 1-27 dates with years beginning with 2000. That inability affects and 1-28 will affect the proper functioning of those computers, computer 1-29 products, and computer services and the ability of those products 1-30 to accurately process, store, receive, transmit, or in any way use 1-31 dates or date data, which is commonly referred to as the "Year 1-32 2000" or "Y2K" problem. 1-33 (c) Whereas, the economy of this state and the economic 1-34 well-being of its citizens have become increasingly dependent on 1-35 information technology and on the use, manufacture, and sale of 1-36 computers, computer products, and computer services. 1-37 (d) Whereas, the response by this state, its citizens, and 1-38 enterprises doing business in this state to the Year 2000 problem 1-39 will determine whether it disrupts substantially the state's 1-40 economy, causes significant or severe economic dislocation among 1-41 consumers, employees, and employers in this state, and impairs the 1-42 ability of state and local governments to provide services and to 1-43 protect and promote the safety and well-being of their citizens. 1-44 (e) Whereas, adverse consequences of the Year 2000 problem 1-45 to the state, its economy, and its citizens can be avoided or 1-46 minimized if users, sellers, manufacturers, and providers of 1-47 computers, computer products, and computer services all act to 1-48 identify problems and to develop and implement solutions before 1-49 harm occurs. 1-50 (f) Whereas, if harm occurs, the state and the well-being of 1-51 its citizens would be best served by prompt resolution of disputes. 1-52 Many disputes can be resolved through the early use of informal, 1-53 nonadversarial dispute resolution techniques. Litigation can be 1-54 expensive and prolonged for the parties and for the courts of the 1-55 state and its political subdivisions and should be used only as a 1-56 last resort if other efforts fail to resolve the dispute to the 1-57 mutual satisfaction of the parties. 1-58 (g) Therefore, this Act adopts reasonable and necessary 1-59 measures to protect and advance the interests of this state, the 1-60 well-being of its citizens, and the health of its economy. 1-61 (h) Further, the purposes of this Act are: 1-62 (1) to protect and promote the well-being of the 1-63 citizens of this state, the health of the state's economy, and the 1-64 ability of state and local governments to provide services by 2-1 avoiding or mitigating the adverse consequences that may result 2-2 from the Year 2000 problem; 2-3 (2) to establish legal incentives that encourage 2-4 users, sellers, manufacturers, and providers of computers, computer 2-5 products, and computer services to identify Year 2000 problems 2-6 early, develop and implement solutions before harm occurs, and 2-7 resolve disputes promptly; 2-8 (3) to encourage parties to resolve disputes through 2-9 informal, nonadversarial means before litigation; 2-10 (4) to discourage litigation or the threat of 2-11 litigation based on speculative theories of recovery or seeking 2-12 damages that are not objectively verifiable, which burdens the 2-13 judicial system and depletes or diverts financial and human 2-14 resources that could be used more productively to solve Year 2000 2-15 problems; and 2-16 (5) to preserve the rights of the citizens of this 2-17 state to seek damages for bodily injury and wrongful death by 2-18 excluding those actions from the scope of this legislation. 2-19 SECTION 2. Title 6, Civil Practice and Remedies Code, is 2-20 amended by adding Chapter 147 to read as follows: 2-21 CHAPTER 147. YEAR 2000 COMPUTER DATE FAILURE 2-22 SUBCHAPTER A. GENERAL PROVISIONS 2-23 Sec. 147.001. DEFINITIONS. In this chapter: 2-24 (1) "Action" means a cause of action to which this 2-25 chapter applies. 2-26 (2) "Claimant" means a party seeking recovery of 2-27 damages, including a plaintiff, counterclaimant, cross-claimant, or 2-28 third-party plaintiff. 2-29 (3) "Computer product" means a computer, computer 2-30 network, computer program, computer software, computer system, 2-31 microprocessor, embedded computer chip, semiconductor device, any 2-32 component of any of those items, or a product that includes any of 2-33 those items as a component of the product. 2-34 (4) "Computer service product" means the product of 2-35 the use of a computer, including uses related to data processing 2-36 and storage. The term includes information stored in the computer 2-37 by personnel supporting the computer. 2-38 (5) "Defendant" means a party from whom a claimant 2-39 seeks recovery of damages, including a counterdefendant, 2-40 cross-defendant, or third-party defendant. 2-41 (6) "Recent consumer product" means a mass-marketed 2-42 computer product, intended by the seller to be used for personal, 2-43 family, or household purposes or by small businesses, that will 2-44 manifest a computer date failure during its normal use and was last 2-45 offered for sale by the manufacturer after January 1, 1997, and in 2-46 the case of software, was offered for a retail price of $300 or 2-47 less. The term does not include customized products. 2-48 (7) "Small business" means a legal entity, including a 2-49 sole proprietorship, that: 2-50 (A) is formed for the purpose of making a 2-51 profit; 2-52 (B) is independently owned and operated; and 2-53 (C) has fewer than 100 employees or less than $1 2-54 million in annual gross receipts. 2-55 (8) "Year 2000 Project Office website" means the Texas 2-56 Year 2000 Project Office website administered by the Department of 2-57 Information Resources. The Internet address of the website is 2-58 www.dir.state.tx.us/y2k. 2-59 Sec. 147.002. ACTION FOR COMPUTER DATE FAILURE. Subject to 2-60 Section 147.004 and regardless of the legal theory, statute, or 2-61 cause of action on which the action is based, including an action 2-62 based in tort, contract, or breach of an express or implied 2-63 warranty, this chapter applies only to an action in which a 2-64 claimant seeks recovery of damages or any other relief for harm 2-65 caused by: 2-66 (1) a computer date failure as described by Section 2-67 147.003; or 2-68 (2) the failure to properly detect, disclose, prevent, 2-69 report, correct, cure, or remediate a computer date failure as 3-1 described by Section 147.003. 3-2 Sec. 147.003. COMPUTER DATE FAILURE. A computer date 3-3 failure is the inability to correctly process, recognize, store, 3-4 receive, transmit, or in any way use date data: 3-5 (1) referring to the year 2000 or affected by the 3-6 transition between the 20th and 21st century or between 1999 and 3-7 2000; or 3-8 (2) with years expressed in a two-digit or four-digit 3-9 format. 3-10 Sec. 147.004. APPLICABILITY. This chapter does not apply to 3-11 an action: 3-12 (1) for wrongful death or bodily injury; 3-13 (2) to collect workers' compensation benefits under 3-14 the workers' compensation laws of this state; or 3-15 (3) to enforce the terms of a written agreement, or to 3-16 seek contractual remedies for breach of a written agreement, that 3-17 specifically provides for liability and damages for a computer date 3-18 failure. 3-19 Sec. 147.005. DUTY OR ACTION NOT CREATED. (a) This chapter 3-20 does not create a duty. 3-21 (b) This chapter does not create a cause of action. 3-22 Sec. 147.006. IMMUNITY NOT AFFECTED. This chapter does not 3-23 expand or limit the immunity of a person under any other law or 3-24 statute providing immunity. 3-25 Sec. 147.007. INSURANCE CONTRACT NOT AFFECTED. This chapter 3-26 does not affect the rights or obligations of parties under a 3-27 contract of insurance. 3-28 Sec. 147.008. SOVEREIGN IMMUNITY NOT WAIVED. This chapter 3-29 does not waive sovereign immunity of the state or of a political 3-30 subdivision of the state. 3-31 (Sections 147.009-147.040 reserved for expansion 3-32 SUBCHAPTER B. PREREQUISITES TO BRINGING ACTION 3-33 Sec. 147.041. LIMITATIONS PERIOD. (a) An action must be 3-34 brought not later than two years after the date the computer date 3-35 failure first caused the harm that is the subject matter of the 3-36 action. 3-37 (b) This section does not extend the limitations period 3-38 within which an action for harm caused by a computer date failure 3-39 may be commenced under any other law or revive a claim that is 3-40 barred by the operation of any other law. 3-41 Sec. 147.042. REPOSE. (a) Except as provided by Subsection 3-42 (b), a claimant must commence an action against a manufacturer or 3-43 seller of a computer product or computer service product before the 3-44 end of 15 years after the date of the sale by the defendant. 3-45 (b) If a manufacturer or seller expressly represented that 3-46 the computer product or computer service product would not manifest 3-47 the computer date failure, this section does not apply. 3-48 (c) This section does not reduce a limitations period that 3-49 applies to an action that accrues before the end of the limitations 3-50 period under this section. 3-51 (d) This section does not extend the limitations period 3-52 within which an action may be commenced under any other law. 3-53 Sec. 147.043. DISABILITY. Section 16.001 applies to the 3-54 periods of limitation and repose established by this subchapter. 3-55 Sec. 147.044. NOTICE. (a) A claimant may not commence an 3-56 action unless the claimant gave notice to the defendant before the 3-57 60th day preceding the date the action commences. 3-58 (b) If the 60-day notice requirement under Subsection (a) 3-59 would prevent commencing the action before the expiration of the 3-60 period of limitation or repose, the claimant must give notice to 3-61 the defendant before the 31st day after the date the action 3-62 commences. 3-63 (c) If the action is a counterclaim, cross-claim, or 3-64 third-party action, the claimant must give notice to the defendant 3-65 before the 31st day after the date of service on the defendant. 3-66 (d) The notice must: 3-67 (1) be in writing; 3-68 (2) identify the claimant; 3-69 (3) describe in reasonable detail the computer date 4-1 failure and the harm caused by the failure; and 4-2 (4) include a specific statement of the amount of the 4-3 damages claimed or the remedy sought. 4-4 Sec. 147.045. NOTICE STAYS PROCEEDINGS. All proceedings in 4-5 the action are stayed for 60 days following the date the defendant 4-6 received the notice under Section 147.044. 4-7 Sec. 147.046. FAILURE TO GIVE NOTICE. (a) On motion of the 4-8 defendant that the claimant did not give the notice under Section 4-9 147.044, the court shall: 4-10 (1) abate the action; and 4-11 (2) require the claimant to give the notice before the 4-12 31st day after the date of the order of abatement. 4-13 (b) The court shall dismiss the claimant's action if the 4-14 claimant does not give notice as required by Subsection (a)(2). 4-15 Sec. 147.047. INSPECTION. (a) A person receiving notice 4-16 under Section 147.044 may inspect a computer product or computer 4-17 service product that is subject to the claimant's control to assess 4-18 the nature, scope, and consequences of the computer date failure. 4-19 (b) The inspection must be conducted in a reasonable manner 4-20 and at a reasonable time and place. 4-21 Sec. 147.048. OFFER TO SETTLE. (a) A defendant receiving 4-22 notice under Section 147.044 may offer to settle the claim. The 4-23 offer may include an offer to cure or correct the computer date 4-24 failure. 4-25 (b) The offer must be accepted by the claimant not later 4-26 than the 30th day after the date the offer is made or the offer is 4-27 rejected. 4-28 (c) A defendant may file a rejected offer to settle with the 4-29 court with an affidavit certifying its rejection. 4-30 (d) If the court finds that the amount tendered in a 4-31 rejected offer to settle filed with the court is the same as, 4-32 substantially the same as, or more than the damages found by the 4-33 trier of fact, the claimant may not recover any amount in excess of 4-34 the lesser of: 4-35 (1) the amount of damages tendered in the settlement 4-36 offer; or 4-37 (2) the amount of damages found by the trier of fact. 4-38 (e) Subsection (d) does not apply if the court finds that 4-39 the defendant making the offer: 4-40 (1) could not perform the offer when the offer was 4-41 made; or 4-42 (2) substantially misrepresented the value of the 4-43 offer. 4-44 (f) In this section, the term "damages" does not include 4-45 attorney's fees or litigation expenses. 4-46 (Sections 147.049-147.080 reserved for expansion 4-47 SUBCHAPTER C. AFFIRMATIVE DEFENSES TO LIABILITY 4-48 Sec. 147.081. AFFIRMATIVE DEFENSE: GOOD FAITH EFFORT TO 4-49 CURE OR CORRECT. (a) It is an affirmative defense to liability in 4-50 an action if: 4-51 (1) the claimant was notified in the manner provided 4-52 by Section 147.082 that the computer product or computer service 4-53 product may manifest computer date failure; 4-54 (2) the claimant was offered a cure or correction for 4-55 the computer date failure; and 4-56 (3) the offered cure or correction would have avoided 4-57 the harm to the claimant caused by the computer date failure. 4-58 (b) In addition to the requirement of Subsection (a), to 4-59 establish the affirmative defense provided by this section: 4-60 (1) if the claimant's action involves a recent 4-61 consumer product, the defendant must prove that the charge, if any, 4-62 for the cure or correction did not exceed the reasonable charges 4-63 for the delivery and installation of the product or items needed to 4-64 cure or correct the computer date failure; or 4-65 (2) if the claimant's action involves a computer 4-66 product or computer service product that is not a recent consumer 4-67 product, the defendant must prove that the charge, if any, for the 4-68 cure or correction did not exceed the reasonable and necessary 4-69 costs to develop, produce, deliver, and install the product or 5-1 items needed to cure or correct the computer date failure. 5-2 Sec. 147.082. NOTICE. (a) Notice under Section 147.081 5-3 must: 5-4 (1) identify the computer product or computer service 5-5 product that manifests or may manifest a computer date failure; 5-6 (2) explain how a cure or correction to the computer 5-7 product or computer service product may be obtained; 5-8 (3) state that there is no additional charge for the 5-9 cure or correction other than reasonable and customary charges for 5-10 delivering and installing the product or items needed to make the 5-11 cure, if any, to obtain the cure or correction; and 5-12 (4) inform the recipient that the solution is offered 5-13 to avoid harm to the recipient and that offering the cure or 5-14 correction could affect the recipient's right to recover damages. 5-15 (b) Notice under Section 147.081 must be received by the 5-16 claimant before the beginning of the longer of the following 5-17 periods: 5-18 (1) the 90th day before the date the claimant suffers 5-19 harm from the computer date failure; or 5-20 (2) the time needed to order, deliver, and install the 5-21 correction to the product or service before the claimant suffers 5-22 harm from the computer date failure. 5-23 (c) The defendant may satisfy the notice requirement under 5-24 Section 147.081 by showing that: 5-25 (1) the defendant delivered notice within the period 5-26 provided by this section; or 5-27 (2) the claimant actually received notice within the 5-28 period provided by this section. 5-29 (d) There is a rebuttable presumption that notice has been 5-30 delivered to a claimant if the Year 2000 Project Office website or 5-31 toll-free telephone number established under Section 147.083(e) 5-32 provides access to information from which a person may obtain the 5-33 information required by this section relating to a cure or 5-34 correction for the computer date failure. The presumption may be 5-35 rebutted by credible evidence that the claimant did not receive 5-36 notice. 5-37 Sec. 147.083. NOTICE ON YEAR 2000 PROJECT OFFICE WEBSITE. 5-38 (a) A person who provides information to the Year 2000 Project 5-39 Office website to satisfy the requirements of Section 147.082 is 5-40 responsible for the accuracy of the person's information posted on 5-41 the website. 5-42 (b) A person is not subject to the jurisdiction of the 5-43 courts of this state solely on the basis that the person has 5-44 provided information for posting on the Year 2000 Project Office 5-45 website. 5-46 (c) The state is not liable for any damages arising from its 5-47 Year 2000-related activities conducted by the Department of 5-48 Information Resources, including: 5-49 (1) operation of the Year 2000 Project Office website; 5-50 (2) reliance on the accuracy of the information on the 5-51 Year 2000 Project Office website; or 5-52 (3) operation and management of the toll-free 5-53 telephone number established in accordance with Subsection (e). 5-54 (d) The Department of Information Resources in its Year 2000 5-55 Project Office website shall provide for the posting of information 5-56 and the creating of links to other websites to facilitate the 5-57 posting of notice. 5-58 (e) The Department of Information Resources shall establish 5-59 a toll-free telephone number for persons who are unable to access 5-60 the Internet to provide to those persons information relating to a 5-61 cure or correction for computer date failure posted on or linked to 5-62 the Year 2000 Project Office website. The Department of 5-63 Information Resources may establish the toll-free telephone number 5-64 either in cooperation with the General Services Commission or by 5-65 contracting with a private vendor. 5-66 (f) Any contracts for goods or services between the 5-67 Department of Information Resources and private vendors that may be 5-68 necessary or appropriate to the fulfillment of the requirements of 5-69 this section are exempt from the requirements of Subtitle D, Title 6-1 10, Government Code. If the Department of Information Resources 6-2 elects to contract with one or more private vendors, the vendors 6-3 have no greater liability to third parties for their actions than 6-4 the state would have had if it had provided the goods and services 6-5 directly. 6-6 Sec. 147.084. AFFIRMATIVE DEFENSE: RELIANCE. (a) In an 6-7 action for fraud, misrepresentation, disparagement, libel, or other 6-8 similar action based on the alleged falsity or misleading character 6-9 of a computer date statement or an express warranty, it is an 6-10 affirmative defense to liability that: 6-11 (1) the defendant reasonably relied on the computer 6-12 date statement or express warranty of an independent, upstream 6-13 manufacturer or seller of the computer product or computer service 6-14 product that the computer product or computer service product would 6-15 not manifest computer date failure; 6-16 (2) the statement was false or misleading; and 6-17 (3) the defendant did not have actual knowledge that 6-18 the statement or warranty was false or misleading. 6-19 (b) In this section, "computer date statement" means a 6-20 material statement about a computer product or computer service 6-21 product regarding the present or future ability of a computer 6-22 product in relation to avoiding computer date failure, including a 6-23 statement that a computer product or computer service product: 6-24 (1) is "Year 2000 Compliant" or a similar 6-25 representation; or 6-26 (2) complies with a computer date standard established 6-27 by a state or federal regulatory agency or by a national or 6-28 international standards organization. 6-29 Sec. 147.085. ADMISSIBILITY OF STATEMENT RELATING TO 6-30 COMPUTER DATE FAILURE. (a) The following are not admissible to 6-31 prove liability for computer date failure: 6-32 (1) an offer to settle under Section 147.048; 6-33 (2) notice required under Section 147.081(a)(1); 6-34 (3) except as provided by Subsection (b), evidence of 6-35 furnishing or offering or promising to furnish a correction or cure 6-36 for a present or future computer date failure; or 6-37 (4) except as provided by Subsection (c), a statement 6-38 made in the process of correcting, curing, or attempting to correct 6-39 or cure a present or future computer date failure. 6-40 (b) Evidence of furnishing or offering or promising to 6-41 furnish a correction or cure for a present or future computer date 6-42 failure is admissible to the extent it is evidence of a guarantee 6-43 or warranty of the correction or cure and the claim is for breach 6-44 of the guarantee or warranty. 6-45 (c) A statement made in the process of correcting, curing, 6-46 or attempting to correct or cure a present or future computer date 6-47 failure is admissible if: 6-48 (1) the statement is false; 6-49 (2) the statement is made with knowledge that it is 6-50 false; and 6-51 (3) the claimant relied on the statement to the 6-52 claimant's detriment. 6-53 (Sections 147.086-147.120 reserved for expansion 6-54 SUBCHAPTER D. DAMAGES 6-55 Sec. 147.121. DAMAGE LIMITATIONS APPLY ONLY IF DEFENDANT 6-56 SHOWS GOOD FAITH EFFORT TO CURE OR CORRECT. The limitations on the 6-57 recovery of damages established by Section 147.122 apply to a 6-58 claimant only if the defendant can show a good faith effort to 6-59 cure, correct, avoid, or mitigate the claimant's possible computer 6-60 date failure problem. 6-61 Sec. 147.122. DAMAGES NOT RECOVERABLE. (a) Subject to 6-62 Section 147.121, a claimant may not recover the following damages 6-63 in an action: 6-64 (1) damages for mental anguish, loss of consortium, or 6-65 loss of companionship; 6-66 (2) exemplary or punitive damages unless the claimant 6-67 proves by clear and convincing evidence that the conduct of the 6-68 defendant was committed with fraud or malice; 6-69 (3) additional damages under Section 17.50(b)(1), 7-1 Business & Commerce Code, unless the trier of fact finds the 7-2 conduct of the defendant was committed with fraud or malice; or 7-3 (4) consequential damages, unless they were reasonably 7-4 foreseeable. 7-5 (b) In this section: 7-6 (1) "Fraud" means fraud other than constructive fraud. 7-7 (2) "Malice" means a specific intent by the defendant 7-8 to cause substantial injury to the claimant. 7-9 Sec. 147.123. DUTY TO MITIGATE DAMAGES. A claimant in an 7-10 action may not recover damages for harm that the claimant, in the 7-11 exercise of reasonable care, could have avoided or mitigated. 7-12 SECTION 3. Subchapter C, Chapter 101, Civil Practice and 7-13 Remedies Code, is amended by adding Section 101.066 to read as 7-14 follows: 7-15 Sec. 101.066. COMPUTER DATE FAILURE. This chapter does not 7-16 apply to a claim for property damage caused by a computer date 7-17 failure as described by Section 147.003. 7-18 SECTION 4. The Department of Information Resources shall 7-19 perform its duties under Subsections (d) and (e), Section 147.083, 7-20 Civil Practice and Remedies Code, as added by this Act, before the 7-21 31st day after the effective date of this Act. 7-22 SECTION 5. (a) Except as provided by Subsection (b), this 7-23 Act applies only to a civil action commenced on or after the 7-24 effective date of this Act. Except as provided by Subsection (b), 7-25 an action commenced before the effective date of this Act is 7-26 governed with respect to the subject matter of this Act by the 7-27 applicable law in effect immediately before that date, and that law 7-28 is continued in effect for that purpose. 7-29 (b) Sections 147.041 and 147.042, Civil Practice and 7-30 Remedies Code, as added by this Act, apply only to an action 7-31 commenced on or after September 1, 1999. An action commenced 7-32 before September 1, 1999, is governed with respect to the subject 7-33 matter of Sections 147.041 and 147.042, Civil Practice and Remedies 7-34 Code, as added by this Act, by the applicable law in effect 7-35 immediately before September 1, 1999, and that law is continued in 7-36 effect for that purpose. 7-37 SECTION 6. The importance of this legislation and the 7-38 crowded condition of the calendars in both houses create an 7-39 emergency and an imperative public necessity that the 7-40 constitutional rule requiring bills to be read on three several 7-41 days in each house be suspended, and this rule is hereby suspended, 7-42 and that this Act take effect and be in force from and after its 7-43 passage, and it is so enacted. 7-44 * * * * *