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1-23     programs, and products would be replaced as outdated or obsolete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                                  * * * * *