http://www.lawnewsnetwork.com/practice/techlaw/news/A13127-2000Jan10.html Y2K: The Fix Is In, but Who's to Pay?

Bug's effects will be unknown for months, lawyers warn

By Ritchenya A. Shepherd The National Law Journal January 11, 2000

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The lights are still on, and canned goods are on grocery shelves--but Y2K lawyers aren't willing to declare the crisis over.

And even if Doomsday never dawns, a dispute is developing over who should bear the costs of compliance.

"It's premature to be declaring victory over the Y2K issue, and that's not wishful thinking on the part of a law firm," said Jeffrey S. White, head of litigation and the Y2K group at San Francisco's Orrick, Herrington & Sutcliffe L.L.P. It could take months to see the impact, he said.

"People are going to be engaged in transactions which require reliance on dates, and data is going to be amassed and retrieved. Until a lot of that is in the can, you won't really know what the effect has been."

Meanwhile, a number of suits have already been filed to recover Y2K remediation costs from insurers, by parties including Xerox, Unisys, GTE Corp., Nike Inc., the Port of Seattle and the Royal Oak, Mich., schools.

Terry Budd, who chairs the Y2K task force at Kirkpatrick & Lockhart L.L.P., said that he expects to see many more. "Now, with the crisis avoided and behind us, there is more time and, frankly, manpower to look at cost recovery avenues," he said.

Before the calendar turned, companies needed to maintain good relationships with the very vendors that were likely to be defendants in cost recovery actions, Mr. Budd said.

"You can't shoot the pilot while the plane is going down...," he said. "Now it is appropriate to determine...what is the rightful allocation for this tremendous cost that has been foisted upon corporate America."

'SUE AND LABOR' Jeff Jinnett, of New York's LeBoeuf, Lamb, Greene & MacRae L.L.P., said in an e-mail, "Our law firm is national Y2K litigation coordinating counsel for a number of insurance companies...certain of which have received notices of claim from insureds seeking to recover some or all of their Y2K remediation costs under a so-called 'sue and labor' clause in their policies."

Lawyers are split over the suits' prospects. "Most insurance companies were very careful about what they covered and didn't," said Claudia Rast, of Detroit's Dickinson Wright P.L.L.C.

Companies also are likely to try to recover remediation costs from tech vendors in cash and discounts on future goods and services, Mr. Budd said. Many are issuing notices of intent to sue, which are required under the new federal Y2K law, Mr. White said.

"My own prediction, coming from a defense lawyer...is, good plaintiffs' lawyers will find a way to bring cases," he said.

Gary M. Hoffman, of Washington, D.C.'s Dickstein Shapiro Morin & Oshinksky L.L.P., said that one of his clients got a first-hand glimpse at the disaster that was avoided. The client, which he declined to name, decided not to invest in fixing an older Unix machine because it didn't serve a vital purpose.

"They did nothing. It failed," he said. "Their other Unix machines, that they did work on, worked fine."

Few firms are disbanding their Y2K groups yet, but lawyers concede that the bulk of their work, litigation-avoidance counseling, is over. They are returning to traditional legal work or seeking to use their tech experience elsewhere.

There is a silver lining to the Y2K cloud, lawyers say. Companies have improved their systems and learned about them--and the lawyers' role was to head off damage rather than helping to control it.

"We worked with clients, helping them to avoid litigation, solving problems," said Mr. Hoffman. "No client wants to be in litigation."

-- Dee (T1Colt556@aol.com), January 11, 2000

Answers

Look for Ed Yourdon to make some cash as an "expert witness" for some of these vendors. They will need to try to prove the value of their goods and services, and a big part of that proof will be finding someone to set up a strong case that the Y2K phenomenon was always a real danger. Ed fits that bill, as long as his heart is still in his cause!

-- Bemused (and_amazed@you.people), January 11, 2000.