A Y2K Glitch For Lawyers: Few Lawsuits
By David Segal
Weikers doesn't write software code nor is he one of those forward-thinking executives who spent millions of dollars to fix computer systems before midnight Dec. 31. Weikers's contribution to a largely glitch-free New Year was less tangible and more primal: He scared the heck out of people.
Like dozens of lawyers around the country, Weikers stood poised to file a batch of Y2K-related lawsuits. Had widespread disaster struck--if utilities shut down, or planes crashed or bank accounts vanished--Weikers and others were ready to light a litigation bomb that by some estimates could have spewed $500 billion, turning software companies into the new century's version of the asbestos industry and keeping plenty of pricey legal talent busy for years.
But a full-blown catastrophe has yet to strike, which is a calamity of a different kind for lawyers. Now Weikers and fellow members of the bar would like a little credit for their role in preventing a meltdown. Threatening lawsuits, they said, prompted corporations to all but eradicate the Y2K bug.
"Nobody is going to believe that lawyers are heros in this case, but we had something to do with it," said Weikers, co-author of a resource guide for lawyers, "Litigating Year 2000 Cases," and the sole partner of Weikers & Co. "It's clear to me and a lot of attorneys that by raising red flags in advance we helped avoid bigger problems down the road."
Initially the year 2000 glitch seemed tailor made for lawyers. The problem stemmed from the thousands of electronic devices and computers across the globe that were programmed to recognize only the last two digits of the year. That could have caused systems to fail Dec. 31 if machines assumed that 1900, not 2000, had arrived.
To some lawyers, this had the hallmarks of a liability bonanza. There were forecasts that businesses would sue for lost earnings when their systems crashed, or their products failed. And if planes had fallen out of the sky or trains derailed, major personal injury class actions might have been filed. Product liability suits were likely as well. Even homeowners were expected to sue when their alarms malfunctioned, failing to summon the police during burglaries.
All the hype had software makers feeling like the next feast at the plaintiffs lawyers buffet. Scores hired defense attorneys and spent millions of dollars devising strategies to shield them if the day of legal reckoning came to pass. Insurers braced for the worst as well.
"Lawyers were licking their chops," said Madelyn Flanagan of the Independent Insurance Agents of America, an Alexandria association. "I think the whole world is relieved."
None of these cases would have been sure-fire winners. In July Congress passed the industry-backed Y2K Act, which offered some liability protections for small software makers, limiting punitive damages and raising the bar for breach of contract suits.
"The act forces plaintiffs to show real negligence with respect to Y2K preparedness," said Yochai Benkler, a professor at the New York University School of Law. "It's not enough for a plaintiff to simply say that something malfunctioned because of Y2K and a particular company is at fault."
Even personal-injury suits based on Y2K-caused transportation wrecks wouldn't have been slam-dunks, Benkler said. Given the amount of attention paid in the press and elsewhere to the century date rollover issue, there would have been questions about whether passengers traveled on New Years with full knowledge of the risks.
Still, there are enough gray areas and complexities in law that everyone expected a flood of suits. Instead, the number of filings has so far fallen well shy of expectations and nearly all the suits are by corporations to recover the cost of upgrading their software.
Remediation cases might in fact be the most lucrative legal legacy of Y2K. About 70 businesses have filed suit for their upgrade expenses; Xerox Corp. and Nike Inc., for example, have sued insurers seeking a total of $260 million for their software upgrade expenses. As the weeks go by, and relief about the unexpected calm gives way to shock over upgrade bills, more companies could demand back their software outlays.
Until then, many firms that were eyeing Y2K suits are waiting.
"We're sort of in a holding pattern right now," said Jere Beasley, a Montgomery, Ala., lawyer whose firm has studied the issue.
"I can't honestly say that I had time set aside for this issue," said Salvatore Graziano, a partner at Milberg Weiss Bershad Hynes & Lerach, a New York firm that describes itself as on its World Wide Web site as the "leading plaintiffs firm in the rapidly emerging field of Year 2000 litigation."
Drawing attention to the issue helped stave off problems before they occurred, Graziano said. "We claimed in court that because of our efforts, substantial changes were made by companies," he said.
The Y2K litigation dud cost defense lawyers a potential bundle, too--in their case the thousands of hours they would have billed defending corporations. "We're not out of the woods yet," said Kirk Ruthenberg, a defense lawyer Sonnenschein, Nath & Rosenthal. "There could still be problems, but they won't be anything like was originally expected."
Ruthenberg doesn't feel cheated. Nor does lawyer Weikers, 38, whose office in the Chestnut Hill part of Philadelphia became a sort of information clearing house for Y2K litigation. Amid piles of papers, a fax machine, a scanner and his two pet dogs, Weikers publicized the possible lawsuit wave via his Web site, www.softwarelitigation.com.
Weikers said he was never one of those lawyers who claimed that the end was nigh. He and others merely raised awareness about the problem, with the result that businesses spent a little money up front, rather than lose a ton of money in court.
Plus, he added, the book on Y2K litigation isn't closed. About 800 slot machines in Delaware blinked out for three days, and Weikers said the state lottery system reportedly was contemplating a lawsuit against the machines' manufacturers for lost earnings during the time the games were shut down.
"They shouldn't rest so assured," Weikers said of those who claim the litigation explosion has been defused. "They should wait a few months. There's going to be a flurry of activity."
© Copyright 2000 The Washington Post Company