HBA-ATS H.B. 9 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 9 By: McCall Civil Practices 3/22/1999 Introduced BACKGROUND AND PURPOSE Year 2000 problems stem from early computer programmers' and applications developers' efforts to conserve memory because of high data costs. To help lower costs, programmers often dropped the first two digits of the year, using only the last two digits. Although it was assumed that new systems would process four-digit dates as computers and their components became cheaper, the practice remained so prevalent that today millions of computers remain unable to process four-digit dates. In addition to computer systems, millions of embedded systems (devices used to control, monitor, or assist the operation of equipment, machinery, or plant) that are relied upon by power grids, oil supplies, and manufacturing facilities to perform automated routines, were developed and programmed in a similar manner. Consequently, these computer systems and embedded systems could malfunction upon the arrival of the year 2000 approaches. Because a number of class action lawsuits filed against information technology vendors in 1997 and 1998 were based in part on year 2000 statements made to customers and the public at large, there is concern about more litigation. H.B. 9 creates a new chapter in the Civil Practice and Remedies Code that addresses lawsuits in which plaintiffs seek recovery of damages or any other relief for harm caused by a computer date failure and the failure to properly detect, disclose, prevent, report, correct, cure, or remediate a computer date failure. A lawsuit must be brought within two years after the date of the computer date failure and a claimant must sue a manufacturer or seller of a computer product or computer service product within 15 years after the date of the sale, unless the manufacturer or seller expressly represented that the computer product or computer service product would not manifest the computer date failure. Before an action can be brought, the plaintiff must give the defendant notice. If no notice is provided, the court is required to dismiss the action. The defendant is given an affirmative defense to liability if the defendant notifies the plaintiff that the computer product or computer service product may manifest computer date failure, and offers the plaintiff a cure or correction for the computer date failure, at no additional charge, that would have avoided the harm to the claimant caused by the computer date failure. A plaintiff is prohibited from recovering damages for harm that the plaintiff, in the exercise of reasonable care, could have avoided or mitigated. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. FINDINGS AND PURPOSE. Sets forth findings of the legislature. SECTION 2. Amends Title 6, Civil Practice and Remedies Code, by adding Chapter 147, as follows: CHAPTER 147. YEAR 2000 COMPUTER DATE FAILURE SUBCHAPTER A. GENERAL PROVISIONS Sec. 147.001. DEFINITIONS. Defines "action," "claimant," "computer product," "computer service product," "defendant," and "Year 2000 Project Office website." Sec. 147.002. ACTION FOR COMPUTER DATE FAILURE. Provides that this chapter applies only to an action in which a claimant seeks recovery of damages or any other relief for harm caused by a computer date failure as described by Section 147.003, and the failure to properly detect, disclose, prevent, report, correct, cure, or remediate a computer date failure, subject to Section 147.004. Sec. 147.003. COMPUTER DATE FAILURE. Defines a "computer date failure" to mean the inability to correctly process, recognize, store, receive, transmit, or, in any way, use dates containing the year 2000 or dates in a four-digit format. Sec. 147.004. APPLICABILITY. Provides that this chapter does not apply to an action for wrongful death or bodily injury, to collect workers' compensation benefits, or to enforce the terms of a written agreement or seek contractual remedies for a breach of an agreement that provides for liability and damages for a computer date failure. Sec. 147.005. DUTY OR ACTION NOT CREATED. Provides that this chapter creates neither a duty nor a cause of action. Sec. 147.006. IMMUNITY NOT AFFECTED. Provides that this chapter neither expands nor limits the immunity of a person under any other law or statute providing immunity. Sec. 147.007. INSURANCE CONTRACT NOT AFFECTED. Provides that this chapter affects neither the rights nor obligations of parties under an insurance contract. Sec. 147.008. SOVEREIGN IMMUNITY NOT WAIVED. Provides that this chapter does not waive this state's or any of its political subdivisions' sovereign immunity. Reserves Sections 147.009-147.040 for expansion. SUBCHAPTER B. PREREQUISITES TO BRINGING ACTION Sec. 147.041. LIMITATIONS PERIOD. Provides that an action must be brought within two years after the date the computer date failure first caused the legal harm. Provides that this section does not extend the limitations period within which an action may be commenced under any other law or revive a claim that is barred by the operation of any other law. Sec. 147.042. REPOSE. (a) Provides that a claimant must sue a manufacturer or seller of a computer product or computer service product within 15 years after the date of the sale by the defendant, except as provided by Subsection (b). (b) Provides that this section does not apply if a manufacturer or seller expressly represented that the computer product or computer service product would not manifest the computer date failure. (c) Provides that this section does not reduce a limitations period that applies to an action that accrues before the end of the limitations period under this section. (d) Provides that this section does not extend the limitations period within which an action may be commenced under any other law. Sec. 147.043. DISABILITY. Provides that Section 16.001 (Effect of Disability) applies to the periods of limitation and repose established by this subchapter. Sec. 147.044. NOTICE. Prohibits a claimant from suing unless the claimant gave notice to the defendant before the 60th day preceding the date the suit begins. Authorizes a claimant to commence an action by the 30th day preceding the date the action commences if the claimant gave notice and the 60-day notice requirement would prevent commencing the action before the expiration of the period of limitation or repose. Provides that the claimant must give notice to the defendant before the 31st day after the date of service on the defendant if the action is a counterclaim, cross-claim, or third-party action. Enumerates the requirements of the notice. Sec. 147.045. NOTICE STAYS PROCEEDINGS. Provides that all proceedings in the action are stayed for 60 days following the date the defendant received the notice under Section 147.044. Sec. 147.046. FAILURE TO GIVE NOTICE. Requires the court, upon a showing by the defendant that the claimant did not give the notice under Section 147.044, to abate the action and require the claimant to give notice before the 31st day after the date of the order of abatement. Requires the court to dismiss the claimant's action if the claimant does not give notice before the 31st day after the date of the order of abatement. Sec. 147.047. INSPECTION. Authorizes a person receiving notice under Section 147.044 to inspect a computer product or computer service product that is subject to the claimant's control to assess the nature, scope, and consequences of the computer date failure. Provides that the inspection must be conducted in a reasonable manner and at a reasonable time and place. Sec. 147.048. OFFER TO SETTLE. Authorizes a defendant receiving notice under Section 147.044 to offer to settle the claim. Authorizes the inclusion in the offer an offer to cure or correct the computer date failure. Provides that the offer must be accepted by the claimant by the 30th day after the date the offer is made or the offer is rejected. Authorizes a defendant to file a rejected offer to settle with the court with an affidavit certifying its rejection. Prohibits the claimant from recovering any amount in excess of the lesser of the amount of damages tendered in the settlement offer or the amount of damages found by the trier of fact if the court finds that the amount tendered in a rejected offer to settle filed with the court is the same as, substantially the same as, or more than the damages found by the trier of fact. Provides that this prohibition is inapplicable if the court finds that the defendant making the offer could not perform the offer when the offer was made or substantially misrepresented the value of the offer. Reserves Sections 147.049-147.080 for expansion. SUBCHAPTER C. AFFIRMATIVE DEFENSES TO LIABILITY Sec. 147.081. AFFIRMATIVE DEFENSE: GOOD FAITH EFFORT TO CURE OR CORRECT. Provides that it is an affirmative defense to liability in an action if the claimant was notified in the manner provided by Section 147.082 that the computer product or computer service product may manifest computer date failure, the claimant was offered a cure or correction for the computer date failure at no additional charge to the claimant other than reasonable and customary charges for delivering and installing the product or items needed to make the cure; and the offered cure or correction would have avoided the harm to the claimant caused by the computer date failure. Sec. 147.082. NOTICE. Enumerates the requirements of notice under Section 147.081. Provides that this notice must be received by the claimant before the beginning of the longer of the 90th day before the date the claimant suffers harm from the computer date failure or the time needed to order, deliver, and install the correction to the product or service before the claimant suffers harm from the computer date failure. Authorizes the defendant to satisfy the notice requirement under Section 147.081 by showing that the defendant delivered notice within the period provided by this section, or the claimant actually received notice within the period provided by this section. Sets forth a rebuttable presumption that notice has been delivered to a claimant if the Year 2000 Project Office website (office website) provides access to a website or other source of information from which a person may obtain the information required by this section relating to a cure or correction for the computer date failure. Authorizes this presumption to be rebutted by credible evidence that the claimant did not receive notice. Sec. 147.083. NOTICE ON YEAR 2000 PROJECT OFFICE WEBSITE. Provides that a person who provides information to the office website to satisfy the requirements of Section 147.082 is responsible for the accuracy of that information posted on the website. Provides that a person is not subject to the jurisdiction of the state courts solely on the basis that the person has provided information for posting on the office website. Limits this state's liability for any damages arising from operation of the office website or reliance on the accuracy of the information on this website. Requires the Department of Information Resources (department) in its office website to provide for the posting of information and the creating of links to other websites to facilitate the posting of notice. Requires the department to establish a toll-free telephone number for persons who are unable to access the Internet to provide to those persons information relating to a cure or correction for computer date failure posted on or linked to the office website. Sec. 147.084. AFFIRMATIVE DEFENSE: RELIANCE. Provides that in an action for fraud, misrepresentation, disparagement, libel, or other similar action based on the alleged falsity or misleading character of a computer date statement or an express warranty, it is an affirmative defense to liability that the defendant reasonably relied on the computer date statement or express warranty of an independent, upstream manufacturer or seller of the computer or computer service product that the computer or computer service product would not manifest computer date failure, and did not have actual knowledge that the statement or warranty was not true. Defines "computer date statement." Sec. 147.085. ADMISSIBILITY OF STATEMENT RELATING TO COMPUTER DATE FAILURE. (a) Provides that an offer to settle under Section 147.048, notice under Section 147.081, evidence of furnishing or offering or promising to furnish a correction or cure for a present or future computer date failure, except as provided by Subsection (b), or a statement made in the process of correcting, curing, or attempting to correct or cure a present or future computer date failure, except as provided by Subsection (c), are not admissible to prove liability for computer date failure. (b) Provides that evidence of furnishing or offering or promising to furnish a correction or cure for a present or future computer date failure is admissible to the extent it is evidence of a guarantee or warranty of the correction or cure and the claim is for breach of the guarantee or warranty. (c) Provides that a statement made in the process of correcting, curing, or attempting to correct or cure a present or future computer date failure is admissible if the statement is false, the statement is made with knowledge that it is false, and the claimant relied on the statement to the claimant's detriment. Reserves Sections 147.086-147.120 for expansion. SUBCHAPTER D. DAMAGES Sec. 147.121. DAMAGE LIMITATIONS APPLY ONLY IF DEFENDANT SHOWS GOOD FAITH EFFORT TO CURE OR CORRECT. Provides that the limitations on the recovery of damages under Section 147.122 apply to a defendant only if the defendant can show a good faith effort to cure or correct the claimant's possible computer date failure problem in the manner described by Section 147.081. Sec. 147.122. DAMAGES NOT RECOVERABLE. Prohibits a claimant from recovering damages for mental anguish, physical pain, loss of consortium, disfigurement, physical impairment, or loss of companionship, subject to Section 147.121. Prohibits a claimant from recovering exemplary or punitive damages unless the trier of fact finds the conduct of the defendant was committed with fraud or malice, subject to Section 147.121. Prohibits a claimant from recovering additional damages under Section 17.50(b)(1) (Relief for Consumers), Business & Commerce Code, unless the trier of fact finds the conduct of the defendant was committed with fraud or malice, subject to Section 147.121. Prohibits a claimant from recovering consequential damages, unless they were reasonably foreseeable. Defines "fraud" to mean fraud other than constructive fraud and "malice" to mean a specific intent by the defendant to cause substantial injury to the claimant. Sec. 147.123. DUTY TO MITIGATE DAMAGES. Prohibits a claimant from recovering damages for harm that the claimant, in the exercise of reasonable care, could have avoided or mitigated. SECTION 3. Amends Subchapter C, Chapter 101, Civil Practice and Remedies Code, by adding Section 101.066, to provide that this chapter does not apply to a claim for harm caused by a computer date failure as described by Section 147.003. SECTION 4. Requires the Department of Information Resources to perform its duties under Sections 147.083(d) and (e), Civil Practice and Remedies Code, before the 31st day after the effective date of this Act. SECTION 5. Makes application of this Act prospective. SECTION 6. Emergency clause. Effective date: 90 days after adjourment.