Lawyers and the Year 2000 Issue

LPIC News - May 1998

Many lawyers have heard of the Year 2000 computer problem but unfortunately not all understand the full scope of the problem and what they must do in order to properly ensure that they minimize their risk. Non-complaint systems may fail, malfunction or incorrectly process date information after the year 1999 or may fail to recognize the year 2000 as a leap year.

While most systems with Year 2000 problems are expected to display problems on and after January 1, 2000, there are many systems that are expected to fail in 1999 or sooner. These include systems which track future dates such as financial systems, litigation support systems, scheduling systems, bring forward/tickler systems and timekeeping software.

Lawyers may be tempted to think that the Year 2000 problem is restricted to computer systems and that in any case, the vendors will provide fixes in time. However, this is not the case. In reality some systems will need to be replaced and there is little time remaining. It can take over a year to select and completely implement complex systems such as those that perform accounting functions. Lawyers who wait can expect increased costs, less favourable contractual terms and the risk that their conversion/implementation will not be completed in time.

The Year 2000 problem is also not restricted to what is typically regarded as computing devices but may affect all types of equipment and devices having computerized components that are dependent on dates. These may include elevators, environmental systems, building access sytems, security systems, fax machines, photocopiers, disbursement capture devices, telephone and voice-mail systems, postal machines, dictation equipment and many other products utilized in a modern law office.

The problem may even affect computer systems that are themselves compliant due to the linkages between systems. A system designed to operate correctly after the Year 2000 may still acquire incorrect data from other systems. In addition, law firms whose systems are fully compliant may encounter problems because they are dependent on suppliers who experience disruptions due to lack of compliance of their systems.

The Year 2000 problem may seriously affect the ability of lawyers to carry on their practice. The effects may range from nuisances such as an inability to send bills, to more serious problems such as an inability to use the telephone system, photocopier, fax machine or computer systems. Even more serious may be a bring forward system that fails, or more insidiously, produces incorrect results. The missed deadlines which can result may buy that lawyer a negligence claim.

It is important for law firms to organize a small group or project team to investigate the potential for loss of critical business functions and other areas of risk for the firm. This project team should include the person at the firm who is responsible for technology. The person responsible for administration should also be included to ensure that the project team addresses Year 2000 risks that lie outside the information technology area.

The first step should be to conduct an audit to understand the scope of the problem. This would include an inventory and review of the software, equipment and other electronic devices utilized by the law firm. In some cases the assistance of suppliers will be required to assess what products (e.g., any equipment or devices used by the firm which may incorporate microprocessors or embedded logic) are susceptible to a Year 2000 problem.

In the event that non-compliant systems or devices are identified, it will be necessary to review the applicable agreements (acquisition, licensing, maintenance) to determine whether the supplier is responsible to correct the Year 2000 problems. Current insurance policies should also be reviewed to assess whether they will cover risks associated with the Year 2000 problem. Common exclusions contained in many types of insurance policies may preclude claims arising from Year 2000 problems.

It would be prudent for lawyers to send letters to their important suppliers of products and services. In addition to the vendors of the products mentioned earlier, this should also include key suppliers such as the telephone company (local and long distance), utilities, banks and landlords. It is also important to consider CDROM vendors and online providers to ensure that searches (corporate, trade-mark, QL and others) will not return inaccurate or incomplete results. The objective would be to put such suppliers on notice regarding the problem and the fact that the law firm is relying on that supplier’s efforts to address those categories of Year 2000 problems that are under that supplier’s control. In appropriate cases it may be necessary to go further and insist on executed compliance agreements in respect of Year 2000.

Many law firms are also receiving Year 2000 inquiry letters from clients. A careful consideration of the firm’s reliance on technology and third party suppliers, and the status of the firm’s due diligence in these areas, should be considered before responding.

Another area of risk for lawyers will arise from a failure to adequately protect their clients from Year 2000 related risks. Lawyers who advise on, or draft agreements in respect of, corporate transactions (mergers and acquisitions), financing/lending transactions, or acquisition of significant equipment or services, must ensure that such agreements contain adequate representations, warranties and/or covenants in respect of the Year 2000 problem. Many clients are also seeking advice related to the Year 2000 problem in respect of disclosure required in annual reports or filings required pursuant to securities legislation, insurance renewals, software licensing and copyright issues, obligations of directors and officers, document retention, inquiry letters, liability and other issues. Some of these areas require specialized knowledge and lawyers should exercise proper care before providing such advice.

© 2005 Alan M. Gahtan. All Rights Reserved | Use is subject to these Legal Terms
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