US Year 2000 Disclosure Legislation

By Alan Gahtan - Hospital Quarterly (Winter 1999)

The "Year 2000 Information and Readiness Disclosure Act" (S-2392) was signed into law in the US on October 19,1998. The Act is intended to promote the voluntary sharing of year 2000 information by limiting the extent to which year 2000 statements can be used as the basis for liability and preventing certain evidentiary uses, against the maker, of a subset of such statements.

Many Canadian hospitals have received year 2000 statements from US-based vendors of products used in their institution. In many cases such statements may be found subject to Canadian law and the vendor may be subject to the jurisdiction of Canadian courts. In such cases, the Act may be of little or no consequence. However, in other cases the vendor may be able to use the Act as a shield against liability arising from inaccurate year 2000 statements.

The Act protects good faith sharing of two kinds of year 2000 information: a broad category called "year 2000 statements, and a narrow subcategory called "year 2000 readiness disclosures." Year 2000 statements and readiness disclosures can include any year 2000 related subject matter, but year 2000 readiness disclosures must be in writing, be clearly labeled and concern one's own products or services. Certain previously issued year 2000 statements may be retroactively designated as 2000 readiness disclosures and receive the protections applicable to 2000 readiness disclosures under the Act.

The primary effect of the Act is to protect a maker of a Year 2000 statement against liability under US law in any legal action based on the making of a Year 2000 statement that is alleged to have been false, inaccurate or misleading. If the year 2000 statement was material and to the extent the year 2000 statement was not a republication (where slightly different rules apply), there is an exception to the foregoing protection where the maker made the year 2000 statement: (a) with actual knowledge that the year 2000 statement was false, inaccurate or misleading; (b) with intent to deceive or mislead; or (c) with a reckless disregard as to the accuracy of the year 2000 statement.

The term "year 2000 statement " means any communication or other conveyance of information assessing year 2000 processing capabilities concerning plans to verify year 2000 processing capabilities, concerning testing of year 2000 processing by products, or services utilizing products, or relating to year 2000 processing. The statements may be in any format, oral or written. The Act applies to any year 2000 statement made on or after July 14, 1998 and no later than July 14, 2001.

A more limited form of additional protection is provided for a narrow category of year 2000 statements which meet certain requirements and are referred to in the Act as "year 2000 readiness disclosure". In order to benefit from the additional protection provided for "year 2000 readiness disclosure", a year 2000 statement must be in writing, clearly identified on its face as a year 2000 readiness disclosure, inscribed in a tangible medium or stored and retrievable in perceivable form, and issued or published by or with the approval of a person or entity with respect to year 2000 processing of that person or entity or of products or services offered by that entity. The additional protection is an evidentiary exclusion which precludes the admissibility of such statements against the persons making them to prove the accuracy or truth of their contents. This additional protection is not expected to be of much benefit to a vendor that makes a year 2000 statement that its product is compliant, which later turns out to be false.

It can be expected that many vendors will misunderstand the scope of the additional protection to be gained by designating year 2000 statements as readiness disclosure (or will just want to get every bit of protection possible). Therefore, it is likely that many hospitals will start to see new year 2000 statements labelled as "year 2000 readiness disclosure". Some vendors will also attempt to avail themselves of the provisions in the Act which permit them to retroactively designate year 2000 statements issued after January 1, 1996 (but before October 19, 1998) as year 2000 readiness disclosure. Such retroactive designation must have been done no later than December 3, 1998. In some cases it can be done by posting on a Web site, in other cases personal notification may be required.

Hospitals that receive a notice advising them that a previously issued year 2000 statement is being designated as year 2000 readiness disclosure can avoid the application of the designation if they can prove (by clear and convincing evidence, which is a high standard to prove) that they relied upon the year 2000 statement prior to the designation, would be prejudiced by the designation and who provide notice of their objection within a specified time period to the party attempting to retroactively designate the year 2000 statement as year 2000 readiness disclosure.

The Act is also intended to encourage the use of the Internet to provide notice of all matters relating to year 2000 processing problems and solutions. Subject to certain exceptions, the use of an Internet website to provide year 2000 information is deemed adequate notice in any litigation in which the adequacy of notice is at issue.

To the extent that it is now more difficult for a hospital to rely on year 2000 assurances provided by US vendors, (1) hospitals will need to focus even more on obtaining contractual warranties of compliance (both in agreements for new acquisitions and from existing vendors of high risk equipment); (2) hospitals will need to rely even more on the conduct of their own testing (and therefore ensuring that they can get access to adequate information required to conduct such testing); (3) hospitals should attempt to negotiate provisions in new agreements which permit the hospital to rely on year 2000 statements made by the vendor; and (4) hospitals that receive year 2000 assurances from a US parent of a Canadian vendor should take steps to ensure that the parent's assurances are adopted by the Canadian subsidiary.

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