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Capitalizing on Y2K 

Computers won't know what to do when 1999 becomes 2000; but lawyers and other profit-seekers will

Wednesday, Oct 21 1998
After Dick Clark catches his breath from counting down the last seconds of this millennium, he is speechless in the next when the portable klieg lights that illuminate his rooftop broadcast booth suddenly go dark. From his perch over Times Square, Mr. New Year watches the Manhattan skyline disappear, block by block, as the East Coast corridor power grid shuts down. Atlanta-based CNN goes to "Breaking News" mode, reporting that the worst of the Year 2000 -- or Y2K -- predictions are coming true. Computers that read the date with just two digits don't know what to do when "99" rolls to "00." Instead of becoming 2000, the year 1999 lurches back to 1900, and critical systems crash. Panic sweeps the nation as the heat goes out, rail lines stall, and grocery store shelves go empty.

Could it be ... Armageddon?
Get on the Internet and you'd think so. There, what was a real but addressable computer glitch has now become an apocalyptic vision. A cavalcade of Y2K Web sites and chat rooms paint chaotic doomsday scenarios that say major cities will "look like Beirut." They tout hideaway communities in rural Tennessee, Idaho, and Arizona. Self-pronounced survivalist experts offer advice on everything from where to buy freeze-dried food to how to drill a well or tan some leather. Then there are the religious zealots who see Y2K as the Mark of the Beast, the Antichrist, and the Four Horsemen all rolled into one. Even the federal government is on the bandwagon, declaring this National Y2K Action Week (Oct. 19-23).

Cut through the Y2K chaff, and there is a serious message that a problem does exist. It probably won't be catastrophic, but we are behind in fixing it and need to work hard to catch up. Yet within that kernel of truth and along the cluttered wasteland of theory, there is a little bit of Y2K for everyone: The separatists have another reason to flee; the zealots a better read of Revelations.

And the rest of us have an all-American opportunity to sell and sue and otherwise pursue the joy of profit.

The worldwide cost to fix the Y2K problem is widely estimated to be between $300 billion and $600 billion in government and private-sector contracts. But no one really knows how bad the computers will crash, and there's a lot of money to be made trying to figure it out.

At the American Bar Association's annual meeting in Toronto this year, the magic number was $1 trillion. Lawyers aren't batting an eye when estimating costs of potential Y2K litigation in the 13-figure range.

"To lawyers, this is better than cigarettes made out of asbestos," Peter de Jager, a prominent Y2K consultant, told a group of attorneys at a national Year 2000 conference in San Francisco last month. "This will be the biggest lawsuit fest this country has ever seen."

As fast as the computer industry is trying to fix the problem, the legal profession is racing to be prepared when it goes bad. Most of the nation's big-city law firms -- more than 500 -- have already devoted staff to setting up separate Y2K practices. One of San Francisco's largest firms, Pillsbury Madison Sutro, established a Y2K task force six months ago. Now 12 lawyers are working on it, calculating litigation risks for their clients.

"I'd like to think we're unique," says Rod Thompson, Pillsbury's managing partner. "But any major firm will be doing the same thing. We need to protect our clients and minimize risk, especially if the predictions come true."

And who is legally responsible for the Y2K problem? The early programmers who devised the two-digit date field in the 1960s are off the hook. They needed to save limited and expensive memory space, and figured better technology would have long since replaced their temporary shortcut by the time the millennium arrived 30 years later.

But on through the 1980s and even into this decade, programmers kept installing the old two-digit standard in new systems. The problem was largely ignored until recently, and with just 14 months to go, the prospect of correcting all the billions of lines of code in time is daunting indeed.

While critical programs will be upgraded in a now feverish attempt to stave off the "millennium bug," countless embedded microchips that lace the nation's digital infrastructure -- too many to fix or even find -- could wreak havoc with interdependent systems that are supposed to know what year it is. So the lawyers have to be ready. At Pillsbury, the Y2K task force is busy minimizing client risk by conducting audits, rewriting contracts, and carefully wording Y2K-compliance disclosure statements.

More than billing clients for "what if" insurance, lawyers are already filing Y2K-related suits -- and winning awards. Last month, what appears to have been the first Y2K suit was settled for $250,000 after a Michigan grocer complained his TEC-America Corp. cash register system crashed when trying to accept credit cards with "00" expiration dates. And Intuit Inc. has been targeted in Santa Clara Superior Court for early releases of its Quicken financial planning software that allegedly were not Y2K-compliant.

Fear of litigation has kept many industries, including utilities and health-care facilities, from openly disclosing their Y2K-compliance status. The lack of dialogue makes it difficult to assess the severity of the problem, whether it be malfunctioning medical equipment or power outages -- which is why Congress passed "Good Samaritan" legislation this month. It aims to encourage companies to share Y2K information and possible remedies by offering some liability protection. But Thompson says there is no way to provide full immunity from civil litigation, which means lawyers will be poised to unearth a Y2K gold mine -- and do more to give their profession a bad name.

"I'm afraid when there is an opportunity to sue, lawyers will file," he says. "There's no doubt lawyers will get business out of Y2K. Whether it reaches the stage of asbestos suits depends on how bad things happen New Year's Eve."

About The Author

Joel P. Engardio


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