Predictable Blame for a Predictable Disaster

Influential Washington law firms have Y2K liability teams in place. But it may not be that simple.
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WASHINGTON -- Worried about Y2K? Forget about publicly flogging your in-house computer geek. You need to visit

millenium3foods.com, where the motto is "Preparedness in a can."

In fact, you can by a year's supply with M3's "millennium pack plus." You get 1,306 pounds of survivalist sustenance, containing 13,200 servings of 63 food varieties -- including such "magic meats" as the soy-based "Don Jose's Taco Veg Meat." There's enough nutrition to last two or three people a full year, all for $2,995. M3 knows its market: Its label features the four fears of price-conscious survivalists: quake, famine, flood and, of course, Y2K.

The beauty of Y2K is that it is the first truly predictable "disaster." Ready or not, that "99" is going to flip to "00."

Washington hates deadlines. And there's not much politicians can do about Y2K. So, we're leapfrogging the technical deadline and moving straight to the blame-assigning stage.

The $1 Trillion Question

A recent Senate

report estimates that Y2K liability lawsuits may cost as much as $1 trillion. Citing studies, Sen.

John McCain

, R-Ariz., says that would be more than the costs of asbestos, breast implants, tobacco and Superfund litigation combined.

Anything that costs a trillion bucks will attract lobbyist lawyers to Capitol Hill like seagulls to a landfill. Indeed, the Legal Times reports that "virtually every" big-foot law firm in Washington has formed a Y2K liability team.

So while the nightly news and front pages these last two weeks suggested that Washington was consumed with Kosovo or Littleton, much of the capital was really busy with S 96, the Y2K Act. Backed by McCain, the chairman of the Senate Commerce Committee and an unannounced presidential candidate, the Y2K Act aims to curb lawsuits. That's right, curb lawsuits.

It shouldn't come as a surprise that if you say "curb lawsuits" in the same sentence as "one trillion dollars, trial lawyers from Georgetown to Capital Hill begin to seize up and spontaneously combust.

Enter Sen.

Fritz Hollings

(D.-SC) the ranking Commerce Committee Democrat and a leading trial lawyer mullah in the Senate. He spent the week essentially filibustering the bill while sounding shocked that the trial lawyers had any interest in this bill at all. Also, he countered -- in the overly polite dialect of the Senate -- that Republicans should be ashamed for fanning the fears of deep-pocketed companies in Silicon Valley and elsewhere.

No Innocents

Accusations from both sides have merit. The trial lawyers are always one of the top three cash cows for the Democrats, and Hollings is doing the lord's work in their eyes. Republicans aren't totally innocent either. Business groups -- led by the

National Association of Manufacturers

and the

U.S. Chamber of Commerce

-- launched the Year 2000 Alliance, which has been working so closely with Republicans that they share the same toothbrush.

Obviously, the GOP would love to woo back Silicon Valley business from Internet creator

Al Gore

. And, finally, McCain is running for President after all, which is almost as expensive as a three-bedroom apartment on Fifth Avenue. Outside of Arizona, he is raising most of his money from Washington's K Street, home to many of those big-foot law firms.

Oh yeah, the bill has actual merits, too: It calls for a "cure" period before a lawsuit could be filed. It would also put a cap on punitive damages and encourage arbitration.

Consumer advocates (and the trial lawyers who feed them) say it would be unfair and unreasonable to scrap the existing state and federal tort system. Remove lawsuits and small businesses could go belly up, they say, while the blue chip suppliers of chips, PCs and software would get away scot-free.

"The basis of capitalism is contract law," says Ed Yardeni, chief economist for

Deutsche Bank Securities

, who is seen in some quarters as a Y2K Chicken Little and in others as a Y2K prophet. Moreover, it is precisely the fear of lawsuits that is motivating many businesses to fix their Y2K problems in the first place. Lifting that risk by capping punitive damages "wouldn't help put fire under the butts of some companies," says Yardeni, who predicts a Y2K-led recession later this year.

Proponents of the Y2K Act argue that companies have all the incentive they need to fix their Y2K bugs: potential lost business. Big punitive damages would be counter productive. Big punitive damages for something that can't happen again (or for at least another thousand years) is just plain silly. Further, if Y2K really does cause utter chaos (cats sleeping with dogs, etc.) companies should be encouraged to get the trains running on time as quickly as possible -- and not get mired in protracted lawsuits. McCain points out that a California man is already suing a host of computer retailers, including

Circuit City Stores

(CC) - Get Report

,

Office Depot

(ODP) - Get Report

,

Office Max

(OMX)

CompUSA

(CPU)

et al) for all of their post-1995 profits. This doesn't help anyone.

The Y2K Act has been tabled in the Senate, because Democrats drenched it with dilatory baubles and the White House has threatened a veto. Senate Majority Leader

Trent Lott's

(R.-Miss.) office says he hopes to bring it back shortly -- once Hollings and McCain can come to terms, which is profoundly unlikely -- because Hollings seems perfectly happy to have no bill at all and a palatable compromise from McCain is unlikely.

Is there a bright side? Maybe. It seems unlikely that failure to pass the bill will have a major effect on the stock market in the near term. Wall Street doesn't care about Y2K, from what I can tell," Yardeni says. "So why should it care about this?"

Scott Kolman an analyst at

Sage Asset Management

agrees: "The lawsuits may darken the cloud over specific technology services firms with Y2K problems -- like

Electronic Data Systems

(EDS)

-- but generally it shouldn't have any major overall effect."

And in Washington there's still that steamy trillion dollars sitting on the horizon -- and plenty of time for more blame. So don't worry about us.

Jonah Goldberg is a contributing editor and a daily online columnist for the National Review. He can be reached at

jonahemail@aol.com.