BEN SULLIVAN Staff Reporter
The lawyers are prepping for the Year 2000 problem.
A growing crop of L.A. cyber attorneys consider the infamous computer glitch in which computer systems around the globe are supposed to crash on Jan. 1, 2000 as a golden opportunity for litigation.
“I know what (liability) problems look like, and this is bigger than anything I’ve ever seen,” said Vito Peraino, an attorney at Hancock, Rothert & Bunshoft who represented insurer Lloyds of London in the Exxon Valdez oil spill. “Every business that relies on computers has to be concerned.”
The Year 2000 problem or Y2K arises from the fact that most computer systems record dates in a way that the year appears as a two-digit field. 1997 is recorded as 97, and 01 represents 1901.
The method was devised to save computer memory in the industry’s early days when such space was precious, but its legacy is that 1900 and 2000 are indistinguishable.
Peraino and other attorneys say litigation is likely to arise against firms whose clients have been damaged as a result of the glitch, from shareholders of companies whose software fails, and from class-action lawsuits filed by purchasers of faulty hardware and software packages.
Already, hundreds of U.S. companies are spending billions of dollars to rewrite or replace affected software. As the costs mount, many companies will be looking to recoup their expenses.
“Let’s say you’re a big bank that went to a big consulting firm and said, ‘Design my accounting system,'” Peraino said.
If, come 2000, your system will no longer tally payroll, accounts payable and accounts receivable data correctly, you’re going to go to the consulting company for some redress, he said.
The consulting firm may, in turn, look to the vendor from which it purchased software components.
“In a worst case scenario you’d have this chain reaction of lawsuits,” Peraino said.
All of which could mean new billings for attorneys.
“I prefer to think of it as an opportunity, not a problem,” said attorney David Bosko, of Sheppard, Mullin, Richter & Hampton. “It’s going to mean an awful lot of work for an awful lot of programmers and lawyers.”
Bosko’s firm has hired a public relations firm to help build an awareness of the problem as well as drum up some business from companies whose computers go bonkers.
But he and other lawyers insist that it’s not just ambulance-chasing in cyberspace.
“Where we got concerned (about) was first from the perspective of what happens if your business shuts down,” said James Kalyvas, an attorney at Foley, Lardner, Weissburg & Aronson in Century City.
The potential liability, he said, is a secondary matter.
Kalyvas, Peraino and Bosko each said they are advising clients to take steps to fix the problem in their own systems, and to contact their suppliers and business partners to encourage them to do the same.
That not only makes good sense for avoiding a system crash, but helps protect the clients against lawsuits down the road, they say.
“For companies that don’t solve this problem, the potential for lawsuits is huge,” said Peraino.
He and the other attorneys say that the likelihood of lawsuits being filed by or against clients will increase as the new millennium approaches.
“You don’t start putting together a lawsuit now, but you start to put people on notice. You tell them you expect they’ve already solved the problem, and if they haven’t you expect them to do so very soon,” Bosko said.
While conceptually simple, Y2K is a challenge to fix. A “magic bullet” software upgrade may be developed for home computer applications, but the diversity of mainframe-PC hybrids used in business by banks, insurance companies, hospitals, government agencies and virtually all other mid- to large-sized organizations preclude a cure-all solution.
Ironically, the culpability of the software and hardware makers themselves is a matter of debate.
Peraino believes there is potential for successful suits against such manufacturers, though no landmark cases have occurred to date.
Kalyvas, however, said warranty disclaimers included with most hardware and software packages pose a stumbling block to such suits.
Software and hardware vendors are “unlike any other area I’ve ever seen in terms of the level of exclusion of responsibility,” Kalyvas said. “You can always make a case and argue why it shouldn’t be, but these would be very tough cases to win in most instances.”