This article by Stuart L. Adams, Jr. appeared in the 

Louisville Computer News


R U Y2K OK 2?

(January 1999)

Yes, this is another article about the so called Millennium Bug or Y2K problem. Yes, I know you’re probably sick and tired of all the newsprint taken up in the last year or so with stories about how airplanes will fall out of the sky, elevators will crash into the basement, and nuclear plants will melt down, etc. But despite all that, this problem has such a devastating potential and so many are still sticking their heads in the sand, that this deserves another shot. By the time you read this, there will be less than a year before it hits.

The last year has been the loudest in terms of the alarm being spread by the media on an issue that has been in the works for decades. The problem, after all, began at the dawn of modern computing, when a single megabyte of memory cost hundreds of thousands of dollars and paper punch cards were still standard issue. It seemed a matter of common sense that if you used two digits to hold the "place" of the year in date codes, you could save a tremendous amount of money on your data storage needs. After all, programmers thought, things were moving so fast that the code would surely be replaced long before the millennium came along. Unfortunately, however, the two digit rule became standard in everything from software programs to the programming of embedded chips used in everything from elevators to medical equipment.

The estimates are still out there. One trillion dollars will be spent on litigation related to Y2K problems. Six hundred billion will be spent on initial remediation efforts. Five percent of the fixes will not really fix the problem, giving rise to a second generation of problems and fixes. Five percent of all businesses will fail as a result of Y2K problems resulting in a global recession of at least six months duration. I’m not ready to join those buying real estate up in the mountains or hoarding bottled water, but I have and will continue my efforts to make myself, my business, and those of my clients, as ready as possible.

The news from the front is that both software and hardware developers are still hard at work trying to come up with a silver bullet to solve the problem. There are a host of new programs to ferret out date factors amongst the millions of lines of code still to be checked, thus decreasing the assessment and testing time frame. I’ve even seen hardware card ad which states they can be installed in all your PCs to provide double buffered clock replacement fooling the millennium when it comes. Beware, however, of such claimed magic fixes. There are software programs out there that will tell you that your machine is OK when it is not.

There has been a great deal of "movement" over the last year but no silver bullet has been found yet to all of the technological, business or legal problems resulting from the decades old programming decision which gave us Y2K. Although software tools are seemingly coming out daily to be used in the battle, none yet gives us a universal, worry free fix. That leaves us to continue (or start) our own program for self preservation.

The litigation has already started, with mixed results. Is this a forecast of things to come, or did some simply jump the gun? One of the first suits to be filed in the United States involved a grocery store that purchased new checkout registers for its store. A substantial portion of its customers typically used credit cards and the new registers included a device, and software programming, to allow the cashiers to check out their customers paying with plastic. Unfortunately, the manufacturer of the system allegedly forgot to provide for the fact that many of the store’s customers would soon be renewing their cards, and when they did their expiration date would move beyond the year2000. The "new" machines naturally automatically determined this to be a "bogus" date and rejected the transaction.

The grocery company filed suit. The manufacturer defended, saying in part that the system was state of the art when manufactured (in the mid 90's) and the situation was compounded (typical of Y2K problems) by a local installer who goofed. Many thought this case would be a harbinger of future litigation on the subject, and it might. It settled recently, without any great legal pronouncements from the court system, for around $250,000 and return of the system, which the manufacturer now says is Y2K compliant.

Intuit, manufacturer of the QuickenŽ family of accounting programs, has had several suits filed against it because of its initial refusal to send its customers free upgrades to make its products Y2K ready. First one suit was dismissed, because the plaintiff was unable to demonstrate present damages. Then three more were dismissed a few weeks ago. There are several other suits out there against Intuit and some of those dismissed may be reinstated. In the mean time, the Silicone Valley law firm which filed several of the now dismissed suits is claiming victory because it "forced" Intuit to now offer the Y2K patch and its new products are advertised as fully Millennium ready.

In a similar series of cases, Medical Manager Corporation, which makes software used to track patient billing and appointments, was also the subject of eight class action suits. The company first announced that its then current versions were not Y2K complaint but that its new release (carrying a minimum $2,500 price tag) would be and its customers could buy that. In a recent settlement, the company now has agreed to provide the upgrade to around 12,000 doctor’s offices at no cost, saving them an estimated $30,000,000.

These early settlements have left us with a continuing legal void, in terms of court precedent which will allow us to have a road map of what is to come. Perhaps one to watch may be the first suit I have found where a vendor has sued its client over Y2K issues. Anderson Consulting, a giant in its industry, has sued its client, for whom it consulted on a large computer replacement project in the mid 90's. The system was billed, typically, as "state of the art" but soon was found to be far from Y2K compliant. Anderson refused to pay to resolve the multi-million dollar problem and the client threatened suit. Anderson preempted this by filing its own suit to "set the bar" on what reasonable diligence was at the time of installation. Anderson, for instance says that Y2K ready was not then an issue and to have installed a fully Y2K ready system at that date would either have been impossible or so costly the client would not have been willing to pay for it.

In the face of this litigation "tip of the iceberg," the big law firms are gearing up with their Y2K litigation groups and consulting companies of all sorts are trying to figure out how to get in on the gold rush. Meanwhile, however, outside of large companies which have had the foresight to start working on the problem, many small and mid-sized companies continue to ignore the inevitable approach of the millennium problem. This, amazingly enough, has resulted in the announcement by one local Y2K consulting company that it was substantially cutting back on the staff it had geared up to handle the onslaught of business, which didn’t materialize.

If this trend continues, the computer industry has grossly overestimated the understanding their potential customers have of their plight. Just as our politicians in Washington sometime loose sight of their roots, computer teckies often mistake the technical understanding of their customers. I had this point drilled home to me recently when I presented a series of lectures to attorneys around Kentucky on the Y2K issue, only to find that in many parts of the state, many of the small firms, even in the Louisville, Lexington and Covington areas, didn’t use computers for anything other than glorified typewriters.

The danger here is that many small firms may be underestimating the impact of Y2K on their business. Just because you don’t think you’re using any date sensitive software, you may still not be immune to the embedded chips which might cause everything from fax machines and answering machines to your building’s HVAC system to malfunction. Additionally, your supply chain for raw materials in and products out may be disrupted anywhere in that chain. Have you made any effort to locate the weak links or to lock in alternate methods? Thinking of waiting until the last minute to buy a replacement computer or software. What about training time or the possibility the item you want may not be on the shelf when you need it. Ever seen pictures of grocery store shelves just before a snow storm or a hurricane. There are already reported shortages of generators, not that the power grid may blink.

Obviously you can do at least some simple things, such as having multiple backups of critical data and printouts of customer lists, accounts receivable and payable, work in progress, etc. You can also plan to have some cash on hand, and maybe a few extra cans of some staples wouldn’t be such a bad idea. Although we still have a year to the "big" date, there may be any number of earlier dates that could hit you. If you make financial projections on software that is not fully Y2K OK, then your projections could be off. This is not the hard crash or blue screen of death you get when your computer screen goes blank. This is the soft crash that happens when your program makes errors not readily apparent, lets say on payroll taxes or return on investment. Whoops!

If you think you’ll sue somebody and recover your losses, think again. Take a lesson from the early litigation. It has either failed or resulted in a settlement so far. Frankly, the lack of legal precedent and the tremendous number of complex factors which plague this brand of litigation probably have much to do with the early decisions to settle rather than see the litigation through to a judge or jury decision. Most of simply won’t be able to afford the cost of the litigation and even favorable results will come at the cost of diversion of resources from your ongoing business.

Partially because of these high costs and uncertain results, there is a movement to mediation of Y2K claims. Many multinational companies, such as McDonald’s, Phillip Morris, General Mills, Bank of America, Aetna and others are signing a pledge to mediate such disputes. A pledge is posted on the Internet by the Center for Public Resources Institute for Dispute Resolution (, a nonprofit Manhattan organization.

Think legislation will help. Maybe so, since the federal government has posted dozens of bills and many states also have legislation lined up. One noteworthy example may be the Year 2000 Information Readiness Disclosure Act, which was signed into law in October. This good Samaritan law was supposedly designed to help companies freely exchange information about their product’s readiness, testing and solutions without being penalized for their efforts. The Act allowed companies to designate, by December 3rd, 1998 any past disclosure statements as "Year 2000 Readiness Statements." The Act makes those qualifying Readiness Statements inadmissible against the maker to prove the accuracy of the statement and further states the maker "shall not be liable under Federal of state law with respect to that year 2000 statement..." unless made with actual knowledge it was false, inaccurate or misleading; was made with intent to deceive or mislead; or with reckless regard to its accuracy. Companies could designate even statements as far back as January 1, 1996 as qualifying statements, and change them.

The Act allows for the creation of specially designated "Year 2000 Internet websites" on which the statements can be posted, giving them a level of immunity. They can even be changed and customers must follow the changes on the web site. The Act is full of exceptions that will be interesting for lawyers to watch as they are litigated, including exclusions for contractual warranties and protests allowed for undue prejudice for the retroactive designation. Duh, as my six year old would say!

Where does all this leave us. No one knows. The key is to do those things now that you can do and, over the next year, to continue (or start) to look at those critical parts of your life and business that may be impacted by a malfunction of your own computer hardware, software or embedded chips (i.e. anything electronic that, at a minimum, has a date function). Additionally, you must look at those you depend on (suppliers, the power grid, etc.) and those who depend on you, including your customers, employees, and creditors.