Legislation before Congress would give legal protection to banks that make erroneous year-2000 disclosures but would limit their ability to collect punitive damages for errors caused by vendors and software makers.

One bill, introduced in the House on July 16 by California Republicans David T. Dreier and Christopher Cox, would protect computer and software companies from paying punitive damages for year-2000 errors, provided the companies offered to repair or replace the affected systems. Plaintiffs could collect for business losses and the costs of repair.

The bill would offer similar liability protection to companies, such as banks, that have made "all reasonable efforts" to protect their computer systems from year-2000-related failure.

A second bill, drafted by the White House and expected to be introduced this week, would provide a safe harbor for companies that make erroneous but good-faith disclosures about their own year-2000 readiness or a vendor's.

Under this legislation, for example, two banks that used the same data processor could share information about the vendor's year-2000 readiness and be protected as long as any wrong information was gathered in good faith.

As a result, said Karen Shaw Petrou, president of the Washington, D.C., bank consulting firm ISD/Shaw Inc., banks will not have to "divert energies finding information about the same people and (can instead) focus on their own systems."

But the chances of either bill passing this year are slim. One problem is the tight Congressional calendar. Trial lawyers also oppose the measures.

"The problem with (the Dreier-Cox) bill ... is that it may not pass constitutional muster," said John L. Hosack, an attorney with Arter & Hadden, Washington, D.C.. "It deprives the person who acquired the product of the claim against the person who sold the product, or it dramatically reduces their ability to obtain full recompense for their damages."

Mr. Hosack said while many state legislatures have floated similar bills, virtually all have failed. In California, where a similar bill died in committee, the constitutional argument was decisive, he added.

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