Time For Change?

Runaway lawsuits provoke lawmakers to push for reform. Here's how their proposals will affect you.

In response to the looming Y2K crisis, Congress has been debating how to help small businesses cope. Various bills focus not on helping businesses get their computers ready in time but rather on how to avoid a flood of lawsuits filed by consumers suing businesses and businesses suing each other--all seeking compensation for their losses. H.R. 775, for instance, the Year 2000 Readiness and Responsibility Act, seeks to require a 90-day cooling-off period for alternative dispute resolution before a Y2K lawsuit can be filed; eliminate joint- and several-liability; and limit the liability of small businesses to $250,000, or three times the amount of actual damages (whichever is greater, or, for businesses worth less than $500,000, whichever is less.)

It's a sign of the times that in the face of a potential crisis, the primary concern of lawmakers and business groups would be a legal meltdown from a projected $1 trillion in legal claims. The Y2K bug provides only the latest occasion for small-business advocacy groups to push for tort reform and, consequently, fundamental changes to America's civil justice system. Every runaway jury verdict seems to spur another outcry over the need for reform.

One recent verdict concerned an Alabama family who claimed they were overcharged more than $1,100 for each of the two Whirlpool satellite dishes sold door-to-door by a local retailer. Although the Whirlpool Corp. waived the amount in dispute, the jury found that the family had been misled about the credit agreement--and ordered Whirlpool to pay them $975,000 for mental anguish and $581 million in punitive damages.

Lawmakers and business advocates nationwide immediately called for reform, claiming that the tort system has become unfair. Meanwhile, consumer groups and attorneys argue that limiting people's ability to recover damages denies them access to justice.

Steven C. Bahls, dean of Capital University Law School in Columbus, Ohio, teaches entrepreneurship law. Freelance writer Jane Easter Bahls specializes in business and legal topics.

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This article was originally published in the August 1999 print edition of Entrepreneur with the headline: Time For Change?.

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