First published in California Law Business, September 29, 1997, by Alex Chun
Year's Eve 1999. Law firms, anticipating a 'litigation explosion' from the glitch, already have attorneys working on the problem full time.
As essential as computer technology has become to businesses, it was only a matter of time before some expensive technical glitch popped up that would translate into big bucks for law firms.
One such well-publicized glitch is the Year 2000 problem, and one of the attorneys that has taken the lead in dealing with its potential legal ramifications is Vito C. Peraino, a senior partner in the Los Angeles office of San Francisco-based Hancock, Rothert & Bunshoft.
Although he wasn't the first attorney to jump on the issue, Peraino has, in less than a year, managed to position himself as one of the select few who are at the forefront of this burgeoning practice area.
By investing countless non-billable hours into researching, writing and giving presentations - including a speaking engagement before Congress - Peraino has generated a substantial amount of business for himself and for his firm from what could only be characterized as a simple programming error.
The error that Peraino and other Year 2000 lawyers, such as Steven L. Hock of Thelen, Marrin, Johnson & Bridges and Perry J. Viscounty of Sheppard, Mullin, Richter & Hampton, predict will fund legal departments for years to come is caused by computer software programs that are unable to recognize the date change from the year 1999 to the year 2000.
The reason for the problem is that during the early days of computer programming, the convention for calendar dates that was widely utilized was two digits rather than four, with computers assuming the first two digits of any year as 19. As a result, when the calendar changes to the year 2000, computer programs will incorrectly read the year as 1900, causing most date-sensitive calculations to fail.
What that means for the banking industry, for example, is that banks will no longer be able to accurately calculate the interest on depositors' accounts. And more broadly speaking, the entire banking system is tied to all sorts of clearing houses that operate to check and clear transactions and wire transactions that could be jeopardized if they are tied to automated calendar programs.
According to most experts, the programming error is easy to fix once it's identified in the computer code. The difficulty lies in the fact that it's everywhere.
No problem, just fix the code, right? Unfortunately, because of the various computer languages in use, there is no single "silver bullet" solution to the problem, and the solutions that do exist are costly and time consuming.
The Los Angeles Unified School District, for example, is in the process of reviewing 17 million lines of programming code in an effort to eradicate the flaw. The cost to fix the error and to replace outdated equipment that is dependent on the defective programs: $30 million to $52 million.
"It's so expensive that most companies just don't want to deal with it," Peraino said. "They can't believe that such a stupid problem can cost so much money."
On a large scale, Gartner Group Inc., an information technology research firm, has estimated that it will cost between $300 billion to $600 billion to correct the Year 2000 problem worldwide. And those figures don't take into account the current legal cost for counseling or the future cost of potential litigation.
"There's no shortage of work in this area, and a lot of firms see themselves doing this work," noted Thelen Marrin's Hock. "The question is whether they are going to have the technical expertise and background to handle the problem the way they should."
A complex commercial litigator by trade, Peraino is also the chairman of Hancock Rothert's technology committee and the son of a computer programmer. As a result, Peraino had little difficulty redirecting the focus of his practice when he came across the Year 2000 problem serendipitously last year.
At that time, Peraino met a gentleman who was forming a Year 2000 company. That meeting sent Peraino scurrying for the Internet; there he found a huge amount of information regarding the technical aspects of the problem, but at the same time, very little about its legal aspects.
"The thing that struck me is that it had all the hallmarks of catastrophe litigation," said Peraino, who has worked on major pollution and asbestos cases on behalf of insurers such as Lloyd's of London. "It was pervasive, it was expensive and it wasn't being paid attention to."
In response, Peraino began investing his own time, networking, delving through books, attending conferences, and participating in Year 2000 Internet chat groups where he typically would be the only lawyer involved.
"I was able to meet a lot of great people who took the time to educate me and who took me under their wing," Peraino remembered. "A lot of people were interested in what I had to say, and it was just a beautiful example of how the Internet is suppose to work. There was a lot of trading of information in a real constructive way."
Armed with his new-found knowledge, Peraino began to set his sights toward client development. He sat down with the firm's in-house and outside marketing people in order to put together a marketing strategy that focused on certain affected industries. He also wrote close to two dozen articles, which then led to a number of high-profile speaking engagements. One of those speaking engagements occurred this past March when he was invited to testify before the U.S. House of Representatives' Subcommittees on Technology, and Government Management, Information and Technology.
"That was a real kick personally, and it was a real honor," Peraino said. "If felt that I was actually doing some good by raising awareness, and it's been a wonderful credential from a client [development] perspective."
Peraino said the firm has been retained by dozens of clients, including Fortune 500 companies, major insurers and banks, and that he has been receiving five or six inquiries a week, many from people who have heard him speak or who have downloaded and read a Peraino-authored article that made its way onto the Internet.
"[One of the things] I'm learning on this project is the power of the Internet as a client development tool," Peraino said. "We have gotten out of this opportunity two clients that I never spoke to, but who found me through the Internet."
Right now Peraino said that he is leading a team of five attorneys (three full-time equivalents) working on Year 2000 matters, and that he expects that number to double by year's end. And personally, 80 percent of his own practice is now devoted to Year 2000 matters.
"I'd surprised if by the year 2000, [the Year 2000 problem] wasn't 15 to 25 percent of the firm's practice," said Hancock Rothert name partner Barry L. Bunshoft. "Vito just had the foresight to see this as an enormous potential legal problem and the insight to start analyzing the nature of the problem and start working with clients on some solutions."
So far, however, virtually all of the work has been restricted to counseling, which includes reviewing contracts, coordinating with third parties with respect to potential liability, and assessing the cost to fix the problem.
In fact, the only litigation that has been spawned by the insidious computer bug thus far is a Michigan case that was filed in July. That case, Produce Palace International v. TEC-America Corp., involves a retail store computer system that was unable to process credit cards that expire on or after the year 2000.
"I think there will eventually be a substantial amount of litigation," said Sheppard Mullin's Perry Viscounty. "It's just too early right now because many companies haven't suffered a loss yet."
Agreeing with Viscounty is Peraino, who recalled a conference he attended last year that featured a lecture by the woman in charge of IBM's internal Year 2000 project.
"Her advice was that if you didn't have a big project underway, you should forget about trying to change all of your code," Peraino said. "The fact is, most companies are far behind the curve so it looks like there will be a litigation explosion," he added.
"At this point, it's like we're starting the third quarter of a football game, and we're far behind," he added. "Anything could happen, but it doesn't look good."
Hancock Rothert & Bunshoft has formed a Year 2000 Team to assist companies with related legal problems. If you would like more information on Hancock's Year 2000 Team, or on the firm in general, please contact: Vito C. Peraino on Tel: 213-623-7777 or E-mail: Click Contact Link or visit the Hancock Rothert & Bunshoft website at Click Contact Link
Visit the Year 2000 website at Click Contact Link
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Year's Eve 1999. Law firms, anticipating a 'litigation explosion' from the glitch, already have attorneys working on the problem full time.
As essential as computer technology has become to businesses, it was only a matter of time before some expensive technical glitch popped up that would translate into big bucks for law firms.
One such well-publicized glitch is the Year 2000 problem, and one of the attorneys that has taken the lead in dealing with its potential legal ramifications is Vito C. Peraino, a senior partner in the Los Angeles office of San Francisco-based Hancock, Rothert & Bunshoft.
Although he wasn't the first attorney to jump on the issue, Peraino has, in less than a year, managed to position himself as one of the select few who are at the forefront of this burgeoning practice area.
By investing countless non-billable hours into researching, writing and giving presentations - including a speaking engagement before Congress - Peraino has generated a substantial amount of business for himself and for his firm from what could only be characterized as a simple programming error.
The error that Peraino and other Year 2000 lawyers, such as Steven L. Hock of Thelen, Marrin, Johnson & Bridges and Perry J. Viscounty of Sheppard, Mullin, Richter & Hampton, predict will fund legal departments for years to come is caused by computer software programs that are unable to recognize the date change from the year 1999 to the year 2000.
The reason for the problem is that during the early days of computer programming, the convention for calendar dates that was widely utilized was two digits rather than four, with computers assuming the first two digits of any year as 19. As a result, when the calendar changes to the year 2000, computer programs will incorrectly read the year as 1900, causing most date-sensitive calculations to fail.
What that means for the banking industry, for example, is that banks will no longer be able to accurately calculate the interest on depositors' accounts. And more broadly speaking, the entire banking system is tied to all sorts of clearing houses that operate to check and clear transactions and wire transactions that could be jeopardized if they are tied to automated calendar programs.
According to most experts, the programming error is easy to fix once it's identified in the computer code. The difficulty lies in the fact that it's everywhere.
No problem, just fix the code, right? Unfortunately, because of the various computer languages in use, there is no single "silver bullet" solution to the problem, and the solutions that do exist are costly and time consuming.
The Los Angeles Unified School District, for example, is in the process of reviewing 17 million lines of programming code in an effort to eradicate the flaw. The cost to fix the error and to replace outdated equipment that is dependent on the defective programs: $30 million to $52 million.
"It's so expensive that most companies just don't want to deal with it," Peraino said. "They can't believe that such a stupid problem can cost so much money."
On a large scale, Gartner Group Inc., an information technology research firm, has estimated that it will cost between $300 billion to $600 billion to correct the Year 2000 problem worldwide. And those figures don't take into account the current legal cost for counseling or the future cost of potential litigation.
"There's no shortage of work in this area, and a lot of firms see themselves doing this work," noted Thelen Marrin's Hock. "The question is whether they are going to have the technical expertise and background to handle the problem the way they should."
A complex commercial litigator by trade, Peraino is also the chairman of Hancock Rothert's technology committee and the son of a computer programmer. As a result, Peraino had little difficulty redirecting the focus of his practice when he came across the Year 2000 problem serendipitously last year.
At that time, Peraino met a gentleman who was forming a Year 2000 company. That meeting sent Peraino scurrying for the Internet; there he found a huge amount of information regarding the technical aspects of the problem, but at the same time, very little about its legal aspects.
"The thing that struck me is that it had all the hallmarks of catastrophe litigation," said Peraino, who has worked on major pollution and asbestos cases on behalf of insurers such as Lloyd's of London. "It was pervasive, it was expensive and it wasn't being paid attention to."
In response, Peraino began investing his own time, networking, delving through books, attending conferences, and participating in Year 2000 Internet chat groups where he typically would be the only lawyer involved.
"I was able to meet a lot of great people who took the time to educate me and who took me under their wing," Peraino remembered. "A lot of people were interested in what I had to say, and it was just a beautiful example of how the Internet is suppose to work. There was a lot of trading of information in a real constructive way."
Armed with his new-found knowledge, Peraino began to set his sights toward client development. He sat down with the firm's in-house and outside marketing people in order to put together a marketing strategy that focused on certain affected industries. He also wrote close to two dozen articles, which then led to a number of high-profile speaking engagements. One of those speaking engagements occurred this past March when he was invited to testify before the U.S. House of Representatives' Subcommittees on Technology, and Government Management, Information and Technology.
"That was a real kick personally, and it was a real honor," Peraino said. "If felt that I was actually doing some good by raising awareness, and it's been a wonderful credential from a client [development] perspective."
Peraino said the firm has been retained by dozens of clients, including Fortune 500 companies, major insurers and banks, and that he has been receiving five or six inquiries a week, many from people who have heard him speak or who have downloaded and read a Peraino-authored article that made its way onto the Internet.
"[One of the things] I'm learning on this project is the power of the Internet as a client development tool," Peraino said. "We have gotten out of this opportunity two clients that I never spoke to, but who found me through the Internet."
Right now Peraino said that he is leading a team of five attorneys (three full-time equivalents) working on Year 2000 matters, and that he expects that number to double by year's end. And personally, 80 percent of his own practice is now devoted to Year 2000 matters.
"I'd surprised if by the year 2000, [the Year 2000 problem] wasn't 15 to 25 percent of the firm's practice," said Hancock Rothert name partner Barry L. Bunshoft. "Vito just had the foresight to see this as an enormous potential legal problem and the insight to start analyzing the nature of the problem and start working with clients on some solutions."
So far, however, virtually all of the work has been restricted to counseling, which includes reviewing contracts, coordinating with third parties with respect to potential liability, and assessing the cost to fix the problem.
In fact, the only litigation that has been spawned by the insidious computer bug thus far is a Michigan case that was filed in July. That case, Produce Palace International v. TEC-America Corp., involves a retail store computer system that was unable to process credit cards that expire on or after the year 2000.
"I think there will eventually be a substantial amount of litigation," said Sheppard Mullin's Perry Viscounty. "It's just too early right now because many companies haven't suffered a loss yet."
Agreeing with Viscounty is Peraino, who recalled a conference he attended last year that featured a lecture by the woman in charge of IBM's internal Year 2000 project.
"Her advice was that if you didn't have a big project underway, you should forget about trying to change all of your code," Peraino said. "The fact is, most companies are far behind the curve so it looks like there will be a litigation explosion," he added.
"At this point, it's like we're starting the third quarter of a football game, and we're far behind," he added. "Anything could happen, but it doesn't look good."
Hancock Rothert & Bunshoft has formed a Year 2000 Team to assist companies with related legal problems. If you would like more information on Hancock's Year 2000 Team, or on the firm in general, please contact: Vito C. Peraino on Tel: 213-623-7777 or E-mail: Click Contact Link or visit the Hancock Rothert & Bunshoft website at Click Contact Link
Visit the Year 2000 website at Click Contact Link
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
