§6604 Punitive damages limitations

Summary

In Y2K lawsuits, a person or company being sued cannot be ordered to pay punitive damages unless the person suing proves by clear and convincing evidence that the legal test for such damages has been met. For smaller defendants, punitive awards that are allowed by law are capped at the lesser of three times the compensatory damages or $250,000. A “smaller” defendant means a person sued as an individual with net worth of $500,000 or less, or a business or other organization with fewer than 50 full‑time employees. The cap does not apply if the plaintiff proves by clear and convincing evidence that the defendant intended to harm the plaintiff. Punitive damages cannot be awarded against a government entity. They also generally cannot be awarded against an institution of higher education (as defined in federal law), except when the Y2K failure happened in the school’s computer‑based student financial aid system and the school either had passed Department of Education Y2K data exchange testing or was not in the process of such testing when the Department stopped testing.