Y2K lawsuit could cost AT&T and Lucent $1-billion

Suit claims telecom giants knew phone systems 'defective'

By SANDRA RUBIN The Financial Post

NEW YORK -- AT&T Corp. and Lucent Technologies Inc. have been hit with a massive Y2K class action suit that could leave the U.S. telecommunications giants on the hook for more than $1-billion in damages.

The lawsuit, brought on behalf of anyone who bought mid-size office telephone systems that are not Y2K compliant, could turn out to be one of the largest filed in connection with the millennium bug.

The complaint, filed yesterday in New Jersey state court, alleges AT&T and Lucent sold defective systems up to late 1997 knowing they would work only until Dec. 31, 1999.

"Many customers purchased and used the telecommunications products without knowing at the time of purchase that the products contained the Year 2000 defect which will, on or about Jan. 1, 2000, render these products inoperable, ineffective and obsolete before the end of their useful lives," says the complaint.

It's believed tens of thousands of purchasers could be involved in the bid for compensation.

"Buyers bought this product, that they thought would be good forever -- and now we're looking at some sort of Armageddon where we press a button and everything goes 'bang' " said Russel Beatie of Beatie & Osborne LLP, the New York law firm that launched the class action.

"At some point, these systems will be forced to use 2000 data and they will crash and burn, bringing down everything connected to it -- client data and such. And after it crashes the whole thing will lock down, meaning you won't be able to do even non-Y2K business."

The suit covers 30 of A&T and Lucent's small to mid-sized components and systems including the AUDIX and Merlin voice messaging systems and the DEFINITY wireless system.

A similar suit is being considered for Canada.

The complaint says AT&T and Lucent realized in the mid-1980s they were dealing with a time bomb, yet did nothing to diffuse it, even though they knew how.

"The Y2K problem has arisen because companies like Lucent and AT&T programmed computers and software over the past few decades using only two-digit date fields, rather than four-digit date fields, for the year," the suit alleges.

Lucent said it expects to defeat the court challenge.

"We have the complaint and we're reviewing it," spokeswoman Lynn Newman said from Murray Hill, N.J. "We believe the case is without merit and we expect to prevail."

She said Lucent -- a former AT&T subsidiary transformed into a stand alone company in 1996 -- has promised customers all systems bought after Sept. 30, 1996 are Y2K compliant or will be made so at the company's expense.

AT&T declined to comment.

"I haven't seen a copy of the complaint, but our corporate policy is we do not comment on legal matters in progress," spokesman David Johnson said from Bedminster, N.J.

Mr. Beatie, whose firm has filed a parallel lawsuit in New York, said customers buying smaller office systems, in the $10,000-$25,000 range (all figures in U.S. dollars), have been especially vulnerable to the Y2K problem because they usually don't have the specialized personnel to do extensive technical research.

He said his midtown Manhattan firm bought a $25,000 phone system about five years ago "and expected we'd be able to use it more or less forever, as long as we were willing to use an antique."

He said AT&T can replace the key part of the phone system for about $10,000 -- but he has balked at being forced to pay again. And the companies may know how to fix the problem, but it's highly questionable whether they have sufficent manpower to deal with it on a national scale, he said.

"We don't believe they have adequate field staff to deal with the systems when they all go blooey later this year," he said.

"So you risk your business being shut down unless you fix, or replace, it.

"And these guys were the only game in town. If you wanted a telephone system, you had to buy their defective system whether you wanted to or not."

http://www.canoe.ca/FP/jan30_y2ksuit.html

-- a (a@a.a), February 01, 1999

Answers

GREAT ARTICLE, a. Thank you for the post.

jeannie

-- jhollander (hollander@ij.net), February 01, 1999.