Cases

Software Failure Experts

Jeff Parmet and Associates specializes in information technology disputes involving software failure, intellectual property, computer forensics, and the Internet. We apply our years of information technology experience to the investigation, analysis and reporting of findings and opinions in disputes and investigations involving computers, data or software to help our clients address the complex technical issues needed to cost-effectively resolve such disputes. We serve our clients as consulting or testifying experts, as required. Attorneys and IT managers requiring expert assistance in the areas of computer failure, intellectual property, computer forensics, and the Internet are invited to contact Jeff Parmet and Associates for a private consultation.

Following are several illustrative cases that will be of interest to you. Litigation consultants from Jeff Parmet and Associates were not involved in offering testimony in any of these cases.

Software Failure

Triple Point Technology, Inc. v. Transammonia, Inc.

NY Supreme Ct., NY County, Index No. 603950/2001, July 2002 (Cahn, J.H.) - In a software failure action brought by software developer Triple Point against commodity-trading company Transammonia for recovery of unpaid fees for services under a consulting agreement, plaintiff moved to dismiss defendant's six counterclaims. Plaintiff and defendant had entered into:

• a software-license agreement for plaintiff's commodity-trading software;
• a consulting agreement in which plaintiff would develop interfaces to defendant's PeopleSoft accounting software; and
• a maintenance agreement (not central to the action).

The court dismissed defendant's first counterclaim for breach of the software-license agreement, notwithstanding significant alleged deficiencies in the software, finding that the license agreement provides that the software was sold "as is."

The court refused, however, plaintiff's motion to dismiss defendant's second through sixth counterclaims for breach of the consulting agreement, fraudulent inducement, common-law fraud, negligent misrepresentation and recession. The court's refusal is based on defendant's allegations that plaintiff had:

• failed to deliver five of the six promised interfaces;
• falsely represented in response to defendant's RFP that it had the capability of developing the interfaces, that it had already successfully developed such interfaces for another client and that defendant relied on such representations;
• appeared to hold specialized skill and expertise with respect to its ability to develop the interfaces.

Click here to retrieve entire opinion.

Electronic Discovery

Zubulake v. UBS Warburg LLC, 2003 WL 21087136

(S.D.N.Y. May 13, 2003) - Cost-shifting criteria modified. Respondent bears cost of producing electronic records that are "accessible," which the court defines as a) active, online data - usually stored on hard drives; b) near-line data, which includes removable media retrievable by robotic devices; and c) offline storage/archives, including removable backups that are easily restored and readily searchable.

For "inaccessible" electronic records, which the court defines as those archived on difficult-to-restore backup tapes, as well as erased, fragmented or damaged files requiring extensive recovery efforts, a small sample must first be taken and put to a more traditional "undue burden" test (i.e., cost-benefit analysis) before a determination on cost shifting can be made. The court relies, with several modifications, on the "gold standard" cost-shifting criteria of Rowe Entertainment, Inc. v. William Morris Agency, Inc., 205 F.R.D. 421, 429 (S.D.N.Y. 2003).

Click here to retrieve entire opinion.

Data Loss

Transport Corporation of America, Inc. v. International Business Machines Corporation, Inc. and Innovative Computing Corporation United States Court of Appeals for the Eighth Circuit, 30 F.3d 953; July 21, 1994 (Honorable James Rosenbaum, District Judge) - The Court of Appeals had to consider whether International Business Machines Corporation, Inc. (IBM) and Innovative Computing Corporation (ICC) were responsible for damages resulting from loss of data caused by the failure of a disk drive. Transport Corporation of America (TCA) entered into an agreement with ICC to purchase an IBM computer system for $541,313.38. Nearly one year after installation of the new computer system, the system went down due to failure of one of the disk drives. TCA alleged that the cumulative downtime for the computer was 33.91 hours and that it incurred a business-interruption loss of $473,079.46, $4,565.00 of which was for loss of data and replacement media. TCA alleged strict liability, negligence, breach of implied warranty and breach of express warranty. Applying Minnesota law, the district court held that the economic loss doctrine barred TCA's tort claims, the terms of IBM's remarketer agreement with ICC "passed through" to TCA and IBM effectively disclaimed implied warranties, and ICC's disclaimer of liability for consequential damages was not unconscionable.

TCA appealed, arguing that, under Minnesota law, tort claims were not barred by the economic-loss doctrine if two conditions were met:

• there is damage to "other property" and
• the parties are not "merchants in goods of the kind.

IBM argued that:

• TCA did not suffer damage to "other property," because the data on the disk drive was integrated into the computer system, and
• the risk of failure of the disk drive was contemplated by TCA as evidenced by the fact they backed up their data every day at 2:00 a.m.

As stated in the appellate opinion, "there are two issues in applying this doctrine to TCA's claim: whether the damages arose out of a commercial transaction and whether the damages claimed fall under the 'damages to other property' exception."

The court decided the transaction between TCA and ICC / IBM could not be considered a commercial transaction, for purposes of the economic-loss doctrine, because TCA does not sell computers and thus is not a merchant in goods of the kind. Still the court held that the economic-loss doctrine does apply because TCA did not experience damage to "other property." Referencing Minneapolis Society of Fine Arts v. Parker-Klein Assocs. Architects, Inc., 354 N.W.2d 816, 820 (Minn. 1984) "where a defect in a component part damaged the product into which that component was incorporated, economic losses to the product as a whole were not losses to 'other property.'"

Affirming the judgment of the district court, the US Court of Appeals concluded that because "failure of the disk drive was contemplated by the parties and the damage was limited in scope to the computer system (into which the disk drive and its data were integrated), TCA must look exclusively to the U.C.C. [Uniform Commercial Code] for its remedy." Therefore TCA was not entitled to consequential damages resulting from loss of business or loss of data caused by the failure of the disk drive.

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