Andersen, J. Baker settle Y2K suits
Andersen Consulting and apparel retailer J. Baker avoid a court battle by settling one of the industry's first Year 2000 contract disputes.
The settlement, announced today after both companies reviewed an evaluation by a court mediator, bodes well for other consultants as it could play a role in setting legal precedent that could protect them from exposure to billions of dollars in liability.
John F. Cooney, an attorney with Venable law firm in Washington, D.C., which has specialists in Year 2K litigation, was awaiting the outcome of this case, as well as the lawsuit against Macola Software.
A judge today ruled to dismiss the case against Macola, stating that the company fulfilled its warranty and contractual obligations to its customers in connection with Year 2000 compliance and its Progression Series Software 6.0.
Cooney said that, individually, the cases do not set precedent. But they could be very important in predicting the direction of future cases. "It's still a little early to talk about precedent," he said of both cases. "But these cases will be very carefully watched."
"The main lesson business lawyers will learn [from these cases] is that the courts are upholding contracts in Year 2000 litigation," Cooney said. "If people understand that that's the rules of the game you won't see as many lawsuits pertaining to the year 2000."
Cooney said systems integrators and companies that provide maintenance services are most exposed to lawsuits, as they tend to draft broader promises to customers.
"They'll say, 'We guarantee the software will run for the next five years' and they may not make a Year 2000 specific reference but the court could say, 'you're responsible because you guaranteed this,'" Cooney said. "The company may not have been as careful as they should have been in limiting their warranty."
Under terms of the resolution, J. Baker dropped its claim against Andersen Consulting. In turn, Andersen dropped its lawsuit against J. Baker.
"We're extremely pleased with the outcome and the clear message this case sends in the Year 2000 issue," said Andersen spokesman Eric Jackson. "We hope this sends a clear signal to the industry and legal community."
J. Baker spokesman Mark Beaulouin said the company was also satisfied with the outcome.
"I highly recommend mediation" as a way to settle contract disputes, Beaulouin said. "It was a great way to clarify the issues. We had always believed the contract [with Andersen] was a valid contract. It was a question of the scope of the contract. After the mediation, we were satisfied that the scope of the contract did not include the Year 2000 issues."
Similar mediation efforts are being employed worldwide as companies try to avoid paying hefty court costs relating to Y2K litigation. Some estimates pin the potential cost of litigation surrounding the Year 2000 technology glitch as high as $1 trillion.
In this case, J. Baker was seeking reimbursement for the cost to fix a computer system that Andersen Consulting ordered nearly ten years ago, alleging the system should have been Year 2000 compliant. In June 1998, J. Baker, which owns the Casual Male Big and Tall chain, threatened to sue Andersen.
After unsuccessfully trying to resolve the matter with J. Baker out of court, Andersen filed a lawsuit in Massachusetts State Superior Court against the company, asking the court to resolve the matter. Andersen said its contract with J. Baker did not require Andersen to address Year 2000 issues.
Both sides agreed to ask a mediator to settle the dispute. Under terms of the settlement, Andersen will not pay J. Baker a reimbursement.
Jackson said the ruling proves that "contracts matter and contracts mean what they say."
In recent months, organizations throughout the computer industry have worked to try to prevent an expected onslaught of Year 2000 legal spates. Legal bodies in the United States, the United Kingdom, Australia, Singapore, and Hong Kong have recently teamed up to form an initiative called the Millennium Accord, which is a set of principles and procedures for resolving Y2K grievances between companies and their customers or business partners.
Problems are expected to occur in the year 2000 because many older computer systems record dates using only the last two digits of the year. If left uncorrected, such systems could treat the year 2000 as the year 1900, generating errors or system crashes.