Lawsuit focuses on Y2K upgrades

In the first class-action suit regarding a Year 2000 bug, a computer hardware company claims a software company failed to provide free year 2000 compliance upgrades.

3 min read
In the first class-action suit regarding a Year 2000 bug, a New York-based computer hardware company has filed a lawsuit in California state court claiming a database accounting software company failed to provide free year 2000 compliance upgrades.

Atlaz International filed the suit yesterday in Marin County Superior Court charging Software Business Technologies and its subsidiary, SBT Accounting Systems, with breach of warranty, fraud, and fraudulent and unfair business practices. The claim seeks compensation and relief, including $50 million for legal and other fees, according to lawyers in the case.

The Inwood, New York-based private company initiated the suit on behalf of all users of SBT products suffering the same plight, according to the complaint.

Atlaz alleges SBT is improperly requiring customers to pay substantial fees to purchase upgrades in order to fix Y2K bugged software in contrast to other software companies which are correcting such problems for free.

However, Dean Morehous, a lawyer with Thelen Marrin Johnson & Bridges, the firm representing SBT, said his client claims the suit is a retaliatory move in response to a suit SBT filed against Atlaz earlier this month for breach of a reseller license agreement.

Atlaz purchased SBT's Pro Series Software at a discount rate for resellers in 1994 with the understanding it would bundle the software with computers it sold. But lawyers representing SBT said that wasn't done, and no software was sold.

In the suit, Atlaz claims versions of SBT's Set Pro Series software sold prior to March 1997 do not recognize dates after 2000. Suffering from the so-called millennium bug, the software assumes the date is 1901 and 1902, rather than 2001 and 2002, when it comes across dates ending in 01 or 02.

Atlaz bought 300,000 copies of SBT's Set Pro Series module, priced at $500 each, which it claims are not year 2000-compliant. Among other damages, Atlaz wants to be compensated for that amount, said Michael Spencer, a lawyer with the New York law firm Milberg Weiss Bershad Hynes & Lerach, which is representing Atlaz.

Spencer said his firm was not aware of any suit filed by SBT against Atlaz before yesterday's class-action suit.

In 1998, SBT plans to offer a free patch that will be year 2000 compliant to all users of its Pro Series accounting software, regardless of what version the customer has, Morehous said.

"SBT's latest version of Pro Series is compliant, but they will not offer it for free because it also contains other bells and whistles beyond the year 2000 compliance," he said.

Morehous, who speaks at year 2000 conferences and has written articles on the issue, said the nature of this suit is unique. It is the first time a suit has been filed by a group of users against one vendor over the Year 2000 bug. "It should be a concern for vendors because it is not one customer--it is a class of users. It should be a wake up call for vendors. We consider it a very important case."

He said it is different than the Detroit-area produce supplier that filed suit last August against its computer vendor because its cash registers couldn't handle sales billed to credit cards expiring in the year 2000. That case is still in court, according to lawyers in the case.

The Year 2000 problem, or the millennium bug, boils down to this: Many computer systems use software which only uses the last two numbers of the year, such as 97, instead of 1997, to track dates. So when 00 comes up for the year 2000, computers will view it as 1900 instead, causing widespread problems.

Patches and upgrades to new systems are fine for businesses with packaged software, but for much of the older, custom software on mainframes and "hard-coded" software resident in cash registers and other systems, diagnoses and solutions will prove much more troublesome and costly.

That's why legal experts say additional Year 2000 bug-related suits are sure to follow.