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PEERLESS WALL AND WINDOW COVERINGS v. SYNCHRONICS
February 25, 2000
PEERLESS WALL AND WINDOW COVERINGS, INC., PLAINTIFF,
SYNCHRONICS, INC., A TENNESSEE CORPORATION, DEFENDANT.
The opinion of the court was delivered by: D. Brooks Smith, District Judge.
MEMORANDUM OPINION AND ORDER
This case is a putative class action involving the so-called
"Y2K problem"*fn1 in a massmarketed business software package.
Plaintiff has filed this suit alleging breach of contract,
express and implied warranties, fraud and negligent
misrepresentation. Presently before the court is defendant's
motion for summary judgment, dkt. no. 51.*fn2 For the following
reasons, I will grant the motion and enter summary judgment for
The facts are undisputed. Plaintiff Peerless Wall & Window
Coverings, Inc. is a small, Pittsburgh-based retail business
owned and operated by Michael Lando, an experienced,
Harvard-educated lawyer currently practicing law as a nonequity
partner in one of the city's major firms, and his wife, Fran
Lando, who handles the day-to-day operations of the business.
Dkt. no. 54, exh. 2, at 4, 8, 12. In late 1993, Peerless wished
to acquire computer software that would run the cash registers in
its several stores, manage inventory and link the stores together
electronically. It sought proposals from two local concerns,
Alpern Rosenthal Consulting and Roth Computer Register Company;
both recommended "Point of Sale V6.5" software produced by
defendant, Synchronics, Inc. Id. at 161. Plaintiffs were given
sales literature prepared by Synchronics about its Point of Sale
software. This literature contained a number of representations,
With SYNCHRONICS Point of Sale and related software,
you'll stay up-to-date. Every minute. Every day.
Automatically. It's that simple.
Synchronics introduced point-of-sale software for
retailers in 1986. Since then, SYNCHRONICS Point of
Sale has been installed in more than 15,000
businesses worldwide. And this number is growing
Best of all, you can tailor SYNCHRONICS software to
meet your specific needs. And it will continue to
meet those needs as you increase sales, expand your
business or add locations.
Dkt. no. 56, exh. A (Goldstein dep. exh. 2, at PL0338).
Roth's proposal was significantly less expensive, and, cost
being the major concern of Peerless, it retained Roth to procure
a package of hardware and Synchronics "Point of Sale V6.5"
software to run in
Peerless' PC-DOS environment. Dkt. no. 54, exh. 2, PL0244-46. No
one from Peerless had any contact with Synchronics in making this
decision. Dkt. no. 54, exh. 2, at 123-24. Moreover, at the time
of the purchase, plaintiff had no knowledge that the "year 2000
problem" even existed, much less expressed any desire that the
software it acquired be Y2K-compliant. Id. at 83-87, 210-11.
For that matter, there is no evidence on this record that
Y2K-compliant software for plaintiff's application was
commercially available. Id. at 83-87, 134.
Defendant Synchronics is also a small, closely-held
corporation. Based in Tennessee, it develops and markets business
applications software. Dkt. no. 54, exh. 1 (Goldstein aff.). It
is owned and operated by Jeff Goldstein, and it employs about
fifty people. Id. At the time Peerless was in the market for
software, Synchronics was acting as a value-added reseller for
the predecessor of RealWorld Corporation. Id. As such,
Synchronics would take more-or-less generic RealWorld
applications software and customize certain enhancements for
particularized "niche" applications like those of plaintiff.
Id. To accomplish this, Synchronics was required to obtain the
RealWorld source code written in the COBOL programming language
and write its own software that interfaced with the RealWorld
code. Accordingly, Synchronics was forced to use data formats
that were compatible with those already programmed by RealWorld,
and thus the Point of Sale software, the earliest version of
which was first released in 1986, followed this practice. Id.;
dkt. no. 56, exh. A at 26, 29, 32, 35.
RealWorld software at that time used only a two-digit year
field, storing only the last two digits and ignoring those
representing the century and millennium. Thus, 1999 would be
stored as "99," 2000 as "00" and 2001 as "01." Unfortunately,
this meant that when the twentieth century ended, all subsequent
dates would be interpreted essentially as falling in the early
part of that century, meaning that 2001 would be mistaken for
1901. See dkt. no. 56, exh. A at 65. Nevertheless, this was a
commonly used programming convention, dating from the early years
of computing when memory was orders of magnitude more expensive
than it is today, and persons involved in data processing
generally ignored the fact that the convention that saved money
then would wreak havoc later.*fn3 In any event, Synchronics was
forced by the design of the RealWorld software to emulate its
two-digit year storage rather than employ a four-digit year
field, which no doubt would have been the better practice. As a
result, the Point of Sale V6.5 software that plaintiff acquired
from it in 1994 was not Y2K compliant.
Meanwhile, Synchronics was concerned that RealWorld, for
reasons unrelated to any issue in this case, would stop licensing
source code to it and essentially cut the rug out from under what
had become a profitable business for Synchronics. Indeed, this
concern would be realized at the end of 1995 when RealWorld
terminated Synchronics' license. Dkt. no. 54, exh. 1, at 3.
Synchronics therefore embarked in December 1993 upon a campaign
to develop its own software from scratch that would compete
against the RealWorld offerings. Dkt. no. 56, exh. A at 61. At
that point, Synchronics was no longer constrained by the
compatibility issues that had previously forced it to use
two-digit year fields, and, aware of the Y2K date rollover
problem, decided to use four-digit fields instead and make the
software Y2K-compliant. Id. at 62, 75. In addition, it designed
its new software packages to run under Microsoft Windows instead
This new offering was named Counterpoint, dkt. no. 56, exh. A at
61, and went to market in December 1995, id. at 75. At the end
of that year, with the RealWorld license terminated and without
further lawful access to the source code, Synchronics stopped
supporting Point of Sale V6.5.
The Point of Sale V6.5 software was licensed pursuant to a
"shrink-wrap" agreement printed on and occupying substantially
all of both sides of the sealed envelopes containing the
diskettes; this license, by its terms, indicated that opening the
envelope would act as an acceptance. In pertinent part, it read
(formatting slightly altered from original):
You should carefully read the following terms and conditions
before opening this diskette envelope. Opening this envelope
indicates your acceptance of these terms and conditions. If you
do not agree with the license below, do not open this envelope.
Return the entire package to your supplier for a refund.
If you accept the terms and conditions below,
complete the Software Registration Information card
found in your User Manual. . . .
LIMITED WARRANTY ON DISKETTES AND USER MANUAL
Synchronics warrants the diskettes and User Manual to
be free from defects in materials and workmanship
under normal use for 90 days after the date of
original purchase. If during this period you discover
a defect in the diskette(s) or User Manual you may
return it to your supplier for a free replacement.
This is your sole remedy in the event of such
No Synchronics Distributor or Dealer is authorized to
make any modification, extension, or addition to this
warranty on behalf of Synchronics or its Licensors.
All implied warranties on the documentation and
diskettes, including implied warranties of
merchantability and fitness for a particular purpose,
are limited in duration to 90 days from the date of
the original purchase. . . .
LIMITATIONS ON WARRANTY AND LIABILITY
Except as expressly provided above for diskettes and
user manual(s), Synchronics, its Licensors,
Distributors, and Dealers make no warranties, either
express or implied, with respect to the Software, its
merchantability, or its fitness for any particular
purpose. The Software is licensed solely on an "as
The entire risk as to the quality and performance of
the Software is with you. Should the Software prove
defective, you assume the entire cost of all
necessary servicing, repair or correction, and any
incidental or consequential damages. In no event will
Synchronics, its Licensors, Distributors, or Dealers
be liable for any damages, including loss of data,
loss of profits, or direct, indirect, incidental,
special, or consequential damages resulting from any
defect in the software, even if they have been
advised of the possibility of such damage.
This license is effective for the useful life of the
software. . . .
C. This is the complete and exclusive statement of
the agreement between you and Synchronics, and this
Agreement supersedes any prior agreements or
understanding, oral or written, with respect to the
subject matter of this agreement.
Synchronics makes no warranties or representations
with respect to the information contained herein; and
Synchronics shall not be liable for damages resulting
from any errors or omissions herein or from the use
of the information contained in this manual.
Dkt. no. 54, exh. 2, dep. exh. 6 at PL1272. Although no Peerless
employee opened any of the diskette envelopes because the
software installation was performed by Roth, Fran Lando did sign
and mail to Synchronics a software registration form in which she
acknowledged that she read and understood the above agreement ...