Wade Gin, 810 S.W.2d 140, 143 n. 4 (Tenn. 1991); Central
Transp., Inc. v. Board of Assessment Appeals, 490 Pa. 486,
417 A.2d 144, 149 (1980); Black's Law Dictionary 296 (5th ed.
1979), is also misplaced.
Accordingly, I will dismiss all of plaintiff's contract and
Plaintiff bases its fraud and negligent misrepresentation
claims upon the statements recited supra from the sales
literature, and upon the implication given by the user manual
that the software could recognize and accurately process dates
after 1999. These claims also fail.
1. The Integration Clause
Initially, I must draw a distinction between fraud in the
execution and fraud in the inducement. "Fraud in the execution
applies to situations where parties agree to include certain
terms in an agreement, but such terms are not included. Thus, the
defrauded party is mistaken as to the contents of the physical
document that it is signing." Dayhoff, Inc. v. H.J. Heinz Co.,
86 F.3d 1287, 1300 (3d Cir. 1996). That is not the situation
here. Rather, this is a case of alleged fraud in the inducement,
which involves "allegations of . . . representations on which the
other party relied in entering into the agreement but which are
contrary to the express terms of the agreement." Id.
Under Pennsylvania law, parol representations that contradict
the express language of a fully integrated contract are
admissible only to show fraud in the execution, not fraud in the
inducement. Sunquest, 40 F. Supp.2d at 653-56;*fn14 accord
Quorum Health Resources, Inc. v. Carbon-Schuylkill Comm. Hosp.,
Inc., 49 F. Supp.2d 430, 432 (E.D.Pa. 1999); Montgomery County
v. Microvote Corp., No. 97-6331, 2000 WL 134708, *7 (E.D.Pa.
Feb.3, 2000); Armstrong World Indus., Inc. v. Robert Levin
Carpet Co., No. 98-5884, 1999 WL 387329, *5 (E.D.Pa. May 20,
1999). Tennessee appears to have a similar rule, dating back at
least three-quarters of a century. See Litterer v. Wright,
151 Tenn. 210, 268 S.W. 624, 624 (1925); accord United Nat'l Real
Estate, Inc. v. Thompson, No. 01-A-01-9108-CV00269 2633, 1992 WL
69642, *4, *9 (Tenn.Ct.App. Apr.8, 1992) (unpublished)
(discussing Litterer); Lowe v. Gulf Coast Dev., Inc., No.
01-A-019010CH00374 7490, 1991 WL 220576, *6 (Tenn.Ct.App. Nov.1,
1991) (recognizing that, while fraud in the inducement is an
exception to the parol evidence rule, "parties cannot use parol
evidence to vary the terms of a written contract"). Cf. Godwin
Aircraft, Inc. v. Houston, 851 S.W.2d 816, 821-22 (Tenn.Ct. App.
1992) (fraud claim premised on representation of airworthiness
permitted despite contract language that aircraft sold "as is,
where is," but without integration clause); Glanski v. Ervine,
269 Pa. Super. 182, 409 A.2d 425, 429 n. 4 (1979) (similar,
residential real estate). The Litterer court expressed the rule
Parol proof of inducing representations to the making
of a contract must be limited to matters not
otherwise plainly expressed in the writing. . . . The
fundamental distinction should be kept clearly in
mind between the denied right to contradict the terms
of the writing, and the recognized right without so
doing to resist recovery thereon, or to rely upon
matters unexpressed therein. The ultimate test is
that of contradiction, which is never permissible.
268 S.W. at 624. Thus, I conclude that plaintiff's fraud claim,
to the extent it is based upon affirmative misrepresentations, is
barred by the integration clause as contrary to the express terms
of the license agreement, in the same manner as the contract and
warranty claims. See Sunquest, 40 F. Supp.2d at 656 (dismissing
fraud in the inducement claim as contrary to integrated
Even if the integration clause did not bar plaintiff's fraud
claims, the representations in the sales literature would still
not be actionable. As stated supra, they make no specific
promises concerning the expected useful life of the software or
its ability to process dates after 1999. At most, these are
statements of puffery — "exaggeration or overstatement expressed
in broad, vague and commendatory language" — not examples of
actionable fraud. See Castrol, Inc. v. Pennzoil Co.,
987 F.2d 939, 945 (3d Cir. 1993). Such statements of the sellers opinion
are merely "sales talk" and should be recognized as such by a
reasonable buyer and appropriately discounted, not stretched into
the basis for a class action lawsuit. See id.; Step-Saver Data
Sys., Inc. v. Wyse Technology, 752 F. Supp. 181, 190 (E.D.Pa.
1990), rev'd in part on other grounds, 939 F.2d 91 (3d Cir.
1991);*fn15 Forbis v. Reilly, 684 F. Supp. 1317, 1321-22
(W.D.Pa.), aff'd mem., 862 F.2d 307 (3d Cir. 1988); Huddleston
v. Infertility Ctr., Inc., 700 A.2d 453, 461 (Pa.Super. 1997);
Klages v. General Ordnance Equip. Corp., 240 Pa. Super. 356,
367 A.2d 304, 310-11 (1976). Cf. Garrett v. Mazda Motors,
844 S.W.2d 178, 181 (Tenn. Ct.App. 1992) (statement that automobile
had been "babied to death" "cross[ed] over the line between
`puffing' or `sales talk' and actual misrepresentation" when "the
car had been stolen and driven 10,000 miles by a thief").
Nor can the implication created by the date examples in the
user manual be considered an express representation. It too is
vague, stating only that the user can enter a date after 1999 and
perhaps that the software will correctly display it in MMDDYY
format on a video display or printed report. It does not
promise that the software will process the date correctly with
respect to other dates. Plaintiff's fraud claim based upon the
user manual is better characterized as an omission claim that
defendant should have disclosed that the software, while
accepting these dates, would not process them accurately.
"It is axiomatic, of course, that silence cannot amount to
fraud in the absence of a duty to speak." Sunquest, 40
F. Supp.2d at 656; accord Duquesne Light Co. v. Westinghouse
Elec. Corp., 66 F.3d 604, 611-12 (3d Cir. 1995); In re Estate
of Evasew, 526 Pa. 98, 584 A.2d 910, 913 (1990); Sevin v.
Kelshaw, 417 Pa. Super. 1, 611 A.2d 1232, 1236 (1992); Patton v.
McHone, 822 S.W.2d 608, 614 (Tenn.Ct. App. 1991). Such a duty
does not arise without a confidential or fiduciary relationship
between the parties generally; in a typical arms-length business
relationship, absent one party's surrender of substantial control
of his affairs to the other, there is no duty to disclose.
Sunquest, 40 F. Supp.2d at 656 (quoting Drapeau v. Joy Tech.,
Inc., 447 Pa. Super. 560, 670 A.2d 165, 172 (1996) (Beck, J.,
concurring)). In fact, "there is virtually no Pennsylvania case
in which a defendant has been held to have a duty to speak when
both the plaintiff and defendant were sophisticated business
entities, entrusted with equal knowledge of the facts" "and
ample access to legal representation." Duquesne Light, 66 F.3d
at 612; accord City of Rome v. Glanton, 958 F. Supp. 1026, 1038
(E.D.Pa.), aff'd mem., 133 F.3d 909 (3d Cir. 1997).
Tennessee, however, may have a broader doctrine. In Perkins v.
M'Gavock, 3 Tenn. (Cooke) 415, 1813 WL 259, *2 (1813), that
state's highest court held that "each party to a contract is
bound to disclose to the other all he may know respecting the
subject-matter materially affecting a correct view of it, unless
common observation would have furnished the information." Accord
Simmons v. Evans, 185 Tenn. 282, 206 S.W.2d 295, 296 (1947). A
review of the Tennessee jurisprudence reveals, however, that
these cases almost always involve the sale of real (usually
residential) property*fn16 or the sale of used automobiles. See
Garrett, 844 S.W.2d at 181; Gray v. Boyle Investment Co.,
803 S.W.2d 678, 683 (Tenn.Ct.App. 1990). In those cases, the
"seller's duty to disclose information concerning the condition
of a product arises from its superior knowledge of the product."
Patton, 822 S.W.2d at 614.
I believe the Tennessee courts might find the existence of a
duty in a computer software case like this one, as the technical
knowledge of the internal design of a software product,
particularly a consumer product distributed only in
machine-readable object code rather than human-readable source
code, is committed entirely to the licensor. Yet, there are many
design details within a software developer's exclusive knowledge,
and the duty to disclose surely cannot arise as to each one of
them, or transactions would become hopelessly bogged-down in
minutiae not to mention possible loss of trade secrets as well.
Rather, that duty can extend only to material information,
information specifically requested by the customer, and
information necessary to make an affirmative disclosure that
would otherwise be a half-truth not misleading. See id. at
Here, there is no evidence that the industry in general or
plaintiff in particular was even thinking about Y2K compliance in
1994, and there was certainly no request for such information. On
the other hand, the use of date entry examples in the user manual
with dates after 1999 does tend to imply that the system was
designed to process those dates properly. If it does not, then
there is a duty to expand on the implicit representation of
compliance by stating that the software will not process later
dates accurately. Thus, while the issue is close, I conclude that
there was a duty to speak under Tennessee law.
Nevertheless, misrepresentations and omissions are not
actionable as fraud without reasonable reliance thereon. In re
Sofamor Danek Group, Inc., 123 F.3d 394, 403-04 (6th Cir. 1997)
(predicting Tenn. law and rejecting fraud-on-the-market in favor
of actual reliance for common law fraud and negligent
misrepresentation claims), cert. denied, 523 U.S. 1106, 118
S.Ct. 1675, 140 L.Ed.2d 813 (1998); Wittekamp v. Gulf & Western
Inc., 991 F.2d 1137, 1144-45 (3d Cir. 1993); Mellon Bank Corp.
v. First Union Real Estate Equity & Mortgage Invs.,
951 F.2d 1399, 1411-12 (3d Cir. 1991); Speaker v. Cates Co.,
879 S.W.2d 811, 816 (Tenn. 1994); Mellon v. Barre-National Drug Co.,
431 Pa. Super. 175, 636 A.2d 187, 190 (1993); Sevin, 611 A.2d at
1236. Here, Mr. Lando admitted that he did not even receive the
manual until after the software was purchased and hence did not
rely on anything contained in it. Dkt. no. 58, exh. 6, at 301,
304, 310. Moreover, Fran Lando admitted that Y2K-compliance was
not a factor in her decision to purchase Synchronics software.
Dkt. no. 54, exh. 3, at 88-90.
Plaintiff urges that reliance should be presumed "where
information material to the transaction was concealed by a
positive misrepresentation and where the evidence shows that the
deceived party would not
have entered the transaction if the truth had been disclosed."
Dkt. no. 55, at 22-23. This is a fair, if perhaps tautological,
statement of the law. See Rowland v. Carriers Ins. Co.,
738 S.W.2d 183, 185-86 (Tenn. 1987); De Joseph v. Zambelli, 392 Pa. 24,
139 A.2d 644, 647-48 (1958); New York Life Ins. Co. v.
Brandwene, 316 Pa. 218, 172 A. 669, 671 (1934). When one would
not have entered the transaction in the presence of full
disclosure of a material fact or absent a misstatement of one,
that person has obviously relied. But here, there is no evidence
that plaintiff would not have acquired defendant's software in
1994 had it been disclosed that it was not Y2K-compliant.*fn17
Indeed, there is no evidence that any Y2K-compliant software for
plaintiff's application was even on the market in 1994.
Accordingly, reliance cannot be "presumed."
Accordingly, I will dismiss plaintiff's fraud claim.
C. NEGLIGENT MISREPRESENTATION
Plaintiff also seeks recovery on a negligence/negligent
misrepresentation theory, which fails for the same reasons as the
fraud claim. Given the contractual relationship between the
parties, moreover, the economic loss doctrine bars this tort
claim in favor of the well-founded view that parties in privity
should look to the contract itself for their remedies. As the
Third Circuit, predicting Pennsylvania law, opined:
[W]here there is privity in contract between two
parties, and where the policies behind tort law are
not implicated, there is no need for an additional
tort of negligent misrepresentation. . . . A party
who engages in contractual negotiations with another
has the ability to protect itself in the contractual
language against the other party's innocent, though
Duquesne Light, 66 F.3d at 620;*fn18 accord Valhal, 44 F.3d
at 207; Sun Co. v. Badger Design & Constructors, Inc.,
939 F. Supp. 365, 371-72 (E.D.Pa. 1996); Eagle Traffic Control v.
Addco, 882 F. Supp. 417, 419 (E.D.Pa. 1995); Palco Linings v.
Pavex, Inc., 755 F. Supp. 1269, 1271 (M.D.Pa.), adhered to on
reconsideration, 755 F. Supp. 1278 (M.D.Pa. 1990) ("[T]ort law is
not intended to compensate parties for losses suffered as a
result of a breach of duties assumed only by agreement. . . . A
buyer['s] . . . desire to enjoy the benefit of his bargain is not
an interest that tort law traditionally protects."); PPG Indus.
Inc. v. Sundstrand Corp., 681 F. Supp. 287, 289-91 (W.D.Pa.
1988); Carlotti v. Employees of Gen'l Elec. Fed. Credit Union,
717 A.2d 564, 566-67 (Pa.Super. 1998), alloc. denied,
739 A.2d 163 (Pa. 1999); Spivack v. Berks Ridge Corp.,
402 Pa. Super. 73, 586 A.2d 402, 405 (1990) ("The general rule of law
is that economic losses may not be recovered in tort (negligence)
absent physical injury or property damage."); Lower Lake Dock
Co. v. Messinger Bearing Corp., 395 Pa. Super. 456, 577 A.2d 631,
634-35 (1990); Ritter v. Custom Chemicides, Inc.,
912 S.W.2d 128, 133 (Tenn. 1995) ("Tennessee has joined those jurisdictions
which hold that product liability claims resulting in pure
economic loss can better be resolved on theories other than
negligence."). This is especially true when there is an
integrated writing. See Sunquest, 40 F. Supp.2d at 651-56; New
York State Elec. & Gas, 564 A.2d at 926 (fully integrated
contract cannot be avoided by pursuing negligent
There are two exceptions to the economic loss rule: one is
fraud (that is, an intentionally false statement), and the
other applies when "the defendant is in the business of supplying
information for the guidance of others and makes negligent
misrepresentations[.]" Sunquest, 40 F. Supp.2d at 658 (quoting
Restatement (Second) of Torts § 552 (1977)); Ritter, 912 S.W.2d
at 130-31; John Martin Co. v. Morse/Diesel, Inc.,
819 S.W.2d 428, 431 (Tenn. 1991). I have already dealt with plaintiff's
fraud claim, and the section 552 claim can likewise be disposed
of in short order by simply pointing out that, unlike the
investment banker in Sunquest, defendant, while it is a
software developer in the information systems business, is not
in the business of providing information.
In Ritter, plaintiff suffered damage to their crops after
reading defendant's advertising and applying its pesticide. The
court, however, held that their claim for economic loss was
barred because the advertising did not show that defendant was
"in the business of supplying information for the guidance of
others[,]" as required by § 552. 912 S.W.2d at 131. More
specifically, the court in Walter Raczynski Prod. Design v. IBM
Corp., No. 92-6423, 1994 WL 247130 (N.D. Ill. June 6, 1994),
held that a manufacturer/seller of computer hardware was not in
the business of supplying information. Id. at *3. It opined:
Even those businesses that provide products or
services often provide operating instructions and
warranty information, as well. . . . [D]efendants who
provide such information are not, for that reason,
"in the business of supplying information. . . ." Any
information supplied by the manufacturer [is]
considered merely incidental to the sale of goods. .
. . [C]omputer hardware and software manufacturers do
not meet the definition of businesses engaged in
providing information, against whom a negligent
misrepresentation claim may be asserted.
Id. (citing cases; citations and some internal quotation marks
omitted); see generally Rankow v. First Chicago Corp.,