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PEERLESS WALL AND WINDOW COVERINGS v. SYNCHRONICS

February 25, 2000

PEERLESS WALL AND WINDOW COVERINGS, INC., PLAINTIFF,
V.
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 defendant.

I.

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, among them:

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 every day!
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).

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 of PC-DOS. 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):

READ THIS FIRST

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 defect(s).
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 is" basis.
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.

TERM

This license is effective for the useful life of the software. . . .

GENERAL

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 ...


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