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Al's Auto Inc. v. Hollander

September 29, 2010

AL'S AUTO INC., PLAINTIFF,
v.
HOLLANDER, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Rufe, J.

MEMORANDUM OPINION AND ORDER

Before the Court is Defendant's Motion for Summary Judgment on Plaintiff's Complaint, and all responses and replies thereto. The claims remaining in this case following the Court's ruling on Defendant's Motion to Dismiss are: Count I, Breach of Express Warranty; Count II, Breach of the Warranty of Merchantability; and Count III, Breach of Warranty of Fitness for a Particular Purpose. Defendants have filed Motions for Summary Judgment on all three Counts, claiming that the contract between the parties limited remedies associated with the express warranty and bars claims under implied warranties through fully enforceable contract clauses. Plaintiff appears to concede that its claims against Defendants Solera Holdings, Inc. and Audatex North America, Inc. should be dismissed, and this Court will dismiss all claims against those parties by the attached Order. As to Defendant Hollander, Inc. (hereinafter "Defendant"), Plaintiff argues that the three contractual provisions relied upon by Defendant are invalid, as the limited remedy "fails of its essential purpose" and the preclusion of implied warranties is unconscionable. For the reasons that follow the Court denies Defendant's Motion for Summary Judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Al's Auto, Inc. is a Pennsylvania business corporation specializing in selling auto parts, with its primary place of business in Trevose, Pennsylvania. Defendant is a Delaware corporation that develops and sells business information management software systems. Defendant's primary place of business is in Plymouth, Minnesota. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §1332. Counts IV-VII of the Complaint, all tort claims, were previously dismissed as time-barred under Pennsylvania law. The remaining counts, Counts I-III, all contract claims, are the subject of the present Motion.*fn1

One of Defendant's software products is the PowerLink system. From 1989 through 2002, Plaintiff successfully used earlier iterations of Hollander's business inventory software, first using HYMS and later PowerLink 1.0, to manage the inventory, store sales records and track sales trends, billing, and other aspects of Plaintiff's auto parts recycling business. In 2002, Defendants allegedly told Plaintiff they would no longer support and update PowerLink 1.0 once PowerLink 2.0 was launched.*fn2 Defendants also allegedly asserted that PowerLink 2.0 would provide a significant enhancement to PowerLink 1.0.*fn3 Plaintiff entered into a contract with Hollander to purchase PowerLink 2.0.

The contract entered into for the sale of PowerLink 2.0 disclaims implied warranties and also any liability for incidental and consequential damages.*fn4 Plaintiff characterizes the contract for PowerLink 2.0 as a pre-printed, standard form contract, which it believed was non-negotiable.*fn5

Defendant notes that essentially the same form contract was used when Plaintiff purchased PowerLink 1.0,*fn6 and yet Plaintiff did negotiate the price term in that earlier contract.*fn7 The Court notes that the price term is not preprinted on the contract, but the terms relevant to this dispute are pre-printed terms.

Defendant emphasizes that Plaintiff's officers stated in their depositions that they had read and understood the contract terms at issue when they entered into the contracts, that at the time of signing they were aware of the limitations on remedies and liability, and that they nevertheless believed that the contract was fair.*fn8 Defendant also notes that Plaintiff admitted that it was aware that Hollander's competitors had office management products on the market, yet made the business decision to purchase Defendant's PowerLink 2.0.*fn9 Plaintiff points out that each of the 175,000-200,000 parts in its inventory was labeled with a unique number created so that it could be tracked using Defendant's PowerLink system, and changing to a new software system would have required re-labeling of each and every part.*fn10 In addition, a new system would require retraining of every staff member. Given these logistical problems and Plaintiff's nearly twenty years of satisfaction with Defendant's products, Plaintiff did not consider competing products.

Plaintiff alleges that Defendant learned that there were serious problems with PowerLink 2.0 during Beta testing at the yard of automobile parts dealer Morris Rose.*fn11 Some of the problems could not be resolved without software patches or updates, but several of the necessary programming changes had not been made prior to the sale of the software to Plaintiff.*fn12

However, under pressure to get PowerLink 2.0 to market,*fn13 Defendant failed to disclose these problems to Plaintiff, and instead assured Plaintiff that version 2.0 would be an improvement over PowerLink 1.0.*fn14

Plaintiff claims PowerLink 2.0 made it impossible to create inventory reports and reports based on customer and sales data, and rendered Plaintiff's wireless network useless. Specifically, Plaintiff claims that immediately after installation of PowerLink 2.0, "Al's Auto experienced numerous system crashes, speed problems, network and server issues, functional problems, and problems customizing reports."*fn15 In addition, the program deprived Plaintiff access to historic sales information, and would not let Plaintiff zero out a customer's billing account, causing it to send out bills to customers who had paid in full.*fn16

Defendant's brief admits that "for months [following installation], Hollander devoted significant resources to Al's Auto, repeatedly sending teams of Hollander personnel to Al's Auto facility" and installing software patches or updates to repair problems in July, August and October 2002.*fn17 Plaintiff claims it took Defendant approximately sixteen months to resolve the software problems to Plaintiff's satisfaction, and notes that even now PowerLink 2.0 does not perform all the functions PowerLink 1.0 performed,*fn18 nor does it process information as quickly.*fn19

Plaintiff claims it suffered significant business losses in 2002 ($503,279 in sales and $241,440 in profits) due to PowerLink 2.0's software problems, and now seeks to recoup these losses in damages. Defendant argues that because Plaintiff's tax returns show an increase in total income for every year, beginning in 2003,*f ...


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