Vmark Software, Inc. v. Emc Corporation

642 N.E.2d 587 (1994)

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Nature of the Case

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Facts

D sought an improved software product for managing its financial reporting, order management, production, and inventory tracking. D used and wanted to continue to use a business applications software called 'Madic' for its accounting, inventory, manufacturing, and financial needs. D sought a product that would enable it to retain the Madic software while using it on the DEC Ultrix hardware. P had developed and was licensing such a product, uniVerse, which it marketed to users, like D, who sought to move their applications software to other, more flexible or capacious systems. One advertised feature of the uniVerse software was its supposed ability to convert existing data files that run in a Prime environment to files that run in a uniVerse environment. D instigated contact and told P that its primary concerns in using uniVerse to replace its Prime system with a DEC system were processing its business data more quickly and efficiently, being able to continue to use dynamic files and alternate indices in its database, and being able to convert to the DEC system by October, 1990, because of the limitations of its Prime system. P assured D that the product would accomplish such goals and that the conversion process could be completed before the end of the summer. Ps' sales representative additionally assured D that, if uniVerse did not function as promised, P would be responsible for the cost of the DEC hardware. By late June 1990, D, relying on P's several representations as to uniVerse's performance and capabilities, had decided to obtain a license for uniVerse and to purchase the DEC Ultrix computer system. EMC would not have purchased the DEC hardware had it not also acquired what it perceived to be fully functional uniVerse software. At the time of their representations, P knew that there had been some prior problems with the performance of uniVerse when used with a DEC Ultrix system. They were also aware that such a combined system had thus far operated more slowly than it was designed to do; that there had been relatively little experience with uniVerse's ability to support the alternate indices function, which even the developer of uniVerse was concerned might not work as represented to D; that P had not actually attempted to use uniVerse to achieve compatibility between Madic application software and DEC hardware; and that difficulties had been encountered with the ability of uniVerse operationally to convert dynamic files to the DEC/uniVerse system. The necessary conversion process required, an extra, time-consuming step that both P's creator and its engineering vice president recognized would make it difficult to meet D's initially desired timetable. None of these problems was explicitly communicated by P to D. In keeping with P's apparent general policy of not mentioning or minimizing negative factors regarding uniVerse's capabilities to prospective customers, P assured D that there would be no serious performance or conversion problems. Nor did the manuals and technical documents supplied by P to D highlight any of these problems relating to the use of uniVerse. D executed an agreement with P. This agreement contained various provisions limiting P's warranties and damage liability, which P asserts preclude any recovery by D. Problems ensued right from the start. The conversion results were not uniformly complete or accurate. The DEC/uniVerse system turned out to operate much more slowly than the Prime system. None of P's repeated efforts to solve the various performance problems over the summer and fall of 1990 succeeded in overcoming them. By December 1990, D concluded that uniVerse was too unreliable to permit D to conduct business activities on it. P who had delivered over twenty different but equally unsatisfactory versions of uniVerse to D, also conceded that uniVerse was not yet a fully functional product for D's purposes. D then purchased a larger Prime system to address its computing needs. D demanded reimbursement for the cost of the DEC hardware and for the time D employees had spent on the failed conversion effort. P refused D's claim, demanded payment under the license agreement, and sued D for breach. D counterclaimed. D sought damages for P's failure to deliver a functional product, founded upon counts for breach of contract, breach of warranty, promissory estoppel, misrepresentation. In a bench trial, the judge ruled against P on its claim for payment, against D on its breach of warranty, and misrepresentation, but for D on its breach of contract and promissory estoppel claims. The judge awarded D $316,901 in what he termed 'reliance damages.' That figure essentially reflected the net cost to D of certain Digital Equipment Corporation (DEC) computer hardware P had purchased in reliance on P's supplying it with a software product that would be fully functional in conjunction with that hardware. Both parties appealed.