Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : SEEC, Inc. (SEEC) -- Ignore unavailable to you. Want to Upgrade?

To: P. Ramamoorthy who wrote (532)	6/22/1998 6:43:00 PM
From: RBB	Read Replies (1) \| Respond to of 1031

First Year 2000 Class Action Filed by David M. Nadler and Kendrick C. Fong* As the Year 2000 approaches, industry analysts and experts predict that beleaguered businesses and disgruntled shareholders will bombard the courts with lawsuits concerning the "Millennium Bug" and whether products and internal systems are Year 2000 compliant. The "Millennium Bug," or Year 2000 problem, is a programming judgment error in many older computer languages, such as COBOL. Because two-digit date fields were used instead of four-digit date fields to conserve valuable and expensive memory space, dates beyond 1999 may not be processed correctly, which can result in systems failure and data corruption, among other things. The first class action lawsuit, Atlaz International v. Software Business Technologies, Inc., was filed in December 1997 in California state court. A class action lawsuit is one in which an individual plaintiff seeks to represent the interests of many other similarly situated persons or companies, such as all those who purchased the same defective product. In this sense, a class action differs from a regular lawsuit in which the plaintiff seeks to represent only his own interests. In Atlaz, the class action seeks to represent all persons or companies that purchased the SBT Pro Series accounting software before March 1, 1997. According to the complaint, the defendant SBT's Pro Series accounting software version 3.0i that was sold before March 1997 is not Year 2000 compliant. Thus, the plaintiff contends that the accounts payable, accounts receivable, and display and print reporting functions of the software have serious Year 2000 defects. In March 1997 SBT released an "upgrade" version 3.2i of the software. The only alleged difference between version 3.0i and 3.2i is that the latter version is Year 2000 compliant. The complaint contains counts for breach of warranty, fraud and deceit, and unfair business practices under California laws. Although the complaint does not indicate the number of customers that rely on the SBT software, the plaintiffs seek damages of over $50 million. The class action plaintiffs, led by Atlaz, allege that SBT is improperly forcing customers to pay hefty fees to correct the Year 2000 problem instead of fixing it at no charge. In support of their position, the plaintiffs note that other software manufacturers treat the Year 2000 problem within the scope of their standard warranties and provide the Year 2000 fix at no additional charge. SBT will likely respond by contending that the Year 2000 problem is outside the purview of the warranty in its software license agreement. SBT will also argue that the upgrade includes numerous other features besides the Year 2000 fix and that the cost of the upgrade reflects these new features. The only other Year 2000 lawsuit is Produce Palace International v. TEC-America Cash Register, Inc. and All American Cash Register, Inc., which was filed last summer in Michigan state court. In that case, the plaintiff complains that the computerized registers they purchased do not accept credit cards with expiration dates beyond 1999. While Produce Palace is notable as the first reported Year 2000 lawsuit, it is unlikely that the case will have any long term significance. Atlaz is a far more important case that could have wide ranging implications for the computer industry and users of commercial software. Indeed, many legal authorities predict that the Atlaz case is just the tip of the iceberg. As more companies decline to correct Year 2000 defects at no charge to the customer, it is likely that more class action suits will follow. As shown by both the Atlaz and Produce Palace cases, the Millennium Bug presents a potentially enormous problem for the many companies that rely on computer systems. The most pressing issues relate to the allocation of responsibility for corrective action and for failure to achieve Year 2000 compliance. Addressing these issues will require a careful analysis of contractual terms and conditions, insurance coverage, and intellectual property rights. Other anticipated issues include corporate fiduciary duties to ensure Year 2000 compliance, and the extent to which publicly traded companies must disclose their compliance efforts under Securities and Exchange Commission regulations or Generally Accepted Accounting Principles. Superimposed on these issues are weighty business judgments and difficult public policy considerations. Analysts predict that many more lawsuits, particularly class actions, are waiting in the wings, both from businesses that claim the products they purchased are defective, and from shareholders that sue company executive boards because they did not timely solve their Year 2000 problems. Thus, the Atlaz case may well be a preview of things to come.