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rejecting misrepresentation claim where the alleged misrepresentation was a matter of "opinion, or at least a question of degree" and the plaintiff had "ample opportunity . . . to make its own judgment" regarding the subject matter of the alleged misrepresentation
Summary of this case from 4 MVR, LLC v. Warren W. Hill Constr. Co.Opinion
CIVIL ACTION NO. 95-11683-DPW.
August 31, 2007
MEMORANDUM AND ORDER
This dispute arises out of a software license agreement between Rockland Trust Company and Computer Associates International, Inc., executed by the parties respectively in late 1990 and early 1991 and covering a variety of banking software products. After a non-jury trial and extended review of the voluminous record in this case, I make the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52.
In summary, I find that Computer Associates met its contractual obligations to deliver the several software products ordered by Rockland Trust after Rockland Trust had conducted an extensive and thorough prepurchase evaluation process. I further find that Computer Associates met its obligations to use its best efforts to cure any defects identified by Rockland Trust as to those products. There was no breach of contract by Computer Associates, nor were there grounds for revocation. Moreover, I find Computer Associates to have engaged in no actionable misrepresentations in connection with the contract between the parties.
In contrast, Rockland Trust has breached the contract by refusing to pay Computer Associates. The reasons for Rockland Trust's breach, to the degree that it was not based — as I have found it was not — upon some material breach by Computer Associates, are not directly relevant to the dispute between the parties before me. However, the evidence indicates that the dissatisfaction with the contract which led Rockland Trust to stop paying was the result of independent management decisions made over a period of years by Rockland Trust which was experiencing a larger set of difficulties in its business. These difficulties led to limitations upon and reductions in resources available to Rockland Trust to execute the Computer Associates contract successfully. But Rockland Trust's failure successfully to execute the contract it entered into with Computer Associates did not relieve it of the obligation to pay outstanding license and maintenance fees under the contract, in the absence of breach or fraud by Computer Associates. Concluding that there was neither breach nor fraud by Computer Associates, I will award damages to Computer Associates on its counterclaim for breach against Rockland Trust.
I. BACKGROUND
Before executing the software licensing agreement at issue in this case with Computer Associates, Rockland Trust had licensed and used banking software from Kirchman Corporation. When Kirchman notified Rockland Trust that it would no longer provide support for the software Rockland Trust used, the bank began to evaluate other vendors.Rockland Trust undertook an extensive evaluation of available software products, ultimately focusing on three companies: Computer Associates, Systematics, Inc., and The Newtrend Group. These vendors were selected because each offered a full line of banking software which seemed adequate for Rockland Trust's needs, without being too complex or expensive. Rockland Trust had two primary goals: to use software products from a single vendor and to replace the Kirchman software components completely before the Kirchman licenses expired.
A. The Evaluation Process
Rockland Trust's evaluation team was lead by William Malley, Senior Vice President of Operations, and included George Gousie, Vice President and Electronic Data Processing Liaison Officer, and Janice Asadoorian, Vice President of Systems and Programming. The team first considered whether each software package was IBM-compatible and could meet the bank's basic functional requirements. Newtrend Group's software was not IBM-compatible, consequently it was eliminated from consideration.
Rockland Trust then evaluated the Computer Associates and Systematics products by comparing each software package to a desired feature matrix, weighted by importance. Each product received an overall score for the full product line and a specific score for each individual application. Next, Rockland Trust evaluated each vendor as a whole, focusing on several criteria, including the degree to which the products met functional requirements, the ease of installation and data conversion from previous software, product cost (including maintenance and conversion), level of vendor support and training, user satisfaction and references, and the financial condition and stability of the vendor. Each of these criteria was weighted by importance to assign an overall score to each vendor.
After the initial ranking evaluations, Rockland Trust personnel made on-site visits to Computer Associates' offices in Maitland, Florida and Dallas, Texas and to Systematics' offices in Little Rock, Arkansas. The evaluation team visited Computer Associates for four days and Systematics for three days. Malley, Gousie, and Asadoorian were part of the evaluation team and participated in the on-site visits. Finally, Computer Associates and Systematics each sent representatives to Rockland Trust for ten days to provide hands-on demonstrations to potential end users of the new software. After these demonstrations, the Rockland Trust employees completed an evaluation form and preference sheet, assigning a score to each vendor based on how well the demonstrated products met the bank's requirements. Computer Associates provided several references at other banks, and Malley contacted them to discuss their experiences with the relevant software components.
When the evaluation process was complete, Rockland Trust concluded that Computer Associates' software system met its needs better than the Systematics package.
B. The Contract Negotiations
Based upon its evaluation of each set of software, Rockland Trust opted to purchase Computer Associates' package. Rockland Trust purchased the following components:
1. Time Investment
2. Exception Administrator
3. Combined Statement
4. CMI Complete
5. Integrated Mortgage Loans
6. Integrated Commercial Loans
7. Integrated Installment Loans
8. Multi-Sort
9. ACH
10. Teller
11. Profitability
12. Financial Control
13. Accounts Payable
14. Imagine
Malley, Alan Peterson, Rockland Trust's Treasurer and CFO, and Rockland Trust's lawyers negotiated the software License Agreement with Computer Associates. Although other Rockland Trust employees, including Gousie and Asadoorian, had been very involved in the evaluation process, they apparently did not participate in the actual License Agreement negotiations. Rockland Trust requested several changes to the standard-form Computer Associates contract, and received all of the requested concessions. Peterson executed the License Agreement on behalf of Rockland Trust on December 21, 1990, and George Tatter, Vice President of Computer Associates, executed the agreement on February 5, 1991 on behalf of Computer Associates.
C. The Contract Details
The License Agreement covered "all program code, documentation, training materials, and enhancements embodying or related to the Licensed Program and any subsequent versions or releases of the Licensed Program which may be delivered to Licensee." The Licensed Programs were listed on an Order Form attached to the License Agreement. A limited warranty provided in relevant part that:
CA also represents that the Licensed Program will operate according to the specifications published by CA for the Licensed Program [as set forth in the manuals and other documentation identified by the codes listed for the Licensed Programs as set forth on the Order Forms]. If it is determined that the Licensed Program does not operate according to such specifications, CA's only responsibility will be to use its best efforts, consistent with industry standards, to cure the defect.
All other warranties were specifically disclaimed: "Except as set forth above, no other warranties, whether express or implied, including, without limitation, the implied warranties of merchantability and fitness for a particular purpose, are made by CA." The License Agreement contained an integration clause stating:
This Agreement, including the reverse side of this Agreement, the Order Form(s) [, Exhibit A] and any other exhibits attached to this Agreement, represents the entire agreement between CA and Licensee with respect to the Licensed Program, and CA and Licensee agree that all other agreements, proposals, purchase orders, representations and other understandings concerning the Licensed Program, whether oral or written, between the parties are superseded in their entirety by this Agreement. No alteration or modifications of this Agreement will be valid unless made in writing and signed by the parties. No attachment, supplement or exhibit to this Agreement shall be valid unless initialed by an authorized signatory of CA.D. The Installation Process and Software Problems
Although a Professional Services Agreement was executed between Computer Associates and Rockland Trust, the bank opted to handle the new software implementation internally, initially with the consulting assistance of Atlantic Data Services, Inc. and later completely on its own. Computer Associates did perform roughly four weeks of work under the Professional Services Agreement, creating an interface to the CMI product by June of 1992.
Not all purchased components were installed or used by Rockland Trust. Both parties agree that the version of Integrated Mortgage Loans available when the License Agreement was signed was not appropriate for Rockland Trust's needs, and it was never installed. The parties eventually negotiated a credit for Mortgage Loans.
Rockland Trust installed and used at least the following applications: Time Investment, Exception Administrator, Combined Statement, CMI, Integrated Installment Loans, ACH, and Financial Control.
Rockland Trust opted not to use Accounts Payable because new management determined it was too expensive, and eventually returned the software to Computer Associates for a credit.
Rockland Trust also decided not to install Teller, Integrated Commercial Loans, and the Imagine Report writing system, after determining that these products did not meet its needs. Rockland Trust did not install Profitability or Multisort because these applications were of relatively low priority.
E. The Software Problems
Rockland Trust claims to have had problems with several pieces of Computer Associates' software. The most substantial disputes concerned the overall "integration" of the software products and specifically arose regarding the ongoing development of Integrated Mortgage Loans, Integrated Installment Loans, and Integrated Commercial Loans. I will discuss in this section the fate of the several software products at Rockland Trust and in addition will make findings regarding "integration."
1. Integrated Mortgage Loans
Rockland Trust did not take delivery of Integrated Mortgage Loans in 1991, because the software lacked certain features and functionality required by the bank. Computer Associates, whose salesperson Fournier acknowledged that the mortgage loan program was relatively weak, advised Rockland Trust that it was developing a new version of the product, which would be available as an upgrade under the maintenance provisions of the License Agreement. Rockland Trust decided to wait and take delivery of the new version.
However, the awaited new version of Integrated Mortgage Loans failed to materialize. In mid-1991, Computer Associates and Newtrend Group joined forces to create a joint venture, Newtrend L.P., which was responsible for developing and marketing banking software products from both companies. Newtrend Group's products, marketed under the MISER brand, were UNISYS-based, while Computer Associates' products had historically been IBM-compatible. This difference in operating system focus was a primary reason Rockland Trust eliminated the Newtrend Group from consideration initially.
In late 1991 or early 1992, Newtrend L.P. decided to halt development on the new version of Integrated Mortgage Loans to focus on the MISER mortgage loan applications, which were seen as better, more feature-rich products. Computer Associates notified Rockland Trust that development was being halted on Integrated Mortgage Loans, and offered the MISER application on an outsourced basis as an alternative. Rockland Trust agreed to consider the MISER product, and evaluated it over the course of nearly a year. In early 1993, Rockland Trust decided not to use the MISER mortgage loan application, and kept the Kirchman mortgage loan product instead. In a letter dated February 3, 1993, Rockland Trust notified Newtrend L.P. that the bank was taking a credit for Integrated Mortgage Loans and Accounts Payable. Employees from both companies met in early March 1993 to discuss the issue, and agreement was eventually reached on an Addendum to the License Agreement, discussed in greater detail below. The first Addendum was dated May 11, 1993 and was sent to Rockland Trust on May 19, 1993. A revised version of the addendum was sent on August 18, 1993, and this version was signed by Rockland Trust on October 1, 1993.
2. Integrated Installment Loans
Rockland Trust acknowledges receipt of the Integrated Installment Loans program, but maintains it encountered problems with the software installation. However, Rockland Trust installed the Integrated Installment Loans program by March of 1993, and ran it for several years. Rockland Trust has introduced a memorandum from Asadoorian to Malley which purported to document problems with Integrated Installment Loans. The major identified issue, a problem with D.U.C. (an operating interface), could not have been a problem with Integrated Installment Loans, because this software did not use D.U.C., as explained by Computer Associates in response to Asadoorian's letter.
3. Integrated Commercial Loans
The Integrated Commercial Loans program was delivered to Rockland Trust in 1991, and was partially installed by Asadoorian at that time. Controversy apparently arose over this program during and after the negotiations for the License Agreement Addendum. Rockland Trust was informed in April of 1993 that Newtrend L.P. had entered into an agreement with Computrol Corporation ("Computrol") in December of 1992 to outsource development of enhanced versions of Integrated Commercial Loans and Integrated Installment Loans, and potentially Integrated Mortgage Loans. Negotiations for the Newtrend L.P./Computrol contract started in the summer of 1992. At the time Newtrend L.P. and Computrol entered the agreement, Rockland Trust was not using Integrated Commercial Loans, and had renewed the Kirchman license for a similar product, which had expired in September of 1992.
Rockland Trust planned to implement the upgraded Integrated Commercial Loans program some time in 1994. Computer Associates was aware of the desired implementation schedule, and encouraged Rockland Trust in a letter dated August 13, 1993 to "monitor the availability of the new 2.0 release for VSE [ i.e. Computrol Commercial Loans]." By December of 1993, however, Newtrend L.P. determined that Computrol was not going to be able to develop the upgraded Integrated Commercial Loans product in a reasonable time frame. At that point, Newtrend L.P. personnel estimated it would take four to six months of additional in-house development work to produce an adequate product. Anticipating problems, Computer Associates prepared an internal memorandum dated December 20, 1993 which analyzed the clients who were potentially "at-risk" because of Computrol's failure to deliver. Rockland Trust was on this list, along with a number of other banks. For several clients, the internal memorandum noted contractual obligations which were threatened because of Computrol's failure to deliver. Rockland Trust, however, was listed only as having seen presentations of the Computrol development work. In a letter dated January 6, 1994, Newtrend L.P. formally terminated its contract with Computrol, and ordered a halt to the project. Rather than taking the Integrated Commercial Loans project in-house, Computer Associates terminated development completely, and a revised version was never delivered. Rockland Trust requested a credit for Integrated Commercial Loans, which Computer Associates refused to provide.
4. Overall Software "Integration"
Rockland Trust contends that the software purchased from Computer Associates was not sufficiently "integrated," as the term is used in the title of three products (Integrated Mortgage Loans, Integrated Commercial Loans, Integrated Installment Loans). Integration is not defined in the License Agreement, and is mentioned only in the title of the three software components listed above. Various witnesses testified as to their understanding of the term at the time the License Agreement was executed.
Both parties agree that "Integrated" was abbreviated as "Integ." in the License Agreement.
Malley, Senior Vice President of Operations at Rockland Trust and head of the evaluation team when the contract was executed, testified that:
it was my understanding at the time the License Agreement was executed that the CA loan components were integrated in that the user at a bank could call up a customer's name and determine the status of that customer's loan account in the three loan products without having to go from program to program, and that customer data, such as name, address, and rate information could be entered once into the system to update or change all subsystems. I never understood integration with respect to the CA loan components to mean more than that. When I did my due diligence on the CA software and called other banks, no one complained to me that the software was not as advertised and no one complained that it was not integrated.
Gousie, Vice President and Electronic Data Processing Liaison Officer at Rockland Trust and another member of the evaluation team, described integration as follows:
An integrated software system allows on-line access to all of a customer's lending relationships from a single set of screens. . . . Integration also means that customer data, such as name, address, etc. do not need to be entered into the system more than once when a customer uses different bank services or products. Lastly, an integrated software system allows for analyzing categories of banking customers by extracting data from a variety of different software applications and synthesizing that data to create reports, for senior management, of patterns of customer activities which can be used to identify such things as marketing opportunities and risk exposure.
Stephen Goodhue, former Director of Information Services at Rockland Trust, provided a definition that was identical to that provided by Gousie.
Based on these definitions, the parties appear to agree that integration has at least two essential components: first, that software tracking different types of loans could be linked together to present an end user with a seamless interface into a individual's portfolio; and, second, that basic customer information input in one location would automatically update throughout the system. Rockland Trust witnesses identified an additional reporting aspect, but this appears to be a subset of "one-screen display" functionality, in that customized reports would be derivative of the information pulled together for the screen display.
Computer Associates has demonstrated that its software package was integrated by means of the CMI component purchased under the License Agreement. To be sure, Gousie testified on behalf of Rockland Trust that the CMI did not work properly and that he was not able to access customer loan balances, but this testimony is undercut by a memo he wrote to Asadoorian, which includes printouts of several sample CMI screens, including loan balances. There is no dispute that Rockland Trust did not attempt to integrate the Kirchman loan programs into the CMI system, and that Rockland Trust did not fully install two of the three Computer Associates loan programs (Mortgage Loans and Commercial Loans). Because Rockland Trust did not install all of the Computer Associates loan components, and did not attempt to link the alternative Kirchman loan programs into the CMI, there is no way to evaluate definitively in retrospect whether the CMI would have offered adequate integration, had the necessary tasks been performed. Computer Associates has presented evidence that other customers routinely used the CMI to pull information from disparate software packages, and Rockland Trust has presented no evidence to the contrary. Under the circumstances, I find Rockland Trust has failed to meet its burden of demonstrating that the Computer Associates software package lacked contractually mandated "integration," even if the term is construed broadly.
5. Other Software
Rockland Trust purchased several other pieces of software from Computer Associates. Some were installed (Time Investment, Exception Administrator, Combined Statement, CMI, ACH, and Financial Control) and some were not (Accounts Payable, Teller, Imagine, Profitability, Multi-sort). Of the programs not installed, Rockland Trust alleges that Accounts Payable did not suit its needs and that Teller and Imagine were defective. Rockland Trust determined that installation of the Profitability and Multi-sort programs was a low priority.
Rockland Trust argues it installed Teller and Imagine, but it appears that these were at most installations for testing purposes.
Rockland Trust has argued that Computer Associates "oversold" Accounts Payable, but does not contend that the program itself was defective or different from the tested version. Similarly, Rockland Trust appears to have misunderstood the nature of the Teller program, arguing that "RTC believed based on CA's representations that Teller would function with RTC's then-existing system." The evidence presented, however, consistently indicates that the Teller program was described as a simulation environment, not as a "front-end" system.
Rockland Trust also claims not to have been provided with the necessary data dictionaries for the Imagine Report writing system, but I find that certain data dictionaries existed and otherwise could have been created with relative ease. This appears to have been a problem of miscommunication, not a situation where the data dictionary capability did not exist.
Rockland Trust claims to have encountered problems with some installed software, as well. The Time Investments program, which was closely related to the Computer Associates Deposit software Rockland Trust licensed and used before the License Agreement was executed, had to comply with certain federal regulations. Rockland Trust alleges that the upgrade to Deposit and Time Investment was insufficient to comply with Regulation DD. The software bugs were eventually worked out, however, and Rockland Trust did not incur any damages as a result.
F. Communication of Problems
The parties dispute the degree to which software problems were reported to Computer Associates. Although there was no requirement that written notice be provided, the limited warranty in the License Agreement necessarily contains an implicit requirement that Computer Associates be notified of problems before the company could be required to used "best efforts, consistent with industry standards" to correct them. Three sources of evidence cast light on this issue: the customer service Support Tracking and Reporting System reports ("STAR reports") introduced by Computer Associates, testimony from various witnesses, and a very small set of written correspondence.
1. STAR Reports
The most probative evidence of complaints made by Rockland Trust to Computer Associates are the STAR reports described in direct testimony from Judith Chambers, a customer support manager for Computer Associates banking software, and submitted into evidence in long and summary form. Chambers testified that based on her review of the STAR reports, she "cannot find either any unresolved issues or any material issues with the CA software reported by RTC." She also noted that there is no record of Rockland Trust taking advantage of Computer Associates' escalation process, which was intended to be used "where a client felt their problems were not being adequately addressed." As described in Chambers' trial testimony, the STAR reports were created by customer service representatives when users called with software problems or questions. Each issue was assigned a number, from 1 to 4, indicating the severity of the problem. The system tracked how long each issue was open, by recording the date the issue was initially identified and the date the issue was closed out. The STAR report summary is broken down by product, and supports Chambers' testimony. From this summary, it is apparent that very few serious issues (those ranked 1 or 2) were identified, and that most issues were dealt with promptly, based on the number of days they were open. The more detailed entries submitted as evidence are voluminous; Rockland Trust has not pointed to any specific entries, and I have found none, that suggest serious problems. I find the STAR reports support Computer Associates' assertion that Rockland Trust failed to give meaningful notice of the problems it claims to have encountered.
2. Witness Testimony
Testimonial submissions suggest that some other notice was provided which might trigger the limited warranty "best efforts" provision. Specifically, testimony from Asadoorian and Goodhue can be read to provide such notice. Asadoorian testified that she made phone calls and sent faxes to notify Computer Associates of software problems, and that they responded to her concerns. She also testified that she contacted and utilized the Computer Associates support staff in Maitland and Dallas, and that she sometimes escalated problems to Jean Fournier, Rockland Trust's Account Executive at Computer Associates.
Testimony from Goodhue referenced various conversations he had with Fournier concerning perceived limitations with the Computer Associates software. These conversations appear to have been about higher-level problems, while Asadoorian's contact was primarily to discuss day-to-day programming issues.
Here also, I find no compelling evidence that once issues were identified either by Asadoorian or Goodhue, Computer Associates failed to use its best efforts to address a problem.
3. Written Evidence
The written evidence identified by the parties relevant to the question of notice is a set of letters between Gousie and Mike Lankford, a Professional Services Account Manager at Computer Associates, discussing problems with Installment Loans in April of 1991. The principal writing is a memorandum that was written from Asadoorian to Malley, and forwarded to Lankford by Gousie. Lankford responded, addressing all of the concerns in Asadoorian's memorandum and expressing surprise that he was not aware she had encountered so many problems. One of the primary concerns raised, a D.U.C. operating interface problem, was not relevant, because, as Lankford explained, Installment Loans did not use D.U.C. Other complaints were directly addressed, and most had already been resolved. This exchange of letters indicates that Computer Associates made reasonable efforts to correct problems, when it was notified of them. Asadoorian's memorandum reflects some help that had already been provided ("CA phoned fixes," "CA informed us . . ."), and Lankford's response clearly outlines other ways Rockland Trust could receive assistance.
G. Addendum Agreement
The Addendum Agreement, executed after Rockland Trust requested a credit for Mortgage Loans and Accounts Payable in February of 1993, changed the parties' obligations under the License Agreement. In the Addendum, Rockland Trust agreed to continue paying for Computer Associates' Accounts Payable software, in exchange for a credit equal to the total payments made, which could be applied toward licensing additional Computer Associates software. Computer Associates agreed to a similar credit for Mortgage Loans payments, except that this credit could also be used for Newtrend Mortgage Lending monthly processing fees, and Rockland Trust was relieved of the obligation to make additional payments for the Mortgage Loans software. All credits automatically expired on November 30, 1995. The Addendum Agreement contained no release of claims by either party.
II. BREACH OF CONTRACT
Computer Associate's liability under the License Agreement contract was limited to an obligation to use "best efforts" to correct failures to conform to the published specification. A threshold issue is what constitutes the specification under the contract. An addition to the contract, requested by Rockland Trust, defines the specification as "manuals and other documentation". Rockland Trust contends that this language encompasses the sales brochures provided by Computer Associates salespeople during the evaluation period. These brochures contain general language regarding the integration of the software which might be read to support Rockland Trust's substantive arguments.
Having had the opportunity to consider the issue in light of the trial submissions, I find that the specification does not include the sale brochures, under either the contract language or general principles of contract interpretation. "Manuals and other documentation" are an included subset of the "specification," which is generally a highly technical document. It is clear that "manuals" refers to the accompanying software manuals. "Other documentation" must be read to include documentation of the sort that would be included in a specification and, under the canon of ejusdem generis, as something akin to a manual. Not every document shown to Rockland Trust in the course of negotiations falls within this definition. Certainly legal documents would not be included in "other documentation." Similarly, sales documents, including sales brochures, cannot reasonably be included in "other documentation," when both the manuals and the specification are specialized technical documents intended for a particular purpose and audience. Computer Associates has provided sufficient examples of "other documentation" of a highly technical variety that were given to Rockland Trust to ensure that this term is not read out of the contract if the interpretation excludes the sale brochures. Consequently, I find that the sales brochures were not part of the published specification.
Because the License Agreement has an express warranty clause, Computer Associates' liability for breach of contract is limited. Specifically, the parties agreed that:
the Licensed Program will operate according to the specifications published by CA for the Licensed Program [as set forth in the manuals and other documentation identified by the codes listed for the Licensed Programs as set forth on the Order Forms]. If it is determined that the Licensed Program does not operate according to such specifications, CA's only responsibility will be to use its best efforts, consistent with industry standards, to cure the defect.
Under the contract, Computer Associates had an obligation to deliver the licensed software, and to ensure that it either (1) functioned as provided in the specifications, or (2) use "best efforts consistent with industry standards" to fix the problem. Inherent in the "best efforts" clause is a notice requirement, effectively providing that Computer Associates could only be expected to fix problems of which it was made aware.
There is no dispute that Computer Associates delivered all of the software requested by Rockland Trust, with the exception of Integrated Mortgage Loans, as to which Rockland Trust did not take delivery, opting to wait for a new version under development at the time of the License Agreement.
One of Rockland Trust's major issues pressed in this lawsuit was Computer Associates' failure to complete an upgrade to Integrated Commercial Loans, but this was not required under either the License Agreement or the Addendum. Integrated Commercial Loans was delivered to Rockland Trust, as required, and a memo from Asadoorian to Malley, dated April 23, 1991, states that Releases 1.0 and 1.0.2 were "installed." To be sure, Goodhue testified that Fournier "specifically promised" that Integrated Commercial Loans would be re-engineered by a particular date; but this promise was, at best, a non-binding oral modification to a License Agreement that required written and signed approval of any changes. Goodhue further testified that he relied on Fournier's promises about the development of Integrated Commercial Loans in deciding to execute the Addendum, but this testimony is undercut by the fact that the Addendum makes no mention of Integrated Commercial Loans. I find that at most Fournier's discussions with Goodhue evidenced Fournier's optimistic opinion about the likely quality of the re-engineered integrated Commercial Loans product and not some enforceable agreement.
In short, Rockland Trust received the Integrated Commercial Loans software it evaluated and purchased, and there is no evidence that Computer Associates failed to use its best efforts to correct problems, after having been informed that the product failed to meet the published specification. There is also no persuasive evidence that Computer Associates' upgrade efforts were inadequate or below industry standards, even though they were ultimately unsuccessful.
Rockland Trust has provided no specific examples, supported by the record, of instances where Computer Associates failed to use its best efforts to correct a problem, once notified that the software failed to conform to the published specification. To the contrary, the internal software problem tracking reports of Computer Associates do not show uncorrected problems reported by Rockland Trust. On this record, I find that Computer Associates attempted, to the best of its ability, to correct problems when it was notified of their existence. Rockland Trust has provided no persuasive evidence to the contrary, and I conclude that there was no breach of contract or breach of express warranty by Computer Associates. I find no demonstrated non-conformity of the goods delivered by Computer Associates that substantially impaired their value to Rockland Trust sufficient to justify revocation of acceptance even if such revocation had been made, as the purported revocation by Rockland Trust here was not, in a timely manner. Because I have concluded that Computer Associates made a good faith effort to correct identified problems as they arose, I further find no breach of the implied covenant of good faith and fair dealing.
III. MISREPRESENTATION CLAIMS
Rockland Trust's claims for fraud/deceit and negligent misrepresentation are complicated by the existence of an express warranty, which, as discussed above, has not been shown to have been breached. Generally, under Massachusetts law, "if 'the contract was fully negotiated and voluntarily signed, [then] plaintiffs may not raise as fraudulent any prior oral assertion inconsistent with a contract provision that specifically addresses the particular point at issue.'" Cummings v. HPG Int'l, Inc., 244 F.3d 16, 20-21 (1st Cir. 2001) (quoting Starr v. Fordham, 420 Mass. 178 (1995) (quoting Turner v. Johnson Johnson, 809 F.2d 90, 97 (1st Cir. 1986))).
In deceit actions, however, Massachusetts courts have held as a policy matter that a party may not induce a contract by fraudulent misrepresentations and then use contractual limitations to escape liability. Cummings, 244 F.3d at 21 (citing Bates v. Southgate, 308 Mass. 170 (1941)). This policy exception is limited in scope and only extends to intentional misrepresentations, not negligent ones. Sound Techniques v. Hoffman, 50 Mass. App. Ct. 425, 927 (2000) ("We are not prepared to ignore our general policy of upholding freedom of contract by allowing [the plaintiff] to avoid a contractual disclaimer that it agreed to, uninfluenced by any fraud or other egregious or intentional misbehavior on [the defendant's] part.").
Consequently, to recover on a misrepresentation theory, Rockland Trust must prove intentional fraud in the inducement of either the License Agreement or the Addendum. Under Sound Techniques, negligent misrepresentation, even if the statements were factual and reasonably relied upon, is insufficient.
A. Fact or Opinion?
As a threshold matter, only statements of fact are actionable in any misrepresentation action. Cummings, 244 F.3d at 21. Statements of opinion cannot give rise to a deceit action, McEnearney v. Chestnut Hill Realty Corp., 38 Mass. App. Ct. 573 (1995), or to a negligent misrepresentation action, Logan Equip. Corp. v. Simon Aerials, Inc., 736 F.Supp. 1188, 1199 (D. Mass. 1990). In differentiating between fact and opinion, Massachusetts courts have looked to the Restatement (Second) of Torts. Cummings, 244 F.3d at 21.
The Restatement (Second) provides that a representation is an opinion "if it expresses only (a) the belief of the maker, without certainty, as to the existence of fact; or (b) his judgment as to quality, value, authenticity, or other matters of judgment." Cummings, 244 F.3d at 21 (quoting Restatement (Second) of Torts § 538A (1977)). Mere puffing or "seller's talk" is generally a non-actionable statement of opinion. Cummings, 244 F.3d at 22 (citing Greenery Rehab. Group, Inc. v. Antaramian, 36 Mass. App. Ct. 73 (1994); Powell v. Rasmussen, 355 Mass. 117 (1969)). False statements that are susceptible of actual knowledge may give rise to a claim for deceit, even without a subjective intent to deceive, Zimmerman v. Kent, 31 Mass. App. Ct. 72 (1991), and statements in the form of an opinion may constitute statements of fact if the recipient might reasonably understand "that there are facts to justify the opinion or at least that there are no facts that are incompatible with it." McEneaney, 38 Mass. App. Ct. at 575.
B. Elements of Deceit
To prevail in an action for deceit under Massachusetts law in these circumstances, Rockland Trust must show that Computer Associates (1) intentionally made a false representation of a material fact, (2) for the purpose of inducing reliance, (3) and that Rockland Trust relied upon the misrepresentation to its detriment. Cummings, 244 F.3d at 22 (citations omitted).
C. License Agreement
Rockland Trust identifies the following alleged misrepresentations in the negotiation of the original License Agreement: a misleading partial disclosure "regarding the status of the reengineering work on the loan applications" and affirmative misstatements "regarding the functionality and integration of the software and upgrades to the software."
In support of the first theory, Rockland Trust cites to discussions about a planned major overhaul of the Integrated Mortgage Loan program and upgrades to the other loan software.
There is no evidence that at the time the original License Agreement was negotiated and signed, Computer Associates knew the planned upgrades were going to fail, or even that the outcome was knowable at that point. Development on Integrated Mortgage Loans continued until late 1991 or early 1992, when it was terminated in favor of the Newtrend Group product. Development on Integrated Commercial Loans continued until 1994, when the outsourcing project with Computrol failed. I find those failures were not knowable in 1990. Because the ultimate outcome was unknowable at the time the License Agreement was signed, any predictions were best guesses or informed opinions, not facts. As such, they cannot be the basis for a deceit claim.
Rockland Trust's second theory, that Computer Associates misrepresented the level of integration of the software package when the License Agreement was negotiated, must fail as well. Because there was, and is, no agreement on how to operationalize the concept of "integration," whether a particular software package is integrated essentially becomes a matter of opinion, or at least a question of degree. Various reasonable people might disagree on whether the software package purchased under the License Agreement was "integrated," depending on their specific understanding of the term, or the particular needs of their business. There is no evidence that Rockland Trust received misleading answers to specific factual questions, and the bank had ample opportunity, which it took, to make its own judgment about whether the Computer Associates software was well-suited to the bank's overall integration needs. Because Rockland Trust had an opportunity to evaluate the Computer Associates software fully, in the form ultimately licensed, and there is no evidence showing misleading answers to factual questions, Rockland Trust's second theory as to fraudulent inducement of the License Agreement is unavailing, and I conclude no fraud in the inducement of the License Agreement has been established.
D. Addendum
Whether the Addendum to the License Agreement was fraudulently induced is a separate question. At the time the Addendum was negotiated and signed, development work on Integrated Commercial Loans was not going well. Computer Associates/Newtrend L.P. had outsourced work to Computrol, and it is clear that Newtrend L.P. employees were concerned about Computrol's ability to deliver a saleable product. However, such concerns are hardly unusual in technical development projects, especially where something is being produced which has never before existed. Inherent in the creative process is a risk of failure. There is no evidence that Newtrend L.P. expected or planned for the Computrol project to fail, only that the company was attempting to evaluate the risk of failure and make contingency plans.
As in the original License Agreement negotiations, any representations made as to the likelihood of success were not knowing, or knowable, misrepresentations at the time they were made. In retrospect, of course, Newtrend L.P. was overly optimistic. At the time, however, the promised upgrades to Integrated Commercial Loans were in progress, and there is no evidence to show that Newtrend L.P. and, more pertinently, through it Computer Associates knew, or should have known, that the project would not come to fruition. Just as I found in Section II supra that Fournier's discussions with Goodhue involved at most Fournier's expression of an optimistic opinion about the reengineered integrated Commercial Loans Product insufficient to support an actionable promise, I find the opinion expressed to be insufficient to support reasonable reliance by Rockland Trust or otherwise to evidence fraudulent inducement. Consequently, I conclude the Addendum was not fraudulently induced.
E. Chapter 93A Claim
Because I have found for Computer Associates on the deceit, misrepresentation, fraudulent inducement, and breach of implied warranty of good faith and fair dealing claims, there is no basis for a claim under Mass. Gen. Laws Ch. 93A.
IV. COUNTERCLAIM
More or less coincidentally with the initiation of this litigation, Rockland Trust stopped paying the outstanding license and maintenance fees under the contract. In failing to pay the remaining invoices, Rockland Trust breached its contract with Computer Associates. The core measure of damages is unpaid invoices in the amount of $1,089,113.73. In addition, Computer Associates asserts in a recent filing that it has incurred $1,160,586.81 in attorneys fees and costs as the costs of collection of the outstanding unpaid invoices. The propriety of the award of attorneys fees and costs is disputed by Rockland Trust. Rather than delay entry of judgment further, I will direct the clerk to enter judgment on the core damages claim. Computer Associates may choose to pursue attorneys fees and costs through, for example, a motion to amend or make additional findings under Fed.R.Civ.P. 52(b) or a motion to alter or amend the judgment under Fed.R.Civ.P. 59(e). Should it do so, I will establish a briefing schedule to resolve the matter with a view toward an amended judgment, if necessary and appropriate. For the time being, pursuant to the parties' Agreement to Limit Liability, I will award $272,278.43 in prejudgment interest, which constitutes 25% of the total core damages of $1,089,113.73. Post-judgment interest shall run in accordance with 28 U.S.C. § 1961 on the total sum of $1,361,392.16.
V. CONCLUSION
For the reasons stated more fully above, I direct the Clerk to enter judgment in favor of Defendant, Computer Associates, on the complaint of Plaintiff, Rockland Trust, Counts I, II, IV, V, VI, and VIII having been resolved by these Findings and Conclusions and Counts III and VII having been resolved in favor of Computer Associates on summary judgment in a Memorandum and Order dated September 8, 1999. I also direct the Clerk to enter judgment for Defendant, Computer Associates, on its counterclaim against Rockland Trust in the amount of $1,089,113.73 together with prejudgment interest in the amount of $272,278.43 for a total of $1,361,392.16; post-judgment interest shall be in accordance with 28 U.S.C. § 1961.