| |
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN (139304)
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
MELVYN I. WEISS
MICHAEL C. SPENCER
SALVATORE J. GRAZIANO
One Pennsylvania Plaza
New York, NY 10119-0165
Telephone: 212/594-5300
LAW OFFICES OF GARY MILLER
GARY MILLER
77 Spruce Street, Suite 206
Cedarhurst, NY 11516
(516) 374-0080
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF MARIN
ATLAZ INTERNATIONAL, LTD., On Behalf of Itself
and All Others Similarly Situated,
Plaintiff,
vs.
SOFTWARE BUSINESS TECHNOLOGIES INC.
and SBT ACCOUNTING SYSTEMS INC.,
Defendants.
___________________________________
Case No. 172539
CLASS ACTION
COMPLAINT FOR DAMAGES AND INJUNCTIVE RELIEF BASED UPON
BREACH OF WARRANTY; FRAUD; AND FRAUDULENT AND UNFAIR BUSINESS PRACTICES
Plaintiff Demands A Trial By Jury
Plaintiff makes the following allegations for its Complaint. The allegations are based upon information and belief, except for those allegations pertaining to plaintiff and its counsel, which are based upon knowledge.
1. This is an action asserting breach of warranty and related claims in connection with defective accounting computer software (the SBT Pro Series) developed and sold by defendants. The defects concern the inability of the software (prior to Version 3.2i, which was introduced in March 1997) to recognize and handle dates starting in the year 2000. In contrast to many other software companies, which are correcting "Year 2000 problems" and providing those corrections free of charge to their customers, defendants are improperly requiring customers to pay substantial fees to purchase upgrades in order to remedy the defect. Plaintiff is suing on behalf of a class of persons whose SBT Pro Series software has the same problem. Plaintiff estimates that over $50 million in fees are involved.
JURISDICTION AND VENUE
2. This Court has jurisdiction over all causes of action asserted herein pursuant to the California Constitution, Article VI, §10, because this case is a cause not given by statute to other trial courts.
3. This Court has jurisdiction over each defendant named herein because each defendant is an association authorized to do business in California and registered with the California Secretary of State, or does sufficient business in California, has minimum contacts with California, or otherwise intentionally avails itself of the markets within California, through the promotion, sale, marketing and distribution of products and services in California, to render the exercise of jurisdiction by the California courts permissible under traditional notions of fair play and substantial justice. The claims asserted in this action have sufficient connection with California to justify the application of California law to all claims asserted herein.
4. Venue is proper in this Court because a substantial portion of the transactions complained of herein occurred in this county, and the products at issue were advertised, promoted, sold and distributed in this county. Defendants have received substantial compensation from the sales of these products in this county and by doing business that had effects in this county.
THE PARTIES
5. Plaintiff Atlaz International, Ltd. is a New York corporation. Plaintiff sells computer equipment, but it has not sold any of SBT's products.
6. Defendant Software Business Technologies Inc. is a holding company operating through subsidiaries. Defendant SBT Accounting Systems Inc. is its principal operating subsidiary. The two companies are referred to collectively herein as "SBT." SBT has its principal place of business at 1401 Los Gamos Drive, San Rafael, California 94903.
7. SBT describes itself as "the leading developer of modifiable database accounting software, with over 60,000 sites serving 300,000 business users worldwide." SBT offers four product lines, each one aimed at a distinct segment of the accounting and Internet market: the SBT Pro Series at issue in this case, as well as SBT Vision Point, SBT Small Business Accountant and SBT WebSeries.
FACTUAL ALLEGATIONS
8. SBT Pro Series is an accounting software package marketed to small- and medium-sized companies. SBT describes Pro Series as "the world's most widely-installed, high-end Windows accounting software, designed to meet the needs of business today and into the next century." Available applications or modules for SBT Pro Series include: System Manager, General Ledger, Accounts Receivable, Accounts Payable, Inventory Control, Sales Orders, Purchase Orders, Payroll, WebTrader and WebAlert.
9. Plaintiff purchased Version 2.5i of SBT Pro Series from defendants and later received Version 3.0i as an upgrade. Included in plaintiff's purchases were the following SBT Pro Series applications or modules: System Manager, General Ledger, Accounts Receivable, Accounts Payable, Inventory Control, Sales Orders and Purchase Orders.
10. In March 1997, SBT introduced Version 3.2i, which has the same feature set and architecture as Version 3.0i. According to SBT's product release literature, the only significant difference between the two versions is that Version 3.0i will recognize a date entry of "01" as the year 1901, whereas Version 3.2i will recognize the entry as the year 2001. In other words, Pro Series packages prior to Version 3.2i are materially defective and will not function properly with regard to dates after December 31, 1999. Those packages are afflicted with what has become known as the "Year 2000 problem" or the "Millennium Bug."
11. Plaintiff and other owners of Pro Series packages prior to Version 3.2i accordingly must obtain Version 3.2i, and pay the purchase price for that version to SBT and related licensing and conversion costs, if they wish to correct the defect and enable their computers to function properly with respect to dates starting in the year 2000.
12. The SBT Product Launch Bulletin for Pro Series 3.2i states as follows:
Why should my customers be concerned now about the Year 2000?
The process of making the change to support the Year 2000 is time-consuming. Many companies, organizations and individuals either underestimate the effort involved or are not even aware of the problem. SBT recognized the issues early and has made the necessary changes in Pro Series 3.2i to not only correctly handle years beyond 1999, but to also do it in such a way that is seamless to our users.
13. SBT has not offered Pro Series 3.2i, or any other fix for Year 2000 problems in Pro Series software, free of charge to plaintiff or other owners of Pro Series software. By comparison, many other companies are providing Year 2000 fixes free of charge to their customers. For example, Computer Associates, one of the largest software companies, provides this policy statement:
Computer Associates' basic support for the millennium date change (Year 2000) provides or will provide for proper operation of our products according to their published documentation. In most cases, this means simply assuring that dates are evaluated and processed properly for sequence and comparison. Testing and Quality Assurance processes are carried out to validate the operation of these products as related to the millennium date change, and any functional errors will be accepted as issues (bugs) and resolved according to our standard maintenance and support policies.
As long as a user's license for each respective CA program remains in effect and active on maintenance, the user will be entitled to all of the benefits of CA's implementation of Year 2000 date support as described above. Of course, nothing herein should be deemed to modify in any way any of the terms or conditions of any existing license between us respecting any CA program.
CLASS ACTION ALLEGATIONS
14. Plaintiff brings this action on behalf of itself and all others similarly situated. The class which plaintiff seeks to represent is composed of all persons or entities who purchased SBT Pro Series software prior to March 1, 1997 (the "Class").
15. The Class is composed of thousands of persons and entities in California and worldwide. The joinder of all Class members individually in one action would be impracticable, and the disposition of their claims in a class action will provide substantial benefits to both the parties and the Court. The Class is sufficiently numerous for class treatment.
16. As an owner of Pro Series Version 2.5i and 3.0i software, plaintiff is asserting claims that are typical of the claims of the Class, and plaintiff will fairly and adequately represent and protect the interests of the Class in that it has no interests antagonistic to those of the other members of the Class. Plaintiff has retained counsel who are competent and experienced in the prosecution of class action litigation.
17. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. Since the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation makes it impracticable for the Class members individually to seek redress for the wrongful conduct alleged herein. If class treatment of these claims were not available, defendants would likely unfairly receive payment for upgrades to remedy the Year 2000 problem in the defective software packages they sold or would otherwise escape liability for their wrongdoing as challenged in this litigation.
18. Common questions of law and fact exist as to all members of the Class. The common questions predominate over any questions which may affect individual members of the Class. Among the questions of law and fact common to the Class are the following: (a) whether defendants' acts as described herein constituted violations of law; (b) the extent of damages sustained by members of the Class; and (c) the appropriate measure of damages.
19. The names and addresses of Class members are available from defendants or their agents. Notice can be provided to such owners by a combination of mail and published notice.
FIRST CAUSE OF ACTION
For Breach Of Warranty
Against All Defendants
20. Plaintiff repeats and incorporates the allegations set forth above as part of this cause of action.
21. SBT Pro Series software packages were sold pursuant to an express written warranty which stated:
LICENSOR WARRANTS THAT THE PRODUCT WILL OPERATE IN SUBSTANTIAL CONFORMITY WITH ITS WRITTEN SPECIFICATIONS FOR A PERIOD OF . . . FIVE YEARS AFTER THE DATE OF LICENSE . . . .
* * *
Licensor reserves the right, without notice to supersede versions of Products with newer versions which may add, modify, or eliminate functionality of earlier versions. Such newer versions may be provided by Licensor as warranty replacements.
22. Due to the defect alleged herein, the SBT Pro Series software packages prior to Version 3.2i do not operate in substantial conformity with their written specifications.
23. For example, according to the Version 3.0i Accounting Applications sales brochure, the "Accounts Payable Specifications" for the Accounts Payable application or module state that the "maximum due days" are "999" and the "maximum days for discount" are "999." However, SBT Pro Series packages prior to Version 3.2i do not operate in substantial conformity with those specifications. For example, if a user were to enter a payment due date after January 1, 2000 (or any other date after December 31, 1999), the system would not function properly. This is because the system would interpret that the invoice is payable immediately because it would incorrectly calculate a date ending in "00" as earlier than the present date. Thus, while the Accounts Payable Specifications provide for the entry of invoices with payment due within 999 days of the invoice, or 32 months, the number of months now remaining before the year 2000 is less than 26. Both the "maximum due days" and the "maximum days for discount" functions will become increasingly problematic as the date approaches January 1, 2000.
24. The Accounts Receivable application or module also has serious functionality defects as a result of the Year 2000 problem. For example, all finance charge calculations that are based on a date calculation that extends into the year 2000 will be incorrect, because dates in the year 2000 will be improperly recognized as earlier than dates in 1999, 1998, 1997, etc. Aging of customer accounts with aging schedules extending into the year 2000 also will be incorrect. Indeed, the system will malfunction for all payments received in the year 2000 regarding invoices which were issued prior to the year 2000.
25. All of the SBT Pro Series applications or modules provide for displaying or printing accounting reports with the feature of choosing a date range for the data to be displayed or printed. The date range feature requires the user to select a beginning date and an ending date for the data to be displayed or printed. In all cases, the software requires that the beginning date be earlier than the ending date. Since the Pro Series system format for date selection is MM/DD/YY (2 digits each for month, day and year), selecting an ending date in the year 2000 would cause the system either to reject the selection or to create an incorrect report. In addition, sorting by date field will be defective in that the year 2000 dates will appear before dates in 1999, 1998, 1997, etc. Examples of accounting reports that are subject to those problems are:
(a) General Ledger: General Ledger Report, Income Statement;
(b) Accounts Payable: Invoice Register, Aged Payables Report, Selected AP Journal, Approved To Pay Report, Cash Requirements Report, Discount Report, Credit Card Transaction Report, Check Register and Bank Reconciliation Report;
(c) Accounts Receivable: AR Journal, Sales Analysis, Sales Tax Report, Invoice Register and Cash Receipts Journal; and
(d) Purchase Orders: Open Orders, Open Order Summary Report, Open Order Detail Report, Unbilled Receipts, Purchase Order Status, Pending Inspections, Completed Inspections, Blanket Orders and Drop Shipment Status Report.
26. In general, all of the SBT Pro Series applications or modules suffer from severe defects as a result of the Year 2000 problem.
27. Plaintiff has provided defendants with timely notice of the breach of warranty alleged herein. Defendants have failed to provide the Class with a nondefective version of SBT Pro Series as a warranty replacement. Defendants accordingly have breached their express warranty.
28. As a result of the foregoing, plaintiff and the members of the Class have suffered damages. Such damages include, without limitation, replacement costs of the software and costs for installing and implementing the replacement software.
SECOND CAUSE OF ACTION
For Fraud And Deceit
Against All Defendants
29. Plaintiff repeats and incorporates the allegations set forth above as part of this cause of action.
30. Plaintiff and the other members of the Class, without knowledge of the falsity of defendants' statements and of defendants' material omissions, and believing defendants' statements to be true and complete, and in reasonable and justifiable reliance upon the statements and representations made by defendants, purchased SBT Pro Series software packages in reliance upon the truth and completeness of the statements contained in the defendants' sales materials and other representations made by defendants. Plaintiff and the other members of the Class would not have purchased their SBT Pro Series software packages except for their reliance upon the representations made by defendants in offering such systems for sale.
31. At the time the statements and representations were made by defendants, defendants were in a superior position to know the true facts regarding the SBT Pro Series software packages and the Year 2000 problem those software packages contained and either knew or recklessly disregarded the same. Defendants owed a duty to disclose the true facts to plaintiff and the Class members but failed or refused to do so, choosing instead to fraudulently conceal the true facts from the public.
32. At the time of their false statements, misrepresentations and omissions, defendants intended that Class members, including plaintiff, act on the basis of the misrepresentations and omissions contained in their sales materials in deciding whether to purchase the accounting packages, and plaintiff and the other Class members reasonably relied thereon to their detriment in making such decisions.
33. Had plaintiff and the members of the Class known of the material facts which defendants wrongfully concealed and misrepresented and the falsity of defendants' representations, plaintiff and the members of the Class would not have made any such purchases.
34. Plaintiff and the members of the Class, as a result of their purchases and by reason of defendants' wrongful concealments and misrepresentations, have sustained general and incidental damages in an amount to be proven at trial.
35. Defendants' suppression of the material facts concerning the Year 2000 problem contained in their SBT Pro Series software packages defrauded plaintiff and the Class in violation of California Civil Code §§1572, 1709 and 1710 and principles of common law, for which violations plaintiff and members of the Class are entitled to recover damages.
THIRD CAUSE OF ACTION
For Fraudulent And Unfair Business Practices In Violation Of
California Business And Professions Code §17200, et seq.
Against All Defendants
36. Plaintiff repeats and incorporates the allegations set forth above as part of this cause of action.
37. California Business and Professions Code §17200 prohibits acts of unfair competition, which includes any "unlawful, unfair or fraudulent business practice."
38. The misrepresentations and nondisclosures by defendants of the material facts concerning the Year 2000 problem contained in the SBT Pro Series software packages constitute an unfair business act or practice within the meaning of Business and Professions Code §17200 because defendants knew or should have been aware at all relevant times that the SBT Pro Series software packages contained such material problems.
39. As a result of the conduct described above, defendants have been and will be unjustly enriched at the expense of plaintiff and the members of the Class. Specifically, defendants have been unjustly enriched by the receipt of monies and profits from the sales of thousands of SBT Pro Series software packages, both in California and throughout the United States.
40. Pursuant to Business and Professions Code §§17203 and 17535, plaintiff seeks an order by this Court ordering disgorgement by defendants of their ill-gotten gains and awarding plaintiff and the members of the Class full restitution of all monies wrongfully acquired by defendants by means of such acts of unfair competition, plus interest and attorneys' fees pursuant to, inter alia, California Code of Civil Procedure §1021.5, so as to restore any and all monies to plaintiff and the members of the Class which were acquired and obtained by means of such unfair competition, and which ill-gotten gains are still retained by defendants. Plaintiff additionally requests that such funds be impounded by the Court or that an asset freeze or trust be imposed upon such revenues and profits to avoid dissipation or fraudulent transfers or concealment of such monies by defendants. Plaintiff and the Class may be irreparably harmed or denied an effective and complete remedy if such an order is not granted.
PRAYER FOR RELIEF
WHEREFORE, plaintiff, on behalf of itself and on behalf of the members of the Class defined herein, prays for judgment and relief as follows:
1. An order certifying that the action may be maintained as a class action;
2. Compensatory damages in an amount to be proven at trial;
3. Equitable and injunctive relief as permitted by law or equity, including disgorgement, imposition of a constructive trust, impounding or attaching defendants' ill-gotten monies, freezing defendants' assets, requiring defendants to pay restitution to plaintiff and all members of the Class and restoring to the public all funds acquired by means of any act or practice declared by this Court to be an unlawful, fraudulent or unfair business act or practice, a violation of laws, statutes or regulations, or constituting unfair competition or false, untrue or misleading advertising;
4. Awarding plaintiff reasonable attorneys' fees, costs and expenses incurred in connection with this suit;
5. Pre- and post-judgment interest; and
6. Such other and further relief as the Court may deem necessary or appropriate.
JURY DEMAND
Plaintiff demands a trial by jury.
DATED: December 2, 1997
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
REED R. KATHREIN
______________________________
REED R. KATHREIN
222 Kearny Street, 10th Floor
San Francisco, CA 94108
Telephone: 415/288-4545
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
MELVYN I. WEISS
MICHAEL C. SPENCER
SALVATORE J. GRAZIANO
One Pennsylvania Plaza
New York, NY 10119-0165
Telephone: 212/594-5300
LAW OFFICES OF GARY MILLER
GARY MILLER
77 Spruce Street, Suite 206
Cedarhurst, NY 11516
(516) 374-0080
Attorneys for Plaintiff