Cataloger could hold vendors liable for millennial snafus

Apr 01, 1999 10:30 PM  By

It’s Dec. 31, 1999, and your management software system is working beautifully. But then you come to work after New Year’s Day 2000 to find your computers spewing error messages and your records destroyed.

Some might say that there’s nothing left for you to do but sue your software vendor. And while suppliers may claim not to be worried about lawsuits, Stamford, CT-based research firm Gartner Group estimates that worldwide Y2K-related legal damages could run as high as ñ2 trillion.

“You will see vendors getting sued and being held accountable,” predicts attorney Tina Talarchyk, an associate at West Palm Beach, FL-based law firm Bakst, Cloyd, and Bakst. Vendors such as software suppliers typcially present themselves as experts, and this positioning, she explains, could lead catalogers to charge that the vendors should have known about any Y2K snafus beforehand. A prosecutor could then claim breach of contract, misrepresentation, or breach of warrantee.

To bolster their case should they become the victim of the “millennium bug”-as well as to troubleshoot potential problems-a number of catalogers have been sending questionnaires to service providers and vendors to gauge their Y2K-compliance. The letters “establish the foundation for liability and therefore pass the liability hot potato back to the source,” says Ernie Schell, a catalog systems consultant in Southampton, PA. “The cataloger, in essence, is trusting the validity of the vendors’ claims of readiness.”

Elmira, NY-based stationery cataloger Artistic Direct mailed compliance forms to each of its vendors, asking questions such as “Can your company ensure that delivery of products and/or services will not be interrupted during or after Jan. 1, 2000?” Likewise, ñ258.2 million gifts cataloger Lillian Vernon, which says it will spend more than ñ2 milllion to ensure it is Y2K-compliant, has sent 2,200 letters to foreign and domestic vendors verifying compliance. “Our suppliers’ ability to meet the deadlines on their purchasing orders, for example, is crucial to our business,” says spokesman David Hochberg. If a vendor signs a document stating it was Y2K-compliant but then fails to fulfill orders because of amillennium bug problem, Lillian Vernon has grounds for a lawsuit.

What, me worry? But for now, suppliers seem more interested in fixing potential problems than in bracing for lawsuits. “We hadn’t thought a whole lot about liability,” says Richard Davenport, business unit leader of Little Rock, AR-based software supplier MorTech. “Our main concern was testing our Premier software system for Y2K glitches.” And Bruce T. Holmes, founder of Haven, the Evanston, IL-based developer of order processing and fulfillment software Mail Order Wizard, says, “I don’t think there will be a lot of legal action taking place. The relationship between a vendor and the cataloger is a marriage of sorts, and the relationship is a strong one. We will get through this.”