Pattern: Three’s a Crowd

[Adapted from Patterns in IT Litigation: Systems Failure (1976-2000)]

Summary: This pattern actually lumps together two sub-patterns. In the first, the client purchases an IT system from the vendor by way of a leasing firm. The client is dissatisfied with the system and stops payment, whereupon the leasing firm sues the client. In the second sub-pattern, the client hires a consultant to recommend, select, or add value to system(s), vendor(s) and/or manufacturer(s). Problems occur in the development, installation, and/or use of the selected and possibly modified systems and the client blames the consultant, who may in turn blame the vendor/manufacturer. In both cases, someone other than the client and the vendor is being impacted by alleged problems with the system.

Causes: In a vendor/leasing firm/client triangle, the client usually signs a lease with a “hell or high water” clause, obligating it for the full lease regardless of the quality and usefulness of the system. At that point, the client is stuck with that obligation, and in the cases reviewed, the court consistently upheld that clause.

The various vendor/consultant/client triangles typically boil down to mutual finger pointing, with each party seeking someone else to blame. Consultants were most at risk in cases where they were making recommendations to clients; some courts found that the consultants were acting in a professional capacity and thus were held to a higher standard.

Recommendations: In at least one leasing case, while the court upheld the “hell or high water” clause on behalf of the leasing company, it ultimately ruled against the vendor because the vendor agreed to assume full liability under the clause should the system prove unacceptable to the client. Clients should keep this in mind, recognizing that otherwise the vendor has only limited exposure, if any, should the system prove unsatisfactory.

As for consultants, value-added retailers (“VARs”), and other third parties, the need for clear communication and agreement among all parties is critical. Make sure that the client knows exactly what you are (and are not) providing; likewise, be sure you have confidence in whatever systems you are using, acquiring, or recommending.

About the Author: bfwebster

Webster is Principal and Founder at at Bruce F. Webster & Associates, as well as an Adjunct Professor for the BYU Computer Science Department. He works with organizations to help them with troubled or failed information technology (IT) projects. He has also worked in several dozen legal cases as a consultant and as a testifying expert, both in the United States and Japan. He can be reached at 303.502.4141 or at bwebster@bfwa.com.