Law Research Service, Inc. v. General Automation, Inc., 380

• Decision Date: 14 March 1974
• Docket Number: Docket 73-2115.,No. 380,380
• Citation: 494 F.2d 202
• Parties: In re LAW RESEARCH SERVICE, INC., Appellant, v. GENERAL AUTOMATION, INC., Appellee.
• Court: U.S. Court of Appeals — Second Circuit

494 F.2d 202 (1974)

In re LAW RESEARCH SERVICE, INC., Appellant, v. GENERAL AUTOMATION, INC., Appellee.

No. 380, Docket 73-2115.

United States Court of Appeals, Second Circuit.

Argued January 23, 1974.

Decided March 14, 1974.

Jane Compton, New York City, for appellant.

Michael Wexelbaum, New York City (Sherman & Citron; Howard Karasik, New York City, of counsel), for appellee.

Before HAYS, MANSFIELD and OAKES, Circuit Judges.

OAKES, Circuit Judge:

This appeal is by a Chapter XI debtor, Law Research Service, Inc. ("Law Research"), an erstwhile supplier of computer services to legal researchers, from an order of the district court affirming the referee's order allowing in full the claim of a creditor, General Automation, Inc. ("General"), for computer hardware and software sold and delivered. Law Research claimed below (1) that it owed nothing because General had not delivered the entire "software package" essential to operation of its service which had been contracted for¹ and (2) that at least it did not owe the $14,000 contract price for that software. The debtor also claimed that the controlling measure of its indebtedness, if any, was by way of a December 31, 1970, invoice for $103,485 (less concededly inapplicable quantity discounts) rather than a subsequently rendered "corrected invoice" dated back to the same date for $115,635 (less an inapplicable quantity discount). We agree with the court below and the referee on the software claim, but remand for further findings in respect to the proper amount of the invoice.

As stated, the debtor-appellant's business was supplying computerized legal research to lawyers; this was being done through a controlled subsidiary corporation in Pennsylvania, by way of a central computer, duly programmed with case materials, which processed questions from lawyers or law libraries through the use of remote computer terminals (teletypewriters) in their offices. In an agreement dated June 19, 1970, and signed by the parties on June 25, 1970, debtor agreed to buy and General to sell up to 50 computer systems and components, but if only a few were purchased the purchase price was subject essentially to disallowance of the quantity discount in whole or in part and was also subject to payment of $14,000 for the "special software package and documentation" which was to be delivered with the first computer system.² The contract incorporated (1) General's standard "terms and conditions" which inter alia provided that "All clerical errors are subject to corrections"; (2) a June 18, 1970, letter relating to a firm, noncancellable order for one prototype system in consideration of which General agreed to "provide the initial software to enable you to operate your prototype system"; and (3) the letter in turn incorporated a quotation for the overall system which was made by General to debtor on June 10, 1970.

Only one system was ever ordered or delivered. That one worked up until the time the hardware was removed by General, apparently for nonpayment. The hardware was returned to the debtor, pursuant to a turnover order by the referee, dated July 22, 1971, but the system was subsequently not put back into operation for reasons that do not clearly appear. The creditor, General, seeks allowance of its claim on the basis of its "corrected invoice" and as we have said, prevailed below.

The appellant's first contention on this appeal is that the entire software package that was called for in the contract and duly ordered was not delivered. This claim is that insufficient "system documentation" was delivered to permit the debtor to operate the computer independently of General. There was evidence before the referee, however, that the system was at all times operating properly and that the alleged missing documentation was a manual which, according to the testimony of General, credited by the referee, is not delivered with special application software such as was specifically developed here for the buyer's specific needs. Operator's manuals and programmer's manuals were given as a part of the overall software³ package delivered; these relate to the hardware itself and explain how to operate it. But nothing was furnished to explain and instruct the customer how the software itself operated, although a description of the software system in summary form was attached to the original contract, or rather the letter of June 18, 1970, incorporated therein. The complaint of the appellant's president in testimony before the referee related to a lack of "documentation" but there was no evidence to show that in this type of special application, software material, in addition to that actually supplied, is required to be furnished, either by the custom of the trade or under the terms of the contract or its supporting documents. The contract itself called only for providing "the initial software to enable you to operate your prototype system." The referee's finding that the contracted for software was delivered is not "clearly erroneous," which under General Order No. 47 (28 U.S.C.) is our guideline for review.

The invoice question is more difficult, partly because the record is insufficient and partly because the appendix presented to us is both somewhat jumbled and incomplete. No more jumbled, however, than General's billing system; for a company in the business of selling computer systems, General's billing of appellant contained more errors, clerical or otherwise, than pocket computers have keys. One would hope...