MECKLENBURG FURNITURE v. MAI SYSTEMS
| Decision Date | 28 July 1992 |
| Docket Number | No. C-C-90-147-P.,C-C-90-147-P. |
| Parties | MECKLENBURG FURNITURE SHOPS, INC., Plaintiff, v. MAI SYSTEMS CORPORATION, f/k/a MAI Basic Four, Inc., Defendant. |
| Court | U.S. District Court — Western District of North Carolina |
Bruce M. Simpson, James McElroy & Diehl, Charlotte, N.C., for plaintiff.
Charles A. Edwards, John R. Rittelmeyer, Raleigh, N.C., Elliott J. Stein, Tustin, Cal., for defendant.
THE TRIAL of this Action was held before this Court and a jury from 4 May 1992 through 7 May 1992 in Charlotte, North Carolina. Plaintiff alleges that Defendant and Plaintiff entered into a contract obligating Defendant to provide Plaintiff a custom computer system capable of performing functions specified by Plaintiff. Complaint of Plaintiff at 2. Plaintiff further alleges that Defendant made misrepresentations to induce Plaintiff to enter this contract and that Defendant ultimately breached the contract. Id. at 2, 3. Appearing for Plaintiff at trial was Bruce M. Simpson of the Charlotte law firm of James, McElroy & Diehl, P.A. Appearing for Defendant at trial were Charles A. Edwards and John R. Rittelmeyer of the Raleigh office of Graham & James.
At the close of Plaintiff's evidence, Defendant moved this Court for Judgment as a Matter of Law. See Fed.R.Civ.Pro. 50(a). After careful consideration, this Court granted the Motion of Defendant. Now, pursuant to that Order, the Court enters the following Findings of Fact and Conclusions of Law.
The Plaintiff, Mecklenburg Furniture Shops, Inc. ("Mecklenburg"), formerly did business in Charlotte, North Carolina as Mecklenburg Furniture Shops. Trial Transcript at 35, 311. Mecklenburg provided a wide variety of retail services to its customers, including interior planning and design, custom upholstery, rugs, accessories, and furniture. Trial Transcript at 35. In November of 1981, the Crewe family, consisting of Leonard Crewe, his wife Betty Crewe, and his son, Clarke Crewe, purchased Mecklenburg. Id. The three members of the Crewe family each played an active role in the management of Mecklenburg. Id. Leonard Crewe served as Chairman of the company, Betty Crewe as Secretary and Vice-Chairman, and Clark Crewe as President. Id. at 35, 90. Betty Crewe, in particular, focused on financial management and inventory control. Id. at 91.
In this capacity, Betty Crewe came to realize that Mecklenburg needed to upgrade its computer equipment. Id. Accordingly, in 1982, Mecklenburg purchased an IBM computer system. Id. Mecklenburg used this system for general accounting and inventory functions. Id. at 95. Betty Crewe was "very much involved in selecting" the software for this system and in working with a consultant in "implementing and testing the programs." Id. at 92. Betty Crewe had extensive prior experience in selecting and evaluating computer systems. Id. Subsequent to the purchase of the IBM system, the Crewes determined that Mecklenburg needed yet another computer system to be used strictly for telemarketing, bulk mail, and pricing. Id. at 93-94. To that end, Mecklenburg purchased a Tandy computer sometime in the mid 1980s. Id. at 94.
These systems soon proved unsatisfactory. Because the IBM system performed general accounting functions, all telemarketing data from the Tandy system had to be entered into the IBM system as well. Id. at 95. Given this and other disadvantages of the older systems, the Crewes decided to purchase another, more powerful computer system. Id. The Crewes hoped to decrease the labor required for duplicate data entry and gain faster computers. Id. Ultimately, the Crewes hoped to better serve their customers through greater efficiency. Id.
To assist Mecklenburg in its search for a new computer system, the Crewe family hired an outside consultant, the accounting firm of Seidman & Seidman BDO ("Seidman"). Id. at 96. Initially, the Crewes and the employees of Mecklenburg discussed the computer functions they needed or wanted. Id. at 97. Then, after committing this list to writing, Mecklenburg gave it to Claudia Miller, the Seidman employee working with Mecklenburg to secure a new computer system. Id. Miller then researched the needs of Mecklenburg and developed her own list. Id. This list, styled by Miller a "Request for Proposal," consisted of five sections and set out in detail the requirements of Mecklenburg and the criteria by which Mecklenburg would evaluate proposed computer systems. Plaintiff's Trial Exhibit 1; Trial Transcript at 97-98. On Mecklenburg's behalf, Seidman sent the Request for Proposal ("RFP") to six vendors of computer systems. Id. at 246. Of these six, only two submitted proposals. Id.
On 14 June 1988, Claudia Miller and Betty Crewe met to discuss the two responses to the RFP. Id. at 102-03. Just prior to this meeting, Mecklenburg had received a bill for tax and consulting services provided by Seidman. Id. The bill, which totalled approximately $10,000.00, was larger than Mecklenburg had anticipated. Id. As a result, Betty Crewe informed Miller that Mecklenburg could no longer afford the consulting services of Seidman. Id. at 102, 251. Without Seidman, Mecklenburg was forced to evaluate the two proposals without significant outside assistance. Id. at 251-52.
One of the responding vendors was Defendant, MAI Systems Corporation, then known as MAI Basic Four ("MAI"). Plaintiff's Trial Exhibits 1 and 2; Trial Transcript at 98. In part, MAI responded by making notations on the RFP and returning that document to Seidman. Plaintiff's Trial Exhibit 1; Trial Transcript at 100. Section II of the RFP is entitled "Instructions and Conditions." Plaintiff's Trial Exhibit 1 at § II. Paragraph six of that section provides:
Vendors are encouraged to submit concise and clear responses to the Request for Proposal. Attention is directed to Section III: Requirements, which provides details on information expected in the vendor responses. Mecklenburg reserves the right to include any part or parts of the selected vendor's proposal in the final contracts.
Id. An MAI representative made specific notations in the margin of the RFP at section II, paragraph six. Those notations provided: Id. These same abbreviations were used in the MAI manual, a separate document attached by MAI to its proposal. Trial Transcript at 235. Betty Crewe understood those notations to mean that RFP requirements marked "S" by MAI were a part of the standard MAI system, that requirements marked "W" by MAI were not a part of the standard MAI system but that MAI was willing to modify its standard system to meet those requirements, and that requirements marked "N" were unavailable from MAI. Id. at 100. Betty Crewe and others at Mecklenburg began referring to this marked-up RFP as the "SWN papers." Id. at 98.
On 16 June 1988, Betty Crewe met for the first time with Susan Gayda, an MAI sales representative who had previously worked with Claudia Miller of Seidman on the MAI response to the RFP. Id. at 103. Also at the meeting were Ed Rand, the Mecklenburg Controller, and Jeff Metheny, another Mecklenburg employee. Id. at 105. Those present discussed in detail the needs of Mecklenburg and the proposal submitted by MAI. Id. at 104. Particular attention was paid to those Mecklenburg requirements MAI had marked "W" or "N." Requirements marked "S" were not discussed. Id. During the course of this discussion, Gayda changed the notation on a few Mecklenburg requirements from "N" to "W." Id. at 106. Subsequently, near the end of June 1988, Betty Crewe, Clark Crewe, Leonard Crewe, Ed Rand, Jeff Metheny, and Amy Deaton, the Mecklenburg telemarketing manager, met with MAI representatives including Susan Gayda and Frank Kavanagh. Id. at 107. At that meeting, MAI demonstrated its computer system. Id. The meeting also involved discussions centered around Mecklenburg's needs for its telemarketing operation. Id. The SWN papers returned by MAI were incorporated into these discussions. Id. at 108.
After this meeting, there were no further substantive discussions between Mecklenburg and MAI until 15 July 1988. Id. at 109. On that date, Betty Crewe met again with Susan Gayda and a representative from Bell Atlantic-TriCon Leasing Corporation ("Bell Atlantic"). Id. During this meeting, Betty Crewe, as Secretary of Mecklenburg Furniture Shops, signed a Valid Data Software Contract and a MAI Purchase and License Agreement. Id. at 110-11; Plaintiff's Trial Exhibits 12 & 13. Later, on 25 July 1988, Betty Crewe signed a Bell Atlantic Leasing Agreement. Id. at 184. These documents reflect the means by which MAI provided a complete computer system to Mecklenburg: MAI Basic Four is a hardware manufacturer, Valid Data is an internal MAI retail furniture software vendor, and Tres Computer Concepts is an independent MAI software vendor for job costing1. Plaintiff's Trial Exhibit 2; Trial Transcript at 132-133. Further, in what was essentially a method of financing its purchase, Mecklenburg would lease all its MAI computer hardware from Bell Atlantic. Trial Transcript at 111; Plaintiff's Trial Exhibit 15. At the time she signed these contracts, Betty Crewe had before her the contracts, the MAI manual, and the SWN papers. Trial Transcript at 111. The contracts were not sprung upon Betty Crewe that day; she had them in her possession for approximately one month prior to the 15 July meeting. Id. at 263. Nevertheless, other than to verify the dollar amounts, Betty Crewe did not read any of these contracts. Id. at 183. Nor did she discuss the contracts with Susan Gayda. Id. Susan Gayda and Betty Crewe made only one modification to the contracts: the deletion of a software module for credit accounts receivable. Id. at 183, 262. Betty Crewe signed the contracts in such haste because she wanted to take advantage of a special discount available...
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