CRN Exclusive: IBM To Appeal $39 Million Lawsuit Verdict From 2010 Sterling Commerce Acquisition


Printer-friendly version Email this CRN article

IBM plans to appeal a multi-million-dollar verdict rendered against it in June from a lawsuit it inherited when it purchased an enterprise software vendor years earlier.

After a two-week trial, a federal jury in Tennessee awarded Jewelry Television $39 million to compensate the company on a software licensing and implementation deal gone awry with Sterling Commerce, which is now a division of Big Blue.

The Knoxville, Tenn.-based jewelry retailer sued Sterling back in 2009, claiming the software developer committed fraud by over-promising comprehensive and integrated solutions to manage its business operations.

[Related: IBM Sues To Stop Former CIO From Taking Leadership Position At AWS]

Liability in the case transferred to IBM in 2010 after it acquired Sterling from AT&T for $1.4 billion. Five years earlier, the telecom giant had merged with Sterling's parent, SBC Communications. Sterling Commerce and its 2,500 employees were subsequently rolled into IBM's WebSphere organization.

"We believe we presented a strong case against JTV's unwarranted claims against Sterling Commerce. We are disappointed by the jury's decision and plan to appeal," Doug Shelton, IBM's director of corporate communications, told CRN via email.

Jewelry Television, which sells its wares on television and the internet, first licensed warehouse management software from Sterling back in 2006. The next year, after a series of pitch meetings with Sterling representatives, the company signed additional contracts for purchase order and operations management solutions.

The customer's goal was to create a state-of-the-art warehouse for distributing jewelry after a phase of rapid growth that overstretched its custom-built legacy system, said JTV's attorney, David Shapiro.

Sterling's representatives convinced JTV to go beyond the warehouse management software and purchase the two other software packages. The developer claimed the three products could all be integrated to create a seamless back-end management platform.

"They kept repeating they had implemented all three for customers prior to JTV and that turned out to be blatantly false," Shapiro told CRN.

In its response to JTV's request for proposal, and in subsequent conversations, Sterling pegged implementation costs at a max of $2 million, the suit claimed.

Printer-friendly version Email this CRN article