The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER
The plaintiff, Bell Sports, Inc. ("Bell" or the "plaintiff")
initiated this action against System Software Associates, Inc.
("SSA") and SSA MidAtlantic ("SSA MidAtlantic") (collectively,
the "defendants") on December 5, 1997 by filing a complaint
alleging seven causes of action. These causes of action arise
from Bell's acquisition of certain computer software from SSA and
certain support services to run the computer software from SSA
The first cause of action sets forth a claim of fraudulent
inducement against both defendants. Bell asserts that the
defendants made material misrepresentations that they knew to be
false to induce it to enter into a contractual relationship. The
second cause of action mirrors the first and asserts a claim of
common law fraud against both defendants. The third and fourth
causes of action seek declaratory judgments against SSA and SSA
MidAtlantic, respectively, seeking a declaration that all
agreements between Bell, SSA and SSA MidAtlantic are null and
void ab initio. The fifth cause of action contends that SSA
intentionally breached certain warranties in connection with a
Software Licensing Agreement. The sixth cause of action claims
that SSA intentionally breached the Software Licensing Agreement.
Finally, the seventh cause of action asserts that the conduct of
both defendants in connection with the Software Licensing
Agreement constituted gross negligent misrepresentation.
On April 23, 1999, the Court rendered a decision on the motions
by the defendants for judgment on the pleadings pursuant to Rule
12(c) of the Federal Rules of Civil Procedure ("Fed. R. Civ.P.").
The court dismissed the first, second, third, fourth and seventh
causes of action. The basis for the Court's dismissal of the
fraud counts was that:
Bell Sports Inc. v. System Software Associates, Inc.,
45 F. Supp.2d 220, 228 (E.D.N.Y. 1999).
Pursuant to Fed.R.Civ.P. 60(b) and Local Civil Rule 6.3, Bell
now moves for reconsideration of the Court's April 23, 1999
decision. In addition, Bell moves to amend its complaint pursuant
to Fed. R.Civ.P. 15(a).
Familiarity with the facts and the Court's prior decision is
presumed, and will not be reiterated here. Briefly stated, the
factual background of this case as set forth in the plaintiff's
complaint is as follows. Bell is in the business of designing,
manufacturing and marketing bicycle helmets, bicycle accessories
and auto racing helmets. SSA is in the business of developing and
licensing complex computer software. SSA MidAtlantic is in the
business of providing consulting and advisory services regarding
the authorization and installation of the SSA licensed software.
SSA owned an equity interest in SSA MidAtlantic.
In 1993, American Recreation Company Holdings, Inc. ("ARC"),
the name of the company before it merged with Bell in 1995,
decided to conduct a major overhaul of its business software as
its then existing software was insufficient to address all of its
needs. ARC's major concerns were that its new software be fully
integrated so that data entered into one individual computer at
one location would trigger automatic updates throughout the
plants and facilities and that the new software have the
capability of tracking important information.
In 1993, ARC formed a team of personnel to detail specific
requirements for a new software package. As a result, ARC
distributed a Request for Proposal ("RFP") to software
developers, including SSA, which sought detailed information and
asked specific questions regarding the features of the respective
software and the capabilities of the software in relation to
ARC's business and needs. Each RFP included a section that asked
the software vendor whether its product had certain specific
standard functions. For each specific standard function, a "Yes,"
answer meant that the current release of the existing software
had that specific function. SSA MidAtlantic responded on behalf
of SSA to ARC's RFP and provided a detailed description of its
Business Planning and Control System Software ("BPCS"). SSA
MidAtlantic's response contained a large number of "Yes"
responses, representing to ARC that BPCS met approximately 80
percent of the specific performance criteria listed in its RFP.
In light of this favorable response, ARC commenced a series of
meetings with SSA MidAtlantic to further explore BPCS's
capabilities. At these meetings, ARC repeatedly stressed its
business needs and what was expected of its BPCS. SSA, through
SSA MidAtlantic, consistently represented to ARC that BPCS would
satisfy those needs. Based upon these representations, ARC
decided to select SSA as its software vendor and to license BPCS.
Thereafter, SSA, SSA MidAtlantic and ARC entered into contract
negotiations that culminated in the execution of several written
On April 29, 1994, SSA and ARC executed a Software Licensing
Agreement that granted ARC a license to use SSA's BPCS, version
4.x, in exchange for a substantial fee. SSA assured ARC that its
software package comported with SSA's representations regarding
the then-current standard functions of BPCS. SSA specifically
warranted that the software "shall function substantially in
accordance with the related user documentation provided by SSA."
In addition, the parties executed a side letter, dated April 29,
1994, that supplemented and modified the Software Licensing
Agreement. The side letter provided
that the limitations of liability and disclaimers of warranty set
forth in the Software Licensing Agreement would not apply "in the
case of gross negligence, willful misconduct, or intentional
breach of contract on the part of SSA."
Contemporaneously with the execution of the aforementioned
agreements, SSA MidAtlantic and ARC executed a Professional
Services Agreement ("PSA"), dated April 29, 1994, ("the Service
Agreement"), which set forth the training, installation services
and support for BPCS that ARC would receive from SSA MidAtlantic.
Bell asserts that SSA and SSA MidAtlantic knew at the time that
they signed all of these agreements that BPCS could not perform
in the manner represented by them and that they willfully and
intentionally misled ARC, fraudulently inducing it to enter into
the Licensing Agreement, the Service Agreement and the side
letter dated April 29, 1994.
While negotiating the Software Licensing Agreement, it became
apparent to ARC that version 4.x of BPCS was deficient in several
material respects and that several critical modifications were
necessary in order for BPCS to be able to perform in a manner
that complied with ARC's original requirements, as well as SSA's
representations. By letter dated May 2, 1994, SSA MidAtlantic
agreed to make such modifications, and agreed that the software
and modifications would "meet the required applications
stipulated by [ARC]."
After execution of the aforementioned agreements, ARC began to
implement BPCS. SSA MidAtlantic personnel conducted the training
at ARC and at SSA MidAtlantic's facilities to prepare for the
conversion of ARC's system to BPCS. During the process, ARC
alleges that they began to discover significant shortfalls in the
performance capabilities of BPCS, and many major deviations from
representations made in SSA's response to ARC's RFP and
throughout ARC's software vendor selection process. Once
discovered, ARC repeatedly raised with SSA MidAtlantic the issue
of the lack of functionality of BPCS. In January, 1995 ARC also
wrote to SSA MidAtlantic expressing ...