The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court
The School District of Niagara Falls ("Niagara Falls") commenced this
action against Defendants, CrossPointe, LLC, ("CrossPointe") on
December 7, 2007 in New York State Supreme Court, County of Niagara,
alleging claims for breach of contract. CrossPointe removed the action
to this Court on January 10, 2008 on diversity grounds.*fn1
1.) Presently before this Court are Crosspointe's (Docket No. 30) and
Niagara Falls' (Docket No. 40) Motions for Summary Judgment. For the
following reasons, CrossPointe's motion is granted in part and denied
in part, while Niagara Falls' motion is denied.
The facts of this case are relatively straightforward. In 2004, Niagara Falls decided to upgrade its computer software because, in part, its old software was being discontinued.
(Defendant's Statement of Facts (Def.'s State."), ¶ 7; Docket No.
33.)*fn2 On January 26, 2005, Niagara Falls, through
the Ulster County Board of Cooperative Educational Services ("BOCES"),
entered into a Master Agreement ("Agreement") with and licensed new
software from CrossPointe. (Id., ¶ 11.) Generally, Crosspointe agreed
to provide Niagara Falls with software that was intended to manage
payroll, human resource, personnel, and student records.*fn3
(Id., ¶ 14.) In return, Niagara Falls contracted to pay
CrossPointe $735,000 for software licensing fees, $150,000 for
maintenance fees spread out through the first five years of
implementation, and $537,000 in conversion fees.*fn4
(Id., ¶¶ 15-16.) Niagara Falls paid everything except the maintenance
fees for the third, fourth, and fifth years, for a total of
$1,347,000. BOCES reimbursed Niagara Falls for approximately 83
percent of the purchase price, making Niagara Falls' final share
$228,990. (Id., 16.)
CrossPointe began to implement the software in early 2005, but the parties never formally agreed on a completion deadline for the project. (Id., 25.) Niagara Falls, however, claims that it expected the software to be completed "in a short duration," and thought that the product would be ready to work "out of the box." (Declaration of Darlene Sprague ("Sprague Decl."), ¶ 4; Plaintiff's Statement of Facts (Pl.'s State."), ¶ 14; Docket No. 38.) Crosspointe disagrees with this characterization and notes that even Niagara Falls employees knew that implementation was a "process, as opposed to an event." (Defendant's Response to Pl.'s State., ¶ 14; Docket No. 46.)
By any account, the implementation was not completed in a short time period. In April of 2006, Niagara Falls Superintendent Carmen Granto started to become nervous that the project was not going smoothly because, at that time, the payroll software was still not functioning.*fn5 (Def.'s Stat., ¶ 25.) Because the project was taking longer than Niagara Falls expected, it set up a meeting with Crosspointe in August of 2006 to address its concerns. (Id., ¶ 25; Sprague Decl., ¶ 5.)
At the meeting, it appears that both parties collaborated to devise a new schedule, called the "Project Plan," which outlined specific deadlines for the installation of certain software components. (Def's State., ¶¶ 28-29, 30.) It is undisputed that the meeting was cooperative and that each party was satisfied with the outcome. (Id., ¶ 28.) Niagara Falls also formed a "Management Review Team," which included Darlene Sprague, Niagara Falls' Administer of Information Services, to oversee the Project Plan and meet weekly with Crosspointe's Project Manager, John Brophy. (Id., ¶ 25; Sprague Deposition, p. 6; Docket No. 33-4.)
Despite the parties' good intentions, Niagara Falls remained unhappy with the length of time that Crosspointe took to install the software. (Sprague Decl., ¶ 10.) In May of 2007, dissatisfied with CrossPointe and with none of Crosspointe's systems in use, Niagara Falls terminated the implementation process. (Def.'s State, ¶ 41; Pl.'s State., ¶¶ 8-11.) Niagara Falls subsequently purchased another software package from a separate company, Finance Manager. (Pl.'s State., ¶ 12.)
Because the Project Plan tracked CrossPointe's progress, it is relatively easy to determine precisely how far along it was in May 2007 when the project was terminated. (Id., ¶ 32.) At that time, 99 percent of the "Project Administration" tasks were marked as complete, while in the "Technical Implementation" phase, 82 percent of the tasks were marked as complete. (Id., ¶¶ 32-35.) However, overall, taking into account the "Finance" and "Student" phases, only 46 percent of the project was completed. (Pl.'s State., ¶ 7.) Crosspointe notes that it started with the "Technical Implementation" phase and was moving sequentially towards the "Student" phase when the project was cancelled. (Def.'s State., ¶ 38.)
Seven months later, in December of 2007, Niagara Falls sued CrossPointe in this action, claiming that it never successfully delivered the product.
As noted above, the parties' rights and obligations are governed by the Agreement, which was signed in January 2005. Relevant selections from it follow.
Concerning warranties, the Agreements reads:
THE WARRANTIES REFERENCED IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. CROSSPOINTE DOES NOT WARRANT THAT THE SOFTWARE IS FREE OF NONMATERIAL DEFECTS. CROSSPOINTE DOES NOT REPRESENT THAT THE SYSTEM WILL MEET [NIAGARA FALLS'] REQUIREMENTS OR THAT THE OPERATION OF THE SOFTWARE WILL BE ...