Manufacturer Wins $61M Suit against ERP Vendor

Dec. 10, 2010
Ross Enterprise fined in fraud lawsuit for not delivering on promised performance for pet food manufacturer Sunshine Mills.

The capabilities and responsibilities of a suite of enterprise resource software were at issue in a court case decided last week, as pet food manufacturer Sunshine Mills was awarded a $61 million verdict by an Alabama jury against Ross Systems.

The software company, which is a subsidiary of CDC Software, was found to use fraudulent practices in the implementation of the Ross ERP system.

According to Sunshine Mills, the Ross suite was sold suggesting it was a complete system that would run comprehensive data collection. But in practice, the pet food manufacturer said its management of inventory, distribution and warehousing data was faulty.

As an example, Sunshine Mills had send out truckload shipments which were never invoiced in the ERP system, forcing the company to manually inventory its goods and write invoices by hand. Ross vehemently denies the allegations and has promised an appeal.

One of the primary points of contention was expectations of capability. Sunshine Mills had anticipated significant savings soon after its ERP rollout. Instead, there were a series of delays, system lockups and an inability to print invoices, according to one of the companys lawyers, Daniel McDowell, a partner at McDowell, Beason & Hamilton.

During the legal fight, Ross argued that Sunshine Mills knowingly purchased a beta version of the software, which meant that the manufacturers claims were subject to limitations.

This is sad news for the software industry, said Ross Systems president Sherri Rodriguez in a statement. These types of unfair judgments make it more and more challenging for software companies to operate.

Though the initial license of the Ross system was $235,000, Sunshine Mills says it spent nearly $2 million on recommended hardware.

The jury ultimately sided with Sunshine Mills, with $16 million in compensatory damages and $45 million in punitive damages.

Though the case will almost assuredly be challenged in appeals, it addresses a field largely unregulated and rife with potential conflict, between companies that invest heavy dollars in software and vendors that promise measurable results. Often the two dont connect.

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