Convoy Corporation, an Oregon Corporation v. Sperry Rand Corporation, a Delaware Corporation

601 F.2d 385, 1979 U.S. App. LEXIS 15177
CourtCourt of Appeals for the Ninth Circuit
DecidedApril 25, 1979
Docket77-2920
StatusPublished
Cited by5 cases

This text of 601 F.2d 385 (Convoy Corporation, an Oregon Corporation v. Sperry Rand Corporation, a Delaware Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Convoy Corporation, an Oregon Corporation v. Sperry Rand Corporation, a Delaware Corporation, 601 F.2d 385, 1979 U.S. App. LEXIS 15177 (9th Cir. 1979).

Opinions

GOODWIN, Circuit Judge:

After a disappointing performance by a new computer system for the routing, planning, and management of its nationwide automobile transport business, Convoy Corp. sued Sperry Rand for damages. Convoy recovered in a court trial. Sperry Rand appeals, contending that a substantial part (if not the entire amount) of the trial court’s judgment is a double recovery. Sperry Rand contends that Convoy recovered the same damages from another supplier of computer services in an out-of-court settlement of another case.

In August, 1969, Convoy entered into a contract with a computer-technology firm known as WOFAC. For $100,000, WOFAC agreed to design for Convoy a computer system for route planning, dispatching and other operations. WOFAC said it had designed for another firm a similar system that could be adapted to Convoy’s needs, with a net saving of $215,000 a year for Convoy.

After soliciting bids from various computer manufacturers, Convoy decided in November 1969 to lease the necessary computer equipment from Sperry Rand (Uni-vac). At WOFAC’s recommendation, Convoy ordered a 9200 II Univac computer, [387]*387with two model 8411 discs. Univac told Convoy, however, that the 8411’s might not be available by February 1970, the date by which Convoy wished to switch over to computerized routing and dispatching. After examining two design books prepared by WOFAC, Univac told Convoy that two model 8410 discs would adequately perform the job.

On November 14, 1969, Convoy signed a standard Univac lease agreement. The lease had a five-year term, a provision that Univac would service the equipment, and an option to purchase. The lease also provided that Univac would not be liable for “any indirect, special or consequential damages such as loss of anticipated profits or other economic loss.” It also contained a provision that Univac’s professional personnel would be available to advise Convoy concerning implementation, review, and improvement of existing data processing systems.

In a separate letter, Univac also agreed that “[i]n support of the programming efforts intended by Convoy personnel, Univac programmers under the direction of the assigned project leader will test and debug programs with the intent of providing a satisfactory work load scheduled to coincide with the delivery of the equipment.” In December of 1969, Univac and Convoy worked out a division of labor for writing “peripheral” programs necessary to make the system work: Convoy would write four difficult programs, and Univac 17 less difficult ones.

The program writing took more time than anticipated. When the Univac computer was installed on March 12, 1970, the programs were not yet available. There was substantial testimony, and the trial court found, that Univac reneged on its oral promise to have four programmers available to do Univac’s share of the programming. Only one programmer from Univac, Lang, was available to Convoy full time, and there was testimony that the work of the part-time help Univac sporadically supplied was incompetent. Before the computer was installed, it also became clear that the programs designed by WOFAC were seriously flawed.

On March 27,1970, Convoy hired Computer Knowledge Corp. (CKC) to write programs, among them some of the programs that Univac had agreed to write. In May 1970, CKC ran a test on the Univac computer and determined that the 8410 discs were too slow for the job Convoy needed, contrary to the earlier promises of Univac. Lang, the Univac project leader, spent a great deal of his time attempting to make the 8410’s work in the Convoy system. As a result, he was unable to write many programs. Ultimately, he failed to make the 8410’s work compatibly;. a program that was supposed to run in 75 minutes took 13 hours instead.

On May 14, 1970, Convoy again ordered 8411’s; Univac represented that the conversion from 8410’s would be simple. But it was not. CKC had to be called in to do extensive conversion work; WOFAC also had to convert some programs. It took WOFAC until December 1970 to finish its changeover to programs suitable for the 8411’s.

The 8411 equipment arrived in June 1970, but it worked only intermittently. The defects were many, and caused losses of entire days’ work. Convoy, CKC, and Lang, spent many hours trying to locate the source of several major problems without success. Finally, in January 1971, a field engineer from Univac’s San Francisco operation put the 8411’s in operable condition.

When Convoy began using the computer system, it learned that its old, manual system of routing and dispatching had been as efficient as the computer. No substantial savings resulted. In July 1971, Convoy canceled the lease under an arrangement with Univac by which Convoy paid rent on the basis of short-term instead of the original long-term rates.

Convoy then sued WOFAC for $516,-129.09, its alleged out-of-pocket costs, more than $1 million in lost profits, and punitive damages, for a total claim of about $2 million. The parties settled the case by a payment by WOFAC to Convoy of $354,500.

[388]*388Convoy then sued Univac in this action, claiming damages of $216,398.61 for out-of-pocket expenses. All of this amount had been included in the $516,129.09 in out-of-pocket expenses originally claimed against WOFAC in the settled action. As noted, the district court entered a judgment for Convoy in the full amount of its claim and this appeal followed.

I. DOUBLE RECOVERY

It is agreed that all the items of expense claimed as damages in this case were also claimed as damages in Convoy’s action against WOFAC, which was settled. Uni-vac argued in the trial court, and again here, that it cannot be held liable for the full amount of these expenses because they were recovered in the settlement with WO-FAC. Moreover, Univac argues that the entire $354,500 Convoy gained in that settlement should be set off against Univac’s liability of $216,398.61.

Convoy argues that there should be no setoff, since the payment from WOFAC represented, at least in part, a settlement of Convoy’s claims for lost profits and punitive damages, which are not at issue in this case. The trial judge held in favor of Convoy, finding that Convoy’s settlement did not fully compensate Convoy for its out-of-pocket expenses. Thus, the court held that Convoy was entitled to recover the full $216,398.61 claimed. Moreover, the court held that, because Univac and WOFAC were not joint obligors, Univac would not have been entitled to any reduction of its own liability to Convoy by virtue of the WOFAC settlement, even if the settlement had fully compensated Convoy for its out-of-pocket expenses.

An examination of the precedents cited by Convoy and Univac suggests that the double-recovery issue lurking in these facts is unusual, if not unique. The cases seem to support two propositions: (1) that a party wronged by a tort or breach of contract is entitled to be made whole, and (2) that a party may not recover more than once for the same wrong. No matter whether liability is characterized as “joint” or “several” or “independent”, these concepts should apply with full force. But it is by no means clear that the application of maxims to the peculiar facts of this case will resolve the issue on appeal.

Here, Convoy reached a settlement in an action against WOFAC, which was based on three components of damage: out-of-pocket expenses, lost profits, and punitive damages.

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601 F.2d 385, 1979 U.S. App. LEXIS 15177, Counsel Stack Legal Research, https://law.counselstack.com/opinion/convoy-corporation-an-oregon-corporation-v-sperry-rand-corporation-a-ca9-1979.