Liberty Bay Credit Union v. Open Solutions, Inc.

905 F. Supp. 2d 389, 2012 WL 5873683, 2012 U.S. Dist. LEXIS 166433
CourtDistrict Court, D. Massachusetts
DecidedNovember 21, 2012
DocketCivil Action No. 11-10189-RGS
StatusPublished

This text of 905 F. Supp. 2d 389 (Liberty Bay Credit Union v. Open Solutions, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liberty Bay Credit Union v. Open Solutions, Inc., 905 F. Supp. 2d 389, 2012 WL 5873683, 2012 U.S. Dist. LEXIS 166433 (D. Mass. 2012).

Opinion

MEMORANDUM AND ORDER ON THE PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

STEARNS, District Judge.

In February of 2007, Liberty Bay Credit Union (Liberty Bay), a Massachusetts chartered lending institution, hired I.A. Systems (IAS) to create a software interface that would allow it to import client member information into automated loan origination software. In February of 2011, Liberty Bay brought this lawsuit against Open Solutions, Inc. (Open Solutions), IAS’s successor-in-interest, alleging, inter alia,1 breach of contract and breach of the implied covenant of good faith and fair dealing. Open Solutions counterclaimed, asserting mirroring causes of action. Presently before the court are the parties’ cross-motions for summary judgment, as well as Open Solutions’ motion for partial summary judgment on the issue of damages. A hearing on the motions was held on November 19, 2012.

[392]*392BACKGROUND

The following material facts are not in dispute, or, where disputed, are taken in the light most favorable to the nonmoving party.. In 2006, Liberty Bay decided to automate its loan origination process to permit its customers to apply for and receive loan approvals online, and to allow it to price these loans using a risk-based pricing model.2 IAS held itself out as an expert developer of proprietary loan origination software, and in particular, Stream-Lend Velocity (Velocity), a “paperless, end-to-loan origination software system that ... provide[s] financial institutions with the ability to automate their entire lending process.” Pl.’s Ex. 11. As touted, Velocity pulls credit ratings of loan applicants and analyzes their financial information according to a lender’s preferred decision rules. Credit applicants using Velocity are able to obtain loan approvals entirely online. By interfacing Velocity with Liberty Bay’s core processing or “host” system software, XP Systems’ XP2, the combined platforms would (or so it was planned) import credit union members’ demographic profiles from the host system for analysis and then automatically book any approved loan for servicing through XP2.3

Liberty Bay and IAS entered into an End User Product License Agreement (the Agreement) on February 16, 2007. The Agreement granted to Liberty Bay “a nonexclusive, non-transferable license to use the Product and any Enhancements to which End User is entitled.... ” Agreement § 2.1(i). “Product” was defined to mean “StreamLend Velocity loan origination software programs in machine readable code, together with the options and modules set forth in Schedule I.” Id. § 1.1(d). Schedule I identified the software features to be licensed and, under the heading “Interfaces,” listed the “XP Host Interface,” the bidirectional interface that was to import data from XP2 into Velocity and then upload data from Velocity to XP2. Id. Schedule I. The Agreement provided that

[i]n the event that [IAS] fails to make an interface that performs all of the functions contemplated [by the Agreement] on or before January 1, 2008, through no fault of End User or any Third Party that is engaged by End User to perform services or provide products, [End User] will have the option to cancel the project and receive a full refund or continue to move forward with the implementation of StreamLend Velocity.

Id. (Refund provision). IAS further warranted that “the product ... is free from any defects and will perform in accordance with the Documentation ... and will not fail or cease to operate or provide erroneous results.” Id. § 8.1.

The Agreement laid out specific obligations of the parties with regard to the development of the XP Interface. It stated that “IAS is responsible for developing, testing and implementing software program^) according to specifications provided by End User within the schedule mutually agreed to by IAS and End User.” Id. Schedule III, Section C; see also id. § 6.5(b). Liberty Bay, for its part, was to provide “facilities, specifications, support and testing to allow IAS to develop the required interfaces,” id. § 6.5(a), including [393]*393“detailed technical and business specifications ... for any interfaces to third party systems within two weeks of contract signing,” id. Schedule III, Section C. Liberty Bay was also required to provide “detailed instructions in writing for required transactions and host fields for booking loans for up to twenty loan products on the host system through the IAS interface within two months of contract signing.” Id. The Agreement stipulated that “[djelays in providing the specifications will result in delays in the development and delivery of the interface(s) to the End User, which will not impact End User acceptance of the system.” Id.

Upon execution of the Agreement, Liberty Bay paid an initial deposit of $113,733.00, equal to 50% of the “Lending Solution Total.”4 It failed, however, to provide IAS with the XP Interface specifications within the required two weeks. Nor did it meet its obligation to provide instructions for the required transactions within the two months specified in the Agreement. Notwithstanding these failures, Open Solutions scheduled a “kick-off’ meeting for September 24, 2007, at which time it installed Velocity on a Liberty Bay server. In December of 2007, Open Solutions conducted a “Super User” training program for Liberty Bay employees. Although Liberty Bay did not pay the annual maintenance fee or the training fee that were due under the Agreement, see supra note 4, Open Solutions continued working towards a “go-live” date of April 14, 2008.

On December 26, 2007, Open Solutions sent to an email to Liberty Bay listing the tasks that Liberty Bay needed to complete in January and February if Velocity was to be up and running by the April go-live date. As of the end of February, Liberty Bay had failed to complete the scheduled tasks. Open Solutions also sent Liberty Bay a questionnaire in January seeking the specifications required to build the XP Interface. When in March, Open Solutions had not been provided the specifications, it sent Liberty Bay a revised project plan with a deferred go-live date of July 1, 2008.

For reasons that are unclear (and disputed by the parties), the July go-live date was subsequently pushed back to December of 2008. Open Solutions meanwhile proceeded with the building of the XP Interface. To perform acceptance testing, Open Solutions required access to the APEX license keys that permitted the Liberty Bay server hosting Velocity to communicate with the server hosting Liberty Bay’s XP2 software. XP Systems, however, balked at providing Open Solutions with the APEX license keys before (and unless) Liberty Bay entered into a new sales quote agreement (which did not happen until October 3, 2008).5

[394]*394In October or November of 2008, after the APEX license keys issue was finally resolved, the XP Interface developed by Open Solutions was delivered to Liberty Bay for acceptance testing.. It immediately experienced problems. When these persisted,6 the go-live date was delayed again, now to February of 2009.

As the February date drew near, the XP Interface was still experiencing importing and uploading errors. Open Solutions spent most of March attempting to correct the flaws in the XP Interface.

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Bluebook (online)
905 F. Supp. 2d 389, 2012 WL 5873683, 2012 U.S. Dist. LEXIS 166433, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liberty-bay-credit-union-v-open-solutions-inc-mad-2012.