EDS misrepresentation ruling ‘a wake-up call’ for vendors

This week’s legal victory for broadcaster BSkyB against IT services supplier Electronic Data Systems (EDS, now HP Services) will have serious repercussions on how IT service providers bid for contracts, according to a leading industry lawyer.

BSkyB accused EDS of misrepresentation, claiming that it was mislead over the time and cost required to complete a customer relationship management (CRM) deployment that began in 2000. Of the five related accusations, only one – that EDS misled its client on the time to delivery – was upheld.

“This will be a big wake-up call to the vendor community,” commented Peter Brudenall, a partner in law firm Hunton & Williams’ global technology and outsourcing group. “Anything they say [to customers] prior to the contract being written needs to be treated with the same gravity as the contract itself.”

Brudenall added that while larger vendors will be in a position to enforce the necessary checks and balances on their sales procedures, smaller vendors could fall into the trap of misrepresentation when bidding for new business.

BSkyB terminated its relationship with EDS in 2002 before completing the work internally. The News International-owned broadcaster then began legal proceedings in 2004.

The total amount that HP Services, as it now known since its acquisition by Hewlett-Packard in 2008, will have to pay BSkyB is yet to be decided, but the broadcaster anticipates that the sum will be in excess of £200 million, despite the contract’s liability cap being set at £30 million. As it was judged that EDS deceived BSkyB, this limit ceases to apply.

Following the decision, HP announced in a statement that it would be seeking an appeal. “This is a legacy issue, dating back to the EDS business in 2000, which HP inherited when it acquired EDS in 2008.

“We are pleased the court dismissed the majority of the allegations. While we accept that the contract was problematic, HP strongly maintains EDS did nothing to BSkyB.”

The accusation that managing director of CRM for EDS at the time, Joe Galloway, misled BSkyB about how long it would take to complete the work was upheld after it emerged that he had lied in court about the nature of his academic degree.

He claimed that he had attended Concordia College in the US Virgin Islands in person, when in actual fact Galloway had obtained his qualification from the ‘diploma mill’ institution via the Internet. This was proved when Mark Howard QC managed to procure a similar degree for his pet dog during proceedings. Following this revelation, the judge ruled that Galloway’s credibility as a witness had been destroyed.

Peter Done

Peter Done is managing director of Peninsula Business Services, the personnel and employment law consultancy he set up having already built a successful betting shop business.

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