Facts

Plaintiff Brunskill Associates Inc. dba Computer Payroll Company and defendant Paychex Inc. were competitors in the payroll services business. Paychex bought the software company that licensed payroll software to competing companies and allegedly refused to provide support and maintenance to those businesses on an increasingly regular basis. Plaintiff claimed Paychex then publicly stated defendant Rapid Payroll Inc. (RPI) was not going to uphold obligations due on binding contracts.

Defendant RPI, a start-up business, created "Rapid Pay," a software system that offered functions needed by plaintiff. RPI's licensing agreement could not be terminated unless the licensee was in breach. In addition, the agreement provided that RPI would perform upkeep and support for the software. Defendant RPI's agreement with the plaintiff stated that RPI was entitled to six percent of all revenue generated by plaintiff. Thus, plaintiff tendered $600,000 to RPI for its software.

In 1996, Paychex bought out RPI. On July 1, 1997, defendant Walter Turek agreed to amend Paychex's contract to give Paychex exclusive worldwide license for the software. Defendants, who drafted this amendment, further required that licensees give up sale control to defendants.

The first type of "Windows" software was released to the public in 1998 but failed to operate correctly.

In 2000, plaintiff began conducting experiments with an old payroll system that was created by a former RPI employee. It licensed this software and characterized it as insurance.

Turek signed a document on Aug. 21, 2001, which stated that RPI and Paychex were going to halt performance on contracts with over 70 licensees at the end of Aug. 2002. Plaintiff claimed that, as a result, it had to pay approximately $2 million to effectuate process conversion and that due to the tremendous time pressure and underdeveloped quality of the new system, plaintiff's reputation and goodwill was damaged. Paychex sales personnel lost hundreds of clients to Paychex for its Rapid Pay service.

PLAINTIFF'S CONTENTIONS:
The plaintiff claimed breach of contract as well as violations of the Business and Professions Code, interference with contract, interference with prospective economic advantage, fraud and source code right.

DEFENDANTS' CONTENTIONS:
The defendants asserted that the license and support for the software was not cancelled and that RPI retracted the cancellation letter ten months after the send date. The defendants also contended that plaintiff had already started its process of moving customers to another program, prior to this retraction.

Defendants filed cross-complaints against the plaintiff, seeking a declaration that the damages amount be limited to the number of license fees paid by plaintiff. Defendants also argued that RPI was not obligated to offer plaintiff any new developments on the software, there was no obligation to give plaintiff the 32-bit Preview software or maintain it and the only remedial measure plaintiff could take was to retrieve the software's source code.

Result

A verdict was reached amounting to $26,010,000, with $15 million in damages, $1 million in punitive damages from defendant Paychex Inc., $10 million in punitive damages from defendant Golisano and $10,000 in punitive damages from defendant Turek.

Other Information

FILING DATE: April 28, 2003.