Heidtman Steel Products v. Compuware

Citation: Heidtmann Steel Prods., Inc. v. Compuware Corp., 2000 WL 621144 (N.D. Ohio Feb. 15, 2000).

Factual Background
Plaintiff, Heidtman Steel Products (“Heidtman”), is in the business of purchasing flat rolled steel coils and processing them for resale. In the early 1990s, Heidtman determined that its computer system was in need of replacement. Heidtman initiated a project known as the "Plus Project," the goal of which was to install a completely new, updated computer system that ran on an Oracle platform.

In order to implement the project's goals, Heidtman enlisted the help of several outside software consultants, including defendant, Compuware Corporation (“Compuware”). All software consultants were under the direction of accounting firm Ernst & Young, whose sole purpose was to oversee the Plus Project.

Upon the hiring of Compuware, a contract, known as the “Agreement for Technical Personnel Services” (the “Agreement”), was drafted. The Agreement provided that the defendant was to supply computer programming expertise, analysis, coding and related services. The Agreement also set forth additional terms and conditions ranging from compensation to the payment of bills and expenses.

Shortly after the Agreement between Heidtman and Compuware was executed, Ernst & Young withdrew from overseeing the Plus Project. As a result, the role of Compuware changed. The changes required were memorialized in a series of additional “phase” agreements that were drafted by the defendant. The purpose of each phase agreement was to define each upcoming “segment” of work to be performed by Compuware.

After the completion of several phases of work by the defendant, Heidtman and Compuware began to clash over the progress of the Plus Project. Heidtman claimed that the launch of the new computer system had been unnecessarily delayed and Compuware had exceeded the budget for the Plus Project. In their defense, Compuware stated that much of the delay was based on Heidtman’s failure to pay Compuware millions of dollars in past due fees. Unable to resolve the issues surrounding the Plus Project, the parties ended their relationship in late April 1997.

Trial Court Proceedings
On May 9, 1998, Heidtman filed suit against Compuware for breach of contract and other common law claims. In support of this claim, Heidtman retained the services Ernst & Young as well as independent computer-consulting firm, Stonebridge Technologies, to conduct an independent audit on the work completed by Compuware. Both companies concluded that Compuware’s management of the project was so poorly managed that none of the defendant’s work on the Plus Project was salvageable and that he money paid to them had been a complete waste. Furthermore, Ernst & Young informed Heidtman that if the Plus Project were to continue, a new computer system would have to be designed from scratch.

In response to the lawsuit, Compuware denied each and every allegation alleged by the plaintiff. In addition, the defendant counterclaimed, alleging that Heidtman breached its contract when it failed to pay invoices owed to Compuware.

Each party file a motion for summary judgment.

At trial, the district court denied Heidtman’s motion for summary judgment on all counts while granting the defendant’s motion for summary judgment in part and denying it in part.

In reaching this conclusion, the court first determined that the initial Agreement and subsequent phase contracts should be read as a single contract. Since each modification of the parties’ obligations provided for a new contract without disturbing the unaffected terms of the old contract, the intent of the parties should be read as to integrate all agreements into a single, unified contract.

Additionally, the court granted Compuware’s motion for summary judgment in regards to U.C.C. applicability (the U.C.C. was not applicable because the contract between the plaintiff and defendant was predominantly one for services and not goods), malpractice (there is no such thing as malpractice by computer consultants), gross negligence (plaintiff’s complaint did not contain allegations that the defendant cause harm to persons, property, or tangible things), promissory estoppel (a written contract covering terms and conditions of defendant’s engagement cannot give rise to an independent cause of action for promissory estoppel) and good faith (good faith is not an implied contractual duty in Michigan).

The court found a genuine issue of material fact for the claims of breach of contract, recission, cancellation, and conversion and replevin and, therefore, summary judgment was not proper for those claims.