Deloitte wants software lawsuit kept away from jury

Deloitte Consulting says Marin County agreed to have a retired judge handle any disputes over an SAP project

Deloitte Consulting is fighting an attempt by Marin County, California, to bring allegations over a failed ERP (enterprise resource planning) software project before a jury, calling it a tactical ploy to gain publicity and avoid a skeptical judge.

Marin County first sued Deloitte in May 2010 in state court, alleging that it placed inexperienced consultants on the SAP project, leading to serious problems that derailed the implementation.

It later filed a separate state case that also named SAP. In that suit, which was removed to federal court, Marin County alleged SAP participated in a conspiracy with Deloitte that violated the US RICO (racketeer influenced and corrupt organizations) statute and was meant to defraud the county of more than US$20 million.

In a court filing last month, Marin County maintained it was required by law to bring the RICO allegations through a separate suit.

"Moreover, the County intends to prosecute this RICO action -- and vindicate the rights of its constituents to a vendor process untainted by the kind of criminal corruption in which Deloitte and its co-defendants engaged -- before a jury," the county said.

Deloitte and Marin County's original contract specified that matters "involving disputes of fact or law relating to" Deloitte's work for the county would be settled by retired California judge John Herlihy, who serves as a "referee" on state cases, according to a motion filed late June 24 by Deloitte in U.S. District Court for the Northern District of California.

Moreover, "nothing" would have prevented Marin County from adding the claims from the second lawsuit to the original action against Deloitte, where they would be heard by Herlihy, the consulting firm said.

Marin didn't do that because it was seeking "a more favorable forum" for its allegations against Deloitte, given that Herlihy "had by then shown he was skeptical of those allegations," the filing adds. "That is blatant forum shopping."

Deloitte wants the claims against it in the federal case to be referred to the judge, according to the filing. Its motion is scheduled to be heard on July 15.

Overall, Deloitte's motivations are clear, according to one expert.

"Obviously they're trying to avoid a media circus, and this has all the makings of a media circus," said Michael Krigsman, CEO of Asuret, a consulting firm that advises companies on how to run successful IT projects.

"When a lay person looks at this, it appears to be a case that involves tremendous waste," and there is additional resonance given California's recent budget woes, Krigsman said.

Marin County "is trying to win in the court of public opinion and hoping that will influence the legal outcome or force a settlement," he said. "As a consulting company, it is not in Deloitte's interest to be dragged through the legal mud publicly."

"At the same time Deloitte would be on very dangerous ground to accept culpability in this case," Krigsman added. "The definition of project failure is not clear and would open the door to other [alleged] victims of IT failures against Deloitte. Deloitte is looking to settle this in the most quiet way possible."

Krigsman uses the phrase "Devil's Triangle" to describe the dynamics of software projects, a metaphor meant to underscore the crucial role vendors, systems integrators and customers must play well in order for implementations to work.

In this case, county officials seemed to lack experience with complex software projects, he said. In addition, "the software seemed to be more than their organization could easily absorb."

Marin County officials have decided to "rip and replace" the SAP system, rather than trying to fix the problems, believing it would be less expensive to do so.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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Chris Kanaracus

IDG News Service
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