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February 9, 1999


By CBR Staff Writer

Government attorney, David Boies may have to take a break from the Microsoft antitrust case in March (see Top Stories) to take part in a long running and complex fraud lawsuit filed against it by Ceska Sporitelna AS, the large Czech state savings bank. The dispute arose in the mid 1990s over a branch automation system that Unisys provided for the bank. As we reported at the time (CI No 2,582), the bank was not happy in 1995 with the service Unisys was providing. Philadelphia is very far from Prague and I am not sure that the people from the US and the UK who are on our project are the best they have. It’s a daily battle with Unisys about terms, functions and costs. We are not happy customers, said the bank. Unisys had signed contracts worth $135m with the bank starting in 1992, in what was being billed as the single largest computer project undertaken in eastern Europe at that time. But the scheduled completion date had slipped while costs escalated. The bank terminated its contract in November 1995, saying that Unisys had failed to meet quality and deadline targets, and under the terms of the contract went to a Vienna arbitrator to seek damages (CI No 2,859). But in June 1996 Ceska Sporitelna sued Unisys for fraud and breach of contract in the Federal District Court. Unisys’ arguments that the bank was bound to settle through the mandatory arbitration clause included in the contract were rejected by a lower court and subsequently by the US Supreme Court, which ruled that Unisys must defend the suit in court. That judgement was based on the fact that the bank filed its suit against the parent company, not the subsidiary. Unisys had argued that If this litigation tactic is tolerated, then the Congressional policy in favor of enforcing arbitration agreements will be rendered meaningless in…disputes arising out of international business transactions. Ford Motor Co, Eastman Kodak Co and Shell Oil Co joined Unisys in asking for the lower court decision to be overturned. They were unsuccessful. Unisys has since filed a counterclaim against the bank for fraud, negligent misrepresentation, intentional interference with prospective business relations and breach of contract. In the Vienna arbitration, which began early in 1998, Unisys is seeking payment of unpaid account receivables and damages for the bank’s repudiation of its contractual obligations, and says the bank is trying to avoid this process through its US suit. It says the fraud suit is without merit and that it is defending the case vigorously as well as pursuing the arbitration. The case is due to continue in the Philadelphia courts from March 15.

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