The trade association for software developers in China said it has sent letters to Alabama government officials saying it is worried about a recent $61 million court judgment against a software company owned by a Chinese parent.
Zhao Xiaofan, vice chairman China Software Industry Association, told The Birmingham News he sent the letters of inquiry to Gov. Robert Bentley and Seth Hammett, director of the Alabama Development Office, the state’s recruiter of new businesses.
The issue stems from a civil jury verdict last year in Franklin County. Ross Systems, an Atlanta-based software developer owned by a Chinese firm, lost a business-dispute trial and was ordered to pay $61 million in punitive and compensatory damages. The jury found that Ross’ software system went awry after being installed at the area’s largest employer, pet-food maker Sunshine Mills.
Now, the Chinese trade association is afraid there are whiffs of xenophobia and jackpot justice wafting through Alabama.
“The recent judgment against Ross Systems in Alabama is cause for concern here in China,” Zhao Xiaofan, vice chairman China Software Industry Association, told The Birmingham News. “We are very concerned on how this trial was handled especially the many references made by the plaintiff attorneys on Ross’ Chinese roots, which was not relevant to the claims of this trial.”
Attempts to reach the offices of Bentley and Hammett were unsuccessful. The identical letters sent by the trade group say verdicts such as the one pending against Ross would run counter to establishing a “fair and productive” business environment. The letters also ask why what appear at first glance to be simple breach-of-contract cases are garnering verdicts for fraud and consequent punitive damage awards.
The letters also hinted that such verdicts might be contrary to the spirit of recent business development talks between Alabama and China, the world’s second-largest economy behind that of the United States. Last year, the letter reminded, China’s vice minister of commerce visited Alabama, where he and state officials pledged to work toward promoting cross-border investment.
Ross Systems’ owner is a Chinese company called CDC Sofware Corp., whose shares trade on Nasdaq, and which in turn is controlled by another Asian firm called CDC Corp. CDC Software had sales last year of $218 million from operations in more than 50 countries performed by about 1,400 employees.
“CDC Software and its subsidiaries like Ross Systems have been pioneers in exploring the U.S. market and their experience is being watched in China as a reference,” the letter says. “To that end, the news of an apparently excessive award may serve as an alarming signal to potential investors looking to invest in states like Alabama.”
The lawyers who won the verdict aren’t impressed.
‘Junk’ issue?
“The only people worried about this are those wanting a thriving market for Chinese junk,” said Daniel McDowell, one of the lawyers who represented Sunshine Mills. “They need to step up, put on their big-boy britches, and pay off the judgment.”
The heart of the dispute was business software Sunshine Mills bought from Ross. The system was designed to integrate aspects of the pet-food maker’s operation, from billing to manufacturing to printing shipping labels.
The suit said the software package caused nothing but chaos, cost $1 million in vain repair attempts and almost shut the business after going rogue — printing multiple shipping labels for the same package, showing non-existent inventory and similar snafus.
As for Ross, the company said the $235,000 system was used by Sunshine Mills for years without complaint, and that the suit was filed only as the deadline for doing so approached. The company even used the software and paid for on-going customer support after the dispute emerged, Ross said.
The jury bought the version presented by Sunshine Mills, and after a three-week trial, submitted punitive and compensatory damages that rank among the highest recorded in Alabama in recent years.
Lawyer McDowell said it might be an anomaly, but it is a deserved one.
“Franklin County is ultra-conservative in most everything, especially when it comes to jury verdicts,” McDowell said. “The award speaks to the damage caused a 60-year old business, nearly at the cost of a couple of hundred jobs.”
For now, the case is on appeal. As it stands, the $61 million verdict is a little less than half of CDC Software’s market value of $137 million. Shares have fallen about 33 percent since the December verdict, to about $4.78.
The company says the Franklin County judgment is accruing interest at about $20,000 a day. Sunshine Mills, Ross said last week, continues to use the software. Verdicts such as this one, the company said, are designed to force defendants to settle rather than seek a new forum on appeal.
“Ross, however, will push forward with its appeal in order to make sure that the Alabama Supreme Court fully reviews the happenings in Franklin County,” said Joe Stutz, the company’s lawyer. “Ross is confident that once the Alabama Supreme Court has the opportunity to review the record in this case, Ross Systems will finally be given a fair chance at receiving justice in an impartial forum.” As for the Chinese software developers, they seem to hope the Alabama corner of the world’s largest market for computer software isn’t too controversial for their tastes.
“I look forward to seeing how the lawsuit will play out and hope it will be resolved in a way that inspires all Chinese companies with confidence in doing business in Alabama,” the software association’s letters says.
Source:http://blog.al.com/businessnews/2011/05/china_software_developers_prot.html
