Systems Integrator Wins Y2K Arbitration Decision

In what's believed to be the first U.S. legal decision on asystems integration contract dispute that concerns the year 2000 date-field problem, a U.S. District Court arbitrator ruled yesterday that systems integrator ASE Ltd. won't have to pay $3.9 million in year 2000 expenses for client Inco Alloys International.

Inco, a maker of nickel alloys, had argued that ASE should have done year 2000 compliance work as part of a five-year outsourcing contract signed in 1995, according to the arbitrator's report. Instead, Inco said, it had to hire additional subcontractors. The arbitrator, whose decision is binding, ruled yesterday in Pittsburgh that Inco's claims were unfounded since neither the original contract nor any of the revisions made during the last three years called for ASE to perform year 2000 work.

Computer law specialist Esther Roditti says the case could signal a trend in which companies seek to use year 2000 work as a loophole to escape failing outsourcing contracts-- though she doesn't think the strategy will succeed often. "I don't think that users can sit back and play dopes and say 'It's all [the vendors' fault]," Roditti says. "If it's not in the contract, then they're both responsible and you're going to see courts looking to the contracts."