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Conn. SC sides with state in case against computer equipment supplier

By Jessica M. Karmasek | Aug 27, 2013

HARTFORD, Conn. (Legal Newsline) -- The Connecticut Supreme Court this week reversed an $18.3 million judgment against the state in a lawsuit filed against a computer equipment supply company.

The case, Chief Information Officer et al. v. Computers Plus Center Inc. et al., arose out of contract disputes between plaintiff Connecticut Department of Information Technology and defendant Computers Plus Center Inc.

CPC had agreed to provide personal computers to state agencies on an as-needed basis.

However, after the memory in the servers that the company had supplied malfunctioned in the summer of 2002, the department began to suspect that CPC deliberately supplied equipment that failed to comply with the relevant contract specifications, even despite the company's prompt remediation.

Soon after, the department determined that the CPC was not a "responsible" bidder under state code, and rejected its pending invitation to the company seeking a bid on a contract to provide an additional computer server for the state Department of Education.

The state agency also requested that CPC certify that all of the equipment supplied to the state by the company over the previous four years complied with the relevant contract specifications.

Because the company was unable to complete its review of all of the contract awards and purchase orders from the requested time period in the time frame that the department had set forth, it simply replied that it believed that it "ha[d] always... adhered to all the terms and conditions of each contract award" and requested that the department, "[s]hould [it] find any other violations other than [the server memory violation]," to "bring them to [the defendant's] attention and [it would] take immediate action."

Unsatisfied with the company's response, the department performed a physical audit of all of the computers that CPC had supplied under the computer contract.

In conducting this audit, the department discovered that many of those computers contained only an integrated network interface card while, in its view, the contract specifications required both an integrated and a stand alone network interface card.

On the basis of its findings, the department notified the state's auditor of public accounts and the state comptroller of "apparently pervasive contract irregularities" with the company, and requested that the Commissioner of Public Safety "conduct a more thorough review" of the defendant's activities in relation to the computer contract.

Shortly after, the department terminated its computer contract with CPC, citing, as reasons, that it was a financial burden to the state and that the purchasing process had not achieved the expected cost savings.

The department then began refusing to award contracts to the company, even when it was the lowest bidder and, in some cases, refused even to acknowledge its bids.

In April 2004, the state sued CPC, alleging breach of contract and fraud claims, based on allegations that the company intentionally provided computers that did not comply with the specifications set forth in the computer contract.

The department also asserted claims for breach of contract and fraud based on allegations that the company provided the state with computer servers that contained generic, after-market memory when the server contracts required factory-installed memory.

A trial court, following a jury trial, awarded CPC $18.3 million on its counterclaim alleging that the state agency violated the company's right to procedural due process. A judge later reduced the award to $1.83 million.

The department appeals the judgment, claiming that the lower court should not have allowed the company to proceed with any counterclaim seeking monetary damages because sovereign immunity deprived the court of subject matter jurisdiction over such counterclaims, and that the court made several improper evidentiary rulings during the trial.

CPC cross-appeals, claiming that the trial court improperly reduced the amount of the jury's verdict in its favor from $18.3 million to $1.83 million and wrongly determined that the doctrine of absolute immunity bars common-law defamation claims against government officials.

The high court sided with the state agency.

"We conclude that the trial court improperly determined that the department had waived the state's sovereign immunity regarding the defendant's counterclaims and, accordingly, reverse the judgment of the trial court in favor of the defendant on the procedural due process counterclaim," Justice Flemming Norcott wrote for the court.

"We further conclude that the trial court's evidentiary rulings were not improper and, therefore, affirm the judgment of the trial court in all other respects.

"Finally, because we conclude that the trial court lacked subject matter jurisdiction over the defendant's counterclaims, we dismiss the defendant's cross appeals as moot."

Attorney General George Jepsen, whose office represented the department in the lawsuit, said in a statement Monday that he was "pleased" with the courts' ruling.

"The court is correct in its conclusion that the state does not waive its sovereign immunity simply by initiating litigation against a private party; rather, a person who believes the state has caused damages must follow the Claims Commission process established by the legislature, which was not done in this case," Jepsen said.

"This is a significant victory for the state's taxpayers, who will not be left on the hook for costs based on a verdict that we maintained was outside the law."

To read the court's complete opinion, click here.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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