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Liberty Bay v. Open Solutions

Liberty Bay v. Open Solutions

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Published by gesmer
Contract, D. Mass. 2012
Contract, D. Mass. 2012

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Published by: gesmer on Nov 25, 2012
Copyright:Attribution Non-commercial


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 Liberty Bay’s Complaint also contained claims for unjust enrichment and violationsof Mass. Gen. Laws ch. 93A, § 11. Those claims were dismissed by order of the courton September 7, 2011. Dkt # 26.UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTSCIVIL ACTION NO. 11-10189-RGSLIBERTY BAY CREDIT UNION,Plaintiff and Counterclaim Defendantv.OPEN SOLUTIONS, INC.Defendant and CounterclaimantMEMORANDUM AND ORDER ON THE PARTIES’CROSS-MOTIONS FOR SUMMARY JUDGMENTNovember 21, 2012STEARNS, D.J.In February of 2007, Liberty Bay Credit Union (Liberty Bay), a Massachusettschartered lending institution, hired I.A. Systems (IAS) to create a software interfacethat would allow it to import client member information into automated loan originationsoftware. In February of 2011, Liberty Bay brought this lawsuit against OpenSolutions, Inc. (Open Solutions), IAS’s successor-in-interest, alleging,
inter alia
breach of contract and breach of the implied covenant of good faith and fair dealing.Open Solutions counterclaimed, asserting mirroring causes of action. Presently beforethe court are the parties’ cross-motions for summary judgment, as well as Open
Risk-based pricing is a methodology used in the mortgage lending industry to setinterest rates by integrating the time value of money with factors predicting theprobability of a borrower’s default.
Solutions’ motion for partial summary judgment on the issue of damages. A hearingon the motions was held on November 19, 2012.BACKGROUNDThe following material facts are not in dispute, or, where disputed, are taken inthe light most favorable to the nonmoving party. In 2006, Liberty Bay decided toautomate its loan origination process to permit its customers to apply for and receiveloan approvals online, and to allow it to price these loans using a risk-based pricingmodel.
IAS held itself out as an expert developer of proprietary loan originationsoftware, and in particular, StreamLend Velocity (Velocity), a “paperless, end-to-loanorigination software system that . . . provide[s] financial institutions with the ability toautomate their entire lending process.” Pl.’s Ex. 11. As touted, Velocity pulls creditratings of loan applicants and analyzes their financial information according to alender’s preferred decision rules. Credit applicants using Velocity are able to obtainloan approvals entirely online. By interfacing Velocity with Liberty Bay’s coreprocessing or “host” system software, XP Systems’ XP2, the combined platformswould (or so it was planned) import credit union members’ demographic profiles fromthe host system for analysis and then automatically book any approved loan for
 The XP2 software manages Liberty Bay’s general ledger. It facilitates customeraccount activities, such as the opening and closing of accounts, the processing of deposits and withdrawals, tracking of balances, and servicing loans.
servicing through XP2.
Liberty Bay and IAS entered into an End User Product License Agreement (theAgreement) on February 16, 2007. The Agreement granted to Liberty Bay “a non-exclusive, non-transferable license to use the Product and any Enhancements to whichEnd User is entitled . . . .” Agreement § 2.1(i). “Product” was defined to mean“StreamLend Velocity loan origination software programs in machine readable code,together with the options and modules set forth in Schedule I.”
§ 1.1(d). ScheduleI identified the software features to be licensed and, under the heading “Interfaces,”listed the “XP Host Interface,” the bidirectional interface that was to import data fromXP2 into Velocity and then upload data from Velocity to XP2.
Schedule I. TheAgreement provided that[i]n the event that [IAS] fails to make an interface that performs all of thefunctions contemplated [by the Agreement] on or before January 1, 2008,through no fault of End User or any Third Party that is engaged by EndUser to perform services or provide products, [End User] will have theoption to cancel the project and receive a full refund or continue to moveforward with the implementation of StreamLend Velocity.
(Refund provision). IAS further warranted that “the product . . . is free from anydefects and will perform in accordance with the Documentation . . . and will not fail or

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