NetSuite slapped with US fraud lawsuit over 'aggressive' salesman's claims

SkinMedix wants its money back for the allegedly 'unusable' e-commerce site NetSuite built

NetSuite is facing a lawsuit from a skin care product retailer that alleges an overzealous salesman led them to buy a software system that utterly failed to meet its needs.

Gulf Coast Medical Group LLC, a Florida company that does business under the name of SkinMedix, had outgrown its website and shopping cart platform in September 2012 and began looking for a replacement that could manage both sales and back-office functions, according to a complaint filed this week in U.S. District Court for the Northern District of California.

Its existing system was managing an inventory of 3,000 products but SkinMedix needed something that could eventually handle a 20,000-item inventory.

After doing some research, SkinMedix president Aaron Kozol contacted NetSuite and subsequently "communicated extensively" in early 2013 with a salesman there, Donald Bizzaro, according to the complaint.

"Because of the high cost of NetSuites software solutions, Mr. Kozol specifically inquired about whether NetSuite could deliver a business solution that met all of SkinMedix's needs," the complaint states.

Bizzaro is "an aggressive salesperson" who told Kozol NetSuite's software would indeed satisfy SkinMedix's needs, it adds.

"In his overly zealous efforts to induce SkinMedix to purchase services from NetSuite, Mr. Bizarro made numerous false representations of fact," the complaint states.

Kozol had told Bizzaro that SkinMedix's Web store loaded pages slowly and inconsistently, and the company wanted a replacement that would deliver "ultra-high speed page loading and image rendering," according to the complaint.

Bizzaro told Kozol NetSuite could design and host a SkinMedix website that would provide "sub-second" page rendering. Kozol also stressed that NetSuite's software had to provide automatic currency conversions for people visiting the site from countries beside the U.S., as well as ARB (automatic recurring billing and reship), according to the complaint.

ARB "is an internet function where a customer can agree to have a seller automatically (a) send the customer a desired product on a recurring basis and (b) bill and charge the customer for the sale, eliminating the need for the customer to manually order the product each time the customer wants to purchase it," and was essential to SkinMedix's growth plans, the complaint states.

In response, Bizzaro told Kozol NetSuite's technology could meet all of these demands and a completed site would be ready for testing by August 2013, a few months before the busy holiday shopping season, according to the complaint.

Based on Bizzaro's assertions, SkinMedix signed a three-year software license with NetSuite and hired it to build the website.

"Immediately before executing the contract with NetSuite, Mr. Kozol contacted Mr. Bizzaro to express his concern that there did not appear to be any reference to the ARB functionality in NetSuites proposed contract documents," the complaint states.

Bizzaro responded by saying ARB "is and will be a seamless component of your NetSuite experience," it adds.

Shortly after SkinMedix signed the contract, a marketing representative contacted Kozol "to interview him about his experience with NetSuite," the complaint states. Although the system hadn't been implemented, Kozol said positive things thanks to Bizzaro's pledges, it adds.

But it quickly became apparent that NetSuite's system was incapable of delivering what Bizzaro had promised it could, according to the complaint. Rather than sub-second page loads, the website "has demonstrated page loading times of greater than four seconds domestically and seven seconds internationally," it states.

Nor does the site display prices in other currencies, according to the complaint. "The website displays product prices in U.S. dollars only, regardless of which currency a customer selects and regardless of what the page footer states," it states. "This presents a tremendous potential liability for SkinMedix, as its website, as developed by NetSuite, effectively misrepresents product prices to global customers."

NetSuite also failed to meet the August 2013 deployment deadline, according to SkinMedix.

As a result of Bizzaro's claims, SkinMedix has spent more than US$250,000 on a "manifestly unusable" website, the complaint states.

Meanwhile, as Kozol engaged "in the futile process of identifying NetSuites failures and requesting that these failures be corrected," NetSuite published a blog article featuring SkinMedix that described how it "had found success by using NetSuite to support all of its business processes," the complaint states.

The blog also features a screen shot labeled as the site NetSuite built for SkinMedix, but in fact the image was of the company's existing system, it adds.

As of Friday, the blog post remained up on NetSuite's website.

Earlier this year, NetSuite assigned a practice director who was supposed to help fix the site's problems, but the individual was initially unresponsive and later referred SkinMedix "to the same NetSuite project managers who had previously failed to grasp and resolve the problems Mr. Kozol and SkinMedix indentified in 2013," the complaint states.

SkinMedix's suit asks the court to sever its contract with NetSuite, order the return of the money it paid to NetSuite and award compensatory and punitive damages.

Bizzaro, who isn't named as a defendant in the suit, couldn't be reached for comment on Friday.

"Here at NetSuite we strive to provide the best software and services to over 20,000 companies, organizations and subsidiaries worldwide," a NetSuite spokeswoman said in a statement. "We are aware that a complaint was recently filed by [SkinMedix] although we have not been formally served with a copy. We are reviewing the facts and intend to defend ourselves vigorously."

NetSuite has yet to tell its side of the story, but software buyers can take at least one important note away from the dispute.

"There are many references [in the complaint] to what Netsuite personnel represented to SkinMedix, but it is not clear whether any of these representations were ever made in writing," said analyst Frank Scavo, managing partner of IT consulting firm Strativa, via email. "There is a lesson learned here for software buyers: if it isn't in the contract, it doesn't exist."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

Tags business issuespersonnelnetsuiteapplicationsenterprise resource planninglegalCivil lawsuitssoftware

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