CSC sues retailer Saks over IT services contract

Technology consulting and outsourcing firm Computer Sciences Corp. (CSC) has filed a lawsuit against retailer Saks Inc., accusing its client of misappropriating trade secrets and violating the terms of an IT services contract signed by the two companies early last year.

Analysts described the suit, which was filed June 18 in U.S. District Court for the Northern District of Georgia, as atypical, since users are usually the ones who initiate litigation against vendors when contract disputes arise. "This is a case of man bites dog. It's an oddity," said Tom Rodenhauser, president of Consulting Information Services LLC in Keene, N.H.

Neither El Segundo, Calif.-based CSC nor Saks, a Birmingham, Ala.-based company that operates Saks Fifth Avenue and other department store chains, would comment on the case this week, though both companies acknowledged that the suit had been filed.

According to the court documents submitted by CSC, Saks agreed in January of last year to let the consulting firm take over its contract negotiations with telecommunications suppliers as well as computer software and hardware vendors. The move was expected to save the retailer about US$2 million in annual costs, CSC said.

CSC reviewed Saks' telecommunications contracts to see what kind of savings the retailer could get by purchasing the services through agreements that the consulting firm has with the suppliers, according to the suit. But CSC alleged that Saks used the confidential information "as bargaining tools in [its] own negotiations with telecommunication service providers."

As part of the suit, CSC is seeking compensatory and punitive damages plus attorneys' fees from Saks. While the consulting firm didn't specify the amount of damages it's requesting, the suit claims that Saks owes CSC nearly $1.5 million along with interest for the services that were rendered under the deal between the companies.

Though legal actions initiated by technology vendors and consultants against users are relatively rare, the kind of contract dispute highlighted by the battle between Saks and CSC may become more commonplace, predicted Alden Cushman, an analyst at Kennedy Information LLC in Fitzwilliam, N.H.

Competition among consulting firms has heightened considerably in the wake of the dot-com collapse and the slowdown in IT spending, putting the balance of power in the hands of users, Cushman said. As a result, he added, some users may find ways to save money on IT instead of leaving the work to a consulting firm, resulting in possible misunderstandings.

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