ECI Sues HP for Mega Damages Alleging Breach of Contract, Inferior Services

/ By Itzhak Dannon /

On 8 April 2013 ECI TELCOM filed a claim at the Tel Aviv District for the sum of NIS38.4 million (about 10.5 million dollars), against Hewlett-Packard (Israel) claiming it had incurred damages as a result of breach of a contract it had with HP for upgrading and maintaining its IT (information technology) system.

פטיש LAWThe suit alleges that in 2009 ECI decided to upgrade its overall computing system (both hardware and software).  To do so, it turned to a number of service providers and solicited proposals for such services.  It avers that the defendant, HP, represented that it has the requisite professional experience and that its workforce was capable of development and provision of the services ECI required.

The complaint submits that, in reliance on HP’s representations as well as its purported abilities and skills in the field – representations that subsequently were also embodied in the agreement between the parties – ECI chose HP over all others as a the  service provider for the upgrade of its computerization array.

The lawsuit claims that even during the life of the agreement HP continued to make representations as to its ability to meet its contractual obligations.  However, as it turned out, according to ECI’s allegations, HP’s statements proved to be false and misleading, it failed to meet its obligations, fundamentally breached the agreement and  its breach is ongoing.  According to ECI, as of the date of filing its complaint, HP was only able to upgrade some of plaintiff’s computer system and to provide only some of the services it undertook to perform – at most 20% of the services it were to provide according to the terms of the agreement.

ECI claims that the agreement’s violations by HP caused it severe damage, manifesting in a heavy financial outlay it was required to expend as a result of the breach.  This was – ECI asserts – due to the need for the acquisition of additional hardware; the need for hiring additional third party personnel for handling and maintenance of its existing computer system; due to recurring downtime of ECI’s computer services used by its employees; and as a consequence of the payment of large sums of money to HP for services of inferior quality, whose value in reality was significantly lower than what HP charged.

The alleged damages were also reflected in HP’s purported failure to provide the services it had promised, in damages to the reputation of ECI and by preventing plaintiff from becoming a world pioneer in the field of IT.

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