Search Our Website:
Over the last several years, plaintiffs' lawyers have increasingly been including computer malpractice counts in their complaints to recover tort-related damages for what often amounts to a simple (although often factually complex) breach of contract claim. By casting a claim as one for computer malpractice, plaintiffs' lawyers hope to obtain greater recoveries for their clients and convince juries that their clients have been duped by sophisticated computer experts. Before practitioners jump headfirst into the computer malpractice arena, they should consider both the current state of the law in this area as well as the implications of including a claim for computer malpractice.

How the Courts Have Handled Computer Malpractice Claims
The majority of jurisdictions that have confronted (or that have at least addressed permeations of) computer malpractice claims have declined to allow such claims to go forward. A good example of the rationale employed by those courts rejecting computer malpractice claims can be seen in Hospital Computer Systems, Inc. v. Staten Island Hospital, 788 F. Supp. 1351 (D.N.J. 1992). Hospital Computer Systems, a computer software development and management services provider ("consultant"), brought an action against Staten Island Hospital ("hospital") for breach of contract stemming from the hospital's failure to pay the consultant's fee. The hospital counterclaimed raising three contract and three tort claims; one of the tort claims was for professional malpractice. In summary, the hospital argued that the consultant did not deliver the computer system that it had represented would meet the hospital's needs.

In dismissing the hospital's computer malpractice claim on summary judgment, the United States District Court for the District of New Jersey held that the hospital could not establish that computer consultants meet the requirements necessary under New York law to give them the status of professionals, which is the prerequisite before a malpractice action could be maintained. The court stated:

A profession is not a business. It is distinguished by the requirements of extensive formal training and learning, admission to practice by a qualifying licensure, a code of ethics imposing standards qualitatively and extensively beyond those that prevail or are tolerated in the marketplace, a system for discipline of its members for violation of the code of ethics, a duty to subordinate financial reward to social responsibility, and, notably, an obligation on its members, even in non-professional matters, to conduct themselves as members of a learned, disciplined, and honorable occupation.

* * * *

Professionals may be sued for malpractice because of the higher standards of care imposed on them by their profession and by state licensing requirements engenders trust in them by clients that is not the norm of the marketplace. When no such higher code of ethics binds a person, such trust is unwarranted. Hence, no duties independent of those created by contract or under ordinary tort principles are imposed on them.

Id. at 1361.

There are, however, a few jurisdictions that arguably have paved the way for plaintiffs' lawyers to successfully raise and litigate computer malpractice claims. An early reported decision that recognized the validity of suing a computer consultant in tort (and conveniently ignored the economic loss doctrine) was in Invacare Corporation v. Sperry Corporation, 612 F. Supp. 448 (N.D. Ohio 1984). Invacare brought an action against Sperry for breach of contract, fraud and negligence arising from Sperry's recommendations and advice concerning the computer system that Invacare purchased. Sperry sought dismissal of the negligence claim on summary judgment arguing that other jurisdictions had rejected the tort of computer malpractice as a matter of law.

Because the United States District Court for the Northern District of Ohio considered Invacare's negligence claim to simply allege breach of an ordinary standard of care as opposed to an elevated standard of care, it rejected Invacare's invitation to dismiss the negligence claim. The court stated in pertinent part:

Invacare alleges that the personnel provided by Sperry failed to perform at a level of ordinary care. If machinists, electricians, carpenters, blacksmiths, and plumbers, are held to the ordinary standard of care in their professions, the Court fails to see why personnel in the computer industry should be held to any lower standard of care. Invacare simply alleges negligence in a business setting. This does not give rise to a new tort of "computer malpractice." Negligence in a business setting is clearly actionable.

Id. at 453.

About two years later, the Indiana Court of Appeals in Data Processing Services, Inc. v. L.H. Smith Oil Corporation, 492 N.E.2d 314 (Ind. Ct. App. 1986) laid further groundwork for the creation of a new tort called "computer malpractice." The issue in Data Processing was whether the contract was one for goods such that UCC applied. This case is significant because in determining that the contract was one for services, the court said that the case was "more analogous to a client seeking a lawyer's advice or a patient seeking medical treatment for a particular ailment than it is to a customer buying seed corn, soap or cam shafts." Id. at 319. According to the court, "[t]hose who hold themselves out to the world as possessing skill and qualifications in their respective trades or professions impliedly represent they possess the skill and will exhibit the diligence ordinarily possessed by well informed members of the trade or profession." Id. Based upon this rationale, the Indiana Court of Appeals held that the trial court properly found that the computer consultant breached its implied promise of having the reasonable skill and ability to do the job for which it contracted.

About three years later, the United States Court of Appeals for the Eighth Circuit expressly recognized a computer malpractice claim in Diversified Graphics, Ltd. v. Groves, 868 F.2d 293 (8th Cir. 1989). Diversified Graphics retained Ernst & Whinney ("E&W") (the predecessor to Ernst & Young) with whom it had a long-standing relationship prior to the dispute, to select and implement an in-house computer data processing system. Diversified Graphics had hired E&W to select a turnkey computer system, which was supposed to be (but was not) fully operational without the need of extensive employee training. Diversified Graphics was awarded money damages on its negligence claim.

On appeal, E&W argued that its motion for a directed verdict was improperly denied because Diversified Graphics failed to offer adequate testimony on the appropriate standard of care and whether it had been breached. The court rejected E&W's argument and said that Diversified Graphics had, in fact, presented sufficient evidence of a lack of professional care. In reaching its holding, the Eighth Circuit relied most heavily upon E&W's failure to abide by its own internal procedures, which incorporated the professional standards of the American Institute of Certified Public Accountants, rather than upon the testimony of a Diversified Graphics expert. The court actually criticized the expert because, in attempting to help Diversified Graphics establish the appropriate professional standard of care, he testified about his personal opinion as opposed to the industry standard.

Although the Eighth Circuit allowed Diversified Graphics to recover for E&W's computer malpractice, it perhaps unknowingly addressed the fundamental reason why the majority of courts are hesitant to recognize computer malpractice claims: There are, in fact, no professional standards that govern the computer industry. However, as the computer industry continues to become "professionalized," particularly as more computer associations begin to adopt ethical and disciplinary codes, it may be that in the near future courts may be less reluctant to reject computer malpractice claims out-of-hand.

Implications of Asserting Computer Malpractice Claims
Assuming that computer malpractice claims are indeed the wave of the future, there are several implications that should be considered. First, the standard of care is elevated. As a practical matter, this means the practitioner must contend with a higher burden of proof and satisfy this burden through the use of expert testimony. The introduction of an expert into a case also translates into increased costs for the client.

Second, by bringing a computer malpractice action, a lawyer can overcome the restrictive privity requirement, thereby expanding the class of prospective plaintiffs. The trend in malpractice actions is to move away from strict notions of privity and zone of danger often found in breach of contract and tort actions, respectively. These concepts have been replaced by broad considerations of foreseeability and the balancing of conflicting interests.

Third, computer malpractice claims enable a lawyer to successfully circumvent the economic loss doctrine, which typically prohibits recovery in tort absent personal injury or property damage. The ability to avoid the economic loss doctrine enables a client to potentially recover the damages it most wants: out-of-pocket costs associated with procuring substitute computing services in the short and long term, increased labor costs associated with hiring additional computer-related staff to help run a system that may be more complicated and complex than what the client asked the consultant to deliver, and lost revenues and profits associated with any shutdown.

Finally, including a computer malpractice claim may enable the client to take advantage of some of the doctrines seen in other malpractice arenas. For example, in a medical malpractice context, the continuous treatment doctrine operates to toll the statute of limitations. Under the continuous treatment doctrine, the statute of limitations begins to run at the end of the patient's continuous treatment, or at the termination of the hospital-patient or physician-patient relationship. Application of this doctrine in the computer malpractice arena may operate to prevent the client from potentially being penalized for allowing the computer consultant to additional time in which to correct the problems affecting the computer system.

Determining if the Computer Consultant is a Professional
Since the primary hurdle in bringing a successful computer malpractice claim seems to be establishing that the computer consultant is a "professional," before undertaking to bring (or for that matter defend against) a computer malpractice claims, the following questions should be asked by any prudent practitioner:
  • Did the computer consultant exercise independent judgment and advise the client in connection with the computer system that was designed, developed and/or installed?
  • Did the computer consultant obtain specialized training such as a Masters in Information Systems from a recognized university?
  • Is the computer consultant certified by an organization such as the Institute for Certification of Computer Professionals ("ICCP")?
  • Does the computer consultant belong to an association such as the Association of Data Processing Service Organization ("ADAPSO") or the Association for Computer Machinery ("ACM") that has a code of ethics?
  • Does the computer consultant have malpractice insurance?

An affirmative answer to one or more of these questions will help to establish that a computer consultant is a professional. Conversely, negative answers to one or more of these questions, coupled with the present lack of licensure that applies to the computer industry, will help to establish that a computer consultant is not a bona fide professional. Unless and until the courts abandon or at least modify the professional vs. nonprofessional distinction, a lawyer needs to think of computer malpractice actions in these terms.