David Beats Goliath in Software Suit and Wins $4.1 Million
A small Kansas City company whose software measures asset overlaps in mutual funds wasn't very happy when A.G. Edwards made the software available to 7,000 of its stockbrokers nationwide.
The brokerage giant had bought just four licenses for the use of Overlap Inc.'s proprietary software. But then it loaded the software onto more than 50 computers and made the proprietary analyses available to every one of its brokers.
A case of extreme overlap, one might say - and one that A.G. Edwards came to regret when a Jackson County jury awarded Overlap Inc. $7.1 million in the company's breach-of-contract and fraud action against the brokerage firm.
After the trial court merged duplicative damage awards last week, the total came to $4.1 million - a tidy sum for tiny Overlap, which has one employee and sells its wares over the Internet and telephone. The verdict comprised $1.8 million in compensatory damages and $2.3 million in punitive damages.
"What we first found out was that Edwards had loaded the software onto several computers. But through discovery we were able to establish that they had engaged in systemwide use of the software," said Overlap's attorney, Patrick Stueve of Stueve Siegel Hanson.
Overlap was founded in 1996 by William C. Chennault, a former professor at Kansas City Kansas Community College and later head of its instructional technology and information systems programs. Chennault developed Overlap's software, which compares the holdings of mutual funds and identifies areas of overlap among them - an important consideration for investors looking to diversify their assets.
The case was filed in 2003 and, after going through four judges, finally went to trial earlier this month. After hearing eight days of testimony, the jury deliberated just two hours before returning its verdict.
A.G. Edwards' attorneys at Blackwell Sanders referred inquiries to their client. Justin Gioia, a spokesman for A.G. Edwards, said the St. Louis-based firm disagreed with the verdict and was reviewing its options, including an appeal.
A.G. Edwards became a division of Wachovia Securities on Jan. 1.