JDA has been hit with a lawsuit from online lingerie and underwear seller Andra Group, which claims its business suffered millions in damages after a new e-commerce system wasn’t delivered as promised.
Andra Group has more than US$40 million in revenue and was founded in 1998, according to the suit filed Thursday in U.S. District Court for the District of Arizona. It has no retail locations, depending instead entirely on its website.
Due to rapid growth, in 2011 Andra began looking for a new website and back-end system, and after evaluating a number of vendors, settled on RedPrairie, which merged with JDA in November 2012.
RedPrairie’s marketing indicated it could provide a “standard online retail platform that could be highly customized to Andra Group’s needs,” according to the suit. In addition, RedPrairie presented itself as having done hundreds of migrations from platforms customers already had, the suit adds.
Andra Group allowed RedPrairie to examine its existing system to figure out what customizations would be needed. RedPrairie promised it could deliver a satisfactory substitute by way of two RedPrairie applications, one of which it had acquired in 2011, according to the suit.
Andra Group signed a number of license agreements with RedPrairie in March 2012 based on the company’s promises, but “these representations were false,” according to the suit.
RedPrairie had “no basis” for making such statements, as it had not fleshed out its middleware technology adequately, and also had “insufficient familiarity” with the way the applications had to interact with each other.
RedPrairie also told Andra Group it would go live on the system sometime in February of this year, according to the suit. Based on this, Andra Group agreed to place its existing system in “lockdown” status during the transition, with no changes able to be made, according to the suit.
A locked-down website can be “highly damaging” to a retailer, given it can “become dated and lose competitiveness with even a short passage of time,” the suit states.
RedPrairie continued to “knowingly and/or recklessly” give Andra Group “rosy project status reports” between June 2012 and Feb. 22 of this year.
Three different project managers were assigned within six months, and as managers were terminated their replacements blamed their predecessors for problems, according to the suit. The go-live date was ultimately delayed until late March.
After the merger with RedPrairie closed and JDA staffers became involved, “it became clear that the transition and integration plan proposed by RedPrairie would not be successful and would not meet Andra Group’s requirements,” the suit states. “It further became clear that RedPrairie did not have the expertise or proper software solutions to provide a seamless platform for Andra Group’s website and back office functions, and, in fact, never had that capability.”
By January of this year, Andra Group had spent about US$1.6 million on the project, and by February the transition plan had ballooned to more than 500 pages.
JDA officials “clearly needed an ‘out,’” the suit alleges. In mid-February, JDA “abruptly reversed course” and began delivering progress reports that cited “significant problems with the budget, timing and overall status of the project for the first time,” the suit states. “It was now clear that JDA could not, and would not, deliver on the promises made by RedPrairie or the contract it had signed.”
JDA subsequently met with Andra Group and proposed rewriting the contract “and essentially re-bid the entire project from scratch,” with Andra Group’s costs rising by $1 million and the go-live delayed to early 2014, according to the suit. The final product would also be less functional than Andra Group’s legacy system, which would have to remain in lockdown mode for another year, it claims.
After Andra Group refused, “JDA made it clear that it preferred to abandon the project entirely,” the suit states. JDA also attempted to shrug off their “massive failures” and treated Andra Group officials “with contempt and condescension,” it claims.
JDA initially agreed to repay “substantially all” of the money Andra Group had spent but subsequently reneged on the deal, refusing to give back no more than a “small fraction” of the money.
Andra Group has suffered at least $4 million in damages on top of the $1.6 million it spent on the project, according to the suit.
The action seeks compensation for Andra Group’s expenses and damages related to the project, as well as attorney’s fees and court costs.
JDA hadn’t filed a response to the suit as of Friday. The company didn’t respond to a request for comment on Andra Group’s allegations.
This may be a case where someone made promises to Andra Group based on a product road map that ultimately couldn’t be delivered, said analyst Ray Wang of Constellation Research.
”It’s not uncommon for things like this to happen,” particularly when mergers and acquisitions come into play, Wang said.
Customers can protect themselves by having a third party do a deep vetting of the products they are interested in buying, Wang added. “This is one of the dangers of sole-sourcing,” he said. “With only one throat to choke, you don’t get that outside opinion on what is real.”