DISPUTE OVER Y2K LIABILITY IS RESOLVED OUT OF COURT

DENISE POWER

CANTON, Mass. -- A closely watched year-2000 dispute between J. Baker here and Andersen Consulting was settled out of court following mediation that resulted in both parties agreeing to withdraw their claims.

At issue was the apparel retailer's demand that Andersen Consulting, Chicago, provide reimbursement to cover costs to bring its merchandising system into compliance with year-2000 computing requirements. Andersen installed the system at J. Baker in 1991.

Andersen responded by filing a lawsuit asking a Massachusetts State Superior Court to declare the $6.6 billion technology consulting organization had fulfilled its contractual obligations to J. Baker.

Following mediation, J. Baker agreed last month that Andersen was not liable for year-2000 expenses related to the system and withdrew its claim; Andersen said it would drop its lawsuit. The damages J. Baker sought were not disclosed.

The resolution follows a similar matter settled out of court last September, involving supermarket retailer Produce Palace, Warren, Mich., and its point-of-sale technology vendors. In that case, Produce Palace received a check for $260,000, while in the more recent case, no monetary damages were awarded to either party.

"We are satisfied," said Mark Beaudouin, senior vice president and general counsel for J. Baker, which operates more than 450 men's apparel stores and nearly 900 footwear departments within discount department stores.

"We went through the mediation process in order to avoid protracted litigation. We wanted to make sure the issue was addressed. Now we will focus on running our business and getting ourselves in good shape for the millennium rather than fight with people who have been our business partners," he added.

Among the issues raised in the dispute were questions of "What did they know?" and "When did they know it?" -- specifically, was Andersen aware of year-2000 implications in 1991, when it installed the system, and was it Andersen's responsibility to bring the matter to light?

Some technical and legal professionals believe a system installed in the early 1990s would likely need to be replaced or modified anyway before year-2000 concerns became an issue.

"I believe 1991 was very early" to be greatly concerned about year-2000 matters, since "most systems have a life expectancy of five to seven years," said an attorney who was a systems developer for 15 years before entering the legal profession and specializing in year-2000 cases. The attorney, who declined to be identified, was not involved in the J. Baker/Andersen case.

Beaudouin said J. Baker was on target for bringing its computer systems into compliance with year 2000. The company is currently in the final test phase and anticipates all systems will be ready this month.

To identify code problems and to modify the code for year-2000 compliance, J. Baker used both internally developed software as well as software tools and project management consultation from Consultants in Business, Engineering and Research, Englewood, Colo.