NTG Telecommunications, which was interested in purchasing a computer network for its office, received a promotional letter from IBM regarding IBM’s PC Server 310, Small Business Solution, a computer network server designed for and marketed to small businesses. The letter stated: “When you’re ready to get down to business, give us a call. . . . We’ll give you the name of the IBM business partner nearest you, as well as answer any questions you might have.” The Small Business Solution was available only through an IBM business partner, which is an entity authorized to resell IBM products.
Jud Berkowitz, president of NTG, contacted Frank Cubbage of Sun Data Services, an IBM business partner, regarding the Small Business Solution. Berkowitz decided to purchase the Small Business Solution after being informed by Cubbage that it was compatible with Windows 95, the operating system installed on each of the networked computers. After he installed the server, NTG started having serious computer problems, which were not resolved until NTG replaced Perfect Office (which was sold as part of the Small Business Solution), with Lotus Smart Suite. Berkowitz sued IBM for fraud based in part on Cubbage’s representation that the Small Business Solution was compatible with Windows 95. IBM argued that Cubbage’s statement could not be attributed to it because a formal licensing or dealership agreement does not create an agency relationship. How should the court rule?
[NTG Telecommunications, Inc. v. IBM, Inc., 2000 U.S. Dist. LEXIS 6279 (E.D. Pa. May 8, 2000).]