Iowa City files lawsuit against software company for $186,000

CEDAR RAPIDS - The city of Iowa City has filed a lawsuit against a Colorado based company after they say a 2009 software agreement with the company worth a total of over $756,000 went wrong.

Filed in Johnson County District court on Oct. 21, the lawsuit alleges that Innoprise Software Inc., which was later acquired by Harris Computer Systems, failed to provide functional software after the city entered into a contract with them on Oct.30, 2009.

The software was supposed to replace the city's system for human resources and payroll, financial and utility billing functions, which was self-built and dated back to the 1980s, Kevin O'Malley, Iowa City's Finance Director said during an interview last month.

According to the suit, the City of Iowa City paid Innoprise $254,179 in payments for the software license and service agreements as work on the implementation of the software progressed.

O'Malley said the city visited cities in Colorado and contacted others that used the software prior to the purchase. He says the software worked fine, but when work began on the Iowa City system, employees found problems that were not addressed in a timely manner.

As such, the lawsuit claims that the city “lost faith” in Innoprise after the company allegedly tried and failed to resolve the issues.

The suit indicates that the city later terminated their contract and demanded a return of all funds paid via a letter to the company on September 28, 2010.

Innoprise and the city of Iowa City entered a final settlement agreement and release on March 3, 2011. The lawsuit claims that Innoprise agreed to return the $196,000 to the city and agreed to transfer $10,000 each month until the amount was paid in full.

According to the suit, Innoprise did not make the $10,000 payments after the initial month, despite notices of default sent to the company.

Harris Computer Systems Inc., a company based in Canada, announced the acquisition of Innoprise Software and its assets on April 29.

The city says that they later received a press release announcing the acquisition and welcoming former-Innoprise CEO Dennis Harward as the new Harris Vice President in May. As such, the lawsuit claims that Harris is liable for the terms established under the March settlement agreement with Innoprise.

O'Malley says, however, that he was allegedly told by a Harris representative that the company was not responsible for Innoprise's repayment agreement with Iowa Cit.  A formal notice of the breach of the agreement was sent to Innoprise's council on May 2.

Iowa City Assistant Attorney Eric R. Goers, who filed the lawsuit, said that letter he sent to a Harris representative in June has gone unanswered. Attempts to contact Innoprise officials have also been unsuccessful, he said.

Goers says that the city is seeking an award of $186,000, the remaining balance from the March settlement agreement, interest at the legal rate and costs associated with the legal action to bring the suit against Innoprise Software and Harris Computer Systems.