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TCS settles lawsuit with Orange County for $26 million

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In a dramatic development, Tata Consultancy Services has settled a three-year-old lawsuit with US District Orange County for a massive $26 million. TCS reportedly entered into an agreement with the Orange County to design, develop and implement an automated tax system. However, the project was not completed and delivered although it was to be completed in 2010. Since the project was not fulfilled, the county sued TCS in 2013 for damages. Commenting on the development, a TCS spokesperson revealed to us that both TCS and Orange County had agreed in principle to settle an on-going dispute regarding the development of a Property Tax Management System. Even though both parties had accused each other over the issue, there has been no liability.

Commenting on the development, the County Executive Office of Orange County disclosed that the total settlement accounted to $26 million. The press release further said that the amount of the settlement was more than four times the original $6.4 million contract. It was more than five times the amount the County actually paid to Tata.

Press release will hurt TCS in future

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According to industry analysts, it is the content of the press release which hurts TCS the most rather than the settlement award. TCS has the required capability to pay $26 million as damages.

But the press release will seriously hurt the credentials of the India-based company. Moreover, it will also affect the prospects of the company in future. It will be difficult for US-based companies to trust TCS anymore after this debacle. Tata will have to work hard to convince the customers that the company will develop products within the stipulated timeframe.

TCS stretched the project to 6 years without delivery

In its legal petition, the County officials alleged that TCS took the promised two-year contract worth $6.4 million. However, the project was, later on, stretched to six-year contract amounting to $17 million. The project was never completed and terminated in 2010.

The County prayed before the jury to award punitive damages for fraud against Tata. The officials and supervisors of Orange County’s district also accused TCS of fraud and lying.

Earlier, the US District Court averted an attempt by TCS to get the fraud case dismissed. Furthermore, the latest settlement comes at a time when the Mumbai-based company is finding it difficult to combat a larger lawsuit.

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In April, a Wisconsin judge asked the IT firm to pay $940 million to healthcare provider Epic Systems for allegedly stealing its source code. However, Epic has asked the judge to reduce the compensation amount by $220 million as per the local Wisconsin law.

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