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Rapid Printing Co vs. Scott Computers, Inc Role of S. Scott (CEO only), President of Scott Computers By Stephen B. Goldberg & Jeanne M. Brett You...

Use the “Preparing Your Strategy” chapter in Bargaining for Advantage as a basis for planning your role for the “Rapid and Scott” negotiation. Use should use as a template Appendix B in BFA. You are not required to use the table format, but you should include a section for each of those that appear in the Appendix. In your discussion of interests, be sure you identify those interests that are shared, those that are conflicting, and those that may be ancillary. In the section on development of proposals, be sure that you develop multiple proposals – and indicate your preference order over these.
Scott CEO.pdf

Rapid Printing Co vs. Scott Computers, Inc
Role of S.S. Scott (CEO only), President of Scott Computers
By Stephen B. Goldberg & Jeanne M. Brett You are the President and Chief Executive Officer of
Scott Computers, Inc., a company engaged in the
manufacturing, selling and leasing of computers and
associated software.1 Scott's gross income for fiscal
1991 was $339 million.
Your company is involved in a lawsuit filed by Rapid
Printing Company, seeking $5,000,000 in damages
(See Appendix C). Rapid is a comparatively small,
but highly regarded printing company specializing in
business forms, multi-page documents, journals, and
reports. Rapid's gross income for fiscal year 1991
was $1,770,000. The facts, as they have been
reported to you by Slade Gorton, Scott's Vice
President for Sales, are these:
In February 1991, Dee Williams, Rapid's Vice
President for Operations, telephoned Scott to request
that a salesperson call upon him. In response to
Williams' request, Scott salesperson June Robertson
met with Williams. At this meeting, a general
discussion took place concerning Rapid's desire to
acquire computer equipment that would provide for
remote computerized composition through portable
terminals placed at Rapid's customers' locations.
With such a system, customers could transmit data
directly to Rapid in typeset-ready format, enabling
Rapid to perform its composition functions faster and
more accurately than its competitors, none of whom
possessed a computer system such as that envisioned
by Williams.
At the close of this meeting, Williams told Robertson
that he would send a written request for a proposal,
which he then did (See Appendix A). That written
request was limited solely to hardware, and contained
no reference to software. Williams and Robertson
then had a series of meetings in which they discussed
Rapid's computer needs and Scott's capacity to satisfy
1 In order to maximize the learning value of this exercise, please
do not show your confidential instructions to anyone else,
including your negotiating partner. those needs. In the course of these meetings, Rapid's
needs for software were discussed, but those
discussions were limited to operating programs and
did not include applications programs.2
At one point Robertson told Williams about
Print-Rite, an application program developed by
Scott for use in the printing industry that Rapid could
rent for $1,750 per month. Williams expressed doubt
that Print-Rite was sufficiently user-friendly to be
used by Rapid's customers, and Robertson told him
that Scott was in the process of developing a
successor to Print-Rite, which should be available
soon, and which would be more user-friendly.
Robertson also told Williams that if Rapid started
with Print-Rite, the transition to a second generation
Scott program would be comparatively simple.
Williams' response was that he did not want to wait
for Scott to develop a better program, that he had
been writing programs for Rapid for years, and that
he would write the application program for the new
system himself. After this, there was no further
discussion of application programs. Thereafter, in
March 1991, Rapid and Scott entered into a contract
enumerating the specific items of hardware and
operating programs to be leased by Scott to Rapid
(See Appendix B). No reference was made in that
contract to any application software.
In July 1991, the Scott hardware was fully installed
at Rapid. It soon developed, however, that the system
was incapable of computerized composition because
it lacked an appropriate application program. At that
2 The world of data processing is divided into two parts, hardware
and software. Hardware is the physical equipment, consisting of a
computer and its peripheral devices. Software consists of the
computer programs used to operate the hardware. There are two
types of computer programs. Operating programs direct the
hardware and interface between the more specific task-oriented
application programs and the hardware. Application programs are
written to direct the computer to perform specific user-oriented
functions, such as the preparation of invoices, inventory records
and composition. © 1996-2006 Dispute Resolution Research Center, Northwestern University. All rights reserved. Revised 1998.
The Dispute Resolution Research Center (DRRC) requires a $3.50 per person usage fee for each of its exercises, including
this exercise. Payment should be made to the DRRC in U.S. dollars. Any use of this exercise without this required payment is
unauthorized and in violation of copyright law, which imposes statutory and other damages on infringers.
DRRC, Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, Illinois 60208-2001
Tel: 847-491-8068, Fax: 847-467-5700, [email protected], www.kellogg.northwestern.edu/drrc point, a dispute developed between Rapid and Scott
concerning whose responsibility it was to provide an
application program. According to Rapid, June
Robertson had promised Williams that Scott would
provide Rapid with Print-Rite at no cost if Rapid
would lease Scott hardware. Robertson denied
having promised to provide Print-Rite, asserting that
when she sought to interest Williams in leasing PrintRite, he said he was not interested, since he planned
to program the new system himself. Scott took the
position that it had fully performed its obligations
under the lease and demanded that Rapid begin
making payments. program made it difficult to train operators, who then
continued to have problems with the program even
after extensive training. With customer service costs
skyrocketing, Scott took Print-Rite off the market in
March 1991.
About two years ago, Scott research and
development personnel began working on an
application program for the printing industry to
replace Print-Rite. Known as SCPPI (Scott
Composition Program for the Printing Industry), this
new program, designed to be user-friendly like the
Macintosh, is a potential source of great profits.
However, it has not yet undergone field development
and is not available commercially. In February 1992, Rapid had made no payments and
the matter was turned over to Scott's legal department
which, in turn, engaged Santina & Jakes to institute
proceedings against Rapid for the approximately
$500,000 due and owing under the lease. The lease
stipulates that if at any time during the term of the
contract, the customer fails to make payments within
30 days of the date on which those payments are due,
the entire amount of the 5-year contract shall
immediately become due. (See Appendix B section
7b.) It is Slade Gorton's view, based primarily on what
Robertson told him, that Williams concocted his
story out of whole cloth in an effort to extricate
himself from an embarrassing and financially
difficult position. Williams did plan to provide a
composition program for the system he had designed,
but overestimated his abilities, and found that he was
incapable of writing a program of that complexity.
Rather than admit his error and lease the Print-Rite
program, which would have added very considerably
to the lease cost, Williams fabricated his story about
having been promised Print-Rite at no charge. In April 1992, before Santina & Jakes could act,
Rapid brought suit against Scott, claiming that Scott
had defrauded Rapid, and had breached its contract
with Rapid, by promising Print-Rite and not making
it available. Rapid sought approximately $5,000,000
in damages from Scott, claiming that it lost profits in
that amount as a result of the failure of the new
system to operate as planned. Despite the seemingly straight-forward nature of the
legal issues presented by this case, the business
considerations are somewhat more complex. Even if
you could persuade Rapid to drop its claims against
Scott, Rapid would still owe Scott over $500,000.
You have learned recently that Rapid's financial
position is not as good as you thought when the lease
was signed. Unless its proposed new system is
operational, Rapid probably cannot meet its
obligations under the lease, and a judgment against it
would almost surely put it into bankruptcy. It is clear
that Scott would spend more to obtain such a
judgment than it would recover. (Gil Santina has
estimated trial costs at a minimum of $50,000
assuming a 2-week trial, billing at the firm's normal
rate of $200 per hour for partners and $100 per hour
for associates.) On the other hand, you do not want
companies that do business with Scott to think that
they can breach leases with impunity. Furthermore,
the computer leasing market is currently quite weak
and there is no likelihood of Scott being able to
recoup its losses on the Rapid lease by immediately
leasing the equipment involved to some other
company. Although you have no reason to doubt that Rapid
would earn approximately $5,000,000 in profits if its
remote computerized system were the first in the
printing industry, you are convinced that Rapid's
factual allegations against Scott have no basis
whatsoever. You are also certain, and your lawyer
concurs, that a counter-claim by Scott for the
approximately $500,000 due it under the lease would
be sustained. Not only is there no reference in the
lease to Scott providing Print-Rite at no charge but
Robertson would have had no authority to promise to
provide it at no charge. Print-Rite was available at
that time at a lease price of $1,750 per month and
Robertson could not have waived that charge.
Indeed, Scott had been having such problems with
Print-Rite that at the time of Robertson's meetings
with Williams, Scott was losing money on Print-Rite,
even at $1,750 per month. The problem with
Print-Rite was that it required an operator to be a
sophisticated computer programmer and a
knowledgeable typesetter. The complexities of the Scott's policy is to attempt to resolve all disputes
short of litigation. In pursuance of that policy, you
2 Rapid vs. Scott/Role of Scott (CEO only) called B.R. Brown, President and Chairman of Rapid
Printing Company, to try to arrange an off-the-record
meeting without the lawyers for the purpose of
working out a settlement. You told Brown that it was
Scott's policy, with respect to all disputes in which it
becomes involved, to attempt to resolve those
disputes, short of litigation. You also told Brown that
unless this matter could be worked out, Scott intended to bring a counter-claim against Rapid for
$510,960, the full amount due under the lease.
Brown, after consulting with Rapid's lawyer, agreed
to meet with you.
(For the purpose of this exercise, assume it is May
1992) 3 Rapid vs. Scott/Role of Scott (CEO only)

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