During the Internet bubble, Covisint LLC and Commerce One Inc. planned to revolutionize the way auto suppliers do business. Now they have turned on each other.
Covisint, of Southfield, Mich., has sued Commerce One, of Pleasanton, Calif., for breach of contract in Oakland County (Mich.) Circuit Court.
In December 2000, Covisint signed Commerce One to a 10-year deal to help develop, install and maintain a comprehensive online marketplace for procurement of parts, suppliers and services. The lawsuit alleges that Commerce One failed to participate in quarterly meetings, respond to requests for product upgrades or provide new technology.
In a brief filed in support of the complaint, Covisint alleges the problems with its main technology partner continue to cause substantial damage. Covisint seeks damages and a court order to force Commerce One to fulfill the agreement.
The suit was filed in response to a demand for arbitration filed by Commerce One with the American Arbitration Association on June 9 after Covisint allegedly refused to pay Commerce One about $2.7 million last December.
"The lawsuit they filed is essentially an effort to avoid arbitration," Commerce One said in a written statement provided by its public-relations firm.
The dispute is the latest in a line of Covisint struggles.
The company has gone through several rounds of layoffs - about 300 contractors and employees have been laid off since 2000, about 150 last year.
Investors stopped funding Covisint in March 2002, and the company has yet to generate a profit.
Because of the problems Covisint has had, the lawsuit doesn't mean much to Joshua Greenbaum, an e-business analyst with Daly City, Calif.-based Enterprise Applications Consulting.
"The implication that Covisint can blame some of its problems on Commerce One is ludicrous," Greenbaum says. "Regardless of its technology situation, Covisint doesn't have a viable business model. The fact that Covisint continues to struggle in an attempt to make it is testament to the company's misguided sense of perseverance."
Paul Manns, director of marketing at Covisint, said the company couldn't comment on pending legal matters.
But he did provide a statement that said: "This situation is merely a contractual dispute between the two companies that will not affect the service Covisint provides to our customers."
Ford Motor Co., General Motors, DaimlerChrysler, Nissan Motor Co. Ltd., Renault SA, Oracle Corp. and Commerce One founded Covisint in 2000.
Crain's Detroit Business is a sister publication of Automotive News.