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July 4, 1994

EDS wins fight with one Texas bank, faces another

By Mark Halper

Electronic Data Systems Corp. has won a decision against one small Texas bank but still faces charges from another alleging that the outsourcer did not provide promised services.

A jury in Hidalgo County State Court in McAllen, Texas, ruled EDS did not commit fraud or fail to comply with its data processing agreement with Texas State Bank as charged [CW, May 30].

The bank was ordered to pay EDS $500,000 for interfering with the outsourcer's attempts to do business with two other banks that merged with Texas State Bank.

Further action weighed

George Carruthers, Texas State Bank's chief financial officer, said the bank's attorneys are deciding whether to appeal the decision. He declined to comment on the ruling except to say, "Naturally we're disappointed."

The mood was different in the victor's locker room. "We said all along the ease had no merit, and the jury has validated that ." an EDS spokesman said last week.

Next up . . .

The ruling should clear the way for a similar suit by First National Bank of Edinburg to proceed to trial, said Bruce Bierhan, a partner at Boston-based law firm Jager, Smith, Stetler & Arata, which is advising the bank.

In a suit filed in the same court, First National in Edinburg, Texas, alleges EDS overburdened the bank's data processing system after EDS took over operations from Mtech Corp. in 1989. The bank also claims EDS failed to provide daily account balance information in a timely manner. It seeks unspecified damages. EDS acquired Mtech in 1988.

EDS and First National parted ways in 1992. Both First National and Texas State Bank replaced EDS and its Mtech system with an integrated banking system from Integrated Technology, Inc. in Lincoln, Nebr.

Motivation

First National Bank of Edinburg said it withheld payments from EDS in an effort to encourage EDS to resolve alleged service shortcomings.

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