High penalty payment for SAP

The Higher Regional Court of Mexico City has ruled in favor of a civil lawsuit filed by Dominion Group and Méxicana de Electrónica Industrial against SAP Mexico.

Specifically, SAP executives in Mexico had sold software licenses in large quantities to their sales partners for resale to Mexican companies in 2012 and 2013 as part of SAP's MCaaS partner program.

The basis was alleged market studies and business plans that promised the partners secure license sales with high profits. The Mexican subsidiary of the Dominion Group, which is listed in Spain, also concluded a partner agreement with SAP on this basis.

It purchased software licenses worth more than ten million US dollars, but has to date realized less than one percent of the license purchase price due to deception regarding actual market conditions. In the further course, it turned out that essential information regarding market potential and profit forecasts on the part of SAP were incorrect.

Market studies by globally recognized consulting firms also showed that the studies and forecasts prepared by SAP itself were flawed in various parts. As a result, the business potential promised as the basis of the partner agreement never existed for the partners.

"Willful and in bad faith."

SAP Mexico has now been sued for payment of over ten million US dollars plus expenses and interest for proving that the company offered a deal, "that was not feasible because no potential target market existed."

In addition, a sum of more than five million U.S. dollars was set as punitive damages due to the illegal actions on the part of SAP Mexico.

In its reasoning on punitive damages, the court also states that it is clear from the record, "that there are elements that demonstrate positive and negative behaviors of SAP México S.A. DE C.V. that are alien to any principle of good faith and that are not one-time events."

The presumption is obvious, "that SAP México, S.A. DE C.V. has a peculiarly determined and even systematic way of deceiving third parties into making a certain investment with the promise of entering into a tolerable business that in reality does not exist because there is no potential market to support it."

The Mexico City Superior Court of Justice also concluded that, in the context of mitigating damages "acted willfully and in bad faith toward the plaintiffs."

The accusation of deception is strengthened by the fact that SAP Mexico put Dominion Group under strong pressure in the decision-making process. In addition, it is clear from the files that the case in question is not a single matter, but that other companies in the industry were promised similar license sales.

Facts known at SAP

This is the first legal ruling in a legal dispute between Dominion Group and SAP Mexico that has lasted for years. In November 2018, a civil court in Mexico City had already ordered the attachment of SAP's Mexican company accounts as a precautionary measure in light of the allegations.

This was Dominion's second attempt to assert its claims against SAP. The company had already informed SAP's top management in Germany about the irregularities in a personal letter in 2016. The facts of the case were apparently also known there.

Nevertheless, all offers of talks have so far been unsuccessful. SAP has since appealed against this court ruling. However, SAP's Mexican company accounts in this case remain frozen.