Dell lawsuit: Pattern of deceit

Dell lawsuit: Pattern of deceit

Summary: According to a recently unsealed lawsuit, Dell shipped approximately 12 million computers containing faulty components and then tried to hide the problems from buyers.

TOPICS: Telcos

According to a recently unsealed lawsuit, Dell shipped approximately 12 million computers containing faulty components and then tried to hide the problems from buyers. By doing so, Dell allegedly engaged in a large-scale pattern of deceit against its enterprise customers.

New York Times article describes the massive extent of this problem:

Internal documents show that Dell shipped at least 11.8 million computers from May 2003 to July 2005 that were at risk of failing because of the faulty components.

A study by Dell found that OptiPlex computers affected by the bad capacitors were expected to cause problems up to 97 percent of the time over a three-year period, according to the lawsuit.

As complaints mounted, Dell hired a contractor to investigate the situation. According to a Dell filing in the lawsuit, which has not yet gone to trial, the contractor found that 10 times more computers were at risk of failing than Dell had estimated. Making problems worse, Dell replaced faulty motherboards with other faulty motherboards, according to the contractor’s findings.

The lawsuit accuses Dell of deliberately blaming customers for product failures caused by the faulty components. The Times article explains this deception:

Dell employees went out of their way to conceal these problems. In one e-mail exchange between Dell customer support employees concerning computers at the Simpson Thacher & Bartlett law firm, a Dell worker states, “We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning.”

In other documents about how to handle questions around the faulty OptiPlex systems, Dell salespeople were told, “Don’t bring this to customer’s attention proactively” and “Emphasize uncertainty.”

One document from the lawsuit, which is embedded at the bottom of this post, makes a variety of specific allegations against Dell:

  • Dell's Motion serves up half-truths while sweeping inconvenient information under the rug...
  • When Dell first knew or should have known about the defective capacitors in the Dell OptiPlex computers. Dell admits in a 2004 e-mail in response to a customer inquiry its awareness of motherboard and thermal issues in November 2002.
  • When Dell first...acknowledged defective capacitors as the cause of computer failures... Dell documents indicate strenuous efforts to attribute OptiPlex failures to customer use and site conditions even when Dell knew that defective capacitors were to blame. Dell advised enterprise customer that it was the “only one” reporting OptiPlex problems.
  • What Dell knew about the pervasive impact of defective capacitors on computer failures when supplying the defective computers. Dell knew before March 2005 that 1.8m units were potentially affected and estimated in September 2005 that 8.m+ were potentially affected by motherboard issues
  • Whether Dell misled AIT and other enterprise customers about the computer failures customers experienced. Dell documents indicate an orchestrated campaign to pin the failures on customers even though Dell knew about the capacitor problem.
  • Whether Dell conducted sham analyses on the causes of computer failures to deflect attention from the cause of the capacitor failures at [plaintiff] AIT. Dell documents indicate that Dell concocted “individualized” solutions to what Dell knew to be an “industry-wide” problem that affected all customers alike. Dell internal communications in April 2005 directing Dell employees to divert attention from OptiPlex quality issues Dell was already aware of to customer-related causes

I asked Ira Winkler, author and expert witness against Dell, to explain the significance of this case:

The most striking aspect of this story is that Dell knew about problems with the capacitors but did not alert customers, which could have prevented damages from occurring. Dell also made up ridiculous reasons for the failures.

This is the first case where liability for hardware or software failures is heading toward plaintiff success in a big way. Typically, hardware and software manufacturers are only responsible for replacing the failed products. In this case, however, the judge is allowing a company to pursue Dell liability for replacing failed products and for all damages resulting from the failures. That outcome involves potentially hundreds of billions of dollars in aggregate, if you use the plaintiff's claim as a base.

The Austin Statesman reports Dell's reactions to the New York Times story: "Dell said the issue was 'old news and the implication that this situation affects Dell currently is incorrect.'"

My take. This situation should remind enterprise buyers to work with trustworthy vendors who have demonstrated willingness to acknowledge and fix problems in a timely manner. The need for trust applies equally well to hardware vendors, software vendors, and consulting companies.

Most large initiatives encounter unexpected challenges somewhere between start and completion. Therefore, the true measure of a vendor becomes their willingness and ability to help customers overcome difficulties that arise.

The lawsuit alleges that Dell arrogantly and callously abused its customers' trust. If Dell loses, I urge the court to award aggressive damages.

Please share your thoughts on Dell and this situation in the comments.

Dell Lawsuit Document

Photo of leaking Dell capacitors from Dell Hell Again.

Topic: Telcos

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  • I've always said Dell is Junk

    Dell is the utter junk of the computer industry and I hope this lawsuit wipes them out!
    • RE: Dell lawsuit: Enterprise failure and deceit

      @itguy08 I don't. I hope they see the light and change their practices. I'd much rather remedy than kill. Lots of folks depend on the enterprise and it's viability. We need a better hammer. Executive accountability? YES!! Death to folks who couldn't help it? no.
    • I fail to see

      the logic in your statement.
      Is there some gain to be had by you if they were to cease to exist?
      Tim Cook
    • RE: Dell lawsuit: Enterprise failure and deceit

      Sounds like @itguy08 forgot to eat his Wheaties today...
      ahh so
    • RE: Dell lawsuit: Enterprise failure and deceit

      @itguy08 Not so with most of their laptops in our experience. My company programs insurance on the web and all the Dell laptops we have had have been quite robust. We had to recently put a 7 yr old Dell unit back in service after the HP we replaced it with went down. It's slow by today's standards, but still a solid workhorse.
    • RE: Dell lawsuit: Enterprise failure and deceit

      All the big companies do the same-maybe HP Gateway are worse, check out all the crap laptops with bad power jacks motherboards that fail just after warranty ends. But the Studio Dell line is crap-the right side power switch breaks apart, falls out, and is totally useless-I am sure Dell knows about this horrible design but does nothing about it!
  • I've seen many HP's and Compaq's suffering from the same problems

    darn cheap capacitors!
    I ran into one this month that was only a year old!
    These problems are still not solved
    somebody is still buying these timebombs
  • Same old story

    This happened to my company with a bevy of Dell desktops. Unfortunately for us, the caps had the uncanny ability of crowning or leaking 2 - 4 weeks after the warranty expired. No matter how much we pushed them on the parts being defective they wouldn't bite.

    We of course changed manufacturers. Good job Dell!
    • RE: Dell lawsuit: Enterprise failure and deceit


      Man that sucks... My employer buys dells as well due to their air quotes CHEAP costs. I personally would not spend my hard earned money on a dell ever.
      • That was 5 years ago

        Unless you're gonna accuse them of still doing it...
        ahh so
      • Fool me once same on you. Fool me twice shame on me!

        @ahh so
        Nuff said...

        Pagan jim
        James Quinn
  • RE: Dell lawsuit: Enterprise failure and deceit

    Their pattern of deceit doesn't end with their products. It's rampant through the whole company. I worked that their corporate office for just short of year because I couldn't stand the lies! My job required me to work very closely with the corporate legal department, and when I would ask why the company was doing [insert illegal issue here], and the only response I would get was "I don't disagree with you."... come on! Why do you think they settled the lawsuit about the lack of promotions for women - because the director of my former department had made promises she never kept, and the company knew they were screwed! And when it comes to looking at vendors for your benefit plans, one of the first rules as a fiduciary is to act in the best interest of the plan participants, NOT to base your decisions on how many Dell computers they've bought. Any US employees participating in any plan governed by ERISA and sponsored by Dell should start asking questions...
    • I worked for a company like that once


      I also worked for a company like that once, and also abandoned it, after 2 months already in my case. Just couldn't stand lying to customers any more. Thank G-d I found a better job now. :)
      Daniel Breslauer
      • RE: Dell lawsuit: Enterprise failure and deceit

        @Daniel575 - good for you! I moved my family all the way from ME to TX thinking that I had finally "arrived" at my dream job. Turned out to be the biggest nightmare and mistake of my life. Still trying to recover from the financial decision to leave and come back to ME, but at least I can sleep at night and look myself in the mirror every day. As my husband often tells me, whenever I question my decision, "It would have been a mistake to STAY and be miserable." I have never burned out faster on a job than I did there. Even made me too sick to continue in my line of work, so I'm considering a complete career change into a completely different field. Money isn't everything, but my happiness and my family sure are! :-)
  • don't forget the software

    if dell used Linux, there would have been far fewer issues.
    windoze only made it worse!
    Linux Geek
    • Re: don't forget the software

      @Linux Geek - what a joke! funny indeed.
      • RE: Dell lawsuit: Enterprise failure and deceit

        @AllanV Oh that's right, Linux doesn't use capacitors.
    • RE: Dell lawsuit: Enterprise failure and deceit

      This problem had nothing to do with the OS installed on the machine; it is completely hardware related. Please stop making absurd comments, it makes us other Linux users look bad.
      • RE: Dell lawsuit: Enterprise failure and deceit

        Correct. I have reinstall different OS, from Windows to Linux, and same thing happens on a Optiplex I had. I strange it how it dies, it does boot from CD and you can load the OS (Linux or Windows) to the hard drive but when you try start up using the hard drive it dies. Pain. We should have Dell replace the bad motherboards or compensate all of us that have these defective units.
    • RE: Dell lawsuit: Enterprise failure and deceit

      @Linux Geek Dell does provide Linux on some computers