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A Baltimore jury has ordered First Union National Bank to pay $276 million for its early withdrawal from a contract with a software company. The verdict, to Steele Software Systems Corp., includes $200 million in punitives.Steele Software accused First Union of pulling out of “a long-term commitment it did not intend to honor,” said plaintiff’s attorney William H. “Billy” Murphy Jr., of Baltimore’s William H. Murphy Jr. & Associates. Steele and First Union entered into a contract in 1997 as part of an effort by First Union to increase its portfolio of home equity loans, Murphy said. Steele Software created a real estate settlement services business, including custom software and a national database on titles and appraisals. The contract offered First Union the ability to tap into this database, rather than ordering information from title companies, Murphy said. “This would allow First Union to save an incredible amount of time on finalizing loans,” he said. Steele also provided automated valuation software, which enabled the bank to immediately acquire the valuations of the properties under consideration. Steele began expanding its facilities to meet the increased needs incurred by the First Union contract.But the deal fell apart after a 1998 decision by the U.S. Office of the Comptroller of the Currency to approve a request by Mellon Bank to set up a settlement services company, he alleged. “First Union realized they could set up their own settlement services company.” The bank then put out bids for this service for First Union and two other affiliated lenders, First Union Mortgage and First Union Home Equity Bank. All three lenders are part of Wachovia Corp. Steele bid for the contract, but didn’t get it. In early 2000, First Union terminated the original contract with Steele and entered into a joint venture with the winning bidder. “Then First Union bought that company out,” said Murphy, and established its own settlement services company. Steele Software Systems filed a breach of contract action against First Union Bank. The plaintiff contended First Union had terminated the contract too soon and that the bank had failed to send thousands of transactions to Steele for processing. Steele Software also accused First Union of fraudulent inducement, alleging that First Union’s motive for the contract was to learn the automated process Steele had created, then create its own settlement services company. First Union responded that there was no fraud and no breach of contract. The bank contended that it had not terminated the contract, but that it had expired. Plaintiffs’ attorneys called nine First Union vice presidents to testify, Murphy said. The most critical of these was William Clewis, a vice president in consumer lending at the bank. Clewis was examined by lead plaintiffs’ attorney Stephen L. Snyder of Baltimore’s Snyder, Slutkin & Lodowski. During the testimony, Murphy said, the witness “admitted that First Union had never intended to live up to that contract.” On March 26, the jury awarded compensatory damages of $37 million for breach of contract and $39 million on the fraud claim. The jury then added $200 million in punitives on the fraudulent inducement charge. First Union will appeal. Steele Software Systems Corp. v. First Union, No. 24-C-00-004496 (Baltimore City, Md., Cir. Ct.).

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