Paychex has paid $7 million to settle several claims stemming from its decision to shut down its Rapid Payroll services, according to information the company has filed with the Securities and Exchange Commission.
The suits in federal and state courts were initiated after Paychex stopped supporting Rapid Payroll's services effective August 2002. Paychex developed Rapid Payroll through its acquisition of Olsen Computer Systems in fiscal 1997. Paychex initially faced 32 suits brought by some of its 76 Rapid Payroll licensees, who obtained a preliminary injunction from a federal court on July 5, 2002, ordering Paychex to continue supporting the software. The court has now ordered that injunction to be lifted in April.
In June, a jury in Los Angeles awarded plaintiffs $6.4 million, but that amount was reduced in September to $5.1 million by the Los Angeles Superior Court. That court also dismissed claims against Paychex that included fraud and tort causes of auction. Three states' cases have been settled for $5.5 million, with five state court cases awaiting trial.
In October, the federal court limited Rapid Payroll's liability to about $3.5 million in 16 cases pending before it. The court ordered Rapid Payroll to release source code under the escrow terms of the license agreements, but dismissed the fraud claims. The company has settled eight federal cases for $1.5 million.
The Rochester, N.Y.-based company recently reported an 8 percent rise in second-quarter profits, to $86.9 million versus the year-ago period.
