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IBM seeks greater judgment; state claims $62 million award erroneous

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A $62 million judgment against the state for canceling a contract with IBM to overhaul Indiana’s social services administration is clearly erroneous, an attorney for the state argued Monday, while an IBM lawyer argued the company was entitled to even greater damages.

A panel of the Indiana Court of Appeals heard arguments in State of Indiana v. IBM, 49D10-1005-PL-021451. Marion Superior Judge David Dreyer in July 2012 awarded IBM more than $52 million in damages plus about $10 million in prejudgment interest.

Indiana’s Family and Social Services Agency in 2006 signed a 10-year, $1.3 billion contract with IBM under which the company was to upgrade the state’s systems for handling claims and processing for welfare, food stamps and Medicaid. Former Gov. Mitch Daniels signed the contract and terminated it in 2009 after the state paid $437 million.

Barnes & Thornburg LLP partner Peter Rusthoven argued that the contract was canceled for cause because the upgrade was “plagued with problems from the start,” and that the record showed IBM was in material breach.

Rusthoven also told the appeals panel it would have to determine whether the trial court ruling that awarded damages to IBM at the summary judgment stage was “infected from top to bottom with legal errors.”

IBM attorney Jay Lefkowitz of the New York firm Kirkland & Ellis LLP said his client was entitled to sums in addition to those awarded by the trial court, and pushed for damages of about $106.6 million.

The increased amount would include an additional $43 million in deferred fees – a “true-up” or “make-whole payment” reflecting the greater amount of upfront work IBM performed at the outset of the contract.

“During the early part of the contract, IBM was being underpaid,” Lefkowitz said.

Judge John Baker presided over the panel that included Judges Ezra Friedlander and Nancy Vaidik, which heard 90 minutes of oral arguments Monday. The arguments may be viewed online. The court will rule at a later date.

Read more about the oral arguments in State v. IBM in the Dec. 4 Indiana Lawyer

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  1. Did someone not tell people who have access to the Chevy Volts that it has a gas engine and will run just like a normal car? The batteries give the Volt approximately a 40 mile range, but after that the gas engine will propel the vehicle either directly through the transmission like any other car, or gas engine recharges the batteries depending on the conditions.

  2. Catholic, Lutheran, even the Baptists nuzzling the wolf! http://www.judicialwatch.org/press-room/press-releases/judicial-watch-documents-reveal-obama-hhs-paid-baptist-children-family-services-182129786-four-months-housing-illegal-alien-children/ YET where is the Progressivist outcry? Silent. I wonder why?

  3. Thank you, Honorable Ladies, and thank you, TIL, for this interesting interview. The most interesting question was the last one, which drew the least response. Could it be that NFP stamps are a threat to the very foundation of our common law American legal tradition, a throwback to the continental system that facilitated differing standards of justice? A throwback to Star Chamber’s protection of the landed gentry? If TIL ever again interviews this same panel, I would recommend inviting one known for voicing socio-legal dissent for the masses, maybe Welch, maybe Ogden, maybe our own John Smith? As demographics shift and our social cohesion precipitously drops, a consistent judicial core will become more and more important so that Justice and Equal Protection and Due Process are yet guiding stars. If those stars fall from our collective social horizon (and can they be seen even now through the haze of NFP opinions?) then what glue other than more NFP decisions and TRO’s and executive orders -- all backed by more and more lethally armed praetorians – will prop up our government institutions? And if and when we do arrive at such an end … will any then dare call that tyranny? Or will the cost of such dissent be too high to justify?

  4. This is easily remedied, and in a fashion that every church sacrificing incense for its 501c3 status and/or graveling for government grants should have no problem with ..... just add this statue, http://commons.wikimedia.org/wiki/File:Capitoline_she-wolf_Musei_Capitolini_MC1181.jpg entitled, "Jesus and Cousin John learn to suckle sustenance from the beloved Nanny State." Heckfire, the ACLU might even help move the statue in place then. And the art will certainly reflect our modern life, given the clergy's full-bellied willingness to accede to every whim of the new caesars. If any balk, just threaten to take away their government milk … they will quiet down straightaway, I assure you. Few, if any of them, are willing to cross the ruling elite as did the real J&J

  5. Tina has left the building.

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