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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. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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