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IBM, state enter mediation over failed welfare contract

December 10, 2014

IBM Corp. and the state have agreed to mediation as a lawsuit between the parties over the failed billion-dollar contract to privatize welfare services awaits a ruling from the Indiana Supreme Court.

The parties reported Monday they had agreed to attempt to settle the case through mediation as justices recommended in an order last month.  

The parties reported that John R. Van Winkle of Van Winkle-Baten Dispute Resolution in Indianapolis will mediate the dispute in a session scheduled for Feb. 25, 2015.

Justices heard oral argument Oct. 30  in which parties countersued after then-Gov. Mitch Daniels cancelled the company’s $1.3 billion contract to automate welfare processing systems. The 10-year deal was cancelled just three years after it started due to poor performance, the state claims. IBM claims the state owes millions in assignment fees, early termination fees, and for equipment the state kept after canceling the contract.

Marion Superior Judge David Dreyer awarded IBM $52 million in damages plus $10 million in prejudgment interest because of the cancellation, but the Court of Appeals reversed, holding that IBM materially breached its contract. A divided panel remanded to the trial court for determination of damages due the state but let stand $40 million in damages due IBM.

Indiana had paid IBM about $437 million under the contract, plus $4.4 million for disengagement services. The state claimed it was owed about $170 million in damages due to IBM’s breach, while the company sought at least $52 million from the state.

The case is State of Indiana v. International Business Machines Corp., 49S02-1408-PL-513.


 

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