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Judge’s actions move IBM case back to Supreme Court

June 1, 2016
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Whether Marion Superior Judge David Dreyer will continue to preside in IBM’s lawsuit against the state over cancellation of its $1.3 billion contract to revamp Indiana’s welfare services is up to the Indiana Supreme Court. A rare original action seeking the judge’s removal was filed May 23, just days after the high court certified its opinion that partially reversed Dreyer in the multimillion-dollar case.

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“This litigation history is beyond extraordinary. It has entailed enormous costs for the State and its taxpayers, with more in the offing,” according to briefs filed by Barnes & Thornburg LLP partners Peter Rusthoven and John Maley, who represent the state. They argue Dreyer must be removed for the way he handled the case after the Supreme Court ruled. “(T)here is at least an appearance that the trial court may be unable to address impartially the issues on remand,” one brief says.

The state’s lawyers have asked the court to remove Dreyer from the case, vacate the order he issued on remand, and block him from taking further action. Dreyer did not return a message seeking comment but has previously said he cannot comment on the IBM case.

The Supreme Court ordered briefs in opposition to the state’s petition for writs of mandamus and prohibition against Dreyer filed by June 14. Justices in March affirmed Dreyer’s ruling of total damages and interest in favor of IBM of about $60 million, but also reversed Dreyer and found IBM had materially breached the contract. Justices remanded the case “for calculation of the parties’ damages consistent with this opinion, including any appropriate offsets.” The state has claimed it is entitled to breach of contract damages of about $150 million.

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Dreyer’s order, issued the day the Supreme Court order was certified, said the state could prove no damages, which surprised attorneys for the state who expected proceedings on remand, or at least an opportunity to move for a new judge. But Andrew Hull of Hoover Hull Turner LLP, who represents IBM, said pleadings seeking to remove Dreyer from the case are “factually incorrect.” He said in a statement that Dreyer did nothing to merit removal and didn’t violate Indiana Trial or Appellate Rules after remand, as the state argues.

“The State’s damage claim was fully litigated during and following the six-week trial in which the State submitted all its evidence, made closing arguments, and expanded those arguments in post-trial briefs,” Hull said. “Ultimately, the Supreme Court, on remand, instructed the trial court to make a ‘calculation’ of the parties’ damages. The trial court did so correctly based on the trial record.  It is wrong for the State to suggest that the ‘calculation’ of damages was made without giving the State a sufficient opportunity to be heard.

“… The Supreme Court provided no instruction to the trial court regarding evidence to be considered in deciding the damages issue,” Hull said. “In fact, the extensive evidence of benefits IBM provided the State under the contract is directly relevant to whether the State incurred any monetary damages as a result of any breach by IBM. The same is true of the evidence showing that IBM was not responsible for the costs that the State claims as damages. The trial judge’s damages order makes these points clear.”

But the state contends Dreyer’s order violated Indiana Appellate Rule 65(E), which forbids a trial court from acting on an appellate opinion before it’s certified; Trial Rule 76(C)(3), which requires a 10-day period for parties to request a new judge when a matter is remanded for proceedings; and Trial Rule 76(B), which requires a change of judge in civil cases when such a change may be taken and a party so moves. The state’s briefs assert Dreyer was bound by the rules even if on remand he was not required to conduct a new trial on the issues.

In seeking Dreyer’s removal, the state argues he disregarded the Supreme Court’s order. “In holding the State is not entitled to damages for IBM’s (master services agreement) breach, the trial court re-embraced the same IBM rationales on which it based its prior ruling that IBM did not materially breach the MSA — the ruling this Court reversed, holding those IBM rationales were legal error.” Those rationales include consideration of the benefits the state derived; delays and performance issues IBM encountered due to natural disasters; the economic downturn and other factors.

“(D)enying damages to the State, by adopting IBM rationales that this Court explicitly rejected, is not simply legal error. It contravened this Court’s mandate, and exceeded the trial court’s sole jurisdiction on remand,” the state’s brief says. A brief filed supporting the petitions asserts Dreyer’s order “is adopted virtually verbatim from sections of IBM’s post-trial Proposed Findings of Facts and Conclusions of Law” filed in his court.

Meanwhile, who will represent Dreyer in the original action asking the Indiana Supreme Court to remove him from the case remained unclear at IL deadline. Typically a state trial court judge would be represented by the office of the attorney general, but in the original action case of State v. Dreyer, 49S00-1605-OR-00294, the state is both plaintiff and defendant. The state may have to pay for private counsel for Dreyer. Already, Indiana taxpayers have paid Barnes & Thornburg legal fees of more than $11.5 million in the IBM case, according to the Fort Wayne Journal Gazette.

“We cannot comment on the specifics of representation here, but legal representation for judicial officers is arranged in accordance with statute,” Bryan Corbin, spokesman for the AG’s office, said in an email May 24. “We are reviewing the … filings to determine what, if any, response would be appropriate from the Attorney General’s Office.”

Meanwhile, IBM argues in briefs filed in Dreyer’s court that he is not obligated under court rules to remove himself. “The State is not entitled to a new judge because, among other things, no issue before the court requires either a hearing or new evidence, both of which are required for a change of judge motion,” Hull said.

“Entitlement to a new judge only applies when ‘a further hearing and receipt of evidence are required to reconsider all or some of the issues heard during the earlier trial,’” IBM contends in a brief in response to a change of judge motion the state filed in Dreyer’s court. “The Supreme Court did not ask this Court to reconsider the State’s damages claim, since this Court never reached that claim in the first place, due to its ruling on liability.”

Also in Dreyer’s court, IBM asked him to enter an order assessing post-judgment interest in favor of IBM. Judgments in IBM’s favor total $49.5 million, with post-judgment interest standing at $9.1 million as of May 23. The brief asks Dreyer to order that amount of interest increasing afterward by $8,136.76 per day until the judgment is satisfied.•
 

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