Editorial: Modest proposal to state, IBM lawyers: Settle for nothing

June 29, 2016

Indiana Lawyer EditorialSix years have passed since Indiana sued IBM over the failed $1 billion contract for the computer giant to modernize a punch-card-era system for determining welfare eligibility. After the contract was famously canceled, IBM blamed the state, the state blamed IBM, and they’ve been fighting in court since.

This clash of titans case is intriguing, bitter and makes good headlines. The state’s deal with IBM was intended to benefit the public interest by better and more efficiently serving our state’s neediest, most vulnerable citizens. Ironically, the only interests that appear to be served by continuing this litigation are those of the high-priced lawyers on both sides. They’re racking up untold millions in legal fees for a case that has become Dickensian in substance and interminability.

Here’s where we are in a nutshell — six years of litigation compressed to a single paragraph:

IBM won a trial court judgment of about $60 million. After appeals, the Indiana Supreme Court reversed. Justices ruled IBM had breached the contract, and they remanded to Marion Superior Judge David Dreyer for a calculation of damages. The state’s lawyers at Barnes & Thornburg LLP claim IBM owes the state $150 million in damages, but Dreyer, without further proceedings, essentially affirmed his prior decision, saying the state could prove no damages. Incensed, the state’s B&T lawyers petitioned the Supreme Court to throw Dreyer off the case and vacate his rulings, accusing him of judicial bias.

Dreyer, meanwhile, has no representation in the case to toss him and his ruling. But this case has become so convoluted that the judge is sort of represented in an awkwardly roundabout way by the IBM lawyers from Hoover Hull Turner LLP locally, and by big guns from Kirkland & Ellis in New York. They argue against removing Dreyer (and, of course, in favor of preserving his multimillion-dollar award). Initially flummoxed about what to do in this case, the office of Indiana Attorney General Greg Zoeller isn’t representing Dreyer. A spokesman said the AG’s office isn’t required to represent a judge in such proceedings, and Dreyer hasn’t asked for a lawyer.

Maybe that’s just as well for the public purse. Lawyers already have billed staggering sums off a failed deal whose legacy is the current de facto state vs. state litigation involving Dreyer. We know taxpayers have paid at least $11 million for contracted lawyers to sue IBM, and the meter is running. We may never know how much IBM has paid its attorneys to sue the state, because that’s not a public record.

The Supreme Court years ago tried to wash its hands of this case, suggesting mediation, which failed. But maybe it’s time to try again, this time considering only the public’s interest in this case being over with at long last. But if that isn’t motivation enough, a bottom-line analysis suggests the optimum outcome for both sides may be ending this case cheap.

Consider: IBM has a judgment of $60 million, for the moment. But with further proceedings, IBM could end up owing the state $150 million, or any amount in between. The state might be able to get a new judge who, with fresh eyes, sees the case in a more favorable light. Or it might not. Either way, all that’s certain is legal fees will continue to run on a case where any victory is hollow, the result of a continued failure in which both sides could benefit, and benefit the public, by simply accepting some blame.

For the good of the public — which ostensibly was the reason for this deal from the start — settle this case. Settle it for nothing. Walk away and cut the public’s losses. At long last, give the citizens of this state at least that small victory.•


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