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Justices agree to again hear long-running IBM dispute

January 15, 2019

A years-long legal battle between the state of Indiana and IBM Corporation will continue now that the Indiana Supreme Court has again granted transfer to the long-running dispute.

Justices unanimously agreed last week to take the case of International Business Machines Corporation v. State of Indiana, 19S-PL-19, for the second time. The case stems from a failed contract between the state and IBM, which was hired to develop a new claims-processing system for the Indiana welfare system.

The original IBM product, known colloquially as modernization, was launched in 2006 and represented a shift toward a centralized call center that could handle customer requests. But after a series of problems with the modernization system, Indiana terminated the contract with IBM and instead launched a new system, known as hybrid, that combined the call center with face-to-face customer contact.

Both parties sued each other in 2010, and Marion Superior Judge David Dreyer initially ruled in IBM’s favor, finding the company had not breached its agreement with the state through modernization’s failure. Instead, Dreyer awarded IBM $49.5 million in damages.

But the Indiana Supreme Court in 2016 reversed Dreyer on the issue of breach and remanded the case for a calculation of damages to be awarded to the state. Judge Heather Welch, to whom the case was later reassigned after Justices removed Dreyer, ordered IBM to pay the state $78.2 million and declined to award post-judgment interest to the company.

After oral argument before the Indiana Court of Appeals last August, the lower appellate panel upheld the $78 million damages award, but also ordered the state to pay post-judgment interest on the $49.5 million originally awarded to IBM.

Both parties then petitioned for transfer, with IBM challenging the $78 million award and a ruling that Welch did not err by setting aside Dreyer’s initial findings. The state’s petition to transfer challenges the award of post-judgment interest. 

Supreme Court oral argument in the case had not been scheduled as of Tuesday morning.

Justices also unanimously granted transfer to and handed down opinions in two other cases last week, J.W. v. State of Indiana, 19S-JV-12, and Brittany Hoak v. State of Indiana, 19S-CR-17. J.W. held that juveniles who are adjudicated as delinquent pursuant to an agreement must challenge their adjudication via Trial Rule 60 before filing an appeal, while Hoak remanded Brittany Hoak’s sentence for a determination as to whether she is eligible for community corrections substance abuse treatment.

The court also denied transfer to 20 other cases. The full list of transfer decisions can be read here.

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