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International Business Machines Corp. v. State

Supreme Court of Indiana

June 26, 2019

INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellant/Cross-Appellee (Defendant/Plaintiff below),
v.
STATE of Indiana, acting ON BEHALF OF the INDIANA FAMILY & SOCIAL SERVICES ADMINISTRATION, Appellee/Cross-Appellant (Plaintiff/Defendant below).

         Argued: February 21, 2019

          Modified on Rehearing: October 10, 2019

         Appeal from the Marion Superior Court, No. 49D01-1005-PL-21451, The Honorable Heather A. Welch, Judge

         ATTORNEYS FOR APPELLANT: Jay P. Lefkowitz, Kirkland & Ellis LLP, New York, New York, Paul D. Clement, Kirkland & Ellis LLP, Washington, D.C., Andrew W. Hull, Laurie E. Martin, Hoover Hull Turner LLP, Indianapolis, Indiana

         ATTORNEYS FOR APPELLEE: Peter J. Rusthoven, John R. Maley, J. Curtis Greene, Meredith Thornburgh White, Barnes & Thornburg LLP, Indianapolis, Indiana

         ATTORNEYS FOR AMICUS CURIAE, INDIANAPOLIS BAR ASSOCIATION: Tyler D. Helmond, Voyles Vaiana Lukemeyer Baldwin & Webb, Indianapolis, Indiana, Josh S. Tatum, Plews Shadley Racher & Braun LLP, Indianapolis, Indiana, Joel M. Schumm, Indianapolis, Indiana, Bryan H. Babb, Bose McKinney & Evans LLP, Indianapolis, Indiana, Libby Y. Goodknight, Krieg DeVault LLP, Indianapolis, IN

         ATTORNEYS FOR AMICUS CURIAE, DEFENSE TRIAL COUNSEL OF INDIANA: James D. Johnson, Blair M. Gardner, Jackson Kelly PLLC, Evansville, Indiana

          On Petition to Transfer from the Indiana Court of Appeals, No. 49A02-1709-PL-2006

         David, Justice.

Page 256

          This case comes before our Court for the second time and arises out of a contract entered into between the State of Indiana, acting on behalf of the Family and Social Services Administration, and International Business Machines, Corp. to modernize and improve Indiana’s welfare eligibility system. We previously determined that IBM materially breached the contract and remanded the matter to the trial court to determine damages and appropriate offsets. After the submission of evidence and a full-day hearing, the trial court issued detailed findings and conclusions. It determined that damages to the State resulting from the breach totaled $128 million and that IBM was entitled to offsets in the amount of $49,510,795, resulting in a final judgment of $78,178,109 to the State.

          Both parties appealed, raising various issues. Today we address one of the issues raised: whether IBM is entitled to post-judgment interest on its $49.5 million damages award running from the date of the original judgment in 2012 or running from the judgment on remand. Finding that the original 2012 judgment was not "final," we hold that the post-judgment interest due to IBM runs from the judgment on remand. We summarily affirm the Court of Appeals on all other issues and affirm the trial court on all issues.

          Facts and Procedural History

         As this Court explained in State v. International Business Machines Corp., 51 N.E.3d 150, 152 (Ind. 2016) ("IBM I"):

This case involves a $1.3 billion Master Services Agreement ("MSA") entered into between the State of Indiana, acting on behalf of the Family and Social Services Administration ("State") and International Business Machines, Corp. ("IBM") to modernize and improve Indiana’s welfare eligibility system. Although the MSA was supposed to last ten years, the State terminated it less than three years in, citing performance issues on the part of IBM. Both parties sued each other for breach of contract.

          After a six-week bench trial, the Marion Superior Court found that the State failed to prove that IBM’s breach of the MSA was material and awarded IBM damages

Page 257

for assignment and equipment fees. It also awarded termination payments and pre-judgment interest. Both parties appealed. Ultimately, this Court reversed, in part, holding that IBM materially breached the MSA. We reversed IBM’s termination payment and pre-judgment interest awards, but affirmed its assignment and equipment fees in the amount of $49,510,795. We remanded to the trial court with the following instructions:

[W]e hold that IBM did materially breach the MSA through its collective breaches in light of the MSA as [a] whole. We therefore reverse the trial court’s finding that IBM did not materially breach the MSA. We summarily affirm the Court of Appeals on all other issues including: affirming the trial court’s award of $40 million in assignment fees and $9,510,795 in equipment fees to IBM, affirming the trial court’s denial of deferred fees to IBM, and reversing the trial court’s award of $2,570,621 in early termination close out payments and $10,632,333 in prejudgment interest to IBM. We also remand the case to the trial court to determine the amount of fees IBM is entitled to for Change Orders 119 and ...

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