Court: IBM broke deal, but still deserves $50M

CHARLES WILSON

INDIANAPOLIS (AP) — IBM Corp. failed to deliver its part of a deal to privatize Indiana's welfare system, but the company is still entitled to nearly $50 million in fees that the state agreed to pay, the Indiana Court of Appeals found Thursday.

The decision sends the four-year-old dispute between IBM and the Indiana Family and Social Services Administration back to the trial judge to work out the details.

Among those details could be whether the state collects more than $175 million in damages.

The state and the Armonk, N.Y.-based company sued each other in 2010 after then-Gov. Mitch Daniels canceled the $1.3 billion contract that set up call centers for clients and largely automated parts of the state welfare system, leading to a hail of complaints.

"In the most basic aspect of this contract — providing timely services to the poor__ IBM failed," the court said in the 2-1 opinion.

Regardless, the state owes IBM nearly $50 million in agreed-upon fees, the judges said.

However, Chief Judge Nancy H. Vaidik and Judge John G. Baker said IBM was not entitled to nearly $13 million that the trial judge awarded the corporation because the state terminated the contract early. The appellate court also sent the case back to the local court to iron out other details.

John Maley, one of the attorneys who represented the state in the lawsuit, said the ruing confirmed the state's contention that IBM breached its contract.

That means Indiana can go back to court and try again to collect more than $175 million in damages from IBM. The local court had ruled that IBM did not violate the terms of its deal with the state, taking those damages off the table.

"It now sends case back to where it started, with the state seeking damages," Maley said.

A spokesman for IBM didn't immediately return messages from The Associated Press Thursday seeking comment.

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The entire ruling can be found online at: http://www.in.gov/judiciary/opinions/pdf/02131403nhv.pdf

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