COA denies state’s bid to get additional money from IBM

Indiana’s argument that although it affirmed, the state’s Supreme Court really intended to reverse the trial court and award more than $4.3 million in post-judgment interest from IBM was met with exasperation from the Indiana Court of Appeals.

The argument was presented in the fourth appeal of the case that began in 2010 and involves a soured contract between Indiana and IBM. In this latest ruling, the appellate court asserted the state made a “remarkable misinterpretation” of the Indiana Supreme Court’s ruling in the matter, which has led to a “continuation of litigation that should have long since ended.”

In State of Indiana v. International Business Machines Corp., 20A-PL-925,  the Court of Appeals found the Marion Superior Court properly denied the state’s verified motion to enter final judgment on remand.

Indiana entered into a 10-year $1.3 billion contract in 2006 with IBM to modernize and improve the state’s welfare system. However, less than three years later, the state terminated the deal because of IBM performance issues.

Breach of contract lawsuits ensued and in 2017 the state was awarded $128 million in total damages, which was offset by the $49.8 million in damages due IBM. Following several appeals and rulings, the Supreme Court affirmed the trial court’s award of post-judgment interest in IBM v. State, 138 N.E. 3d 255, 259 (Ind. 2019).

However, Indiana is now arguing the interest on the IBM and the state judgments should be calculated separately based on different statutes, interest rates and accrual dates.

The state contends it is owed more than $4 million in additional post-judgment interest. Primarily, the state argues the interest it is due should be based on its gross award of $128 million at a rate of 8% from Aug. 4, 2017, while the interest due IBM should be based on its award of $49.8 million at a rate of 6% from March 14, 2018.

“The gist of the State’s appeal is that the Supreme Court, in actuality, reversed the trial court on this issue and remanded,” Judge Robert Altice wrote for the court. “This can’t be so. A plain reading of the Supreme Court’s opinion, and the trial court’s order which was affirmed, indicates that no post-judgment interest was due IBM because its damage award was zeroed out by the setoff.”

As the Court of Appeals explained, the Supreme Court held that since IBM’s award was less than the state’s award in the 2017 order, IBM’s award was applied to offset what was owed to the state.

“… (T) here was no judgment due IBM and, thus, no post-judgment interest on IBM’s offset award,” Altice wrote.