Supreme Court to Rule if Indiana Owes IBM

The State Supreme Court will decide whether the state owes any money to IBM or vice versa for the failed deal to modernize the state‘s welfare system.

Justices heard oral arguments Wednesday as Indiana tried to get out of paying almost $50 million that‘s owed to IBM according to state Court of Appeals ruling. This goes back to when then governor Mitch Daniels canceled the contract in 2009 because IBM‘s welfare system wasn‘t working. “The most important and overarching policy objectives involved timeliness standards that they failed,” said Peter Rusthoven, the attorney for the state.

IBM and the state sued each other after the 10-year, $1.3 billion contract was called off, with IBM winning at least some compensation, even though the appeals court ruled the company‘s performance was substandard. IBM argues that it had largely fixed problems with the welfare system by the time Daniels canceled the deal.

“Some of those things that caused the shortcomings, the failure, even some of those breaches that were not material were no longer there,” said Jay Lefkowitz, IBM‘s attorney. “The fact is that we substantially performed, and that we were making cures,” something Lefkowitz said the Court of Appeals found in reducing the award to the state from the Marion County judge‘s order.

The state wants to seek up to $177 million from IBM – Indiana had paid the company $437 (m) million at the time the contract was canceled. The money awarded to IBM was primarily compensation for equipment.