Article Image
Indiana Supreme Court Urges Mediation between State and IBM

Wednesday, November, 12, 2014


The Indiana Supreme Court has urged both sides in a dispute between the state of Indiana and IBM Corp. to enter into mediation over an ongoing dispute concerning the automation of Indiana’s welfare program under IBM.  The court has given both legal teams 30 days in which to respond.  If a mediation agreement cannot be reached, the court will proceed with rendering a decision on the matter (arguments were heard on October 30, 2014).


Indiana hired IBM to update, modernize, and automate its welfare program in 2006 with a ten-year contract worth $1.3 billion.  By 2009, participants in the program were complaining of long waits, missing documents, and chaotic, unpredictable behavior from the automated system, and Governor Mitch Daniels canceled the contract with more than seven years to go.  Countersuits were then launched.


Indiana’s attorneys have already indicated a willingness to mediate the dispute.  IBM’s attorneys have only stated that they are “reviewing” the suggestion, and have not issued any formal response.


The case has had its ups and downs so far.  A judge ruled in 2012 that Indiana had not proved its case of breach of contract, and awarded IBM more than $50 million in damages.  On appeal, however, the ruling was changed to reflect that IBM was, in fact, guilty of breach of contract – but still awarded IBM nearly $50 million in damages.


It is very possible IBM will seek the certainty of at least a negotiated portion of these fees instead of risking receiving nothing in a courtroom.