Oral Arguments Begin In Supreme Court Battle Between State, IBM

At the heart of the dispute between Indiana and computer giant IBM is whether the technology firm’s failures in the contract to modernize the state’s welfare system were enough to justify Indiana terminating the whole contract, and getting damages afterward. 

Indiana signed a 10-year contract worth more than a billion dollars with IBM in 2006 for the firm to modernize and manage the state’s welfare system.  But three years later, Gov. Mitch Daniels canceled the contract, saying the system was plagued with problems. 

Both sides filed lawsuits, seeking lost costs and damages.  A trial court sided with IBM, while an appeals court found both parties were entitled to some money.  IBM attorney Jay Lefkowitz says when looking at the balance of the whole contract, the tech company was performing well in 19 of the 24 key performance indicators.

“Even with respect to a lot of these metrics that were in the red, there was dramatic improvement and that we are seeing steady improvement; the backlogs are coming down,” Lefkowitz said.

But Attorney Peter Rusthoven, arguing on behalf of the state, says IBM was failing the heart of the contract: to provide welfare services to the state’s neediest citizens.

“The performance in so-called ‘as-is’ counties – counties where IBM had not gone in – was better than that in the modernized counties, the counties where they’d gone in and we’d paid them $437 million,” Rusthoven said.

The Supreme Court did not announce a timetable for its ruling.  Justice Mark Massa recused himself from the case.  Massa served as Gov. Daniels’ general counsel when the IBM contract was signed and terminated.