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Sunday, February 12, 2012

Ind. Courts - "State justices to weigh IBM arguments"

Tomorrow morning at 9:00 AM:

9:00 AM - State of Indiana v. International Business Machines Corporation (49S00-1201-PL-15) - In this action arising from the State's cancelation of a contract with IBM under which IBM was to improve and modernize Indiana's welfare system, the Marion Superior Court issued an order granting IBM's motion to compel the Governor to testify at a deposition. The State filed an emergency motion to accept the interlocutory appeal and a motion under Appellate Rule 56(A) for immediate transfer to the Supreme Court. The Supreme Court granted both motions and has assumed jurisdiction over the appeal.
Here is a list of earlier ILB entries re IBM.

Two major Indiana Sunday papers have excellent, original stories today on the case.

Angela Mapes Turner writes in the Fort Wayne Journal Gazette:

The intricacies of Indiana’s split with IBM gets another airing Monday, when the highest court in the state will gather on the third floor of the Indiana Statehouse to hear attorneys’ oral arguments on the value the governor’s testimony.

The debate already has cost Hoosier taxpayers at least $8 million, according to a contract with law firm Barnes & Thornburg, which was hired to represent the state’s social-services agency.

IBM attorneys have argued Gov. Mitch Daniels was an architect of the deal and asked for his deposition, and in December, the Marion Superior Court agreed.

An initial court ruling shielded the governor based on an old state law prohibiting the governor and other elected officials from subpoena. IBM attorneys pushed back after the governor wrote about the IBM contract and his firing of the company in his 2011 book.

In December, Judge David Dreyer ruled the “unprecedented investment of public resources” in the case made it illogical to exclude Daniels’ participation.

IBM attorneys have entered into evidence thousands of pages of emails created by the administration, including Daniels, regarding the contract, but the contents of those emails have not been made public.

At issue are two lawsuits, filed the same day in May 2010. IBM sued the state for $53 million in contractual fees and equipment, while the state sued IBM for more than $400 million it paid the company.

About a quarter of the contract’s original $1.16 billion contract with IBM had been paid to the technology company when Indiana canceled the contract in 2009.

Late last month, Marion Superior Court issued a summary judgment ruling on several issues in the dispute. The court ruled many of the matters at issue should be resolved at trial, including whether IBM should receive $43 million in deferred fees and more than $9 million for equipment the state kept after the contract was canceled.

IBM, in a statement, said the state’s refusal of its contractual obligations endangered Indiana’s business environment and would be a deterrent to businesses considering moving or expanding operations to Indiana. IBM Corp. has some existing contracts with state agencies, but none that approaches the scale of the FSSA program, according to state records.

Eric Bradner's story in the Evansville Courier & Press is headed "State Supreme Court to decide whether governor must give deposition." Some quotes:
The Indiana Supreme Court is set to decide whether IBM Corp. will get to grill Gov. Mitch Daniels as a part of the legal battle over the state's botched effort to modernize its welfare delivery system.

It will be the final word on whether the Republican governor who was the primary pitchman for the 10-year, $1.37 billion deal — until he cited its shortcomings, changed course and fired the lead contractor, IBM, in October 2009.

Now, IBM is suing the state, and the Indiana Family and Social Services Administration is suing back. The dueling lawsuits mean courts will ultimately decide whether it's the state or the contractor that owes the other side money.

At the center of the dispute is whether Daniels should have to give a deposition. IBM argues it's essential; the state says allowing the governor to be called for such a meeting would open the door to distractions of all sorts in other cases for the state's top executive.

Last month, Marion County Superior Court Judge David J. Dreyer ordered Daniels to submit to a deposition within 60 days. That raised the constitutional question of whether the chief executive can be forced to do so, so the Indiana Supreme Court stepped in and snatched the case.

The court is set to hear arguments from both sides — IBM and the state — on Monday. While Indiana Attorney General Greg Zoeller's office has filed a briefing on the constitutional issue at hand, it's Barnes and Thornburg attorney Peter Rusthoven who the Daniels administration has hired to do the state's legal work on the modernization contract and the IBM lawsuits. * * *

In May 2010, the Daniels administration filed a lawsuit seeking to get back the $437 million it had already paid IBM. On the same day, IBM filed a lawsuit saying the state owed it $53 million in contractual fees and equipment expenses.

Since Daniels was a key advocate of the need to embark on the modernization project and often argued that the IBM method was better than what the state had before, IBM has sought to depose him.

That's what Dreyer ruled on last month.

In his ruling, Dreyer said that the "effects and consequences" of allowing Daniels to dodge a deposition are "simply untenable."

He said his order was "a narrow historical interpretation that applies only to the narrow unprecedented circumstances presented by this specific case," and not one that ought to apply otherwise to requests to depose the governor.

His ruling summarized the case for a Daniels deposition.

"On one hand, IBM is required to defend against claims seeking at least $437 million including allegations of deficient performance and intentional misrepresentation. The record is besieged with actions, statements and apparent decisions of the governor that are clearly discoverable and potentially admissible at trial," Dreyer wrote.

"Many of the governor's actions and statements are arguably inconsistent with the state's factual allegations in this lawsuit — some are not," he said.

He went on to write that if Daniels is not ordered to give a deposition, IBM would be subject to evidence and statements from him that it could not cross-examine.

"It is illogical, first of all, to find the Statute is intended to allow a governor to choose not to offer evidence to recover taxpayer money and defend the State in a matter of such high public importance," Dreyer wrote.

"The unprecedented investment of public resources under the contract makes it illogical to find the Statute would not allow full discovery of all the information regarding how it worked, or didn't work. To hold otherwise is contrary to common sense and a disservice to a seemingly diligent governor working to safeguard the investment."

Meanwhile, Indiana Solicitor General Thomas Fisher will represent Zoeller's office in Monday's Supreme Court hearing. It is not defending the state in the lawsuit, but is rather arguing the constitutional point that a governor should not be ordered to submit to a deposition.

Posted by Marcia Oddi on February 12, 2012 12:50 PM
Posted to Ind. Trial Ct. Decisions | Upcoming Oral Arguments