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Tuesday, November 26, 2013

Ind. Decisions - More on "IBM, state in court Monday" [Updated]

Updating this ILB entry from Nov. 20th, the oral argument took place yesterday morning before the Indiana Court of Appeals. The ILB has not located a post-oral argument story, but you may listen to the entire oral argument in State of Indiana vs. International Business Machines Corporation here.

[Immediately updated] Niki Kelly of the Fort Wayne Journal Gazette reported at length on yesterday's oral argument. Some quotes:

Attorney Peter Rusthoven, representing the state, said the system was plagued with problems from the outset and IBM refused to hire more people to add to the “human dimension.”

He said IBM regularly didn’t meet federal guidelines for delivering services, which led to terminating the contract for cause.

But attorney Jay Lefkowitz, on behalf of IBM, pointed out that Indiana was trying to hire IBM to run the new hybrid system up until the day the company was terminated. The two sides couldn’t agree on the cost, though.

“It wasn’t a failure of the system,” he said. “It was a failure of design.”

Rusthoven spent a lot of time during his argument focusing on the $40 million assignment fees, which he called “arbitrary and unreasonable.” He likened the fees to a penalty multiple times.

But the three-judge panel hearing the case reminded him the state of Indiana signed the contract that included the fees.

“Where is it our job to protect the taxpayers from those who negotiated this?” Judge John Baker asked.

And Lefkowitz said the assignment fees were simply a pre-negotiated price the state could pay to take over the contracts – with existing payment rates – of the multiple subcontractors involved in delivering service.

Rusthoven also argued the state can’t be required to pay interest on the judgment because it has sovereign immunity.

But Lefkowitz said the “contract could not be more clear on interest” and the state doesn’t have immunity from a contract it signed.

Posted by Marcia Oddi on November 26, 2013 09:40 AM
Posted to Indiana Courts