Indiana Supreme Court Rules In IBM Welfare Case

INDIANAPOLIS -- The Indiana Supreme Court Tuesday ruled that computer giant IBM did breach its contract with the state after former Gov. Mitch Daniels hired the firm to modernize Indiana’s welfare system.

Daniels signed a 10-year contract worth more than $1 billion with IBM in 2006 to take over the state’s welfare system. Just three years later, Daniels cancelled the contract, citing what he said was a system plagued with problems.

The state and IBM sued each other, each seeking lost costs and damages. A trial court ruled for IBM. The Court of Appeals ruled largely for the state.

The Supreme Court urged both sides to come to a solution on their own through mediation. That effort failed. And so in a unanimous decision, the Supreme Court upheld the Court of Appeals’ ruling.

Justice Steven David notes that IBM officials themselves admitted the company’s performance wasn’t good enough. And he says excuses IBM used as reasons for its poor performance – including the recession – don’t matter.

The ruling awards $50 million to IBM, which includes some equipment fees. It also says IBM will pay money to the state for breach of contract, but it sends the issue back to the trial court to determine that amount.