Judge rejects some of Indiana’s claims against IBM

The core issue in a dispute over a project to modernize Indiana's welfare system — whether IBM breached the billion-dollar contract — wasn't addressed when a judge dismissed 17 of the state's claims against the computer giant, an attorney for the state said Monday.

A Marion County judge rejected the state's allegations that IBM provided false information during the project. One of the dismissed claims would have allowed the state to collect triple damages.

"The main complaint against IBM for us is breach of contract … and this does nothing with respect to that," said Peter Rusthoven, one of the private attorneys representing the state in this case. "The main issue is whether they did what they said they would."

Judge David Dreyer, who issued the order Sunday, is presiding over a trial that started last month of dueling lawsuits concerning the state's cancellation of IBM's nearly $1.4 billion contract with the Family and Social Services Administration. Gov. Mitch Daniels killed the contract in 2009, less than three years into its scheduled 10-year span amid wide-ranging performance complaints from clients, their advocates and federal officials.

Indiana is suing IBM for the $437 million it paid the company, and IBM is countersuing for about $100 million that it claims it's still owed.

The judge denied the state's claims that it was the victim of a crime, which would have made it eligible to collect triple damages, and that IBM's countersuit was frivolous.

"The State has introduced no credible evidence that IBM knowingly or intentionally made any false Statements to the State or any other governmental entity," Dreyer wrote in the eight-page order, which granted IBM's motion for summary judgment on some of the claims.

The company applauded the ruling and said it was looking forward to continuing its case this week.

"IBM's commitment serving the citizens of Indiana with the highest standards of business ethics and professional conduct has always been a priority," IBM said in a statement Sunday. A company spokesman said Monday that IBM would have no further comment on the order.

Rusthoven, the state's attorney, said the judge's order didn't set back the state's case because it affected only one area of the dispute and not the breach of contract claims. But he said the state's attorneys disagreed with the judge's order.

An expert in contract law generally agreed with Rusthoven.

"Typically, there are lots of claims that get thrown out and losing on some of those, you expect that," said Antony Page, a professor at Indiana University's McKinney School of Law in Indianapolis. "It's possible that the meat of the complaint is still there."

He said the state faced an uphill battle to win its claims that IBM's alleged falsehoods had risen to the criminal level.

"You're having to prove that the guy's a liar," Page said. "That's hard to do."

The trial in Marion County Superior Court began Feb. 27. Rusthoven said the trial likely will last into next week, and he doesn't expect the judge to rule for several weeks after that.