I N T H E



# I n d i a n a S u pre m e C o u rt

S up r e m e C o u r t Ca s e N o

. 19 S

- PL

- 19



## I nt e r n a t i o n a l B us i n e s s M a ch i n es C o r po ra t io n,

A ppell a n t /Cr o ss

- Ap pell e e

(D e f e nd a n t /Pl a in t i f f b e l o w)

,



### - v



## S t a t e of I nd i a n a

, a ct i n g o n b e h a lf of t h e I n d i a na

F a m ily & So c i a l Se r v i c es A dm i n i st ra t ion

A ppellee/Cr o ss

- A ppell a n t

(Pl a i n t i ff / D e f e nd a n t b e l o w)

.

Argued : February 21, 2019 | Originall y Decided : June 26, 2019

Modified on Rehearing : October 10

, 2019

A p p e al f r o m t h e M a r i o n S u p e r i o r Co u r t

N o . 49 D 01

- 1 0 05

- P L

- 2 14 51

T h e H o n o r ab l e H e at h e r A

. W e l c h , J u d g e

O n P e t iti o n to T r a n s f e r f ro m t h e I n d i a n a Co u r t o f A p p e als

N o . 49 A 0 2

- 170 9

- P L

- 20 0 6

Opinio n o n Rehearin g b y Justic e David

Chief Justice Rush and Justice Goff concur.

Justice Slaughter concurs in part and dissents in part with separate opin ion.

Justic e Massa not participating.Indiana Supreme Cour t | Ca s e No

. 19S

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- 1 9 | October 10 , 2019 P a ge 2 o f 9



## Da v id

, J u st i c e

.

T h i s c a s e c o m es b e f o r e o u r Co u r t f or t h e s e c o n d t i m e a n d a r is es o u t of a

c o n t r a c t e n t e r ed i n to b et w een t h e S t a te of I n di a n a, a c t in g on b e h a l f of t h e

Fa m i l y a n d Soc i al S e r v i c e s A d m i n is t r at i o n

, a n d I n te r n at i o n al Bu s i n e s s

M a ch i n e s

, C or p

. to m o d e r n i ze a n d i m p rov e I nd i a n a’s w e l f a r e e l i g i b i l i ty

s y s te m

. We p r e v i o us l y d ete r m i n ed t h at I B M m ate r i a ll y b r ea ch ed t h e

c o n t r a c t a n d r e m a nd ed t h e m atter to t h e t r i al c o u r t to d e te r m i n e d a m ages

a n d a pp r o p r i ate o ffs et s

. A f ter t h e sub m i s s i o n o f e v i d e nc e a n d a fu l l

- d ay

h ea r i n g, t h e t r i al c o u r t i s su ed d et a i l ed f in d i n g s a n d c o nc l u s i o ns

. It

d ete r m i n ed t h at d a m ages to t h e S t a te r e sul t i n g f r om t h e b r ea c h t ot a l ed

$128 mil l i o n a n d t h at I B M w as e n t i t l ed to o ff s ets i n t h e a m o un t o f

$49,510,795, r e sul t i n g i n a f i n al j ud g m e n t o f $78,178,109 to t h e S tate.

B oth p a r t i es a pp ea l e d

, r a i s i n g v a r i o u s is s u e s

. T o d ay w e a dd r e s s o n e o f

t h e i s su es r a i s e d : wh et h er I B M i s e n t i t l ed to p o s t

- j ud g m e n t i n te r e s t on i ts

$49.5 mil l i o n d a m ages a w a r d r unnin g f r om t h e d ate of t h e o r i g i n al

j ud g m e n t i n 2012 o r r un n i n g f ro m t h e j ud g m e n t o n r e m a nd

. F i n d i n g t h at

t h e or i g i n al 2012 j ud g m e n t w as n o t “ f i n a l ,” w e h o l d t h at t h e p o s t

j ud g m e n t i n te r e s t du e to I B M r un s f r om t h e jud g m e n t o n r e m a nd

. We

summ a r i l y a f f i r m t h e C o u r t o f A pp ea l s o n a l l o t h er i ssu es a n d a f f i r m t h e

t r i al c o u r t on a l l i s su e s

.



## Fa c ts and P r oc edu r al Hi s t o r y

As t h i s Co u r t ex pl a i n e d i n St at e v. I n t ern at i o n a l B usiness Ma chines C o rp

.,

51 N

. E .3d 150, 152 ( I n d

. 2016) ( “I B M I” ) :

T h i s c a s e i n v o l v es a $1.3 bil l i o n M a s ter S e rv i c es Ag r ee m e n t

( “M S A”) e n te r ed i n to b et w een t h e S t a te of I n d i a n a, a c t i n g on

b e h a l f o f t h e Fa mil y a n d So c i al S e rv i c es A d m inis t r at i o n

( “ S tate”) a n d I n t e r n at i o n al Bu s i n e s s M a c h i n e s

, C or p

. ( “I B M ”)

to m o d e r n i ze a n d im p r o v e I nd i a n a’s w e l f a r e e l i g i b i l i ty s y s te m

.

A l t h o u gh t h e M S A w a s supp o s ed to l a s t ten yea r s

, t h e S t a teIndiana Supreme Cour t | Ca s e No

. 19S

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- 1 9 | October 10 , 2019 P a ge 3 o f 9 te r m i n ated i t l e s s t h an t h r ee ye a r s i n

, c i t i n g p e r f or m a nc e i s s u es

on t h e p a r t of I B M. B o th p a r t i es su ed ea c h ot h er f or b r ea c h of

c o n t r a c t.

A f ter a s i x

- w eek b e nc h t r i a l

, t h e Ma r i on S up e r i or Co u r t f o un d t h at t h e

S t a te f a i l ed to p r o v e t h at I B M’s b r ea c h of t h e M S A w as m ate r i al a nd

a w a r d ed I B M d a m ag e s f or a s s i g nm e n t a n d e q uipm e n t f ee s

. It a ls o

a w a r d ed te r m i n at i o n p ay m e n ts a n d p r e

- j ud g m e n t i n te r e s t. B oth p a r t i es

a pp ea l e d

. U l t i m ate l y

, t h i s Co u r t r e v e r s e d

, i n p a r t, h o ld i n g t h at I B M

m ate r i a ll y b r ea ch ed t h e MS A. We r e v e r s ed I B M ’s te r m i n at i o n p a y m e n t

a n d p r e

- j ud g m e n t i n te r e s t a w a r ds

, bu t a f f i rm ed i ts a ss i g nm e n t a n d

eq u i p m e n t f ees i n t h e a m o un t o f $49,510,795. We r e m a nd ed to t h e t r i al

c o u r t w i th t h e f o ll o w i n g i ns t r uc t i o ns :

[ W ] e h o l d t h at I B M di d m ate r i a ll y b r ea c h t h e M S A t h r o u gh i ts

c o ll e c t i v e b r ea ch es i n l i g h t of t h e M S A as [ a] wh o l e. We

t h e r e f o r e r e v e r s e t h e t r i al c o u r t's f i n d i n g t h at I B M d i d n ot

m ate r i a ll y b r ea c h t h e MS A. We summ a r i l y a f f i r m t h e C o u r t o f

A pp ea l s on a l l ot h er i s su es i n clu d i n g: a ff i rm in g t h e t r i al c o u r t's

a w a r d o f $40 m i ll i o n i n a s s i g nm e n t f ees a n d $9,510,795 i n

eq u i p m e n t f ees to I B M, a f f i rm i n g t h e t r i al c o ur t's d e n i al of

d e f e rr ed f ees to I B M, a n d r e v e r s i n g t h e t r i al c o u r t's a w a r d of

$2,570,621 i n ea r l y te r min at i o n cl o s e o u t p ay m e n ts a n d

$10,632,333 i n p r e j ud g m e n t i n te r e s t to I B M

. We a ls o r e m a n d

t h e c a s e to t h e t r i al c o ur t t o d et e r m i n e t h e a m o un t of f ees I B M

i s e n t i t l ed to f o r C h a n ge O r d e r s 119 a n d 133, a n d f o r

c a lcul a t i on of t h e p a r t i e s ' d a m ages c o n s i s te n t w i th t hi s o pi n i o n

,

i n clu d in g a n y a pp r o p r i ate o ffs ets to t h e S t a te as a r e sul t of

I B M 's m ate r i al b r ea c h o f t h e MS A.

I d. at 168

- 169.

On r e m a nd

, t h e t r i al c o u r t h e l d a full

- d ay h ea r i n g a n d c o n s id e r ed b o th

p r e

- h ea r i n g b r i e f s a n d p o s t

- h ea r i n g s u b m i ss i o ns

. It i s s u ed an 83

- p a ge

o r d er a w a r d i n g t h e S t a te $128 m i l l i on i n d a m ages a n d c r e d i ted I B M

$49,510,795 f o r a ss i g n m e n t a n d eq u i pm e n t f ees t hi s C o u r t uph e l d plu s t h eIndiana Supreme Cour t | Ca s e No

. 19S

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- 1 9 | October 10 , 2019 P a ge 4 o f 9

a m o un t of f ees f or t h e ch a n ge o r d e r s ( an a m o un t ag r eed t o v i a s t i p u l at i on

of t h e p a r t i e s)

. Th e t r i al c o u r t d e n i ed I B M’s r eq u e s t f or p o s t

- j ud g m e n t

i n te r e s t o n t h e $49.5 m i l l i on

- d o ll ar a w a r d f o r a s s i g nm e n t a n d eq u i p m e n t

f ee s

. Th u s

, I B M w as or d e r ed t o p ay t h e S t a te $78.2 mil l i o n

, a f ter o ffs et s

.

B o th p a r t i es aga i n a p p ea l e d

. I B M a r g u e d : 1) i t i s e n t i t l ed to p o s t

j ud g m e n t i n te r e s t on t

h e f ees uph e l d b y t hi s Co u r t i n I B M I; 2) t h e t r i al

c o u r t e r r ed b y s ett i n g a sid e t h e f a c t u al f in d i n gs of t h e o r i g i n al t r i al c o u r t;

a n d 3) t h e t r i al c o u r t e rr ed b y h o ld i n g I B M r e sp o n s i bl e f or t h e c o s ts of

i m pl e m e n t i n g a d i ff e r e n t an d m or e ex p e ns i v e w e lf a r e s y s tem t h an t h e o n e

c o n te mpl ated b y t h e M S A. For i ts p a r t, t h e S t a te a r g u ed i t w as e n t i t l ed to

a dd i t i o n al d a m ages r e sul t i n g f ro m t h e b r ea ch

.

Th e C o u r t o f A pp ea l s a f f i r m ed i n p a r t, r e v e r s e d i n p a r t, a n d r e m a nd ed

w i th ins t r uc t i o ns

. I n t ’l B us. Ma chines C o rp. v. S tat e o n b eh a lf o f I ndi a n a

F a mily & S o c. S ervs. A d mi n

., 112 N

. E .3d 1088 ( I nd

. Ct. A pp

. 2018) ( “I B M

II” )

. It r e j e c ted b o th of t h e S t a te’s r eq u e s ts f or a dd i t i o n al d a m ages a n d

c o nclud ed t h at I B M w as e n t i t l ed to p o s t

- j ud g m e n t i n te r e s t on t h e $ 4 9

. 5

m i ll i o n d a m ages a w a r d t h at su rv i v ed I B M I.

B oth p a r t i es s o u g h t t r a nsf e r

. Th e I n d i a n a p o l i s B ar A ss o c i a t i o n ’s

A pp e ll ate P r a c t i c e S e c t i o n a n d t h e D e f e ns e T r i al C o u n s el o f I n d i a n a

(DT CI) h a v e f i l ed a mici b r i e f s i n s upp or t o f t r a nsf er on t h e p o s t

- j ud g m e n t

i n te r e s t issu e. We g r a n ted t r a nsf er t h e r e b y v a c at i n g t h e Co u r t of A p p ea l s

o p i n i o n

. I nd

. A pp e ll a t e R ul e 58 ( A )

. We w r i t e o nl y to a d d r e s s t h e p o s t

j ud g m e n t i n te r e s t i s s u e. We summ a r i l y a f f i r m t h e ot h er p o r t i o n s of t h e

Co u r t of A pp ea l s o p i ni o n a n d a f f i r m t h e t r i al c o u r t o n a l l i s s u e s

.



## Standa r d o f R e v iew

H e r e, t h e t r i al c o u r t h as m a d e sp e c i al f i n d in gs pu r su a n t to I nd i a n a T r i al

R ul e 52 ( A )

. As s u ch

, a r e v i e win g c o u r t m ay a f f i r m t h e j ud g m e n t o n a n y

l eg a l t h eo r y supp o r ted b y t h e f i n d in g s

. G & N A ircr a f t

, I nc. v. Bo ehm

, 743

N

. E .2d 227, 234 ( I nd

. 2 001) ( c i tat i on s om i tte d)

. F u r t h e r

, [w]h en t h e

sp e c i f i c i s su e o n r e v i e w r e l ates to t h e a w a r d o f d a m age s

, a d a m age a w a r d

sh o ul d n ot b e r e v e r s ed i f i t i s w i t h i n t h e s c o p e o f t h e e v i d e nc e b e f or e t h e

t r i al c o u r t.” Id

. ( q u ot ing Dunn v. C a dien t e

, 516 N

. E .2d 52, 54 ( I nd

. 19 8 7 ))

.Indiana Supreme Cour t | Ca s e No

. 19S

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H o w e v e r

, t h e r i g h t to p o s t

- j ud g m e n t i n te r e s t a r i s es a s a m atter of

s t a t u to r y l a w

. T

incher v. D a vids o n

, 784 N

. E .2d 551, 553 ( I nd

. Ct. A pp

.

2003 )

. Th e m ea n i n g o f a s t a t u te i s a q u e s t i o n o f l aw w h ic h w e r e v i e w de

n o v o

. E S P N, I

nc. v. Un i v. o

f Not re D a me Po lice Dep 't

, 62 N

. E .3d 1192, 1195

( I nd

. 2016 )

.



## Di s c u ss i o n a n d D e c i s i o n

I B M a r g u es t h at i t i s e n t i t l ed to p o s t

- j ud g m e n t i n te r e s t o n i ts $49.5

m i ll i on a w a r d as e n te r ed b y t h e t r i al c o u r t a n d a f f i r m ed b y t hi s Co ur t i n

I B M I. O u r C o u r t o f A pp ea l s ag r ee d

. It a p pl i ed B e a m v. Wa u s a u I ns. C o

.,

765 N

. E .2d 524 ( I nd

. 2 0 02) a n d f o un d t h at t h e “ o n e c o ns ta n t” i n t h e c a s e

w as t h e a w a r d o f a s s i g nm e n t a n d eq u i pm e n t f e es to I B M

. I n t' l B us.

Ma chines C o rp

., 112 N

. E .3d at 1103. W h i l e i t i s t r u e t h at t hi s a w a r d h as

r e m a i n ed u nch a n ged fro m t h e o r i g i n al j ud g m e n t un t i l p r e s e n t, w e d o n ot

fin d B e a m to b e a pp l i c a bl e to t h e s e f a c ts a n d c i r cums ta nc e s.

In B e a m t h i s Co u r t l ooked a t I nd i a n a C o d e s e c t i o n 24

- 4. 6

- 1

- 101 a n d

a dd r e ss ed wh et h er p o s t

- j ud g m e n t i n te r e s t on a m o di f i ed a w a r d ru n s on

t h e a m o un t a f ter m o d i fic a t i on b y t h e r e v i e win g c o u r t o r t h e o r i g i n al

a m o un t. B e a m, 765 N

. E .2d at 534. I nd i a n a C o d e s e c t i o n 2 4

- 4.6

- 1

- 101

p r o v i d es t h at p o s t

-

j u d g m e n t i n te r e s t a cc r u es b a c k to t h e "d ate of t h e

r et u r n of t h e v e r d i c t or fin d i n g of t h e c o u r t un t i l s a t isf a c t i o n

. . . ." T he

o p e r at i v e l a n g u age i n B e a m i s t h at wh e n :

a j ud g m e n t i s r e v e r s ed o n a pp eal a n d r e m a nd ed to t h e t r i al

c o u r t f or t h e e n t r y of a n ew j ud g m e n t, p o s t

- j ud g m e n t i n te r e s t

a cc r u es f r om t h e d ate t h e t r i al c o u r t e n te r s t h e n ew j ud g m e n t.

* * *

[Bu t] wh e r e a m o n ey j ud g m e n t h as b een m o d i f i ed o n a pp eal

a n d t h e o nl y a c t i on n e c e ss a r y i n t h e t r i al c o ur t i s c o mp l i a n c e

w i th t h e m a nd ate o f t h e a pp e ll ate c o u r t, i n te r e s t on t h e

j ud g m e n t as m o d i f i ed r un s f r om t h e d ate of t h e o r i g i n al

j ud g m e n t.Indiana Supreme Cour t | Ca s e No

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B e a m, 765 N. E .2d at 534

- 535. ( c i tat i o n om i tte d )

.

We f o un d t h at b e c a us e w e m o di f i ed t h e a m o un t o f d a m ages bu t d i d

n ot r e v e r s e j ud g m e n t f or pl a i n t iff

, p o s t

- j ud g m e n t i n te r e s t r an f ro m t h e

d ate of t h e o r i g i n al v e r dic t on t h e m o d i f i ed a m o un t. Id

. at 534.

Bu t h e r e, i t i s n ot I nd i a n a C o d e s e c t i o n 24

- 4. 6

- 1

- 10 1 1 t h at g o v e r ns

, bu t

I nd i a n a C o d e s e c t i o n 3 4

- 13

- 1

- 6 b e c a us e w e a r e d ea l i n g w i th a su m o f

m o n ey du e f r om t h e St ate. It p rov i d e s :

W h e n e v e r

, b y f i n al d e cr ee o r j ud g m e n t, a su m o f m o n ey i s

a d j ud ged to b e du e a n

y p e r s on f r om t h e s t a t e

, an exe cu t i on

sh a l l n ot issu e bu t t h e j ud g m e n t sh a l l d r aw i n te r e s t at an

a nnu al r ate of s i x p e rc e n t ( 6%) f r om t h e d ate of t h e

a d j o u r nm e n t of t h e n e xt e nsu i n g s e s s i on of t h e ge n e r al

a ss e mbl y u n t i l a n a pp r o p r i at i on i s m a d e b y l a w f or t h e

p ay m e n t a n d t h e j ud g m e n t i s p a i d.

Th e r e l e v a n t i n q

u i r y i n B e a m wa s w h et h er t h e j ud g m e n t w as o nl y

m o d i f i ed or r e v e r s ed e n t i r e l y, a n d pu r su a n t to t h e s ta tu te, p o s t

- j ud g m e n t

i n te r e s t w as du e f r om t h e “ d ate of t h e r et u r n of t h e v e r d i c t or f i n d i n g of

t h e c o u r t.” I nd

. Co d e § 24

- 4.6

- 1

- 101. H e r e, t h e r e l e v a nt i nq u i r y pu r suan t

to I nd i a n a Co d e s e c t i o n 34

- 13

- 1

- 6 i s wh et h er t h e r e w as a fin al d e c r ee or

j ud g m e n t. A f i na l j ud g m e n t "disp o s es of a ll i s su es a s to al l pa r t i es t h e r e b y

e ndin g t h e pa r t i cula r c as e

. " G e o rg o s v

. J a c k s o n

, 790 N

. E .2d 448, 451 ( I nd

.

2003 )

.

At t h e t i m e of r e m a n d

, a l l t h e i s su es w e r e n ot disp o s ed of a s t h i s

Court 's o pinio n in IBM I d i d two things: 1) it rev erse d the trial c ourt on

the issue of whether IBM's breach of the M S A was m aterial; and 2)

remand ed to the trial court to calculate appropriate damages as well as

offsets. While I BM wants us to consider its suit against the S tate separate

and apart from S tate's suit, the two arise out of the s ame facts and

1 In d

. C od e § 2 4

- 4

. 6

- 1

- 1 0 1 be g ins with q u a li f ying l a ngu a ge th a t it a pp lies “ [ e ] x c e p t a s

o the r wi s e p ro vi d ed by s t a tute.

. . .”Indiana Supreme Cour t | Ca s e No

. 19S

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- 1 9 | October 10 , 2019 P a ge 7 o f 9

c i rc ums ta n c es a n d a r e i n ex t r i c a bl y t i e d

. C a s e l aw i s c l ear t h at a f i n al

j ud g m e n t d i sp o s es of “ a ll i s su es a s to a ll p a r t i e s .” Id

. ( q u o t i n g I nd i a n a

A pp e ll ate R ul e 2 (H ) ( e mph a s i s a dd e d)

. N o t a l l t h e i s su es a s to a l l p a r t i es

w e r e r e s o l v ed a t t h e t i m e of r e m a n d a n d fu r t h e r

, wh at w as du e a n d o w ed

to I B M w as n e c e ss a r i l y c o n t i n ge n t up on wh at d a m ages w e r e du e t h e S t a te

f or t h e b r ea ch

. I B M c o ul d h a v e r e c o v e r ed m o n ey f r om t h e S t a te i f t he

S t a t e ’s d a m age a w a r d w as l e s s t h an wh at w a s a w a r d ed to I B M o r I B M

a w a r d c o ul d h a v e s i m pl y b een a pp l i ed to o ffs et wh at w as o w ed to t h e

S tate. In B e a m, w e s t a ted t h e r at i o n a l e f or a w a r d i n g p o s t

- j ud g m e n t

i n te r e s t as i f t h e d ate of t h e o r i g i n al j ud g m e n t wh en i t h as n ot b een

r e v e r s e d : i t "c o mp e ns a tes pl a i n t i f f s f or t h e l o s s of m o n ey t h at h as b een

d ete r m i n ed to b e h a v e r i g h t full y b e l o n ged to t h em t h r o u g h o u t t h e t i m e of

t h e p e nd i n g a pp ea l ." B e a m, 765 N

. E .2d at 534. H e r e, t h e r e i s n o m o n ey

t h at r i g h t full y b e l o n ged to I B M as t h e a m o u n t a w a r d ed to i t m ay h a v e

b een a n d ul t i m ate l y w a s

, o nl y an o ffs et to wh at I B M o w es t h e S t a te.

A cc o r d i n g l y, l ook i n g at t h e s t a t u te, o u r c a s e l aw a n d t h e f a c ts of t h i s c a s e,

p o s t

- j ud g m e n t i n te r e s t go i n g b a c k to t h e o r i g i n al j ud g m e n t i s

i n a p p ro p r i ate.



## C o n c lu s i o n

We hold that the pos t

-

j udgment interest due to I B M stems from the

judgmen t o n re mand

. Unde r Indian a Cod e sectio n 34

- 13

- 1

- 6

, th e

judgmen t "draw[s ] interes t a t a n annua l rat e o f si x percen t (6% ) fro m the

dat e o f th e adjournmen t o f th e nex t ensuin g sessio n o f th e general

assembly

... . " Followin g th e judgmen t i n thi s cas e o n Augus t 4

, 2017

, the

next ensuing session of th e General Assembly adjourned on March 14, 2018.

Therefore, th e post-judgment interest du e to IB M runs from March 14, 2018.

We summarily affirm th e Court of Appeals on all other issues and affirm the

trial court on all issues.



### Ru sh, C.J., and Goff

, J., concur

.

Slau g hter, J., concur s in part and dis sen ts in part with separate op inion.

Massa, J., not participating.Indiana Supreme Cour t | Ca s e No

. 19S

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- 1 9 | October 10 , 2019 P a ge 8 o f 9 A T T O R N E Y S F O R A P P E L L A N T

Jay P

. L e f k o wi t z

K i r k l a n d & E l l is LLP

N e w Yo r k

, N e w Yo r k

P a u l D

. C l e m e n t

K i r k l a n d & E l l is LLP

Was h i n g t o n

, D

. C

.

An d re w W. H u ll

L a u r i e E

. M a r t i n

H oo v e r H u ll T u r n e r L L P

I n d i a n a po l is, I n d i a n a

A T T O R N E Y S F O R A P P E L L E E

P e t e r J. Ru s t

h o v e n

J o h n R . M a l e y

J. C u r t is G re e n e

Mer e d ith T

h o r n b u r g h W h i t e

B a r n e s & T h o r n

b u r g L L P

I n d i a n a po l is, I n d i a n a

A T T O R N E Y S F O R A M I C U S C U R I A E

, I N D I A N A P O L I S B A R

A S S O C I A T I O N

Ty l e r D

. H e l mo n d

V oy l e s V a ia n a L u k e m e y e r B al d w i n & W e bb

I n d i a n a po l is, I n d i a n a

J o sh S

. T at u m

P l e ws S h a d l e y R a ch e r & B r a u n L L P

I n d i a n a po l is, I n d i a n a

J o e l M. S c h u m m

I n d i a n a po l is, I n d i a n a

B r y a n H

. B abb

Bo se M c K i nn e y & E v a n s LLP

I n d i a n a po l is, I n d i a naIndiana Supreme Cour t | Ca s e No

. 19S

- PL

- 1 9 | October 10 , 2019 P a ge 9 o f 9

L ibby Y

. Good k n i g h t

K r i e g D e V a u lt L LP

I n d i a n a po l is, IN

A T T O R N E Y S F O R A M I C U S C U R I A E

, D E F E N S E T R I A L C O U N S E L

O F I N D I A N A

Ja m e s D

. J o h n s o n

B la i r M. G a r d n e r

Jac k s o n K e lly P LL C

E va n s v il l e , I n d ia n a

### Slaughter, J., c o ncu r ring in p a rt, diss e nt i ng in part.

Th e C o u r t summ a r i l y a f f i r m s an a w a r d o f $125 mil l i o n to t h e S t a te as

d i r e c t d a m ages r e sul t in g f ro m I B M ’s b r ea c h of c o n t r a c t t o upd ate

I nd i a n a’s w e lf a r e s y s t e m

. A c e n t r al p r e m i s e o f t h e a pp e ll ate r ul i n g we

a f f i r m i s t h at t h e “ Mo d e r n i zat i o n ” a pp ro a c h r eq u i r ed b y t h e p a r t i e s ’

M a s ter S e r v i c es Ag r ee m e n t i s “e ss e n t i a ll y t h e s a m e” as t h e m or e

ex p e ns i v e “ H y b r i d ” a pp ro a c h t h e S t a te e v e n t u a ll y i mpl e m e n te d

. I B M v.

S tat e

, 112 N

. E .3d 1088, 1101 ( I nd

. Ct. A pp

. 2018 )

, t r a ns

. g r a n te d

. I am

un a bl e to j o i n t h e Co u r t’s summ a r y a f f i r m a n c e b e c a us e t h e r e c o r d

e s ta blish es t h at t h e Ag r ee m e n t r eq u i r ed I B M to i mpl e m e n t o nl y

Mo d e r n i zat i on a n d n o t H y b r i d

. Th u s

, I w o u l d t r eat t h e S t a te’s a dd i t i o n al

c o s ts to i mpl e m e n t H y b r i d n ot as d i r e c t d a m ages sub j e c t to a $12 5

- m i ll i o n

c ap bu t as c o ns eq u e n t i al d a m ages sub j e c t to a $3

- m i l l i o n c a p

. On t he

s e p a r ate i s s u e o f p o s t

-

j ud g m e n t i n te r e s t, I j o i n t h e Co u r t.

I.

Th e S tate’s o r i g i n al pl a n f or upd at i n g wh at t h e n

- G o v e r n or M i t c h

D a n i e l s c a ll ed “A m e r i c a ’s w or s t w e lf a r e s y s te m ” w as to a d o p t a

“ m o d e r n i ze d ” s y s tem b a s ed on r e m ote e l i g i b i l i ty. S tat e v. I B M

, 51 N

. E .3d

150, 153 ( I nd

. 2016 )

. N ee d y H oo s i e r s w o ul d a ppl y f o r w e lf a r e b e n e fi ts

u s i n g t h e in te r n et or a c c e s s i n g a c a l l c e n ter w i t h o u t t h e n eed f or f a c e

- to

f a c e m eet in gs w i th a c a s e w or ke r

. I d. An a p p lic a n t’s e l i g i b i l i ty w o u l d t h en

b e d e c i d ed t h ro u gh a c e n t r a l i zed p ro c e s s s tate wid e r at h er t h an i n l o c al

c o un ty w e lf a r e o ffic e s

. Id.

A f ter m o n t h s of n eg o t i at i o ns

, i n D e c e mb er 2 0 06 t h e S t a te c o n t r a c ted

w i th I B M to e s t abl i s h Mo d e r n i zat i o n

— a c e n t r a l i zed s y s tem w i th c a l l

c e n te r s to p r o c e s s w e l f a r e a ppl i c a t i o ns

. Id. T h i s a rr a n ge m e n t a ls o w o ul d

a ll ow r e m ote e l e c t r o n i c a cc e s s to t h e s y s te m

, p rov i d e a p a p e r l e s s

d o cum e n t s y s te m

, i m p l e m e n t too l s to l o w er f r a u d a n d imp r o v e I nd i a n a’s

p o o r w e lf a r e

- t o

- w or k r e c or d

, a n d r e duc e adm i n is t r at i v e c o s t s

. I d. T h e

p a r t i e s ’ te n

- yea r

, b i l l i o n

- d o ll a r

- plu s Ag r ee m e n t w as m or e t h an 16 0 p ages

l o n g w i th exte n s i v e at t a chm e n t s

, i n clu d in g ex hi b i t s

, s ch e dul e s

, a n d

a pp e n d i c e s

, a dd r e ss i n g a l l a sp e c ts o f t h e p a r t i e s ’ bu s in e s s r e l at i on s h i p

. I d.

Th e Ag r ee m e n t a ls o i n clud ed a ch a n ge

- or d er p r o c e du r e b y wh i c h t h eIndiana Supreme Cour t | Ca s e No

. 19 S

- PL

- 1 9 | Oc tober 10

, 2019 P a ge 2 o f 4

p a r t i es c o ul d ag r ee f o r I B M t o t a ke on a dd i t i o n al w or k

— n ot r eq u i r ed

und er t h e or i g i na l Ag r ee m e n t

— f o r a dd i t i o n a l p ay. I d

. at 165

.

P r o bl e m s w i th Mo d e r n i za t i on a r o s e as s oon as t h e s y s tem w as f i r s t

ro ll ed o u t to a l i m i ted p i l ot a r ea. I d. at 155. S o m e o f t h e p ro bl e m s w e r e

att r i bu ted to t h e e c o n o mi c d o wn t u r n i n 2008 as w e lf a r e a pp l i c a t i o n s

i n c r ea s ed d r a m at i c a ll y. I d. A n d t h at s a m e yea r

, t h e S tate f a c ed a s e r i es o f

n at u r al d i s a s te r s t h at a ls o s t r a i n ed t h e s y s te m

. Id. Th r o u g h o u t t h e p r o j e c t,

t h e S t a te us ed t h e ch a n ge

- or d e r p ro c e s s e l e v e n t i m e s to ex p a n d t h e sc o p e

of I B M’s w or k und er t

h e Ag r ee m e n t. I

d. at 1 5 6. Bu t p ro bl e m s p e r sis te d

,

a n d i n O c to b er 2009 t h e S t a te n ot i f i ed I B M i t w o ul d b e te r m i n a t i n g t he

Ag r ee m e n t f o r c a us e e ff e c t i v e i n D e c e m b er 2009. I d. at 157. Jus t b e for e

a nn o un c i n g t h e te r m i n at i o n

, t h e S t a te a d o p t e d a “ Pl an B ” a pp ro a c h to

w e lf a r e m o d e r n i za t i o n

— a d e c e n t r a l i zed m o d el r eq u i r in g a d d i t i o n al

p e r s o nn el a n d ph y s i c a l sp a c e. I d.

[ In S e p te mb er 2009 ]

, t h e S tate d e c i d ed to ch a n ge a pp ro a ch es

a n d a d o p t a h y b r i d a p p ro a c h to w e lf a r e m o d e r n i zat i o n

,

r e f e rr ed to b y t h e p a r t i es as “ Pl an B .” Pl an B m ov ed a w ay f ro m

t h e c e n t r a l i zed c a l l c e n ter a n d m ov ed e l i g i b i l i ty d et e r m i n a t i o n s

b a c k to t h e l o c al o ff i c e, i n c r ea s i n g f a c e

- to

- f a c e c o n ta c t b et w een

c l i e n ts a n d s ta f f

.

I d

. Th e S t a te i n i t i a ll y a s ked I B M to i mpl e m e n t i ts Pl an B

— “ H y b r i d ”

—

s y s tem v i a t h e ch a n ge

- or d er p r o c e ss

, bu t t h e p a r t i es w e r e un a bl e to ag r ee

on t h e p r i c e f or I B M to t a ke on t h e s e a dd i t i o n al s e rv i c e s

. I d. A f ter t h e

te r m i n at i o n

, t h e S t a te incu rr ed subs t an t i al a d d i t i o n al c o s ts a ss o c i at e d w i th

i m pl e m e n t i n g H y b r i d

.

O u r i n i t i al o pi n i o n ag r eed w i th t h e S t a te t h at I B M h ad m ate r i a lly

b r ea ch ed t h e Ag r ee m e n t b y f a i l in g to d e l i v er t h e Mo d e r n i zat i on s y s tem

t h e S t a te h ad p r o cu r e d

, t hu s e n t i t l i n g t h e S t a t e to r e c o u p d a m ages

r e sul t i n g f ro m t h e b r ea ch

. I d. at 168

- 69. On r e m a nd

, t h e t r i al c o u r t

a w a r d ed $125 mil l i o n i n d i r e c t d a m ages f o r t h e S tate’s i nc r e as ed c o s ts

a ss o c i ated w i th t h e t r a n s i t i on to H y b r i d a n d an a dd i t i o n al $3 m il l i o n in

c o ns eq u e n t i al d a m ag e s

. 112 N

. E .3d at 1095. As to d a m age s

, t h e c o u r t ofIndiana Supreme Cour t | Ca s e No

. 19 S

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- 1 9 | Oc tober 10

, 2019 P a ge 3 o f 4

a pp ea l s a f f i r m e d

. Id

. at 1105

- 06. A n d t o d ay o u r C o u r t summ a r i l y a f f i rm s

t h e c o u r t of a pp ea ls

.

II.

Th e Ag r ee m e n t d i d n o t r e qu i r e I B M t o i ncu r t h e H y b r i d

- r e l ated c o s ts of

r e n t i n g a dd i t i o n al s p a c e, h i r i n g a d d i t i o n al p e r s o nn e l

, a n d r e n eg o t i at ing

subc o n t r a c ts w i th s ub c o n t r a c t o r s a l r ea d y un d er c o n t r a c t to i mpl e m e n t

Mo d e r n i zat i o n

. A n d t h e p a r t i e s ’ c o nduc t r e fl e c ts a s m u ch

. It i s te l l i n g t h at

t h e S t a te i n i t i a ll y a s ked I B M to i mpl e m e n t H y b r i d v i a ch a n ge or d e r

. B y

e n te r i n g i n to t h e ch a n ge

- or d e r p ro c e ss

, t h e S t a te a l l bu t a dm i ts t h at

H y b r i d i s o u t s i d e t h e s c o p e o f c o n t r a c ted s e r v i c e s

. P a r t i e s d o n ot n egot i ate

p r o p o s ed ch a n ges to a n ag r ee m e n t t h at a l r e a d y r eq u i r es t h o s e t h i n g s

.

Th e c o u r t o f app ea l s t hu s e rr ed i n t r eat i n g t h e S t a t e ’s a dd i t i o n al c o s t s to

i m pl e m e n t H y b r i d a s “ r e p ro cu r e m e n t c o s t s ”

— a d e fin ed te r m und er t h e

Ag r ee m e n t. S uc h c o s ts a r e t h e “ r ea s o n a bl e c o s ts a n d ex p e ns e s ” t h e S tate

i n cu r s to “ p ro cu r e s e r v i c e s s i m i l ar to t h e a ppl i c a bl e te r m i n ated S e rv ic es

. .

. to t h e e xte n t suc h c o s ts a n d ex p e ns es w o ul d n ot h a v e o t h e r w i s e b e en

i n cu rr ed b y t h e S t a te bu t f o r t h e T e r m i n at i on ”. Th e S t a te’s p o s t

te r m i n at i on c o s ts of t r a n s i t i o n in g i ts w e lf a r e

- r e f or m s y s tem f ro m

Mo d e r n i zat i on to H y b r i d w e r e n ot c o s ts to “ r e p r o cu r e” a n yt h i n g; t h e

a dd i t i o n al H y b r i d s e rv i c e s h ad n e v er b een “ p r o cu r e d ” f r om I B M i n t he

f i r s t pl a c e. O nl y Mo d e r n i za t i on h ad b een p ro cu r ed f ro m I B M

, bu t I B M d i d

n o t d e l i v e r

, s o i t w as i n m ate r i al b r ea ch

. T h u s

, i t w as n o t I B M ’s b r ea c h but

t h e S t a te’s d e c i s i on to sw i t c h to t h e d i ff e r e n t, m or e ex p e ns i v e H y b r i d

s y s t em t h at c a us ed t h e S t a te to i ncu r t h e s e a dd i t i o n al ex p e ns e s

. Th e S t a t e ’s

a dd i t i o n a l

, H y b r i d

- r e l ated c o s ts a r e at m o s t c o ns eq u e n t i al d a m age s

, n ot

d i r e c t d a m age s.

O n e r e sul t of t h e c o u r t o f a pp ea ls ’ r ulin g i s t h at t h e S t a te i s b etter o ff

t h an i f I B M h ad n o t b r ea ch e d

. T o b e su r e, t h e S t a te i s e n t i t l ed to t h e b e n e f i t

of i ts b a r g a i n w i th I B M. It c an r e c o v e r t h e d a m ages c a us ed b y I B M ’ s

b r ea ch

— i.e.

, t h e d i f f e r e nc e b et w een wh at I B M h ad to p r o v i d e und er t h e

Ag r ee m e n t a n d wh at I B M a c t u a ll y d e l i v e r e d

. Bu t t h e S t a te i s n ot e n t i t l ed

to a w i ndf a l l

. It c a nn ot r e c o v e r c o s ts f or a dd i t i o n al s e rv ic es b eyo n d wh at

t h e Ag r e e m e n t r eq u i r e d

. B e c a us e I d i s ag r ee w i th t h e c o u r t o f a pp ea ls ’Indiana Supreme Cour t | Ca s e No

. 19 S

- PL

- 1 9 | Oc tober 10

, 2019 P a ge 4 o f 4

a w a r d o f d a m ages att r i b u t abl e to I B M’s b r ea ch

, I r e sp e c t full y diss e n t f r om

o u r C o u r t’s summ a r y a f f i r m a nc e o f t h at p or t i on of t h e a pp e ll ate o pin i o n.

III.

F i n a ll y, t h o u gh t h e Co u r t’s summ a r y a f f i r m a nc e b e n e f i ts t h e S t a te i n

t h e sh o r t t e r m

, t h e l o n ge r

- t e r m c o ns eq u e nc e o f o u r r ul i n g f o r t h e St a te’s

fu t u r e p r o cu r e m e n t e ff or ts m ay n o t b e s o f a v or a bl e. I t w i l l c o m e as l i tt l e

su r p r i s e i f p r o sp e c t i v e v e nd or s r e sp o n d t o to d ay’s r ul i n g i n o n e of t w o

w ay s

. E i t h er t h ey w i l l n ot d o bus i n e s s w i th t h e S t a te a t a ll

, t hu s r e du c i n g

t h e suppl y o f t h o s e wi l l i n g to c o n t r a c t w i th t h e S tate. Or t h ey w i l l i n clude

a r i s k p r e m i u m i n t h e i r c o n t r a c ts t o c o v e r t h e un k n o w n c o s ts o f f u l f illing

o bl i g a t i o n s b eyo n d w h at t h ey a g r eed t o. E i t h er w ay, t h e S t a te a n d i ts

t a x p ay e r s m ay s oon l e a r n t h at t h e fu t u r e c o s t of o b t a i n i n g t h i r d

- p a r ty

s e rv i c es w il l b e h i g h e r

— p e r h a p s a pp r e c i a bl y s o

— t h an o t h e r w i s e. T he

m ag n i t ud e of t h e i nc r e a s ed c o s t m ay n ot b e k n o w a bl e, bu t i t i s a c o s t

n o n et h e l e ss

.