State v. Int'l Bus. Machs. Corp.

160 N.E.3d 1127

STATE of Indiana, Appellant-Plaintiff/Defendant,

v.INTERNATIONAL BUSINESS MACHINES CORPORATION, Appellee-Defendant/Plaintiff.

Court of Appeals Case No. 20A-PL-925

Court of Appeals of Indiana.

Filed December 9, 2020

Attorneys for Appellant: Peter J. Rusthoven, John R. Maley, J. Curtis Greene, Indianapolis, Indiana

Attorneys for Appellee: Daniel R. Lombard, Chicago, Illinois, Andrew W. Hull, Jason L. Fulk, Indianapolis, Indiana, Paul D. Clement, Washington, DC

Altice, Judge.

Case Summary

[1] Despite the complex history of this case, which has entered its second decade and culminated in this fourth appeal, the question before us is rather simple. Did the Supreme Court mean what it said when it expressly affirmed the trial court's 2017 final judgment on all issues ? Or, as suggested by the State, did the Supreme Court carelessly use – three times in the Court's relatively short opinion – the "generic ‘we affirm’ statement", Appellant's Reply Brief at 11, and really intend to reverse the trial court's judgment regarding post-judgment interest and remand? The answer is clear. The Supreme Court affirmed the trial court's judgment in all respects, and the State's attempt to seek an additional award of over $4.3 million in post-judgment interest from International Business Machines Corporation (IBM) based on application of a novel calculation "on remand" is baseless.

[2] We affirm.

Facts & Procedural History

[3] Once again, an appeal from the "seemingly never-ending saga between the State and IBM" has come before us. IBM v. State , 112 N.E.3d 1088, 1092 (Ind. Ct. App. 2018), summarily aff'd in part and vacated in part , 124 N.E.3d 1187 (Ind. 2019), modified on reh'g , 131 N.E.3d 609 (Ind. 2019). A Cliffs Notes version of the history of this case follows, drawn from the plethora of previous appellate opinions in this matter.

[4] In December 2006, the State of Indiana, acting on behalf of the Indiana Family and Social Services Administration, entered into a ten-year, $1.3 billion contract with IBM to modernize and improve the State's welfare system. Less than three years later, the State terminated the contract citing IBM performance issues. The parties, in 2010, separately sued each other for breach of contract in Marion County Superior Court, and the actions were consolidated.

[5] The trial court, Judge David Dreyer presiding, granted partial summary judgment in favor of IBM for $40 million in assignment fees.¹ Then, after a six-week bench trial in early 2012, the trial court entered final judgment on July 18, 2012, finding no material breach on IBM's part and awarding IBM additional damages from the State including, among other things, about $9.5 million in equipment fees. Both parties appealed and the appeal eventually made its way to our Supreme Court. In State v. IBM , 51 N.E.3d 150, 153 (Ind. 2016) ( IBM I ), the Supreme Court affirmed the award to IBM for assignment and equipment fees, totaling slightly over $49.5 million, but reversed other awards to IBM. The Court also reversed the trial court's finding that IBM did not materially breach the contract and remanded to the trial court to "determine the amount of fees IBM is entitled to for Change Orders 119 and 133, and for calculation of the parties' damages consistent with this opinion, including any appropriate offsets to the State as a result of IBM's material breach of the [contract]." Id. at 168-69.

[6] After remand, the State sought and eventually obtained, by order of the Supreme Court, a change of judge.² Judge Heather Welch then presided and held a full-day hearing on damages and considered both pre- and post-hearing submissions. In sum, the State argued that it was entitled to over $173 million in damages and that the previously awarded $49.5 million in damages to IBM, which was upheld on appeal, along with a stipulated amount for change order fees, should be offset against the State's damages. Because IBM had no amount due after setoff, the State argued that IBM was entitled to no post-judgment interest. IBM, by contrast, claimed that it was entitled to post-judgment interest on the damages it was awarded in 2012 that were not disturbed on appeal.

[7] On August 4, 2017, the trial court issued its judgment on remand in an 83-page order. The court awarded the State $128 million in total damages and offset that amount by the damages due IBM, which totaled $49,821,891 for assignment fees, equipment fees, and change order fees. Relevant for our purposes, the trial court rejected IBM's request for post-judgment interest on the $49.5 million award dating back to 2012 and expressly determined that IBM was entitled to $0 in post-judgment interest. The State, on the other hand, was awarded post-judgment interest at an 8% annual rate on the net damages award of $78,178,109.

[8] Both parties again appealed, posing a combined five issues for review. This court affirmed the trial court's 2017 order in all respects except for the determination regarding post-judgment interest. IBM , 112 N.E.3d 1088. We concluded that IBM was entitled to post-judgment interest on the $49.5 million damages award entered in 2012, which had remained undisturbed on appeal, and we, therefore, reversed the trial court on this issue and remanded for calculation of the post-judgment interest due IBM based on the 2012 award. Id. at 1103.

[9] The Supreme Court granted transfer and addressed only the post-judgment interest issue, summarily affirming the other portions of our opinion. Specifically, in the beginning of its original opinion issued on June 26, 2019, the Court stated as follows:

Today we address one of the issues raised: whether IBM is entitled to post-judgment interest on its $49.5 million damages award running from the date of the original judgment in 2012 or running from the judgment on remand. Finding that the original 2012 judgment was not "final," we hold that the post-judgment interest due to IBM runs from the judgment on remand. We summarily affirm the Court of Appeals on all other issues and affirm the trial court on all issues.

IBM , 124 N.E.3d at 1188.

[10] The Supreme Court expressly disagreed with our court's analysis regarding post-judgment interest because we relied on a case – Beam v. Wausau Ins. Co. , 765 N.E.2d 524 (Ind. 2002) – that applied Ind. Code § 24-4.6-1-101, the default statute dealing with post-judgment interest, rather than Ind. Code § 34-13-1-6, which governs interest on money judgments against the State.³ Applying the correct statute, the Court explained:

Here, the relevant inquiry pursuant to Indiana Code section 34-13-1-6 is whether there was a final decree or judgment. A final judgment "disposes of all issues as to all parties thereby ending the particular case." Georgos v. Jackson , 790 N.E.2d 448, 451 (Ind. 2003).

At the time of remand, all the issues were not disposed of as this Court's opinion in IBM I did two things: 1) it reversed the trial court on the issue of whether IBM's breach of the [contract] was material; and 2) remanded to the trial court to calculate appropriate damages as well as offsets . While IBM wants us to consider its suit against the State separate and apart from State's suit, the two arise out of the same facts and circumstances and are inextricably tied. Case law is clear that a final judgment disposes of "all issues as to all parties." Id. (quoting Indiana Appellate Rule 2(H) (emphasis added). Not all the issues as to all parties were resolved at the time of remand and further, what was due and owed to IBM was necessarily contingent upon what damages were due the State for the breach. IBM could have recovered money from the State if the State's damage award was less than what was awarded to IBM or [the] IBM award could have simply been applied to offset what was owed to the State . In Beam , we stated the rationale for awarding post-judgment interest as [o]f the date of the original judgment when it has not been reversed: it "compensates plaintiffs for the loss of money that has been determined to be have rightfully belonged to them throughout the time of the pending appeal." Beam , 765 N.E.2d at 534. Here, there is no money that rightfully belonged to IBM as the amount awarded to it may have been and ultimately was, only an offset to what IBM owes the State. Accordingly, looking at the statute, our case law and the facts of this case, post-judgment interest going back to the original judgment is inappropriate.

Id. at 1191 (emphases added).

[11] The Court then concluded its opinion as follows: "We hold that the post-judgment interest due to IBM runs from the judgment on remand. We summarily affirm the Court of Appeals on all other issues and affirm the trial court on all issues." Id.

[12] IBM sought rehearing on both damages and post-judgment interest issues. The State opposed the petition for rehearing in all respects. Regarding post-judgment interest, the State indicated that "[t]here is no reason whatever to disturb the Court's holding on this straightforward issue." Appellee's Appendix Vol. 2 at 29. The State suggested, however, that the Court "may wish to clarify that [ I.C. § 34-13-1-6 ]'s unambiguous terms do indeed control when IBM's judgment against the State will begin to ‘draw interest.’ " Id. The State noted this case's "protracted, contentious history" and advised that clarifying that IBM's judgment did not start to draw interest until the adjournment of the 2018 legislative session would "forestall any effort to lift the Court's concluding statement from its statutory context" and "prevent yet further litigation and delay in a case that must come to a close." Id.

[13] On October 10, 2019, the Supreme Court granted rehearing in part and issued an order modifying the concluding paragraph of its opinion as follows:

We hold that the post-judgment interest due to IBM runs stems from the judgment on remand. Under Indiana Code section 34-13-1-6, the judgment "draw[s] interest at an annual rate of six percent (6%)

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