August 9, 2019

Not All Post-Judgment Interest Statutes Are Alike; International Business Machine Corporation v. State of Indiana

Category: Indianapolis Law Club | Author: | Share:

In January, we told you about a decision of the Indiana Court of Appeals in a dispute over post-judgment interest in the long-running dispute between IBM and the State of Indiana over an attempted overhaul of the State’s welfare eligibility system. The Indiana Supreme Court granted transfer, and has given additional insight into how post-judgment interest is calculated in Indiana.

In his first term, Governor Daniels sought to overhaul and modernize Indiana’s welfare system. In 2006, the State entered into a $1.3 billion Master Services Agreement (MSA) with IBM. Although the MSA was supposed to last ten years, the State terminated it less than three years in, citing performance issues on the part of IBM. Both parties sued each other for breach of contract.

After a six-week bench trial, the trial court entered a $49.5 million judgment for IBM. The Court of Appeals reversed the trial court’s decision. It found that IBM had materially breached the MSA, but it affirmed the trial court’s award of $49.5 million to IBM for equipment fees and subcontractor assignment fees. The Indiana Supreme Court granted transfer and agreed with the Court of Appeals. It then remanded to the trial court for calculation of the parties’ damages, including any appropriate offsets to the State as a result of IBM’s material breach of the MSA.

On remand, the trial court held a new bench trial. The trial court awarded the State $128 million in damages. The court denied IBM’s request for post-judgment interest on its $49.5 million award. Offsetting the State’s pre-interest liability to IBM, the trial court entered a final judgment, ordering IBM to pay the State more than $78 million. On appeal, the Court of Appeals held that the trial court erred by not awarding postjudgment interest to IBM on its $49.5 million award. The Indiana Supreme Court granted transfer to address this issue.

When deciding that the trial court should have awarded post-judgment interest, the Court of Appeals relied upon Beam v. Wausau Ins. Co., 765 N.E.2d 524 (Ind. 2002). But the Supreme Court found that case distinguishable. In Beam, the Court held that when

a judgment is reversed on appeal and remanded to the trial court for the entry of a new judgment, post-judgment interest accrues from the date the trial court enters the new judgment. … [But] where a money judgment has been modified on appeal and the only action necessary in the trial court is compliance with the mandate of the appellate court, interest on the judgment as modified runs from the date of the original judgment.

When reaching the Beam holding, the Court was governed by IC § 24-4.6-1-101. But this case was governed by IC § 34-13-1-6, which requires a different result. This statute requires a “final decree or judgment.” And at the time of the remand, the case was not final.

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 MSA 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.” Not all the issues as to all parties were resolved at the time of remand.

Given the non-final nature of the proceedings, “post-judgment interest going back to the original judgment is inappropriate.”

Lessons:

  1. The date from which post-judgment interest should be calculated may vary depending on the statute under which the interest is sought.
  2. Post-judgment interest under IC § 34-13-1-6 is calculated from the final judgment.
  3. A judgment is “final” for the purposes of IC § 34-13-1-6 when it disposes of all issues as to all parties.