INDIANAPOLIS — The Indiana Supreme Court ruled Monday that Gov. Mitch Daniels doesn't have to answer questions under oath in a $400 million lawsuit that the state filed against IBM Corp. after he canceled the company's contract to process welfare applications.
The court issued the 5-0 ruling just hours after hearing arguments from attorneys for the state and IBM on whether a state law prohibiting governors from facing a court subpoena applied in the lawsuits over the 2009 cancellation of the $1.37 billion contract.
The order reverses a Marion County judge's ruling that the law didn't protect Daniels from being deposed by IBM's lawyers. The court's order said the judge's ruling was "contrary" to state law but didn't further explain the decision, saying a full opinion would be issued later.
The state attorney general's office joined with attorneys for the Indiana Family and Social Services Administration in asking that attempts to compel Daniels to testify be stopped.
"In this important separation of powers case, we appreciate the fact that the Indiana Supreme Court has acted quickly and decisively in finding that the head of the executive branch cannot be forced to give a civil deposition," Attorney General Greg Zoeller said in a statement.
IBM spokesman Clint Roswell issued a statement saying Daniels had spearheaded the welfare automation program himself, adding, "We continue to be surprised that the governor would choose to hide behind this statute, especially after the state initiated this lawsuit."
The trial over the lawsuits is scheduled to start Feb. 27 and last four to five weeks.
Marion Superior Court Judge David Dreyer said in his December ruling that the law state attorneys said protected Daniels from testifying was "ambiguous" and excluding Daniels from being deposed would be "illogical," given that the state filed the first lawsuit in the case.
Jay Lefkowitz, an attorney for IBM, contended during Monday's oral arguments before the Supreme Court that the state law in dispute protected the governor from facing a subpoena to testify in court but not from a notice seeking a deposition by lawyers before the trial.
Justice Robert Rucker asked Lefkowitz whether that interpretation would give more power to an attorney filing a lawsuit than a judge overseeing a trial.
Lefkowitz responded that the governor would be able to decline to testify without facing any personal penalty, but IBM could then ask the judge to limit what evidence the state could present.
Lefkowitz said just after the hearing that depositions by aides to Daniels have shown he was closely involved in the state's dealings with IBM.
"He signed the contract. He made decisions about where the call centers should be," Lefkowitz said. "He sat down with IBM executives and talked to them on the phone about implementation."
The state agency is suing IBM for $437 million, the money it paid IBM to introduce call centers, document imaging and other automation to applications for food stamps, Medicaid and other public assistance programs. Daniels fired IBM for breach of contract in 2009, less than three years into the 10-year-deal, amid complaints of lost documents, lengthy hold times for the call centers and improperly denied benefits.
IBM's countersuit said the state still owes the company about $100 million in deferred payments and equipment costs.
Justice Frank Sullivan questioned whether the state was trying using the governor's immunity as a legal tactic to prevent his testimony in a lawsuit filed by the state.
Peter Rusthoven, an attorney representing the Family and Social Services Administration, said the state didn't intend to present anything based on what the governor said about the contract as evidence in the case.
"The only issue is do we have a right to terminate the contract?" Rusthoven told the justices.
Rusthoven told reporters afterward that the law shielding the governor from testifying is needed because the state faces potentially thousands of lawsuits at any one time.
"People elect a governor to make decisions, they don't elect him to be witness in chief," Rusthoven said.
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