INDIANAPOLIS — An Indiana Supreme Court justice pressed a state attorney on Monday about whether it was proper for the state to try and prevent Gov. Mitch Daniels from answering questions in a $400 million lawsuit that it filed against IBM after Daniels canceled the company's contract to process welfare applications.
The Supreme Court heard arguments from attorneys for the state and IBM on whether a state law prohibiting governors from facing a court subpoena applies in lawsuits over the 2009 cancellation of state's $1.37 billion contract with the company.
State lawyers argued that a Marion County judge's order in December that IBM could question Daniels was wrong and that the company has been able to interview many of Daniels' aides about the decision. Company attorneys maintain that Daniels was closely involved with decisions about the contract and that the state law doesn't apply to requests for him to be questioned under oath by attorneys before the trial.
Justice Frank Sullivan questioned whether the state was trying to use 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 Indiana 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.
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.
Jay Lefkowitz, an attorney for IBM, contended the state law in dispute protects the governor from facing a subpoena to testify in court but not from a notice seeking a deposition.
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 said the Marion County judge's ruling still allows the governor to decline to testify without facing any personal penalty, but IBM could then ask the judge to limit what evidence the state could present.
After the hearing, Lefkowitz said depositions by aides to Daniels have shown that he was closely involved in the state's dealings with IBM.
"He signed the contract," Lefkowitz said. "He made decisions about where the call centers should be. He sat down with IBM executives and talked to them on the phone about implementation."
The court didn't say when it would issue a ruling. The trial in the lawsuits is due to start Feb. 27 in the Marion County court and last four to five weeks.
Marion Superior Court Judge David Dreyer said in his ruling that the law state attorneys said protects Daniels from testifying is "ambiguous" and excluding Daniels from being deposed would be "illogical," given that the state filed the first lawsuit in the case.
Rusthoven said 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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