Judge Rules State Owes IBM $12 Million on Failed Medicaid Privatization; Conflicted Barnes & Thornburg Attorneys Authorized to be Paid $9.8 Million for Work in Representing State in Losing Effort

The Star reports:

A Marion County judge today ruled that the state owes IBM $12 million in a dispute over the state's canceled welfare-modernization contract, but the victory falls short of the money IBM had sought.

That amount is in addition to $40 million that Judge David Dreyer previously ruled IBM deserved for subcontractor fees. The bulk of the new $12 million judgment covers $9 million in equipment it left in the state's possession when the contract was canceled. The state gets nothing out of the ruling, a blow for Gov. Mitch Daniels. 

"Neither party deserves to win this case," Dreyer wrote in a 65-page ruling. "This story represents a 'perfect storm' of misguided government policy and overzealous corporate ambition. Overall, both parties are to blame and Indiana's taxpayers are left as apparent losers."

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At the outset of this case, the Daniels' administration pushed for the hiring of the politically-connected law firm Barnes & Thornburg.  The only trouble is Barnes & Thornburg's client is ACS, the company that was the major subcontractor to IBM in the Medicaid privatization effort.  In the state contract employing the firm, Barnes & Thornburg detailed that firm had a conflict in representing the State against IBM since ACS is a logical co-defendant and said ACS was waiving that conflict.  B&T also provided assurances that, should the State decide to sue ACS, the law firm would wall off the attorneys at the firm who represent ACS from the attorneys suing ACS.

The only problem is, as I've detailed on this blog, it is a nonwaivable conflict under the Rules of Professional Conduct.   The reason why is that we lawyers are duty bound to zealously represent our clients.  The fact that B&T represents the State against IBM, in a case in which its own client is a possible defendant and certainly a party from which third party discovery would be sought, means B&T may well not aggressively pursue the claim against IBM if in doing so means it has to sue ACS and lose that company's legal work.

One wonders if the loss by the B&T attorneys was because the defense of the state was hampered by B&T's lawyers not wanting to also go after ACS which would seem to be a necessary party to the lawsuit. 

The B&T lawyers committed the worst violation of the conflict of interest rules I have ever seen in my practice of law.  If our conflict of interest laws are going to mean anything, they need to be enforced.

Nonetheless, the B&T firm is set to be handsomely paid for their losing efforts.  A March amendment to the legal services contract pegged the firm's compensation at $9.8 million.

See also:

Wednesday, April 4, 2012, Barnes & Thornburg's Outrageous Conflict of Interest in the IBM Medicaid Privatization Case

Friday, January 12, 2012, IBM Wins Judgment on Cancelled FSSA Contract; Conflicted Barnes and Thornburg Attorneys Cost Taxpayers Millions More

Wednesday, September 21 2011, Barnes & Thornburg Continues to Fleece the State's Taxpayers In Representing FSSA

Thursday, October 21, 2010, AP Hits Barnes & Thornburg on Conflicts of Interest in $5.25 Million FSSA Contract, Reveals Governor's Office Asked that Contract be Awarded

Saturday, October 16, 2010, Conflicted Barnes & Thornburg Receives $5.25 Million Contract From State to Sue Former Client IBM Over Medicaid Privatization Effort