IBM ordered to pay $1.6b to BMC

IBM has been ordered to pay Houston-based IT firm BMC $1.6 billion for fraud and contract violations because it moved mutual client AT&T from BMC software to IBM software. On Monday, US District Judge Gray Miller issued his final judgment [PDF] in the case, which began five years ago and culminated in a bench trial in March. …

[John Brown (no body)]

IBM rejected the decision and said it intends to appeal the ruling.

See icon.

Seems to be SOP when either rich or spending other peoples money. These sort of cases really ought to go direct to some very high court and have a very high bar for an appeal to a supreme court.

[Youngone]

Re: IBM rejected the decision and said it intends to appeal the ruling.

Legal systems everywhere seem to be entirely set up to advantage wealth.

“The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread.”

[Gene Cash]

Re: IBM rejected the decision and said it intends to appeal the ruling.

Hm... dunno about you, but I'd sure appeal to try to get out from under a $1.6B fine or at least get it reduced.

Lawyers are expensive, but $1.6B is a fine chunk 'o change.

[Youngone]

Re: IBM rejected the decision and said it intends to appeal the ruling.

Sure, but the difference between you and I and IBM is that they can keep appealing until the sun expands into a red giant, whereas you and I would run out of money first, which is entirely the point.

[Missing Semicolon]

Re: IBM rejected the decision and said it intends to appeal the ruling.

They would spend more. it's about establishing the principle that you don't sue IBM, you will lose. That's going to save more than $1.6B

[ecofeco]

Re: IBM rejected the decision and said it intends to appeal the ruling.

BMC is not to be toyed with either.

[steelpillow]

Re: IBM rejected the decision and said it intends to appeal the ruling.

Even IBM would be unlikely to move a customer across without their knowledge and consent. Just exactly what did IBM think their agreement with BMC covered?

[Yes Me]

Re: IBM rejected the decision and said it intends to appeal the ruling.

Even the IBM of 20 years ago wouldn't do it, but with today's IBM that seems devoid of principles, anything is possible. I'm with the judge.

[CujoDeSoque]

Looks like someone pissed off a judge.

"IBM’s business practices – including the routine eschewal of rules – merit a proportional punitive damages award. … Finally, IBM’s conduct vis-à-vis BMC offends the sense of justice and propriety that the public expects from American businesses." - That's a pretty damning statement from a judge.

[usbac]

Re: Looks like someone pissed off a judge.

Possibly an older gentleman that has been reading about the numerous age discrimination lawsuits against IBM? Maybe he doesn't like to be referred to as a "Dino-baby" himself?

[nematoad]

Re: Looks like someone pissed off a judge.

"...offends the sense of justice and propriety that the public expects from American businesses."

I'd say that IBM's conduct exactly fulfils the public's expectations of American businesses.

See also:

Oracle, Amazon and Microsoft.

[systemBuilder22]

One of 1,000+ Rometty mistakes ...

This was during Ginny Rometty's tenure and she is the worst leader that IBM has ever had almost as bad as GE's Jack Welch who ruined the company Thomas Edison built ..

[The Man Who Fell To Earth]

Re: One of 1,000+ Rometty mistakes ...

Jack Welch was a classic type that MBA's love due to his extracting short term gains despite the fact that he setup the company so his successors would rein over a complete tanking of Shareholder value. And that's before you get to the decimation of it's industrial might.

[GuldenNL]

Re: One of 1,000+ Rometty mistakes ...

One could argue that Welch followed in Edison’s footsteps. Old Tom was a royal SOB who reportedly screwed over many.

[xyz123]

IBM's defence will be that either BMC staff are over 40yrs old (and some of them are black) and therefore aren't deserving of legal protection.

That's their ACTUAL defence for firing anyone aged over 40, or who isn't white. Even internal IBM emails have revealed they hate the [N-Words] and oldies with a deep deep passion.

[Secondrule]

IBM vs the world

Dodgy business practices + IBM = The Norm.

Shady as all shit.

[Anonymous Coward]

Re: IBM vs the world

You beat me to it.

Any account IBM took over, the main drive was to immediately start trying to sell more IBM crap (even to the point of ripping out perfectly good solutions).

[Peter2]

Re: IBM vs the world

Well, yes.

Have you ever met a salesdroid who's actually turned around and said "that bit of equipment is perfectly fine and has decades of life in it" instead of trying to flog you a replacement for it?

Salesdroids get paid by commission, not by acting in your best interests.

[localzuk]

What's there to appeal?

IBM had a contract saying they wouldn't move mutual customers over to their own systems. They did so.

That seems pretty cut and dry?

[AVR]

Re: What's there to appeal?

IBM seems to be claiming that they didn't induce AT&T to switch to IBM's systems, it was all AT&T's decision, and AT&T isn't bound by a contract between IBM and BMC. The judge didn't buy it but IBM's going to try to find another judge.

[the spectacularly refined chap]

Re: What's there to appeal?

Yes, it seems at first sight the customer is getting lost in all this. This kind of side agreement sounds intrinsically dubious, possibly anticompetitive or even corrupt, but I have to assume AT&T were on board with this to at least some extent since the court didn't throw it out.

Standard disclaimers for legal cases - I wasn't there, I haven't considered the evidence as presented, I'm not legally trained etc - but this does at least raise an eyebrow from me.

[GuldenNL]

Re: What's there to appeal?

I saw one of these with another three letter giant from the inside. We first tried to walk the client back, then we told them they must communicate ASAP to the other party or we would have to drop them as a customer under “Section 718.877674 with the vague verbiage.”

They did communicate, we immediately provided the other company with enough proof that we tried to walk them back.

No harm done and we actually made some friends that resulted in a couple of partnering deals.

[Anonymous Coward]

Re: What's there to appeal?

IBM would need to dispute the finding of fact and appelate courts tend not to challenge the such.

[Tubz]

What can IBM appeal, Yes it was AT&T decision to move to IBM software, but I bet IBM didn't say to AT&T sorry dudes, we can't get involved as we have a contract clause with BMC banning us or just turn a blind eye, cash the cheque and hope BMC go away with a tiny compensation payment, problem is IBM didn't expect a $1.6B payment.

[bofh1961]

There's nothing appealing about IBM

But going through the process will get the compensation reduced to an amount they regard as acceptable.

[Andy The Hat]

Not commenting on the business practices

For all I know BMC is as bad as IBM and AT&T but if AT&T were using old software which they were probably paying through the nose for and *they* wanted a non-BMC replacement option surely as a purchaser, coming to the end of a contract, that side step is within *their* remit and a reasonable course of action?

If the approach was indeed from AT&T, I'm not sure whether that would count as IBM 'stealing customers', but tying a customer into a contract that is impossible to get out of by making a closed agreement with alternative suppliers would be dangerously close to cartel-like behaviour which in itself is neither desirable or necessarily within the law (that's one for the anti-competition lawyers).

This case could (and probably will) run and run ...

[Alan_Peery]

Re: Not commenting on the business practices

If the "please rip this BMC crap out and replace it with less costly IBM" had originated from AT&T, then IBM would have presented that as evidence. Since the judge found against them, they must not have had that evidence.

[Ken Hagan]

Re: Not commenting on the business practices

From the fine article:

"The decision to remove BMC Software technology from its mainframes rested solely with AT&T, as was recognized by the court and confirmed in testimony from AT&T representatives admitted at trial."

[Falmari]

Re: Not commenting on the business practices

@Andy The Hat “but tying a customer into a contract that is impossible to get out of by making a closed agreement with alternative suppliers would be dangerously close to cartel-like behaviour”

That was my thought as well. Having read all 106 pages of the pretty damming on IBM final judgment it is nothing like cartel behaviour.

Basically, IBM is in the outsourcer business who AT&T have outsourced the running (which includes the BMC software) and maintenance of their mainframes to. But IBM don’t have licenses to run BMC software as the AT&T BMC license does not permit outsourcing.

The OA (Outsource Agreement) that IBM have with BMC gives IBM the right to use their outsourcing customer’s (AT&T) license or purchase the licenses at 72%. Part of the agreement is that IBM will not displace BMC software with their own. If IBM do displace BMC software, they liable for 1 year’s license and support fees. This only applies to customers that IBM is the outsourcer for and using the customer’s BMC licences which is the case with AT&T.

In 2015 IBM signed a contract with AT&T to replace all BMC software with IBM software. The also renegotiated the OA contract and tried to remove the displacement clause but BMC would not sign if the clause was removed. They did manage to get the list of customers that the displacement clause applied to reduced but could not get AT&T removed from the list. The new OA was signed in 2015 after the AT&T contract.

IBM entered into the new OA contract with BMC in bad faith as they had no intention of abiding by that contract. This is backed up by the IBM negotiator. The judge considered fraudulent, which is why IBM ended up with this. From the judgement:-

12. BMC shall recover direct and punitive damages from IBM on its fraudulent

inducement claim, plus prejudgment interest in the amount of 5% and post-judgment

interest:

a. BMC is entitled to recover from IBM $717,739,615 in actual contractual damages.

b. BMC is entitled to recover from IBM $168,226,367.29 in prejudgment interest on

the actual damages described above.

c. BMC is entitled to recover from IBM $717,739,615 in punitive damages based on

fraud found by clear and convincing evidence.

d. BMC is entitled to recover from IBM post-judgment interest from the date of the

entry of judgment at the federally mandated rate. 28 U.S.C. § 1961.

[GuldenNL]

Re: Not commenting on the business practices

A fine job of research, I’m giving you TWO gold stars and an upvote!

[Anonymous Coward]

Pot Kettle?

BMC are known for their price gouging since they became owned by a vulture capital company. So perhaps AT&T wanted out legitimately. It doesn't say what the product set was, but we are presently trying to get rid of BMC products for this very reason. But the alternatives in some cases are woefully inadequate.

[Jimmy2Cows]

Re: Pot Kettle?

What AT&T wanted was irrelevant; IBMs contract with BMC forbade the migration. IBM ignored that, apparently wilfully. Now they have a $1.6 beeeeellion fine because of that wilful ignorance.

AT&T don't exactly have a great reputation either. Maybe AT&T didn't want to pay termination fees to BMC. Maybe IBM didn't tell AT&T. Maybe IBM thought they could get away with it. None of that matters.

[Anonymous Coward]

Time for another "restructuring" so a soon-to-be-bankrupt division holds the tab. :(