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IBM $1.6B Appellate Reversal

Yetter Coleman, serving as co-counsel alongside Clement & Murphy, secured a complete appellate victory for IBM in a long-running dispute with BMC Software. The U.S. Court of Appeals for the Fifth Circuit reversed and rendered a take-nothing judgment in favor of IBM, eliminating the massive judgment against the tech giant.

The appellate court found that IBM did not breach the contract, which the district had erroneously interpreted. The Yetter Coleman team included Connie Pfeiffer, Reagan Simpson, Paul Yetter, Tim McConn, and Grant Martinez.

 The Dispute

In 2017, BMC sued IBM in the Southern District of Texas over a disputed software conversion project. The two tech companies provide mainframe software, and many of their clients use both IBM and BMC products. IBM also manages mainframe systems as an “outsourcer” for certain customers.

BMC argued that IBM improperly displaced BMC software from the mainframe system of mutual customer AT&T, BMC’s largest mainframe client, while performing an outsourcing project. IBM contended it was carrying out AT&T’s directives to remove duplicative and costly software, which IBM said was allowed by its agreement with BMC.

The Trial and Appellate Victory

Yetter Coleman has served as co-counsel since the lawsuit began in 2017, helping secure the denial of a preliminary injunction that year. In 2022, after a hotly contested two-week bench trial, the district court ruled that IBM owed BMC $1.6 billion. However, Yetter Coleman, as trial counsel with Quinn Emmanuel, helped obtain critical findings that AT&T had independently decided to switch from BMC to IBM software without IBM’s improper influence.

On appeal, Yetter Coleman again served as co-counsel. The Fifth Circuit held that the contract unambiguously permitted IBM’s actions for AT&T. The court concluded AT&T’s independent decision to no longer use BMC software and instead choose IBM software was sufficient to allow IBM’s conduct under the contract’s permission to “discontinue use of BMC Customer Licenses for other valid business reasons.” Accordingly, the court of appeals rendered a take-nothing judgment in IBM’s favor.


Media Links:
Texas Lawbook: “Fifth Circuit Undoes $1.6B Judgment Against IBM”
Law360: “5th Circ. Nixes Software Co.’s $1.6B Win In IBM Contract Row”