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IBM Wins Appeal Reviving Fraud Claim in $2.5 Billion Lawsuit

Paul, Weiss succeeded in persuading the New York Supreme Court’s Appellate Division, First Department, to unanimously reverse the dismissal of a fraud case brought by client IBM against semiconductor supplier GlobalFoundries. 

The decision reinstates IBM’s claim that GlobalFoundries fraudulently induced IBM to transfer its $1 billion semiconductor business and contribute $1.5 billion as part of the parties’ long-term technology alliance to develop and manufacture the next generations of high performance computer chips. IBM, which seeks $2.5 billion in damages, alleges that GlobalFoundries fraudulently misrepresented that it had made a corporate commitment to be in the high performance chip business and subsequently reneged on its contractual obligations to IBM.

A New York state judge dismissed the fraud claim in September 2021 on grounds that representations about corporate strategy are expressions of the company’s aspirations, not actionable statements of present fact, and that the claim was duplicative of IBM’s breach of contract claims. The Appellate Division reversed that decision, holding that IBM properly alleged that “GlobalFoundries knowingly made material misrepresentations of present fact about its business plan and financial commitment that were untrue.”

The Paul, Weiss team includes litigation partners Robert Atkins (who argued the appeal), Jane O’Brien, Jeannie Rhee and Richard Tarlowe, and counsel Martha Goodman and Darren Johnson

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