IBM sues company for $1.5B over alleged breach of contract

ESSEX JUNCTION, Vt. (AP) — IBM has filed a civil lawsuit against the company it sold a manufacturing plant to for $1.5 billion over an alleged breach of contract because the company never produced the microchips it promised in the sale.

The lawsuit filed in New York State court said IBM sold GlobalFoundries its Essex Junction microchip plant and paid the company $1.5 billion to manufacture high-performance microchips that are essential to its business, The Burlington Free Press reported Friday.

IBM said it wants the $1.5 billion back plus damages because GlobalFoundries hasn’t complied with the terms of their agreement. IBM alleges GlobalFoundries has misused the funds and ultimately never produced the product.

GlobalFoundries spokesperson Laurie Kelly said on June 11 that the “IBM allegations are meritless and (GlobalFoundries) is confident the court will agree.”

IBM declined the Burlington Free Press’s request for an interview.

In statement the company said that GlobalFoundries, which is based in Dubai, assured IBM over years that it would fulfill the commitments in their agreement but, “GlobalFoundries instead abruptly and without any justification walked away from IBM while IBM was reliant on GlobalFoundries.”

The Essex Junction plant, located 7 miles from the city of Burlington, is important to the state’s economy.

After the finalized Essex Junction sale, GlobalFoundries said it would not develop the smaller-sized chips IBM wanted. The company began manufacturing larger-sized microchips that IBM disapproved of as a substitute, the lawsuit said.

Not long after, GlobalFoundries halted all production on high-performance technology, including the microchips.

IBM claims that the company assurances to develop high-performance microchips “were false and intended to deceive IBM,” the lawsuit said.

The companies halted all communication with each other in the summer of 2018.