Iusacell's $2.5 Billion Lawsuit Against IBM Put on Hold

A U.S. judge on Friday put on hold a $2.5 billion lawsuit by Mexican mobile phone operator Iusacell SA de CV accusing IBM Corp of fraudulent misrepresentations, citing a pending arbitration launched by the U.S. technology giant.

U.S. District Judge Naomi Reice Buchwald in New York granted IBM's bid to stay the lawsuit as it involved issues central to an arbitration pending before the International Chamber of Commerce.

In 2010, Iusacell signed a contract with IBM's Mexico unit, which under the agreement would improve and operate Iusacell's IT systems.

In a lawsuit filed in April, Iusacell alleged that IBM claimed it would provide "virtually unlimited" resources to the company for the project, even though it only intended to provide limited, inadequate amounts of resources to Iusacell.

Iusacell contended that under Mexican law it was entitled to recover both its actual damages and lost profits, including $2.5 billion (roughly Rs. 15,400 crores) in lost revenue.

Iusacell is co-owned by media and retail mogul Ricardo Salinas' Grupo Salinas and broadcast giant Grupo Televisa.

Earlier this month, AT&T agreed to acquire Iusacell for $1.7 billion (roughly Rs. 10,475 crores). The deal will occur after Grupo Salinas buys out its partner's 50 percent stake in Iusacell.

IBM moved for a stay of the lawsuit in light of the arbitration, which its Mexican unit commenced in November 2013 seeking payment under the contract. IBM is seeking $300 million in the arbitration, according to the court ruling.

A final hearing in the arbitration is scheduled for February 2016, Buchwald said. While Buchwald agreed to stay the lawsuit, she said she would entertain a future motion to vacate it based on "materially changed circumstances."

Representatives for the companies did not immediately respond to requests for comment.

The case is Iusacell SA de CV v. International Business Machines Corporation, U.S. District Court, Southern District of New York, No. 14-2697.

© Thomson Reuters 2014