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Oracle Corp. programmers rushing, in December 2013 at a Tigard office, to complete the ill-fated Cover Oregon website.
(Michael Lloyd/file photo)
The risk and the rhetoric continue to escalate in Oregon's high-stakes legal battle against Oracle Corp.
According to the Oregon Legislative Fiscal Office, the state has spent nearly $16 million so far building its case that the giant software company badly bungled development of the Cover Oregon heath-care exchange. With the trial not set to begin until January, the Department of Justice has estimated the cost of the lawsuit could top $27 million by next April, making it one of the most expensive in department history.
"I had feared it would be extremely high, but my God, I'm shocked by that number," said Mike McLane, House Republican leader.
The case is as notable for its secrecy as its expense. Oracle has argued that thousands of pages of evidence should be kept confidential. Entire court hearings have been closed to the public because so much of the evidence in the case has been ruled "for-attorneys' eyes only."
Reporters managed to get into a hearing in the case Monday afternoon after an attorney for The Oregonian/OregonLive convinced Marion County Circuit Court Judge Courtland Geyer that the public had the legal right to attend.
McLane and other critics claim Attorney General Ellen Rosenblum is throwing good money after bad in continuing to fight the company. He agrees with Oracle that the state's poor management of the Cover Oregon project doomed the effort more than Oracle's work.
Yet, those massive legal fees could prove a wise investment if the state can recover some or all of the nearly quarter-billion dollars it paid Oracle for the failed Cover Oregon website. Attorney General Rosenblum has resisted calls that she back off and settle the case, even from Gov. Kate Brown.
"This case is about making sure Oregonians are paid back fairly for the miserable job performance of a corporate contractor that we hired," Rosenblum said. "We paid $240 million to Oracle to produce a health exchange that never worked."
But Oracle, with its $20 billion in cash in the bank, has proven a formidable opponent. The company has spent more on legal fees than the state, confirmed company spokesman Ken Glueck. It has hired seven different law firms and filed five lawsuits of its own against Oregon.
John Parry, a law professor and expert on civil litigation at Lewis & Clark Law School, predicted Oracle will file more motions to dismiss and other delaying tactics that will drive up the cost.
"That's probably Oracle's strategy at the end of the day," Parry said. "Gin up the rhetoric, work the political side of things, try to wait out the state until everyone collapses in exhaustion."
Last Wednesday, the company launched another of its hotly worded broadsides against the state.
Oracle went out of its way to question the integrity of Rosenblum and lawyers of the Markowitz Herbold law firm in Portland, hired by the Department of Justice to handle the case.
Oracle accused the state's "ethically-challenged and hopelessly conflicted lawyers" of withholding key information from Oracle in the discovery process. "The case is a complete fabrication," Glueck said. "The Attorney General has committed fraud on the court and we intend to ask for sanctions."
"That rhetoric was extraordinary in its invective and its intensity," said John Parry, a law professor at Lewis & Clark. "It would have made a romance novelist blush."
But there's a reason Oracle is employing such hardball tactics. The state didn't just accuse the software company of botching the Cover Oregon job while pocketing millions of dollars. It accused the company of fraud, false claims and even racketeering violations typically used to prosecute mobsters.
"Markowitz got really aggressive with its initial complaint," said David Friedman, Willamette University Law School professor. "In layering on fraud and racketeering, they made this harder to resolve. I'm not sure what they thought they had to gain."
It did, however, allow Markowitz and the state to ask for triple damages.
But Oracle dug in all the harder.
In last week's motion, Oracle argued the state improperly withheld from Oracle certain portions of the testimony of David Jurk, a former Oracle contractor who has emerged as a key witness for the state. They also argued Jurk's testimony was inadmissible because he had no firsthand knowledge of many of the circumstances.
Oracle tried to get Jurk's testimony thrown out at Monday's hearing. Judge Geyer denied that request, and ruled for the state.
When Rosenblum hired the Markowitz firm to handle the litigation, she also hired another Portland lawyer, Eric English, to try and settle the case.
There is some talk that with the main trial now less than five months away, English and Glueck are quietly trying to find common ground. Glueck has already claimed once to have a settlement deal in hand. He insisted last fall that he and Brian Shipley, then Kate Brown's chief of staff, had reached a deal to settle the case for $25 million, largely in software as opposed to cash.
Rosenblum denied any such deal. Oracle sued to try and force the state to proceed with the deal.
Today, meanwhile, there are few outward signs of cease fire. In fact, the state wants to up the ante. David Markowitz, lead partner of the Markowitz firm, argued Monday that the state be allowed to ask for punitive damages against Oracle on top of the triple damages the state could get if it wins the false claims act and RICO charges.
To get punitive damages, the state needs to prove Oracle acted with malice -- that it intentionally and recklessly lied to the state.
The state has filed a motion to unseal the entire case and make the filings public. When asked for a copy of the motion, Department of Justice officials said they couldn't release it. The state's motion to unseal all the records is itself under seal.
Meanwhile, the game of hardball continues. In August, Markowitz lawyers will depose Larry Ellison, Oracle founder and chief executive.
-- Jeff Manning
503-294-7606; @JeffManningOre