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Oracle Litigation Update Part 1(b): The Oracle Securities Litigation is Likely to Settle

A month ago, we posted the first of a two part series updating our clients and colleagues on the status of Oracle’s litigation in the software licensing space. (Part II, addressing the NEC Corporation and Envisage matters, was posted two weeks later.)

In Part I, we noted with some surprise that Lead Plaintiff’s motion for class certification was granted. With another procedural hurdle cleared, we commented that the litigation was poised to continue plunging into discovery (albeit under a strict protective order that, thus far, has kept nearly all information from the public eye). While the court has issued substantive orders (notably on Oracle’s motions to dismiss and more currently on class certification), the court has not addressed the factual sufficiency of the evidence. Therefore, the public has no real indication of how the facts of the matter have been unfolding. (Bearing in mind the bona fide shocking nature of the credible whistle-blower allegations in the complaint, there could be some genuinely revelatory information coming out of discovery.) 

Among other things, we commented that Oracle did not want resolution on the merits. It stands to reason that any substantive findings could do damage to the component parts of its tried-and-true auditing script. While we speculated that Oracle would continue erecting procedural barriers to throw the matter off the tracks – including subsequent motions to decertify the class – it turns out Oracle chose another, potentially even simpler, method to defang the matter before it caused any damage. They settled it.

What We Know About the Settlement

On June 3, 2022, not even a month after the court granted class certification, counsel for defendants filed a Stipulation and [PROPOSED] Order Vacating Case Scheduling Order in Light of Settlement. [Dkt. 125.] Wasting no time, Judge Freeman signed the proposed order on the same day. [Dkt. 126.]

Unsurprisingly, little can be gleaned from the face of the skeletal motion and order. All we know is that all parties “have reached an agreement to settle this action, subject to the Court’s approval”. Lead Plaintiff will file a motion for preliminary approval within 30 days (on or about July 3, 2022), and both parties request that the Court vacate all future deadlines set forth in the Court’s May 25, 2021, Scheduling Order. 

What Happens Next?

While the forthcoming motion for preliminary approval of the settlement may contain additional information regarding the terms of the settlement, there are very few tea leaves to read at this time. Still, there are a few things to note. (What follows is entirely gleaned from publicly-available filings.)

Oracle got what it wanted – no material adverse rulings on its auditing and licensing practices. We will scrutinize upcoming filings carefully, but at this stage, it is unlikely that anything adverse will enter the public record. If that is correct, the shocking whistle-blower allegations in the complaint will remain just that: allegations. 

The chilling effect of the litigation on Oracle’s cloud tactics (if any) will likely abate. In our previous blog post, we shared our impression that the pendency of this matter has chilled Oracle’s leveraging of inflated audit results to push cloud credits. Only time will tell, but if our impression is correct, the dismissal of this matter without any material findings could reopen the floodgates, and Oracle could resume utilizing its full bag of audit tricks.

The Related Matter: Chugh v. Oracle, Case No. 5:19-cv-00764 (N.D. Cal. 2019). On February 12, 2019, about six months after the Oracle Securities Litigation was filed, a similar derivative securities litigation was filed on behalf of two Oracle shareholders against Oracle Corporation and various individual defendants. Though not styled as a class action, this matter was designated as “related” and appears to be under the continuing effects of a June 2019 stay that was continued in June 2021. 

The publicly available filings do not indicate that the Chugh matter is being settled in conjunction with the Oracle Securities Litigation. That said, because the matter is already stayed and has no upcoming dates on the calendar, the docket wouldn’t necessarily indicate whether settlement discussions are already underway. At this juncture, the matter could pick up where the Oracle Securities Litigation left off. Alternately, the matter could be unceremoniously settled and dismissed before the stay is lifted. In any event, we consider it unlikely that this relatively discrete litigation will have much impact on Oracle or the market.

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As always, we will monitor these matters carefully and keep our clients and friends informed. In the interim, never hesitate to reach out to us with questions or comments, and we sincerely hope that a summer without the risks of litigation is on your horizon.

Published on 6/29/2022

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