knowledge & insights

Oracle Litigation Update: River Supply Inc. v. Oracle

Beeman & Muchmore, LLP is not involved in the River Supply, Inc. v. Oracle Corporation, et al. matter in any capacity. All information contained herein has been taken from the public record.

As America’s most famous inventor, Thomas A. Edison knew his way around a laboratory and the patent office. Edison was also intimately familiar with the courtroom, attempting to control the market by filing numerous lawsuits against alleged infringers of his patents. Yet, despite the fact that his many successes as an aggressive patent-holder in litigation are as much a part of his legend as his famous workshops, Edison had the following to say about litigation:

“A lawsuit is the suicide of time.”

We could not have said it any better ourselves. Our decades in the litigation trenches fighting on behalf of our clients, including taking over 30 cases to jury verdict, have given us a clear eye and hard-earned perspective on the relative merits and perils of launching a lawsuit. And, as experienced courtroom lawyers, we know firsthand that the thrill of victory is inevitably burdened with a heavy price. Too often the expenditure of precious time, money and resources results in a Pyrrhic victory for the aggrieved party initiating the lawsuit.

Out of our collective litigation experiences, we formed a law firm, Beeman & Muchmore, LLP, centered on four founding principles that we believed to be lacking in the legal market:

  • an unwavering and undistracted commitment to our clients;
  • a dedication on behalf of our clients to the micro specialty of software licensing in the ERP industry;
  • a willingness to partner with our clients on creative fee arrangements; and
  • litigation avoidance.

In many respects, litigation avoidance is a cornerstone of our practice. While we have litigated against Oracle – we were the team that filed the iconic Mars v. Oracle lawsuit – we profoundly understand that navigating the treacherous waters of ERP contracts and installations means keeping our clients out of the distracting business of litigation and in the business of their own business. When companies come to us for counseling on ERP issues with Oracle (or any software vendor), our mission is favorably extricating them from the dispute, not carrying a flag up a hill in the name of a greater cause.

River Supply, Inc. v. Oracle America et al. (N.D. Cal. Case No: 3:23-cv-02981)

We have written and spoken extensively over the years about Oracle’s predatory licensing practices. And, as part of our status as thought leaders and in order to better serve our clients, we diligently monitor litigation filed by and against Oracle. We closely watched Oracle’s pair of lawsuits against its licensees in the summer of 2021 in order to educate our clients on the precipitating events. We also stayed abreast of Google v. Oracle for the potential impact on Java licensees as well as the Oracle Securities Litigation and the Oracle Data Privacy Litigation for valuable insight into Oracle’s practices and as cautionary tales to our clients.

For all of its dubious practices that we encounter on a daily basis, it is important to note that Oracle has demonstrated itself to be a savvy litigant that, when it so desires, employs fierce, scorched-earth tactics (See Oracle v. Rimini Street). Bearing this in mind, a recently filed complaint against Oracle by River Supply, Inc. begs a very serious question: To what end?

“Massive fraudulent scheme” for the main course with a side of “criminal intent”?

At the core of the complaint, River Supply alleges it paid almost $170,000.00 for an Oracle/NetSuite installation gone bad.  [First Amended Complaint (FAC), Dkt. 4, ¶3.) Without any personal knowledge of the veracity of River Supply’s specific allegations, we corroborate from our own experiences that such occurrences are unfortunately common and can confirm on behalf of our own clients that failing ERP installations are both maddening on an emotional level and nothing short of treacherous for our clients’ businesses. But this sole failed installation for River Supply appears to serve as a mere triggering event for a complaint full of breathtaking allegations that Oracle is systemically guilty of fraud, unfair business practices, and even criminal intent in the marketing and sale of ERP systems. [FAC, ¶146.]

Indeed, the complaint reads as nothing short of a declaration of war by a small Pennsylvania building materials supplier against the technology behemoth Oracle:

“ … Oracle and NetSuite are involved in a massive fraudulent scheme across ERP product lines to lie to prospective customers about the capabilities of their software and their professional services teams, to low ball bids for ERP projects in order to win the contract, and after contract award to deploy ‘escalation teams’ to concoct excuses to obtain further fees through change order customizations and to further delay delivery of the ERP solution, all the while continuing to be paid under the terms of their one-sided contracts. Because the scheme is so ubiquitous and widespread, it likely emanates from and has the approval of, the highest echelons of Oracle’s management in California, Texas and elsewhere.” [FAC, ¶87.]

In support of the heavy allegation of a “massive fraudulent scheme”, the complaint relies on “the facts asserted in other court cases filed against Oracle arising out of failed Oracle ERP implementations.” [Complaint, ¶ 82.] More precisely, in lieu of actual allegations based on personal knowledge, the River Supply complaint invokes four separate lawsuits filed against Oracle, piggybacking on the allegations therein. [FAC, ¶¶83-86.]

Importantly, in every instance as to the cited lawsuits, the embedded allegations from separate matters remain just that – allegations. The Complaint does not cite to actual findings in the other matters because none of the identified matters were adjudicated on the merits in favor of the plaintiff.  (One of the matters was dismissed in its entirety on jurisdictional grounds and is up on appeal; another saw Oracle prevailing on summary judgment on the contract claims asserted before the case was settled; and the other two were settled and dismissed with prejudice prior to adjudication of the evidence.)

In other words, River Supply’s complaint does not cite to adjudicative facts or evidence in support of their assertions of “a massive fraudulent scheme” on the part of Oracle, but instead simply piles allegations on top of allegations. (See, by contrast, The Oracle Securities Litigation which was replete with whistleblower allegations curated by the Plaintiffs’ firm that filed the class action.)

Oracle v. NEC Corporation: The past as an inauspicious prologue to alleging systemic fraud against Oracle

We have no comment on the likelihood of success of the River Supply litigation against Oracle. However, we can comment on Oracle v. NEC Corporation (N.D. Cal. Case 5:21-cv-05270), the last time we are aware that a single dissatisfied Oracle licensee attempted to turn an individual grievance into broad allegations of systemic fraud. In that matter, NEC alleged in a counter-claim that, as part of an ongoing fraudulent enterprise, Oracle intentionally sold less expensive licenses that rendered licensees noncompliant with the fraudulent intent of leveraging penalties down the road. These allegations were not well-received by the court.

Finding that NEC failed to state a claim, Judge Bryer noted that NEC “alleges fraud only by insinuation,” singling out NEC’s statements that it “has little doubt” based on “circumstantial evidence” that someone at Oracle perpetuated fraud. Somewhat wryly, Judge Bryer stated, “Though NECAM may have 'little doubt', federal courts require more." (Order, Dkt. 34, 6:12-16.) The matter was dismissed shortly after the court granted Oracle’s motion to dismiss NEC’s counterclaim.

A few concluding thoughts

The River Supply complaint provided a pretext for the litigation, surprisingly remarking that River Supply “is a very small company and does not have a legal department. Nor did it retain outside counsel to review the [Oracle] agreements …”

Put differently, an ounce of prevention is worth a pound of cure. Because we harbor deep skepticism that failure to read a contract is an effective cornerstone for a litigation, we founded Beeman & Muchmore to level the playing field for our clients when mired in a dispute with Oracle. To that end, we counsel our clients on how to avoid litigation, not spark a holy war against a litigation-savvy behemoth.

While reviewing the River Supply complaint, we took the opportunity to revisit the concerns we lodged at the time of filing of the NEC counterclaim. Because we believe the considerations that we provided at that time are as salient now as then, we summarize them again below:

  • Litigating against Oracle is incredibly costly and incredibly risky. Not only is Oracle unnervingly comfortable in the quagmire of bitter litigation, it does not reserve its litigation might for competitors. It is important to recall that the State of Oregon went after Oracle in an attempt to recover over $6 billion in connection with a disastrous failed ERP installation. In that matter, Oregon filed an extremely aggressive complaint, found itself fending off multiple counter suits, and spent over $30 million in legal fees before agreeing to a settlement that included only $25 million in cash.
  • In litigation, Oracle is defending the integrity of its very business model while the licensee is not. Understanding the imbalance of incentives in a suit against Oracle is crucial. For Oracle, selling and installing ERP systems is, quite literally, the core of its business. For the licensee, a dispute is a distraction from the normal business operations of the company.
  • Matters of proof and recovery can be extraordinarily difficult in software installation disputes. A lot of people are involved in an ERP installation, with scores of emails, texts, Slack communications, etc. detailing the minute-by-minute development of a project gone wrong. Be assured that Oracle was always protecting the record during the installation. Also, never forget that Oracle painstakingly crafts warranty disclaimers and limitations of liability to protect itself from the risks of litigation. And, bearing the River Supply complaint in mind, an admission that the licensee did not take the time to read the binding agreement feels like a thin reed on which to perch a holy war-styled litigation.
  • Intimidating the intimidator: the high stakes gamble. It is difficult for us to imagine that any business wishes to spend the next several years and potentially millions of dollars attempting to prove a pattern and practice of fraud for which it, quite literally, has no direct evidence at the time of filing.

Considering all we know about Oracle’s scorched earth litigation tactics, is taking on a Goliath in the technology world a risk that you would be willing to assume on behalf of your company?

* * *

When all is said and done, we believe that the American journalist Ambrose Bierce said it best:

“Litigation: A machine which you go into as a pig and come out of as a sausage.”

Published on June 29, 2023

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