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Oracle America, Inc. v. Or. Health Insurance Exchange Corp.

United States District Court, D. Oregon

January 13, 2015

ORACLE AMERICA, INC., a Delaware Corporation, Plaintiff,
v.
THE OREGON HEALTH INSURANCE EXCHANGE CORPORATION, dba COVER OREGON, an Oregon Limited Liability Corporation; THE STATE OF OREGON, BY AND THROUGH THE OREGON HEALTH AUTHORITY AND THE OREGON DEPARTMENT OF HEALTH SERVICES; and DOES 1-25, INCLUSIVE, Defendants

For Plaintiff: BRENNA K. LEGAARD, JEFFERY S. EDEN, Schwabe, Williamson & Wyatt, P.C., Portland, OR; KAREN JOHNSON-MCKEWAN, ROBERT S. SHWARTS, ERIN M. CONNELL, Orrick, Herrington & Sutcliffe LLP, San Francisco, CA; DORIAN E. DALEY, DEBORAH K. MILLER, PEGGY E. BRUGGMAN, Oracle Corporation, Legal Department.

For Defendants: DAVID B. MARKOWITZ, PETER H. GLADE, LISA A. KANER, DALLAS S. DELUCA, HARRY B. WILSON, Markowitz Herbold PC, Portland, OR.

OPINION AND ORDER

ANNA J. BROWN, United States District Judge.

This matter comes before the Court on the State of Oregon's Motion (#39) to Dismiss; the Joint Motion (#41) to Dismiss or, in the Alternative, to Stay of the State and Cover Oregon; and Cover Oregon's Motion (#44) to Dismiss. For the reasons tat follow, the Court GRANTS the State's Motion to Dismiss; DENIES Cover Oregon's Motion to Dismiss; and GRANTS in part and DENIES in part the Joint Motion to Dismiss or, in the Alternative, to Stay of the State and Cover Oregon. The Court also GRANTS Oracle America, Inc., leave to file a Second Amended Complaint no later than January 27, 2015.

BACKGROUND

The following facts are taken from the Amended Corrected Complaint and the materials filed in connection with the Motions to Dismiss.

In 2007-2008 the Oregon Department of Human Services (DHS) began a project to modernize its technology systems (the Modernization Project). To identify potential technology vendors to implement the Modernization Project, DHS issued a Request for Identification (RFI) in January 2009.

In February 2009 Oracle submitted a response to the RFI.

At some point in 2009 the Oregon Legislature created the Oregon Health Authority (OHA) as a division of DHS.

On March 23, 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA), Public Law No. 111-148, 124 Stat. 119 (2010), and thereby established legal foundations for states either to create health-insurance exchanges (HIX) or to use an HIX developed by the federal government.

In October 2010 the United States Department of Health and Human Services (HHS) announced it would offer Early Innovator grants to states to design and to implement the information technology infrastructure needed to operate the HIX required by the ACA. The State of Oregon determined an Early Innovator Grant would provide it with the opportunity to combine the Modernization Project with a project to create an HIX for the State.

In February 2011 HHS awarded the State an Early Innovator Grant to implement an HIX. The State then began seeking a company to provide both the Modernization Project and an HIX.

Throughout 2010 and 2011 OHA employees attended numerous presentations and demonstrations by Oracle related to its ability to provide the Modernization Project and the HIX. The State, through DHS/OHA, subsequently decided to use Oracle to complete the Modernization Project and the HIX (the Oracle Solution).

Although the State did not contract with Oracle directly, it contracted with Mythics, Inc., a corporation that works with Oracle to distribute and to sell Oracle products and to provide consulting on the implementation and integration of Oracle's products.

On June 30, 2011, the State entered into an agreement with Mythics and executed the Mythics License and Services Agreement (MLSA). Although Oracle did not sign the MLSA, Oracle was named as a third-party beneficiary of the MLSA.

The MLSA did not provide for the actual purchase of Oracle products and services, but instead provided a contractual framework to govern the purchase of Oracle products and services. Actual purchases were made through a series of purchase orders submitted pursuant to the MLSA.

In June 2011 the Oregon Legislature passed legislation creating the Oregon Health Insurance Exchange Corporation (Cover Oregon)[1] as a public corporation and an independent unit of the State. Oregon Revised Statute § 741.002(1)(a) provides Cover Oregon shall " [a]dminister a health insurance exchange in accordance with federal law to make qualified health plans available to individuals and groups throughout this state."

Also on June 30, 2011, DHS/OHA executed a Statement of Work that provided Mythics and Oracle would " assist" DHS and OHA with the " installation, implementation, configuration, and customization of the Oracle Policy Automation 10.2 components to support benefit eligibility processing and full determination for various state programs" and the HIX.

In August 2011 DHS and OHA executed a purchase order with Oracle for the purchase of licenses for the Oracle Solution, the hardware on which to run the software, and consulting services to begin planning and implementing the Oracle Solution.

Between June 30, 2011, and July 11, 2013, the State and Mythics executed 20 purchase orders under the MLSA for the purchase of Oracle hardware, software, and services.

In November 2011 DHS and OHA entered into the Oracle License Service Agreement (OHA OLSA) with Oracle. Like the MLSA, the OHA OLSA did not provide for the actual purchase of Oracle products and services but instead provided a contractual framework governing the purchase of Oracle products and services. Actual purchases were made through a series of purchase orders submitted pursuant to the OHA OLSA.

Between November 30, 2011, and May 29, 2014, DHS and OHA executed 23 purchase orders under the OHA OLSA.

In December 2012 OHA began to transition the HIX-IT Project to Cover Oregon.

As noted, Cover Oregon was not a party to the MLSA or the Oracle-OHA Agreements. On March 14, 2013, therefore, Cover Oregon executed an Oracle License and Services Agreement (Cover Oregon OLSA) with Oracle. Like the MLSA and the OHA OLSA, the Cover Oregon OLSA did not provide for the purchase of Oracle products and services but instead provided a contractual framework governing the purchase of Oracle products and services. Specifically, purchases were made through a series of Oracle ordering documents and Cover Oregon purchase orders submitted pursuant to the Cover Oregon OLSA.

In order for Oregonians to obtain insurance for 2014 as required by the ACA, Cover Oregon established the goal of launching the HIX by October 1, 2013. The HIX, however, was not ready to launch at that time. Throughout 2013 and into 2014 Oracle and Cover Oregon worked to make the Oregon HIX useable and effective.

On August 8, 2014, Oracle filed a Complaint in this Court against Cover Oregon, 3:14-CV-1279-BR (the Federal Action), asserting claims for breach of contract and quantum meruit in which Oracle alleged Cover Oregon has not paid for all of the services that Oracle rendered, " continue[s] to use Oracle's work product[,] and . . . has transferred some or all of that work product to others in violation of the parties' written agreements." In the Federal Action Oracle based the Court's jurisdiction on diversity.

On August 22, 2014, Oregon Attorney General Ellen Rosenblum, the State of Oregon, and Cover Oregon filed an action in Marion County Circuit Court (the State Action) against Oracle, Mythics, and six Oracle employees[2] alleging claims for fraud; breach of contract; breach of the Oregon False Claims Act (OFCA), Oregon Revised Statute § 180.750, et seq.; and violations of Oregon Racketeer Influenced and Corrupt Organizations Act (ORICO), Oregon Revised Statute § 166.715, et seq.

Also on August 22, 2014, Cover Oregon filed in the Federal Action a Motion to Dismiss for Failure to State a Claim and Failure to Join Necessary and Indispensable Party. Specifically, Cover Oregon asserted this Court must dismiss the Federal Action because Oracle failed to sue the State of Oregon, a necessary and indispensable party.

On September 8, 2014, Oracle filed an Amended Complaint[3] in the Federal Action against Cover Oregon and the State in which Oracle asserted claims for copyright infringement (against Cover Oregon and the State), breach of contract (against Cover Oregon), breach of the implied covenant of good faith and fair dealing (against Cover Oregon), and quantum meruit (against Cover Oregon and the State).

On September 18, 2014, this Court denied Cover Oregon's Motion to Dismiss (#15) in the Federal Action as moot and directed Cover Oregon and/or the State to file any motions against the Amended ...


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