Oracle 2010 Annual Report Download - page 207

On August 2, 2010, a stockholder derivative lawsuit was filed in the United States District Court for the Northern District of
California. On August 19, 2010, a similar stockholder derivative lawsuit was filed in the Superior Court of the State of California,
County of San Mateo. The derivative suits were brought by alleged stockholders of Oracle, purportedly on our behalf, against some
of our current officers and directors. Citing the claims in a qui tam action (discussed below), plaintiffs allege that Oracle improperly
overcharged the United States government by failing to provide discounts required under its contract with the General Services
Administration (GSA), and that Oracle made false statements to the United States government. Plaintiffs alleged that the officer and
director defendants are responsible for this alleged conduct and have exposed Oracle to reputational damage, potential monetary
damages, and costs relating to the investigation, defense, and remediation of the underlying claims. Plaintiffs bring claims for breach
of fiduciary duty, abuse of control, and unjust enrichment. The plaintiffs seek compensatory and other damages, restitution,
disgorgement of alleged illicit proceeds, punitive damages and
other relief. On September 20, 2010, Oracle removed the San Mateo action to the United States District Court for the Northern
District of California. On September 30, 2010, plaintiff in the former San Mateo action brought a motion to remand that case to San
Mateo Superior Court. On October 28, 2010, Oracle brought a motion to dismiss the two actions, arguing that the Delaware
Chancery Court is the proper venue for both actions. On January 3, 2011, the court denied plaintiff’s motion to remand, and the court
also denied Oracle’s motion to dismiss the actions for improper venue. Thereafter, the two cases were consolidated, and on
February 10, 2011, plaintiffs filed a consolidated complaint. On March 31, 2011, Oracle filed a motion to dismiss the consolidated
complaint, and the individual defendants brought a separate motion to dismiss. Plaintiffs filed a consolidated opposition to these
motions on April 28, 2011, and defendants filed a consolidated reply on May 19, 2011. The court heard oral arguments on these
motions on June 2, 2011, but has not yet ruled on these motions. As discussed in the paragraph below, Oracle believes that the
claims in the qui tam action are meritless.
On June 16, 2009, the United States Department of Justice notified us that a qui tam action had been filed against the Company in
the United States District Court for the Eastern District of Virginia and that the government was conducting an investigation of the
allegations in the sealed complaint. On July 29, 2010, the United States government filed a Complaint in Intervention in that action,
alleging that Oracle made false and fraudulent statements to the GSA in 1997-98 regarding Oracle’s commercial pricing practices,
discounts provided to Oracle’s commercial customers, and discounts provided to government purchasers. The government alleges
that Oracle also improperly manipulated commercial sales to avoid the discounting restrictions imposed by the GSA contract,
reiterated and confirmed in 2001 false statements allegedly made during the 1997-98 contract negotiations, and breached a duty to
inform the government about discounts offered to commercial customers. The Complaint in Intervention alleges False Claims Act
violations and claims for breach of contract, fraud in the inducement, constructive fraud, fraud by omission, payment by mistake,
and unjust enrichment. The Complaint in Intervention seeks statutory penalties and damages, including treble damages. Oracle filed
a motion to dismiss the complaint and on November 3, 2010, the court granted the motion in part and denied it in part. The court
dismissed the government’s claims to the extent they arose before May 29, 2001, and ordered the government to file a new
complaint. This First Amended Complaint was filed on November 16, 2010, and makes allegations similar to those in the original
complaint. Oracle filed a motion to dismiss the First Amended Complaint, which was denied. Oracle answered the First Amended
Complaint on February 1, 2011. The parties are currently engaged in discovery. Fact discovery is currently scheduled to close on
August 9, 2011, and the final pretrial conference is scheduled for August 18, 2011 unless extended by the court. We cannot currently
estimate a reasonably possible range of loss for this action. We believe that we have meritorious defenses against this action, and we
will continue to vigorously defend it.
Other Litigation
We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of
business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are
attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of
any of these claims or any of the above mentioned legal matters will have a materially adverse effect on our consolidated financial
position, results of operations or cash flows.
Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠