Oracle Hit with New Lawsuit for Fraud, Negligent Misrepresentation, Breach of Contract, Breach of Warranty and Other Claims Involving its ERP and Cloud Offerings
Worth & Company, Inc., (“Worth” or “Plaintiff”) a Pennsylvania corporation in the mechanical contractor business has sued Oracle America, Inc. (“Oracle”) in federal court in the Northern District of California. The Complaint alleges various claims relating to Oracle’s enterprise resource planning (“ERP”) and cloud software offerings including claims for intentional & negligent misrepresentation, breach of contract, breach of warranty, and other related causes of action. Unlike other recent lawsuits against Oracle alleging similar California state law claims, the suit was brought in federal court on the basis of diversity jurisdiction. Plaintiff seeks damages for Oracle’s failure to deliver a fully functioning product, or alternatively restitution of the $4.5 million dollars paid to Oracle for the alleged faulty software solution and rescission of the various Oracle contracts including a Master Agreement, a Subscription Agreement and other related Oracle contracts.
According to the Complaint:
“Worth seeks money damages or rescission for Oracle’s breach of contract and breach of warranty of merchantability and fitness for a particular purpose based on Oracle’s failure to provide an enterprise resource planning (ERP) software system compatible for use in Worth’s business as a mechanical contractor. Despite Oracle’s representations that its integrated software system, i-cloud services, and technical support system was a functioning workable product fully capable of fulfilling Worth’s needs, Oracle failed to provide a collectively suitable and operable software system. Worth paid in excess of $4,500,000.00 to purchase and implement the ultimately non-functioning Oracle ERP product. Alternatively, Worth seeks money damages or rescission under California law for Oracle’s negligent and continued misrepresentations that the integrated software system was suitable for Worth’s needs.”
The Complaint sets forth in detail the long and tortured saga with Oracle, which began in 2014 when Worth sent out a Request for Quotations (“RFQ”) for a new ERP system. Oracle responded to the RFQ and provided a proposal after a series of detailed meetings where “Oracle requested and Worth provided certain data requests for its demonstration/validation sessions with Worth” and Worth provided to “Oracle a detailed project management list of all of the items Worth wanted to ensure the new ERP solution would handle”. According to the Complaint “[t]hroughout the bidding and negotiation of the implementation services contracts, Oracle represented that all of Worth’s business requirements would be met by the EBS application.” Worth contends that these representations turned out to be false.
On February 20, 2015 Oracle and Worth executed several agreements pertaining to the ERP system, but it didn’t take long until it became clear that Oracle would not be able to meet the “go live” date that had been promised. According to the Complaint:
“By November 2015, it was evident to both Oracle and Worth that the on premises implementation and cloud integration was seriously delayed and wrought with issues. Oracle continued to provide assurances that it would work through all of the issues and that its EBS system was the most efficient program for Worth, and that Worth’s needs would be fulfilled by the EBS system.”
Although the “go live” date was eventually kicked to February 2016, it soon became apparent that Oracle would not be able to meet that deadline. In fact, the new “go live” date was eventually pushed an entire year to February 2017. Worth continued to have issues with Oracle’s implementation after the “go live” date of February 2017. In fact, problems continued throughout all of 2017, leading Worth to decide in the Spring of 2018 that it would discontinue the use of the Oracle ERP system and find another solution.
According to the Complaint, Oracle warranted in the Master Agreement “that a Program licensed to You will operate in all material respects as described in the applicable Program Documentation”. Worth contends that despite this representation, the ERP system never worked as promised and that “[t]he breach by Oracle of the Master Agreement is so total and fundamental that the essential purpose of the contract fails, and the limited remedies and warranties provided in the Master Agreement fail of their essential purpose”. According to Worth, “Oracle’s breaches of the Master Agreement resulted in the software and services Oracle was to provide to be absolutely useless to Worth and destroyed the essential objects of the Master Agreement.” As an alternative to money damages, Worth seeks rescission of the agreements and restitution of all monies paid to Oracle under the agreements.
Worth contends that it relied on Oracle’s representations to its detriment. According to the Complaint, “Oracle made the Representations with the intent that Worth would rely on the Representations by entering into the Master Agreement, the Subscription Agreement and the Additional Oracle Agreements by paying the monies due under the agreements. Oracle also knew that Worth would rely on the Representations by devoting substantial resources to implementing the product it was purchasing from Oracle.”
This new suit follows on the heels of another California lawsuit that was filed against Oracle relating to its cloud offerings, Barrett Business Services, Inc. vs. Oracle America, Inc., Cognizant Worldwide, Cognizant Technology and Kbace Technologies, Inc., Case No. CGC-19-572574, San Francisco Superior Court. In Barrett, Oracle likewise was accused of over promising and failing to deliver a viable system at the price point and within the time frame promised. The price of Oracle’s proposed solution in that case mushroomed from $5.4 million to over $33 million. In addition, the completion of Phase I was pushed from July 2018 to April 2019 and Phase II from January 2019 to May 2021. Barrett contends that despite the price jump the new Oracle plan failed to provide a solution as to how to customize Oracle’s HCM Cloud to meet its needs. The company was forced to hire an independent consultant to advise the company on the situation. The independent consultant concluded that Oracle’s HCM Cloud was not a suitable solution as it (1) lacked required functionality; (2) had a poor user interface; (3) had minimal API’s; and (4) needed significant customization. Oracle has not yet made an appearance in that action.
Tactical Law will continue to monitor the Barrett case and the newly filed Worth case, which is entitled Worth & Company, Inc. vs. Oracle America, Inc. Case No. 3:19-cv-00918, in the Northern District of California. Check back for updates.
Pam Fulmer of Tactical Law