Celonis v. SAP Update: What Celonis's Proposed Second Amended Complaint Adds to the Lawsuit5/11/2026 By Pam Fulmer
On May 2, 2026, Celonis filed a motion in Celonis SE v. SAP SE, Case No. 3:25-cv-02519-VC (N.D. Cal.), for leave to file a Second Amended Complaint. The proposed pleading — running 117 pages — has not yet been approved by Judge Vince Chhabria, but it is publicly filed and worth reading. Stripped of the antitrust framing, the proposed complaint is a detailed account of an enterprise software vendor squeezing its installed base. Here is what is alleged, organized by what is happening to the customer rather than by claim. The Customer Owns the Data, But Cannot Get to It Celonis alleges that SAP's own General Terms and Conditions for Cloud Services confirm that customers own their enterprise data. The data resides in the customer's instance of the SAP ERP system, often on the customer's own servers. Celonis's process-mining tool reads that data from the customer's environment. SAP is not in the path. Notwithstanding that ownership structure, the proposed complaint walks through a sequence of SAP technical notes — each of which incrementally narrowed how a customer could extract its own data for use with a non-SAP tool. Celonis alleges that after the sequence of changes, only two extraction pathways remain technically permitted: OData, which SAP has withdrawn support for, and Datasphere, an SAP product that the complaint alleges carries fees so high that using it as an extraction conduit to a non-SAP tool is commercially infeasible — sometimes exceeding the cost of the third-party tool itself. The customer-side picture this paints is a familiar one. A customer that purchased SAP ERP under a set of expectations about its ability to work with the third-party tools of its choice has watched those expectations narrow through a succession of vendor-published technical notes the customer never specifically agreed to. The customer's contract did not change. The technical implementation of the customer's contract did. SAP Allegedly Lied to its Customers to Get Them to Stop Using a Vendor They Liked The most operationally consequential allegations in the proposed amended complaint are the false-statement allegations. Celonis identifies — by individual SAP employee, by date, by customer, and by substance — specific communications in which SAP told joint customers that using Celonis would violate license terms, require purchase of additional database or HANA full-use licenses, render the customer non-compliant with SAP policy, or imperil S/4HANA migration. The proposed pleading references internal SAP materials that, according to Celonis, instructed SAP account teams to make these statements on a "case-by-case basis" and to avoid any "general compliance campaign" or "public communications" — a directive Celonis cites as evidence that SAP itself recognized the statements were problematic. For the customers on the receiving end of those conversations, the experience was not abstract. The proposed complaint reflects customer inquiries to Celonis in which the customer reported being told its current extraction processes were "no longer permitted," asked Celonis whether it was "in compliance with SAP requirements," reported having been "warned" about future problems with Celonis after migrating to S/4HANA, and asked whether SAP would "want to charge us" for the data connection. One customer told Celonis that as a result of what SAP had communicated, the customer "may be unable to implement Celonis" on its S/4HANA instance. Another reduced its Celonis contract because of its understanding that the Celonis approach "is not allowed." These are not antitrust harms in the abstract. They are operational decisions enterprise customers made based on information the proposed complaint alleges was false. Customers Were Pushed Into a Bundle Whether They Wanted It Or Not Celonis alleges that SAP has been giving Signavio — its own process-mining product — away free or near-free inside the RISE bundle, with an internal directive to "include Signavio in every software sale." The customer effect is that customers renewing or expanding their SAP relationship receive Signavio at no additional incremental cost, and Celonis alleges that this has caused customers to drop or scale back their Celonis usage in favor of a product the proposed complaint characterizes as inferior. Celonis identifies multiple lost expansion and renewal contracts — customer names redacted — where Celonis was told the reason for the loss was Signavio's inclusion in a RISE bundle. For customers, the dynamic is one we see repeatedly in enterprise software. A bundled component is presented as free, which makes it operationally rational to consume it. The free component then displaces a third-party tool the customer had been paying for. The customer "saves money" in the short run and loses optionality in the long run, as the third-party market shrinks and the vendor's bundled offering becomes the default. Customers Are Migration Hostages Threaded through the proposed pleading is an allegation that resonates with our practice and bears separate attention: customers' relationships with third-party tools are being disrupted at the exact moment customers are migrating to S/4HANA, and SAP is using the migration as leverage. The proposed amended complaint alleges that SAP communicated to customers that continued use of Celonis could jeopardize their S/4HANA migration — a migration most enterprise SAP customers cannot realistically defer. The proposed pleading frames this as part of a coercive scheme. The customer-side characterization is simpler: the customer cannot exit, cannot defer the migration, and is making procurement decisions about third-party tools under conditions in which the dominant vendor is communicating that the customer's strategic IT future depends on cooperating. That is the textbook fact pattern of economic duress under Rich & Whillock, Inc. v. Ashton Development, Inc., 157 Cal. App. 3d 1154 (1984), and an important reason customers facing this type of vendor pressure should preserve communications carefully and consider counsel involvement early. Customer Choice — Once Promised, Now Allegedly Removed The proposed complaint quotes SAP's own historical promises of an "open ecosystem" and "free customer choice," made publicly between 2012 and 2018, on which Celonis and other third-party developers built their businesses. The same proposed complaint alleges that SAP continues to advertise its platform as an "open ecosystem" on customer-facing materials, while internally directing the conduct described above. The complaint also notes that SAP gave explicit assurances to antitrust regulators reviewing the Signavio acquisition that process-management software like Signavio would require only "scanner access" with no fees for indirect use applicable — assurances Celonis says SAP has not honored. For customers, the gap between vendor public messaging and vendor account-team conduct is a recurring theme. The proposed complaint illustrates how that gap can be documented and ultimately litigated. What This Means for SAP Customers Right Now A few practical observations follow from reading the proposed Second Amended Complaint as a customer-side document. First, document everything. The proposed pleading is built on emails, sales-team communications, internal SAP slides, and customer-to-vendor inquiries. The customer that preserves these communications — whether or not it ever intends to litigate — is the customer with the strongest hand at the next renewal. Second, treat compliance assertions skeptically. The proposed complaint alleges that the central pattern of SAP's customer-facing campaign was false statements that the customer's use of Celonis was non-compliant, would trigger additional license requirements, or would create technical or migration risk. Customers who hear similar assertions from any enterprise vendor should obtain those assertions in writing and route them through counsel before acting on them. Vendor compliance claims are not self-validating. Third, recognize what California law provides. We have written before about the California-law tools available to customers facing aggressive vendor conduct: the implied covenant of good faith and fair dealing under Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal. 4th 342 (1992); California's Unfair Competition Law under Business and Professions Code section 17200; economic duress under Rich & Whillock; and tortious interference theories where the vendor's conduct disrupts the customer's relationships with third parties. The Celonis litigation is a live test of how these tools apply to enterprise software conduct. The legal infrastructure California customers can use is more developed than is often appreciated. Fourth, the third-party tools customers depend on may have claims of their own. Celonis is litigating in its own name, but the conduct it describes is conduct directed at SAP customers. Customers whose preferred third-party tools have been the target of similar vendor pressure should be aware that the third party may have independent claims, and that the customer's documentation may be relevant evidence in those proceedings. Caveats Two important ones. First, this is a proposed pleading. The Court has not yet granted leave to amend; until it does, the First Amended Complaint remains the operative pleading. Second, these are allegations only. SAP has denied the allegations in its responsive pleadings and will be entitled to test them through discovery, dispositive motions, and ultimately at the December 7, 2026 trial. Nothing in this post should be read as a finding or conclusion about the merits. Closing Thought The most important sentence in the proposed amended complaint, from the customer's perspective, may be the one in which Celonis frames its own theory: customers buy SAP's ERP software to collect and run their own data, and SAP is allegedly using its control over that ecosystem to deny customers the freedom to work with the providers of their choice. Whether or not Celonis ultimately proves its case, the underlying dynamic — a dominant enterprise vendor narrowing customer choice through technical, contractual, and informational levers — is one California licensees will continue to encounter. The proposed pleading is a useful map of what that dynamic looks like in practice and where the legal pressure points are. We will continue to monitor the case as the Court rules on the motion to amend. Tactical Law Group LLP represents enterprise software licensees in licensing disputes, audit defense, and commercial negotiations involving Oracle, SAP, Broadcom, and other enterprise software vendors. Nothing in this post is legal advice or a comment on any pending litigation. The allegations described are taken from a publicly filed proposed pleading and have not been adjudicated. If your organization is facing aggressive vendor conduct directed at your relationships with third-party providers, please contact us directly.
0 Comments
By Pam Fulmer
Software audit disputes used to be uncomfortable but survivable. A publisher would audit usage, claim over-deployment, and demand a true-up. The customer could dispute the findings, involve counsel, and negotiate while the business kept running. That leverage has changed. In a SaaS, cloud-hosted, subscription, or remotely administered environment, the vendor may control the customer’s practical ability to operate. If the vendor can suspend access, disable authentication, block a hosted environment, or lock down critical data, the dispute is no longer just about who is right under the contract. It is about whether the customer can keep running long enough to find out. California law has not yet developed a mature body of published SaaS “kill switch” cases. But California does provide a set of doctrines that can matter when a vendor threatens to disable mission-critical software to collect a disputed demand: the implied covenant of good faith and fair dealing, economic duress, unconscionability, conversion and trespass to chattels in appropriate cases, the Unfair Competition Law, and emergency injunctive relief. The key is precision. The customer’s argument should not be that a vendor can never suspend service. If the contract clearly allows suspension after defined conditions are met, California courts will generally take that language seriously. The stronger argument is that a vendor may not use a suspension right beyond its contractual scope, in bad faith, without satisfying conditions precedent, to enforce a knowingly inflated demand, or in a way that interferes with customer-owned property or data beyond what the agreement permits. And as a lawyer defending software audit disputes for years, I can tell you that many demands are knowingly and intentionally inflated to use as leverage to extract a large software purchase from the customer. Now imagine how empowered these same predatory publishers will be with the kill switch in their hands. Enterprise software customers would do well to start planning their strategies now. Start with the Contract The first question is what the agreement actually says. Many enterprise software agreements contain suspension provisions for nonpayment, uncured breach, security risk, license overuse, audit noncompliance, or violation of acceptable-use restrictions. Some clauses are narrow and procedural. Others are broad and vendor-friendly. California law gives real force to express contract language. In Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., 2 Cal. 4th 342 (1992), the California Supreme Court held that the implied covenant of good faith and fair dealing may not be used to prohibit conduct the agreement expressly permits. The covenant protects the bargain; it does not rewrite it. In Bevis v. Terrace View Partners, LP, 33 Cal. App. 5th 230 (2019), the Court of Appeal likewise rejected an implied-covenant theory that would have required a party to choose one contractually permitted course over another. Those cases are important vendor-side authority. But Carma also identifies the customer’s opening: the implied covenant has particular force where one party holds discretionary power affecting the rights of the other. The strongest customer argument is not “the vendor can never suspend.” It is that the vendor cannot use a discretionary suspension mechanism as a pretextual coercion device to obtain benefits outside the bargain or to enforce a claim it knows is false or materially overstated. Think of Oracle's VMware virtualization policy arguments. Relevant questions include whether the contract allowed suspension for this type of alleged breach; whether the vendor satisfied notice, cure, audit, escalation, and dispute-resolution requirements; whether the customer is current on undisputed amounts; and whether the vendor is threatening to suspend services, data, affiliates, or environments beyond the clause’s scope. Economic Duress California’s economic-duress doctrine can be powerful in a kill-switch dispute, but only if the customer can show more than ordinary commercial pressure. The leading case is Rich & Whillock, Inc. v. Ashton Development, Inc., 157 Cal. App. 3d 1154 (1984), where a release was unenforceable because it was obtained after a contractor refused to pay an undisputed amount, knowing the other party faced financial ruin. The doctrine turns on a wrongful act, coercive pressure leaving no reasonable alternative, and submission to the pressure. The wrongful act need not be a crime or independent tort; asserting a claim known to be false, making a bad-faith threat to breach, or wrongfully withholding payment may qualify. That framework can fit software suspension threats where a vendor uses a knowingly inflated audit claim, refuses to follow agreed procedures, threatens suspension for amounts not yet due, or demands unrelated purchases or broad releases as the price of continued access. But a vendor’s threat to exercise a clear contractual suspension right after a material uncured breach is not automatically wrongful merely because it creates pressure. If payment is necessary to keep operating, the customer should pay expressly under protest, reserve all rights, identify the disputed grounds in writing, and document why no reasonable alternative existed. Unconscionability Unconscionability is possible, but often difficult in enterprise software disputes. In Sanchez v. Valencia Holding Co., 61 Cal. 4th 899 (2015), the California Supreme Court explained that unconscionability requires both procedural and substantive elements. Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109 (2013) describes the same basic framework. In B2B software contracts, the customer may be sophisticated, represented, and able to evaluate alternatives. The better argument targets the combined remedial architecture: unilateral vendor breach determinations, short cure periods, suspension before neutral review, a bar on consequential damages, a low liability cap, and no meaningful data-export right. The goal may be limited but important: preserve access during a good-faith dispute or prevent the vendor from invoking a liability cap for a wrongful shutdown. Conversion, Trespass, and Data Lockout Tort theories are strongest when the vendor interferes with property interests beyond a mere contractual right to use the vendor’s hosted service. The customer should identify exactly what property is being impaired: customer data, electronic records, backups, local installations, servers, devices, credentials, or domain assets. In Intel Corp. v. Hamidi, 30 Cal. 4th 1342 (2003), the California Supreme Court held that unwanted emails did not establish trespass to chattels because they did not damage Intel’s computer system or impair its functioning. For kill-switch purposes, Intel underscores the need for concrete impairment: blocked access, disabled functionality, interruption of system use, or loss of access to records. Conversion may also apply to certain digital property. In Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2007), the Ninth Circuit, applying California law, held that a domain name could support a conversion claim. The out-of-state case Clayton X-Ray Co. v. Professional Systems Corp., 812 S.W.2d 565 (Mo. Ct. App. 1991) remains useful by analogy, but California briefing should lead with California authority. UCL and Emergency Relief California’s Unfair Competition Law can support restitution and injunctive relief, but not ordinary damages. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003) makes that remedial limit clear. The “unlawful” prong is often the cleanest route, using breach of the implied covenant, duress, unconscionability, statutory violations, or wrongful property interference as predicates. The “unfair” prong requires caution in B2B disputes; under Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999), unfairness in competitor cases must be tethered to a legislatively declared policy or threaten competition. The most important remedy may be a temporary restraining order or preliminary injunction. California courts consider likelihood of success and the interim harm to each side. Butt v. State of California, 4 Cal. 4th 668 (1992). The customer should build a record showing both irreparable harm and merits: disputed demand, payment of undisputed amounts, failure to follow contract procedures, operational dependency, lack of alternatives, and threatened loss of customer-owned data. California law gives customers a toolkit, not a silver bullet. The winning case usually turns on contract language, procedural defects, a timely good-faith dispute, wrongful pressure, and whether suspension would interfere with customer data or operations in a way damages cannot repair. That is enough to change the negotiation. A vendor facing a prepared TRO application, a duress record, possible UCL restitution, and property-based claims for overreach must evaluate the cost of flipping the switch more carefully. This article is for general informational purposes only and does not constitute legal advice. Readers should consult counsel about the specific facts of their own situation |
By Tactical Law Attorneys and From Time to Time Their Guests
|
RSS Feed
tactical law group llp |
COPYRIGHT TACTICAL LAW GROUP LLP 2016-2026. ALL RIGHTS RESERVED
|
Legal Disclaimer: Contents may contain attorney advertising under the laws of some states. Prior results do not guarantee a similar outcome.