Oracle on Losing End of Strategy to Defeat Arbitration

Pamela K. Fulmer

​Oracle has again suffered a legal setback, this time at the Ninth Circuit.  In an unpublished opinion issued yesterday, a panel made up of Justices Schroeder, Rawlinson and Lasnik, affirmed a ruling by District Court Judge Laporte, which granted a former Oracle employee, Marcella Johnson’s motion to compel arbitration.  Johnson sued Oracle in February 2017 in federal court on behalf of a proposed class of sales employees in a dispute about how Oracle pays its sales team commissions. Johnson claimed that Oracle changed its commission policies resulting in “clawbacks” of previously paid amounts, and that such clawbacks are illegal under California employment law.
 
Johnson eventually dropped her suit in federal court and filed a class arbitration in San Francisco before JAMS, after Oracle produced an employment agreement with an arbitration provision.  However, although employers usually prefer arbitration, Oracle declined to pay its portion of the arbitration fees, instead contending that Johnson had petitioned for arbitration under a provision that had been superseded by a later agreement that explicitly blocked classwide treatment of claims in arbitration.  Johnson then moved to compel arbitration, claiming that the arbitrator could decide which arbitration agreement governed.  Oracle argued that the decision on which agreement governed was for the district court and not the arbitrator to decide.
 
The Ninth Circuit rejected Oracle’s argument finding that the agreements provided for either the applicability of the Federal Arbitration Act (“FAA”) or Judicial Arbitration and Mediation Services (“JAMS”) rules. The court reasoned that “[u]nder those rules, issues concerning arbitrability can be delegated to the arbitrator so long as the delegation is clear,” which it found to be so in the Oracle contracts.
 
Since the case will now be in private arbitration and not a public court of law, Tactical Law will be unable to monitor the case.  That is regretful as it would be interesting to learn more about Oracle’s strong-arm tactics with its own sales people.  Companies undergoing Oracle audits know how aggressive Oracle sales can be in pushing expensive audit resolution proposals.  It is no wonder given the immense pressure that Oracle apparently imposes on its sales team to meet high Oracle sales goals.  If you are a company undergoing an Oracle audit, seek experienced legal counsel knowledgeable about California law to assist you in successfully navigating the audit and defeating aggressive Oracle sales tactics.