Hewlett-Packard Co. v. Oracle Corp., H039507

• Decision Date: 27 August 2015
• Docket Number: H039507
• Citation: 191 Cal.Rptr.3d 807,239 Cal.App.4th 1174
• Court: California Court of Appeals Court of Appeals
• Parties: HEWLETT–PACKARD COMPANY, Plaintiff, Cross–Defendant and Respondent, v. ORACLE CORPORATION, Defendant, Cross–complainant and Appellant.

239 Cal.App.4th 1174

191 Cal.Rptr.3d 807

HEWLETT–PACKARD COMPANY, Plaintiff, Cross–Defendant and Respondent

v.ORACLE CORPORATION, Defendant, Cross–complainant and Appellant.

H039507

Court of Appeal, Sixth District, California.

Filed August 27, 2015

Latham & Watkins, Daniel M. Wall, Alfred C. Pfeiffer, Jr., Sadik Huseny, San Francisco, for Defendant, Cross–Complainant and Appellant Oracle Corporation.

Gibson, Dunn & Crutcher, Jeffrey T. Thomas, Irvine, Samuel Liversidge, Los Angeles, Robert S. Frank, Jr., for Plaintiff, Cross–Defendant and Respondent Hewlett–Packard Company.

Opinion

RUSHING, P.J.

Plaintiff Hewlett Packard Company (HP) brought this action against Oracle Corporation (Oracle) alleging that Oracle breached contractual and other duties by announcing that it would no longer make its software products compatible with certain HP hardware products. After the trial court found in a bifurcated trial that Oracle was indeed obligated to adapt its products to the HP systems, and on the very eve of a trial on the questions of breach and remedy, Oracle brought a motion under the anti–SLAPP statute, Code of Civil Procedure section 425.16 (§ 425.16 ), challenging one aspect of HP's proof of damages. The trial court denied the motion as untimely. Oracle immediately appealed, bringing all further proceedings to a halt. In a pattern that has become all too familiar to the appellate courts of this state, the appeal, like the motion engendering it, is utterly without merit. The motion was late under any reasonable construction of the facts, and it was quite properly denied because it could not possibly achieve the purposes for which the anti–SLAPP statute was enacted. We will therefore affirm, declining to assess sanctions against Oracle only because we do not wish to further delay the long–overdue trial of the merits of this action.

Background

A. History of Cooperation in the Mission Critical Enterprise Server Market

For many years prior to 2010, Oracle and HP cooperated in the market for servers variously characterized as “high performance,” “high–end enterprise,” and “mission critical.” Many of HP's sales in this category involved machines utilizing the Itanium processor, a product of Intel Corporation. According to an HP expert witness whose report Oracle cites on another point, HP sells two servers utilizing the Itanium processor—“Integrity” and “Superdome.” The servers, with the HP–UX operating system—a proprietary derivative of Unix—were adapted “to perform mission–critical processes, such as large–scale technical, government, or business computing. Customers with these mission–critical computing needs ... tend to be large businesses, universities, and government agencies.” Oracle sold and supported software, including its industry–dominant database program, that it “ported” to run on these and competing systems.¹ The trial court found the relationship to have been “profitable for both parties.”

B. Acquisition of Sun; Hiring of Hurd; Ensuing Suit; Hurd Agreement

In 2010 this seemingly harmonious relationship was shaken by two events. First, in January, Oracle acquired Sun Microsystems, whose products included servers built around its SPARC processor and typically running Solaris, its own Unix–based operating system. The acquisition of these assets made Oracle a natural competitor with HP in the mission critical server market. As the trial court wrote, “This was a potential sea change in the relationship between the parties.”

Then, about seven months after Oracle acquired Sun, a well–publicized chain of events resulted in the resignation of HP's chief executive officer, Mark Hurd, at the request of HP's board. A month later, Oracle hired Hurd as its co–president.

Expressing concern that Hurd could use HP trade secrets to the unfair advantage of Oracle—particularly in exploiting the newly acquired Sun assets to compete with HP—HP filed suit against Hurd. The dispute was quickly settled by a written agreement in late September, 2010, between HP and Oracle (the Hurd agreement). Its first enumerated paragraph, entitled “Reaffirmation of the Oracle–HP Partnership,” states, “Oracle and HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership as it existed prior to Oracle's hiring of Hurd.”

C. Cessation of Porting; Initiation of Suit

According to the trial court's statement of decision, Oracle issued a press release on March 22, 2011—some six months after entering the Hurd agreement—stating that it had “decided to discontinue all software development on the Intel Itanium microprocessor.”² This suggested that Oracle would no longer port new versions of its software products to run on HP's Itanium systems. Any doubt on that score was eliminated when, as the court found, “Oracle identified on its website the current versions of its major products that were available on Itanium and the next versions of those products that would not be available on Itanium.” Oracle apparently indicated, at or about the same time, that new versions of its software would continue to be “made available” on the competing “IBM Power and Sun S[PARC]” platforms.

On June 15, 2011, HP filed the complaint in this action alleging, among other things, that Oracle's announced refusal to continue porting its software to Itanium constituted a breach of the Hurd agreement, a violation of assurances made enforceable by promissory estoppel, and a breach of the covenant of good faith and fair dealing. It prayed for a declaration that Oracle was under a duty to continue porting its products to Itanium, for a decree compelling Oracle to specifically perform that obligation, and for damages. Oracle filed a cross–complaint and HP demurred. Oracle filed an amended cross–complaint asserting that the Itanium platform was doomed and that HP had artificially propped it up by making secret payments to Intel, thus misleading the public and Oracle as to its future viability. HP also demurred to this pleading, with results not disclosed by the record. The trial court deemed the matter a complex case. The parties filed cross–motions for summary judgment or summary adjudication, which the court apparently denied.

D. Finding Against Oracle in Phase 1; Vow to Appeal

The court conducted a bench trial under HP's declaratory relief cause of action on the question whether Oracle was under a duty to continue porting its products to Itanium. On August 1, 2012, the court issued a tentative ruling to the effect that Oracle was under such an obligation by virtue of both the Hurd agreement and other assurances Oracle had given to HP.

On the day the court issued its tentative ruling, Oracle responded with a press release framed as a quotation from an Oracle spokesperson. It stated that “ ‘[n]othing in the court's preliminary opinion change[d] th[e] fact’ ” that, as asserted in Oracle's March 2011 press releases, “ ‘Itanium was approaching its end of life.’ ” The Hurd settlement was dismissed as “ ‘an unrelated employment agreement’ ” in which Oracle had not “ ‘give[n] up its fundamental right to make platform engineering decisions.’ ” The press release concluded, “ ‘We plan to appeal the Court's ruling while fully litigating our cross claims that HP misled both its partners and customers.’ ”

On August 28, the court issued a 43–page statement of decision ratifying and explaining its tentative ruling. It reserved for further trial “[t]he issues of both parties' performance pursuant to, and any breach of,” the duties thus found. Also reserved was the question of the remedy, if any, to which HP was entitled.

E. Resumption of Porting; Supplementation of Damages Theory

Prior to the trial in phase one, HP's experts on damages and causation had submitted reports premised on Oracle's own announcement that Itanium users would be unable to run new versions of Oracle products. On September 4, 2012, Oracle reversed itself on this point, issuing yet another press release stating that it would “continue building the latest versions of its database and other software covered by the judge's ruling to HP Itanium computers.” Oracle did not indicate how long this undertaking could be expected to last.

Oracle's announcement muddied the waters on causation and damage.³ Oracle's counsel wrote to the court on September 10, 2012, stating that HP's claims for “future damages” were no longer viable. As a result, he wrote, the parties had agreed that further discovery on damages and causation was necessary.⁴ The court manifestly agreed, and in December 2012, HP's experts promulgated supplemental reports opining that Oracle's announced intention to resume porting had not repaired the harm to HP caused by the March 2011 announcements. The essential mechanism of damage, they opined, was widespread market uncertainty about the future viability of Itanium servers as a platform for Oracle applications. Both witnesses identified the prospect of an eventual appeal by Oracle as a factor contributing to this uncertainty. Damages expert Jonathan Orszag wrote that the “continued decline in Itanium revenue” reflected in then–current projections “shows that any favorable impact from the Phase I decision and the Oracle September 2012 announcement has been more than outweighed by the continuing negative impact ... from the March 2011 Oracle Announcements and the continuing uncertainty created by Oracle's recent statements regarding its intention to appeal the Phase I decision.” He noted other factors bearing on customer uncertainty, including “serious concerns about ... Oracle's commitment to the Itanium platform ... and concerns about the level and quality of Oracle's future contractual performance.” Oracle's September 2012 statement failed...