Oracle Am., Inc. v. Or. Health Ins. Exch. Corp.

• Decision Date: 18 November 2015
• Docket Number: 3:14-CV-01279-BR
• Citation: 145 F.Supp.3d 1018
• Parties: Oracle America, Inc., a Delaware Corporation, Plaintiff, v. The Oregon Health Insurance Exchange Corporation, dba Cover Oregon, an Oregon Limited Liability Corporation, and The State of Oregon, by and through The Oregon Health Authority and The Oregon Department of Human Services, Defendants.
• Court: U.S. District Court — District of Oregon

145 F.Supp.3d 1018

Oracle America, Inc., a Delaware Corporation, Plaintiff,

v.The Oregon Health Insurance Exchange Corporation, dba Cover Oregon, an Oregon Limited Liability Corporation, and The State of Oregon, by and through The Oregon Health Authority and The Oregon Department of Human Services, Defendants.

3:14-CV-01279-BR

United States District Court, D. Oregon.

Signed November 18, 2015

BRENNA K. LEGAARD, JEFFERY S. EDEN, Schwabe, Williamson & Wyatt, P.C., 1211 S.W. Fifth Avenue, Suite 1900, Portland, OR 97204, (503) 222-9981, KAREN JOHNSON-McKEWAN, ROBERT S. SHWARTS, ERIN M. CONNELL, Orrick, Herrington & Sutcliffe LLP, The Orrick Building, 405 Howard Street, San Francisco, CA 94105, (415) 773-5700,DORIAN E. DALEY, DEBORAH K. MILLER, PEGGY E. BRUGGMAN, Oracle Corporation, Legal Department, 500 Redwood Shores, CA 94065, (650) 506-9534, Attorneys for Plaintiff

DAVID B. MARKOWITZ, PETER H. GLADE, LISA A. KANER, DALLAS S. DELUCA, HARRY B. WILSON, Markowitz Herbold PC, Suite 3000, Pacwest Center, 1211 S.W. Fifth Avenue, Portland, OR 97204-3730, (503) 295-3085, Attorneys for Defendants

OPINION AND ORDER

BROWN

, District Judge

This matter comes before the Court on Defendant State of Oregon's Motion (#92) for Summary Judgment, Plaintiff Oracle's Cross-Motion (#104) for Summary Judgment, and the Motion (#142) of Defendant Department of Consumer and Business Services (DCBS) for Judgment on the Pleadings. For the reasons that follow, the Court DENIES the State of Oregon's Motion for Summary Judgment, GRANTS Oracle's Cross-Motion for Summary Judgment, and GRANTS DCBS's Motion for Judgment on the Pleadings.

BACKGROUND

The parties are familiar with the facts underlying this action. The Court, therefore, sets forth only the facts relevant to the pending Motions.

At some point in 2009 the Oregon Legislature created the Oregon Health Authority (OHA) as a division of the Oregon Department of Human Services (DHS).

On March 23, 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA), Public Law No. 111–148, 124 Stat. 119 (2010)

, and thereby established legal foundations for States either to create health-insurance exchanges (HIX) or to use an HIX developed by the federal government.

The State of Oregon, through DHS/OHA, ultimately decided to use Oracle to complete a Modernization Project and the HIX (the Oracle Solution). Initially, however, DHS/OHA entered into an agreement on June 30, 2011, only with Mythics, Inc., a corporation that works with Oracle to distribute and to sell Oracle products and to provide consulting on the implementation and integration of Oracle's products. That agreement, the Mythics License and Services Agreement (MLSA),¹ provided in pertinent part:

This agreement is governed by the substantive and procedural laws of Oregon, without giving effect to such state's principles of conflicts of laws, and you and Mythics agree to submit to the exclusive jurisdiction of, and venue in, the federal courts in Oregon, or the state courts in Salem, OR in any dispute arising out of or relating to this agreement.

Agreed Facts (#88), Ex. 7 at § O.1.

In June 2011 the Oregon Legislature passed legislation creating the Oregon Health Insurance Exchange Corporation (Cover Oregon)² as a public corporation. Specifically, Oregon Revised Statute § 741.002(1)(a)

provided Cover Oregon shall “[a]dminister a health insurance exchange in accordance with federal law to make qualified health plans available to individuals and groups throughout this state.”

In November 2011 DHS/OHA entered into an Oracle License Service Agreement (OHA OLSA) with Oracle that provided in pertinent part:

This agreement is governed by the substantive and procedural laws of Oregon and you and Oracle agree to submit to the exclusive jurisdiction of, and venue in, if in state Courts, in the Circuit Court of the State of Oregon for Marion County or, if in federal courts, the United States District Court for the District of Oregon, in any dispute arising out of or relating to this agreement.

Agreed Facts (#88), Ex. 13 at § O.1. The OHA OLSA was signed by the State of Oregon Chief Information Officer Carolyn Lawson, Oregon Assistant Attorney General Jack McDonald, DHS/OHA Office of Contracts and Procurement Officer Stella Transue, and Oracle Contracts Manager Elizabeth Hwang. Agreed Facts (#88), Ex. 13 at 25.

As noted, Cover Oregon was not a party to the MLSA or the OHA OLSA. On March 14, 2013, therefore, Cover Oregon and Oracle executed an Oracle License and Services Agreement (Cover Oregon OLSA) that provided in pertinent part:

This agreement is governed by the substantive and procedural laws of Oregon and [Cover Oregon] and Oracle agree to submit to the exclusive jurisdiction of, and venue in, if in state Courts, in the Circuit Court of the State of Oregon for Marion County or, if in federal courts, the United States District Court for the District of Oregon, in any dispute arising out of or relating to this agreement.

Second Am. Compl., Ex. B at ¶ O.1. The Cover Oregon OLSA was signed by Cover Oregon Executive Director Howard King and Oracle License Contracts Manager William Simpson. Second Am. Compl., Ex. B at 26.

In order for Oregonians to obtain insurance for 2014 as required by the ACA, Cover Oregon established the goal of launching the HIX by October 1, 2013. Although the HIX was not ready to launch at that time, Oracle and Cover Oregon worked to make the Oregon HIX useable and effective throughout 2013 and into 2014.

On August 8, 2014, however, Oracle filed a Complaint against Cover Oregon in this Court basing federal jurisdiction on the parties' diversity of citizenship and asserting claims for breach of contract and quantum meruit . Oracle alleged Cover Oregon has not paid for all of the services that Oracle rendered, “continue[s] to use Oracle's work product[,] and ... has transferred some or all of that work product to others in violation of the parties' written agreements.”

On August 22, 2014, Cover Oregon filed a Motion to Dismiss for Failure to State a Claim and Failure to Join Necessary and Indispensable Party. Specifically, Cover Oregon sought dismissal of the Federal Action because Oracle failed to sue the State of Oregon, who, according to Cover Oregon, was a necessary and indispensable party to the action.

On September 8, 2014, Oracle filed an Amended Complaint in which Oracle added Oregon as a defendant and asserted claims for copyright infringement against Cover Oregon and Oregon, breach of contract against Cover Oregon, breach of the implied covenant of good faith and fair dealing against Cover Oregon, and quantum meruit against Cover Oregon and Oregon.

On September 18, 2014, in light of Oracle's allegations in its Corrected First Amended Complaint,³ the Court denied as moot Cover Oregon's Motion to Dismiss for Failure to State a Claim and Failure to Join Necessary and Indispensable Party and directed Cover Oregon and/or Oregon to file any motions against the Corrected First Amended Complaint no later than October 2, 2014.

On October 2, 2014, Oregon and Cover Oregon each filed separate Motions to Dismiss Oracle's Corrected First Amended Complaint as well as a Joint Motion to Dismiss or, in the Alternative, to Stay.

On December 19, 2014, the Court heard oral argument on Oregon's Motion to Dismiss; the Joint Motion to Dismiss or, in the Alternative, to Stay filed by Oregon and Cover Oregon; and Cover Oregon's Motion to Dismiss. The Court orally granted Oregon's Motion to Dismiss, denied Cover Oregon's Motion to Dismiss, and took the Joint Motion to Dismiss under advisement.

On January 13, 2015, the Court issued an Opinion and Order in which it formally granted Oregon's Motion to Dismiss and denied Cover Oregon's Motion to Dismiss with leave for Oracle to file a Second Amended Complaint consistent with the Court's rulings. Specifically, the Court concluded when Congress enacted the Copyright Remedy Clarification Act, it did not abrogate the States' sovereign immunity to copyright actions pursuant to Section 5 of the Fourteenth Amendment to the United States Constitution; Oregon did not waive its sovereign immunity in the action before this Court when it brought an action in state court against Oracle and others alleging only state-law claims; and Oracle did not establish that its claim against Oregon for copyright infringement as alleged in its Corrected First Amended Complaint falls within the scope of the OHA OLSA contractual provision. The Court granted Oracle leave to file a Second Amended Complaint to the extent that it could allege facts to establish that Oregon waived its sovereign immunity for the copyright claim pursuant to the venue clause in the OHA OLSA. The Court also granted in part and denied in part the Joint Motion to Dismiss as follows: (1) the Court denied the Joint Motion to Dismiss Oracle's copyright-infringement claim on the ground that Oracle failed to state a claim, (2) the Court granted the Joint Motion to Dismiss Oracle's alternative Fourth Claim for quantum meruit , and (3) the Court granted the Joint Motion to Dismiss the Doe Defendants.

On January 27, 2015, Oracle filed a Second Amended Complaint in which it asserted claims for copyright infringement against Cover Oregon and Oregon; breach of the implied covenant of good faith and fair dealing against Cover Oregon; and, in the alternative to its claim for copyright infringement, claims for breach of contract and quantum meruit against Cover Oregon.

On March 3, 2015, Oregon filed a Motion for Summary Judgment in which it asserted the Eleventh Amendment of the United States Constitution bars Oracle's claim against it for copyright infringement. On March 20, 2015, Oracle filed a Cross-Motion for Summary Judgment on the issue of Eleventh Amendment immunity. The Court heard oral argument on the parties' Cross-Motions on April 10, 2015. At the hearing the parties requested the Court to reserve ruling on these Motions for Summary Judgment until it decided the motion for...