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Oracle gets help pushing state to settle


Oracle America, the ill-fated Cover Oregon project contractor, is so heavily invested in media portrayals of its legal battle with the state that it has been sharing filings and other materials with a law professor who’s frequently quoted in the media. The company even assigned one of its lawyers to meet with him over coffee last November to make its case.

The vast, publicly traded California software giant’s interest in swaying public opinion through David Friedman, a Willamette University law professor based in Salem, sheds light on the company’s strategy as it tries to kill or settle an unusual lawsuit filed by Oregon Attorney General Ellen Rosenblum accusing the firm of fraud and racketeering in the website debacle.

Oracle is now trying to force a settlement in court, claiming it had a $25 million oral agreement with aides to Gov. Kate Brown. Brown denies that.

It’s hardly unexpected that an expert commenting for the media is approached by outside parties seeking to influence their message. Friedman spoke candidly about it when asked about his interactions with the firm, noting that he wouldn’t even let the company buy him coffee.

What’s interesting is the message Oracle was trying to get across, using a lawyer who is friendly with Friedman as an intermediary. The company’s argument is that the federal government could “claw back” all of its $305 million it gave Oregon for the bungled project before the state ever gets a dime from any judgment — a talking point that appears intended to sap political leaders’ support for the suit filed in August 2014.

“They wanted me to understand their claw-back argument,” Friedman says of his coffee with the lawyer working on the case. “Their tenor was ‘Gee, there are some things that the media doesn’t get and we’re not sure why they don’t get it.’ So I think there’s this expectation that if they educate people ... it will sway public opinion.”

The firm’s strategy has yielded some success. Armed with his own research on top of the Oracle briefing that included case law and federal correspondence, Friedman echoed the company’s message recently in a Willamette Week article, concerning what happens if Oregon successfully recoups some of its $240 million paid to Oracle.

“Litigation will take forever,” Friedman was quoted saying. “And everything Oregon recovers — even punitive damages — will end up going back to the federal government.”

Oracle executives have provided the same message to the Portland Tribune and the Portland Business Journal. “Any financial resolution will absolutely be recouped by the federal government,” Ken Glueck, a senior vice president for the firm, wrote in an email.

However, the state could well keep a significant portion of any settlement.

While the federal government has said it does expect some funds to be returned by states that successfully sue exchange contractors over the federally funded website projects, it’s already indicated in statements to the press and in a similar situation in Maryland that it won’t claw back all the funds recouped.

The state of Maryland recently reached a $45 million settlement with its health exchange contractor after its website performed poorly. That amounted to about 60 percent of what the contractor had received. Of that sum, the state will keep roughly $13 million, with the remainder going to the federal government, according to a spokesman for the Maryland attorney general.

An equivalent agreement recouping 60 percent of the $240 million Oregon paid Oracle would mean a settlement of about $140 million. If Maryland’s agreement with the federal government is any guide, Oregon might get to keep more than $40 million of that — a nice return on the roughly $4 million it has paid so far to its outside law firm, Markowitz Herbold, to sue Oracle.

The state also can point to a 2011 letter it obtained from a top federal health official promising that funds spent on the exchange in accordance with federal law won’t have to be repaid.

Friedman says the Maryland situation may not be a good fit for what happens in Oregon. He also says his statement referred to a lawsuit judgment that could be years off, not to a settlement. By then, there could be a Republican in the White House who is less willing to work with states on the Affordable Care Act. He says Oregon should settle the case sooner rather than later.

“The longer they take to settle, the more they’re going to burn in time and litigation fees,” he says.

Oracle’s push to get the state to settle for $25 million came shortly after the state claimed that corporate documents back its case that the firm provided shoddy workmanship and engaged in unethical behavior. Oracle denies wrongdoing.

Friedman, a specialist in contracts and commercial law, has been getting calls from local media since after the litigation began. He has become known as one of the only people tracking the legalities of the wide-ranging litigation, which is occurring simultaneously in federal and state court. He’s since appeared in the Baltimore Sun and the Los Angeles Times.

Friedman says studying the complex case benefits his students and keeps him up to speed on current legal issues. “I like talking about current litigation in class,” he says. “For me as an academic, keeping my toe in the water of what’s going on nationally and internationally and locally is something that I’ll do. And if a lawyer is willing to let me in on what their theory is, I’m willing to listen to it.”

But his goal is to understand things from all sides, so he does his own research, he says.

When an Oracle attorney approached him about coffee, he says he made it clear preemptively that he was not for sale and would never call a reporter to place a comment. The firm’s lawyer recognized his “complete independence” up front and in email correspondence with him, Friedman adds.

The lawyer showed Friedman correspondence, case law and other materials to demonstrate why the federal government could claw back funds from Oregon in the event of a judgment.

“Not an ounce of pressure was ever exerted on me to reach a certain conclusion,” Friedman says. “They seemed to have a take that the raw materials would speak for themselves.

“One of the joys of academia is only having an obligation to being true to your own beliefs and arguments — and that’s not something I’d compromise or surrender to anyone.”

By Nick Budnick
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