Page 1 - COMPLAINT FOR BREACH OF CONTRACT AND QUANTUM MERUIT 

Brenna K. Legaard, OSB #001658

Email: blegaard@schwabe.com

Jeffrey S. Eden, OSB #851903

Email: jeden@schwabe.com

SCHWABE, WILLIAMSON & WYATT, P.C.

1211 SW 5th Avenue, Suite 1900

Portland, OR 97204

Telephone: 503-222-9981

Facsimile: 503-796-2900

Karen G. Johnson-McKewan, pro hac vice pending

Email: kjohnson-mckewan@orrick.com Robert S. Shwarts, pro hac vice pending

Email: rshwarts@orrick.com

Erin M. Connell, pro hac vice pending

Email: econnell@orrick.com 

ORRICK, HERRINGTON & SUTCLIFFE LLP 

The Orrick Building

405 Howard Street

San Francisco, CA 94105-2625

Telephone: 415-773-5700

Facsimile: 415-773-5759 

Attorneys for Plaintiff Oracle America, Inc.

THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

PORTLAND DIVISION

ORACLE AMERICA, INC., a Delaware 

Corporation,

 Plaintiff,

 v.

OREGON HEALTH 

INSURANCE EXCHANGE 

CORPORATION, a Public Corporation, dba 

COVER OREGON; and DOES 1-

25, inclusive,

 Defendants.

No.______________________

COMPLAINT FOR BREACH OF 

CONTRACT AND QUANTUM MERUIT 

DEMAND FOR JURY TRIAL

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Plaintiff Oracle America, Inc. (“Oracle “) brings this Complaint against Defendant 

Oregon Health Insurance Exchange Corporation, doing business as Cover Oregon (“Cover 

Oregon”), for breach of contract and quantum meruit based on Cover Oregon’s continued use of 

software developed by Oracle despite Cover Oregon’s failure to pay approximately $23 million 

for services Oracle rendered. Oracle is a company with a 30-year history of successfully 

developing and implementing some of the most complex technical systems in the world, 

including the health insurance exchanges of at least a half dozen states. Oregon hired Oracle—

among many others—to help build Oregon’s health insurance exchange, and Oracle worked at 

Oregon’s direction on that project. Since October 1, 2013, hundreds of thousands of Oregonians 

have been enrolled in health insurance or Medicaid through the use of the software that Oracle 

and others built. That, however, is a fact most Oregonians do not understand, because when the 

press reported that the exchange was not accessible for consumer self-service on October 1, 

2013, public officials chose not to give a measured, fully informed response. Cover Oregon and 

public officials could have done two things in the face of those press reports: (a) own up to the 

management and technical challenges they had encountered and commit to a plan for resolving 

them; or (b) blame someone else. They chose the latter, and they fixed their sights on Oracle. 

While flogging Oracle publicly, Cover Oregon continued privately to ask for Oracle’s help. 

(Indeed, it continues to this day to seek Oracle’s technical help with the project). Oracle gave 

that help for many months, in spite of the public excoriation, because it was committed to 

helping Cover Oregon complete the project and because Cover Oregon repeatedly promised to 

pay Oracle for its services. In the end, though, Cover Oregon reneged on its promises, thus 

prompting this lawsuit.

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Oracle seeks damages and any such other relief as the Court may deem proper. Oracle 

alleges the following based on personal knowledge and on information and belief as to the acts 

of others:

PARTIES

1. Plaintiff Oracle is a subsidiary of Oracle Corporation, and it is a Delaware 

corporation whose principal place of business is Redwood City, California. Oracle develops and 

licenses certain intellectual property, including enterprise software programs and related 

services. Oracle is the world’s leading supplier of enterprise hardware and software systems and 

related technical support and consulting services for those systems. Oracle’s enterprise software 

includes the “Oracle Enterprise Architecture” solution, the “Oracle Policy Automation” solution, 

and the “Siebel Customer Relationship Management” applications, all of which can be 

customized to meet the needs of customers.

2. On information and belief, Defendant Cover Oregon is an Oregon public 

corporation under ORS 741.001(1) with its principal place of business at 16760 S.W. Upper 

Boones Ferry Road, Suite 200, Durham, in Washington County, Oregon 97224. Cover Oregon 

does business in the District of Oregon. 

JURISDICTION AND VENUE

3. The Court has subject matter jurisdiction based on diversity under 28 U.S.C. 

§ 1332(a) as Oracle, on the one hand, and Cover Oregon on the other, are citizens of different 

states, and the amount in controversy exceeds $75,000, excluding interest and costs.

4. Venue in this District is appropriate because Cover Oregon has consented to 

venue in this District in its contract with Oracle, including the Oracle License and Services 

Agreement signed by the parties on or around March 14, 2013, in which Cover Oregon agreed:

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, 

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the United States District Court for the District of Oregon, in any 

dispute arising out of or relating to this agreement.

5. Venue in this District is also appropriate under 28 U.S.C. § 1391 as Cover Oregon 

is headquartered in Durham, in Washington County, Oregon.

FACTUAL ALLEGATIONS

THE HISTORY OF THE OREGON HEALTH INSURANCE EXCHANGE PROJECT

6. On March 23, 2010, President Obama signed into law the Patient Protection and 

Affordable Care Act (“ACA”), establishing the legal foundations for states to create health 

insurance exchanges by which individuals and small businesses could compare and purchase 

health insurance policies and, where eligible, obtain federal subsidies for premium payments.

7. At the time the ACA was enacted, the state of Oregon’s Department of Health and 

Human Services (“DHS”) was already engaged in an ambitious IT project of its own to 

modernize its delivery of health and human services to low-income Oregonians. Oregon was 

preparing to undertake what it called its “Modernization” project (“Modernization Project”) 

designed to upgrade Oregon’s Internet-based health and human services information technology 

system, by which Oregon would provide web accessibility, for both consumers and caseworkers, 

to its social services programs, such as the Supplemental Nutrition Assistance Program, 

Temporary Assistance for Needy Families, and Medicaid. 

8. In 2009, while the DHS Modernization Project was in its early stages, the Oregon 

Legislative Assembly created the Oregon Health Authority (“OHA”) to which it transferred 

some of the programs long resident under the DHS umbrella, including the state’s health-related 

programs. The transition was expected to take two years to complete, from 2009 to 2011. As a 

result of that redistribution of work, the Modernization Project included elements of 

programming that spanned both agencies, necessitating substantial coordination between those 

two organizations and development of a shared administrative services system for the two 

entities. 

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9. Passage of the ACA in the midst of the DHS/OHA transition presented Oregon 

with another massive technical and organizational challenge: creating its own health insurance 

exchange. Oregon decided not only to build its own exchange, but to integrate it with its to-bemodernized health and human services programs. Oregon thus undertook two major information 

technology projects at once, at least one of which had no established template or precedent, and 

whose legal parameters were still a work in progress.

10. Oregon compounded the already high level of difficulty of its undertaking with at 

least three more decisions:

(a) Rather than engage the services of an experienced system integrator—in 

effect, a general contractor to manage the massive project—Oregon decided to manage the 

project by itself, despite having little or no experience with projects of such novelty, complexity 

or scale. That decision was akin to an individual with no construction experience undertaking to 

manage the processes of designing and building a massive multi-use downtown skyscraper 

without an architect or general contractor, instead engaging and managing dozens of separate 

subcontractors with different specialties to build different parts of the project. 

(b) Oregon was already developing the Modernization Project across two 

bureaucracies—DHS and the recently created OHA—and added development of the health 

insurance exchange to OHA’s responsibilities. Then, when OHA ran out of federal grant money 

to build the exchange (which was then still very much a work in progress), it hastily transferred 

responsibility for construction of the exchange to the newly created entity, Cover Oregon, which 

had qualified for substantial federal grant money intended to sustain its operation of the 

exchange. Using funds supplied entirely from the federal government, the state thus undertook a 

multi-part project of unprecedented size and complexity for which it had no expertise, divided 

responsibility for its management and decision-making among multiple organizations, and 

decided to forgo hiring any experienced professionals to lead the project. It then abruptly 

transferred the uncompleted work to a separate entity when the state ran out of federal money. In 

other words, decisions about how to erect that downtown skyscraper without an architect or a 

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general contractor were now going to be made by a group of inexperienced people who could not 

agree on how to make decisions, let alone which decisions were most important. That same 

group of people was also going to direct the work of a large collection of subcontractors, each of 

whom played a different role in relation to the projects, and all of whose work required 

coordination. Oracle was just one of many contractors engaged for these projects, a list that 

included Deloitte & Touche, Eagle Creek Software Services, Speridian Technologies, Point B 

Management Consultants, KPMG, Maximus Inc., Cognosante, LLC, TahoeBlu, Inc., Purple 

Squirrel, Walsh & Associates, LLC, Radha Consulting, and a variety of individual consultants. 

(One of those contractors—Maximus, Inc.—was hired for the express purpose of enabling OHA, 

and later Cover Oregon, “to understand known and probable risks, and establish priorities for 

mitigation/remediation strategies.” Maximus dutifully reported on the risks, but OHA and Cover 

Oregon seemed largely to ignore the contents of those reports.)

(c) When OHA handed the health insurance exchange (sometimes referred to 

as “HIX”) project to Cover Oregon just a few months before the October 1, 2013 open 

enrollment start date under the ACA, Cover Oregon decided that it would operate in a 

technological environment (comprised of hardware and software) that was entirely separate from 

that being used for the Modernization Project. That decision alone caused substantial additional 

costs, weeks of delays, and wholly unnecessary additional complexity. Oracle is informed and 

believes this decision was the direct result of bureaucratic dysfunction between DHS and OHA, 

and those two agencies’ inability to work with the brand new Cover Oregon.

11. Throughout the time that Oracle worked for DHS, OHA, and Cover Oregon, all of 

them ignored repeated warnings from Oracle and their own advisors that the project was in 

trouble for reasons only they could correct, including:

(a) The government bureaucracies and Cover Oregon worked poorly together. 

They did not agree on work priorities, they competed with one another for resources and in 

decision-making, and they failed to provide authoritative direction to all of the contractors 

working on the project. Communications among the different entities were “ineffective and at 

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times contentious,” according to a report commissioned by Oregon’s governor. For example, at 

one point, OHA’s Chief Information Officer complained to Oracle personnel that Cover 

Oregon’s efforts were “becoming highly disruptive to the Modernization effort,” and that her 

team felt “they are being run over” by Cover Oregon. As a result, one organization would make 

decisions without taking account of implications of that decision for the work being performed 

for the other organization; the result was often duplication of effort and rework. That 

dysfunction endured throughout the project. As late as mid-September 2013—just two weeks 

before the start of the federally-mandated open-enrollment period—Maximus issued a report in 

which it observed that the overall “business transformation/integration between OHA and CO is 

not being tracked like a formal project. Typically a project of this size would have specific 

governance reporting, charter, scope, tasks, milestones, deliverables, and deadlines for the 

interagency work that is to be accomplished both operationally and technically.” The risk 

Maximus identified that flowed from this was that Cover Oregon could not be sure that the 

project would be implemented in the expected timeframe.

(b) Cover Oregon failed to make timely decisions either alone, or with OHA 

and DHS, about the health insurance exchange’s functional requirements, which serve to provide 

the overall structure and scope of the IT project. On a large project, it is critical for the system 

integrator to define functional requirements early on in the project and adhere to those 

requirements. With Cover Oregon and the state agencies acting as the system integrator, the 

obligation to provide those functional requirements rested solely with them, and not with Oracle. 

Indeed, the organizations involved in the project could not even agree on a single process for 

defining those functional requirements. In late January or early February 2012, a group of state 

employees took a 60-day “retreat” for the express purpose of articulating the project’s 

requirements, and they returned empty-handed. The quality assurance consultant, Maximus, 

Inc., reported on the lack of fully articulated requirements in its March 2012 report 

(“Requirements baseline should have been completed and approved by the customer at this phase 

in the project”). While Maximus characterized the 60-day retreat as “a step in the right 

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direction,” it expressed doubt about the likely efficacy of the effort, since it was not clear that 

key stakeholders at OHA or DHS were even involved. By June 2012, Maximus reported:

HIX Corp. [later known as Cover Oregon] did not perceive that 

requirements had been adequately defined and in early February of 

2012, it was announced that they were undertaking an effort to 

define the business requirements. This effort was originally 

defined as a 60 day effort, but it has taken longer than originally 

stated and full requirement definition is not expected to conclude 

until mid to late June. To date, a detailed schedule of this effort has 

not been made available to the MAXIMUS Team and it is our 

understanding that it is under development.

12. This failure to make (or stand by) essential decisions persisted for the duration of 

the project. At one point, then interim director of Cover Oregon, Dr. Bruce Goldberg, confided 

to Oracle personnel that getting Cover Oregon personnel to make decisions was “like pushing a 

rope.”

(a) Cover Oregon and state agency representatives involved in the project 

changed their minds frequently about the work they wanted performed and how they wanted it 

completed, and they did not follow appropriate channels within either their own decision-making 

organizations or the Oracle team to communicate desired changes. Oracle software developers 

found themselves asked to perform on-the-spot code changes to meet ad hoc requests from 

Cover Oregon employees (a phenomenon Cover Oregon’s Chief Technology Officer himself 

acknowledged was “short circuiting our processes”), and at least one Cover Oregon employee 

attempted to implement his own changes to otherwise final code. The consequences of these 

uncontrolled changes and shifting priorities were entirely predictable. Although Oracle 

attempted to persuade its customers to implement and enforce controls on its change processes, 

Cover Oregon did not heed Oracle’s advice, and instead scolded Oracle for overstepping its 

bounds with respect to project management. The following exchange between Oracle’s Chief 

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Corporate Architect, Edward Screven, and Cover Oregon’s Chief Technology Officer, Garrett 

Reynolds is illustrative of the problem:

From: Edward Screven [mailto: [address redacted]]

Sent: Thursday, January 16, 2014 5:15 PM

To: Reynolds Garrett

Cc: Goldberg, Bruce; Karjala Aaron

Subject: Urgent: Administrative Access to Siebel

Garrett,

Oracle employees on site in Durham report that in a meeting today 

you stated that you now have Siebel Administrator privilege, and 

you have used that privilege to directly make environment and 

application changes to the production environment. Is this 

correct? 

Following established change control procedures is essential. 

Making any change to production without following proper 

procedure puts the system at risk, both at the time of the change 

and later, during upgrades. If you have made such changes, please 

send a written description of each change, including when you 

made it. Also, please do not make any more changes.

From past email you have written, I gather you believe you 

understand Siebel so well that you can make changes on your own, 

without involving others or following process. But even trivial 

changes can result in confusion that leads to serious mistakes down 

the road, and even an expert can make mistakes. Recall that your 

proposed procedure to complete migration of data elements to data 

vault would have resulted [in] data loss.

 - Edward

...

On 1/16/2014 6:28 PM, Reynolds Garrett wrote:

I thought Cover Oregon paid for and owned the system....

Thanks

B. Garrett Reynolds

Chief Technology Officer

Cover Oregon | www.CoverOregon.com

[address redacted] | [redacted]

 

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13. Cover Oregon had ample and repeated warnings that the healthcare exchange 

might not be fully functional for consumers on October 1, 2013, the date the state and federal 

insurance exchanges were required to go live under the ACA. Maximus issued monthly reports 

throughout most of the project to Cover Oregon, and it warned about trouble with development 

of the insurance exchange from the start. For example, in March 2012, Maximus wrote:

Detailed and maintainable functional and technical requirements 

are critical to the success of the project. As of February 2012, gaps 

in requirements are unknown. There have been multiple attempts 

to clarify requirements, but as yet none have been adequate. In an 

attempt to address some of the past failed efforts, a new 

requirements process (called the ‘60-day’ Requirements Process) 

was introduced on 02/08/12 and will be ‘owned’ by HIX 

Corporation rather than HIX-IT. Clearly articulating ownership of 

this process is a step in the right direction. However, the 

involvement of other stakeholders, including OHA and DHS, are 

[sic] not yet clear. Nor is there a way as yet to determine if the 60 

day time frame is realistic.

A year later, the March 2013 Maximus report still flagged the lack of solid requirements as a 

risk:

With the project deadline less than 1 year away and the lack of a 

stable and experienced organization, development and delivery 

teams within OHA as well as the requirements delay within [Cover 

Oregon], the probability of missing the target date is currently an 

issue.

In May 2013, Cover Oregon’s then-executive director, Rocky King, admitted requirements were 

still not adequate and asked Oracle for help in finalizing the technical requirements: 

The on the ground Oracle team has informed Cover Oregon that 

we still need to tighten up requirements in some areas. When we 

looked into it, we found three areas where requirements still need 

to be fully developed. These include the back office customer 

service areas, some global user interface functions and security 

policies. When Cover Oregon looked into it further, we found that 

functional and technical design has not been fully updated since 

October of 2012. This poses issues with system integration testing, 

and also puts Cover Oregon at risk due to not having a fully 

documented system. Cover Oregon requests that Oracle helps to 

tighten up any remaining requirements as well as puts focus on 

completing technical documentation as soon as possible by 

bringing in additional resources. We do not want to divert the onthe-ground developers and analysts.

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This request was an extraordinary one: Cover Oregon was the owner of the project and therefore 

responsible for making decisions about what the exchange would and would not do. The parties’ 

contracts made it abundantly clear that Oracle had no role in establishing the functional 

requirements for the exchange, and Cover Oregon should have finalized them long before May 

2013. 

14. In late July 2013—just two months before the October 1, 2013 deadline—Oracle 

made a presentation to the Cover Oregon board in which it explained that Cover Oregon still had 

not completed its work on functional requirements for the exchange, and it noted that there was 

only limited time remaining for final functional and integration testing. Without finalized 

requirements and complete use cases, Oracle could perform only limited testing (with respect to 

the work and areas of the site that had been completed), but not end-to-end performance testing. 

The report to the Cover Oregon board stated that the project was at substantial risk. The 

Maximus report for July reiterated that warning, putting the overall risk level for the project at 

“high.” It explained in its executive summary:

Please note, that while progress was made during the month, the 

progress was not considered significant enough to lower the 

overall risk of the whole endeavor. In other words, progress in 

some areas since last month is offset by the fact that there is one 

less month until the federally mandated deadlines. Additionally, 

each rating category will carry a different relative weight when 

assessing the overall risk level of the effort. For example, while 10 

out of 16 Quality Rating Categories are medium (yellow) or low 

(green), critical categories including “Scope,” “Schedule,” and 

“Inter-Org Coordination” remain high (red), which drives the 

overall high (red) risk assessment.

15. Cover Oregon continued to ignore most of those warnings until virtually the eve 

of the deadline. Just two weeks before the deadline, an Oracle consultant advised Cover 

Oregon’s then Chief Information Officer, Aaron Karjala, that it was time to stop issuing change 

orders, that two more had just been “auto-approved” with demands for immediate 

implementation, and both were likely to create more problems than they solved. The message 

reported:

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As we all knew would happen, as 10/1 approaches, stakeholders 

are starting to throw everything into the wheelbarrow with hopes 

of getting it in. I’m also seeing [Cover Oregon] members coming 

down to the Training Room and interacting with the developers, 

speaking to these new requirements. We’ve had the CR [change 

request] process for some time and though it’s not without its 

flaws, it has been pretty functional in adding order to the 

requirements channel. I feel like when we need that order most we 

are abandoning it. When the business walks downstairs and taps 

developers to talk new requirements with them it is a distraction at 

best and at worst we lose momentum and focus on priority items.

Maximus confirmed the truth of Oracle’s complaint about Cover Oregon’s ineffective change 

control process. In its report issued two weeks before the October 1 deadline, Maximus reported 

that “[u]nauthorized changes are still making their way into the system.” 

16. On September 18, 2013—mere days before the October 1 deadline—Cover 

Oregon’s Executive Director still had not grasped the deep substantive challenges to going live 

that his organization had created in the development process. He repeatedly conveyed concern 

about the “sizzle not the steak” of the massive IT project, as evidenced by a lengthy email he 

wrote to an Oracle consultant in which he described his desire to make the website look good, 

and apparently assumed the ongoing functional challenges would resolve themselves:

Probably everyone will disagree with me[,] my staff, yours, 

consultants actually [sic] I know they would disagree with me – but step back and have a discussion with Aaron [Karjala]. Take a 

customer perspective rather than an IT perspective. Again, I do 

not want to detract from the priority 1’s that must be done to go 

live 10/1 but damn, if the road is going to be be [sic] bumpy, let 

me at least be driving a good looking car.

Emphasis in original.

17. Starting in late August 2013, Oracle added substantial additional resources to the 

project at Cover Oregon’s request in hopes of accelerating the pace of work, instilling in the 

Cover Oregon employees a greater sense of discipline about completing requirements and use 

cases, and stopping the constant change orders, both formal and informal. Over several months, 

Oracle committed, among others, its Chief Corporate Architect and members of his team, 

members of Oracle’s “A Team,” (a highly specialized technical team comprised of enterprise 

architects, solution specialists and software engineers), representatives of Oracle Laboratories, 

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members of the Testing and Release Management Teams, as well as additional subject matter 

experts in testing, release management, and the software products being deployed, to assist on 

the project. Cover Oregon’s incapacity for lasting decision-making or project discipline, 

however, continued to frustrate Oracle’s efforts at every turn. Nevertheless, Oracle continued to 

work at Cover Oregon’s request, trying to drive the project to a conclusion.

18. In the months leading up to October 1, and continuing thereafter, Oracle did its 

best to ensure that the most important pieces of the website—including eligibility determinations 

and actual enrollment into programs—worked for Oregonians during the open-enrollment 

period. At a high level, a fully functioning exchange had to include four principal functions: (a) 

a “citizen self-service” portal; (b) a portal through which Community Partners and Agents, as 

well as Customer Service Representatives, could gain access for customers; (c) eligibility 

determination and enrollment functions; and (d) “back-office” operations for billing. Of these, 

the most important were the second and third pieces that would enable insurance professionals to 

process applications for individual customers, assess their eligibility and get them enrolled in 

plans. This is where Oracle tried to focus its efforts, often in spite of Cover Oregon’s demands.

19. Despite the project’s technical and bureaucratic challenges, a website was 

produced that enabled Cover Oregon and the state’s agencies to enroll more than 430,000 

Oregonians in health insurance or Medicaid under the ACA, as Cover Oregon’s management 

reported in June 2014. While the consumer-facing, self-service portal did not open during the 

initial open-enrollment period, Community Partners and Agents, and Customer Service 

Representatives were able to use the site to enroll Oregonians. 

20. By February 2014, a health insurance exchange website existed that included the 

citizen self-service functionality. Cover Oregon did not disclose that information to the public 

and did not open the working self-service portal for individuals, for unexplained reasons of its 

own. Between February and mid-June, Oracle continued to work (at Cover Oregon’s request) on 

completing the back-office functionality and improving the other functionality that was already 

in place.

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THE SMEAR CAMPAIGN

21. Though the state and Cover Oregon succeeded in enrolling a very large number of 

Oregonians in health care coverage, the failure to deliver a working citizen self-service portal on 

October 1, 2013 was a political embarrassment for Governor Kitzhaber, who immediately looked 

for places to lay the blame. Among those who have lost their jobs at OHA or Cover Oregon over 

this project are Carolyn Lawson, OHA’s Chief Information Officer; Rocky King, Cover 

Oregon’s Executive Director; Bruce Goldberg, Cover Oregon’s Interim Executive Director; 

Aaron Karjala, Cover Oregon’s Chief Technology Officer; and Triz delaRosa, Cover Oregon’s 

Chief Operating Officer. Carolyn Lawson was the first to go, and after destroying her 

professional reputation, the Governor quickly turned his sights on Oracle, and he set out 

systematically to vilify the company in the media. 

22. Ms. Lawson refused to accept her scapegoating quietly, however. She issued a 

tort claim notice on March 17, 2014, in which she alleged that several individuals associated 

with Cover Oregon and OHA attempted to deflect responsibility for the problems with Cover 

Oregon “by organizing, encouraging, allowing, tolerating and/or engaging in a substantial coverup, the purpose of which was to protect selected individuals ... while unfairly and untruthfully 

pointing the finger at others.” In that same notice, she went on to explain that the conspiracy she 

observed “centered on a ‘core story’” that the exchange failed to launch properly for two 

reasons: first, that Ms. Lawson had mismanaged it; and second, that “Oracle, which had been 

hired to build most of the Exchange’s infrastructure, committed serious and fatal blunders in its 

work.” According to Ms. Lawson, when she declined to go along with the plan to blame Oracle, 

she was herself targeted. Her tort claim notice alleges that one OHA employee told her, 

“Somebody has to be held to blame for this—it’s going to be Rocky [King], or it’s going to be 

Oracle, or it’s going to be you. We want it to be Oracle, but it can be you if you want.” 

(Emphasis added).

23. While Oracle continued to work on the exchange at Cover Oregon’s request, 

Governor Kitzhaber embarked upon a months-long campaign to blame Oracle for OHA’s and 

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Cover Oregon’s mismanagement of the health insurance exchange project. In furtherance of that 

campaign, Governor Kitzhaber held several interviews and press conferences during which he 

blamed and criticized Oracle for the problems with the exchange. Critical to Governor 

Kitzhaber’s scapegoating was the threat of litigation against Oracle. During a January 9, 2014 

press conference, for example, Governor Kitzhaber announced that he hired First Data to 

conduct an “independent assessment” of the Cover Oregon project, asserting First Data’s report 

would determine, in part, whether Oregon would sue Oracle. Cover Oregon privately continued 

to request Oracle’s help. Oracle, believing that the best solution for Oregonians was to focus on 

completing the project, continued to work, quietly and without public retort, in spite of the 

constant public slander.

24. When First Data’s report came out, it attributed a large part of the problems to 

Cover Oregon’s mismanagement of the project including its failure to hire a system integrator. 

Governor Kitzhaber admitted “oversight was a problem at Cover Oregon...” He later admitted 

in his May 29, 2014 letter to Attorney General Rosenblum that OHA’s and Cover Oregon’s 

“decisions contributed to the failure to deliver a working website....” These admissions did not 

slow his campaign against Oracle; in a March 20, 2014 press conference, Governor Kitzhaber 

again blamed Oracle for the Oregon Health Exchange project’s shortcomings and repeated his 

threat to sue the company. His campaign culminated on May 29, 2014 when he made a surprise 

appearance before a committee of the Oregon Legislative Assembly excoriating Oracle for its 

work and demanding that the Attorney General file suit. Even as the Governor threatened to sue 

Oracle, Cover Oregon continued to ask for Oracle’s help and signed contract extensions, and 

Oracle continued to work. Indeed, as recently as July 25, 2014, Cover Oregon contractors asked 

Oracle to supply personnel as subcontractors to assist them on the project.

25. While Oregon continues to threaten Oracle with lawsuits aimed at demanding the 

return of funds paid to the company for its work, Oracle continues today to render managed 

cloud services to Cover Oregon. 

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26. The Oregon Department of Justice has not filed the Governor’s long-threatened 

lawsuit. The slander against Oracle thus remains hanging in the political air in Oregon.

THE CONTRACTS

27. The relationship between Oracle and Cover Oregon is defined by the contracts 

between them by which the parties defined their respective rights and responsibilities. Oracle 

has performed its obligations under those agreements, but Cover Oregon has not.

28. As of April 30, 2013, OHA ran out of money for the insurance exchange project. 

Because Cover Oregon had received substantial federal funding to run the exchange, OHA and 

Cover Oregon agreed to transfer the exchange project ahead of schedule and, on or about May 1, 

2013, Cover Oregon assumed ownership of the project and responsibility for managing the 

insurance exchange project and its many subcontractors from that point forward. 

29. In anticipation of transferring the health insurance exchange project to Cover 

Oregon, on or about March 14, 2013, Cover Oregon and Oracle entered into an Oracle License 

and Services Agreement (“OLSA”), a true and correct copy of which, including all amendments, 

is attached hereto as Exhibit A. Under the Cover Oregon OLSA, Cover Oregon would receive—

upon payment for services—a non-exclusive, non-assignable right to use the software Oracle 

developed and delivered to Cover Oregon under the OLSA:

Upon payment for services, you have the non-exclusive, nonassignable, royalty free, perpetual, limited right to use for your 

internal business operations anything developed by Oracle and 

delivered to you under this agreement; however, certain 

deliverables may be subject to additional license terms provided in 

the ordering document. 

(Emphasis added).1

 

 1 Oracle also signed an OLSA with OHA and DHS in November of 2011 that contained the same language requiring 

payment for services before OHA/DHS would have the right to use software that Oracle developed.

Case 3:14-cv-01279-BR Document 1 Filed 08/08/14 Page 16 of 21
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30. Cover Oregon and Oracle also entered into an Amendment to the OLSA, 

containing, among other terms, a “Source Code” provision stating that all source code Oracle 

delivered to Cover Oregon was subject to the terms of the OLSA and any application order and 

program documentation. Thus, it was always the parties’ intent, as memorialized in the OLSA, 

that Cover Oregon would not obtain a right to use any of the software until it paid for Oracle’s 

services. Oracle continued to retain all ownership and intellectual property rights to the 

programs and software it developed and delivered to Cover Oregon.

31. Cover Oregon also executed several “Ordering Documents” identifying the 

services Cover Oregon requested and the fees Cover Oregon had agreed to pay Oracle for those 

services. As in the OLSA, Cover Oregon agreed in each Ordering Document that—upon 

payment for services—Cover Oregon would receive a non-exclusive, royalty-free license to the 

software Oracle developed for Cover Oregon:

Upon payment for services, Cover Oregon shall have a royaltyfree, nonexclusive, and irrevocable license for Cover Oregon and 

the U.S. Federal Government to reproduce, publish, or otherwise 

use anything developed and delivered under this Ordering 

Document resulting from the services provided hereunder and to 

authorize others to do the same solely for the development and/or 

use of a government-operated health insurance exchange and 

eligibility automation system in accordance with the Affordable 

Health Care Act and applicable regulations of Federal purpose. 

You shall not have any other rights in or to anything developed and 

delivered to you hereunder. 

(Emphasis added). True and correct copies of the Ordering Documents for Oracle consulting 

services are attached hereto, collectively, as Exhibit B.

32. Each Ordering Document also referenced and included a “Time and Materials 

Exhibit” (“T&M Exhibit”), identifying the specific services Cover Oregon had requested. Under 

the T&M Exhibits, Cover Oregon agreed that: (a) Oracle would provide its services on a time 

and materials basis, (b) Cover Oregon would pay for all time spent performing such services, and 

(c) Oracle would “assist” Cover Oregon on the project and work at Cover Oregon’s sole 

direction. 

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33. It is not unusual for consultants such as Oracle to work on a time and materials 

basis. Indeed, many consultants, including Oracle, have done so on many projects, including 

projects for public sector customers. The reason Oracle worked on a time and materials basis—

and not for a fixed fee—is a simple one. While everyone involved understood the ultimate 

objectives of the projects—to create a fully-functional, web-accessible, self-service health 

insurance exchange, to modernize the state’s provision of its broader health and human services 

offerings, and to integrate the multiple systems involved—Cover Oregon and the state agencies 

had no real plan for how, exactly, those projects would operate or how they would work 

together. Without a fixed scope for the project—the equivalent of architectural blueprints—no 

contractor could reasonably be expected to agree to work on a fixed-fee basis. Because only 

DHS, OHA and, ultimately, Cover Oregon, could resolve the uncertainties regarding the overall 

scope and structure of the massive project, and because only Cover Oregon and the state 

agencies could demand changes in the project, those entities properly bore the inherent risks 

associated with failing to resolve them in a timely way.

34. In about November 2013, Cover Oregon stopped paying its invoices and refused 

to sign Ordering Documents for the services it had requested and was continuing to request from 

Oracle, forcing Oracle to either risk working without payment or abandon the project. By the 

end of February 2014, Cover Oregon had executed Ordering Documents for Oracle consulting 

services rendered through August 2013, but not for services rendered between then and the end 

of February 2014. In that period, at Cover Oregon’s request, Oracle continued to render 

consulting services to Cover Oregon, and it committed substantial additional resources to the 

project outside of its consulting organization, in the form of, among others, its Chief Corporate 

Architect and members of his team, members of Oracle’s A Team, representatives of Oracle 

Laboratories, as well as additional subject matter experts in testing, release management, and the 

products at issue. Oracle repeatedly asked Cover Oregon to pay its outstanding invoices and 

execute Ordering Documents for the work it was requesting so that Oracle could render invoices, 

and Cover Oregon promised on multiple occasions that it would do so. Governor Kitzhaber 

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personally made multiple promises to Oracle that the company would be paid for its work. On 

the strength of those promises, and in furtherance of its desire to see the project completed, 

Oracle kept its consultants working on the project through February 2014.

35. In February 2014, however, Oracle advised Cover Oregon and Governor 

Kitzhaber that it would not continue to work indefinitely without Ordering Documents and 

payment. By then, it had dedicated consulting services and other resources to the project worth 

at least an additional $68 million in reliance upon promises that Cover Oregon had yet to fulfill. 

36. Though Cover Oregon eventually paid the outstanding invoices and for a portion 

of the services provided from November 2013 through February 2014, Cover Oregon refused to 

execute Ordering Documents covering all the services provided or to compensate Oracle for the 

full value of the services rendered during that period. 

37. Oracle is informed and believes that Cover Oregon is using work product that 

Oracle’s personnel produced and for which Cover Oregon has not paid, in violation of the terms 

of the OLSA. Oracle is further informed and believes that Cover Oregon may have transferred 

Oracle’s intellectual property to other parties, including OHA and/or DHS, also in violation of 

the terms of the OLSA and related agreements.

FIRST CLAIM FOR RELIEF

(Breach of Contract)

38. Oracle hereby restates and realleges the allegations set forth in paragraphs 1 

through 37 above and incorporates them by reference.

39. Cover Oregon entered into written contracts with Oracle to pay for consulting 

services rendered on a time and materials basis, and it further agreed that it would not be entitled 

to use Oracle’s work product without first paying for it. Cover Oregon further agreed that it 

could not transfer Oracle’s work product without Oracle’s consent. 

40. Oracle performed services for Cover Oregon in accordance with the terms of its 

written agreements with that entity. 

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41. Oracle has demanded payment for all of the services rendered to Cover Oregon, 

and by the filing of this Complaint hereby demands payment of the unpaid sums. Cover Oregon 

has failed and refused, and it continues to fail and to refuse to pay for all of those services.

42. Oracle is informed and believes and thereon alleges that Cover Oregon has 

continued to use Oracle’s work product, and that it has transferred some or all of that work 

product to others, all in violation of the parties’ written agreements.

43. As of the filing of this Complaint, Oracle is informed and believes that Cover 

Oregon continues to use the Oracle software for which it has not paid in full, and it may have 

transferred that work product in violation of the terms of the parties’ agreements. Accordingly, 

as a direct and proximate result of Cover Oregon’s breaches of contract as alleged herein, Oracle 

has sustained damages in an amount to be proved at trial.

SECOND CLAIM FOR RELIEF

(Quantum Meruit)

44. Oracle hereby restates and realleges the allegations set forth in paragraphs 1 

through 43 above and incorporates them by reference.

45. Cover Oregon requested services from Oracle related to the HIX Project, 

including but not limited to the development of software for the health insurance exchange 

application process and eligibility automation. Cover Oregon agreed to pay Oracle for those 

services. 

46. Oracle provided the services Cover Oregon requested and in reliance upon Cover

Oregon’s promises to compensate Oracle for that work. The reasonable value of those services, 

including not only Oracle’s consultants, but also the other personnel it committed to the project, 

is at least $23 million. Accordingly, Oracle is entitled to the reasonable value of the services 

Oracle performed for Cover Oregon for which Cover Oregon has not yet paid.

PRAYER FOR RELIEF

WHEREFORE, Oracle prays for judgment against Cover Oregon as follows:

A. entry of judgment in favor or Oracle against Cover Oregon on all claims for relief;

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B. an order of restitution in the amount equal to the reasonable value of the services 

Oracle provided Cover Oregon at Cover Oregon’s request, and for which Oracle has not been 

paid;

C. an order enjoining Cover Oregon, its officers, agents, servants, employees, 

attorneys, and affiliated companies, its assigns and successors in interest, and those persons in 

active concert or participation with it, from continued acts in breach of the parties’ written 

contracts;

D. an order awarding Oracle damages it has sustained as a result of Cover Oregon’s 

breaches in an amount according to proof;

E. prejudgment interest at the statutory rate from the time payments came due; and

F. any and all other legal and equitable relief as may be available under law the 

Court may deem proper. 

DEMAND FOR A JURY TRIAL

Oracle demands a jury trial for all issues so triable.

Dated: August 8, 2014

 Respectfully submitted,

By:

Brenna K. Legaard, OSB #001658 

Email: blegaard@schwabe.com

Jeffrey S. Eden, OSB #851903

Email: jeden@schwabe.com 

SCHWABE, WILLIAMSON & WYATT, P.C.

1211 SW 5th Avenue, Suite 1900 

Portland, OR 97204 

Telephone: 503-222-9981 

Facsimile: 503-796-2900

Attorneys for Plaintiff

Oracle America, Inc.

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