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'Ego' drives Oracle, law firm fracas over $1,500
- — 03 September, 2011 05:36
Oracle and a large New York law firm are in a legal dispute over $US1,500 that has likely already rung up many times that amount in costs, according to recent court documents in Oracle's lawsuit against third-party software support provider Rimini Street.
Along with a few other companies, Rimini Street caters to customers with stable ERP (enterprise-resource-planning) systems, like those sold by Oracle. Rimini Street claims its services, which may enable customers to forgo upgrades on their ERP implementations, can save customers at least 50 percent off their current support bills.
Oracle sued Rimini Street last year, claiming it has an illegal business model that repeats one used by former SAP subsidiary TomorrowNow. Oracle won a US$1.3 billion judgment in a related lawsuit, but the award was overturned this week by a judge. Rimini Street has denied any wrongdoing in the case, which has seen scores of the company's customers subpoenaed.
Now Rimini Street customer Pillsbury Winthrop Shaw Pittman is refusing to turn over documents sought by a subpoena unless Oracle agrees to pay the $1,500 in compensation for time its staff spent collecting them, according to documents Oracle filed Aug. 26 in U.S. District Court for the Southern District of New York.
Oracle served a subpoena on the law firm in February and since then held meetings for five months in an attempt to resolve "what should have been a straightforward issue," the filing states.
Non-parties to lawsuits are protected from subpoena-related costs only when they are "undue" or "significant," neither of which applies here, Oracle's filing argues.
During initial contacts with Pillsbury, Oracle did agree to pay "reasonable" costs, the filing states. But the Pillsbury employees' time does not qualify since they would have been paid their salaries whether or not Oracle had served the company with a subpoena, and therefore it does not constitute an "out-of-pocket" expense, it adds.
Pillsbury told Oracle that its workers spent about six hours preparing the documents, but has not explained how that resulted in a $1,500 total, it wrote. "So Oracle does not know if Pillsbury is charging its normal billing rate for these employees -- in which case Pillsbury is attempting to earn a profit from responding to the subpoena -- or whether the figure represents an allocation of annual salary attributable to this document review, or if some other methodology was used."
The $1,500 should be no issue for Pillsbury to shoulder on its own, given that it grossed more than $500 million last year, and because of the litigation's "public importance," Oracle argued.
It also indicated how important the suit is to Oracle. "Oracle has invested countless hours and billions of dollars in the research and development of its software and support materials," the filing states. "It employs thousands of people across the world, and its financial stability depends in large part on customer support revenues."
In a response filed Friday, Pillsbury disagreed with Oracle's interpretation of the law, arguing that the employees' time qualified as a reimbursable expense.
Pillsbury initially estimated the work would cost $3,000, a figure Oracle did not object to at first, the filing claims. Later, Pillsbury revised its estimate to $1,500 but Oracle balked at paying on grounds that it "did not know to what [Pillsbury] was attributing the cost," according to the filing.
"Oracle and its counsel should not be permitted to hoodwink non-parties into responding to subpoenas by promising reimbursement and then reneging on the payment," it adds.
Oracle's argument also "overlooks the fact that the $1,500 requested represents only a portion of the costs incurred by Pillsbury," the filing states. "Indeed, over 40 hours of attorney time have already been spent responding to and addressing issues raised by Oracle's subpoena. Pillsbury, however, does not seek reimbursement for attorney time, only staff time. Thus, by seeking only $1,500, Pillsbury is shouldering most of the cost of compliance with the Subpoena."
Legal experts expressed mixed opinions of the dispute, with one saying Oracle should have met Pillsbury's request long ago.
Oracle's costs related to filing the action will "absolutely swamp the $1,500" and likely already have, said Frederick Rushton, an attorney in Massachusetts.
"These lawsuits are ego lawsuits, not based on principle. It's the stupidest thing. Pay the $1,500 and get it over with. The larger suit is so much more important. To take yourself off track with something like this, there's only one explanation: It's ego."
Oracle's initial court filings alone probably cost many thousands of dollars in billable hours, he added.
Firms representing Oracle in the Rimini Street case include Boies, Schiller and Flexner, which is headed by David Boies, who is known for his role prosecuting the U.S. government's antitrust case against Microsoft.
But another expert suggested Oracle was wise to pursue this legal avenue, despite the cost, and is standing on fairly solid legal ground.
"Often the party being subpoenaed for discovery often foots the bill as long as the judge agrees that the request is reasonable," said Noah Schaffer, a writer for the industry publication Lawyers Weekly. "It'd be another matter if they made some time-wasting demand for millions of documents that would take hundreds of employees months to produce."
"I think [Oracle is] right in not wanting to set a precedent in this case or others," Schaffer added. "What happens if the next round of discovery would cost $50,000? Or $500,000?"
Rimini Street and Oracle declined comment.
A hearing on Oracle's motion is scheduled for Tuesday.
Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com