State readies for Oracle lawsuit

• If one is filed, it’s likely to be a costly one

By Jonathan J. Cooper / The Associated Press


Published Jun 17, 2014 at 12:01AM / Updated Jun 17, 2014 at 01:20AM

SALEM — Oregon has taken new steps toward a potential lawsuit against the developers of its failed health insurance website by hiring a phalanx of lawyers and issuing demands for evidence and other material that could be used in a civil case against technology giant Oracle Corp.

Legal demands for potential evidence were issued Monday, officials in the governor’s office and the state Department of Justice told The Associated Press. But they declined to say how many of the so-called civil investigative demands were issued or whom they target. They are the first such demands issued in preparation for potential litigation against Oracle, said Kristina Edmunson, a department spokeswoman.

In addition, documents obtained by the AP show the state last month more than quadrupled its contract with a law firm handling the case, raising it from $550,000 to more than $2.5 million.

Gov. John Kitzhaber blames Oracle for bungling the software for Cover Oregon, the state-run site that was supposed to allow residents to sign up for insurance under the federal health law.

The state paid Oracle, the second-largest software corporation in the world, $134 million in federal funds to build the online enrollment system. The website never fully launched, requiring staff to process part of each application by hand in a slow and costly maneuver. Altogether, about $250 million in federal funds has been spent on Oregon’s exchange, including technology development, salaries, advertising and rent.

An Oracle spokeswoman declined to comment. In past public statements, the company has defended its work, saying the state did not deliver requirements in a timely manner and failed to staff the project with skilled personnel. The company has said Kitzhaber “wants to shift blame from where it belongs.”

The state decided to ditch the Oracle-built website and use the federally run exchange.

The civil investigative demands issued Monday are similar to subpoenas and are used by the government to seek information that could be used in a lawsuit. They can help lawyers decide whether to sue over unlawful business practices or false claims.

It’s unknown how much a lawsuit would cost, but Nkenge Harmon Johnson, a Kitzhaber spokeswoman, said the state may be able to recover legal fees if it wins.

Portland law firm Markowitz Herbold Glade & Mehlhaf PC has been paid $352,000 so far to prepare for a potential lawsuit and their contract now allows them to bill the state up to $2.5 million.

In addition, the state has racked up legal bills to defend itself in multiple investigations over Cover Oregon’s failures, according to documents obtained by the AP.