In re Oracle Securities Litigation

In a major victory for Analysis Group client Oracle Corporation, the Ninth Circuit Court of Appeals affirmed the district court's 2009 order granting summary judgment in favor of Oracle. In rendering his opinion, Judge Richard C. Tallman stated that the plaintiffs had a "dearth of admissible evidence to show fraud" and were unable to "establish loss causation. Their Section 10(b) claim alleging misrepresentations of Suite 11i's quality and success fails as a result."

Oracle originally was sued in the US District Court for Northern California by shareholders claiming that the company and some of its officers issued misleading forecasts about the company's financial condition and, in particular, that Oracle's earnings forecast in December 2000 ignored deteriorating economic and business conditions, as well as alleged quality issues with its new product, Application Suite 11i.

Analysis Group Managing Principal Bruce Deal, Vice President Peter Hess, and Senior Advisor James Rosberg supported our affiliates, Columbia Graduate School of Business Dean R. Glenn Hubbard and Stanford University Professor George Foster, in their analyses of Oracle's forecasting process and the business environment in late 2000 and early 2001.

Dr. Hubbard authored an expert report analyzing the extent to which the oncoming recession and its impact on Oracle's business could have been foreseen. Analyzing macroeconomic and sector data, he showed that the recession's impact on Oracle was not evident as late as February 2001 and that the company's forecasting process incorporated information about the economy's effect on Oracle's business. Dr. Hubbard also authored a rebuttal report responding to the plaintiffs' forecasting expert.

Professor Foster, an expert in forecasting, accounting, and management systems, including extensive experience with software and technology companies, assessed the performance and reliability of Oracle's forecasting process. In his rebuttal report responding to the plaintiffs' forecasting expert, Professor Foster found that Oracle's forecasting process incorporated relevant market information, had historically performed accurately, and was followed during the period in question.

In June 2009, Oracle was granted summary judgment by the district court, due to the plaintiffs' failure to show loss causation between the allegations made in the complaint and losses suffered by shareholders. The judge concluded that the plaintiffs failed to show that Oracle's forecasting process ignored or did not account for "major economic change," and that there was no evidence that the process became unreliable during an economic slowdown. The judge also ruled in favor of Oracle's Daubert motion to strike the opinion of the plaintiffs' forecasting/economic expert that Oracle's forecasting process was unreliable.

In affirming the district court decision, Judge Tallman wrote, "The overwhelming evidence produced during discovery indicates the market understood Oracle's earnings miss to be a result of several deals lost in the final weeks of the quarter due to customer concern over the declining economy."