Judge agrees damages model in Oracle cloud class-action

Link between compliance and sales appeared to boost cloud performance in case disputed by Big Red


A US class-action case claiming Oracle falsely inflated its cloud revenue by threatening customers with audits is set to continue after a federal judge approved the damages model proposed by the plaintiffs.

United States District Judge Beth Labson Freeman has certified an "out of pocket" approach to determining damages incurred by investors as a result of Oracle's alleged false statements about its cloud revenue. Oracle has consistently insisted the case – which dates back to 2018 – has no merit.

Oracle had argued that the City of Sunrise Firefighters' Pension Fund, which is bringing the case, had failed to meet the requirements to disclose its damages model.

Expert witness David Tabak has now produced a class-wide "out of pocket" damages model tied to omission-based price inflation that sets out the principle for calculating damages.

The judge ruled [PDF] the approach met all requirements for class certification and granted the case to continue.

Last year Oracle failed to block the case, but succeeded in reducing its scope. The judge said the plaintiffs had succeeded in arguing a narrow omission theory of securities fraud, based on Oracle's prior statements explaining why its cloud growth was slowing down.

The plaintiffs seek to represent a group of investors who bought shares in Oracle between 15 March 2017 and 19 June 2018. The lawsuit claims Oracle misled its investors about the sales of its cloud products by threatening customers with expensive software licensing audits unless they agreed to use Oracle's cloud software. The suit also alleges that Oracle offered customers large discounts for on-premises products if they accepted short-term cloud contracts they didn't want and were unlikely to use.

Oracle has contested this point, saying that sales from the deals were real and accurately represented.

A confidential witnesses statement produced last year by the pension fund's legal team [PDF] alleged at least 80 percent of Middle East and Africa cloud revenue was generated by "inserting cloud into compliance-based deals." It was "crystal clear these [sales] are fake" because "none of these deals are renewed," one of the witnesses was quoted as saying.

According to the statement, he and other members of Oracle sales teams discussed their "audit-driven cloud deals." Meanwhile, prepared sales strategy slides "would very clearly say" that Oracle's License Management Services division was engaged in "compliance deals."

He said "executives were instructed to offer customers a 90 percent discount on on-premises licenses if they purchased $300,000 worth of cloud subscriptions" and "assure the customer that they did not need to use the product, and that the purchase of cloud products was merely a necessary condition to unlocking the on-premises discount."

Judge Freeman previously noted in a 2021 order that "Oracle does not have an independent duty to disclose its sales tactics." ®

Broader topics


Other stories you might like

  • Lonestar plans to put datacenters in the Moon's lava tubes
    How? Founder tells The Register 'Robots… lots of robots'

    Imagine a future where racks of computer servers hum quietly in darkness below the surface of the Moon.

    Here is where some of the most important data is stored, to be left untouched for as long as can be. The idea sounds like something from science-fiction, but one startup that recently emerged from stealth is trying to turn it into a reality. Lonestar Data Holdings has a unique mission unlike any other cloud provider: to build datacenters on the Moon backing up the world's data.

    "It's inconceivable to me that we are keeping our most precious assets, our knowledge and our data, on Earth, where we're setting off bombs and burning things," Christopher Stott, founder and CEO of Lonestar, told The Register. "We need to put our assets in place off our planet, where we can keep it safe."

    Continue reading
  • Conti: Russian-backed rulers of Costa Rican hacktocracy?
    Also, Chinese IT admin jailed for deleting database, and the NSA promises no more backdoors

    In brief The notorious Russian-aligned Conti ransomware gang has upped the ante in its attack against Costa Rica, threatening to overthrow the government if it doesn't pay a $20 million ransom. 

    Costa Rican president Rodrigo Chaves said that the country is effectively at war with the gang, who in April infiltrated the government's computer systems, gaining a foothold in 27 agencies at various government levels. The US State Department has offered a $15 million reward leading to the capture of Conti's leaders, who it said have made more than $150 million from 1,000+ victims.

    Conti claimed this week that it has insiders in the Costa Rican government, the AP reported, warning that "We are determined to overthrow the government by means of a cyber attack, we have already shown you all the strength and power, you have introduced an emergency." 

    Continue reading
  • China-linked Twisted Panda caught spying on Russian defense R&D
    Because Beijing isn't above covert ops to accomplish its five-year goals

    Chinese cyberspies targeted two Russian defense institutes and possibly another research facility in Belarus, according to Check Point Research.

    The new campaign, dubbed Twisted Panda, is part of a larger, state-sponsored espionage operation that has been ongoing for several months, if not nearly a year, according to the security shop.

    In a technical analysis, the researchers detail the various malicious stages and payloads of the campaign that used sanctions-related phishing emails to attack Russian entities, which are part of the state-owned defense conglomerate Rostec Corporation.

    Continue reading
  • FTC signals crackdown on ed-tech harvesting kid's data
    Trade watchdog, and President, reminds that COPPA can ban ya

    The US Federal Trade Commission on Thursday said it intends to take action against educational technology companies that unlawfully collect data from children using online educational services.

    In a policy statement, the agency said, "Children should not have to needlessly hand over their data and forfeit their privacy in order to do their schoolwork or participate in remote learning, especially given the wide and increasing adoption of ed tech tools."

    The agency says it will scrutinize educational service providers to ensure that they are meeting their legal obligations under COPPA, the Children's Online Privacy Protection Act.

    Continue reading
  • Mysterious firm seeks to buy majority stake in Arm China
    Chinese joint venture's ousted CEO tries to hang on - who will get control?

    The saga surrounding Arm's joint venture in China just took another intriguing turn: a mysterious firm named Lotcap Group claims it has signed a letter of intent to buy a 51 percent stake in Arm China from existing investors in the country.

    In a Chinese-language press release posted Wednesday, Lotcap said it has formed a subsidiary, Lotcap Fund, to buy a majority stake in the joint venture. However, reporting by one newspaper suggested that the investment firm still needs the approval of one significant investor to gain 51 percent control of Arm China.

    The development comes a couple of weeks after Arm China said that its former CEO, Allen Wu, was refusing once again to step down from his position, despite the company's board voting in late April to replace Wu with two co-chief executives. SoftBank Group, which owns 49 percent of the Chinese venture, has been trying to unentangle Arm China from Wu as the Japanese tech investment giant plans for an initial public offering of the British parent company.

    Continue reading
  • SmartNICs power the cloud, are enterprise datacenters next?
    High pricing, lack of software make smartNICs a tough sell, despite offload potential

    SmartNICs have the potential to accelerate enterprise workloads, but don't expect to see them bring hyperscale-class efficiency to most datacenters anytime soon, ZK Research's Zeus Kerravala told The Register.

    SmartNICs are widely deployed in cloud and hyperscale datacenters as a means to offload input/output (I/O) intensive network, security, and storage operations from the CPU, freeing it up to run revenue generating tenant workloads. Some more advanced chips even offload the hypervisor to further separate the infrastructure management layer from the rest of the server.

    Despite relative success in the cloud and a flurry of innovation from the still-limited vendor SmartNIC ecosystem, including Mellanox (Nvidia), Intel, Marvell, and Xilinx (AMD), Kerravala argues that the use cases for enterprise datacenters are unlikely to resemble those of the major hyperscalers, at least in the near term.

    Continue reading

Biting the hand that feeds IT © 1998–2022