Oracle faces continued legal battle over alleged NetSuite software misrepresentations

Judge allows fraud case to continue after customer resubmits complaint

A judge has allowed a fraud case against Oracle to continue after a customer resubmitted allegations that it was misled about the tasks Big Red's NetSuite software could perform.

In November last year, Oracle won a reprieve in its defense of a lawsuit alleging the company conducted a "widespread fraudulent scheme and unfair business practice" in sales of NetSuite software, with all claims dismissed against Big Red except for the plaintiff's allegation that Oracle breached its contract with the user by failing to deliver workable software on time.

However, River Supply Inc. (RSI), a Pennsylvania-based architectural construction material supplier, was told it could amend its claim, which originally alleged that Oracle committed fraud in the way it sold the software. Oracle has denied the allegations and continues to fight the case.

The February 16 ruling [PDF] from Laurel Beeler, United States Magistrate Judge in the District Court, Northern District of California, dismissed RSI's claims of a breach of the implied covenant of good faith and fair dealing as well as its California's unlawful-competition law (UCL) claim. However, the court denied Oracle's motion to dismiss the fraud claim.

Oracle will get a couple more chances to dismiss the claim, though. The judge allowed Oracle to submit a supplemental briefing, RSI to submit its opposition to that briefing, and Oracle another reply by March 7, after which the judge will hold a conference to determine whether and how the case will go to court.

In its second amended complaint filing from December last year, RSI alleged [PDF]: "Oracle lures their customers into signing complex and confusing agreements, with terms thrust on the customer at the last moment without adequate time to review, and with key parts of the agreements hidden in hyperlinks."

RSI says it entered negotiations to become an Oracle customer from the fall of 2020, when it first spoke with the software vendor's salespeople.

Among the allegations is the claim that Oracle said it could provide software to support RSI's complex catalog, which includes more than 10,000 stock keeping units (SKUs in retail industry speak).

The customer had explained that as a hardware store it "was important that any solution contain automatic updating capabilities for purchase orders or when RSI's suppliers … updated their catalogs or other information, images or data," the amended complaint said.

Oracle assured the customer it could "provide the required functionality and had the solution to combine all companies financially and help make process improvements to River Supply's then current system processes, without losing any functionality," the claim said.

Big Red assured RSI it could replace the current solution, based on Quickbooks Desktop Enterprise, Sage 100, and ECI Spruce "with only minor customizations."

However, the plaintiff alleges that as well as suffering delays to the project, Oracle failed to deliver the required functionality. Instead the global technology giant began claiming the promised features were out of scope and "demanding expensive change orders" to meet the requirements, including the catalog features RSI believed it had already been promised as part of the contract.

RSI alleges it lost $170,000 in implementation and subscription fees, as well as $700,000 in additional resources it dedicated to the failed project. RSI said it also suffered additional damages in the form of lost revenue owing to problems with its performance in e-commerce and lost efficiencies as a result. ®

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