IN THE SUPREME COURT OF THE STATE OF...
Transcript of IN THE SUPREME COURT OF THE STATE OF...
IN THE SUPREME COURT OF THE STATE OF OREGON
ELLEN ROSENBLUM, the AttorneyGeneral for the State of Oregon; STATE OPOREGON, by and through Ellen Rosenblum,the Attorney General for the State of Oregon,the Oregon Health Authority, and the OregonDepartment of Human Services; and theOREGON HEALTH INSURANCEEXCHANCJE CORPORATION, dba CoverOregon, an Oregon public corporation,
Plaintiffs-Adverse Parties
STEPHEN BARTOLO, an individual;THOMAS BUDNAR, an individual; KEVINCURRY, an individual; SAFRA CATZ, anindividual; and BRIAN KIM, an individual,
Defendants-Relators,
and
ORACLE AMERICA, INC., a Delawarecorporation; RAVI PURI, an individual; andMYTHICS, INC., a Virginia corporation,
Defendants.
Marion County Circuit CourtNo. 14C20043
SC No. S
MANDAMUS PROCEEDING
MEMORANDUM IN SUPPORT OFPETITION FOR ALTERNATIVE WRIT OF MANDAMUS
Thomas W. Sondag, OSB No. 844201 David B. Markowitz, OSB No. 742046
Milo Petranovich, OSB No. 813376 Lisa A. Kaner, OSB No. 881373
Pilar C. French, OSB No. 962880 Dallas DeLuca, OSB No. 072992
601 SW Second Avenue, Suite 2100Portland, OR 97204-3158Telephone: [email protected]@[email protected]
Attorneys for Defendants-RelatorsStephen Bartolo, Thomas Budnar,Kevin Curry, Safra Catz, and BrianKim
Harry B. Wilson, OSB No. 077214Markowitz Herbold PC3000 Pacwest Center1211 SW Fifth AvenuePortland, OR 97204-3730Telephone: 5 03.29 5.3 0 8 [email protected]@markowitzherbold.comdallasdeluca@[email protected]
Special Assistant Attorneys General forPlaintiffs-Adverse Parties
TABLE OF CONTENTS
Page
INTRODUCTION................................................................................................ 1
STATEMENT OF THE FACTS .......................................................................... 5
ARGUMENT ....................................................................................................... 9
I. The Trial Court's Assertion Of Personal Jurisdiction Over
Relators Is Improper And Warrants This Court's Immediate
Review............................................................................................. 9
A. Under the fiduciary shield doctrine, Relators' limited
contacts with Oregon in their capacity as Oracle
employees do not satisfy Robinson's quid pro quo
requirement.......................................................................... 13
B. Relators' contacts with Oregon were not the but-for
cause of the State's alleged injury ....................................... 20
II. The Trial Court's Holding That The Complaint States
OFCA Claims Against Relators Is Wrong And Warrants
This Court's Immediate Review .................................................... 26
A. This Court may properly address the State's failure to
state a claim on mandamus .................................................. 26
B. The complaint fails to allege that Catz, Bartolo,
Budnar, or Kim made false statements "in the course
of presenting" a claim in violation of
ORS 180.755(1)(b) ..............................................................27
1. The trial court incorrectly interpreted the phrase
«in the course of." ..................................................... 28
2. The trial court ignored the textual requirement
that the same person who "makes a false
statement" must also "present the claim." ................ 33
C. The complaint does not allege that Curry "presented a
false claim" in violation of ORS 180.755(1)(a) .................. 37
CONCLUSION .................................................................................................. 39
ii
TABLE OF AUTHORITIES
Pages)
Cases
ADD Ram Tech. Servs., Inc. v. Ko~esko,240 Or App 620, 247 Pad 1251 (2011) ......................................................... 14
Alfieri v. Solomon,263 Or App 492, 329 Pad 26 (2014) ....................................................... 28, 30
Armstrong World Indus., Inc. v. Allibe~t,No CIV A 97-3914, 1998 WL 966017 (ED Pa Nov 19, 1998) .................... 16
Calder v. Jones,465 US 783 (1984) ........................................................................................ 16
Ce~ciello v. Canale,S63 F App'x 924 (3d Cir 2014) .................................................................... 17
State ex gel. Circus Circus Reno, Inc. v. Pope,
317 Or 151, 854 P2d 461 (1993) ............................................................... 9, 10
Clemons v. WPRJ, LLC,928 F Supp 2d 885 (SD Tex 2013) ............................................................... 17
Davis v. Metro Pods., Inc.,885 F2d 515 (9th Cir 1989) ........................................................................... 18
D~eye~ v. Portland Gen. Elec. Co.,341 Or 262, 142 Pad 1010 (2006) ...................................................... 9, 26, 27
Dudnikov v. Chalk &Vermilion Fine Arts, Inc.,
514 Fad 1063 (10th Cir 2008) ....................................................................... 13
EQ Solutions, LLC v. Funk,No CIV 04-6070-TC, 2004 WL 816850
(D Or Apr 14, 2004) .......................................................................... 13, 17, 19
F~^ase~ v. Smith,594 Fad 842 (1 lth Cir 2010) ......................................................................... 24
Gillis v. GreatAtl. & Pac. Tea Co.,27 SE2d 283 (NC 1943) ................................................................................ 35
111
Goober v. Mako Prods., Inc.,6$6 Fad 1335 (Fed Cir 2012) ........................................................................ 17
Hannon v. Beard,524 F3 d 275 (1st Cir 2008) ........................................................................... 24
State ex rel. Hydraulic Se~vocont~^ols Copp. v. Dale,
294 Or 381, 657 P2d 211 (1982) ................................................................... 11
LaDue v. City of Talent,
No. 1:14-CV-01421-CL, 2015 WL 1636655 (D Or Apr 10,
2015) .............................................................................................................. 19
La Vallee v. Pa~~ot-Ice Drink Pods. ofAm., Inc.,
193 F Supp 2d 296 (D Mass 2002) ............................................................... 17
Lowe v. Philip Mo~~is USA, Inc.,
344 Or 403, 183 Pad 1$1 (2008) ................................................................... 36
United States ex gel. Marcus v. Hess,
317 US 537 (1943) ........................................................................................ 38
Maine Midland Bank, N.A. v. Mille^,
664 F2d 899 (2d Cir 1981) ............................................................................ 15
Menken v. Emm,503 Fad 1050 (9th Cir 2007) ......................................................................... 24
Norpac Foods, Inc. v. Gilmore,
318 Or 363, 867 P2d 1373 (1994) ................................................................ 29
O'Connor^ v. Sandy Lane Hotel Co.,
496 Fad 312 (3d Cir 2007) ...................................................................... 21, 24
Ott v. Mortg. Investors Copp. ,No.3:14-CV-00645-ST, 2015 WL 1648702 (D Or Apr 14,
2015) .............................................................................................................. 19
Pac. Co~netta, Inc. v. Jung,
218 FRD 250 (D Or 2003) ................................................................ 13, 17, 19
Ramex, Inc. v. Nw. Basic Indus.,
176 Or App 75, 29 Pad 1211 (2001) ............................................................. 3S
Robinson v. Ha~^ley-Davidson Motor Co.,
354 Or 572, 316 Pad 287 (2013) .................................2, 12, 13, 16, 20, 24, 27
1V
Schwa~zenegge~ v. Feed Ma~^tin Motor Co.,374 Fad 797 (9th Cir 2004) ........................................................................... 13
United States ex gel. Schwedt v. Planning Res. Corp.,
59 Fad 196 (DC Cir 1995) ............................................................................ 29
Simkins Copp. v. Gourmet Res. Intl,601 F Supp 1336 (ED Pa 1985) .................................................................... 17
State v. Jackson,40 Or App 759, 596 P 2d 600 (1979) ............................................................ 29
Tompkins v. Exec. Comm. of the S. Baptist Convention,
No CIV 13-0840, 2015 WL 1569034 (DNM 2015) ..................................... 17
United States v. Mackby,261 F3 d 821 (9th Cir 2001) ........................................................................... 3 7
United States v. Toyobo Co.,811 F Supp 2d 37 (DDC 2011) ..................................................................... 38
Whalen v. Connelly,545 NW2d 284 (Iowa 1996) ......................................................................... 17
Willemsen v. Invaca~e Corp,,352 Or 191, 282 Pad 867 (2012) ................................................................... 10
World-Wide Volkswagen Copp. v. Woodson,444 US 286 (1980) ........................................................................................ 14
Statutes
2015 Oregon Laws Ch. 3 (S.B. 1) ........................................................................ 6
31 USC 3729(a) (1988) ...................................................................................... 29
ORS 180.750(1) ............................................................................................27, 38
ORS 180.750(2) ..................................................................................................37
ORS 180.750(2)(c) ............................................................................................. 31
ORS 180.755(1)(a) .............................................................................................37
ORS 180.755(1)(b) .................................................................................27, 31, 33
ORS 180.760(4) ..................................................................................................24
u
ORS 180.760(5) ............................................................................................ 19, 32
INTRODUCTION
Relators seek this Court's immediate review of significant questions
about the State's authority to turn a contract dispute with a global software
company into an opportunity to extract over half a billion dollars from five aut-
of-state employees personally. The claims against these employees—Relators
before this Court—are based on nothing more than a comment or two by each,
or the mere failure to speak. Even more remarkably, the State's allegations
make clear that its alleged injuries would have occurred even without any of
Relators' statements.
The trial court was wrong to conclude that it may exercise personal
jurisdiction over Relators under these circumstances, and wrong to interpret the
Oregon False Claims Act (OFCA) to allow the claims to proceed. If nat
immediately corrected, these errors threaten not only to devastate Relators'
personal reputations and financial security for years to come, but will have
profound implications for the hundreds of thousands—if not millions—of
employees who work for large corporations that do business with Oregon and
now face unpredictable and potentially massive liability for simply working on
State projects.
The State is enmeshed in heated and highly publicized litigation with
Oracle America, Inc., arising out of a multi-year, multi-million dollar contract
related to the State's development of its now-abandoned Affordable Care Act
website. The State has claims pending against Oracle for breach of contract,
fraud, and violations of the OFCA and Oregon's RICO statute that, if proven at
trial, will fully compensate the State for its alleged injuries. The State,
however, seeks to multiply its potential recovery by asserting hundreds of
millions of dollars in additional claims against Relators, five out-of-state Oracle
employees, in their personal capacities under the OFCA.
Relators moved to dismiss the complaint, both because the trial court
lacked personal jurisdiction over them under this Court's decision in
.Robinson v. Harley-Davidson Motor Co., 354 Or 572, 316 Pad 287 (2013), and
because the complaint failed to state actual claims against them under the plain
language of the OFCA. Ignoring the import of Robinson, however, the trial
court summarily denied Relators' motion to dismiss on jurisdictional grounds.
The trial court also rejected Relators' motion to dismiss for failure to state a
claim, adopting instead an overreaching interpretation of the OFCA that
imposes liability on employees for malting false statements "in the course of
presenting a claim," even if there is no allegation that they presented any claim
at all. Together, the trial court's holdings commit Relators to years of
involvement in what is sure to be protracted and expensive litigation between
the real parties in interest—Oracle and the State—all the while with hundreds
of millions of dollars in personal liability hanging over them based on nothing
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snore than a comment or two (or silence) offered solely in their capacities as
Oracle employees.
Unsurprisingly, the law does not allow this. The trial court's decision is
contrary to the framework for personal jurisdiction established under this
Court's decision in Robinson. Robinson held that non-resident individuals are
subject to personal jurisdiction in Oregon courts only as a "quid pro quo"
exchange far seeking the benefits and protections of Oregon law. Properly
applied, this requirement forecloses personal jurisdiction over Relators because
their actions in Oregon were solely at the direction and for the benefit of their
employer, Oracle. Although this so-called "fiduciary shield doctrine" has been
adopted by courts in other jurisdictions, this Court has not previously had an
opportunity to determine its application under the Robinson framework and
Oregon law. This case thus presents an important issue not just for Relators but
for all companies doing business in Oregon. The trial court also misapplied
Robinson's "but-for causation" requirement, which bars personal jurisdiction
over Relators because the Complaint establishes—and, indeed, the State does
not contest—that Relators' comments (or lack thereof) were not material to the
State's alleged injuries.
The trial court's refusal to grant Relators' motion to dismiss for failure to
state a claim was equally mistaken. Ignoring the plain language of the OFCA's
prohibition against making a false statement "in the course of presenting a
C~
claim," the trial court allowed the State's case to proceed against Relators even
without a single allegation indicating that Relators submitted any claims to the
State, let alone that their allegedly false statements occurred in the course of
presenting such claims.
This Court's immediate review is necessary to ensure that Relators obtain
meaningful and effective relief For the State, adding specious fraud claims
against individual Oracle employees to its complaint is simply a litigation
strategy designed to increase its leverage in its contract dispute with Oracle.
But for the employees, seemingly targeted at random by the State, the mere
assertion of these claims has been devastating. The hope of an eventual
determination that they were never properly before the trial court in the first
place is of little comfort as they face years of infirm accusations of fraud and
hundreds of millions of dollars of claims hanging over their heads. The top
Google hits for Relators' names and "Oracle" are articles repeating these
charges, harming Relators' reputations in their out-of-state communities.
Meanwhile, Relators and their families live in a constant state of financial
insecurity due to the impact of hundreds of millions of dollars in potential
liability on their ability to qualify for personal credit or a new mortgage. The
State's use of Relators as pawns in the State's dispute with Oracle is not
permitted by the laws of Oregon or the U.S. Constitution, and warrants this
Court's immediate intervention.
Aside from the impact of the pending claims on Relators personally, the
trial court's decision requires immediate reversal to ensure that its errors do not
broadly expose employees of large national corporations to unpredictable and
potentially massive liability simply because they work on State projects.
Relators are five of 132,000 employees who work at Oracle worldwide. Far
more than just these five employees communicated with the State about the
project. If personal jurisdiction exists over Relators—who were sued on the
basis of a handful of comments (or the mere failure to speak) that the State
concedes were not the but-for cause of its alleged injuries—then jurisdiction
could also attach to practically anyone who works on a state project and
communicates with government employees on behalf of their company. The
trial court offered no principled way to limit this exposure. Instead, it simply
pushed aside the legal principles that serve that purpose: personal jurisdiction
and the plain language of the OFCA. This Court should immediately review
and reverse the trial court's decision.
STATEMENT OF THE FACTS
In 2011, Oregon created the Oregon Health Insurance Exchange
Corporation (known as "Cover Oregon") to administer Oregon's state run
health insurance exchange under the federal Affordable Care Act. ER 3 0
Di
¶¶ 98-99.1 Later that year, Oregon hired Oracle to assist in setting up the
exchange and in modernizing its technology related to social services generally.
ER 2-3 ¶ 4; ER 28 ¶ 92. Things did not go as planned, and the State ultimately
decided to transition Oregon residents to the federal health insurance exchange
rather than run its own exchange. ER 46 ¶ 155; ER 60 ¶ 173. Litigation
ensued, with the State seeking hundreds of millions of dollars in damages
against Oracle, and Oracle countersuing for copyright infringement in federal
court and unpaid bills in state court.2 The State, however, decided to go a step
further and seek hundreds of millions of additional dollars from Relators, five
out-of-state Oracle employees: Stephen Bartolo, Thomas Budnar, Safra Catz,
Kevin Curry, and Brian Kim.3
According to the State, Relators are personally liable for its alleged
injuries because, in the course of their employment by Oracle, they each made
' Since the trial court's decision, the State has filed an amended complaint. We
still refer to the original complaint, which was the basis of the trial court's
decision. In any event, the relevant allegations have not changed.
2 Cover Oregon has since been dissolved, and its claims have reverted to the
State. See 2015 Oregon Laws Ch. 3 (S.B. 1). In the interest of simplicity,
Relators refer herein to all claims as being brought by the State, even though
technically, the claims against Relators were brought only by the Attorney
General. ER 73, 75, 77, 78, 81.
3 The State also sued a sixth employee, Ravi Puri, whom it later dismissed
without prejudice.
%~
statements (or failed to make statements) in violation the OFCA. The alleged
conduct and claimed liability for each Relator are as follows:
ClaimedLiability
Defendant Alleged Conduct (ER 123)
One statement at a breakfast meeting and a OverCurry failure to speak during product $267 million
demonstrations. ER 81 ¶ 271.
Two statements about when the health
Budnar exchange would be "ready to launch" and two Over
instances of not correcting a colleague. ER 75 $112 million
¶ 242.
One statement that the health exchange was
"nearly ready to launch" and one that certain OverCatz
functions were "operational." ER 73-74 $87 million
¶ 235.
A presentation that "create[d] the impression OverKim that core elements of the [exchange] were X45 million
functional." ER 36-37 ¶ 125.
An email and oral advice that the system $10 000 perBartolo would be "ready to launch" in October. ER 77 «violation"
~ 251.
In total, the State seeks over $500 million from Relators personally. The
State does not, however, claim that it actually suffered $500 million in damages
as a result of Relators' statements. Instead, it seeks to recover the same
damages and multiples of damages from Oracle and Relators separately. For
example, the complaint alleges that one of Catz's statements caused the State to
pay Oracle over $43 million, ER 74 ¶ 238, for which the State seeks double
damages, ER 74 ¶ 239. But that same $43 million payment is also the basis of
the State's claim against Budnar, ER 76 ~ 246, and the State seeks double
damages from Budnar too, ER 76 ¶ 247. On top of all that, the State seeks
triple damages from Oracle for that same $43 million. ER 68 ~¶ 210, 211, 213.
In short, by adding Relators to its lawsuit and then seeking compounded
damages, the State has managed to convert an approximately $43 million
payment to over $300 million in claims. And that represents only a fraction of
the claims asserted in the complaint.
With respect to the State's specific claims under the OFCA, it accuses
Curry of presenting a false claim to the State in violation of ORS 180.755(1)(a),
see ER 81-82 ~¶ 271-77, and the other Relators of malting a false statement "in
the course of presenting" a claim in violation of ORS 180.755(1)(b), see ER
73-81 ~~ 235-70. The complaint, however, contains no allegations that Relators
were involved in any way in the submission of any claims. See infra § II.B.2.
Relators moved to dismiss the claims on the grounds that the court lacked
personal jurisdiction and that the complaint failed to state any actual claims
against them under the OFCA. The trial court held a hearing on June 9, 2015
and denied the motion from the bench, announcing that it was adopting the
State's arguments in their entirety. ER 381. The court later issued a written
G~
order memorializing that conclusion. ER 394-96.4 Relators now seek an
Alternative Writ of Mandamus from this Court.
ARGUMENT
I. The Trial Court's Assertion Of Personal Jurisdiction Over Relators
Is Improper And Warrants This Court's Immediate Review.
The trial court incorrectly concluded it could exercise personal
jurisdiction over Relators. This Court should grant the Petition to review, and
reverse that decision.
"The remedy of a writ of mandamus is available to compel a court's
decision" where "the law requires a particular decision" and there is no other
"plain, speedy and adequate remedy in the ordinary course of the law." D~eye~
v. Portland Gen. Elec. Co., 341 Or 262, 276, 142 Pad 1010, 1017 (2006). That
standard is met here. Relators cannot obtain effective relief "in the ordinary
course of law" because, without this Court's immediate intervention, they will
be forced for years to endure the extraordinary accusations of fraud against
them in an out-of-state court that had no jurisdiction over them in the first place.
Indeed, perhaps in recognition of such considerations, this Court has previously
reviewed jurisdictional decisions on mandamus. See, e.g., id.; State ex gel.
4 With one exception not relevant here, the trial court's order states that it
"adopts plaintiffs' arguments and authority" with respect to both Relators'
motion to dismiss for lack of personal jurisdiction and their motion to dismiss
for failure to state a claim. ER 395. Accordingly, for the purposes of this
Petition and ultimately this Court's review, the State's arguments and the trial
court's holdings are one and the same.
Circus Ci~^cus Reno, Inc. v. Pope, 317 Or 151, 854 P2d 461 (1993); Willemsen
v. Invacare Copp., 352 Or 191, 282 Pad 867 (2012).
Mandamus is particularly appropriate here because the State's decision to
target Relators personally is an inappropriate use of its power, with devastating
reputational and economic consequences for Relators that will continue until
the claims against them are dismissed. Based on nothing more than a comment
or two Relators made in their capacities as Oracle employees, the State has
accused them of fraud against a public institution and subjected them to
hundreds of millions of dollars of potential personal liability. The State asserts
these claims not because they are necessary for the State to recover for its
alleged injuries; to the contrary, the State's claims against Oracle alone are
many multiples of the actual damages the State allegedly suffered. Nor does it
assert them because Relators' alleged conduct exacerbated the State's injuries;
the complaint makes clear, and the State does not contest, that the State would
have incurred exactly the same costs even without Relators' comments. The
State has targeted Relators for no reason other than to increase its litigation
leverage in its contract dispute with Oracle—a dispute that Oracle is able and
willing to fight on the merits. The State's decision to also go after individual
employees in their personal capacities is akin to hostage-taking.
The cost of this stratagem to Relators is enormous. Countless articles,
easily found by a neighbor or potential employer in Relators' out-of-state
11
communities with a simple Internet search, repeat the State's unsubstantiated
accusations that they defrauded the State of Oregon. Anyone who has ever
applied for a line of credit can imagine the crushing impact of hundreds of
millions of dollars of potential personal liability on Relators' abilities to qualify
for a new mortgage or an educational loan. Without this Court's intervention,
Relators and their families will continue to live in a constant state of financial
insecurity and restricted freedom of movement for years as the litigation makes
its way through the trial court.
There is also no doubt, as this Court wrote in Dreyer, that "the law
requires a particular decision" with respect to Relators' motion. Whether the
trial court may exercise personal jurisdiction over Relators is a pure question of
law. Here, the laws of Oregon and the due process limitations of the United
States Constitution require dismissal of the claims against Relators.
The trial court based its exercise of personal jurisdiction over Relators
exclusively on ORCP 4 L, which "extend[s] Oregon jurisdiction to the outer
limits of due process." State ex rel. Hyd~^aulic Ser~vocont~ols Copp. v. Dale, 294
Or 381, 384, 657 P2d 211, 212 (1982). This Court has held that, in order for a
court to exercise jurisdiction over a defendant under this "long-arm" statute,
three requirements must be met: (1) the defendant must have "purposefully
availed] itself of the privilege of conducting activities within the forum State";
(2) the action must "`arise out of or relate to' the foreign defendant's ̀ activities
12
in the forum State"'; and (3) the exercise of jurisdiction must comport with "fair
play and substantial justice." Robinson v. Haley-Davidson Motor Co., 354 Or
572, 579-80, 316 Pad 287, 292 (2013).
The trial court's main error was concluding that the State satisfied the
second "arise out of or relate to" prang, also called "the relatedness
requirement." As this Court has explained, "[t]he animating principle behind
the relatedness requirement is the notion of a tacit quid pro quo that makes
litigation in the forum reasonably foreseeable." Id. at 592 (internal quotation
marks omitted). Under the relatedness requirement, Relators' contacts with
Oregon must (i) provide a basis for concluding that the litigation was
"reasonably foreseeable," and (ii) be the but-for cause of the State's alleged
injuries. Id. at 594.
The trial court lacked personal jurisdiction over Relators under the "arise
out of or relate to" prong for two reasons. First, Relators' contacts with Oregon
in their capacity as Oracle employees inured solely to the benefit of Oracle and
therefore did not give rise to any quid pro quo between the State and Relators
personally that would make the State's suit against them reasonably
foreseeable. Although this so-called "fiduciary shield doctrine" has been
adopted in other jurisdictions, its application under Oregon law is an issue of
first impression for this Court. Second, Relators' contacts with Oregon were
not the but-for cause of the State's alleged injuries.
13
A. Under the fiduciary shield doctrine, Relators' limited contactswith Oregon in their capacity as Oracle employees do notsatisfy Robinson's quid pro quo requirement.
As this Court explained in Robinson, personal jurisdiction arises only
where the "defendant's activities * * * bear a meaningful relationship to the
scope of the benefits and protection received from the forum state." 354 Or at
592. In other words, in exchange for a state's "benefits and protections," the
defendant submits "as a quid pro quo * * * to the burdens of litigation in that
forum." Schwarzenegge~ v. Fred Martin Motor Co., 374 Fad 797, 802 (9th Cir
2004) (internal quotation marks omitted); see also Dudnikov v. Chalk &
T~er~mzlion Fine Arts, Inc., 514 Fad 1063, 1078 (10th Cir 2008) ("Specific
jurisdiction * * * is premised on something of a quid pro quo.") (cited by
Robinson, 354 Or at 593).
A logical implication of this quid pro quo requirement is what courts
sometimes refer to as the "fiduciary shield doctrine." As one Oregon federal
district court described it: "A corporate officer who has contact with a forum
only in the performance of his official duties is not subject to the personal
jurisdiction of the courts in that forum." Pac. Co~netta, Inc. v. Jung, 218 FRD
250, 255 (D Or 2003); see also EQ Solutions, LLC v. Funk, No CIV. 04-6070-
TC, 2004 WL 816850, at * 1 (D Or Apr 14, 2004) ("Although defendant has
made several trips to Oregon, each was as the representative of his company
14
* * *. The fiduciary shield doctrine precludes plaintiffs from relying on these
contacts to establish jurisdiction over defendant in his individual capacity.").
In such cases, the individual employee—as opposed to his or her
employer—does not assume the burden of jurisdiction in exchange for
receiving anything personally, nor does the employee have any ability to
calibrate his or her contacts with Oregon to account for their jurisdictional
consequences. Cf. World-Wide Volkswagen Copp. v. Woodson, 444 US 286,
297 (1980) (personal jurisdiction rule should allow out-of-state residents to
"structure their primary conduct with some minimum assurance as to where that
conduct will and will not render them liable to suit")
The Court of Appeals recently addressed the fiduciary shield doctrine but
ultimately determined that it did not need to decide whether to apply the
doctrine in order to resolve the case before it. See ADD Ram Tech. Se~vs., Inc.
v. Koresko, 240 Or App 620, 635, 247 Pad 1251 (2011) (discussing whether a
court may exercise personal jurisdiction "over an individual who at all times
was acting within his official capacity and scope of duty as an officer of a
corporate defendant." (emphasis omitted)). Likewise, this Court has not
previously had occasion to consider the extent of the doctrine's application
under Oregon law, in particular under the framework for establishing personal
jurisdiction set forth in Robinson. This case squarely presents this important
and unresolved question of law affecting the thousands of out-of-state
15
employees of companies that do business in Oregon, warranting the Court's
immediate attention.
The fiduciary shield doctrine is rooted in principles of fairness: "The
underpinning of this fiduciary shield doctrine is the notion that it is unfair to
force an individual to defend a suit brought against him personally in a forum
with which his only relevant contacts are acts performed not for his own
benefit but for the benefit of his employer." Maine Midland Bank, N.A. v.
Miller, 664 F2d 899, 902 (2d Cir 1981).
That reasoning is particularly persuasive here, where Relators' contacts
with Oregon amount to no more than a comment or two made solely in their
capacities as Oracle employees in the course of a massive State procurement
that was years in the making and execution. It is indisputable that their contacts
with Oregon inured to the sole benefit of their employer, Oracle.5 On these
facts, subjecting Relators personally to hundreds of millions of dollars in claims
in Oregon based on a dispute that is really between the State and Oracle is a
violation of Relators' due process rights. This Court implicitly recognized as
much when it adopted the quid pro quo requirement in Robinson.
Indeed, although the fiduciary shield principle that Relators advocate is a
natural application of the quid pro quo requirement (which Robinson houses
under the second "arise out of or relate to" prong of its personal jurisdiction
5 Oracle has accepted jurisdiction over it for all claims made in the litigation.
~~
analysis), it is also a compelling reason to conclude that Relators did not
"purposefully avail [themselves] of the privilege of conducting activities within
the forum State," as required under the first prong, and that the exercise of
jurisdiction over Relators would not comport with "fair play and substantial
justice," as required under the third prong. Robinson, 354 Or at 579-80. See
also A~^mstrong World Indus., .Inc. v. Allibe~t, No CIV A 97-3914, 1998 WL
966017, at * 6 (ED Pa Nov 19, 1998) ("It would be repugnant to notions of fair
play and substantial justice to make an individual subject to jurisdiction on the
basis of acts done in a fiduciary capacity for an employer's benefit.").
The trial court reached a different conclusion based on the State's
erroneous claim that the U.S. Supreme Court rejected the fiduciary shield
doctrine in Calder v. Jones, 465 US 783 (1984). It is obvious from reading
Calder, however, that the Court did nothing of the sort. The Court held only
that a defendant's status as an employee does not insulate him from jurisdiction
as a categorical matter. Consistent with this haiding, Relators do not contend
that Oregon law creates blanket immunity from jurisdiction for corporate
employees. Instead, "each defendant's contacts with the forum State must be
assessed individually." Id. at 790. The Court explained that under the facts of
that particular case, the defendants were the "primary participants in an alleged
wrongdoing" and thus "jurisdiction over them [wash proper on that basis." Id,
In short, as one federal district court observed, Calder "neither rejected the
17
fiduciary shield doctrine nor adopted it." La Vallee v. Parrot-Ice Drink Pods.
ofAm., Inc., 193 F Supp 2d 296, 301 (D Mass 2002). Indeed, since Calder,
courts have regularly continued to apply the fiduciary shield doctrine.
In contrast to Calder^, the complaint here does not allege that Relators
were "primary participants" in anything; to the contrary, over the course of the
State's years-long business relationship with Oracle, Relators' only alleged
See, e.g., Whalen v. Connelly, 545 NW2d 284, 295 (Iowa 1996) ("[W]e
reaffirmed the validity of the fiduciary-shield doctrine in * * * apost-Calder^
case."); G~obe~ v. Mako Products, Inc., 686 Fad 1335, 1347 (Fed Cir 2012)
("The fiduciary shield doctrine buffers corporate officers from personal
jurisdiction when their official duties were their only contact with a forum
state."); Cerciello v. Canale, 563 F App'x 924, 927-28 (3d Cir 2014) ("This so-
called ̀ corporate shield' doctrine sometimes protects defendants who are thus
sued in their individual capacities for what are corporate acts."); Tompkins v.
Exec. Comm. of the S. Baptist Convention, No 0:15-CV-02053, 2015 WL
1569034, * 16 (DNM Mar 31, 2015) ("New Mexico recognizes the ̀ fiduciary
shield doctrine,' which provides that a ̀corporation's contacts generally cannot
be attributed to the officers, directors or employees of the corporation when the
individuals' acts were carried out solely in their corporate or representative
capacities."') (citation omitted); Pac. Co~netta, Inc. v. Jung, 218 FRD 250, 255
(D Or 2003) ("A corporate officer who has contact with a forum only in the
performance of his official duties is not subject to the personal jurisdiction of
the courts in that forum."); EQ Solutions, LLC v. Funk, No CIV. 04-6070-TC,
2004 WL 816850, at * 1 (D Or Apr 1.4, 2004) ("Although defendant has made
several trips to Oregon, each was as the representative of his company * * * .
The fiduciary shield doctrine precludes plaintiffs from relying on these contacts
to establish jurisdiction aver defendant in his individual capacity."); Szmkins
Copp. v. Gourmet Res. Intl, 601 F Supp 1336, 1345 (ED Pa 1985) ("[A]
corporate officer or director's actions taken in his corporate capacity are, by
themselves, insufficient to bring him personally within the jurisdiction of this
court."); Clemons v. WPRJ, LLC, 928 F Supp 2d 885, 901 nl l (SD Tex 2013)
("[A]n individual's transaction of business within the state solely as a corporate
officer does not create personal jurisdiction over that individual * * *.").
I:
contributions to the 13-claim, 383-paragraph complaint are one or two
comments each (and in a few instances, the mere failure to speak). Nothing in
Calder suggests that under these circumstances, courts should not consider
whether a defendant was acting for herself or for her employer in assessing
whether the quid pro quo is sufficient to warrant personal jurisdiction over the
defendant herself rather than just the employer.
Below, the State pointed to decisions declining to apply the fiduciary
shield doctrine as a limitation on jurisdictional statutes that, like Oregon's,
authorize jurisdiction to the full extent of the Due Process Clause. The State
relied primarily on Davis v. Metro P~^oductions., Inc., 885 F2d 515, 521-23 (9th
Cir 1989), see ER 217, which is distinguishable for two reasons. First, Davis
applied a different meaning to the term "fiduciary shield doctrine." The Davis
court was focused on whether "a person's mere association with a corporation
that causes injury in the forum state is not sufficient in itself to permit that
forum to assert jurisdiction over the person." Davis, 885 F2d at 520. The State
is not asserting jurisdiction over Relators solely because there is jurisdiction
over Oracle, so the question addressed in Davis is irrelevant here.
Second, the defendants in Davis were the sole shareholders and officers
of the corporation at issue. Id. at 516. Relators are not asking the Court to
adopt a version of the fiduciary shield that would insulate those kinds of
defendants; instead, consistent with Calder and Robinson, the Court should
19
hold that employee status is a factor that should be considered in determining
whether the quid pro quo requirement is satisfied, and that under the
circumstances of this case, personal jurisdiction is lacl~ing due to the absence of
quid pro quo. The State's—and by extension, the trial court's—reliance on
Davis was thus misplaced.
Relators aclznowledge that, just as numerous courts have endorsed the
doctrine that Relators advocate here, numerous courts have rejected it.
Oregon's federal district court, in particular, appears internally divided over the
issue. That division of authority, however, is only more reason for this Court
to grant the petition and provide guidance to the lower courts regarding the
extent of the fiduciary shield doctrine's application under Oregon law.
Finally, the State erroneously relied on ORS 1$0.760(5) to support its
position that Relators' employee status is irrelevant under Robinson's personal
jurisdiction framework. ORS 180.760(5) states: "If a court finds that an act or
omission of an individual on behalf of a corporation or other legal entity
constitutes a violation of [the OFCA], the court may find that both the
individual and the legal entity violated [the statute]." But that provision does
~ Compare Pac. Co~netta, Inc. v. Jung, 218 FRD 250 (D Or 2003); EQ
Solutions, LLC v. Funk, No CIV. 04-6070-TC, 2004 WL 816850 (D Or Apr 14,
2004) (applying fiduciary shield doctrine) with Ott v. Mortgage Investo~^s Copp.,
No. 3:14-CV-00645-ST, 2015 WL 1648702 (D Or Apr 14, 2015); LaDue v.
City of Talent, No 1:14-CV-01421-CL, 2015 WL 1636655 (D Or Apr 10, 2015)
(declining to apply fiduciary shield doctrine).
not purport to override federal Constitutional principles governing personal
jurisdiction, nor could it. Who may be held liable under the OFCA—which is
the question ORS 180.760(5) answers—is an entirely separate question from
whether the State has established personal jurisdiction over the defendant as a
matter of due process.
The trial court's categorical rejection of the quid pro quo requirement as
applied to Relators undermines Robinson and, if allowed to stand, could have
significant negative consequences for Oregon commerce. If a passing comment
at a brealtfast meeting by an out-of-state employee in the course of a years-long
procurement can support hundreds of millions of dollars of claims against the
employee personally, what company would aslc its employees to do work for
the State of Oregon given the possible exposure and disruption to their personal
lives? The best companies—those that the State would want to have as
contractors—will simply stop doing business with Oregon rather than risk
exposing their employees to this kind of personal liability.
B. Relators' contacts with Oregon were not the but-for cause of
the State's alleged injury.
In order for a claim to "arise out of or relate to" a defendant's contacts
with Oregon, there must be "a significant nexus between a claim and a
defendant's contacts within the state for the exercise of state court jurisdiction."
Robinson, 354 Or at 581. This Court concluded in Robinson that if the
defendant's contacts with Oregon were not the but-for cause of the plaintiff's
21
injury, then by definition there is not a sufficient nexus. Id. at 589. The test
"draws a bright line separating the related from the unrelated." O'Connor v.
Sandy Lane Hotel Co., 496 Fad 312, 322 (3d Cir 2007)
The but-for test is not satisfied here because the State's own complaint
demonstrates that, even if any Relator had not made the comments attributed to
him or her, the State's alleged injuries would have been exactly the same. The
State alleges, "DHS, OHA, and Cover Oregon were damaged in the full amount
of every claim paid" "[a]s a direct and foreseeable result" of yeas' worth of
statements made by Oracle. ER 71 ¶ 218. These statements were made
between February 2009, ER 12 ~ 35; ER 69 ¶ 214(a), and Apri12014, ER 45
¶ 151; ER 70 ~ 214(p), by many different people. Indeed, the complaint
identifies sixteen separate categories of statements, each containing numerous
statements identified through a labyrinth ofcross-references. ER 69-70
¶ 214(a)-(p). For example, under ER 69 ¶ 214(a), the State alleges that Oracle
described. its "Solution" as "out-of-the-box" at least three times in February
2009, ER 12-13. ¶ 35, by marking "4" in response to 95% of the questions on a
vendor questionnaire sent to Oracle in March 2011, ER 19-20 ¶¶ 57-61, and in
demonstrations between May 10-12, ER 22-23 ¶ 69-72.
Within the years' worth of statements the State alleges it relied on, Kim
gave a single presentation. ER 78 ¶ 256. Curry made a single statement at a
breakfast meeting. ER 81 ¶ 271. Budnar made two statements about when the
22
exchange would be "ready to launch," ER 75 ¶ 242, amid seven categories of
different "ready to launch" statements made by others. ER 69-70 ¶ 214(i)-(o).
Catz also made one "ready to launch" statement in addition to sending one
email about certain functions being operational. ER 73-74 ¶ 235. Finally,
Bartolo sent one email, and also made his own "ready to launch" statement. ER
77 ¶ 251. Peppered throughout are a few instances of failing to speak—in other
words, accusations that Relators did absolutely nothing. ER 7S ¶ 242(c)-(d);
ER 81 ¶ 271.
The handful of comments from Relators represent only a fraction of
everything Oracle employees said, all of which the State claims caused its
injuries. In other words, the allegations in the complaint demonstrate that for
each Relator, even if he or she had not engaged in the alleged conduct, the
State's claimed injuries would have been exactly the saine.g
Remarkably, the State did not dispute below that the complaint fails to
allege that Relators were the but-for cause of any of the State's alleged injuries.
See ER 211 (expressly declining to dispute Relators' but-for analysis of the
complaint). Instead, it argued that the but-for requirement is satisfied here
g One even more specific example: Although the State alleges that it lost
approximately $43 million because of statements made by Catz, ER 74 ~ 238, it
also alleges that it would have lost that $43 million anyway because of
statements made by a different employee, ER 80 ¶ 267. Thus the complaint
itself forecloses the possibility that, but for Catz's conduct, the State would not
have been injured by the loss of this money.
23
because it would not have sued Relators had they not engaged in the conduct it
alleges, and therefore Relators' contacts with Oregon are the but-for cause of
the litigation (rather than the injury). This is aself.-serving manipulation of
Robinson's but-for test that, if accepted, would render the requirement
completely irrelevant.
As far as Relators are aware, no court, other than the trial court below,
has endorsed the extraordinary notion that the but-for test is satisfied so long as
the plaintiff asserts that he or she would not have brought suit against the
defendant but for the defendant's in-state conduct, regardless of whether the
damages that the plaintiff seeks bear any relationship to that conduct. And
understandably so. The State's test would eviscerate the but-for requirement,
rendering it satisfied so long as the plaintiff says it is satisfied. Nor would it
make any sense—or, indeed, comport with due process—to tie personal
jurisdiction to the plaintiff's personal, subjective reasons for filing a lawsuit.
The State also argued more narrowly that the complaint's failure to allege
that Relators were the but-for cause of the State's injuries is irrelevant in the
particular context of the OFCA, because an OFCA claim may be asserted
without such an allegation. Whatever the import of the State's theory in an
OFCA case seeking only the minimum statutory penalties, that is not the case
that the State brought here: The complaint expressly purports to base personal
jurisdiction on Relators' "acts within Oregon giving rise to injuries within
24
Oregon," ER 9-10 ¶¶ 23-27—"injuries" for which the State seeks hundreds of
millions of dollars from Relators.9
The State presumably made the strategic decision to base its claims
against Relators on its alleged injuries because the minimum statutory penalties
the OFCA provides are miniscule in comparison.10 Having made that choice,
however, the State must live with the legal consequences. If, as the complaint
alleges, personal jurisdiction over Relators is based on inju~^ies that Relators
allegedly caused, then Robinson requires the complaint to allege that Relators'
acts are the but-for cause of those injuries. The State did not even atter~npt to
make that showing, either in its complaint or before the trial court.
Finally, the State asserted for the first time during the hearing on
Relators' motion that the motion should be denied because "[m]ore than one act
can be a but for cause of an injury." ER 375. The State used the example of
~ Relators are unaware of any cases declining to apply the but-for test to the
plaintiff's alleged injuries where those injuries are the basis for. the damages
sought by the plaintiff See, e.g., Robinson, 354 Or at 591; O'Connor, 496 Fad
at 323 ("[Defendant's] contacts are abut-for cause of [plaintiff's] injury");
Hannon v. Beard, 524 Fad 275, 282 (lst Cir 2008) ("[Whether] the injury
would not have occun•ed but for the defendant's forum-state activity"); Menken
v. Emm, 503 Fad 1050, 1058 (9th Cir 2007) ("[Plaintiff] must show that he
would not have suffered an injuJ^y ̀ but for' [defendant's] forum-related
conduct."); Fraser v. Smith, 594 Fad 842, 8S1 (1 lth Cir 2010) ("Two of
[plaintiff's] contacts arguably do qualify as but-for causes of the [defendants']
inju,~ies.") (emphasis added in all quotations).
to Under ORS 180.760(4), penalties under the OFCA are "the greater of
$10,000 for each violation or an amount equal to twice the amount of damages
incurred for each violation."
25
Sam pushing Sally into the street, where John is driving too fast and hits Sally.
Id. In the State's example, John and Sam are each but-for causes of Sally's
injuries: If Sam had not pushed Sally, Sally would have been fine; if John had
not been driving too fast, Sally would have been fine. The trial court later cited
the State's "multiple but for causes" argument as a basis for denying Relators'
motion. ER 381.
The State's argument was a non sequitur. Of course there can be
multiple but-for causes of an injury. That metaphysical principle has never
been in dispute. The fatal problem with the State's complaint is that it fails to
allege that any of Relators were the but-for cause of the State's injuries. Unlike
Sally who would be safe if not for Sam's push, the State would have suffered
the exact same injuries even if Curry had not commented on Oracle's
capabilities at the breakfast meeting, even if Budnar had not predicted when the
health exchange would be "ready to launch," even if Catz had not described
certain functions as "operational," and so on. Indeed, it bears repeating, the
State has never argued othe~^wise.
The State's theory of personal jurisdiction in this case is thus
incompatible with this Court's reasoning in Robinson and with due process.
Indeed, as noted earlier, supra at 15-16, the State's efforts to haul Relators to
Oregon to face hundreds of millions of dollars in claims under these
circumstances—i.e., where their Oregon contacts amount to no more than a
26
comment or two by each made solely in their capacities as Oracle employees
and that were ultimately immaterial to the State's alleged injuries—are so
unreasonable as to violate not only Robinson's "arise out of or relate to" prong,
but also the third prong requiring that the exercise of personal jurisdiction
comport with "fair play and substantial justice."
II. The Trial Court's Holding That The Complaint States OFCA Claims
Against Relators Is Wrong And Warrants This Court's Immediate
Review.
A. This Court may properly address the State's failure to state a
claim on mandamus.
As discussed earlier, supra § I, a writ of mandamus is a proper remedy
where the court below made an error of law for which an ordinary remedy is not
"plain," "speedy," or "adequate." See Dreyer, 341 Or at 276. Lilce the trial
court's holding that it could exercise personal jurisdiction over Relators, its
holding that the State stated claims against Relators under the OFCA satisfies
this standard. Here, the question of whether the trial court erred in adopting the
Stag's expansive and counter-textual interpretation of the statute is a purely
legal one, with enormous implications for the many companies that do business
with the State. Correcting the trial court's error only after years of protracted
litigation with hundreds of millions of dollars in liability hanging over Relators'
heads is hardly speedy or adequate.
Mandamus review is particularly appropriate where, as here, the State's
failure to state a claim is deeply intertwined with its failure to establish personal
~~ll
jurisdiction. Robinson explains that personal jurisdiction exists only where the
defendant's contacts with the Oregon "provide a basis for an objective
determination that the litigation was reasonably foreseeable." 354 Or at 594.
The State's reading of the OFCA, however, is so contrary to the statutory text
that Relators could not possibly have foreseen that the statements alleged in the
complaint might lead to any sort of suit under the OFCA, let alone hundreds of
millions of dollars in personal liability.
Indeed, this Court has previously entertained a failure to state a claim
argument on mandamus where, as here, it was accompanied by an argument
that the lower court lacked jurisdiction. See D~eye~, 341 Or at 276-77.
B. The complaint fails to allege that Catz, Bartolo, Budnar, or
Kim made false statements "in the course of presenting" aclaim in violation of ORS 180.755(1)(b).
Four Relators—Catz, Bartolo, Budnar, and Kim—are accused of
violating ORS 180.755(1)(b), which states: "~1 person may not * * * ~iJn the
course of presenting a claim fog payment or^ approval, make or use, or cause to
be made or used, a record or statement that the person knows to contain, or to
be based on, false or fraudulent information." (emphasis added). For OFCA
purposes, a "claim" is a "request or demand made to a public agency * * *that
seeks moneys, property, services or benefits." ORS 180.750(1). The "claims"
here are Oracle's invoices to the State. See ER 128-36; see also ER 229
("* * *present the claim, i.e., send an invoice")
The trial court found the State's allegations sufficient to state a claim
under this provision only because it made two errors of statutory interpretation.
First, the court incorrectly interpreted the phrase "in the course of to mean
only "a relationship with." Second, the court ignored the textual requirement
that the claim be submitted by the person malting the allegedly false statement.
1. The trial court incorrectly interpreted the phrase "in the
course of."
The trial court erroneously accepted the State's contention that a person
may be deemed to make a statement "in the course of 'submitting an invoice so
long as the statement is "related to, associated with, or linked to" an invoice.
The plain statutory language does not permit so tenuous a connection between
the statement and the actual "present[ation]" of a claim. Rather, "in the course
of means just what it says: in the same progression of events.
The trial court's error in concluding otherwise is indisputable. It drew its
definition of "in the course of from the Court of Appeals' decision in Alfieri v.
Solomon, 263 Or App 492, 500, 329 Pad 26, 31 (2014), which construed a
statute containing the two phrases, "in the course of ' and "in connection with."
In ruling that "in the course of means "related to, associated with, or linked
to," however, the trial court here mistakenly adopted the Court of Appeals'
definition of "in connection with." By contrast, the Court of Appeals concluded
that "in the course of means "progress or progression through a series (as of
acts or events) or through a development or a period." Id. at 500.
29
That "series of acts" here are those that constitute "presenting a claim."
This Court similarly has construed "in the course of in other Oregon statutes to
apply strictly to the specific activity at issue. See No~pac Foods, Inc. v.
Gilmore, 318 Or 363, 366, 867 P2d 1373, 1375-76 (1994) (provision of
ORS 656.005(7)(a) limiting compensable injuries to those "`arising out of and
`in the course of employment"' generally excludes claims based on injuries
occurring before work or after work); State v. Jackson, 40 Or App 759, 763,
596 P2d 600, 602 (1979) ("in the course of committing or attempting to commit
theft" applies only to period during which the defendant's attempted theft
actually underway). The distinction is not mere semantics: A person might put
on a clean t-shirt "in connection with" his or her earlier shower, but likely
would not put on a shirt "in the course of that shower. Yet the trial court
rewrote ORS 180.755(1)(b) in exactly this way, in the process stripping a
critical provision of the OFCA of an express textual limitation, i'
~ 1 Relying on United States ex ~^el. Schwedt v. Planning Res. CoNp,, 59 Fad 196
(DC Cir 1995), the State also argued that liability under ORS 180.755(1)(b)
could attach to statements made "during the same period of time" when
invoices were submitted. ER 232-33. But, unlike Oregon's False Claim Act,
the text of the federal False Claims Act provision construed in Schwedt
contained no "in the course of requirement, and indeed specifically applied to
statements made "to get a false or fraudulent claim paid or approved by the
Government." Id. at 198 (quoting 31 USC 3729(a) (1988)).
30
Applying Alfie~i's actual and legally correct definition of "in the course
of," it is indisputable that none of Relators made a false statement in the course
of presenting a claim.
Kim. The complaint alleges that Kim violated ORS 180.755(1)(b) by
giving a demonstration on June 13, 2013 that "create[d] the impression that the
core elements of the [exchange] were functional and nearly complete." ER 36-
37 ¶ 125. As a result, the State claims, "Cover Oregon paid Oracle
$22,SS 1,105.19 for consulting services." ER 78 ¶ 259. But no invoices were,
or are alleged to have been, submitted "in the course of 'that presentation. To
the contrary, Exhibit 1 to the complaint establishes that the $22,551,105.19 paid
came from invoices sent between June 1 S, 2013 (five days after the
presentation) all the way to August 30, 2013 (more than two months after the
presentation). ER 134. In other words, the State's claim is based on the
implausible notion that Kim gave his demonstration "in the course of
presenting claims that no one actually submitted for more than two months. Id.
Bartolo. The State alleges that Bartolo made false statements in an
October 10, 2013 email and in an October 17, 2013 Cover Oregon Board of
Directors meeting. ER 40 ¶ 136. The State argues that the statements were
made "in the course of presenting a claim" based on invoices that Oracle had
previously submitted and were outstanding at the time. ER 77 ¶ 253. For
example, one of those invoices was submitted on August 27, 2013, ER 130
31
(Invoice # XJ72CFC86), more than two weeks before Bartolo's alleged
statements. Bartolo's statements could not have been made "in the course ofl'
submitting an invoice that someone else submitted weeks earlier.
Budnar. The State first alleges that Budnar made a false statement on
August 8, 2013 at a Cover Oregon Board of Directors meeting. ER 38-39
¶ 130. As a result, according to the complaint, "Cover Oregon paid Oracle
$12,265,026.37 for consulting services" between August 8, 2013 and October 1,
2013. ER 76 ¶ 245. The next invoice, however, was submitted on August 20,
2013, more than a week after the meeting. ER 134.
The State also claims that Budnar "failed to correct" statements made by
a different employee on January 7, 2014 and February 11, 2014. ER 75-76
¶¶ 242, 246. In other words, Budnar is accused of saying absolutely nothing.
But the failure to speak is not a violation of ORS 180.755(1)(b), which states
that a person may not "make or use, or cause to be made or used, a record or
statement" that contains false information. No plausible reading of this
language prohibits someone from staying silent when someone else makes a
purportedly false statement.
Nor can the State salvage its claim that a "false statement" can be an
omission by pointing to the Act's definition of a "false claim." ER 241. It is
true that a false claim can be one that omits material information. See
ORS 180.750(2)(c). But Budnar is not accused of submitting a false claim.
32
The State's theory apparently is that Budnar somehow "used" a false statement
by remaining silent when a completely accurate claim was submitted to the
State. The definition of "false claim" is not relevant at all to the determination
of whether silence equates with "using" within the meaning of
ORS 180.755(1)(b).
Finally, the State attempts to bolster its claim against Budnar by pointing
to ORS 180.760(5). See ER 241. But that provision just sets forth the remedies
"[iJf a court finds that an act or omission of an individual on behalf of a
corporation or other legal entity constitutes a violation of ORS 180.755."
(emphasis added). The word "omission" in that provision does not create an
independent basis for liability. It provides the remedies if a person violates
ORS 1$0.755. The provision includes the word "omission" because "fail[ing]
to disclose" certain false claims is one of the nine different ways that someone
can violate the OFCA. The mention of "omission." in the remedies provision
does not mean the other eight types of violations may be based on omissions as
well. In short, Budnar's alleged "failure to correct" cannot be construed as a
false statement under the Act, let alone a statement made in the course of
submitting a claim.
Catz. The complaint's allegation. as to Catz is more direct, though no
more meritorious: that she made a false statement in the course of presenting an
oral. "demand" that previously submitted invoices be paid. ER 45 ¶¶ 150, 151.
K~j
The supposed "demand," however, specified neither an amount to be paid or
even which services or products Oracle should be paid for, and thus cannot
constitute a "claim" under ORS 180.750(] ). Unsurprisingly, the State failed to
identify in the long history of federal and state false claims act litigation even
one instance in which a court interpreted "claim" to include such statements
relating to previously submitted claims.
The State also alleges that Catz sent a letter containing a false statement,
but it does not allege the letter made any reference at all to payments of any
kind. See ER 45 ¶ 151. And she allegedly sent another email at some point
referring simply to the need to resolve "payment issues," but the State does not
allege it included any false statements. ER 45 ¶ 151; ER 74 ~ 237.
2. The trial court ignored the textual requirement that the
same person who "makes a false statement" must also
"present the claim."
The trial court misinterpreted ORS 180.755(1)(b) in a second way. The
OFCA. requires that a defendant make a false statement in the course of that
defendant presenting a claim. That is the plain language of the pr. ovision: "A
person may not * * * [i]n the course of presenting a claim * * *make * * * a
record or statement * * *based on false or fraudulent information."
ORS 180.755(1)(b). The same "person" who is "presenting a claim" is the one
who "make[s] a [false] record or statement." It is indisputable that the
complaint contains no such allegations. Rather, to quote counsel for the State,
34
"the attorney general alleges that they each made false statements in the course
of their employer presenting invoices to Cover Oregon." ER 377 (emphasis
added).
Again, the trial court allowed the State to rewrite the OFCA to remove an
express textual limitation on its scope. And again, the limitation is important.
Imagine a hypothetical statute modeled on ORS 180.755(1)(b): "A person may
not send a text message in the course of driving a car." That statute would not
apply to a passenger who sent a text while someone else was at the wheel.
Similarly, ORS 180.755(1)(b) does not apply to statements made with respect to
invoices that someone else submitted.
The State's objection to this textual construction is that construing the
OFCA to require the defendant to present a claim would be subject to evasion:
"Under such an interpretation," it asserts, "any corporate manager could
insulate herself from liability for making false statements designed to encourage
the payment of claims simply by having a subordinate present the claim, i.e.,
send an invoice." ER 229.
This is a straw man argument. The complaint does not allege any such
evasion by Relators, so the State's purported concern is irrelevant here. It is
also vastly overstated: No corporate structure would ever insulate the company
itself from liability, so there will always be an entity to hold responsible for any
actual violation of the OFCA. The question is whether the OFCA authorizes
35
the State to extract money from Relators personally for what they personally
did not do. It does not. Unlike some closely held corporations where all the
actions of the corporation are taken by one or two individuals, Relators are just
five out of more than a hundred thousand employees at Oracle. And as far as
the complaint alleges, none of them has ever delivered a single invoice to the
State. By its plain text, the OFCA does not provide a cause of action against
Relators personally in the absence of allegations that they personally submitted
claims to the State.
Finally, the State tools the remarkable position that the presentation of a
claim requirement is satisfied by the allegation that Relators were "managers,"
because "[b]y virtue of their management authority, a factfinder can reasonably
infer that [Relators] each controlled the submission of invoices to the State and
Cover Oregon," ER 228 (internal quotation marks omitted). The sole authority
the State could find to support that proposition was a North Carolina state court
decision from 1943, which held that statements by the "manager" of an A&P
supermarket could be imputed to his employer for purposes of ~espondeat
superior. See Gillis v. G~eatAtl. & Pac. Tea Co., 27 S~2d 283, 285 (NC
1943). The lack of precedential support for the State's position makes sense.
None of the trial court's leaps of logic constitute a "reasonable inference"
necessary to overcome the failure of the complaint on its face to allege the
presentation of a claim. See Ramex, Inc. v. Nw. Basic Indus., 176 Or App 75,
36
85, 29 Pad 1211, 1216 (2001); Lowe v. Philip Mo~~is USA, Inc., 344 Or 403,
407 nl, 183 Pad 181, 182 nl (2008). The State's argument to the contrary—
that employees may be held personally liable under the OFCA based solely on
their "executive title and managerial role" and perceived "authority to control
the presentation of claims" to the government, regardless of their actual
knowledge or involvement in the alleged scheme—is wholly foreclosed by the
OFCA's scienter requirement (and the federal FCA's identical scienter
requirement), which does not permit liability for mere "constructive"
knowledge.
Indeed, the State's assertion that an employee's title alone is sufficient to
establish that he or she "presented" an invoice is simply nonsensical when
applied to Relators. Oracle is a 132,000-person company with 400,000
customers and more than $38 billion in annual revenue. The notion that it is
reasonable to infer, solely by virtue of their titles, that a Technical Manager
(Kim), aVice-President (Bartolo and Budnar), ar even the then-President and
CFO (Catz) must have personally submitted or directed the submission of the
claims alleged in the complaint—almost 150 invoices dated over almost three
years—is preposterous.
The State advanced, and the trial court rubber-stamped, a nearly limitless
definition of "in the course of presenting" requirement of ORS 180.755(1)(b).
That rewritten definition renders the statute dangerously overbroad, potentially
37
applying to anything a contractor employee says to a state employee so long as
an invoice is pending or one is submitted at some point in the following months.
And because no other false claims act in the United States contains the phrase,
"in the course of," the trial court's ruling will be the only relevant precedent for
the points at issue in this case for the foreseeable future absent review by this
Court. Properly interpreted, ORS 180.755(1)(b) requires a defendant to make a
false statement in the course of that defendant actually presenting a claim.
When the statute as written is applied to the facts of this case, it is indisputable
that the complaint fails to state a claim against Catz, Bartolo, Budnar, or Kim.
C. The complaint does not allege that Curry "presented a false
claim" in violation of ORS 180.755(1)(a).
Unlike the other Relators, Curry is accused of violating
ORS 180.755(1)(a), which provides: "A person may not * * * [p]resent for
payment or approval, or cause to be presented for payment or approval, a claim
that the person knows is a false claim." That provision has three elements: (1) a
false claim12 (2) which was presented or caused to be presented (3) with
knowledge that the claim is false. See United States v. Mackby, 261 Fad 821,
826 (9th Cir 2001) (same elements). The complaint alleges that Curry violated
this provision by "induc[ing]" the State, through false statements, to enter into
12 A "false claim" is a claim that "(a) Contains, or is based on, false or
fraudulent information; (b) Contains any statement or representation that is
untrue in whole or part; or (c) Omits information that could have a material
effect on the value, validity or authenticity of the claim." ORS 180.750(2).
contracts with Oracle, with the result that "each and every one of [Oracle's]
invoices * * * was a false claim." ER 81-82 ¶ 273.
As an initial matter, even if "fraudulent inducement" were a viable theory
under the OFCA, the federal cases the State cited stand only for the proposition
that claims so tainted can be classified as "false." See, e.g., United States ex rel.
Marcus v. Hess, 317 US 537, 543-44 (1943). In other words, that theory only
relates to the first element the State must allege. United States v. Toyobo Co.,
811 F Supp 2d 37, 46-48 (DDC 2011), on which the State placed principal
reliance, ER 238, could not be clearer that a plaintiff must also independently
allege and prove that a defendant presented or caused a claim to be presented.
No such allegation appears in the complaint. Indeed, there is no
allegation that Curry had anything at all to do with invoicing. Curry is accused
only of inducing the State to enter a contract which, as the complaint
acknowledges, did not obligate the State to pay a single dollar. See ER 28 ¶ 92.
Accordingly, it could not possibly be a "request or demand" for money.
ORS 180.750(1).
The interpretation of the OFCA the State encouraged and the lower court
accepted does not just stretch the text of the statute, it rewrites the text across
numerous provisions. This case of first impression demonstrates the pressing
need for guidance from this Court.
39
CONCLUSION
The Court should grant the Petition for an Alternative Writ of
Mandamus.
Respectfully submitted,
LANE POWELL Pc
By ~,Thomas W. Sondag, OSB No. 844201Milo Petranovich, 05B No. 813376Pilar C. French, OSB No. 962880601 SW Second Avenue, Suite 2140Portland, OR 97204-3158Telephone: [email protected]@lanepowell, [email protected]
Attorneys for Defendants-Relators StephenBartolo, Thomas Budnar, Kevin Curry, SafraCatz, and Brian Kiin
CERTIFICATE OF FILING AND SERVICE
I hereby certify that I filed the foregoing Memorandum in Support of
Petition for Alternative Writ of Mandamus by causing it to be electronically
fled with the Appellate Court Administrator on August 24, 2015, through the
appellate eFiling system.
I further certify that I served the foregoing document by causing a copy
thereof to be mailed by first-class mail on August 24, 2015, addressed as
follows:
David B. MarizowitzLisa A. KanerDallas DeLucaHarry B. WilsonMarkowitz Herbold PC3000 Pacwest Center1211 SW Fifth AvenuePortland, OR 97204-3730
The Honorable Courtland GeyerCircuit Court JudgeMarion County Circuit Court100 High Street NEPO Box 12869Salem, OR 97309
Dayna UnderhillHolland &Knight LLP111 SW Fifth Avenue, Suite 2300Portland, OR 97204
Brenna K. LegaardJeffery S. EdenSchwabe, Williamson &Wyatt, P.C.1211 SW Tifth Avenue, Suite 1900Portland, OR 97204
Clifford Scott DavidsonSussman Shanlc LLP1000 SW Broadway, Suite 1400Portland, OR 97205
Timothy D. BelevetzHolland &Knight1600 Tysons Boulevard., Suite 700Tysons Corner, VA 22102
Ravi Puri6825 Sunbriar DriveCumming, GA 30040
Janet Lee HoffmanJanet Hoffman &, Associates1000 SW Broadway, Suite 1500Portland, OR 97205
Thomas W. Sondag
Of Attorneys for Defendants-RelatorsStephen Bartolo, Thomas Budnar,Kevin Curry, Safra Catz, and BrianKim