State sets $2 million limit to fight Oracle case

The State of Oregon has sued Oracle over its role in creating the failed Cover Oregon health care exchange website, and it has budgeted $2 million to fight the case.

The Department of Justice hired an outside firm to handle the case rather than dedicating its own attorneys to the task and while Portland business litigation firm Markowitz Herbold Glade & Mehlhaf PC is giving the state a 10 percent discount, its attorneys' rates still aren't cheap.

The seemingly large budget likely won't last more than one year on a case legal experts say could last far longer than that.

The Justice Department often hires specialized firms on complicated projects, spokeswoman Kristina Edmunson said. The department has just six attorneys and one paralegal in its entire "special litigation unit," and they work on a range of cases that include environmental and election lawsuits, as well as a lawsuit against 5-Hour Energy.

DOCUMENT:Read the contract for details

To put that in perspective, the Markowitz firm is dedicating seven lawyers to the Oracle case alone, more than the justice department has in its entire special litigation unit.

Two are named partners: David Markowitz and Peter Glade. The other five are: Lisa Kaner, Harry Wilson, Kristin Asai, Dallas DeLuca and Keith McIntire.

Their rates span a large range. Markowitz charges $650 per hour, but Asai, who took the bar just four years ago, charges only $295 per hour. The rest fall somewhere in between, averaging $430 per hour.

The contract requires the firm to give the state a 10 percent discount, which means it will pay an average $387 per hour for the work done on the case.

In contrast, the state's attorneys all bill $159 per hour, Edmunson said.

That means the state can pay for about 5,168 hours of work, which is about 215 days — less than one year. However, the budget would likely stretch a little further, as Markowitz staff, such as paralegals and legal secretaries, charge lower hourly rates and will also do some of the work.

The cost is split evenly in the contract between the Justice Department, the Department of Human Services, the Oregon Health Authority and Cover Oregon, a public corporation.

In addition to Oregon's lawsuit, filed in state court, Oracle has sued the state in federal court. As a result, the resolution to the Cover Oregon debacle could become as messy as the project itself.

Willamette University College of Law professor David Friedman said it could take years to resolve the two lawsuits.

It isn't unusual for two parties to sue each other, he said. However, it's far less common for one to sue in federal court and one to sue in state court, which presents some problems.

"It's kind of a mess, is what it is," he said.

There are generally three possible scenarios:

• Both lawsuits could go forward simultaneously, possibly with contradictory results. I''s quite possible one court could find for Oregon and one for Oracle, ending up with the two writing each other large checks.

• One lawsuit could be put on hold. This is called a "stay," and it could be used to allow one case to be resolved first. It would streamline the process somewhat but would also allow the decision from the resolved case to inform the testimony in the other. That would put whoever lost Case No. 1 at a disadvantage in Case No. 2.

• They could file countersuits. This would create four lawsuits (two in each court), but it might clarify things on both ends as it would allow both Oregon and Oracle to present counterarguments from the beginning.

No matter which scenario plays out, Friedman said, neither case will go straight to trial. There will be a series of motions to dismiss, motions to strike and more. At the end, both will almost certainly be appealed, ultimately to the Ninth Circuit Court of Appeals and the Oregon Supreme Court.

The process for that will almost surely take more than a year. However, contracts are often extended or amended later, so even though it is a binding document, nothing is set in stone.

hhoffman@statesmanjournal.com, (503) 399-6719 or follow at twitter.com/HannahKHoffman