By Associated Press • 

State budgets $2 million for Cover Oregon lawsuit

SALEM — Oregon has budgeted $2 million for its legal fight with software giant Oracle over the state's failed health care exchange website.

The state sued the Redwood City, California, company in Marion County Circuit Court last month, claiming that Oracle officials lied, breached contracts and engaged in “a pattern of racketeering activity.” Meanwhile, the company has sued the state in federal court alleging breach of contract.

Oracle was the largest technology contractor working on Oregon's health insurance enrollment website, known as Cover Oregon. The public website was never launched, forcing the state to hire hundreds of workers to process paper applications by hand. The issue became a political liability for Democratic Gov. John Kitzhaber.

The state has hired a Portland business litigation firm — Markowitz, Herbold, Glade & Mehlhaf PC — to represent it, the Statesman Journal reported. The firm is giving a 10 percent discount on its rates, but legal experts say the $2 million budget likely won't last more than a year on a case that could last longer than that.

The state Justice Department often hires specialized firms on complicated projects, spokeswoman Kristina Edmunson said. The department has just six attorneys and one paralegal in its special litigation unit, which handles cases that include environmental and election lawsuits.

The Markowitz firm is dedicating seven lawyers to the Oracle case.

The state is seeking damages as high as $240 million and hundreds of millions more in penalties. But Oracle has called the lawsuit “a desperate attempt to deflect blame from Cover Oregon and the governor for their failures to manage a complex IT project.”

Its federal lawsuit seeks payment of more than $23 million in disputed bills. The company blames Oregon for the website's failure, saying the state had incompetent and indecisive staff.

With the competing lawsuits, 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.

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

Both lawsuits could go forward simultaneously, possibly with contradictory results if one court finds for Oregon and one for Oracle, ending up with the two writing each other large checks.

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Information from: Statesman Journal, http://www.statesmanjournal.com

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