United States: Oracle And Its Partners Sued For Negligent Misrepresentation And Breach Of Contract Over Oracle Cloud Software Product

Last Updated: January 13 2020
Article by Pamela Fulmer

Oracle America, Inc. and its partners Kbace Technologies, Cognizant Worldwide and Cognizant Technology were sued by Barrett Business Services, Inc. ("BBSI") in San Francisco Superior Court, for among other things, negligent misrepresentation and breach of contract arising out of one of Oracle's Cloud service offerings. The Complaint seeks damages, restitution and rescission of the Cloud Services contract and a related agreement.

According to the Complaint, Oracle touted on its website and in various marketing materials that Kbace and the Cognizant companies demonstrated outstanding and innovative solutions with Oracle's Human Capital Management ("HCM") Cloud Products and that Kbace was a leading Oracle Cloud implementation partner. BBSI sought to implement an integrated enterprise system for its customers that would integrate complex payroll and invoicing, and made these requirements clear to Oracle and its partners. Oracle is alleged to have praised Kbace and assured BBSI that with Kbace as its implementation partner, Oracle's HCM Cloud Product would meet all of BBSI's requirements. BBSI contends that Oracle represented to BBSI that Kbace was its best payroll implementation partner, and that Kbace had implemented over 300 payrolls and was currently implementing a customer with payroll needs similar to BBSI. According to the Complaint, Oracle and the other Defendants represented that the cost of the project would be between $5.4 and $5.95 million with a "go live" date of mid-2018 for Phase I and an Accounts Receivable/Platform as a Service go live date of January 2019. Throughout the process, the Complaint alleges that BBSI stressed to Defendants the importance of quality and timeliness in the roll-out of the product.

In April 2018 BBSI discovered for the first time that the Oracle software product did not manage local tax configurations and that the HCM Cloud System did not include Oracle's Time & Labor Application. According to the Complaint, BBSI could not use another payroll software due to the lack of functionality in Oracle's HCM Cloud. It was not until June of 2018 that BBSI learned that Oracle's HCM product simply did not include the functionality that BBSI required. At this time Kbace also admitted that contrary to the representations made by itself and Oracle, it had actually been eleven years since it had implemented a similar product, and that it did not currently have the capability to propose a solution that would meet BBSI's needs.

In June 2018 Cognizant proposed a new plan for implementing the functionality sought by BBSI. However, the price of this new plan mushroomed from $5.4 million to over $33 million. In addition, the completion of Phase I was pushed from July 2018 to April 2019 and Phase II from January 2019 to May 2021. Despite the price jump the new plan failed to provide a solution as to how to customize Oracle's HCM Cloud to meet BBSI's needs. BBSI was forced to hire an independent consultant to advise the company on the situation. The independent consultant concluded that Oracle's HCM Cloud was not a suitable solution as it (1) lacked required functionality; (2) had a poor user interface; (3) had minimal API's; and (4) needed significant customization.

In the lawsuit, BBSI asserts claims against Oracle and its implementation partners for negligent misrepresentation, breach of contract and rescission of both agreements. BBSI claims damages in the form of the costs of hiring its own consultant as well as the costs of re-deploying internal resources to address the problems due to the defective performance, and related opportunity costs. BBSI also seeks restitution for monies it paid to the Defendants plus pre-judgement interest.

The case is Barrett Business Services, Inc. vs. Oracle America, Inc., Cognizant Worldwide, Cognizant Technology and Kbace Technologies, Inc., Case No. CGC-19-572574, San Francisco Superior Court. Tactical Law will continue to monitor the case. Check back for periodic updates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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