oracle summary motion

8/2/2019 Oracle Summary Motion

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ATTORNEYS AT LAW

SAN FRANCISCO

ORACLE CORPORATIONS MEMORANDUM OF POINTS AND AUTHORITIESIN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION

CASE NO. 1-11-CV-203163

LATHAM & WATKINS LLPDaniel M. Wall (Bar No. 102580)Alfred C. Pfeiffer, Jr. (Bar No. 120965)Sadik Huseny (Bar No. 224659)

505 Montgomery Street, Suite 2000San Francisco, California 94111-6538Telephone: (415) 391-0600

Facsimile: (415) 395-8095

ORACLE CORPORATIONDorian Daley (SBN 129049)Deborah K. Miller (SBN 095527)

500 Oracle ParkwayM/S 5op7Redwood Shores, California 94065Telephone: (650) 506-5200Facsimile: (650) 506-7114

Attorneys for Defendant and Cross-ComplainantORACLE CORPORATION

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SANTA CLARA

HEWLETT-PACKARD COMPANY,

Plaintiff,

v.

ORACLE CORPORATION,

Defendant.

ORACLE CORPORATION,

Cross-Complainant,

v.

HEWLETT-PACKARD COMPANY,

Cross-Defendant.

CASE NO. 1-11-CV-203163

Action Filed: June 15, 2011Trial Date: May 31, 2012

ORACLE CORPORATIONSMEMORANDUM OF POINTS ANDAUTHORITIES IN SUPPORT OF ITSMOTION FOR SUMMARYADJUDICATION

Date: April 30, 2012Time: 9:00 AMPlace: Department 1C

Assigned for all Purposes toThe Honorable James P. Kleinberg

PUBLIC REDACTED VERSION


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TABLE OF CONTENTS

PAGE

I. INTRODUCTION ............................................................................................................. 1

II. BACKGROUND/STATEMENT OF FACTS................................................................... 3

A. The Oracle-HP Relationship.................................................................................. 3

B. The Hurd Settlement Agreement ........................................................................... 6

III. ARGUMENT................................................................................................................... 11

A. The Reaffirmation Provision Did Not Transform HistoricallyDiscretionary Partnership Activities Into New ContractObligations........................................................................................................... 11

1. It is For the Court to Determine Whether the Reaffirmation

Provision is Reasonably Susceptible to HPs Interpretation.................... 12

2. The Contracts Text is Not Reasonably Susceptible to anInterpretation Whereby a Reaffirmation FundamentallyTransforms the Nature of the Oracle-HP Partnership.............................. 14

3. The Drafting History Indisputably Shows that HP SoughtBut Oracle Rejected New Business Commitments WithRespect to Porting and Pricing................................................................. 18

4. HPs Proposed Interpretation Would Render theReaffirmation Provision Unenforceable .................................................. 21

5. The Parties Course of Dealing Confirms that PortingAgreements Have Specific Terms Not Found in theReaffirmation Provision........................................................................... 23

B. HP Has Not Honored the Reaffirmation Provision as a ProductSupport Agreement .............................................................................................. 25

C. HPs Implied and Quasi-Contract Claims Fail as a Matter of Law ..................... 26

IV. CONCLUSION................................................................................................................ 30


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TABLE OF AUTHORITIES

CASES

Advanced Choices, Inc. v. Dept of Health Servs.,182 Cal. App. 4th 1661 (2d Dist. 2010)................................................................................ 28

Bustamante v. Intuit, Inc.,141 Cal. App. 4th 199 (6th Dist. 2006)............................................................................. 2, 22

C & K Engineering Contractors v. Amber Steel Co.,23 Cal. 3d 1 (1978) ............................................................................................................... 28

Caminetti v. Pac. Mut. L. Ins. Co.,22 Cal. 2d 344 (1943) ........................................................................................................... 16

Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc.,2 Cal. 4th 342 (1992) ............................................................................................................ 27

Columbia Pictures Television v. Krypton Broad. of Birmingham, Inc.,106 F.3d 284 (9th Cir. 1997) ................................................................................................ 29

Conderback, Inc. v. Standard Oil Co. of Cal., W. Operations,239 Cal. App. 2d 664 (1st Dist. 1966) .................................................................................. 23

Dore v. Arnold Worldwide, Inc.,39 Cal. 4th 384 (2006) ................................................................................................ 2, 12, 14

Eisenberg v. Alameda Newspapers, Inc.,74 Cal. App. 4th 1359 (1st Dist. 1999)............................................................................. 2, 27

Feltner v. Columbia Pictures Television, Inc.,523 U.S. 340 (1998).............................................................................................................. 29

Garcia v. Truck Ins. Exch.,36 Cal. 3d 426 (1984) ....................................................................................................... 2, 21

Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga,175 Cal. App. 4th 1306 (4th Dist. 2009)............................................................... 3, 13, 14, 21

Hamilton v. Greenwich Investors XXVI, LLC,195 Cal. App. 4th 1602 (2d Dist. 2011)................................................................................ 25

Joffe v. City of Huntington Park,201 Cal. App. 4th 492 (2d Dist. 2011).................................................................................. 29

Ladas v. Cal. State Auto. Assn,19 Cal. App. 4th 761 (1st Dist. 1993) ................................................................................... 22

Lance Camper Mfg. Corp. v. Republic Indem. Co.,44 Cal. App. 4th 194 (2d Dist. 1996).................................................................................... 28


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Lange v. TIG Ins. Co.,68 Cal. App. 4th 1179 (2d Dist. 1998)............................................................................ 28, 29

Pac. Gas & Elec. v. G.W. Thomas Drayage & Rigging Co.,69 Cal. 2d 33 (1968) ............................................................................................................. 13

Parsons v. Bristol Dev. Co.,

62 Cal. 2d 861 (1965) ................................................................................................... 2, 3, 13

PMC, Inc. v. Porthole Yachts,65 Cal. App. 4th 882 (4th Dist. 1998)................................................................................... 27

Robinson & Wilson, Inc. v. Stone,35 Cal. App. 3d 396 (4th Dist. 1973).................................................................................... 22

Spellman v. Dixon,256 Cal. App. 2d 1 (2d Dist. 1967)....................................................................................... 22

Stellar v. Sears, Roebuck and Co.,

189 Cal. App. 4th 175 (2d Dist. 2010).................................................................................. 12Suarez v. Life Ins. Co. of N. Am.,

206 Cal. App. 3d 1396 (2d Dist. 1988)................................................................................. 14

Third Story Music, Inc. v. Waits,41 Cal. App. 4th 798 (2d Dist. 1995).................................................................................... 27

Travelers Cas. & Sur. Co. v. Superior Court of Santa Clara Cnty.,63 Cal. App. 4th 1440 (6th Dist. 1998)................................................................................. 14

United Cmty. Church v. Garcin,231 Cal. App. 3d 327 (2d Dist.1991)...................................................................................... 3

Walker v. KFC Corp.,

728 F.2d 1215 (9th Cir. 1984) .............................................................................................. 28

Weddington Prods v. Flick,60 Cal. App. 4th 793 (2d Dist. 1998).................................................................................... 22

Winet v. Price,4 Cal. App. 4th 1159 (4th Dist. 1992)....................................................................... 12, 13, 14

Wolf v. Walt Disney Pictures and Television,162 Cal. App. 4th 1107 (2d Dist. 2008).......................................................................... 13, 21

Woods v. Ins. Co. of N. Am.,38 Cal. App. 3d 144 (1st Dist. 1974) .................................................................................... 19


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STATUTES

California Civil Code 1636...................................................................................................... 12



OTHER AUTHORITIES

Eric Posner, The Parol Evidence Rule, the Plain Meaning Rule, and thePrinciples of Contractual Interpretation, 146 U. Pa. L. Rev. 533, 534 (1998)....................13


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I. INTRODUCTIONThis motion addresses Hewlett-Packard Companys (HPs) primary claims in this case:

its so-called contract claims. As the Court knows, HP contends that the settlement agreement of

an employment suitHPs lawsuit against Mark Hurd when Hurd went to work for Oracle

Corporation (Oracle)(the Hurd Settlement Agreement) fundamentally transformed a

longstanding but mostly voluntary strategic partnership between HP and Oracle into a legally

obligatory relationship, whereby Oracle must create future software products for HP platforms

and price its software products on terms that ensure HPs competitiveness. The purported engine

of this transformation is a two-sentence term in the Hurd Settlement Agreement that

reaffirm[s] the Oracle-HP partnership.

From the time in September 2010 when the parties settled the Hurd lawsuit until June

2011, just before this case was filed, no one associated with HP ever put in writing, even once,

publicly or privately, anything saying that this Reaffirmation Provision obligated Oracle to

provide HP with new products, favorable pricing or other alleged perquisites of partnership.

This is despite HPs claim that Oracle breached the Reaffirmation Provision [s]oon after signing

the Hurd Agreement, Compl. 44, and that the pricing and product development decisions at

issue in this litigation occurred in December 2010 and March 2011. There is literally no

documentary evidence that HP ever treated this reaffirmation as a contract that constrained

or even mattered tothe parties business dealings. Only in June 2011with the demand letter

that preceded the filing of this lawsuitdid HP begin to claim that the September 2010

Reaffirmation Provision obligated Oracle to continue making and pricing software products for

HP on terms consistent with the way those products were offered and supported prior to

Oracles hiring of Hurd. Compl. 61.

The key issue in this case is whether the Reaffirmation Provision means what HP now

says it does. That is an issue ofcontract interpretation, the traditional province of judges rather

than juries. California law, in particular, has gone out of its way to ensure that contract

interpretation remains a judicial responsibility in most cases. At the heart of this division of

labor is the rule from Chief Justice Traynors opinion inParsons v. Bristol Dev. Co., 62 Cal. 2d


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861, 865 (1965), that [i]t is solely a judicial function to interpret a written instrument unless

the interpretation turns upon the credibility of extrinsic evidence. This is so even when

conflicting inferences may be drawn from uncontroverted evidence. Garcia v. Truck Ins. Exch.,

36 Cal. 3d 426, 439 (1984).

Oracle is entitled to summary adjudication on HPs breach of contract claim (and

corollary claims for declaratory relief and breach of the covenant of good faith and fair dealing)

because, as a matter of law, HPs position about what the Hurd Settlement Agreement means

cannot be right. That is because the Reaffirmation Provision on its face, and viewed in the

context of the Hurd Settlement Agreement, is not reasonably susceptible to HPs

interpretation. See Dore v. Arnold Worldwide, Inc., 39 Cal. 4th 384, 393 (2006). The primary

stumbling block is the plain language of the provision, which is a reaffirmation and refers to

consistency with past practices, concepts that are plainly at odds with an intent to transform the

parties partnership from a mostly voluntary enterprise into one where product development and

pricing decisions are contractually constrained. The language is also hopelessly vague for the

purposes HP claims it servesa point this Court itself raised months agowhich would render

the agreement void for vagueness. See Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 209

(6th Dist. 2006). Moreover, the drafting history shows that HPsoughttrue business

commitments in the course of the settlement negotiationsincluding porting and pricing

obligations exactly like the ones it claims nowand Oracle indisputably rejected the requests.

Literally all of the extrinsic documentary evidence supports Oracles position that the

reaffirmation created no new product development or pricing obligations.

Oracle is also entitled to summary adjudication on HPs implied and quasi-contract

claims. HP cannot show a breach of any implied contract because California law does not allow

any such claims when the parties have considered and either adopted or rejected a functionally

equivalent express contractual commitment. See, e.g.,Eisenberg v. Alameda Newspapers, Inc.,

74 Cal. App. 4th 1359, 1387 (1st Dist. 1999) (There cannot be a valid express contract and an

implied contract, each embracing the same subject, but compelling different results.). The

parties have executed numerous formal porting agreements between them, and Oracle rejected


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porting and pricing commitments in the Hurd Settlement Agreement, leaving no room for any

argument that an implied contract somehow addresses this subject matter. Similarly, HPs

promissory estoppel claim fails because HP cannot show, as it must, detrimental reliance on a

clear and unambiguous promise for porting or pricing guarantees. There is no record evidence of

any promise that meets the strict requirements of California promissory estoppel law.

Furthermore, Oracles rejection of HPs proposed contractual language prescribing precisely the

duties HP now seeks to enforce on a promissory estoppel theory means that HPs alleged

reliance was unreasonable as a matter of law.

This is an important motion, because HPs game plan in this lawsuit is to put on a case

that Oracles decision to stop porting its new software products to the Itanium platform was

unfair, arbitrary, outrageous, and anti-consumer. It clearly wants the jury to address this

saga emotionally so that it will second-guess and condemn Oracles business decisions about

which platforms to support and what prices to charge. But these emotional arguments are

irrelevant if Oracle had no legal duty to port its future software to the Itanium platform, or price

its software in any particular way. The Court has a special obligation under California law to

determine whether the Hurd Settlement Agreement contains such a duty before letting the breach

case go to trial. See Parsons, 62 Cal. 2d at 866 n.2;Habitat Trust for Wildlife, Inc. v. City of

Rancho Cucamonga, 175 Cal. App. 4th 1306, 1341-42 (4th Dist. 2009). Here, the Reaffirmation

Provision contains no such duty, entitling Oracle to summary adjudication.

II. BACKGROUND/STATEMENT OF FACTS1A. The Oracle-HP RelationshipFor several decades, Oracle and HP have made complementary products. The two

companies business relationshipwhich they have sometimes called a partnership,

1 We are mindful of the so-called Golden Rule of Summary Adjudication: if [a fact] is not setforth in the separate statement [of undisputed material facts], it does not exist. United CmtyChurch v. Garcin, 231 Cal. App. 3d 327, 337 (2d Dist. 1991). At the same time, here as inmost cases there are some noncontroversial background facts that, while not strictlymaterial, help the Court understand the arguments presented. The inclusion of suchbackground material (via citation to the Wall declaration and other sources) does not changethe basis of the motion, which is exclusively those facts listed in the separate statement.


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sometimes called an alliance, and sometimes called co-opetitionhas revolved principally

around Oracles computer software and HPs computer hardware. Wall Decl., Ex. 1 (Vella Dep.

Ex. 346); Wall Decl., Ex. 2 (Miller Dep. at 177:25-178:11). In short, there was money to be

made working together because a common set of customers wants to run Oracle software on HP

servers. The Oracle-HP relationship is not unique in that respect. Silicon Valley is replete with

such partnerships, and Oracle similarly partners with IBM, its overall largest competitor,

applications software competitors like SAP, and many others. See Wall Decl., Ex. 3 (Ellison

Dep. at 72:6-13); Wall Decl., Ex. 4 (Mendelsohn Dep. at 134:6-9).

For the most part, Oracle has adapted its software to run on others platforms or with

others software at its own cost, with no contract in place, and purely in the pursuit of Oracles

own self-interest. There is no dispute that that is how Oracle came to port its software to HPs

platforms originally. See, e.g.,Wall Decl., Ex. 5 (Stallard Dep. at 353:15-354:5). Certain HP

servers have been and continue to be popular, and Oracle has profited from selling software

licenses to customers who use them. That said, self-interest is not always enough to convince an

independent software vendor, or ISV, like Oracle to port its software to a given platform.

Porting agreementsmeaning formal written contracts whereby in exchange for some

negotiated compensation an ISV adapts specified software to run on another partys platform

are a common feature of this industry. HP enters porting agreements with a variety of ISVs,

when it decides it needs to pay the ISVs to undertake or accelerate porting efforts that ISV self-

interest alone would not ensure. Wall Decl., Ex. 6 (Fink Dep. at 111:15-112:20); Wall Decl., Ex

7 (Palk Dep. Ex. 937 at 17).

Partners or not, Oracle and HP have executed numerous formal porting agreements.

Some arose when Oracle acquired other software companies whose products had not been ported

to an HP platform, and HP wanted to ensure that Oracle ported them. See, e.g., Separate

Statement of Undisputed Facts (Undisputed Facts) 3, 4, 9. 2 Others arose in the ordinary

2 The Undisputed Facts address each of HPs claims separately, and repeat certain entries formultiple claims. In this Memorandum, reference to an Undisputed Facts entry listed underone claim should be taken also to apply to all other claims to which the cited entry isrelevant.


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course of businessincluding, significantly, the Agreement for Porting Oracle E-Business

Suite to the HP-UX on Itanium Platform, executed in 2006, by which HP paid Oracle to port its

primary catalogue of business applications software to the HP-UX on Itanium Platform.

Undisputed Facts 1. HP sought and obtained this formal contractual commitment as part of its

Integrity Acceleration Program, in essence a pool of millions of dollars HP paid to Oracle,

IBM and numerous other ISVs to port their software to the HP-UX platform. Wall Decl., Ex. 8

(Bartlett Dep. Ex. 876 at HPC_00036996).

The Court need not delve into the details of these express porting agreements, because no

part of HPs case is based on any of them. The salient point is simply this: though the parties

disagree over a number of important issues in this litigation, there is no dispute that

(a) historically, their relationship encompassed some actions that Oracle carried out voluntarily,

without binding commitments to HP, and other actions that Oracle carried out under contractual

obligation;and (b) Oracle developed versions of its software for HP platforms under both

regimeson its own when it suited Oracles business interests and by contract when more was

required.

Against that established backdrop, two events in 2010 caused tension in the companies

partnership. First, in January, Oracle completed its acquisition of Sun Microsystems.

Undisputed Facts 14. Sun had been one of HPs primary competitors in certain hardware

markets, including what HP likes to call the mission critical UNIX market.3 Undisputed Facts

15. That is the business at issue in this case and the target market for the HP server products

that run HPs proprietary version of the UNIX operating system, called HP-UX. As HP

executives have acknowledged, Oracles acquisition of Sun changed the dynamic of Oracles

relationship with HP. Interactions between the companies that had been principally cooperative

in the past would now need to account for Oracles newfound interest in competing against HP in

the hardware business. Undisputed Facts 16.

3HP has filed antitrust complaints against Oracle in various jurisdictions around the world (notincluding the United States), and in those investigations the parties are contesting whetherthere is such a thing as a mission critical UNIX market. We adopt HPs term here solely toavoid needless conflict and without endorsing it.


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Second, in late summer 2010, the two companies had a nasty public quarrel over HPs

decision to fire its President and CEO, Mark Hurd, and Oracles decision a few weeks later to

hire Mr. Hurd as its own co-President. When HP fired Mr. Hurd, Oracle CEO Larry Ellison

blasted the HP board, calling the decision the worst personnel decision since the idiots on the

Apple board fired Steve Jobs many years ago. Undisputed Facts 17. When Oracle announced

its hiring of Mr. Hurd, HP instantly filed a lawsuit against himby 9:29 a.m. the next day,

before any diligence could possibly have been donealleging that Mr. Hurd had breached the

Separation and Release he signed when he left HP (the Separation Agreement), and that his

new job would inevitably lead him to disclose HP trade secrets. See Undisputed Facts 19.

Though Oracle was not a party to that litigation, it did take umbrage, and responded immediately

with a press release castigating HP for its vindictive lawsuit. The statement took the form of a

quote from CEO Larry Ellison, which read:

Oracle has long viewed HP as an important partner. . . . [T]he HPboard is acting with utter disregard for that partnership, our jointcustomers, and their own shareholders and employees. The HPBoard is making it virtually impossible for Oracle and HP tocontinue to cooperate and work together in the IT marketplace.

Undisputed Facts 21. The quote appeared in an article on the front page of the following days

New York Timesbusiness section. Undisputed Facts 22. The Wall Street Journalalso reported

that the H-P-Oracle feud was turning onetime partners into rivals. Undisputed Facts 23.

B. The Hurd Settlement AgreementHPs lawsuit was against Mr. Hurd alone. It thus sought relief against Hurd alone,

principally in the form of various injunctions to prevent Hurd from breaching his confidentiality

obligations. See Undisputed Facts 19, 20; Wall. Decl., Ex. 11 (Hurd Compl. A-H). It had

nothing whatsoever to do with whether Oracle ported software to HP, the prices Oracle charged

for its software when it ran on HP platforms, or any other commercial matter. It was an

employment dispute. And true to that character, when HP, Hurd and Oracle began discussing a

settlement of the case, the talks were about how to protect HPs confidential information and

amend the Separation Agreement that HP and Hurd had executed a month earlier. See Wall

Decl., Ex. 12 (Livermore Dep. at 72:24-80:10). There was nothing about reaffirming any


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partnership in HPs first oral settlement proposal, its first written settlement proposal, or its

second written settlement proposal. See Undisputed Facts 24, 26, 29.

Behind the scenes, however, Ellisons aggressive public response to HPs suit against

Hurd, which raised the specter of an end to collaborations between Oracle and HP, touched a

nerve at HP. As former HP senior executive and current board member Ann Livermore testified,

it was in part because Larry had been so vocal that HP ultimately decided it was important to

reach out to Oracle about reaffirming the companies partnership. Undisputed Facts 31. In

addition, HP was concerned that a man it had just fired, Mark Hurd, was becoming one of

Oracles leaders. As HP senior executive David Donatelli put it: [I]f you look at it from a

personal level, obviously Mark was fired from Hewlett-Packard, at the end of the day. And you

always have concern that people let their personal issues get in the way of longstanding

partnerships. Wall Decl., Ex. 13 (Donatelli Dep. at 183:17-21);see also Undisputed Facts 31.

On Saturday, September 11, 2010, shortly after a telephonic meeting of the HP board at

which these concerns were discussed and four days after filing the lawsuit, HP first asked Oracle

to reaffirm the partnership. Undisputed Facts 29. That request was made in a telephone call

between Ms. Livermore and Oracle Co-President Safra Catz. Undisputed Facts 28, 29. In

parallel, HP executives set out on a research mission of sorts to determine what contracts did in

fact exist between HP and Oracle, and what additional commitments HP should seek from

Oracle. Wall Decl., Ex. 6 (Fink Dep. at 30:18-24; 120:18-25). The request made its way to

Martin Fink, the executive who runs HPs Business Critical Systems unitthe unit that makes

and sells the servers running HP-UX on Itanium. Mr. Fink located several agreements

containing limited porting commitments for certain existing Oracle products, but found no

broader contractual obligations, and nothing that required Oracle to portfuture versions of its

software to HP operating systems. Wall Decl., Ex. 6 (Fink Dep. at 31:8-33:21; 133:4-20). He

then created and forwarded to HPs in-house counsel a list of asks to, as he put it, maintain[]

business continuity for the BCS business. Wall Decl., Ex. 6 (Fink Dep. at 18:21-25). Clearly,

someone had decided to try to use the Hurd settlement talks to extract substantial forward-

looking business commitments from Oracle. Included in the list of asks was an explicit


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commitment by Oracle to keep porting its software to HP-UX on Itanium. Wall Decl., Ex. 6

(Fink Dep. at 138:6-16).

Ann Livermore did not raise porting or pricing explicitly when she first asked Safra Catz

to reaffirm the partnership. Wall Decl., Ex. 12 (Livermore Dep. at 96:15) (We didnt go very

deep.); id. at 80:5-20 (indicating that she first discussed porting with Ms. Catz in connection

with later drafts). Ms. Catz relayed the original reaffirmation request to Oracles General

Counsel, Dorian Daley, who drafted the first version of the reaffirmation provision as follows:

The parties re-affirm their commitment to their longstanding strategic partnership as established

under their existing contractual commitments and their mutual desire to continue to support their

joint customers. Undisputed Facts 32. Ms. Daley simultaneously proposed that the press

release disclosing the settlement would announce continuation of the longstanding and mutually

productive relationship between HP and Oracle. Id. It was a public relations solution to a

public relations problem.

The next day, September 12, 2010, HP sent Oracle a counter-offer, in the form of a term

sheet, envisioning a different kind of commitment. See Undisputed Facts 33. The paragraph

HP drafted began with Oracles language about re-affirm[ing] their commitment to their

longstanding strategic partnership and their mutual desire to continue to support their joint

customers. Id. But HP struck Ms. Daleys reference to existing contractual commitments

and in its place proposed what clearly would have been a set of new business commitments:

This reaffirmation to include a commitment from Oracle tocontinue to offer its product suite on HP platforms on terms thatare as good as or better than any other platform, and to co-marketand co-sell with HP such that the products available on HPPlatforms are promoted or sold on par with or better than any otherplatform Oracle supports (other than Exadata). The detailedoperative terms (including duration of the contractualcommitment) to be resolved in the drafting of the actual writtenagreement.

Id.

When Dorian Daley received HPs September 12 proposal, she understood that HP was

trying to change the reaffirmation from an essentially symbolic public relations commitmenta

way to calm the waters that were roiling due to the Hurd controversyinto a detailed set of


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commercial and product development commitments. Ms. Daley rejected this effort. Later on

September 12, she drafted and forwarded to HP a new version of the reaffirmation language that

with minor modifications became the final language the parties would later ratify. Undisputed

Facts 34-35; compare Undisputed Facts 43. Ms. Daleys September 12 draft reads as

follows:

1. Reaffirmation of the Oracle-HP Partnership. Oracle and HPreaffirm their commitment to their longstanding strategicrelationship and their mutual desire to continue to support theirmutual customers. Oracle will continue to offer its product suiteon HP platforms and HP will continue to support Oracle products(including Oracle Enterprise Linux and Oracle VM) on itshardware in a manner consistent with that partnership.

Undisputed Facts 34. To clarify the purpose and effect of these two sentences, Daley appended

a cover email in which she explainedunequivocally and unmistakablythat Oracle would not

agree to a reaffirmation that resulted in new obligations:

Reaffirmation of the Oracle-HP Partnership: This was intended toreaffirm and continue the existing relationship and not to put HPin a better position that it currently enjoys or result in thenegotiation of a new contractual commitment. Ms. Catz and Ms.Livermore did not discuss anything more tha[n] an agreement tocontinue to work together as the companies havewith Oracleporting products to HPs platform and HP supporting the portedproducts and the parties engaging in joint marketingopportunitiesfor the mutual benefit of customers. They did not

discuss, and Oracle will not agree, to a most favored nationsclause. Given their market positions, such an agreement mighteven be considered suspect by regulatory authorities. Negotiationof detailed operative terms is therefore not necessary.

Id. (emphasis added).

HP pushed back. On September 13, HP made a new written counter-offer which we now

know was based on Martin Finks list of asks for HPs BCS business. See Wall Decl., Ex. 6

(Fink Dep. at 135:21-138:16). It outlined obligations for Oracle that are identical to the porting

and pricing obligations that HP now says Oracle actually took on. See Compl. 61. HP

proposed to add the following sentence (among others) to the reaffirmation, words that could

pass as a summary of HPs position in this case:

Oracle will continue to support all ongoing versions of HP-UXwith Oracles relevant database, middleware and applicationproducts with the availability, marketing and pricing in


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competitive terms that Oracle has provided HP for the past fiveyears.

Undisputed Facts 37.

Ms. Daley rejected this 33 minutes after the draft arrived, writing in an email: [Y]ou are

losing the only executive management advocate for a settlement with this. Safra [Catz] was with

me now shes going off the reservation. Undisputed Facts 39. Catz called Livermore to

complain about this as well. See Undisputed Facts 38. Most importantly, Oracle removed all

of HPs proposed commitments language in its September 14 counter-offer (Undisputed Facts

40) and HP thereafter gave up trying to add porting and pricing language to the reaffirmation.4

See, e.g., Undisputed Facts 41; Wall Decl., Ex. 14 (Daley Dep. Ex. 59); Wall Decl., Ex. 15

(Daley Dep. Ex. 61).

Only one more change was made to the Reaffirmation Provision, and it does not alter any

of the words that do work in HPs theory of the case. The change clarified that what the

parties were reaffirming was the partnership as it existed prior to Oracles hiring of Hurd (see

Undisputed Facts 35), and not as of any later date. Wall Decl., Ex. 16 (Holston Dep. at 209:13-

210:22). Of course, the language on its face limits the scope of the Reaffirmation Provision to

the subject of HPs lawsuit: Hurds move to Oracle.5

The day the parties signed the Hurd Settlement Agreement, they jointly issued a press

release entitled HP and Oracle Reaffirm Commitment to Long-term Strategic Partnership. It

said, in relevant part:

HP and Oracle Corp. today reaffirmed their long-term strategicpartnership and the resolution of litigation regarding Mark V.Hurds employment at Oracle. While the terms of the settlementare confidential, Mr. Hurd will adhere to his obligations to protectHPs confidential information while fulfilling his responsibilities atOracle. The agreement also reaffirms HP and Oracles

4Ms. Livermore now claims that HP should never have sent Oracle the September 13 markupto the Reaffirmation Provision, since she had already agreed with Ms. Catz not to try tospecify Oracles obligations. See Wall Decl., Ex. 12 (Livermore Dep. at 121:14-123:7). Itdoes not matter whether that is true, since it is undisputed that HP sent the markup andOracle promptly rejected it. See Undisputed Facts 37, 40.

5 There was no discussion of this change either between Ms. Catz and Ms. Livermore orbetween counsel. Wall Decl., Ex. 12 (Livermore Dep. at 120:24-123:7); Wall Decl., Ex. 16(Holston Dep. at 223:24-224:15).


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commitment to delivering the best products and solutions to theirmore than 140,000 shared customers.

Undisputed Facts 44. The release included a quote attributed to Larry Ellison stating, Oracle

and HP will continue to build and expand a partnership that has already lasted for over 25 years.

Id.

Just as Ellisons September 7 comments had drawn widespread public interest, the

parties rapprochement did the same. The September 20 release, like Ellisons earlier missive,

made the front page of the following daysNew York Timesbusiness section; the article began,

A fierce and public feud between Oracle and Hewlett-Packard, two of the worlds largest

technology companies, has ended after all of two weeks. Undisputed Facts 45. And once

again, the Wall Street Journalalso took notice, reporting the end of weeks of mudslinging by

HP and Oracle. Undisputed Facts 46.

III. ARGUMENTA. The Reaffirmation Provision Did Not Transform Historically

Discretionary Partnership Activities Into New Contract Obligations

The Complaint alleges that Oracle breached the Reaffirmation Provision in the

Hurd Settlement Agreement because it: (i) announced that it plans to discontinue all software

development on the Itanium microprocessor, and that new versions of Oracle software will not

run on the Itanium platform; (ii) stopped supporting Itanium customers that are using existing

versions of Oracle software; and (iii) changed its longstanding software license pricing formula

to specifically disadvantage Itanium platforms. Compl. 60;see also id. 67. The question

presented is thus whether the Reaffirmation Provision constrains Oracles discretion to price its

software or decide which hardware and software platforms to support, by requiring Oracle to

forever act consistent with the way [Oracle] products were offered and supported prior to

Oracles hiring of Hurd. Compl. 61.6

6 HP has not seriously pursued the allegation that Oracle failed to support Itanium customerswith existingversions of Oracle software. We therefore focus on the porting and pricingclaims. In terms of whether there is a duty to provide such support, the issues are the same.


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1. It is For the Court to Determine Whether the Reaffirmation Provisionis Reasonably Susceptible to HPs Interpretation

California follows the fundamental common law rule that a contract must be interpreted

so as to give effect to the intentions of the parties. See Cal. Civil Code 1636. The standard is

objective: [t]he question is what the parties objective manifestations of agreement or objective

expressions of intent would lead a reasonable person to believe. Stellar v. Sears, Roebuck and

Co., 189 Cal. App. 4th 175, 184-85 (2d Dist. 2010). There is a limited range of possible

interpretations for every contract, typically described as those meanings to which the language is

reasonably susceptible. Dore, 39 Cal. 4th at 393. Neither a judge nor a jury may ever adopt

an interpretation outside this range.

In the first instance it falls on the trial judge to determine whether the competing

positions fall within the range of reasonable interpretations. When a dispute arises over the

meaning of contract language, the first question to be decided is whether the language is

reasonably susceptible to the interpretation urged by the party. If it is not, the case is over. Id

at 393 (citation omitted). This first step is often described as determining whether the contract is

ambiguous. Ambiguity in this sense has a particular meaning, which in substance is whether

the contract language is reasonably susceptible to both interpretationsproffered by the parties

to the dispute. Winet v. Price, 4 Cal. App. 4th 1159, 1165 (4th Dist. 1992).7

Virtually all

contracts have some degree of ambiguity in the simple sense that the words are not perfectly

clear. But courts do not concern themselves with an ambiguity per se, i.e., an ambiguity

unrelated to an application.Dore, 39 Cal. 4th at 391. The courts threshold decision is whether

the language of the contract is reasonably susceptible to the interpretation on which the case

turnsin this case, HPs claim that the Reaffirmation Provision constrains Oracle product

development and pricing decisions that historically have been discretionary.

At common law the question of ambiguity effectively determined whether parol

evidence was admissible to aid the process of interpretation. See, e.g.,Eric Posner, The Parol

Evidence Rule, the Plain Meaning Rule, and the Principles of Contractual Interpretation, 146 U.

7 This is a question of law, not of fact. Winet, 4 Cal. App. 4th at 1165.


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Pa. L. Rev. 533, 534 (1998). Parsons and subsequent California cases have put a distinct spin on

that doctrine. Under California law, in order to decide whether a contract is ambiguous in the

first place, the judge considers (though without officially admitting into the record) the very

same extrinsic evidence that would be relevant to guide the interpretation of the contract if it

were deemed ambiguous. See Pacific Gas & Elec. v. G.W. Thomas Drayage & Rigging Co.,

69 Cal. 2d 33, 40 (1968).

Moreover, in most cases the judge will interpret the contract whether or not it is deemed

ambiguous. That is, a trial judge bears the sole responsibility to determine what the parties

intended an agreement to mean either (a) if its text is unambiguous, Wolf v. Walt Disney

Pictures and Television, 162 Cal. App. 4th 1107, 1125-26 (2d Dist. 2008), or (b) even if the

language is ambiguous, so long as the evidence required to resolve the ambiguity is

uncontroverted. Winet, 4 Cal. App. 4th at 1166 n.3. This is the essence of theParsons rule:

courts, not juries, resolve competing inferences from uncontroverted extrinsic evidence. The

upshot of this regime is that contract interpretation under California law is a three-step process,

the first two of which are entirely the trial judges responsibility.8

This is not to say that juries have no role in interpreting contracts. They do, but only

where the judge cannot choose between two reasonable interpretations without resolving a

factual conflict in the extrinsic evidencein other words, only if the proper interpretation turns

on the outcome of a material credibility dispute. See Habitat Trust, 175 Cal. App. 4th at 1342.

8 SeeWolf, 162 Cal. App. 4th at 1126-27 (citations omitted):

First, [the judge] provisionally receives any proffered extrinsic evidence that isrelevant to prove a meaning to which the language of the instrument is reasonablysusceptible. If, in light of the extrinsic evidence, the language is reasonably susceptibleto the interpretation urged, the extrinsic evidence is then admitted to aid the court in its

role in interpreting the contract. . . . This is true even when conflicting inferences may bedrawn from the undisputed extrinsic evidence or that extrinsic evidence renders thecontract terms susceptible to more than one reasonable interpretation. If, however, thereis a conflict in the extrinsic evidence, the factual conflict is to be resolved by the jury.

HPs counsel has previously endorsed this understanding of California law. See Wall Decl.,Ex. 17 (Case Mgmt. Conf. Tr. at 10:23-26 (Aug. 12, 2011) (MR. COOPER: Purelyinterpreting a contract is a judicial function not necessarily for the jury, and then you have tolook beyond that to see whether there are genuine factual disputes that underlies [sic] thatinterpretation.)).


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Frequently it does notand as a result California case law is replete with contract interpretation

disputes cut off at summary judgment or summary adjudication. See, e.g., Suarez v. Life Ins. Co.

of N. Am., 206 Cal. App. 3d 1396, 1408 (2d Dist. 1988) (affirming summary judgment); Winet, 4

Cal. App. 4th at 1162 (same); Travelers Cas. & Sur. Co. v. Superior Court of Santa Clara Cnty.,

63 Cal. App. 4th 1440, 1445 (6th Dist. 1998);Dore, 39 Cal. 4th at 387 (affirming summary

judgment);Habitat Trust, 175 Cal. App. 4th at 1345 (same).

HP cannot get past those first two steps in the contract interpretation process because the

contract language, its context, and the undisputed extrinsic evidence foreclose its position. 9

2. The Contracts Text is Not Reasonably Susceptible to anInterpretation Whereby a Reaffirmation Fundamentally

Transforms the Nature of the Oracle-HP Partnership

We begin, as the Court must, with the words. The Reaffirmation Provision states:

Reaffirmation of the Oracle-HP Partnership. Oracle and HPreaffirm their commitment to their longstanding strategicrelationship and their mutual desire to continue to support theirmutual customers. Oracle will continue to offer its product suite onHP platforms, and HP will continue to support Oracle products(including Oracle Enterprise Linux and Oracle VM) on itshardware in a manner consistent with that partnership as it existedprior to Oracles hiring of Hurd.


On its face, without any of the negotiating context, this provision means nothing more

than that the parties are reaffirming whatever relationship and obligations they already had

prior to Oracles hiring of Hurd. Thats the only conceivable way to understand the word

reaffirm. It means to state something again. See, e.g., Reaffirm,American Heritage

Dictionary of the English Language (4th ed. 2006) (To affirm or assert again);

Reaffirmation,Blacks Law Dictionary (9th ed. 2009) (Approval of something previously

decided or agreed to; renewal). Req. for Judicial Notice Ex. 6-7. To reaffirm a commitment is

to communicate that you still intend to meet thatpre-existingcommitment. One might reaffirm a

9 To avoid repetition, Oracle will not address the first two steps in the interpretive processseparately. However, all arguments should be taken to apply first to the threshold inquiry(ambiguity), and then if necessary to the subsequent one (uncontroverted facts).


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binding commitment (like a contract) or a non-binding commitment (like a strategic

partnership); every day of the week one can read about world leaders reaffirming alliances,

policies and platforms. But in all cases one can only reaffirm what already exists. No one

creates a new obligation by reaffirming something.

HP skips over the title of the Reaffirmation Provision and the first sentence, and rests its

entire case on a fragment of the second sentence: Oracle will continue to offer its product suite

on HP platforms in a manner consistent with that partnership as it existed prior to Oracles

hiring of Hurd. That language, however, is part of and completely consistent with the explicit

reaffirmation that precedes it. The California rule is that [t]he whole of a contract is to be taken

together, so as to give effect to every part, each clause helping to interpret the other. Cal.

Civil Code 1641. In the Reaffirmation Provision as a whole, the title communicates that the

paragraph constitutes a reaffirmation; the first sentence is a reaffirmation; and the second

sentence explains thescope of the reaffirmation. But all it means is that the parties will get back

to supporting each other consistent with the partnershipas if the Hurd spat had never

happened.

The context in which the clause arose compels this interpretation. Seeid. 1647 (A

contract may be explained by reference to the circumstances under which it was made, and the

matter to which it relates.). The problem addressed by the settlement generally and the

Reaffirmation Provision in particular is disruption in the Oracle-HP relationship caused by

Oracles hiring of Mark Hurd. That was also the point of Oracles September 7, 2010 press

release saying that the lawsuit was making it virtually impossible for Oracle and HP to continue

to cooperate and work together in the IT marketplace. See Undisputed Facts 21. HPs

witnesses admit that the Reaffirmation Provision addressed Hurds move to Oracle, including

HPs business lead on the negotiations, Ms. Livermore, who agreed that the Reaffirmation

Provision was meant to permit the partnership to go forward with Mark Hurd out of the

equation. Undisputed Facts 30.

In that context and for that purpose the language chosen for the Reaffirmation

Provisionits brevity, generality and the explicit references to reaffirming what existed prior to


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Oracles hiring of Hurdmakes perfect sense. Nothing more was needed to address the public

relations issues that were causing customers to wonder about the future of the Oracle-HP

partnership. A brief two sentences allowed the parties to announce, truthfully, that they had

reaffirmed their long-term strategic partnership. See Undisputed Facts 44. The strategy

worked, at least briefly. The same leading newspapers that had spread word of the falling-out

reported the patching-up. See Undisputed Facts 45, 46.

HP argues that if the Reaffirmation Provision means so little, then it is illusory, which as

a matter of law a contract cannot be. But it is not illusorybecause reaffirming the partnership

had value. It in essence retracted a public statement that Larry Ellison had made that bothered

HP deeply. Furthermore, reaffirmations were apparently very valuable to HP, since there are

two of them in the Hurd Settlement Agreement, both at HPs request. Paragraph 2 of the

agreementimmediately following the Reaffirmation Provisionhas HP and Hurd reaffirm

their commitment to comply with the terms of the Separation Agreement (the contract executed

just a month earlier when Hurd left HP). It is axiomatic that terms in a contract should be given

consistent meaning, and clearly this second reaffirmation provision does nothing but take

entirely pre-existing obligations and reiterate the relevant parties intention to carry on as they

otherwise would have, with no material changes going forward. See Caminetti v. Pac. Mut. L.

Ins. Co., 22 Cal. 2d 344, 358 (1943). In light of that, HP cannot sensibly contend that bare

reaffirmations, without more, have no contractual significance; there is no debate that it sought

and received two of them in this very contract.

The language chosen for the Reaffirmation Provision makes no sense for the purpose of

transforminga mostly voluntary strategic partnership into a fully obligatory one. Make no

mistake: HP is claiming that the 27 words it is pulling from the Reaffirmation Provision were

worth billions of dollars to HP, and that the fate of HPs entire HP-UX business depends on

them. Were HPs interpretation accepted, those 27 words would obligate Oracle to spend

millions of dollars on development indefinitelyuntil HP decides to give up on the Itanium

platform. See Wall Decl., Ex. 13 (Donatelli Dep. at 109:10-110:11) (testifying that the Hurd

Settlement Agreement obligates Oracle to offer its software on the HP-UX Itanium platformfor


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as long as HP chooses to stay in the business of promoting the platform, and without any

compensation from HP). It is patently unreasonable to contend that Oracleor anyonewould

agree to take on obligations of that dimension with this kind of breezy, feel-good language.10

Indisputably, the list of missing termsthe terms one would expect to see in an

agreement reasonably susceptible to HPs interpretationis long and substantial. Neither of the

Reaffirmation Provisions two sentences contains a price term. Neither contains a duration term.

Neither contains a term that identifies with any specificity which of Oracles hundreds of

products Oracle is obligated to port. Neither contains a term that identifies with any specificity

which of HPs platforms Oracle allegedly agreed to port its software products to. Neither

contains a term that identifies the timing of required ports. Neither contains a term that identifies

what resources HP is to make available to facilitate the ports. Neither contains any performance

criteria to constrain Oracle from providing a minimal or poor quality port. Neither contains a

term that explains how the parties pre-existing, written porting agreements are affected by this

new omnibus obligation. And with respect to HPs pricing theory, neither contains a term that

says what list price, range of list prices, or method for calculating list prices Oracle may

permissibly use for its ported software. It is no exaggeration to say that every expected detail for

a contract of such import is missing from the Reaffirmation Provision.11

This is not something that HP can explain away or excuse. HP effectively recognized

that much more would be required to create bona fide porting and pricing obligations when, on

September 12, 2010, it first proposed that the reaffirmation should include a commitment

from Oracle to continue to offer its product suite on HP platforms on terms that are as good as or

better than any other platform. See Undisputed Facts 33. To this, HP added: The detailed

10 Months ago, this Court made the same point about the Reaffirmation Provision: it makes the

reader feel warm, but then as lawyers, we would look at that and say, isnt that nice? Butwhat does it really say? Where are the specifics? Are there agreements and contracts thatback that up that are specific? Wall Decl., Ex. 18 (Conf. Tr. at 18:23-28, 19:8-12 (Oct. 17,2011). The Courts observation captures the essence of why HPs position is objectivelyunreasonable: because the words chosen, and the context in which they were crafted, makeno sense as the singular expression of a desire to contractually constrain the complicated andevolving relationship that two of the worlds largest corporations had for decades.

11The missing terms problem is even greater once the parties course of dealing is considered,as it is in Section III.A.4. below.


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operative terms (including duration of the contractual commitment) to be resolved in the drafting

of the actual written agreement. Id. (emphasis added) Oracle did not disagree that detailed

operative terms would be needed ifthe parties intended to make product development and

pricing commitments to one another. Obviously they would be. Ms. Daleys response, in

writing on September 12, was that Oracle was not going to make any new commitments and

[n]egotiation of detailed operative terms [was] therefore not necessary. Undisputed Facts

34.

Furthermore, HPs newfound preference for generality destroys the enforceability of the

Reaffirmation Provision, a point covered in Section III.A.4. below. The law abhors that

outcome, however, so in these circumstanceswhere language is hopelessly vague for one

purpose but perfectly adequate for a more limited agendaCalifornia Civil Code section 1643

imposes a binding interpretive directive. That section commands: A contract must receive such

an interpretation as will make it lawful, operative, definite, reasonable, and capable of being

carried into effect, if it can be done without violating the intention of the parties. The

Reaffirmation Provision can be interpreted in a way that makes it lawful, operative, definite,

reasonable, and capable of being carried into effect: by construing it narrowly to address how

the Hurd controversy affected the partnership, and nothing more.

Oracle submits that HPs contract argument does not make it out of the gate. It fails at

the first step in the interpretive process, where the Court must decide whether the language used

is reasonably susceptible to HPs proposed interpretation. We now turn to the drafting history,

which removes all doubt.

3. The Drafting History Indisputably Shows that HP Sought But OracleRejected New Business Commitments With Respect to Porting and

Pricing

The most startling part of this case is how HP thinks it can possibly get away with its

contract claims given the drafting history. The Background section above contains the complete

chronology, but in short:

HP orally asked Oracle to reaffirm the partnership on September 11.



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Oracle prepared a first draft later on September 11 that said nothing about new

product development or pricing commitments. Undisputed Facts 32.

HP countered on September 12, asking that the reaffirmation include a

commitment from Oracle to continue to offer its product suite on HP platforms

on terms that are as good as or better than any other platform. Undisputed Facts

33.

Oracle rejected this later on September 12. Dorian Daley proposed a new version

that used some of HPs language (i.e., continue to offer its product suite on HP

platforms), but stated unambiguously that this language would not put HP in a

better position tha[n] it currently enjoys or result in the negotiation of a new

contractual commitment. Undisputed Facts 34.

HP countered on September 13 with even more explicit obligatory language:

Oracle will continue to support all ongoing versions of HP-UX with Oraclesrelevant database, middleware and application products with the availability,

marketing and pricing in competitive terms that Oracle has provided HP for the

past five years. Undisputed Facts 37.

Oracle rejected this immediately; both Dorian Daley and Safra Catz told their

counterparts at HP that Oracle would not agree to this. Oracle removed all of

HPs proposed new language on September 14. Undisputed Facts 38-40; Wall

Decl., Ex. 6 (Livermore Dep. at 96:13-19); Wall Decl., Ex. 19 (Daley Dep. Ex.

56).

HP gave up its efforts to add obligatory language, and accepted Oracles language

with the minor exception of clarifying that the reaffirmation was of the

partnership as it existed prior to Oracles hiring of Mark Hurd. See Undisputed

Facts 41.

California law recognizes that [w]ords deleted from a contract may be the strongest

evidence of the intention of the parties. Woods v. Ins. Co. of N. Am., 38 Cal. App. 3d 144, 149

(1st Dist. 1974). Here, HP tried twice to persuade Oracle to agree to genuine business

commitments with respect to porting and pricing, and Oracle unequivocally rejected those

proposals on each occasion.

The key exchange occurred on September 12, when Dorian Daley transmitted the

language that, with minor modification, would become the Reaffirmation Provision. At this


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moment in the negotiations the divide between Oracle and HP could not have been any clearer:

Oracle was willing to reaffirm the strategic partnership publicly,

for the sake of addressing a public relations issue, but would not

make any new business commitments.

HP wanted both a public reaffirmation of the partnership and

tangible business commitments.

Ms. Daleys September 12 draft obviously reflects the former conceptshe said that her

language was intended . . . not to put HP in a better position tha[n] it currently enjoys or result

in the negotiation of a new contractual commitment. Undisputed Facts 34. HPs response

was not to say, hold on a second; that language does indeed contain a porting commitment.

Instead, HP tried to change the term, proposing additionallanguage articulating precisely the

duty from Oracle that HP claims in this litigation. See Undisputed Facts 37. Oracle rejected

every word of that proposal. See Undisputed Facts 40. To any reasonable person, the

conclusion is inescapable that HP did not get the commitment it now claims to have received.

We would be remiss not to address HPs main argument, which in its own way is based

on Ms. Daleys September 12 email. The argument has two parts: first, that the second sentence

of the Reaffirmation Provision does not simply reset the parties relationship to thestatus quo

ante, before the Hurd controversy, but ratherfreezes thestatus quo anterequiring a

continuation of the business relationship as it existed before the hiring of Mark [Hurd] (Wall

Decl., Ex. 12 (Livermore Dep. at 104:23-25));12 andsecond, that Ms. Daley essentially said so in

the cover email she sent with her September 12 draft. HP cites Ms. Daleys statement that Ms.

Catz and Ms. Livermore did not discuss anything more tha[n] an agreement to continue to work

together as the companies havewith Oracle porting products to HPs platform. That, HP

argues, plainly shows a forward-looking porting commitment.

The problem is that HP is taking Ms. Daleys statement wildly out of context. The full

paragraph of Ms. Daleys email reads:

12 See also Compl. 61 (as to any Oracle software product that was offered on HPs Itaniumplatform at the time Oracle signed the Hurd Agreement, Oracle [must] continue to offer andsupport that product, including any new versions, revisions, patches or updates of theproduct, on HPs Itanium platform in a manner and on terms consistent with the way thoseproducts were offered and supported prior to Oracles hiring of Hurd).


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Reaffirmation of the Oracle-HP Partnership: This was intended toreaffirm and continue the existing relationship and not to put HPin a better position that it currently enjoys or result in thenegotiation of a new contractual commitment. Ms. Catz and Ms.Livermore did not discuss anything more tha[n] an agreement tocontinue to work together as the companies havewith Oracleporting products to HPs platform and HP supporting the ported

products and the parties engaging in joint marketingopportunitiesfor the mutual benefit of customers. They did notdiscuss, and Oracle will not agree, to a most favored nationsclause. Given their market positions, such an agreement mighteven be considered suspect by regulatory authorities. Negotiationof detailed operative terms is therefore not necessary.

Undisputed Facts 34 (emphasis added).

This is the very definition of uncontroverted extrinsic evidence, so the Court alone

decides what it means for the purpose of interpreting this agreement. See Garcia, 36 Cal. 3d at

439; Wolf, 162 Cal. App. 4th at 1126-27;Habitat Trust, 175 Cal. App. 4th at 1341-42.

Obviously Ms. Daley is addressing the Reaffirmation Provision as a whole, and she is saying that

Oracle will not agree to a reaffirmation that results in new contractual obligations. As noted

above, she is also saying that Oracle will not go down the path of negotiating the detailed

operative terms that would need to be addressed if the porting and pricing terms that HP

requested in its September 12 draft were a part of this settlement. She acknowledges, and Oracle

agrees, that Oracle and HP will continue to work together as the companies have on all sorts of

levels, porting included. But as the companies have clearly means according to what each

company decides is for the mutual benefit of customersnot as a matter of newfound

contractual obligation to each other. HP can quibble with Ms. Daleys words all it wants, but it

makes no sense to argue that she rejected new commitments categorically and accepted a broad

new porting obligation at the same instant. That HP tried again the very next day to get porting

and price commitmentsonly to have Ms. Daley reject them againremoves all doubt. See

Undisputed Facts 37, 40.

4. HPs Proposed Interpretation Would Render the ReaffirmationProvision Unenforceable

California follows the common law rule that if a supposed contract does not provide a

basis for determining what obligations the parties have agreed to, and hence does not make


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possible a determination of whether those agreed obligations have been breached, there is no

contract. Bustamante, 141 Cal. App. 4th at 209 (quoting Weddington Prods v. Flick, 60 Cal.

App. 4th 793, 811 (2d Dist. 1998);Robinson & Wilson, Inc. v. Stone, 35 Cal. App. 3d 396, 407

(4th Dist. 1973) (a contract must evidence a meeting of the minds upon the essential features of

the agreement) (internal quotation marks omitted).13

In short, the essential features of the

bargain mustbe addressed or there is no contract.14

As discussed above in Section III.A.2, none of the essential features of a porting or

pricing obligation appears anywhere in the Reaffirmation Provision, let alone in the fragment HP

relies on. The abject indecipherability of the parties commitments to each other under HPs

current reading of the Reaffirmation Provision was evident during the testimony of former HP

General Counsel Mike Holston, one of the drafters of the agreement. When asked [w]hat about

the relationship became obligatory as a result of paragraph 1? he responded,

I would say that the parties were then required to act consistentwith the course of conduct that they had engaged in up to that pointin time, subject to a limitation of having to make decisions. Theycan make changes if those changes would be reasonable, they can and both parties are required to act in good faith.

Faced with the follow-up question, Can you be any more specific? Holston answered No, I

cannot. Wall Decl., Ex. 16 (Holston Dep. at 216:10-20).

That is simply not good enough. To the contrary, it makes this case highly analogous to

Bustamante, where the plaintiff contended that an agreement with his erstwhile entrepreneurial

collaborator was enforceable because they had committed to take all steps necessary to obtain

adequate funding and to formally launch the company. 141 Cal. App. 4th at 210. The court

disagreed on the ground that the deal left too many critical questions open: what steps are

13 To make matters worse for HP, it is black-letter law that [a] contract sought to bespecifically enforced in equity requires a greater amount of certainty in its terms than isnecessary in a contract that is the basis of an action at law for damages. 14 Cal. Jur. 3dContracts 100 (collecting cases);see alsoWeddington Prods., 60 Cal. App. 4th at 816 (forspecific performance, contract must not only contain all the material terms but also expresseach in a reasonably definite manner) (quoting Spellman v. Dixon, 256 Cal. App. 2d 1, 3(2d Dist. 1967)).

14Whether a contract term is sufficiently definite to be enforceable is a question of law for thecourt. Ladas v. Cal. State Auto. Assn, 19 Cal. App. 4th 761, 770 n.2 (1st Dist. 1993).


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necessary? How can it be ascertained whether a party has complied with this term? How long

were they required to seek adequate funding? Id. On HPs reading of the Reaffirmation

Provision, there is literally no way to know which parts of the parties decades-long relationship

define their duties (e.g., the part before Oracle acquired Sun and started competing against HP,

or the seven months after that but before the Hurd suit); no way to know whether the

Reaffirmation Provision requires fidelity to particularoutcomes (e.g., we have always done X,

so we must continue to do so) or particularapproaches (e.g., we always had discretion to

decide whether or not to do X, so we still have that discretion); and as a result, no viable way to

identify whether a given action or omission would or would not violate the contract.

One of HPs witnesses suggested the absence of detail was intentional, because Oracle

and HP had such a broad, deep, expansive relationship, we could never document all the details

associated with [reaffirming] it. Wall Decl., Ex. 12 (Livermore Dep. at 88:13-22). That is not

an available argument. The substantive law of contract requires a minimal level of detail, and to

the extent the contract purports to cover a broad, deep, expansive relationship, then more, not

less, detail is required. The 27 words that HP lifts from the Reaffirmation Provision cannot be

interpreted to do what HP says they do. See Cal. Civ. Code 1643.

5. The Parties Course of Dealing Confirms that Porting Agreements

Have Specific Terms Not Found in the Reaffirmation Provision

It is well-established that the past course of dealing between two parties is relevant to the

question whether a subsequent agreement is reasonably susceptible of a contested

interpretation. See Conderback, Inc. v. Standard Oil Co. of Cal., W. Operations, 239 Cal. App.

2d 664, 685 (1st Dist. 1966). In this case, two undisputed features of the parties past course of

dealing bear on the interpretation of the Reaffirmation Proceeding: (i) they do, occasionally,

enter contracts whereby Oracle commits to port certain software products to certain HP

platforms; and (ii) those contracts look absolutely nothing like the Reaffirmation Provision in the

Hurd Settlement Agreement.

Whatever partnership glue has held Oracle and HP together in the past, it has not been

strong enough to obviate the need to enter into genuine contracts from time to time.


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Indisputably, Oracle and HP have found it necessary to enter into formal porting agreements on

multiple occasions. In 2006, for example, Oracle and HP signed a contract pursuant to which

Oracle (knowingly) took on an obligation to port its E-Business Suite, a set of software

applications, to the HP-UX on Itanium platform. The agreement is titled, appropriately,

Agreement for Porting the Oracle E-Business Suite to the HP-UX on Itanium Platform.

Undisputed Facts 1. It is eight pages long, plus another six pages of exhibits and attachments.

On the first page, it says, [t]he purpose of this Agreement is to define the relationship and

responsibilities between the parties, including but not limited to, engineering and resource

requirements, processes for collaboration, and tasks for the porting of EBS to the HP-UX on

Itanium platform. There is no mistaking what the document is. It calls for HP to pay Oracle

$2.987 million for the initial development work to port the applications, and over a million

dollars a year for a period of up to five years for ongoing support. See Undisputed Facts 2.

In 2007, Oracle and HP signed an Agreement for Porting the Oracle Retail Suite to HP

Integrity and PA-RISC 11.23 Platform. Undisputed Facts 3. It is the kind of detailed

commercial agreement that sophisticated companies invariably enter when they intend to bind

themselves to significant forward-looking obligations. The contract runs to ten pages, and

articulates precisely the HP Responsibilities and the Oracle Responsibilities it imposes.

Later that year, the parties entered an Agreement for Porting Demantra to HP-UX on Itanium

Platform. Undisputed Facts 4. Lest it be unclear what Demantra is, or what the contract

required Oracle to do with it, the ten-page agreement explicitly defines what software Oracle has

to port,see Undisputed Facts 5, for how long,see Undisputed Facts 8, in exchange for what

payments,see Undisputed Facts 6, and with what maintenance and support commitments,see

Undisputed Facts 7.The parties fourteen-page 2008 Agreement for Porting the Oracle

Tuxedo 10gR3 Software to the HP OpenVMS Integrity 8.3-1H1 Platform lays out the same

types of information for a different Oracle software product, in similar detail. See Undisputed

Facts 9-13.

The moment the Court inspects these agreements it will be clear that Oracle and HP

know how to create a forward-looking porting obligation when they want to. Their course of


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dealing confirms that the Reaffirmation Provision in the Hurd Settlement Agreement manifestly

is nothing like a porting agreement. It mustmean something else, because it is so completely

lacking in every detail the parties themselves have historically deemed essential to such

agreements.

* * *

In conclusion, the Reaffirmation Provision cannot reasonably be interpreted to create

fundamental, forward-looking business obligations with respect to product development, pricing

or other matters unrelated to the Hurd employment litigation. It cannot be interpreted to require

Oracle to forever maintain consistency with business practices that span decades and that have

been obligatory only when the parties negotiated formal agreements making them so. The Court

can reach these conclusions either in the first step of the interpretive process, by finding that the

language unambiguously forecloses HPs position, or in the second step based on the

uncontroverted extrinsic evidence. Either path leads to the same result: because HPs proposed

interpretation cannot be right, its contract claim must fail.

B. HP Has Not Honored the Reaffirmation Provision as a ProductSupport Agreement

Recent testimony by Martin Fink, HP Senior Vice President and General Manager for the

Business Critical Systems (BCS) division, demonstrates that if the Reaffirmation Provision is

indeed a product support agreement, HP has breached or repudiated it. That, of course, would

preclude HPs contract claims. See Hamilton v. Greenwich Investors XXVI, LLC, 195 Cal. App.

4th 1602, 1614 (2d Dist. 2011) (plaintiffs own performance is required to make out breach of

contract claim).

The second sentence of the Reaffirmation Provision says that HPwill continue to

support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a

manner consistent with the partnership as it existed prior to Oracles hiring of Hurd.

Undisputed Facts 43 (emphasis added). HPs lawyers have placed great weight on the fact that

the Reaffirmation Provision includes this reciprocal obligation to Oracle, suggesting it provides

consideration for the porting commitment HP allegedly received. Compl. 57. On March 8,


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ORACLE CORPORATIONS MEMORANDUM OF POINTS

oracle summary motion

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