Oracle Summary Motion

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ATTORNEYS AT LAW SAN FRANCISCO
LATHAM & WATKINS LLP Daniel M. Wall (Bar No. 102580) Alfred C. Pfeiffer, Jr. (Bar No. 120965) Sadik Huseny (Bar No. 224659) 505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: (415) 391-0600 Facsimile: (415) 395-8095 ORACLE CORPORATION Dorian Daley (SBN 129049) Deborah K. Miller (SBN 095527) 500 Oracle Parkway M/S 5op7 Redwood Shores, California 94065 Telephone: (650) 506-5200 Facsimile: (650) 506-7114 Attorneys for Defendant and Cross-Complainant ORACLE CORPORATION SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA HEWLETT-PACKARD COMPANY, Plaintiff, v. ORACLE CORPORATION, Defendant. CASE NO. 1-11-CV-203163 Action Filed: Trial Date: June 15, 2011 May 31, 2012
ORACLE CORPORATIONS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION Date: April 30, 2012 Time: 9:00 AM Place: Department 1C Assigned for all Purposes to The Honorable James P. Kleinberg
ORACLE CORPORATION, Cross-Complainant, v. HEWLETT-PACKARD COMPANY, Cross-Defendant.
PUBLIC REDACTED VERSION
ORACLE CORPORATIONS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR SUMMARY ADJUDICATION CASE NO. 1-11-CV-203163
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TABLE OF CONTENTS PAGE I. II. INTRODUCTION ............................................................................................................. 1 BACKGROUND/STATEMENT OF FACTS................................................................... 3 A. B. III. The Oracle-HP Relationship .................................................................................. 3 The Hurd Settlement Agreement ........................................................................... 6
ARGUMENT................................................................................................................... 11 A. The Reaffirmation Provision Did Not Transform Historically Discretionary Partnership Activities Into New Contract Obligations........................................................................................................... 11 1. 2. It is For the Court to Determine Whether the Reaffirmation Provision is Reasonably Susceptible to HPs Interpretation.................... 12 The Contracts Text is Not Reasonably Susceptible to an Interpretation Whereby a Reaffirmation Fundamentally Transforms the Nature of the Oracle-HP Partnership.............................. 14 The Drafting History Indisputably Shows that HP Sought But Oracle Rejected New Business Commitments With Respect to Porting and Pricing................................................................. 18 HPs Proposed Interpretation Would Render the Reaffirmation Provision Unenforceable .................................................. 21 The Parties Course of Dealing Confirms that Porting Agreements Have Specific Terms Not Found in the Reaffirmation Provision........................................................................... 23
3.
4. 5.
B. C. IV.
HP Has Not Honored the Reaffirmation Provision as a Product Support Agreement .............................................................................................. 25 HPs Implied and Quasi-Contract Claims Fail as a Matter of Law ..................... 26
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 ii
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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).................................................................................. 12 Suarez 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 California Civil Code 1641...................................................................................................... 15 California Civil Code 1643...................................................................................................... 23 OTHER AUTHORITIES Eric Posner, The Parol Evidence Rule, the Plain Meaning Rule, and the Principles of Contractual Interpretation, 146 U. Pa. L. Rev. 533, 534 (1998).................... 13
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I.
INTRODUCTION This 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 of contract 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 in Parsons v. Bristol Dev. Co., 62 Cal. 2d 1
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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 HP sought true 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 2
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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 FACTS1 A. The Oracle-HP Relationship
For several decades, Oracle and HP have made complementary products. The two companies business relationshipwhich they have sometimes called a partnership,
We are mindful of the so-called Golden Rule of Summary Adjudication: if [a fact] is not set forth in the separate statement [of undisputed material facts], it does not exist. United Cmty Church v. Garcin, 231 Cal. App. 3d 327, 337 (2d Dist. 1991). At the same time, here as in most cases there are some noncontroversial background facts that, while not strictly material, help the Court understand the arguments presented. The inclusion of such background material (via citation to the Wall declaration and other sources) does not change the basis of the motion, which is exclusively those facts listed in the separate statement. 3
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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 selfinterest 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
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The Undisputed Facts address each of HPs claims separately, and repeat certain entries for multiple claims. In this Memorandum, reference to an Undisputed Facts entry listed under one claim should be taken also to apply to all other claims to which the cited entry is relevant. 4
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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.
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HP has filed antitrust complaints against Oracle in various jurisdictions around the world (not including the United States), and in those investigations the parties are contesting whether there is such a thing as a mission critical UNIX market. We adopt HPs term here solely to avoid needless conflict and without endorsing it. 5
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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 HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees. The HP Board is making it virtually impossible for Oracle and HP to continue 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 Times business section. Undisputed Facts 22. The Wall Street Journal also reported that the H-P-Oracle feud was turning onetime partners into rivals. Undisputed Facts 23. B. The Hurd Settlement Agreement
HPs 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 6
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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 port future 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 forwardlooking business commitments from Oracle. Included in the list of asks was an explicit 7
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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 to continue to offer its product suite on HP platforms on terms that are as good as or better than any other platform, and to co-market and co-sell with HP such that the products available on HP Platforms are promoted or sold on par with or better than any other platform Oracle supports (other than Exadata). The detailed operative terms (including duration of the contractual commitment) to be resolved in the drafting of the actual written agreement. 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 8
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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 HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware 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 to reaffirm and continue the existing relationship and not to put HP in a better position that it currently enjoys or result in the negotiation of a new contractual commitment. 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 and HP supporting the ported products and the parties engaging in joint marketing opportunitiesfor the mutual benefit of customers. They did not discuss, and Oracle will not agree, to a most favored nations clause. Given their market positions, such an agreement might even be considered suspect by regulatory authorities. Negotiation of 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-UX with Oracles relevant database, middleware and application products with the availability, marketing and pricing in 9
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competitive terms that Oracle has provided HP for the past five years. 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 209:13210:22). 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 strategic partnership and the resolution of litigation regarding Mark V. Hurds employment at Oracle. While the terms of the settlement are confidential, Mr. Hurd will adhere to his obligations to protect HPs confidential information while fulfilling his responsibilities at Oracle. The agreement also reaffirms HP and Oracles Ms. Livermore now claims that HP should never have sent Oracle the September 13 markup to the Reaffirmation Provision, since she had already agreed with Ms. Catz not to try to specify Oracles obligations. See Wall Decl., Ex. 12 (Livermore Dep. at 121:14-123:7). It does not matter whether that is true, since it is undisputed that HP sent the markup and Oracle promptly rejected it. See Undisputed Facts 37, 40. There was no discussion of this change either between Ms. Catz and Ms. Livermore or between counsel. Wall Decl., Ex. 12 (Livermore Dep. at 120:24-123:7); Wall Decl., Ex. 16 (Holston Dep. at 223:24-224:15). 10
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commitment to delivering the best products and solutions to their more 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 days New York Times business 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 Journal also took notice, reporting the end of weeks of mudslinging by HP and Oracle. Undisputed Facts 46. III. ARGUMENT A. 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
HP has not seriously pursued the allegation that Oracle failed to support Itanium customers with existing versions of Oracle software. We therefore focus on the porting and pricing claims. In terms of whether there is a duty to provide such support, the issues are the same. 11
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1.
It is For the Court to Determine Whether the Reaffirmation Provision is 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 interpretations proffered 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. 12
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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 the Parsons 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.
See Wolf, 162 Cal. App. 4th at 1126-27 (citations omitted): First, [the judge] provisionally receives any proffered extrinsic evidence that is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. If, in light of the extrinsic evidence, the language is reasonably susceptible to 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 be drawn from the undisputed extrinsic evidence or that extrinsic evidence renders the contract terms susceptible to more than one reasonable interpretation. If, however, there is 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: Purely interpreting a contract is a judicial function not necessarily for the jury, and then you have to look beyond that to see whether there are genuine factual disputes that underlies [sic] that interpretation.)). 13
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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 an Interpretation 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 HP reaffirm their commitment to their longstanding strategic relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products (including Oracle Enterprise Linux and Oracle VM) on its hardware in a manner consistent with that partnership as it existed prior to Oracles hiring of Hurd. Undisputed Facts 43. 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 that pre-existing commitment. One might reaffirm a
To avoid repetition, Oracle will not address the first two steps in the interpretive process separately. However, all arguments should be taken to apply first to the threshold inquiry (ambiguity), and then if necessary to the subsequent one (uncontroverted facts). 14
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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 the scope 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. See id. 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 15
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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 transforming a 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 platform for 16
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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
11
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? But what does it really say? Where are the specifics? Are there agreements and contracts that back 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 objectively unreasonable: because the words chosen, and the context in which they were crafted, make no sense as the singular expression of a desire to contractually constrain the complicated and evolving relationship that two of the worlds largest corporations had for decades. The missing terms problem is even greater once the parties course of dealing is considered, as it is in Section III.A.4. below. 17
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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 if the 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 Oracle Rejected 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. Undisputed Facts 29. 18
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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 Oracles relevant 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 19
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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 additional language 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 the status quo ante, before the Hurd controversy, but rather freezes the status 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 and second, 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 Itanium platform at the time Oracle signed the Hurd Agreement, Oracle [must] continue to offer and support that product, including any new versions, revisions, patches or updates of the product, on HPs Itanium platform in a manner and on terms consistent with the way those products were offered and supported prior to Oracles hiring of Hurd). 20
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Reaffirmation of the Oracle-HP Partnership: This was intended to reaffirm and continue the existing relationship and not to put HP in a better position that it currently enjoys or result in the negotiation of a new contractual commitment. 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 and HP supporting the ported products and the parties engaging in joint marketing opportunitiesfor the mutual benefit of customers. They did not discuss, and Oracle will not agree, to a most favored nations clause. Given their market positions, such an agreement might even be considered suspect by regulatory authorities. Negotiation of 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 Reaffirmation Provision 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 21
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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 must be 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 consistent with the course of conduct that they had engaged in up to that point in time, subject to a limitation of having to make decisions. They can 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
14
To make matters worse for HP, it is black-letter law that [a] contract sought to be specifically enforced in equity requires a greater amount of certainty in its terms than is necessary in a contract that is the basis of an action at law for damages. 14 Cal. Jur. 3d Contracts 100 (collecting cases); see also Weddington Prods., 60 Cal. App. 4th at 816 (for specific performance, contract must not only contain all the material terms but also express each in a reasonably definite manner) (quoting Spellman v. Dixon, 256 Cal. App. 2d 1, 3 (2d Dist. 1967)). Whether a contract term is sufficiently definite to be enforceable is a question of law for the court. Ladas v. Cal. State Auto. Assn, 19 Cal. App. 4th 761, 770 n.2 (1st Dist. 1993). 22
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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 particular outcomes (e.g., we have always done X, so we must continue to do so) or particular approaches (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. 23
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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 24
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dealing confirms that the Reaffirmation Provision in the Hurd Settlement Agreement manifestly is nothing like a porting agreement. It must mean 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 Product Support 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 HP will 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, 25
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2012, Oracle asked Martin Fink whether HP would support Oracle Enterprise Linux in a recently launched HP hardware initiative called Project Odyssey. Mr. Fink testified that
. See Undisputed Facts 47-49. The following testimony ensued: Q. Do you consider that HP has any contractual obligations to Oracle with respect to supporting Oracle Enterprise Linux? A. Im not aware of any contracts regarding that. Q. Have you -- this probably answers that question, but Ill ask it anyway. In managing BCS, have you made any decisions based on a perceived need to -- a perceived contractual need to support Oracle Enterprise Linux? A. No. Undisputed Facts 48. If, as HP now says, the Reaffirmation Provision obligates the parties to support one anothers products tangibly, in more than a symbolic sense, then HP has failed to deliver the one thing that Oracle got explicitly: support for Oracle Enterprise Linux. However the Court chooses to read thisas course-of-performance evidence that undermines HPs contract interpretation arguments, or as a repudiation of a tangible support obligationit plainly undermines HPs case. C. HPs Implied and Quasi-Contract Claims Fail as a Matter of Law
The Reaffirmation Provision is the heart of HPs contract case. However, as backup, HP has alleged three additional contract-like causes of action: breach of the covenant of good faith and fair dealing, breach of an implied contract, and promissory estoppel. Because HP indisputably sought from Oracle an express contractual commitment identical to the commitment that HP claims on these alternate theories, and Oracle indisputably rejected that commitment, none of HPs implied and quasi-contract claims can succeed. Furthermore, because the parties have executed actual porting agreements with specified scopes and obligations, implied and quasi-contract theories cannot enlarge Oracles obligations.
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Covenant of Good Faith and Fair Dealing: An action for breach of the covenant of good faith and fair dealing is not an alternative to proving a contract. The covenant is implied in existing contracts and ensures good faith in the performance of prescribed duties. As such, the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract. See Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373 (1992). Furthermore, the duty to act in good faith does not alter the specific obligations of the parties under the contract. PMC, Inc. v. Porthole Yachts, 65 Cal. App. 4th 882, 890 (4th Dist. 1998) (citation omitted). Numerous cases hold that the covenant cannot be used to create obligations from matters that a contract leaves to the parties discretion. See, e.g., Carma Developers, 2 Cal. 4th at 373; Third Story Music, Inc. v. Waits, 41 Cal. App. 4th 798, 808 (2d Dist. 1995). HPs claim pursuant to the covenant is grounded solely in the Hurd Settlement Agreement. See Compl. 71-73. It thus fails because the Reaffirmation Provision imposes no obligation remotely along the lines that HP claims. Implied Contract: HPs Fourth Cause of Action for breach of implied contract alleges: By virtue of the collaborative partnership between HP and Oracle to make their respective products compatible, a contract implied in fact arose between HP and Oracle that obligated them to continue with the same collaboration for future product versions. Compl. 76. Acceptance of that theory would send shudders through a technology industry replete with such partnerships. There is no existing legal authority for the proposition that developing software or other goods compatible with anothers platform creates an implied legal duty to do so in the future. Countless technology companies would be put at risk were HPs position adopted. There are numerous factual reasons why HPs implied contract claim would fail,15 but as a matter of law it is foreclosed by the principle that [t]here cannot be a valid express contract and an implied contract, each embracing the same subject, but compelling different results. See,
15
As discussed at length above, the documentary record of the negotiating history of the Hurd Settlement Agreement shows that during that time, HP explicitly proposed porting and pricing obligations functionally identical to those it claims in this litigation that Oracle took on. If an implied-in-fact agreement for pricing or for Oracle to port its software to the HPUX platform had already existed at the time of the Hurd litigation, then it would have made no sense for HP to have proposed such obligations. 27
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e.g., Eisenberg, 74 Cal. App. 4th at 1387. HP alleges that the Hurd Settlement Agreement is an express contract covering the same subject matter, and there are numerous formal porting agreements that expressly provide for porting. See Undisputed Facts 148, 150, 151, 156. Where parties have chosen to specify their obligations on a subject by contract, their choices cannot be expanded or overridden by an allegedly implied-in-fact agreement. See Lance Camper Mfg. Corp. v. Republic Indem. Co., 44 Cal. App. 4th 194, 203 (2d Dist. 1996) (rejecting impliedin-fact contract claim because it is internally inconsistent in light of the plaintiffs simultaneous allegation of a valid express contract on the same issue). Promissory Estoppel: Promissory estoppel is not a doctrine designed to give a party to a negotiated commercial bargain a second bite at the apple in the event it fails to prove a breach of contract. Walker v. KFC Corp., 728 F.2d 1215, 1220 (9th Cir. 1984) (applying California law). Under California law, a promissory estoppel claim requires a showing of reasonably foreseeable detrimental reliance on a promise. See Lange v. TIG Ins. Co., 68 Cal. App. 4th 1179, 1185 (2d Dist. 1998). The promise must be clear and unambiguous in its terms and the reliance must be both reasonable and foreseeable. Advanced Choices, Inc. v. Dept of Health Servs., 182 Cal. App. 4th 1661, 1672 (2d Dist. 2010).16 The alleged promises on which HP rests its claim cannot be considered clear and unambiguous commitments to port future releases of Oracles software. Frankly, this has always been plain on the face of the Complaint, which alleges the following promises: (1) a May 2010 Oracle letter to customers which states, in part, that HPs family of servers based on Itanium is a significant technology platform for Oracle Corporation and that Oracle looks forward to continuing to ship quality products for the Integrity platform (Undisputed Facts 193); and (2) statements by four Oracle executives in press releases and interviews regarding Oracles then-current plans regarding HP Integrity servers and the partnership generally. Complaint 40, 41, 42.
16
There is no right to a jury trial on a promissory estoppel cause of action. C & K Engg Contractors v. Amber Steel Co., 23 Cal. 3d 1, 5 (1978). 28
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The May 2010 letter does not promise support for future products. Undisputed Facts 193. To the contrary, it explicitly warns the reader that: [A]ll of the above future platform and feature support is in planning and is subject to change. This document is for informational purposes only and may not be incorporated into a contract or agreement. Id. In other words, to the extent the letter (which is not to HP anyway) can be read to make any promise by Oracle to support HPs platforms, it was an overtly equivocal promise conditioned on Oracles right to change its support decisions at any time. With regard to comments by Oracle executives, as a matter of law general pledges to work together and statements of historical fact are not clear and unambiguous promises that may support a claim for estoppel. See Lange, 68 Cal. App. 4th at 1185-86 (statement of fact did not constitute a promise); Columbia Pictures Television v. Krypton Broad. of Birmingham, Inc., 106 F.3d 284, 292 (9th Cir. 1997) (affirming summary judgment under California law where the only promise was a promise by plaintiff to work with defendant), revd on other grounds in Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998). Each of the alleged statements by Oracle executives spoke either to Oracles then-current commitment to support existing applications on HP servers or to the Oracle-HP partnership generally. See Undisputed Facts 194. None of the statements speaks to Oracles porting of future Oracle products, let alone any particular Oracle product. Such general statements fall well short of the clear and unambiguous promise on which a promissory estoppel claim must be based. Lange, 68 Cal. App. 4th at 1185-86. Nor can HP establish that its reliance on such statements as promises to port Oracle products in the future was reasonable. It defies common sense for HP to have relied on a letter that expressly disclaims any obligation to provide future support. Further, California law is clear that informal representations regarding unsolidified future plans cannot be reasonably relied upon for purposes of promissory estoppel. See Joffe v. City of Huntington Park, 201 Cal. App. 4th 492, 513 (2d Dist. 2011). HP cannot therefore have reasonably relied upon general partnership statements by Oracle executives as promises to fulfill the very specific obligations HP now seeks to enforce. Finally, the negotiation of the Hurd Settlement Agreement rendered 29
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any reliance after September 2010 indisputably unreasonable, as HP proposed contractual language describing precisely the duties HP now seeks to enforce and Oracle explicitly rejected that language. See Undisputed Facts 201, 204. IV. CONCLUSION For the foregoing reasons, Oracle respectfully seeks summary adjudication on the abovereferenced causes of action. Dated: March 26, 2012 LATHAM & WATKINS LLP Daniel M. Wall Alfred C. Pfeiffer, Jr. Sadik Huseny By: /s/ Daniel M. Wall Daniel M. Wall Attorneys for ORACLE CORPORATION
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ATTORNEYS AT LAW SAN FRANCISCO

ORACLE CORPORATION, Cross-Complainant, v. HEWLETT-PACKARD COMPANY, Cross-Defendant.

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