Oregon settles lawsuit for botched health care rollout

Oregon settled with a California software giant in a lawsuit that accused Oracle America Inc. of collecting tens of millions of dollars to create a state health care exchange website that didn't work.

The state initially asked for more than $6 billion in punitive damages when it filed the lawsuit in 2014 against the Redwood Shores, California company, but Oregon ultimately accepted a package that included $35 million in cash payments and software licensing agreements and technical support with an estimated upfront worth of $60 million.

The state paid Oracle $240 million to create its Cover Oregon website but ultimately abandoned the site and joined the federal exchange to comply with the Affordable Care Act.

Most of the money used to pay Oracle was from federal funds designated to help states comply with the new health care law and that is likely why the settlement relies mostly on non-cash value, said David Friedman, an associate professor of law at Willamette University who has closely followed the litigation.

"The government would say, 'Thank you for being our collection agency. We're going to take that back,'" he said. "That's why this is coming out as credits and things that are a little bit to the side of the direct verdict. Oracle has probably convinced them that this is their best shot at collecting the best value."

Six years of unlimited Oracle software and technical support included in the deal will save the state hundreds of millions of dollars in years to come and ends a bitter legal battle that has damaged Oregon's "collective psyche," Attorney General Ellen Rosenblum said in a statement.

"The beauty of the deal is that if we choose to take full advantage of the free (software), we are uniquely situated to modernize our statewide IT systems over the next six years — something we could not otherwise afford to do," she said.

The cash payments include $25 million to reimburse the state's legal fees and a $10 million grant to fund math, science and technology education in Oregon schools.

Oracle has insisted the website worked but former Gov. John Kitzhaber chose not to use it for political reasons.

"We are pleased to have this contentious litigation behind us and to provide Oregon with the flexibility to obtain the software and technical support it desires to address the State's needs over the next several years," said Dorian Daley, the company's executive vice president and general counsel. "This is an innovative resolution to a complex matter."

Oregon produced the country's worst rollout of the new national health insurance program. While the crippled website eventually worked, Oregon's failed to enroll a single person online. The state had to resort to hiring 400 people to process paper applications.

In March 2015, Gov. Kate Brown signed legislation dissolving Cover Oregon.

"This was going to go on and on forever and ever," Friedman said. "A lot of people can claim victory over this."

She can now put the messy litigation behind her as she runs for election in her own right, Friedman said. Brown inherited the governorship after her predecessor quit amid a federal investigation in February 2015. The winner of the November election will serve out the two remaining years of former Gov. John Kitzhaber's term.

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This story has been corrected to show Brown is not running for a second term, but to serve out the two remaining years of former Gov. John Kitzhaber's term.

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