When you are being sued by an individual, a company or the government, it may not always make the best business sense to go through a trial. Many businesses may find it easier, faster or better for their public image to resolve a legal matter with a settlement agreement, even if it means paying something out.
When it is the government bringing the lawsuit, it may be a lot easier to keep negative publicity off your company by agreeing to a settlement agreement. It is still unclear why Oracle Corp. and Oracle America Inc. consented to a settlement agreement with the federal General Services Administration, but they no longer have to face the federal government in a breach of contract lawsuit.
According to the lawsuit, Oracle signed a contract with the General Services Administration in 1998 to sell licenses for software and provide technical support to federal departments. The contract was signed under the Administration’s Multiple Award Schedule program which required Oracle to provide the government with its pricing policies.
The lawsuit started when the government alleged that Oracle had failed to disclose those policies, including the discounts it provided to its commercial customers. The federal government also says that the discounts it received from Oracle were not as large as the ones the company gave to commercial customers. It alleged that Oracle made false statements about its pricing policies during contract negotiations.
It is unknown how much Oracle would have to pay if it had lost the breach of contract lawsuit in court, but it is likely that it would have exceeded the $199.5 million settlement award. Additionally, with the lawsuit resolved, Oracle does not need to make its pricing policies or any alleged failure to comply with the government contract public.
Source: Silicon Valley/San Jose Business Journal, “Oracle to pay $200M in settlement,” Eli Segall, Oct. 6, 2011