Strong-arm tactics alleged in Oracle, reseller dispute

Reseller ITD claims Oracle "destroyed" its business, but Oracle says it is simply owed $19 million

Oracle explicitly said that it planned to sell products directly to its largest accounts after it acquired Sun Microsystems last year. But reseller Innovative Technology Distributors is claiming Oracle set about doing so in a way that "destroyed" ITD's business through unfair dealings, according to a lawsuit filed in U.S. District Court for the District of New Jersey.

Oracle, in turn, has filed a lawsuit against ITD in a California court, claiming the Edison, New Jersey, company owes it more than US$19 million for products it was given.

ITD, which filed its suit March 10, had resold Sun Microsystems software and hardware since 2005, with annual revenue "well in excess" of $100 million and a client list including Motorola and Alcatel-Lucent, according to its complaint.

Oracle strung ITD along for much of last year, telling it that a new contract to replace the one it had with Sun was forthcoming, but all the while Oracle was planning to phase the company out, according to the complaint.

Finally, Oracle offered an amendment to ITD's existing agreement on Dec. 29, according to the complaint. But it had to be signed within a day, and its terms were onerous, according to ITD. It covered only a six-month period, eliminated previously provided discounts on products, and limited ITD to "essentially only two customers: Alcatel-Lucent and Motorola," the complaint states.

The deal was a "stop-gap, intended to benefit Oracle by providing it with more time to take direct those customers where ITD was most entrenched," it adds.

Despite its misgivings, ITD was "forced to sign under duress" because Oracle would not process certain orders placed by Alcatel-Lucent unless it did so, the complaint alleges.

Apart from the contract issue, day-to-day business became more difficult for ITD after Oracle bought Sun, according to the complaint.

Previously, ITD was able to obtain price quotes for customers within 24 hours, with shipments occurring quickly, the complaint states. But Oracle put a number of new procedures in place that slowed the process down considerably, according to ITD.

Product shipments were also hit by significant delays because Oracle "stopped ordering parts it needed in advance based on forecasts, and instead only ordered parts after customer purchase orders were received," the complaint states.

In addition, Oracle reneged on a promised deal that would have seen ITD take over some integration work done by its Customer Ready Systems division, the complaint alleges. The opportunity would have been worth $60 million to $80 million per year, according to ITD.

In anticipation of the work, ITD spent more than $1 million, including for a new 18,000-square-foot facility, it adds. But Oracle "turned its back" on ITD, and even used the company's integration business plan "as the model for a new integration facility plan that it would embark on without ITD's involvement," it states.

Finally, the lack of a new "workable contract" with Oracle caused ITD to lose its line of credit with Wells Fargo bank, as well as to default on an outstanding loan with the lender, the complaint adds.

All told, ITD has been "essentially destroyed," it states.

But in a separate suit filed this month in U.S. District Court for the Northern District of California, Oracle tells a decidedly different story, alleging that ITD owes it $19 million for hardware products. ITD resold the products for more money than that sum, yet refuses to pay, according to the complaint.

Last July, ITD placed hundreds of orders for Oracle products and services totaling more than $19 million. In November, Oracle placed ITD on "credit hold" because it owed millions of dollars in outstanding invoices, the complaint states. Oracle refused to sell ITD more products until it brought its account current, it adds.

Oracle made efforts in February to resolve the dispute, culminating in a March 1 meeting between executives and legal counsel from both companies, but ITD is still refusing to pay, according to the complaint.

ITD claims the sum Oracle wants is "drastically inflated." It is seeking compensatory damages from Oracle for violation of state franchising law, breach of contract, tortious interference and other alleged violations, as well as a declaratory judgment that it does not owe the $19 million.

Oracle's complaint demands ITD pay the $19 million plus interest and attorney's fees. It does not address the allegations laid out in ITD's suit. As of Monday, Oracle had not filed a response to ITD's complaint in New Jersey.

An Oracle spokeswoman declined comment.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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