SAN FRANCISCO (CN) — A federal judge refused to dismiss Oracle’s claims that Terix Computer and its top executives fraudulently transferred assets to sidestep a $57 million copyright settlement.
Oracle America sued Terix et al. in January 2014, claiming they offered customer support for Oracle’s Unix-based Solaris operating system, using Oracle’s proprietary updates and support materials, in violation of copyright.
Terix et al. argued that Oracle wanted to squeeze them out of a “robust” third-party aftermarket. Terix nonetheless agreed to pay $57.7 million to settle the claims. Co-defendant Maintech agreed to pay another $14 million for its role.
Oracle then sued Terix again, in June this year, and its CEO and founder Bernd Appleby, CFO James Olding, and TUSA Inc., Ermine IP, and Ermine Services. Oracle claimed that Appleby and Olding are co-owners of TUSA and the Ermine companies, to which the two men “fraudulently transferred all of Terix’s assets.”
“Rather than have Terix pay what it owes Oracle … Appleby and Olding … conspire[d] to transfer all of Terix’s assets to TUSA, Ermine IP and Ermine Services, which then continued doing business under the name ‘Terix,’ in a brazen fraudulent transfer to try to thwart the federal government,” Oracle said in its complaint, which U.S. District Judge Jon Tigar in his Sept. 22 order refusing to dismiss the case. (Ellipses and brackets as in ruling.)
As a result of the fraudulent transfer, Oracle said, “Terix has zero assets left to pay any part of its debt to Oracle.”
In the June lawsuit, Oracle seeks damages for vicarious and contributory copyright infringement against Appleby and Olding, alter ego liability against both men, and fraudulent transfer against all defendants.
The Terix defendants filed a motion to dismiss Oracle’s first amended complaint on July 28, saying its copyright claim is precluded by res judicata and that the alter ego claim fails to state a claim.
Tigar struck down the defendants’ res judicata assertion, citing Beebe v. United States (721 F.3d 1079, 1083 n.4 (9th Cir. 2013)), and Gonzalez v. Hernandez (175 F.3d 1202, 2017 (10th Cir. 1999)).
Ninth Circuit authority “supports the proposition that ‘a judgment in favor of the injured party in a vicarious liability relationship does not preclude a second action against non-parties except as to the amount of damages,” Tigar wrote in his 19-page order.
He said the rule applies to the instant case, and that “Oracle is not barred from suing the individual defendants for vicarious copyright infringement, but is precluded from seeking more than the $57,723,000 previously awarded to Oracle.”
He also rejected the defendants’ alter ego liability argument, finding that Terix’s transfer of assets was clearly done to avoid paying the agreed-upon settlement, while continuing to operate Terix.
“The court concludes that Oracle has sufficiently pleaded its alter ego claim,” Tigar wrote.
He said Oracle successfully pleaded the claim by applying the California Uniform Voidable Transfer Act, which states that “[a] transfer made or obligation incurred by a debtor is voidable as to a creditor … if the debtor made the transfer or incurred the obligation … [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.”
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