joseph w. cotchett (36324) jordanna g. thigpen … · joseph w. cotchett (36324 ......

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JOSEPH W. COTCHETT (36324)[email protected] L. FINEMAN (124870)[email protected] C. MOLUMPHY (168009)[email protected] G. THIGPEN (232642)[email protected] COTCHETT, PITRE & McCARTHYSan Francisco Airport Office Center840 Malcolm Road, Suite 200Burlingame, CA 94010Phone: (650) 697-6000Fax: (650) 697-0577

Attorneys for Plaintiff Lisa Galaviz, derivatively on behalf of Oracle Corporation

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

LISA GALAVIZ, derivatively on behalf ofORACLE CORPORATION,

Plaintiff,vs.

JEFFREY S. BERG, et al.,

Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.

PHILIP T. PRINCE, derivatively on behalf ofORACLE CORPORATION,

Plaintiff, vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.

))))))))) )) )))))))))))))))))))

Case No. C-10-03392-RS

PLAINTIFF LISA GALAVIZ’MEMORANDUM IN OPPOSITION TONOMINAL DEFENDANT ORACLECORPORATION’S MOTION TODISMISS

Date: December 2, 2010Time: 1:30 P.M.Ctrm: 3, 17th FloorJudge: Richard Seeborg

Case No. C-10-4233 RS

PLAINTIFF GALAVIZ’ MPA IN OPPOSITION TO MOTION TO DISMISS

Case3:10-cv-03392-RS Document39 Filed11/10/10 Page1 of 13

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TABLE OF CONTENTSPage

I. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Factual Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. Overview of Galaviz Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. The Forum Selection Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. Legal Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. While Oracle Concedes That Federal Law Governs the Validity andEnforceability of The Forum Selection Clause, It Fails to Cite a SingleFederal Case Supporting its Novel Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. The Forum Selection Clause Is Invalid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. The Clause Was Approved In Violation of Delaware Corporate Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2. The Clause Is Invalid Under Contractual Principles, Including LackOf Mutual Consent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

C. The Forum Selection Clause is Unreasonable and Unjust . . . . . . . . . . . . . . . . . . . 7

IV. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

PLAINTIFF GALAVIZ’ MPA IN OPPOSITION TO MOTION TO DISMISS -i-


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TABLE OF AUTHORITIESPage(s)

CASES

Argueta v. Banco Mexicano, S.A. (9th Cir. 1996) 87 F.3d 320. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Badie v. Bank of America67 Cal. App. 4th 779 (1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

BRC Grp., LLC v. Quepasa Corp.2009 U.S. Dist. LEXIS 72521(N.D. Cal. Aug. 7, 2009). . . . . . . . . . . . . . . . . . . . . . . . . 4, 5

Carnival Cruise Lines v. Shute (1991) 499 U.S. 585.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Docksider, Ltd. v. Sea Tech., Ltd.875 F.2d 762 (9th Cir. 1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Elf Atochem N. Am., Inc. v. Jaffari727 A.2d 286 (Del. 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

IBJ Schroder Bank & Trust Co. v. Resolution Trust Co.26 F.3d 370 (2d Cir. 1994).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

In re Revlon, Inc. Shareholders Litig.990 A. 2d 940 (Del. Ch. 2010).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 6

M/S Bremen v. Zapata Off-Shore Co.407 U.S. 1 (1972).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-9

Manetti-Farrow, Inc. v. Gucci America, Inc.858 F. 2d 509 (9th Cir. 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Murphy v. Schneider Nat’l, Inc. (9th Cir. 2004) 362 F.3d 1133.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Outokumpu Eng'g Enters. v. Kvaerner Enviropower685 A.2d 724 (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Papendick v. Bosch410 A.2d 148 (1979). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

State v. San Francisco Sav. & Loan Soc.66 Cal. App. 53 (1924). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Stewart Org., Inc. v. Ricoh Corp.487 U.S. 22 (1988).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Stolow v. Greg Manning Auctions, Inc.258 F. Supp. 2d 236 (S.D.N.Y. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PLAINTIFF GALAVIZ’ MPA IN OPPOSITION TO MOTION TO DISMISS -ii-


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STATUTES & RULES

Delaware Corporate Law § 102(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Delaware Corporations Law § 109. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Delaware Corporate Law §109 (b).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Delaware Corporate Law §109(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Delaware Corporation Law § 242 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

F.R.C.P. Rule 23.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

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I. Introduction

Derivative plaintiff Lisa Galaviz (“Plaintiff” or “Galaviz”), a long-time shareholder of

Nominal Defendant Oracle Corporation’s (“Oracle”), respectfully submits this memorandum in

opposition to Oracle’s motion to dismiss for improper venue.

First, another derivative action, the Prince Action, was filed in San Mateo Superior Court

and then removed by Oracle. Prince’s motion to remand is set for hearing with this motion.

While Galaviz believes the Court has jurisdiction over her action, she agrees the claims – which

Oracle pejoratively refers to “copycat” – are similar. For that reason, Galaviz agrees that the

remand motion should be resolved first.1/ If the Court denies the remand motion, both cases will

be properly before this Court for a single determination of venue. Conversely, if the Court finds

it lacks jurisdiction and remands, Galaviz is prepared to dismiss her action, so that two different

courts are not required to consider and resolve the same or similar venue motions.

Second, if Oracle’s venue motion is considered, it lacks any legal support. Indeed, no

court, state or federal, in American history has ever enforced a forum selection clause in a

corporation’s bylaws covering a shareholder derivative actions – not one. Not surprisingly,

Oracle’s motion fails to cite any opionion recognizing or applying its novel theory.

Third, dismissal based on a forum selection clause (typically used in the commercial

contract setting) would have troubling ramifications in a derivative action, particularly given the

unique facts present here. The specific forum selection clause was (1) added to Oracle’s bylaws

(rather than its charter, thus bypassing shareholder notice and approval), (2) in 2006, after the

wrongdoing had occurred, and (3) approved by the same directors who are defendants herein.

Again, putting aside the fact that no court has ever enforced such a clause, it would be unfair and

improper to apply the clause retroactively to cover misconduct that already occurred.

Finally, the forum selection clause does not even pass the contractual analysis that it is

subject to. No shareholder – including Galaviz – ever consented to the clause, and its

implementation would severely prejudice a shareholder’s right to pursue derivative claims.

1 Galaviz hereby incorporates by reference all arguments made by Prince in his oppositionmemorandum, with the exception of any relating to lack of federal jurisdiction.

PLAINTIFF GALAVIZ’ MPA IN OPPOSITION TO MOTION TO DISMISS 1


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II. Factual Background

A. Overview of Galaviz Action

Plaintiff Galaviz filed the initial derivative action in federal court on August 2, 2010,

pursuant to Rule 23.1 of the Federal Rules of Civil Procedure. Venue was properly selected in

the Northern District of California, where Oracle resides and maintains its Redwood City

headquarters.

The Galaviz Complaint asserts California state law claims against certain members of

Oracle’s Board of Directors and certain senior officers arising from Oracle’s alleged systemic

practice of over-billing the federal government for software products, in violation of its contracts.

Specifically, plaintiff alleges that defendants abused their fiduciary and controlling positions at

Oracle and authorized the Company to defraud the United States by failing to apply the same

discounts offered to commercial customers. As a result, the federal government was overcharged

millions of dollars. The fraud was detailed in a recently unsealed whistle-blower action filed by

former senior executive, Paul Frascella, and on July 29, 2010, the United States joined the action

and filed its own Complaint.

Critical to this motion, the SEC Complaint – just like the Galaviz Complaint – allege that

the illegal billing practices occurred over an eight-year period, from 1998 to 2006. During this

period, most of the Defendants presided over Oracle. Indeed, the SEC Complaint alleges that

Oracle intentionally failed to give the federal government the same discounts on software that it

provided to its commercial customers and went out of its way to hide these deals from the

government. Oracle’s exposure is massive: according to the Department of Justice, Oracle sold

about $1.1 billion worth of software and product support to the government.

This unlawful behavior has severely damaged Oracle. In addition to its potential

exposure to damages, Oracle has already incurred the huge cost of investigating misconduct,

implementing remedial measures, and defending suits, along with the corresponding damage to

Oracle’s business operations, corporate image and goodwill. At the same time, defendants have

been enriched by salaries, bonuses, fees, stock options and other perquisites not justified by

Oracle’s unlawful activities and performance under their stewardship. Defendants’ disregard for



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their own fiduciary and legal obligations has bred a climate of disdain and disrespect for legal

compliance throughout Oracle’s managerial and supervisory ranks, resulting in the investigation

and suits.

The above legal challenges constitute serious and unnecessary threats to Oracle’s finances

and future prosperity. Collectively, the lawsuits are already doing severe damage to the

company’s business operations, public image, goodwill and reputation. Most troubling, despite

the mounting problems, Defendants have taken no steps to fix them. By this action, Plaintiff, a

long-time owner of shares of Oracle stock and resident of San Mateo County – Oracle’s

headquarters and residence – seeks to recover damages for Oracle.

B. The Forum Selection Clause

According to Oracle’s motion and supporting declaration, Oracle’s Board of Directors

met at the Half Moon Bay Ritz Carlton on July 9 and 10, 2006. See Declaration of Philip T.

Besirof (“Besirof Decl.”) (Doc. No. 21), ¶3, Ex. B.2/ At that meeting, the Board – including

many directors who are now defendants in this case – voted to amend the Company’s bylaws to

include a forum selection clause that purports to require that all derivative claims be brought in

the Chancery Court of Delaware (and, effectively, abrogate the Company’s own shareholders’

rights to litigate in their home states or even Oracle’s county of residence). Id., ¶¶ 2-5, Exs. A-

D.3/

Notably, Oracle does not explain (and the heavily redacted minutes do not describe) why

the Board approved the amendment adding the forum selection clause, why the Board chose to

add the clause by amending the Company’s bylaws rather than amending the Company’s charter

(requiring notice and shareholder approval), or whether it provided notice to shareholders of the

change. Indeed, the referenced minutes don’t even include the “Amended and Restated Bylaws”

that were supposedly attached as an exhibit.

2 Plaintiff has separately filed Objections to Evidence cited in Oracle’s motion.

3 Coincidentally or not, the Board’s vote took place shortly after Oracle’s CEO, LarryEllison, settled a derivative action pending in San Mateo County Superior Court, alleging that heillegally sold $900 million in Oracle stock shortly before a negative earnings release. Ellisonreportedly paid $122 million to settle the action, which was approved in November 2005.



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III. Legal Argument

A. While Oracle Concedes That Federal Law Governs the Validity andEnforceability of The Forum Selection Clause, It Fails to Cite a SingleFederal Case Supporting its Novel Theory

Oracle brings this motion to dismiss under Rule 12(b)(3), which permits the court to

consider reasons for denying enforcement of a forum selection clause, regardless of whether they

are apparent on the pleadings. Argueta v. Banco Mexicano, S.A. (9th Cir. 1996) 87 F.3d 320,

324. In ruling on a Rule 12(b)(3) motion, the court must draw all reasonable inferences and

resolve all factual conflicts in favor of the party seeking to avoid the enforcement of the clause.

Murphy v. Schneider Nat’l, Inc. (9th Cir. 2004) 362 F. 3d 1133, 1139.

Oracle asserts that federal law governs the validity of a forum selection clause. However,

Oracle cites no federal case authority – not one case – applying a forum selection clause to a

derivative action. That is because no court has ever upheld such a novel theory. Oracle’s failure

to support its motion with on-point authority is consistent with meet and confer efforts prior to

this motion. Galaviz’ counsel asked Oracle to provide any known case where a court enforced a

forum selection clause included in a corporation’s bylaws to a shareholder derivative action. No

case was provided.

The few federal cases that Oracle does cite are inapposite. Neither Stewart Org., Inc. v.

Ricoh Corp., 487 U.S. 22, 32 (1988) nor Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F. 2d

509, 513 (9th Cir. 1988) had anything to do with derivative actions or any of the other unique

circumstances presented by this motion. Similarly, while Oracle cites two federal cases for the

proposition that a forum selection clause may contain “mandatory” language – Docksider, Ltd. v.

Sea Tech., Ltd., 875 F. 2d 762 (9th Cir. 1989) and BRC Grp., LLC v. Quepasa Corp., No. C 09-

01506, 2009 U.S. Dist. LEXIS 72521(N.D. Cal. Aug. 7, 2009) – that is besides the point. There

is no dispute that Oracle’s clause contains mandatory language (versus an option of where to

bring suit); the issue is whether such a clause, approved after the fact, without shareholder notice

or consent, by the very directors who are defendants in the case, is valid and enforceable in a

derivative context. Indeed, the cases cited by Oracle concerned contracts between private parties,



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not a clause covering a shareholder derivative action and affecting the rights of thousands of

shareholders.4/

Lacking federal authority, Oracle is left clinging to dicta in a footnote of a single state

court decision, In re Revlon, Inc. Shareholders Litig., 990 A. 2d 940, 960 n.8 (Del. Ch. 2010),

where the court indicated that corporations could decide to adopt “charter provisions selecting an

exclusive forum for intra-entity disputes.” Emphasis added. However, that footnote remark had

nothing to do with the court’s resolution of the underlying case, did not concern a forum

selection clause asserted in a derivative lawsuit, did not analyze the validity or enforceability of

such a clause, and as the footnote indicated, and was limited to the very different hypothetical

situation where a company adopts a clause in its charter, presumably with shareholder notice and

approval. Perhaps, for all of these reasons, the court ends the footnote discussion by stating,

“[t]he issues implicated by an exclusive forum selection provision must await resolution in an

appropriate case.” Id.5/

B. The Forum Selection Clause Is Invalid

1. The Clause Was Approved In Violation of Delaware Corporate Laws

Oracle asserts that the Board’s vote to amend its bylaws and add a forum-selection clause

was a “valid act.” In support, Oracle cites Delaware Corporations Law Section 109, which

provides that bylaws may contain any provision “not inconsistent with law or with the certificate

of incorporation, relating to the business of the corporation, the conduct of its affairs, and its

rights or powers or the rights or powers of its stockholders, directors, officers, or employees.” 8

Del. C. §109(a) and (b) (emphasis added). According to Oracle, since a forum selection clause

“relates” to the rights of stockholders, it can appropriately be inserted in the bylaws by the Board

without shareholder approval, even if it limits their options.

4 In BRC, supra, 2009 U.S. Dist. LEXIS 72521 at * 7, the plaintiff did not even challenge“the validity or reasonableness of the clauses.”

5 Another Delaware court stated, “Although relevant to a determination ofjurisdiction, a forum selection clause is not by itself dispositive.” Outokumpu Engg Enters. v.Kvaerner Enviropower, 685 A. 2d 724, 733 (1996); see also, Papendick v. Bosch, 410 A. 2d 148,153 (1979) (contrasting plaintiff “of limited means” with defendant “huge multi-nationalenterprise”).



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However, Oracle’s analysis ignores Section 102(b)(1), covering “certificates of

incorporation” or charters. Under Section 102(b)(1), a company’s charter may contain provisions

“defining, limiting, and regulating the powers of the corporation, the directors, and the

shareholders. . . .” 8 Del. C. § 102(b)(1). Thus, read together, while corporate bylaws can

include provisions relating to shareholder rights, only a charter can include provisions which

limit such rights.

Plainly, a forum selection clause limiting where Oracle’s shareholders can file a

derivative action, and requiring them (in many cases) to travel across the country to retain

counsel, argue motions, and conduct trial, limits their powers and should have been approved by

a valid charter amendment. Further, Oracle cannot argue that Delaware courts need to apply its

own state’s laws in derivative actions; federal and state courts are plainly capable of applying

Delaware laws, and have done so for years.

Similarly, under Section 242 of Delaware’s Corporation Law, the charter amendment

required shareholder consent by majority vote:

After a corporation has received payment for any of its capital stock, or after anonstock corporation has members, it may amend its certificate of incorporation,from time to time, in any and as many respects as may be desired, so long as itscertificate of incorporation as amended would contain only such provisions as itwould be lawful and proper to insert in an original certificate of incorporationfiled at the time of the filing of the amendment; and, if a change in stock or therights of stockholders, or an exchange, reclassification, subdivision, combinationor cancellation of stock or rights of stockholders is to be made, such provisions asmay be necessary to effect such change, exchange, reclassification, subdivision,combination or cancellation.

See 8 Del. C. § 242(a) (emphasis added), (b) (describing procedure for approval of amendments;

requiring majority vote). Here, any decision to require Delaware courts as the exclusive forum

for derivative litigation plainly constituted a “change” or “cancellation” of shareholders’ prior

rights, whereby they were allowed to bring derivative litigation in states other than Delaware.

Thus, by failing to obtain shareholder consent, the Board’s unilateral action is invalid.

Finally, the only two cases cited by Oracle – In re Revlon, Inc. Shareholders Litig., supra,

990 A. 2d 940, 960 n.8 and Elf Atochem N. Am., Inc. v. Jaffari, 727 A. 2d 286 (Del. 1999) –

actually support Galaviz’ position. In Revlon, the court noted that corporations may adopt



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“charter” provisions requiring an exclusive forum for lawsuits which, of course, would require

shareholder vote. In Elf Atochem, the issue was whether Delaware’s Limited Liability Company

Act required the LLC itself, in addition to its members, to sign an agreement containing a forum

selection clause. The court noted the Act’s language only required “members” to consent, and

upheld the agreement since both members had executed the agreement. Plainly, the same cannot

be said here.

2. The Clause Is Invalid Under Contractual Principles, Including LackOf Mutual Consent

As Oracle concedes, most forum selection clauses are negotiated by parties in commercial

settings and included in contracts. Since bylaws are a type of contract (Stolow v. Greg Manning

Auctions, Inc., 258 F. Supp. 2d 236, 249 (S.D.N.Y. 2003)), “‘[t]he rules of contract interpretation

are generally applicable to the interpretation of bylaws.’” IBJ Schroder Bank & Trust Co. v.

Resolution Trust Co., 26 F. 3d 370, 374 (2d Cir. 1994) (quotation omitted).

Under contract rules, mutual consent is a necessary element for the formation of a

contract. Restatement (Second) of Contracts § 17(a). Yet, curiously absent from Oracle’s

motion and supporting declaration is any discussion of mutual consent. Oracle also does not

assert that it provided notice to shareholders of the meeting, their intent to change the bylaws to

add a forum selection clause, nor even the basis for the change. To the contrary, as discussed

above, the shareholders never received notice of and never consented to any provision requiring

that Delaware be the exclusive forum for derivative litigation, and that they were giving up their

rights to litigate in alternative forums. See also, Galaviz Decl., ¶¶ 3-4 (attesting that she never

was notified of, nor agreed to, the forum selection clause).

C. The Forum Selection Clause is Unreasonable and Unjust

In addition to the reasons described above, the Court should deny the motion since the

forum selection clause is unreasonable and unjust. As described by the Supreme Court in M/S

Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-15 (1972) (“Bremen”), a forum selection clause

may not be enforced if (1) its incorporation into the contract was the result of fraud, undue

influence, or overreaching; (2) it is fundamentally unfair and inconvenient, effectively depriving



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a party of its day in court; or (3) it would contravene a strong public policy of the forum in which

the suit is brought. If any of these factors is present, the clause should not be enforced. Here,

most if not all of the factors are present.

For example, forum selection clauses contained in certain types of contracts, such as form

or adhesion contracts, are subject to judicial scrutiny for fundamental fairness, where courts may

consider factors such as the basis for selecting the forum and whether it discourages the pursuit

of legitimate claims, whether consent was obtained by overreaching, and whether the contesting

party had notice of the forum provision. Carnival Cruise Lines v. Shute (1991) 499 U.S. 585,

594-95. Here, as discussed above, the amended bylaw was passed without any notice, much less

consent, to Oracle’s shareholders. Further, there can be little dispute that requiring shareholders

to bring a derivative suit in Delaware, or nowhere at all, will discourage the pursuit of derivative

claims by increasing the difficulty and cost of any such litigation.

In Bremen, the Court held that a forum clause will be unenforceable if it is “inconvenient

for the trial of the action.” Bremen, 407 U.S. 1 at 17. There are extra costs associated with

litigating in the Court of Chancery that do not exist in the Northern District of California. Those

costs include, for plaintiff, travel, excessive document costs, and potentially retaining new

counsel. Galaviz Decl., ¶ 5. Presumably, Oracle will also be forced to incur some of these costs,

as its headquarters, and at least some of the witnesses, are located in the Northern District of

California.

In Bremen, in finding that the resisting party had not demonstrated that the specified

forum was inconvenient, the Supreme Court stated that “[w]e are not here dealing with an

agreement between two Americans to resolve their essentially local disputes in a remote alien

forum. In such a case, the serious inconvenience of the contractual forum to one or both of the

parties might carry greater weight in determining the reasonableness of the forum clause.” Id. at

18. The same circumstances are presented in this case: Delaware is a remote forum for this

California shareholder (and, presumably, thousands of other shareholders).

Finally, as the Supreme Court held in Bremen: “A contractual choice-of-forum clause

should be held unenforceable if enforcement would contravene a strong public policy of the



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forum in which suit is brought.” Here, whether applying federal or California law, enforcement

of the clause would contravene important public policy, including the right of shareholders to

pursue valid derivative claims in a local forum. Indeed, California courts recognize forum

selection as a right that cannot be altered retroactively without the consent of the parties affected.

In Badie v. Bank of America, 67 Cal. App. 4th 779 (1998), an amendment to a company’s bylaws

requiring arbitration of disputes was held not to be binding on existing depositors in the absence

of consent. Rather, the court held the right to select a judicial forum was “a substantial right not

lightly to be deemed waived.” 67 Cal. App. 4th at 806. Similarly, an amendment to bylaws

cannot unilaterally change pre-existing rights of shareholders. See State v. San Francisco Sav. &

Loan Soc., 66 Cal. App. 53, 61 (1924).

For all of these reasons, the clause should be held unreasonable and unjust. Bremen, 407

U.S. at 12-15.

IV. Conclusion

For the reasons stated above, plaintiff Galaviz requests that Oracle’s motion to dismiss

for improper venue be denied.

Dated: November 10, 2010 COTCHETT, PITRE & McCARTHY

By: /s/ Mark C. Molumphy MARK C. MOLUMPHY

JOSEPH W. COTCHETTNANCY L. FINEMANJORDANNA G. THIGPENMATTHEW K. EDLING




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JOSEPH W. COTCHETT (36324)[email protected] L. FINEMAN (124870)[email protected] C. MOLUMPHY (168009)[email protected] G. THIGPEN (232642)[email protected] K. EDLING (250940)[email protected], PITRE & McCARTHYSan Francisco Airport Office Center840 Malcolm Road, Suite 200Burlingame, CA 94010Phone: (650) 697-6000Fax: (650) 697-0577





Plaintiff,vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.


Plaintiff, vs.


Defendants;-and-

ORACLE CORPORATION,

))))))))) )) )))))))))))))))))

Case No. 10-CV-3392-RS

DECLARATION OF PLAINTIFF LISAGALAVIZ IN OPPOSITION TONOMINAL DEFENDANT ORACLE’SMOTION TO DISMISS

Date: December 2, 2010

Time: 1:30 p.m.

Courtroom: 3, Hon. Richard Seeborg

DECLARATION OF PLAINTIFF LISA GALAVIZ IN OPPOSITION TO NOMINAL DEFENDANT ORACLE’S MOTION TO

DISMISS

Case3:10-cv-03392-RS Document39-1 Filed11/10/10 Page1 of 2

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I, Lisa Galaviz, declare:

1. I am a Plaintiff in this action, and reside in San Mateo County, California. I have

personal knowledge of the matters stated below and, if called as a witness, I could and would

competently testify thereto.

2. Based on my account information, which I believe to be accurate, I am presently a

shareholder of Oracle Corporation (“Oracle”) and have continuously been a shareholder of

Oracle, directly and through my family trusts, since at least 1999.

3. I understand that Oracle recently filed a motion asserting that its bylaws were

amended in 2006 to require that derivative actions be filed in Delaware Chancery Court. Before

now, I was not aware that Oracle had amended its by-laws or otherwise announced that the

Delaware Chancery Court was the exclusive forum for derivative actions.

4. I also do not recall ever, consenting to or approving any amendment to Oracle’s

bylaws requiring Delaware to be the exclusive forum for derivative actions against Oracle.

5. As an individual shareholder, enforcement of the clause would effectively

deprived me of my ability to sue Oracle outside of the State of Delaware. As a local school

employee, I would not be able to litigate this case in Delaware, financially or logistically or

participate in court hearings or trial. I also understand that my current attorneys are not licensed

to practice law in Delaware.

I declare under penalty of perjury that the foregoing is true and correct. Executed at San

Mateo, California, on November 10, 2010.

s/ Lisa Galaviz LISA GALAVIZ

Attestation Pursuant to General Order No. 45

Pursuant to General Order No. 45, Section X. B., I, Mark C. Molumphy, hereby certify

and attest that Ms. Galaviz has authorized me to file this document.

I declare under penalty of perjury that the foregoing is true and correct. Executed on

November 10, 2010.

s/ Mark C. Molumphy MARK C. MOLUMPHY

DECLARATION OF PLAINTIFF LISA GALAVIZ IN OPPOSITION TO NOMINAL DEFENDANT ORACLE’S MOTION TO

DISMISS 1


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Plaintiff,vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.


Plaintiff, vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.

))))))))) )) )))))))))))))))))))


PLAINTIFF LISA GALAVIZ’OBJECTIONS TO EVIDENCE CITEDBY NOMINAL DEFENDANT ORACLECORPORATION IN SUPPORT OF ITSMOTION TO DISMISS



PLAINTIFF GALAVIZ’ OBJECTIONS TO EVIDENCE


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Derivative plaintiff Lisa Galaviz (“Plaintiff” or “Galaviz”) hereby objects to evidence

presented by Nominal Defendant Oracle Corporation (“Oracle”) in support of its motion to

dismiss.

Evidence submitted to the Court in support of a motion must meet all requirements for

admissibility of evidence if offered at the time of trial. Schwarzer, Tashima & Wagstaffe,

California Practice Guide – Federal Civil Procedure Before Trial (TRG 2008) ¶ 12-57;

Travelers Cas. & Sur. Co. of America v. Telstar Const. Co., Inc. (D.Az. 2003); N.D.Cal. Local

Rule 7-5(b).

With respect to a declaration, it is a substitute for oral testimony and, therefore, must

conform to the same requirements of competency and personal knowledge that would apply if the

declarant were to testify. Id., California Practice Guide at ¶¶ 12:58-59. “It is not enough for the

declarant simply to state that he or she has personal knowledge of the facts stated. Rather, the

declaration itself must contain facts showing the declarant’s connection with the matters stated

therein, establishing the source of his or her information.” Id.; see also, FRE 602; United States

v. Shumway (9th Cir. 1999) 199 F.3d 1093, 1104. Similarly, documentary evidence attached to a

declaration “must be properly authenticated (usually by declaration of someone with personal

knowledge of the document’s genuineness and execution).” Id., California Practice Guide at ¶

12:59.1.

1. Declaration of Philip T. Besirof (“Besirof Decl.”) (Doc. 21), Paragraph 2 and

Exhibit A attached.

The declarant, Mr. Besirof, an attorney at Morrison & Foerster, lacks personal knowledge

and competency to testify about the matters described. Further, the attached exhibit is not

properly authenticated and is inadmissible hearsay. FRE 802.

2. Besirof Decl., Paragraph 3 and Exhibit B attached.




PLAINTIFF GALAVIZ’ OBJECTIONS TO EVIDENCE 1


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3. Besirof Decl., Paragraph 4 and Exhibit C attached.




4. Besirof Decl., Paragraph 5 and Exhibit D attached.




5. Besirof Decl., Paragraph 6, “On information and belief, Oracle’s bylaws

have been available on the Company’s website since August 28, 2006.”


and competency to testify about the matters described. Further, Mr. Besirof fails to state the

basis for his “information and belief.” Finally, to the extent he is testify about contents or truth

of matters contained in documents allegedly available back in 2006, such testimony is

inadmissible hearsay. FRE 802.

Plaintiff respectfully requests that the Court sustain her objections to such evidence and

to strike the evidence in considering the underlying motion.

Dated: November 10, 2010 COTCHETT, PITRE & McCARTHY

By: /s/ Mark C. Molumphy MARK C. MOLUMPHY


PLAINTIFF GALAVIZ’ OBJECTIONS TO EVIDENCE 2


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Plaintiff,vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.


Plaintiff, vs.


Defendants;-and-

ORACLE CORPORATION,

Nominal Defendant.

))))))))) )) )))))))))))))))))))


[PROPOSED] ORDER DENYINGNOMINAL DEFENDANT ORACLECORPORATION’S MOTION TODISMISS



[PROPOSED] ORDER DENYING MOTION TO DISMISS


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The Court, having considered Nominal Defendant Oracle Corporation’s (“Oracle”)

motion to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3), and all

papers and arguments submitted in support and in opposition to the motion, including those

submitted by plaintiffs in the Galaviz and Prince actions, and all objections to evidence,

HEREBY ORDERS that:

1. The objections to evidence submitted by plaintiff Galaviz are SUSTAINED. The

cited evidence lacks personal knowledge, proper authentication, and in the case of

the documents attached, constitutes inadmissible hearsay. FRE 602, FRE 802.

2. The motion to dismiss is DENIED. The Court, considering the papers and all

competent evidence, and drawing all reasonable inferences and resolving all

factual conflicts in favor of the plaintiffs as the parties seeking to avoid

enforcement of the clause, finds (1) the forum selection clause is invalid and (2)

enforcement of the clause in the context of these shareholder derivative actions,

which cover conduct pre-dating the clause, would be unreasonable and unjust.

Dated: _______________. _______________________________UNITED STATES DISTRICT JUDGE

[PROPOSED] ORDER DENYING MOTION TO DISMISS 1


joseph w. cotchett (36324) jordanna g. thigpen … · joseph w. cotchett (36324 ......

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