As Oregon remains transfixed by the still-unfolding slew of revelations around Gov. John Kitzhaber and his fiancee, Cylvia Hayes, Oracle America is threatening to frustrate one of the beleaguered official’s legislative priorities— by blocking the move to dissolve Cover Oregon.

The California software giant, which Kitzhaber has repeatedly vilified over the implosion of the Cover Oregon technology project, is threatening to go to court to block an idea first floated by Kitzhaber during last fall’s political campaign: a bill to make the health exchange bureaucracy go away.

Lawmakers have gathered behind SB 1, legislation that would fold the functions of Cover Oregon under the state Department of Consumer and Business Services and abolish the stand-alone entity that has become a political embarrassment. It’s passage was thought to be a sure thing, so much so that the Kitzhaber administration began preparations for the transfer months before any bill was announced.

Oracle America , enmeshed in dueling lawsuits with the Kitzhaber administration and Attorney General Ellen Rosenblum, is now threatening to sue to block state lawmakers’ attempt to dissolve the beleaguered health exchange bureaucracy.

In a Feb. 9 Oracle legal filing, the firm’s lawyers call the pending legislation a “transparent attempt to end-run” Oracle’s lawsuit demanding $23 million in what the company calls unpaid bills. They call the bill unconstitutional and say Oracle would “likely” go to court to block the bill .

Such a lawsuit would throw into chaos the already-begun transition of the health exchange’s functions to the state.

The legalities are complicated. Oracle has copyrighted its programming code and in court is accusing the state of using that code without permission while owing the company money.

Oregon’s lawyers, meanwhile, claim that states don’t have to obey copyright law. However, that copyright immunity does not extend to Cover Oregon, a stand-alone legal entity.

In a Feb. 6 filing, lawyers for the state asked a federal judge to delay Oracle’s lawsuit demanding $23 million from the state until July. They wrote that if SB 1 becomes law, it will bolster the state’s immunity defense. The bill’s language says that instead of Cover Oregon litigating any legal cases, the state Department of Consumer and Business Services will take over — meaning that in the Oracle case DCBS can claim the copyright immunity that Cover Oregon currently lacks.

In October, The Oregonian/OregonLive forced the disclosure of a confidential report prepared by consultant Clyde Hamstreet, a Kitzhaber associate brought in to oversee the exchange and make a recommendation on its future. Hamstreet recommended Cover Oregon not be dissolved and criticized the political decision-making around the exchange.

Oracle’s threat to block the exchange transition bill — not to mention the controversy that has weakened the Kitzhaber administration — could now play into potential settlement talks. Oracle is widely expected to use deposition testimony in the court cases to explore suggestions that the state’s decision-making over the exchange was heavily influenced by Kitzhaber campaign advisors.

In January, Kitzhaber told the Portland Business Journal that he was hoping to settle the case.

–Nick Budnick

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