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Start marking your Oracle-DOJ score card

The judge's line of questioning will be a key indicator of his thinking on whether to overrule the Justice Department's challenge to Oracle's hostile bid for rival PeopleSoft.

A federal judge supported the Department of Justice this week in pretrial decisions related to its antitrust challenge of Oracle's bid for PeopleSoft, but legal experts cautioned that it's too early to draw conclusions about his thinking.

On Wednesday, U.S. District Judge Vaughn Walker denied Oracle's request to exclude testimony from DaimlerChrylser executive Michael Gorriz, scheduled to be one of the Justice Department's customer witnesses. The court session tackled procedural issues as both sides gear up for the start of the trial Monday.

Special coverage

The judge's line of questioning will be
a key indicator of whether he's inclined
to overrule a federal challenge to
Oracle's hostile bid for PeopleSoft.

"This is not necessarily a predeterminer of anything, other than Oracle didn't want the DaimlerChrylser guy and lost," said Stan Gorinson, a partner with Kilpatrick Stockton and a former Justice Department antitrust official. "Oracle thought this guy was a slight (negative) and tried to leverage it into something else."

Still, the pattern of such rulings can hint at how the judge will finally rule.

Ready to rumble
Walker, of the Ninth Circuit U.S. District Court in San Francisco, will preside over the nonjury trial, which is expected to last four weeks. To size up the performance of the two parties, trial attorneys and law professors have suggested focusing on legal motions and the judge's line of questioning.

Motions to limit evidence or arguments presented "are one of the most revealing pretrial (events)," said Robert Pringle, a trial attorney with Thelen Reid & Priest. Such motions "signal where the parties are going in the case," he said. "And the judge, by ruling on these motions, says something about whether he thinks there is something (worthwhile) in them or not.?

In one of these motions, Oracle had sought to prohibit the May 19 deposition of Gorriz, DaimlerChrylser's IT business systems vice president. Oracle said DaimlerChrylser did not provide the software maker with documents Oracle attorneys had requested.

Software dealing

Below are the top 10 software-related mergers since 2000, excluding shareholder buyouts, along with the Oracle-PeopleSoft deal shown where it would stand if completed. Of these 11 deals, only Oracle's involves a hostile bid.

BuyerAcquired companyDate completedDeal size (billions)
VeritasSeagateNov. 2000$17.7
i2Aspect DevelopmentJune 2000$7.9
Phone.comSoftware.comNov. 2000$7
NTTVerioSept. 2000$6.7
ExodusGlobalCenterJan. 2001$5.8
TerraLycosOct. 2000$5.6
CiscoArrowPointJune 2000$5.5
LucentChromatisJune 2000$4.6
InfoSpaceGo2NetOct. 2000$4.5
KanaSilknetApril 2000$4.1
Source: Thomson Financial

Gorriz, one of 25 witnesses the Justice Department plans to call during the trial, is expected to testify about the automaker's consideration of available options for human resources and financial management software.

"We did fine in his deposition, but we felt it suggested there was more information out there that would be favorable to us," said Dan Wall, an attorney Oracle hired for the case. "But when we asked DaimlerChrylser, they refused to produce it."

Oracle is also seeking to exclude some or all of the testimony of three university professors the Justice Department names on its witness list. The academics are supposed to address economic issues related to the merger, including the potential impact on market share, competition and pricing.

Walker said he would take up that issue June 10, when he will also consider a request by the Department of Justice to exclude certain information Oracle's witnesses are expected to present.

The Justice Department wants to bar some testimony from Dale Kutnik, chairman of industry research firm Meta Group. The agency, in its court filing, said it wants Kutnik "precluded from offering opinion on economic conclusions or findings" because he's an analyst, not an economist.

Here comes the judge
Another telling sign of a judge?s view comes from the questions he or she asks during the trial. ?This is a key area, especially with reference to the market issue,? said Laurence Popofsky, an attorney with Heller Ehrman White & McAuliffe. The Justice Department will argue that the merger would reduce the business applications market from three major competitors--SAP, Oracle and PeopleSoft--to two. Oracle will counter that there are many other competitors.

?The judge, by the questions he asks, gives a fair indication of what is or isn?t bothering him (about the case)," Popofsky said. This questioning, which in an antitrust trial is likely to be economically based, "will reveal the kinds of concerns that will drive the outcome of the case," he said.

?The judge, by the questions he asks, gives a fair indication of what is or isn?t bothering him (about the case)."
-- Attorney Laurence Popofsky

Popofsky, who went before Walker while representing Pacific Gas & Electric in an antitrust case in the mid-1990s, said the judge paid a lot of attention to expert witness testimony and to information gleaned from economists.

"He was particularly interested in market definitions, (more than in) testimony from the companies that participate in the market," Popofsky said.

He said the judge will also be weighing the credibility of witnesses in the case. "It comes down to, 'Who does the judge believe?' If you blow your credibility, everything else doesn?t matter much."

Trial attorneys agree that credibility is key.

"You can tell over time if the government?s case is making sense, or if Oracle?s attorneys are punching holes in it," Gorinson said.

Facts versus the law
Gorinson noted that there's a distinction between expert witnesses, such as industry analysts who give opinions about market share, and fact witnesses, who testify to the specifics of the case, such as, "I saw John shoot the gun."

"If you have a fact witness who doesn?t do well when testifying to the events of the case, that can tell you who is up or down in a case," Gorinson said. Oracle is relying on competitors to serve as fact witnesses, while the Justice Department is turning to customers for that role.

But Pringle, who has also appeared before Walker in several cases, said the judge's decisions are usually based more on the law than on the facts of the case.

"Some people may have a compelling case based on the facts, but, at the end of the day, Judge Walker won?t ignore the law to get an appropriate result,? Pringle said, citing the antitrust media merger case involving the San Francisco Chronicle and San Francisco Examiner. Hearst Corp., which owned the Examiner, had offered $660 million to buy the competing newspaper in 2000.

The Justice Department allowed the merger to move forward, but a San Francisco politician who wanted to buy the Examiner filed a lawsuit to block the deal. In that trial, Walker questioned the Justice Department's review of the merger and asked the regulatory agency to respond to some pointed questions.

"In the Examiner-Chronicle case, the judge showed he was very much against the merger and had trouble with the Justice Department?s position as an interested party," Pringle said. Nonetheless, though Walker issued orders that went against the Justice Department, he allowed the merger to proceed.

Because Walker has been seen to give greater weight to the law in the end, that makes it particularly difficult to forecast how he?ll ultimately rule, Pringle said. Even in cases where the judge had expressed concerns about someone's case, Pringle said, "in some of those matters, he?s ultimately ruled in their favor."