Presented by Hodgson Russ, the Whistleblower Blog is written by a team of lawyers experienced in successfully guiding both whistleblowers and companies accused by whistleblowers of wrongdoing through the False Claims Act process.

Shareholder Derivative Suits Premised on False Claims Act Violations

One prominent example is the case of Galaviz v. Berg. In that case, the plaintiff, on behalf of Oracle (one of the largest software corporations in the world), filed suit against certain senior officers and members of the board of directors for breach of fiduciary duty and abuse of control. Specifically, the plaintiff alleged that defendants abused their controlling positions at Oracle by their reckless mismanagement of the company, authorizing the company to defraud the United States by failing to disclose deep discounts Oracle offered to commercial customers but not made available to federal government agencies. According to the complaint, the federal government was overcharged millions of dollars as a result of the deception.

The fraud was first revealed in a whistleblower action filed by a former senior executive, Paul Franscella. As discussed in our October 21, 2011, post, Mr. Franscella’s allegations were recently settled when Oracle agreed to pay $199.5 million—$40 million of which Mr. Franscella recovered directly. To date, the shareholder derivative action has been stalled by motions focused on esoteric legal issues. But, now that the whistleblower suit is resolved, the shareholder derivative action may take on new life. One thing is clear, the Galaviz case will serve as a road map for other private litigants who are determined to send a message to corporate America.

Michelle Merola is a partner in the Business Litigation Practice at Hodgson Russ LLP. You can reach her at

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