A Michigan public pension fund has initiated legal proceedings against technology corporation Oracle, alleging the company failed to disclose critical information about a major client’s financial situation before conducting a $25 billion public note offering in February 2026.
The Sterling Heights Police & Fire Retirement System filed the class action lawsuit in Davidson County, Tennessee, where Oracle has been relocating its corporate headquarters over the past five years. The suit names Oracle, several current and former executives and board members, along with investment banking firms involved in underwriting and managing the February 2026 note offering.
According to the lawsuit, Oracle promoted substantial growth in its cloud computing business during the months preceding the offering. Company executives attributed this expansion to major participants in what they described as the ongoing artificial intelligence revolution. The pension fund states that Oracle reported its remaining performance obligations had increased to approximately $523 billion, representing a dramatic rise from around $97 billion the previous year.
The complaint centers on Oracle’s relationship with OpenAI, an artificial intelligence research company that would later announce a $300 billion cloud computing agreement with Oracle. The pension fund alleges that OpenAI was responsible for the majority of Oracle’s reported growth in remaining performance obligations, but that Oracle failed to disclose significant concerns about OpenAI’s financial capacity.
The lawsuit claims that at the time of the note offering, OpenAI had missed internal revenue targets and new user goals. Additionally, the pension fund states that OpenAI’s chief financial officer had expressed doubts about the company’s ability to pay for cloud computing services like those provided by Oracle. Despite these circumstances, the registration statement for the note offering contained no such disclosures, according to the complaint.
The pension fund alleges that OpenAI was not profitable at the time and generated only a fraction of the revenue necessary to meet its payment obligations to Oracle, not to mention additional infrastructure commitments to other parties. To fulfill its agreements with OpenAI, the lawsuit claims Oracle had to increase its debt burden, resulting in tens of billions in new capital expenditures and over $200 billion in long-term lease agreements.
During an earnings call referenced in the complaint, Oracle executives reportedly stated they anticipated $50 billion in capital expenditures for 2026 to meet demand for artificial intelligence-related services. When investors raised concerns, executives allegedly pointed to previous growth in remaining performance obligations as justification.
The lawsuit asserts that none of the named defendants conducted reasonable investigation or had reasonable grounds to believe that statements in the registration statement were accurate and complete. The pension fund argues that by omitting these material facts, Oracle violated the Securities Act, as OpenAI allegedly accounted for most of the company’s reported future revenue gains that executives frequently cited.
Since the February 2026 note offering, the price of the notes has fallen significantly from their original offering price, resulting in damages to the plaintiff and other class members, according to the complaint.
The Sterling Heights Police & Fire Retirement System is seeking compensatory damages and cancellation of the note purchases. The pension fund is represented by San Diego-based law firm Robbins Geller Rudman & Dowd.
Oracle declined to comment on the ongoing litigation when contacted about the case.
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