JD Edwards is to sue Oracle for $1.7bn (£1bn), claiming that its "arrogant and unlawful" actions, designed to scupper the JD Edwards deal with PeopleSoft, are destroying shareholder value.

As the bidding war heats up, JD Edwards has filed claims seeking damages for interference in its proposed merger with PeopleSoft.

A Colorado state court has received claims seeking $1.7bn in damages against Oracle. The damages are equivalent to the price PeopleSoft had agreed to pay for JD Edwards.

A separate filing in a Californian court accuses Oracle chief executive Larry Ellison and executive vice president Chuck Phillips of having "engaged in unfair business practices". Last week, Ellison said he believed shareholders would view the JD Edwards merger as "a risky undertaking".

JD Edwards is hoping to get an injunction to prevent Oracle proceeding with its $5.1bn cash offer for PeopleSoft.

"Oracle's sole aim is to disrupt [the] merger. We will not sit idly by while Oracle pursues this arrogant, unlawful and destructive course of action," said Bob Dutkowsky, chairman and president of JD Edwards, in a statement.

The announcement from Oracle last week that it would offer $5.1bn for PeopleSoft's outstanding shares has threatened to derail the buyout of JD Edwards.

This has left the mid-market business application maker in limbo. For its customers, this uncertainty is likely to put purchasing plans on hold, at least until the outcome becomes more certain.

Yesterday, PeopleSoft's board rejected Oracle's offer, and urged its shareholders to follow suit. Earlier in the week, PeopleSoft dropped its own plans to take legal action against Oracle.