Updated from 6:31 p.m. EDT

Software firm J.D. Edwards ( JDEC) took up where its merger partner PeopleSoft ( PSFT) apparently left off : filing a lawsuit against Oracle ( ORCL), claiming the database giant was trying to wreck the deal with a hostile tender of its own.

Thursday evening, J.D. Edwards announced it had filed suit in a Colorado state court -- its headquarters are in Denver -- claiming that Oracle's $16-a-share offer for PeopleSoft was an attempt to ruin the merger between PeopleSoft and J.D. Edwards. The company said it would be filing a suit in a California court as well -- where PeopleSoft and Oracle are headquartered.

The Colorado suit seeks $1.7 billion in compensatory damages and an unspecified amount of punitive damages. The suit also seeks an injunction prohibiting Oracle from going forward with its offer for PeopleSoft.

The suit (announced a few minutes after Oracle's fourth-quarter earnings call started) comes as rhetoric heated up over the meaning of Oracle's offer for its applications rival.

Earlier in the day, PeopleSoft CEO Craig Conway argued that Oracle CEO Larry Ellison's move may backfire.

In a conference call, Conway suggested that confusion and anger over Oracle's tactics may give IBM ( IBM) and even Microsoft ( MSFT) a chance to siphon business from the database giant.

"Some things have been written on SAP's ability to capitalize on this," said Conway, referring to the efforts of SAP to win over customers confused by the tumult . "But the real beneficiary of last week is more likely to be IBM."

"It's the only significant competitor to Oracle in the database industry," he explained, noting IBM's database market share outranks that of Oracle. "The level of concern, frustration and outrage is so high that I think IBM has the opportunity to convert Oracle's customers into IBM customers. I think SAP's less the story than the opportunity this provides IBM and to some extent Microsoft with the SQL server database that has grown steadily in large corporations."

PeopleSoft on Thursday said its board has voted unanimously to recommend that stockholders reject Oracle's takeover bid.

The rejection was expected, as senior PeopleSoft executives reacted angrily to the offer as soon as it was made and even threatened (and then backed off ) a lawsuit. In a release, PeopleSoft said the board believes the offer would "undoubtedly face lengthy antitrust scrutiny, with a significant likelihood that approval would not be granted."

Additionally, the board decided the uncertainties created by Oracle's offer, which would include discontinuing PeopleSoft's products, "represent a substantial threat to stockholder value." The target company said the "unsolicited and hostile nature of the offer, combined with Oracle's statements, is designed to disrupt the company's strong momentum at significant cost to PeopleSoft's customers."

Responding to PeopleSoft's announcement today that it would reject its takeover offer, Oracle issued a brief announcement expressing disappointment, saying: "Mr. Conway (PeopleSoft's CEO Craig Conway) has already unilaterally rejected Oracle's offer to acquire PeopleSoft -- at any price and under any circumstances -- even before the PeopleSoft Board had met to consider it. PeopleSoft's Board has also refused repeated requests to meet with Oracle to discuss our offer and they have refused to redeem the company's 'poison pill.' "

Oracle had asked PeopleSoft's board to waive the poison pill, an action that would have made it easier for Oracle to negotiate directly with PeopleSoft's shareholders.

On the conference call Thursday, Conway sought to inject a note of finality in speaking of the board's decision. "From our point of view, this process is at an end. The board's evaluation is over and we've got business to do."

Asked how the company would seek to defend itself if Oracle persists in its takeover effort, Conway responded that the board's decision "speaks for itself."

If that weren't enough, the two lawsuits initiated by J.D. Edwards might deter Oracle. Besides the suit that seeks to put the kibosh on Oracle's hostile takeover bid, J.D. Edwards filed a separate action against leading Oracle execs -- Chairman and CEO Ellison and Executive Vice President Chuck Phillips -- alleging they're guilty of wrongful conduct and unfair business practices.

"Oracle's sole aim is to disrupt a merger that will create value for the key stakeholders of J.D. Edwards and PeopleSoft," said J.D. Edwards CEO Bob Dutkowsky in a statement. "Oracle's unsolicited offer for PeopleSoft will only destroy value for our companies' shareholders, customers and employees and the technology community overall. We will not sit by idly while Oracle pursues this arrogant, unlawful and destructive course of action."

Oracle spokesman Jim Finn said the case "has no merit whatsoever. Clearly PeopleSoft and J.D. Edwards prefer to fight in the courts than let shareholders decide."

In an interview on CNBC, Larry Ellison said he was "really not surprised" to learn about the lawsuits against his company. "There's usually a lot of litigation that goes on in offers like this," he said, adding, "We'd like to close the deal in July if we can."

Oracle has said it isn't sure what it would do with J.D. Edwards if it were to successfully acquire PeopleSoft.

Earlier this week, Ellison said PeopleSoft had dropped plans to pursue its own lawsuit against his company. PeopleSoft never confirmed that it intended to file a suit.

Pressure on PeopleSoft

"In the end, PeopleSoft was targeted by a hostile bid exactly because we have stronger products, because we are so well-positioned," PeopleSoft CEO Conway told analysts and investors on today's conference call. "The approach may also cause a challenge and disruption of business but we have 8,000 people whose single-minded purpose is to ensure there is minimal disruption of our business."

Still, asked to comment on how much of its business was at risk as a result of the distraction, he said "I don't know," and acknowledged customers' "desire to have clarity."

Also on the call, Conway confirmed reports that he and Ellison had once discussed a possible merger of part of their operations. Previously, Conway had offered to acquire Oracle's applications suite and maintain it under PeopleSoft's brand, he said, but Ellison refused. "He felt there needed to be one code base. I felt it was not advisable to leave 10,000 or 12,000 customers having to convert code base ," Conway said.

When PeopleSoft acquires J.D. Edwards, he noted, it plans to maintain three families of infrastructure to better-serve customers. Conway stressed that PeopleSoft wouldn't require J.D. Edwards' customers, most of whom use IBM's AS400 platform, to convert to a new architecture.

Shares of PeopleSoft closed down 25 cents, or 1.4%, to $17.37, while Oracle was up 6 cents, or 0.5%, to $13.33. JDEC ended up 2 cents, or 0.2%, to $13.36.

After hours, both stocks were little changed: PeopleSoft gave up 9 cents, or 0.6%, and Oracle gained 17 cents, or 1.3%, after reporting a better-than-expected quarter.