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Kimball Denies SCO's Motion for Reconsideration/Clarification
Friday, September 14 2007 @ 08:47 PM EDT

When it rains, it pours, they say. First, SCO files for Chapter 11 bankruptcy protection, and now on the same day Judge Dale Kimball has denied SCO's Motion for Reconsideration or Clarification of the August 10, 2007 Order. Here's his Order [PDF]. I wrote an article earlier today about SCO's Reply Memorandum in support of this motion, and as you'll see, I am not surprised at the denial.

SCO also filed a Notice of Bankruptcy [PDF] also with an attached bankruptcy form. Here's some interesting wording:

PLEASE TAKE FURTHER NOTICE that as a result of the pendency of the Debtors' bankruptcy cases and the application of 11 U.S.C. 362(a)(1), the commencement or continuation of judicial proceedings against the Debtors to pursue prepetition obligations was automatically stayed. The automatic injunction granted by 11 U.S.C. 362(a) will remain in effect until the bankruptcy case is dismissed or closed or until such earlier times as set forth in 11 U.S.C. 362(c), (d), (e) and (f).

PLEASE TAKE FURTHER NOTICE that contempt proceedings may be initiated against any party who participates in any violation of the automatic stay, and, pursuant to the provisions of the Bankruptcy Code, the Bankruptcy Court may award actual damages, including costs and attorneys' fees (and, in appropriate circumstances, punitive damages) to compensate the Debtors for loss arising out of violations of the automatic stay.

Nyah, nyah, Novell, you can almost hear them saying. I feel like adding Groklaw to the list of creditors. We'd all saved up to send an attorney to the trial to report on it for Groklaw, and when he tried to cancel the ticket just now, he can't get his money back. So, I guess he could fly to Utah for the sheer glamor of it and check out the great Salt Lake. But no trial for now.

****************************************

____________________________________

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
_____________________________________

THE SCO GROUP, INC.,

Plaintiff, vs.

NOVELL, INC.,

Defendant.

___________________________________

ORDER

Civil Case No. 2:04CV00139DAK

___________________________________

This matter is before the court on The SCO Group, Inc.'s ("SCO") Motion for Reconsideration or Clarification of the Court's Order dated August 10, 2007. The parties have fully briefed the motion, and the court concludes that a hearing would not significantly aid in its determination of the motion. Having carefully considered the memoranda submitted by the parties and the facts and law relevant to the motion, the court enters the following order denying SCO's motion.

SCO seeks reconsideration of the court's determination that while the amended APA allowed SCO to enter into SVRX Licenses incidentally involved in its rights to sell and license UnixWare, such incidental licensing did not excuse SCO from paying royalties to Novell for the SVRX components in those licenses. It is within the court's discretion to reconsider a previous order. Anderson v. Deer & Co., 852 F.2d 1244, 1246 (10th Cir. 1988).

1

Rule 54(b) provides that "any order or other form of decision, however designated, which adjudicates fewer than all adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties." Fed. R. Civ. P. 54(b). In Major v. Benton, 647 F.2d 110, 112 (10th Cir. 1981), the Tenth Circuit explained that
When a court enunciates a rule of law in the course of a given case, the law of the case doctrine generally requires the court to adhere to the rule throughout the proceedings. 1B Moore's Federal Practice P 0.404(1) at 402-03. The rule is one of expedition, designed to bring about a quick resolution of disputes by preventing continued reargument of issues already decided. Roberts v. Cooper, 61 U.S. (20 How.) 467, 481, 15 L.Ed. 969 (1858); White v. Murtha, 377 F.2d 428, 431-32 (5th Cir. 1967). Unlike res judicata, the rule is not an "inexorable command," but is to be applied with good sense. Murtha, 377 F.2d at 431-32 . . . . When a lower court is convinced that an interlocutory ruling it has made is substantially erroneous, the only sensible thing to do is to set itself right to avoid subsequent reversal. Lindsey v. Dayton-Hudson Corp., 592 F.2d 1118, 1121 (10th Cir.), cert. denied, 444 U.S. 856, 100 S. Ct. 116, 62 L. Ed. 2d 75 (1979) . . . . Courts have generally permitted a modification of the law of the case when substantially different, new evidence has been introduced, subsequent, contradictory controlling authority exists, or the original order is clearly erroneous. See Fuhrman v. United States Steel Corp., 479 F.2d 489, 494 (6th Cir.), cert. denied, 414 U.S. 859, 94 S. Ct. 71, 38 L.Ed.2d 110 (1973); Murtha, 377 F.2d at 431-32.

Although Rule 54(b) allows a court to revisit any order that rules on less than all of the claims in a case, a motion to reconsider is not appropriate when it merely restates the party's position taken in the initial motion. A motion for reconsideration is an "inappropriate vehicle to reargue an issue previously addressed by the court when the motion merely advances new

2

arguments, or supporting facts which were available at the time of the original motion. Absent extraordinary circumstances, . . . the basis for the second motion must not have been available at the time the first motion was filed." Servants of the Paracletes v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). A motion to reconsider must be made upon grounds other than a mere disagreement with the court's decision and must do more than rehash a party's former arguments that were rejected by the court.

SCO asserts that even though Novell argued that it was entitled to royalties if the licensing of SVRX was incidental, that was not Novell's central argument. SCO also contends that the issue was not fully briefed because Novell did not argue that it was entitled to SVRX Royalties for incidental licenses of SVRX until its reply memorandum. But SCO's assertions fail to recognize that it was SCO who raised the argument regarding incidental licensing of SVRX in its memorandum in opposition to Novell's motion for partial summary judgment on its Sixth, Seventh, Eighth and Ninth Claims for Relief. SCO also filed a cross motion for summary judgment on these claims. SCO asserted that it was not required to pay royalties to Novell under the Sun and Microsoft Agreements because those agreements are licenses for UnixWare that license SVRX only incidentally. In making that argument, SCO had the opportunity to raise all of its arguments with respect to why the APA, as amended, did not require it to pay royalties for such incidental licenses.

SCO further claims that it presented evidence that the licensing of SVRX in the Sun and Microsoft Agreements was only incidental to a UnixWare license and that Novell was not entitled to a royalty for such incidental licenses of SVRX apart from whatever royalty Novell was entitled to receive pursuant to the APA's provisions regarding UnixWare royalties. Despite the

3

evidence SCO presented, the court recognized that the parties disputed whether the SVRX component of the licenses was only incidental and found that there was a question of fact as to the portion of SVRX technology licensed in the Sun and Microsoft Agreements.

The court understood and analyzed both parties' positions, conducted its own analysis to interpret the applicable agreements, and explained the reasoning behind its conclusions in its August 10, 2007 Memorandum Decision and Order. SCO does not contend that any change in fact or law has occurred since the court's order. SCO merely disagrees with the court's order. SCO restates its previous arguments and asserts new arguments that were available to it at the time of the original briefing on this issue. These do not provide grounds for a motion to reconsider.

Even if the court were to consider SCO's newly asserted argument regarding the failure of the APA to specify any method for calculating SVRX Royalties in the case of an incidental license of SVRX, the court concludes that it does not impact its prior analysis of the issue. The APA made SCO Novell's administrative agent for purposes of passing through SVRX Royalties and royalties from SCO's future sale of UnixWare products.

It is clear that the royalty obligation with respect to the future sale of UnixWare products expired on December 31, 2002. Thus, such obligation expired before the Sun and Microsoft Agreements at issue. SCO's citation to Schedule 1.2(b) (b)(i)(a) for the proposition that there was no obligation to pay royalties to Novell is unclear given that the obligation had expired and, in any event, the section relates to the amount of product that was required to be shipped or licensed in a year before the royalty obligation began.

The court continues to find that the only provision of Schedule 1.2(b) relevant to the

4

parties' dispute on this issue is (f), which relates to whether an SVRX customer has been validly converted to UnixWare. While the APA terminated SCO's royalty obligations with respect to UnixWare, it provided for no termination of SCO's obligation with respect to SVRX Royalties. With respect to SVRX Royalties, SCO had a continuing obligation to pass those royalties through to Novell.

Section 4.16 allowed SCO to enter into new SVRX Licenses and amendments to existing SVRX Licenses incidental to its license of UnixWare, but nothing in Section 4.16 attempts to terminate Novell's right to SVRX Royalties to those SVRX Licenses. Although it is possible that the provisions of (f) of Schedule 1.2(b) could terminate the SVRX Royalty obligation with respect to an existing SVRX customer, SCO makes no attempt to assert that it validly converted either Sun or Microsoft to UnixWare.

Section 1.2(f) of the amended APA provides that SCO is to provide Novell with a report detailing its receipt of SVRX Royalties and royalties from Royalty-Bearing Products as contemplated by Schedule 1.2(b), which is defined as UnixWare products and White Box. Such reports were to be separately broken down by revenue type, product, customer, etc. To the extent that SCO licensed SVRX technology incidental to UnixWare and such license had no value, Section 1.2(f) would still require SCO to notify Novell of its receipt of royalties and break it down by revenue type and product.

After negotiating new or amended SVRX Licenses with a customer, SCO would have had all the information necessary for allocating the value for the separate portions of the agreements. As Novell's fiduciary, SCO was obligated to account and remit the appropriate amount. The APA sets forth these requirements. The fact that the APA did not include a method

5

for calculating the value of the SVRX technology licensed does not change the court's conclusion that it was SCO's fiduciary obligation to carry out that function. The APA plainly places that duty on SCO.

While a motion for reconsideration should be granted to correct manifest errors of law, see Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir. 1997), neither SCO's arguments nor the court's review of its prior order convinces the court that the analysis in its prior order contains manifest errors of law. SCO also states that insofar as it has misapprehended the court's ruling on this issue, its motion should be considered a request for clarification. The briefing on this motion and other pretrial motions demonstrates that SCO has not misapprehended the court's ruling. Therefore, no clarification is necessary.

For these reasons, SCO's Motion for Reconsideration or Clarification of the Court's Order dated August 10, 2007 is denied.

DATED this 14th day of September, 2007.

BY THE COURT:

----[signature]---
DALE A. KIMBALL
United States District Judge

6


  


Kimball Denies SCO's Motion for Reconsideration/Clarification | 279 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: alisonken1 on Friday, September 14 2007 @ 09:09 PM EDT
Please include correction in the title.


---
- Ken -
import std_disclaimer.py
Registered Linux user^W^WJohn Doe #296561
Slackin' since 1993
http://www.slackware.com
http://www.mutagenix.org

[ Reply to This | # ]

Off-topic here
Authored by: alisonken1 on Friday, September 14 2007 @ 09:10 PM EDT
Please use the proper POT/HTML mode before use.

---
- Ken -
import std_disclaimer.py
Registered Linux user^W^WJohn Doe #296561
Slackin' since 1993
http://www.slackware.com
http://www.mutagenix.org

[ Reply to This | # ]

Kimball Denies SCO's Motion for Reconsideration/Clarification
Authored by: JamesK on Friday, September 14 2007 @ 09:11 PM EDT
"Nyah, nyah, Novell, you can almost hear them saying"

Can the bankruptcy go ahead, with the conversion ruling pending?


---
There are 10 kinds of people, those who understand binary and those who don't.


[ Reply to This | # ]

The Great American Legal System.
Authored by: Anonymous on Friday, September 14 2007 @ 09:12 PM EDT
So I guess that lying and cheating wins the day. tSCOg gets handed over to
trusties who will most likely broker a settlement of sorts with all parties and
the principals of this farse get to walk.

[ Reply to This | # ]

Kimball Denies SCO's Motion for Reconsideration/Clarification
Authored by: Anonymous on Friday, September 14 2007 @ 09:20 PM EDT
My focus of work is business, not law, but this whole Chapter 11 issue makes me
want to tear out my hair.

So one company makes money by violating a license and selling someone else's
product, and the money is disbursed to the creditors before the party who's
property was stolen. It just seems as though the system is a little bit
backwards...

The timeless argument is whether the value of any given product is in the
technology, the implementation, or both.

The patent system seems to favor the technology 100%, whereas the bankruptcy
process seems to favor implementation 100%. Although the system is also likely
in place to prevent the vultures from circling, but still...

Is there anyone that knows the reasoning behind the bankruptcy rules? It just
seems like there must be some good reason I'm missing...

[ Reply to This | # ]

All plane tickets are refundable.
Authored by: pajamian on Friday, September 14 2007 @ 09:34 PM EDT
At least from what I understand, you can upgrade the ticket to one that is
refundable, then get a refund on the upgraded ticket. There may be a penalty
fee for the upgrade or refund, though.

Note: IANAAR (I Am Not An Airline Representative)


---
Windows is a bonfire, Linux is the sun. Linux only looks smaller if you lack
perspective.

[ Reply to This | # ]

Kimball Denies SCO's Motion for Reconsideration/Clarification
Authored by: rand on Friday, September 14 2007 @ 09:45 PM EDT
If SCO argued in open court that they were not going to declare bankruptcy, and did it anyway, is there any way to make them pay for the "mis-truth"?

---
The wise man is not embarrassed or angered by lies, only disappointed. (IANAL and so forth and so on)

[ Reply to This | # ]

Change of Venue
Authored by: Anonymous on Friday, September 14 2007 @ 09:46 PM EDT
I posted this previously, but it was buried kind of deep.

I've followed a scam company that went bankrupt, and it is not a pretty process.
Just speculation here, but knowing how low SCO can go, I bet it goes something
like described.

In effect, SCO just got a change in venue. They were going to lose in front of
Kimball, so they got a BK court in Delaware.

Novell has options, by I bet they file a creditor's claim for 95% of the money
involved in the MS and Sun deals. They will then go for a seat on the creditor's
committee. Also, they will file to have a trustee appointed rather than letting
SCO "work it out" using their own management.

Then, Novell gets to pull out the summary judgment to support their claim for
20-odd million, but will have to duke it out with MS, Sun, MOG and the rest of
the sordid creditors.

Meanwhile, SCO goes out and signs a beggars deal to get Debtor In Possession
financing to operate. The DIP lender is first in line for assets, but SCO won't
care is they sign away the company if they get to collect salaries for a couple
more years. Novell, if certified as a creditor, will object to the terms of the
DIP financing, so expect SCO to sign a deal ASAP. They were prepared for this.

If the creditor and debtor committees find Novell is owed in excess of SCO's
assets, this will convert to Chapter 7.

[ Reply to This | # ]

Novell should file for creditor position
Authored by: Anonymous on Friday, September 14 2007 @ 09:58 PM EDT
Judge Kimball has ruled conversion has taken place and Novell is due some
money.

Novell should have a clear right to file for position as a creditor to SCO's
Chapter 11 filing for some amount between $0 and $30M or so given the conversion
ruling. Novell does not have to specify an amount just that the amount is
nonzero and an accounting is due. SCO's failure to submit to earlier audits is
also a bonus here, there clearly are unresolved issues about the amount of money
SCO owes Novell.

SCO's representative in the bankruptcy is then charged with determining the
amount. SCO's banktruptcy representative would then be forced to get the case
moving. Note this clearly would not be Novell violating that NOTE provision
about cases being stayed. The case would be restarted as part of the process of
valuing the creditors required for the bankruptcy hearing.

In fact once Novell files for position as a creditor the pressure is on SCO to
get the accounting sorted out.

SCO messed up big time by not doing this before the August ruling.

[ Reply to This | # ]

Woah.
Authored by: maz2331 on Friday, September 14 2007 @ 10:17 PM EDT
I just re-read the "contempt" paragraphs in the filing, and they
didn't threaten Novell, they threatened Judge Kimball himself with a contempt
charge.

This will NOT go well for them. The bankruptcy filing is a transparent
bad-faith effort that could very well be tossed out by the bankruptcy court. And
threats like this against a judge hearing a case you're a party to is just,
well, stupid in the extreme.

I thought their earlier footgun tactics were bad, akin to using an artillery
piece with a nuclear round. This is even worse. This footgun attracted an
asteroid from outer space and put it on a direct collision course with SCO's
foot. The crater is going to be truly massive.

[ Reply to This | # ]

Madder than a hornet?
Authored by: Observer on Friday, September 14 2007 @ 10:22 PM EDT
Somehow I get the feeling that SCO believes that, since they can't get the judge any madder at them than he already is, they can spit in his face with impunity. "You won't play along with us, so we're going to pull this death-defying legal trick, and yank this case out of your grasp, in the hope that we can find someone else who will play by OUR rules..."

And to think we believed they couldn't sink any lower....

---
The Observer

[ Reply to This | # ]

Bankruptcy Filing - why does it affect this case?
Authored by: Anonymous on Friday, September 14 2007 @ 10:46 PM EDT
I have very limited knowledge on this issue, so of course I am stumped once
again by the wording of things and how others are interpreting them....

From the highlighted area:

"PLEASE TAKE FURTHER NOTICE that as a result of the pendency of the
Debtors' bankruptcy cases and the application of 11 U.S.C. 362(a)(1), the
commencement or continuation of judicial proceedings against the Debtors to
pursue prepetition obligations was automatically stayed. "

SCO is the one who has brought the proceedings - not Novell - and therefore, as
I read this statement, SCO vs Novell should not be affected. Unless one
interprets the "against" as being "it would be ok to continue if
you (SCO) are winning, but not ok if you are losing." Also they have filed
a PETITION for Bankruptcy. Does that not mean the court has to accept it (even
if only a formality) and if so, which is scheduled first? - the SCO vs Novell or
the Bankruptcy court acceptance of the filing?

We shall see by the actions of the courts.

[ Reply to This | # ]

SCO is just judge shopping
Authored by: Anonymous on Friday, September 14 2007 @ 11:01 PM EDT

This gives SCO a chance to argue in front of another judge. Now,
when Novell or IBM want to do this or that, everyone has to argue
in front of someone other than Kimball.

It's been a while, but as I remember it, the bankruptcy code is laced
with warnings against fraudulent or bad-faith actions on the part
of anyone, and that includes SCO.

My outrageous WAG: the bankruptcy court dismisses SCO's petition
until Kimball rules exactly how much SCO owes Novell. Until then,
it's not possible to determine if SCO is actually insolvent.

[ Reply to This | # ]

Bankruptcy versus Apr '07 10Q
Authored by: pmichaud on Friday, September 14 2007 @ 11:06 PM EDT
In the previous article, PJ noted the comparison of assets and liabilities
between the bankruptcy filing and the April 2007 10Q.

In briefly looking at the 10Q, what jumps out at me is that the 10Q lists a
liability of $1,995,000 as "Payable to Novell, Inc."

So, what happened to this liability between April 30, 2007 and the accounting
used for the bankruptcy filing... did Novell get paid?

My naive guess is that they must've been paid somehow, otherwise they would be
listed as a much larger creditor in the bankruptcy filing. Perhaps this also
explains why SCO's cash position isn't as strong as we might otherwise expect
based on previous filings?

I'm neither an accountant nor lawyer -- I'm just curious about the difference
between then and now.

Pm

[ Reply to This | # ]

What happens to the Swiss arbitration?
Authored by: Anonymous on Friday, September 14 2007 @ 11:11 PM EDT
Is that considered a "judicial proceeding" and/or is it out of reach
of the US courts? It would seem that no US court could enforce it (except the
bankruptcy court) during any bankruptcy proceedings; but what effect would it
have in bankruptcy proceedings?

[ Reply to This | # ]

A question about bankruptcy
Authored by: Anonymous on Friday, September 14 2007 @ 11:16 PM EDT
A thief steals my car and declares bankruptcy while it is in his posession. Do I have to line up with the creditors to get my car back?

Novell's situation seems somewhat similar. SCO is guilty of conversion (stealing Novell's money). It seems unreasonable to bar Novell from trying to recover it.

According to this case the bankruptcy act has exceptions dealing with such offenses as conversion. The linked document made my head spin, but my understanding is that it says a debt created by conversion may or may not be discharged by bankruptcy.

A little googling found many cases dealing with trover , replevin , and conversion. Nothing that I found indicated that bankruptcy could be used to prevent the recovery of property owned by a plaintiff.

[ Reply to This | # ]

Good Reading US Code title 18, chapter 9
Authored by: Anonymous on Friday, September 14 2007 @ 11:24 PM EDT
  • * TITLE 18--CRIMES AND CRIMINAL PROCEDURE
  • o PART I--CRIMES CHAPTER 9--BANKRUPTCY
  • Sec. 151. Definition.
  • Sec. 152. Concealment of assets; false oaths and claims; bribery.
  • Sec. 153. Embezzlement against estate.
  • Sec. 154. Adverse interest and conduct of officers.
  • Sec. 155. Fee agreements in cases under title 11 and receiverships.
  • Sec. 156. Knowing disregard of bankruptcy law or rule.
  • Sec. 157. Bankruptcy fraud.

    [ Reply to This | # ]

  • Kimball's Clarification
    Authored by: Anonymous on Friday, September 14 2007 @ 11:34 PM EDT
    "SCO also states that insofar as it has misapprehended the court's ruling on this issue, its motion should be considered a request for clarification. The briefing on this motion and other pretrial motions demonstrates that SCO has not misapprehended the court's ruling. Therefore, no clarification is necessary." [emphasis added]

    Kimball understands SCO perfectly it seems.

    [ Reply to This | # ]

    Fat lady purging her bowels...
    Authored by: Anonymous on Saturday, September 15 2007 @ 12:14 AM EDT
    seems a far more apt metaphor than the fat lady singing here... My prediction
    for what happens now:

    The bankruptcy trustee will take one look at the cases and seek a deal with
    Boies-Schiller to terminate the litigation as quickly as possible in return for
    some of their $$$$ back (no appeals).

    And Boies-Schiller will happily accept, in return for an agreement indemnifying
    themselves against liability for representing their client in such a disastrous
    manner (Mettler over at lamlaw.com thinks B&S have a real case to answer
    here, IANAL so HAITD).

    SCOX's grounds for bankruptcy is presumably their liability to Novell, so Novell
    will get their money.

    IBM will probably settle for a public apology (it's not like there's any money
    for them to get). And the bankruptcy trustee will be pretty happy to agree.

    Someone will snap up the remains of SCOXs software business on the cheap - most
    likely a Unix or Linux vendor in it for the remaining customers.

    The wildcards are share-holder lawsuits against Darl, criminal actions by
    SCOsource fraud victims, and possibly IBM or Novell or RedHat or an opportunist
    snapping up SCOX in order to get all dirt on SCOs backers needed for lawsuits
    against the backers.

    What other loose ends to tidy up have I forgotten?

    [ Reply to This | # ]

    A week early
    Authored by: webster on Saturday, September 15 2007 @ 12:40 AM EDT
    Collecting Thoughts

    1. This was inevitable. SCO in a burst of realism has advanced their
    bankruptcy by one week. Why waste time and resources on a trial that might
    generate a very high preferential debt to an agressive creditor? The Judge
    could have snapped a constructive trust on them as he handed them a decision.
    Better no number than a round high number. Novell is thrown in with the rest of
    the creditors until they can convince the bankruptcy court otherwise.

    2. Now let's see who is best prepared for Plan B. It is going to get very
    interesting. One can not help but think IBM and Novell have been planning for
    SCO bankruptcy.

    ---
    webster


    2007 Monopoly Corporation. ALL rights reserved. Yours included.

    [ Reply to This | # ]

    Time to sue
    Authored by: Anonymous on Saturday, September 15 2007 @ 01:00 AM EDT
    I wish I owned stock in SCO. The stockholders will, of course, end up with
    nothing in Chapter 11. I wish I owned some as now seems like it would be the
    appropriate time to sue SCO management, the board of directors, and the lawyers.
    They certainly weren't looking out for their stockholders best interests in all
    of this. Instead, it seems like it is just a matter of these folks all trying
    to keep the money flowing into their pockets for as long as possible.

    [ Reply to This | # ]

    Cases STAYED, not dismissed
    Authored by: Anonymous on Saturday, September 15 2007 @ 01:04 AM EDT
    IANAL, and I am about to prove that.

    My understanding is that a BK filing automatically stays all court cases.
    Doesn't eliminate them, but stays them. Now SCOX may have figured out a clever
    way to avoid paying Novell a few bucks (and piss it away instead) but I am
    guessing Novell's primary objective was not really the money.

    So at some point, provided SCOX doesn't go Chapter 7 and liquidate, Novell and
    IBM cases get restarted. BK is not SCOX's permanent "get out of
    lawsuit" card, it is just a delay of those lawsuits.

    Some people seem to be wringing their hands that SCOX somehow escaped but this
    looks really bad for them. What are they going to do? Magicly start being a
    successful company? Not likely. How about sell off some assets? All that
    would do is give them more money to lose once the court proceedings restart.
    Sell themselves to someone else? Sure, along with the lawsuits.

    I saw a horrible video once of a failed suicide bomber dying on a Bagdad street
    and I know it is a terrible thing to say but that was what came to mind when
    thinking of the present state of SCOX. They are going to die and nobody is
    going to help them. In the meanwhile they will wish it happened quicker. This
    is the end game.

    [ Reply to This | # ]

    And When Does The Criminal Charges Get Filed
    Authored by: Anonymous on Saturday, September 15 2007 @ 01:23 AM EDT
    Wouldn't this be a good time for the criminal charges to be laid.

    [ Reply to This | # ]

    Judicial proceedings AGAINST
    Authored by: Anonymous on Saturday, September 15 2007 @ 01:24 AM EDT
    Does bankruptcy law also indicate that judicial proceedings BY plaintiff have to
    stayed.

    SCO is the plaintiff in all the cases it is currently involved in, does that
    still hold that those proceedings have to be stayed?

    Won't the bankruptcy court consider that the 5 million windfall (phffft!) from
    the IBM case may solve SCO's debt problems?

    [ Reply to This | # ]

    But this doesn't stop the arbitration in Switzerland! (n/t)
    Authored by: kh on Saturday, September 15 2007 @ 01:45 AM EDT
    .

    [ Reply to This | # ]

    Kimball Denies SCO's Motion for Reconsideration/Clarification
    Authored by: Anonymous on Saturday, September 15 2007 @ 02:21 AM EDT
    I predict Novell and IBM seek nothing less than a smoking hole in the ground where SCO used to be.
    Well for a business, esp. one with much in the way of tangible assets, bankruptcy is pretty much a smoking hole in the ground. (Airlines have a history of successfully going in and out of chapter 11 like yo-yos - but they have real assets - planes, landing rights, brands --- SCOX's biggest asset is probably their office photocopier.)
    And why in the world would a bankruptcy trustee need Boies-Schiller's help to settle the cases?
    My thought was that B-S might be willing to refund a bit of their $30mil to avoid the work (and embarrassment) of having to go through the appeals process. And the trustee would probably be inclined to take any cash they can get.

    [ Reply to This | # ]

    Wait for Novell and IBM to make their next move
    Authored by: mexaly on Saturday, September 15 2007 @ 02:31 AM EDT
    Novell foresaw the bankruptcy possibility and asked the Judge for the
    constructive trust.

    They must have made additional preparations. I imagine they've already sprung
    into action.

    The Novell and IBM attorneys are known for skill and cunning. The SCO attorneys
    are less well reputed.

    The Bankruptcy judge may take awhile to come up to speed. Let's hope that judge
    is as thorough and thoughtful as the Honorable Kimball.

    ---
    My thanks go out to PJ and the legal experts that make Groklaw great.

    [ Reply to This | # ]

    Novell's next moves?
    Authored by: Anonymous on Saturday, September 15 2007 @ 02:59 AM EDT
    The way I see their are three types of moves at Novell's disposal.

    It will be interesting to see actions Novell takes.

    The way I see the first two are obvious.
    1) File a secured claim, reflecting the Judge Kimball rule that TSG is guilty of

    conversion, hence this is a criminal matter.

    2) Because this is a criminal matter file a Motion is Bankruptcy Court to have
    the stay limited to determine the extent of TSG's liability.

    This motion may actual be several Motions including fraud. The petition for
    Bankruptcy Court did not mention the liability by conversion owed Novell. In
    this case, it is not TSG's money, but Novell's.

    I appears that the TSG management is trying to escape the Constructive Trust
    in Judge Kimball's Court in hopes of a better forum.

    Additionaly, if the Bankruptcy Court believes that this should have been a
    Chapter 7 rather than Chapter 11, the Bankruptcy Judge may grant lifts of the
    stays of other court action to determine the amount of liability.

    I hope Darl McBride has hired a competent personal attorney, because I for
    see criminal charges in his future, which are exempt from the stay.

    This is going to be fun to watch the destruction of the TSG.


    [ Reply to This | # ]

    Kimball Denies SCO's Motion for Reconsideration/Clarification
    Authored by: Anonymous on Saturday, September 15 2007 @ 03:58 AM EDT
    PLEASE TAKE FURTHER NOTICE that as a result of the pendency
    of the Debtors' bankruptcy cases and the application of 11
    U.S.C. § 362(a)(1), the commencement or continuation of
    judicial proceedings against the Debtors to pursue
    prepetition obligations was automatically stayed. The
    automatic injunction granted by 11 U.S.C. § 362(a) will
    remain in effect until the bankruptcy case is dismissed or
    closed or until such earlier times as set forth in 11
    U.S.C. § 362(c), (d), (e)

    P.J.. as I understand it this means that all action in SCO
    vs Novel and SCO vs IBM are stayed pending action by the
    Bankruptcy Court in Delaware

    1.Is the Bankruptcy court State of Federal?
    2.Since by action of the Utah court SCO has possession of
    Novel money which according to contract is Novel's money
    does that mean that the Bankruptcy Court will allow the
    action in SCO vs Novel to continue since all the
    continuance is suppose to ascertain is how much money SCO
    has of Novel?
    3.Since the Judge in SCO vs Novel indicated that there are
    possible criminal acts involved in SCO actions concerning
    Novel's money does an official criminal investigation start
    or has it already started?
    4.Since there are criminal acts or potential criminal acts
    involved by senior SCO officials does that mean that these
    officials will be able to continue in power at SCO.
    5.If all actions against SCO are stayed does that mean that
    all money in all accounts is frozen pending action by the
    Bankruptcy Court?

    [ Reply to This | # ]

    Did SCOX perjure themselves?
    Authored by: Sunny Penguin on Saturday, September 15 2007 @ 06:01 AM EDT
    Some questions, (IAAGeekNAL)

    I seem to remember, when Novell first asked for a trust, SCOX replied,
    (something like) "they were solvent" and the trust was not necessary.

    Does this count as perjury?

    Also; about the SCOX SEC files.

    SCOX "Made a profitable quarter" when the illegal conversion of Novell
    funds were listed as SCOX funds in the SCOX SEC reports; Will all of these
    reports need to be refiled with the SEC?

    ---
    If you love your bike, let it go.
    If it comes back, you high sided.....

    [ Reply to This | # ]

    Kimball Denies SCO's Motion for Reconsideration/Clarification
    Authored by: eggplant37 on Saturday, September 15 2007 @ 07:11 AM EDT
    Personally, I think it's a crock of excrement that SCO decided to file for
    bankruptcy. Their only motivation was to further delay the case. This grates
    against my nerves, as we're likely to never see resolution in SCO v Novell or
    SCO v IBM now. This move coming from the company that couldn't wait to get its
    case before a jury seems like a slap in the face.

    [ Reply to This | # ]

    Novell - Go for Boies $30 million
    Authored by: thorpie on Saturday, September 15 2007 @ 07:26 AM EDT
    Novell's cash has ended up with Boies-Schiller.
    As this was converted (ie stolen) money Novell surely have a strong claim to
    recover every red cent from Boies-Schiller, and all their involved staff,
    personally.
    This is further strengthened as Boies-Schiller must have known from the start
    that the money was Novells. It was never SCO's for SCO to pay them with. It is
    receiving stolen goods.
    Realistically Boies & co should have said to SCO three or four years ago
    that they could not accept their money as it was stolen property.
    As they took the money they are liable. Every one of them personally.
    Let Novell and IBM both go for Boies throat big time.
    Let all of Boies-Schiller be personally bankrupt and live out the remainder of
    their lives in the gutter, which is too nice a place for them in any case.
    Get properly personal

    ---
    The memories of a man in his old age are the deeds of a man in his prime -
    Floyd, Pink

    [ Reply to This | # ]

    Remember: It is not about the money
    Authored by: Anonymous on Saturday, September 15 2007 @ 07:34 AM EDT
    A lot of people seem concerned that IBM and Novel might not get back the money
    they are owed (or had converted). Obviously, this would be an injustice,
    however, I think IBM and Novel both knew that they would never get much, if any,
    of their money back from the very outset. I don't think they care much and
    neither should we.

    This is not about the money. If it was about the money then IBM and/or Novel
    could have ended this expensive fiasco years ago, for a trivial sum, just by
    buying SCO. Instead, IBM and Novel have decided to invest their time and money
    (neither of which they will get back) to achive some more important objectives:

    1. To clear their good names of the lies SCO has told about them.

    2. To establish undisputable and unencumbered copyright ownership of their own
    products.

    3. To establish the undisputable legitimacy and integrity of Linux, on which
    they depend for a significant part of their business.

    4. To make a very public example of SCO and its friends so that anybody thinking
    of trying a similar shakedown in future is strongly discouraged.

    These 4 objectives are more or less successfully completed now. The vast
    majority of the claims against IBM and Novel are already dismissed. The
    copyrights have been ruled on. Nobody takes the FUD seriously and Linux goes
    from strenth to strength. SCO is toast and there may yet be serious
    repercussions for those behind this scam. This is a happy ending.

    This is only about the money to the extent that SCO and its friends must not be
    allowed to profit from their misdeeds. It doesn't really matter where the money
    ends up, only where it doesn't.

    [ Reply to This | # ]

    Kimball Denies SCO's Motion for Reconsideration/Clarification
    Authored by: Anonymous on Saturday, September 15 2007 @ 08:30 AM EDT
    Seems like the Judge postponed the trial as a matter of caution.

    The cited Bankruptcy statute says that actions "by creditors" are
    stayed.

    But here's the thing -- Novell is NOT a creditor. There's a reason (it's not
    oversight) why Novell is not listed on the list of creditors.

    Novell's arrangement with SCO regarding the collection of funds is (and the
    court so found) an AGENCY relationship, not a line of credit or a loan or a
    debt. Under the agency arrangement, Movell never lost 'title' to the money
    collected by SCO for SVRX licenses and never gave control and discretion over
    the MONEY to SCO (which would have created a creditor relationship).

    It's precisely this reason why (a) Novell was able to seek an equitable versus a
    legal remedy, to wit, the RETURN of Novell's money, not the repayment of
    Novell's money, and (b) thereby getting a bench trial, because "returning
    your stuff" is an equitable remedy.

    By the court ruing that SCO was guilty of conversion, the court found, in
    effect, that under the agency relationship SCO was only handling SCO's money,
    like a bank teller handles a deposit. SCO had no 'license' to use that money,
    Novell never alienated its right to that particular corpus of money, and
    Novell's right was to that particular money, not merely a right (as a creditor
    would) to the repayment of that money with OTHER money plus interest. The
    creditor relationship involves more risk, as a lender -- including the risk that
    the borrower might declare bankruptcy.

    S0 -- for those that have written that it makes no sense for someone who
    steals/converts funds to be able to hide that money and pay off creditors first
    -- I would say, I agree, and the law doesn't appear to support that either.

    As I said, the bankruptcy statute stays the actions of creditors.

    But Novell is trying to get it's own stuff back from a thief (because conversion
    is a form of theft). A thief cannot declare bankruptcy and keep stolen goods.

    I expect this will all get flushed out in the first few days of next week, in
    the form of a motion from Novell.

    LEXLAW

    [ Reply to This | # ]

    McBride not a Stockholder!?
    Authored by: TJ on Saturday, September 15 2007 @ 09:43 AM EDT

    From scanning the list of Equity Security Holders it seems that several of the board of directors of The SCO Group Inc. didn't have much confidence in the company.

    Unless I've missed something the position is:

    • Campbell 0
    • Leeman 0
    • McBride 0
    • Millington 0
    • Mott 51,020
    • Thompson 0
    • Yaroo 5,492,834 + 9,615 + 500

    On 26th April 2007 Campbell Leeman Millington Mott Thompson and Yarro each received 15,000 Non-qualified Stock Options.
    Only Mott and Yarro apparently retain holdings.

    Also, according to the SCO Investor site, Thompson isn't listed as a board member, but the 10Q for the period up April 30th 2007 says:

    To elect seven members to the Board of Directors to serve until their successors have been appointed. All directors were elected with Ralph J. Yarro III receiving 18,680,781 votes in favor and 617,273 votes withheld; R. Duff Thompson receiving 18,860,495 votes in favor and 437,559 votes withheld; Darcy G. Mott receiving 18,837,495 votes in favor and 460,675 votes withheld; Darl C. McBride receiving 18,850,552 votes in favor and 447,502 votes withheld; Daniel W. Campbell receiving 18,860,480 votes in favor and 437,574 votes withheld; Omar T. Leeman receiving 18,553,565 votes in favor and 774,489 votes withheld; and J. Kent Millington receiving 18,837,199 votes in favor and 460,855 votes withheld.

    [ Reply to This | # ]

    Timing Question
    Authored by: ljs on Saturday, September 15 2007 @ 10:29 AM EDT
    Are parties in a litigation are advised of the results of rulings before they
    are posted?

    We knew that Judge Kimball would rule today on SCO's Motion for
    Reconsideration/Clarification. Did SCO know the results of that ruling before
    pulling the trigger on bankruptcy?

    If the ruling had gone the other way, would they have even filed this? I would
    think not, so they waited until they either had the results or could not afford
    to wait any longer.

    [ Reply to This | # ]

    Kimball Denies SCO's Motion for Reconsideration/Clarification
    Authored by: Anonymous on Saturday, September 15 2007 @ 10:52 AM EDT

    I have been reading on how SCOg petition effects Novell. What I haven't read is the sequence of steps that is required to get into bankruptcy, because SCOg is not in bankruptcy yet.

    I am going to assume that the sequence of steps for corporate bankruptcy is the same as personal bankruptcy (which I have some knowledge).

    The first step is the petitioning of bankruptcy court for protection (which everyone knows by now). Once you see a bankruptcy lawyer to file the petition you stop paying all creditors and any lawsuits are stayed. Also in this step you have to list all creditors and the amount owed whether secured or unsecured and a letter is sent to all creditors of your intention of filing for bankruptcy.

    The second step is to create a payment plan to pay your creditors. This can be a 100% repayment or pennies on the dollar. This plan is submitted to the bankruptcy judge for review. This plan is also sent to the creditors.

    The third step a meeting with the bankruptcy judge. This is where things get interesting. Also at this meeting will be any creditors that do not like the payment plan and any other interested parties. I am sure that IBM and Novell (especially Novell) will show up. Also this step can be dragged on for a long time with additional meetings.

    The fourth step will be confirmation if SCOg can get through step 3 a trustee will be assigned to oversee the payment plan. Once there is a confirmation SCOg will be in bankruptcy.

    This is a simplistic view and INABL (I'm not a bankruptcy lawyer) but I have gone though Chapter 13.

    [ Reply to This | # ]

    Anti Open Source (Linux) Forces Win
    Authored by: arthurpaliden on Saturday, September 15 2007 @ 11:25 AM EDT
    tSCOg Wins.

    I know this sounds absurd but the purpose of tSCOg campaign was never to collect
    money because they knew they could not because they did not have the copyrights.
    It was to slow that adoption of open source software by creating Fear,
    Uncertainty and Doubt about the legal ramifications of using open source
    software Linux in particular.

    To reinforce this the sued some large companies, after all if they did not have
    really good evidence why would they ever dream of going up against the likes of
    IBM.

    Now they have had to file for bankruptcy protection because their money ran out
    because IBM et lat drew out the court cases so long and blocked SCO at every
    turn while they tried to get their case together.

    And to date not one of the cases has actually 'gone to completion'. Even in
    Auto Zone and Daimler Chrysler some issues were left open, it is just that tSCOg
    did not have the resources to follow up.

    So we now have the situation were SCO went bankrupt before any of the court
    cases were completed there fore the legality of open source software,
    particularly the Linux operation system, is still in doubt.

    No you can point to all the facts and summery judgments you like but the fact is
    that information will never get in front of decision makers besides no one
    really knows what a summery judgment is. So regardless of what investigations
    are done by the bankruptcy courts, Sec, DoJ etc the only pertinent fact to the
    general business community at large is that tSCOg was forced into bankruptcy
    before the trials were started/competed so nothing was decided.

    Ergo tSCOg wins.

    Sad isn't it.

    [ Reply to This | # ]

    Banckruptcy Hearing Tuesday AM
    Authored by: RFD on Saturday, September 15 2007 @ 12:01 PM EDT
    I read on another site that the first hearing has been set for 9:15 on Tuesday, September 18, in Wilmington, before U.S. Bankruptcy Judge Kevin Gross.

    Does anyone know how to confirm this? Can anyone attend?

    IANAL, but my WAG is:

  • Novell will appear and move to intervene. (if that is necessary)
  • Move the court to take judicial notice of Judge Kimball's August 10 order.
  • In view of the findings breach of fiduciary duty and of conversion, move that the court appoint a trustee and remove current management.
  • Suggest that the trustee cannot really proceed until the amount of the conversion is determined, and move that the stay on SCO v. Novell be lifted so that the trial can proceed.

    ---
    Eschew obfuscation assiduously.

    [ Reply to This | # ]

    • Could be - Authored by: Anonymous on Saturday, September 15 2007 @ 02:34 PM EDT
    • Regardless... - Authored by: Wardo on Monday, September 17 2007 @ 10:14 AM EDT
    When is "LD" Day
    Authored by: Anonymous on Saturday, September 15 2007 @ 02:45 PM EDT
    LD = liquidation day....

    [ Reply to This | # ]

    Flight of the Attorney
    Authored by: grouch on Saturday, September 15 2007 @ 08:14 PM EDT

    We'd all saved up to send an attorney to the trial to report on it for Groklaw, and when he tried to cancel the ticket just now, he can't get his money back. So, I guess he could fly to Utah for the sheer glamor of it and check out the great Salt Lake. But no trial for now.

    It looks like there are at least two options for the attorney:

    1. Fly to Utah and enjoy the time he had already set aside for the trip.
    2. Present the ticket in bankruptcy court in Delaware as evidence of harm caused by a fraudulent claim of bankruptcy by SCOG.

    That last one is suggested under the assumption that the attorney would know whether such a thing is feasible or just too off-the-wall to try. :)

    ---
    -- grouch

    "People aren't as dumb as Microsoft needs them to be."
    --PJ, May 2007

    [ Reply to This | # ]

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