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In "Foxes Petition to Guard the Henhouse" News ...
Sunday, September 16 2007 @ 08:00 PM EDT

I'm sick in bed today, so I had nothing better to do than read the bankruptcy code. That is a little dry for a gal with a high fever and I kept falling asleep, so eventually I thought I'd start with the US Courts "Bankruptcy Basics" explanation and work up to it, when I noticed something worrisome about what happens next in the section on Creditors' Committees:
Creditors' Committees

Creditors' committees can play a major role in chapter 11 cases. The committee is appointed by the U.S. trustee and ordinarily consists of unsecured creditors who hold the seven largest unsecured claims against the debtor. 11 U.S.C. § 1102. Among other things, the committee: consults with the debtor in possession on administration of the case; investigates the debtor's conduct and operation of the business; and participates in formulating a plan. 11 U.S.C. § 1103. A creditors' committee may, with the court's approval, hire an attorney or other professionals to assist in the performance of the committee's duties. A creditors' committee can be an important safeguard to the proper management of the business by the debtor in possession.....

That makes sense, to let those who are about to be stiffed have some say in how it all happened and what to do going forward. The committee gets to see the books and look over all the records. You can imagine a creditors' committee with Novell and IBM and Red Hat on it, I'm sure.

But who are the top seven creditors, according to SCO's filing, who we would normally therefore expect will be investigating SCO Group's and SCO Operations, Inc.'s "operation of the business" and formulating a plan for SCO to reorganize? The list for SCO Group [PDF] and for SCO Operations is identical, and Novell isn't on it, and neither is IBM or Red Hat. Instead, we find:

  • Amici LLC ($500,650.73)
  • Boies Schiller (287,256.39)
  • Canopy Group ($139,895.00)
  • Gre Mountain Heights Property ($132,502.00)
  • Microsoft Licensing, Inc. ($125,575.00)
  • Sun Microsystems, Inc. ($50,000.00)
  • Veritas Software ($37,881.33)

With a couple of possible exceptions, that looks a little like a list of the perps to me.

Is that not bizarre? That can't be the final list. It can't pass the snort test, let alone the laugh test.

SCO is so much fun to watch. I'd say this bankruptcy is going to be at least as entertaining as the SCO saga has been in civil court.

This is a bit reassuring, from the Bankruptcy Code, the section on Creditors' and equity security holders' committees:

(1) A committee of creditors appointed under subsection (a) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest claims against the debtor of the kinds represented on such committee, or of the members of a committee organized by creditors before the commencement of the case under this chapter, if such committee was fairly chosen and is representative of the different kinds of claims to be represented.

(2) A committee of equity security holders appointed under subsection (a)(2) of this section shall ordinarily consist of the persons, willing to serve, that hold the seven largest amounts of equity securities of the debtor of the kinds represented on such committee.

(3) A committee appointed under subsection (a) shall—

(A) provide access to information for creditors who—
(i) hold claims of the kind represented by that committee; and

(ii) are not appointed to the committee;

(B) solicit and receive comments from the creditors described in subparagraph (A); and

(C) be subject to a court order that compels any additional report or disclosure to be made to the creditors described in subparagraph (A).

If you don't mind me asking, what exactly is that $287,256.39 debt to Boies Schiller for and when was that debt incurred? And isn't Amici run by a friend of David Boies? Canopy Group. Microsoft. Sun Microsystems. These are the very folks who helped SCO end up in a bankruptcy court in Delaware, no? Well, I'm just a para, and one that doesn't do bankruptcies of this type, although I've done individuals' bankruptcies, but I can't believe this would be the makeup of the committee.

GRE Mountain owns a property in New Jersey, according to DealTracker. And so I thought I'd see if this was the landlord for SCO's offices in Murray Hill, New Jersey. Richard Ellis is the Managing Agent for GRE, and sure enough, here's a page listing their tenants, and SCO is one of them.

SCO has also filed an 8K with the press release announcing the bankruptcy attached. In SCO's most recent 10Q, from June, it mentioned it had entered into leases for its corporate offices in the US and for the international sales office extending through the year ending October 31, 2010. So that's why they are on the list.

Veritas has done business with SCO since the Santa Cruz days in connection with SCO UnixWare. Here's a copyright notice, for example, from November of 2002 for UnixWare 7 Release 7.1.3, and Veritas is on the list. And old timers will remember that back in 2005, I found a press release regarding Veritas and Project Monterey. So that's why Veritas is there.

But is there a single entry on this list that has a higher, or even a larger, claim to SCO's money than Novell? In fact, it isn't even SCO's money, according to the Honorable Dale Kimball, waiting patiently in another courtroom in Utah. I would venture to guess he is recalling, as am I, the words of SCO's attorney, Stuart Singer, in January at the hearing on Novell's motion for partial summary judgment on the sixth, seventh, eighth and ninth claims for relief or, in the alternative, a motion for preliminary injunction, and SCO's cross motion for partial summary judgment. In the section where Mr. Singer addressed Novell's claim that it needed a constructive trust because it was afraid SCO would file for bankruptcy, he said this:

Novell likes to say that SCO is on the point of bankruptcy. It has no proof of that. SCO obviously has been managing tight cash situations for some years, and it is planned to be in a position to continue through to conclusion of this litigation doing that.

"Unless Novell wins", he forgot to add. Joke. Joke. Here's how Michael Jacobs, Novell's attorney at that hearing, explained some fine points about the money they wanted put into a trust:

MR. JACOBS: I think that's -- so, the Supreme Court I think has helped us out on this issue recently and, to some degree, trumped some of the case law that might have preexisted on this question. I think I'm not going argue that, on that breach of contract claim, where our remedy is at law, that we have a constructive trust remedy. I don't think I need to reach that point because we are defined in the agreement as the equitable owner of the SVRX royalties because they are a fiduciary collecting for our benefit.

That set of predicate relationships, if you will, sets up the claim for a constructive trust. It's our property that they are holding in trust for us, and it's defined that way in two ways: One. The strict letter of the agreement, which allocates to us this ownership interest; and, secondly, the fiduciary arrangement that arises out of the contract.

So I think maybe the harder question is: Can a contract establish a fiduciary relationship? Can a contract allocate ownership in the way it does and not convert the remedy that we would have, because it's in a contract, to a legal remedy?

And I think the answer to that clearly, under California law, is that the contract doesn't change the essence of the claim. The fact that the relationship or the ownership interests arise out of the contract ... doesn't change this from an equitable to a legal claim, and, therefore, we have a claim to a constructive trust, and we have a claim to a preliminary injunction establishing a constructive trust....

So the language, "All royalties fees and other amounts due," is dispositive here of one of the issues in SCO's opposition. Is it really just royalties due under the binary aspects of the SVRX relationships? Well, it doesn't say "royalties only." It says, "royalties, fees and other amounts due." So, any category of revenue under an SVRX license, regardless of what it is attributed to and regardless of how it's labeled, again, all royalties, fees and other amounts due.

Now let me pause here because there is something very interesting going on in the debate between the parties. Their cross motion and their opposition rests heavily on these declarations from business people who have had some varying degree of association with the actual transaction. And I think there is a basic misapprehension about the role of contracts and the role of lawyers that divides the parties on this motion.

Business people form -- I'm not telling you anything new, but I thought it's worth articulating what's going on here. Business people come up with an idea for a deal. They model the deal. They model the transaction based on aspects of the transaction that they understand. One of the aspects of this transaction that they apparently modeled was the continuation of the existing SVRX revenues because they could understand that.

Lawyers then sat down and drafted an agreement. And lawyers, they are not computer engineers, but they are transactions engineers, and they try to draft language that anticipates not only what the business people might have specifically contemplated by way of the business purpose of the transaction, lawyers try and draft language that covers all contingencies.

That doesn't make that any less of the intent of the parties simply because it's the result of the lawyers doing drafting of an agreement. The lawyers are the party at that stage of a relationship and then, of course, the parties ratify what the lawyers do when they sign the agreement. So there's -- what's basically going on here is SCO would have us ignore what the lawyers did.

Now, there are ways to do that. They could ask for the contract to be reformed if, in some way, the contract didn't reflect the underlying intent of the parties. But they haven't asked for reformation. They could make an argument for mutual mistake, but they haven't made an argument for mutual mistake. They haven't said the lawyers were incompetent, although there is a theme running through their papers that somehow their lawyers didn't capture their intent or, to be more precise, the predecessor's intent in the agreement.

It may be that, as the Asset Purchase Agreement was being drafted, people were working quickly. It may be that Novell had all sorts of leverage over old SCO during the time of drafting the Asset Purchase Agreement. That doesn't change the outcome. We look at what the contract says, not what the business people might have thought was the essence of the deal.

Now, here, we have one additional important fact, if you will, that reinforces this basic point I'm driving at. There were three months between the signing of the Asset Purchase Agreement and the signing of Amendment Number 1. This provision was heavily focused on. 4.16 is a major focus of Amendment Number 1. There was a lot of opportunity to tweak the language if tweaking would have better conformed the agreement to some different notion of what the transaction was all about.

But, in particular, the language, "all royalties, fees and other amounts due, under all SVRX licenses" didn't change. SVRX royalties in Amendment Number 1 was used as a category. There are various carve outs from the category, but those carveouts confirm that the set SVRX royalty is a very large set because certain things were exempted from the set explicitly. They weren't said -- it wasn't not said that these things are not SVRX royalties. It was said that these things which are not SVRX royalties are not part of the payment remittance obligation that SCO incurs.

So, these elements of the set help define the set, and that was done three months after the Asset Purchase Agreement was signed. So that's the first "all," all royalties fees and other amounts due.

Then the second "all," all SVRX licenses as listed in detail under Item 6 of Schedule 1.1A hereof and referred to herein as SVRX royalties.

Now, this part has provoked all sorts of consternation and argumentation on the other side. What is an SVRX license, they ask. The list of programs that is identified under Section 1.1A makes this a non-issue as far as this motion is concerned because what we demonstrated in our papers is that if you take the SUN and Microsoft agreements and lay them against the list of programs in Schedule 1.1A, it's almost a -- it's a lay down. It's a perfect match up. It's almost as if they took Schedule 1.1A, added and subtracted a little bit from it, but used the exact formulations for the names of the programs in the SUN and Microsoft agreements.

So, we don't need to know the ultimate scope of SVRX licenses. We don't need to know how far it could possibly reach in order to decide this motion. What we know is: If you take that list of programs and you lay it down against the exhibits in SUN and Microsoft, particularly NXB of the Microsoft agreement, the second payment provoking annex of the Microsoft agreement, it's a nearly perfect match up.

THE COURT: What does "nearly perfect" mean?

MR. JACOBS: Well, there are a few additions. I didn't notice any important subtractions. There are a few additions to the list. In annex B, it's two additions at the top, I think, and everything else lines up perfectly. So are these -- is there -- there are two questions to ask, I suppose. Are the SUN and Microsoft agreements SVRX licenses, or do they represent at least, in part, SVRX licenses? We think the answer to both is yes. The second. They are at least in part an SVRX license. We think they are also SVRX licenses.

And this is where I think the fiduciary obligation starts to kick in. One of the obligations of a fiduciary is to make it possible for the principal to know whether you have collected on behalf of the principal or on behalf of yourself. And you have a duty to prevent the kind of commingling here that's gone on; not commingling only in the sense of the pot of money but commingling in the agreements. So this is where I think the fiduciary duty aspect of this should tilt the -- any concerns that one might have about this lineup of programs against SCO.

They had a duty to do this in a way that would not provoke this kind of self-serving, "no, no we are not your fiduciary for this" sort of declaration that they have introduced....

So really this is a question about the importantance of the language of the contract as against the declarations of the business people that SCO submitted.

He said he wasn't telling the judge anything he didn't know about contract law. And that is true. But I am reproducing it because I thought Roger Parloff might want to take notes. He may not have followed that hearing. And second, now that SCO has in fact done what Mr. Singer told the judge, or implied to the judge, it wasn't about to do, I thought it might help all those trying to figure out how all this ties in with the bankruptcy, particularly the fiduciary responsibilities SCO had toward Novell.

The Economist offered a tongue-in-cheek description of US bankruptcy law back in 2002:

THROUGH European executives' eyes, American bankruptcies are perverse affairs. First, failed managers often hang on to the helm well after their firms have officially gone bust. After companies seek safe harbour under Chapter 11, America's famous insolvency law, banks swoop in to lend them even more money. Next, lawyers help the firm restructure older debts, giving bosses months or years to run their businesses interest-free. Failure, American style, is nice work if you can get it.

But don't forget that in the Declaration of Tor Braham, the lawyer who drafted the APA between Novell and Santa Cruz, he mentioned that Novell thought ahead, worried about a SCO bankruptcy someday:

9. As to SVRX, the intent was that Santa Cruz would act as Novell's agent. The Wilson team and I drafted the APA provisions that memorialized the agency relationship. This drafting is reflected in contemporaneous documents that still exist. Exhibit 1, for example, is a true and correct copy of my marked-up redline of Wilson's early draft of the APA containing Section 4.16. In this early draft of 4.16, as well as the final APA, we defined SVRX License to include any agreements relating to a series of UNIX System V software products that we listed in Item VI of Schedule 1.1(a). (See Exhibit 1 at NOV 42711; See Exhibit 2 at 31.) We did not limit SVRX License to a subset of SVRX license agreements relating only to the binary rights and royalties under those agreements. Indeed, we drafted the contract to state "all SVRX Licenses" and that term was intended to encompass licenses governing source and binary rights and revenues. (Id.)

10. One agency obligation we included in the contract — and to which Santa Cruz agreed — was that Santa Cruz would collect and pass through all SVRX Royalties to Novell, subject to a 5% administrative fee. In Section 4.16(a), the Wilson team and I defined SVRX Royalties to be "all royalties, fees and other amounts due under all SVRX Licenses." (See Exhibit 2 at 31.) We did not limit this revenue stream to a subset of "all royalties, fees and other amounts" such as binary royalties or sums being paid be existing SVRX customers. Further, because we were concerned about Santa Cruz's viability and what could happen to these revenues if Santa Cruz went bankrupt, at my direction we proposed contract language to Santa Cruz whereby Novell would remain the equitable owner of the SVRX Royalties under the Bankruptcy Code:

Seller and Buyer further acknowledge and agree that Seller is retaining all rights to the SVRX Royalties notwithstanding the transfer of the SVRX licenses to Buyer pursuant hereto, and that Buyer only as [sic] legal title and not an equitable interest in such royalties within the meaning of Section 541(d) of the Bankruptcy Code.

(See Exhibit 3 at NOV 41922.) In case Santa Cruz declared bankruptcy, the SVRX Royalties would be protected from the bankruptcy estate and Novell would continue to receive them. Attached hereto as Exhibit 3 is a true and correct copy of Wilson's transmittal to Santa Cruz of the aforementioned proposed language. Santa Cruz agreed to our proposed language.

So, my question is, is this retroactive? By that I mean, if SCO failed to hand over the money it should have, doesn't it have to now anyway, if Novell has an equitable interest, and SCO actually has no interest in that money, and *then* the other creditors can have at whatever is left?

More digging needed. Here's something I can use for a start after I take another nap.


  


In "Foxes Petition to Guard the Henhouse" News ... | 204 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Off topic thread starts here
Authored by: Totosplatz on Sunday, September 16 2007 @ 08:16 PM EDT
Please make links clicky

Greetings from Zhuhai, Guangdong, China

---
All the best to one and all.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Sunday, September 16 2007 @ 08:16 PM EDT
If Novell, IBM, and Red Hat are not on the list of creditors, the SCO only owes
$2 million dollars, with cash on hand well in excess of that. So the judge will
deny the request for Chapter 11, and the Novell trial begins. Kimball slaps a
constructive trust on SCO for $25.8 million, and that's all she wrote.

[ Reply to This | # ]

News pic here please.
Authored by: Waterman on Sunday, September 16 2007 @ 08:22 PM EDT
Don't forget to make links clickable.

[ Reply to This | # ]

PJ's get well thread.
Authored by: Waterman on Sunday, September 16 2007 @ 08:27 PM EDT
For those who want to wish her a speedy get well wish. Which most of us do.

[ Reply to This | # ]

Veritas
Authored by: cmc on Sunday, September 16 2007 @ 08:30 PM EDT
I'd question how old that Veritas debt is. Not because I think it's a recent
"quick, hurry up and fill the top seven spots" ploy, but because
Symantec merged with Veritas (and kept the Symantec name) in July 2005. So in
my non-lawyer eyes, it would seem that the debt would be with Symantec, wouldn't
it? Not that this really means anything, but I was just curious.

[ Reply to This | # ]

Some of the issues:
Authored by: Anonymous on Sunday, September 16 2007 @ 08:40 PM EDT
The list of creditors as supplied by SCO is not final. Novell and IBM will be
added to the list the moment they file with the BK court and claim an interest
in the outcome.

Novell is a victim of conversion. That means that Novell's claims are settled
before any general creditor's claims. The issue is more complicated because
there is no specific dollar value.

Creditors get votes on the BK committee depending on the amount they are owed.
The BK court is likely to allow the case in Utah to go forward to determine how
much of Novell's money was converted. The purpose of bankruptcy doesn't extend
to protecting a thief. Almost all BK acts make that clear.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Sunday, September 16 2007 @ 08:50 PM EDT
Amici LLC ($500,650.73)
Boies Schiller (287,256.39)
Canopy Group ($139,895.00)
Gre Mountain Heights Property ($132,502.00)
Microsoft Licensing, Inc. ($125,575.00)
Sun Microsystems, Inc. ($50,000.00)
Veritas Software ($37,881.33)
Total $1,269,759

a. Total assets $ 14,800,000.00
b. Total debts (including debts listed in 2.c.,below) $
7.500.000.00

If it is assumed (with SCO who knows but not correct by
standard accounting) that b Total debt does not include any
of the debt listed above then total debt is: $8,769,759

If we the take net total debt from total assets that leaves
SCO (according to SCO) with $6,030,241.
which is definitely solvent

So again we get a preview of SCO think.
Novel's money is SCO's money and SCO's money is SCO's
money.

Some how I believe the bankruptcy judge with just 2 years
experience as a judge was selected for this case somehow
and is totally unperpared for the likes of a SCO and SCO
thought.

[ Reply to This | # ]

They are prepared
Authored by: symbolset on Sunday, September 16 2007 @ 09:16 PM EDT

Obviously SCO has been working this out for some time in order to ensure their committee will be favorable to the present management.

The levels they're going to are just amazing.

Is it possible they intend to continue to wage their FUD war as a chapter 11 zombie? Is there some way to prevent this, or is this just the beginning of a story that won't end?

[ Reply to This | # ]

Novell License payments --historic data
Authored by: stats_for_all on Sunday, September 16 2007 @ 09:27 PM EDT
This largely Reprints an Old post of mine from June 2006.

This is the "Payable to Novell" liability and "restricted cash" asset due Novell from 10-Q quarterly reports.

The absense of any citation of this ongoing payment stream in the bankruptcy filing is very, very odd-- SCOX surely knows that this is material information. This restricted cash asset/liability is distinct from the contested Sun/Microsoft/SCOSource licenses.

The reported "payable to Novell liability"

Q1 2003 ..... 1250
Q2 2003 ..... 1779
Q3 2003 ..... 1428
Q4 2003 ..... 2025
Q1 2004 ...... 550
Q2 2004 ..... 3203
Q3 2004 ...... 506 **
Q4 2004 ..... 3283
Q1 2005 ...... 604
Q2 2005 ..... 4007
Q3 2005 ...... 425
Q4 2005 ..... 2815
Q1 2006 ..... 945
........
Q1 2007 .... 1995
Notes: 04Q3 value uncertain (two values reported, in different reports). and 06Q1 value obtained by subtraction of restricted cash-- the Legal Escrow account and the Novell Escrow are combined in the Balance sheet statement.
Restricted Cash is carried as an asset and increases as the licensees pay in.. The licensees are reported by Bert Young in the CC 12/2005 as mostly "Japanese telcos".
"Payable to Novell" is a current liability should increase by an offseting amount. The license payments as a cash stream do not occur anywhere on the revenue statement under any category, since they are not SCOX revenue.
The payment schedule is uncertain, but appears to follow a six month rolling cycle.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: tknarr on Sunday, September 16 2007 @ 09:28 PM EDT

I think one of the reasons Novell isn't on that list is that it's not a creditor. SCO doesn't owe Novell money, SCO's maintaining illicit possession of Novell's money. So Novell's not in the position of a creditor, someone who loaned money to the bankrupt company, they're more in the position of the company that leased the photocopiers to the bankrupt company. They don't have to stand in line, they just have to prove to the bankruptcy court that the photocopiers really are theirs and they can go in and take them without any regard to debt priority or what that'll do to the company or the other creditors.

This is not particularly good for SCO, BTW.

[ Reply to This | # ]

Remember, drink plenty of fluids...
Authored by: ETian on Sunday, September 16 2007 @ 09:32 PM EDT
...I'm thinking eight glasses of water. (Good luck with that if you're not used
to drinking much water.) This reminds me of a favorite aunt who used to work
herself until she got sick. With the output you have, I'm amazed you have any
health left. Best wishes for a speedy recovery!

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: John Hasler on Sunday, September 16 2007 @ 09:48 PM EDT
Canopy Group means Mr. Mustard, doesn't it? The man who had Yarro frogmarched
out of his office? I can't think of a better man to oversee McBride. He may be
a fox but I'm sure he knows how to make sure no one else eats any of his hens.

---
IOANAL. Licensed under the GNU General Public License

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Sunday, September 16 2007 @ 09:52 PM EDT
This is a well-rehearsed plan by SCO to try to game the Federal Bankruptcy court
just like they did with the civil courts. SCO lawyers have been working on this
for months -- tweaking their strategy as time went on. What a setup! Very
impressive!

[ Reply to This | # ]

Impressive in a sick sort of way ...
Authored by: nsomos on Sunday, September 16 2007 @ 09:54 PM EDT
I find this impressive in a sick sort of way.

Somebody has been staying up late at nights
doing lots of planning. The phrase 'well
orchestrated' comes to my mind.

SCOG machinations are about as sleazy as the
sick kids who murder their parents, and then
beg the court for mercy because they are now
orphans.

I suppose one could argue that until and
unless the bankruptcy is granted, that other
cases are NOT stayed.

I really hope that the bankruptcy court is
made aware of some of the 'interesting' and
'unusual' circumstances surrounding this
particular bankruptcy filing.

It would be most pleasant to have SCOG and
Darl denied bankruptcy protection at this time.

[ Reply to This | # ]

isn't Amici run by a friend of David Boies?
Authored by: bstone on Sunday, September 16 2007 @ 09:59 PM EDT
Amici was at least partially owned by members of Boies family. It was sold in
2004 to Xerox, so it is no longer a Boies family company. Xerox claims that the
Boies family had divested their interest before they bought it.

The contract Amici had with SCO may have contributed to the value of Amici when
it was sold, but the Boies family appears to be out of Amici now.

[ Reply to This | # ]

The best laid SCO plans...
Authored by: Anonymous on Sunday, September 16 2007 @ 10:09 PM EDT
Have gone awry since Darl & Co took over.

Novell, IBM and Red Hat get to have their say, and if theyget a chance to offer
proof, SCO will be converted to Chapter 7 by the judge. Even if only Novell
gets the stay against its trial lifted and is awarded half of what it claims,
SCO is done. Bankruptcy courts can see through SCO smoke and mirrors because
it's all about money, not nebulous claims of negative know how. The BK court
will not dismiss the filing, but it will want to know more about the magnitude
of pending liabilities.

Darl's First Day Pleading states Novell claims up to $37 million and that is why
SCO filed, so the judge will be interested in knowing exactly what the liability
is. It's won't make sense to a BK judge to allow Chapter 11 to proceed for
small creditors only to have the company emerge someday to face the large
creditors.

[ Reply to This | # ]

Mettler: Bankruptcy court can yank cases from Kimball
Authored by: Anonymous on Sunday, September 16 2007 @ 10:49 PM EDT

Haven't seen this discussed yet as a motive for SCO to file
for bankruptcy.

Lew Mettler is saying the bankruptcy court can pull all of
SCO's litigation -- yes, Novell, IBM, Red Hat and Auto Zone
-- and try them itself, and this includes jury trials.

Obviously, if Kimball won't give SCO a jury trial, maybe the
bankruptcy court will.

I doubt even Las Vegas will make book on this happening.

[ Reply to This | # ]

Corrections Thread
Authored by: artp on Sunday, September 16 2007 @ 10:57 PM EDT
Make the title indicate some semse of the correction needed, please.

Must not be many corrections needed if it took this long to get it posted. :-)

---
Userfriendly on WGA server outage:
When you're chained to an oar you don't think you should go down when the galley
sinks ?

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Monday, September 17 2007 @ 12:07 AM EDT
It appears that this is just an entertaining diversion - a plan put into action
without careful consideration of the realities of the situation. Much like this
sorry saga has been all along.

SCO is circling the drain, and this isn't going to save their company or prevent
following actions from punishing the guilty. Get the red dress ready, PJ - it's
almost closing time.

[ Reply to This | # ]

You should have read lamlaw
Authored by: Anonymous on Monday, September 17 2007 @ 12:13 AM EDT
He covered all of this yesterday. See Bankruptcy Hearing on Tuesday - Updated and Trade media on SCO bankruptcy. My favorite quote from these is "Stay tuned. Read Groklaw. (Forget the trade press. They still think that SCO was suing Novell for patent violations. Or, that Microsoft was eventually blocked from bundling IE.)"

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: drh on Monday, September 17 2007 @ 02:17 AM EDT
Looking at the top 7 list, the only ones I see that would be willing to work as
trustees would be BSF. The rest may want their money but do not want anything to
do with running a dead business that has so many outstanding legal claims
against it.

BK court is about money, so looking at the remaining court cases, who wants
money? IBM and REDHAT would probably accept a settlement that covers their legal
fees, they were not really after money. Novell wants the money that SCO stole
from them, thats one. And BSF wants money, thats two, and thats really it. And
they are both fighting over the same money as it turns out, because SCO paid BSF
with the money it stole from Novell.

All the rest of the claimants, including in part Novell, were more interested in
"removing their ability to make war", in forcing SCO to stop making
false and damaging claims against their business.

It appears to me that the only way the claimants can achieve what they want is
to go for the "smoking hole" option. They all tally up what they could
be owed, and present the BK court with this admittedly vast amount of money SCO
owes them at the outcome of the trials. They all file objections to BSF being
one of the trustees to prevent them from doing a cash grab. They all file for
lift of stay against their respective cases. Finally they request immediate
conversion to Chapter 7.

As far as I can tell Novell gets to go first because, while tried in a civil
court, conversion is actually a criminal offense (and could play an important
part). Since SCOs case against Novell has already been decided except for the
amount and constructive trust, I don't believe the BK court can re-try this
case. When Novell points out to the BK court that all that is left is one or two
days of bench trial, the BK court would be unwilling (and unwise) to take it
over. They will probably lift that stay with the provision that once the amount
is determined the BK court will decide on how much of that money is actually
paid.

The reality is that the only way now for Novell to get its money is to file a
new case(s) against the SCO directors and lawyers. They are the ones who
technically either stole the money or received stolen money, and they knew it.
Judge Kimball left that door open to Novell, now they have to decide to walk
through it.

BSF is in some serious trouble here. They are listed as one of the top 7
creditors, they are on SCOs list of preferred lawyers, and the accusation is now
out that they were the funnel point of questionable funds. Putting them on as a
trustee creates a rather large conflict of interest, especially if they do get
that position and do decide to pay themselves first. They will fight Chapter 7
because they get little or no money there.

A smart BK judge is going to look at the mountain of filings come Tuesday and
take this all under advisement.


---
Just another day...

[ Reply to This | # ]

Is Darl going to filp on Bill?
Authored by: Anonymous on Monday, September 17 2007 @ 03:34 AM EDT
One possibility that I have not seen discussed much is if Darl is flipping on
Microsoft.

The interesting timing of the BK filing makes me wonder if Darl et al are
feeling a bit used right now. A few years a ago Darl's fairy god mother was
whispering in his ear about how he was going to make a fortune. Cash and
positive press flowed his way.

Now a few years later. The case is gone. The cash is nearly gone. The press is
nearly gone. And Darl is left looking the idiot.

I wonder if Darl has been going back to his fairy god mother insisting that she
do something about this mess. But, the fairy was not home when he knocked.

Darl files BK with the threat that deals with the fairy be made public unless
she fix thing. Darl knows that if the deals become public, he becomes a little
fish in a big sea.

Is it just ironic that he files on the Friday before the EU antitrust case hits
the headlines.

My guess is the Darl knows he has been played and know he is mad.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: dodger on Monday, September 17 2007 @ 04:02 AM EDT
I say 'drown the wench' ("Long Kiss Goodnight")

Hey PJ,so where is the 'justice' that you expected to prevail in this case? SCO
has tied up the courts for 5 years, the executives have for sure made pretty
pennies in their stock deals and bonuses, and Red Hat, Novell and IBM have spent
a fortune in defending themselves against this 'proxied' attack. It doesn't look
good that they will recover their costs. However, it would be fitting that the
perpetrators of this scheme go to jail for misuse of the legal system. It would
be VERY FITTING if the supporters of the rogues also paid a penalty for their
roles as 'fairy godmothers.'

Is this too much to hope for?

[ Reply to This | # ]

What's a judge to think?
Authored by: Ian Al on Monday, September 17 2007 @ 04:34 AM EDT
Lewis Mettler has been banging on about how important it is for Novell, IBM and
Redhat to make their presence felt at the bankruptcy court on Tuesday. I think
he is right and that they will do that because they are professional lawyer
teams.

However, even if they don't there may be no escape for SCOG.

In comments in earlier articles I mentioned how Darl had told the judge in his
statement in support of the bankruptcy petition that SCOG had been found guilty
of conversion in the Novell case and that they were likely to suffer
considerable damages in the IBM and RedHat case since they were largely lost.
The judge won't skip over comments like that just because Darl starts by saying
that SCOG deserve to win millions.

The judge will see that the declared assets are roughly twice the declared
liabilities and that the company can stay solvent for months. To agree the
recovery he must determine why an apparently solvent company expects bankruptcy.
He has to see that the SCOSource costs on the books and the questions from the
SEC about accounting for litigation costs are a key factor. Darl's petition
paper giving the dangers to SCOG of the litigation prognosis will be the next
warning signal to the judge. I think I can guess what the judge will think.

If he does not hear it from Novell, IBM and Redhat then he will have to approach
the judges in the three cases. Then it is just a matter of looking at the order
in Novell, the summaries from the two sides in IBM as to what is left and the
claims from Redhat to see what his next step must be. He must get that list of
liabilities and creditors updated the only way he can; by unstaying the three
cases.

---
Regards
Ian Al

Linux: Genuine Advantage

[ Reply to This | # ]

Judgement and orders for EU
Authored by: Anonymous on Monday, September 17 2007 @ 04:52 AM EDT
Here are the judgment and orders in the EU ruling for your viewing pleasure.

http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&
numaff=T-201/04

[ Reply to This | # ]

Lamlaw: no, I don't feel sorry for the accessories
Authored by: Anonymous on Monday, September 17 2007 @ 05:45 AM EDT

From Lamlaw (which BTW is well worth reading):

And one always has to feel a bit sorry for all of the normal creditors that were just trying to help out and provide services or products.

Well, actually, no: I don't feel sorry for anybody who did business with SCO after it became clear, at least 3 years ago, that they had the ethics of a dog flea. Friends, if you know a person or a company is basically crooked, have nothing to do with them. If you try to deal with them and get burned, it serves you right.

In criminal law, someone who assists a crook can be charged as an accessory. Having dealings with SCO after 2004 doesn't make a person or company an accessory to a crime, but morally, there is little difference.

[ Reply to This | # ]

Could petition be dismissed for lack of good faith
Authored by: Anonymous on Monday, September 17 2007 @ 06:58 AM EDT
I had a very quick look online about US bankruptcy and C11 and I ended up
wondering whether Novell should not be filing for this petition to be dismissed
on the grounds of lack of good faith?

There appears to be precedent for this and lifting the automatic Stay on other
actions In re Arnold, 806 F2d 937 (CA9 1986).

Surely the SCO petition is not really for reorganisation - it is a not very
veiled attempt to stave of the liability that will arise from the Novell case.

[ Reply to This | # ]

Lost faith and the end of community.
Authored by: Anonymous on Monday, September 17 2007 @ 07:06 AM EDT
OK.....

I have to hand it to them.... The end game is now seen.

SCO is the sacrificial lamb. It has been from day one.

Some one really knows how to play the US Civil legal system, and I will give
them credit for a beautifully executed game of legal chess.

I can see that they planned this well before the initial IBM suit. I am sorry PJ
but it seems to me that for all the praise give to the system at the Novel
summery judgments it seems it wont matter one iota.

Look at the situation... SCO is bankrupt... It doesn't matter what happens
during to bankruptcy. SCO will die and with it any chance we have of clearing
Linux's' name. All chances gone. No final judgments from any courts about GPL no
judgments on IBM sneaking UNIX code into Linux.

Yes Novell can say "Linux is clean" but that wont draw anywhere near
as much publicity as a court slam dunking SCO about how much crap they spread.

SCO had no intention of ever having a court rule on the Linux Question. It knew
it couldn't win. It never intended on winning.

The intention was to make quick money for a bunch of lawyers and corporate high
fliers and smudge Linux's' name so MS could nobble a competitor for a while,
thus making them more money.

MS knew that SCO was a sacrifice. Why do you think they are now waving the
Patents around. SCO served their purpose, blackened Linux's name, for their next
trick a prolonged patent battle, then I am sure they will come up with more
copyright ploys....

They can keep it going for decades using the US civil courts as a willing
participant. Keep a legal cloud hanging over Linux for so long that it wont ever
have the chance to shine. (In their mind). And all the time more of the already
rich make more money.

It makes me sick. And it shows that there are major flaws in both US corporate
mentality and the US civil legal system.

No thoughts to tearing down a thing that show there is more beauty in humanity.
Their greed shows how little some think about their fellow humans. Screw
community, Screw sharing wonderful creations.. Just give me Money!

Sigh.... I am sorry PJ, but it is becoming evident that the legal system you so
rightfully defend and love is being abused.

By the people who truly don't give a damn about anything but their own
pockets....

I lose faith in humanity, when so many of the humans I see involved in this just
want to see of the end of a wonderful community.

And why do they wish it to end?

Money.

RSC

[ Reply to This | # ]

So how does it work, exactly?
Authored by: Anonymous on Monday, September 17 2007 @ 07:31 AM EDT
One thing first off, the presence of GRE on the list shouldn't necessarily be
construed as collusive, although if it were in Utah, a closer look would
certainly be mandatory. Do any of us expect them to have paid their rent on time
in the last 60 days?

But my main question is, once in bankruptcy court, when the cases are stayed,
how do the litigants in the other cases petition the bankruptcy court? Just file
briefs, which the judge is obligated to read? Does SCO get to file objections?
Does it jump straight to oral hearing, or is there a lag of about a week, to
allow time for interested parties to file?

And I can't wait to read Red Hat's and SCOG's next letters to the judge in their
case. :-)

bkd

[ Reply to This | # ]

Frustrating the course of justice?
Authored by: talldad on Monday, September 17 2007 @ 09:26 AM EDT
And second, now that SCO has in fact done what Mr. Singer told the judge, or implied to the judge, it wasn't about to do
Hmm, this and reading the earlier summaries of the effect of Ch 11, made me ponder. Has SCO deliberately, with malice aforethought, done something which is designed to or has the predominant effect of denying justice to Novell, or of overturning the impact of Justice Kimball's decision/s? Is there anything in the Bankruptcy Code to deny SCO the use of those Ch 11 protections should this be the case?

---
John Angelico
Down Under fan &
OS/2 SIG Co-Ordinator

[ Reply to This | # ]

Perps
Authored by: Anonymous on Monday, September 17 2007 @ 01:09 PM EDT
" With a couple of possible exceptions, that looks a little like a list of
the perps to me.

Is that not bizarre? That can't be the final list. It can't pass the snort test,
let alone the laugh test."

This is the first list, not the last one. Any major creditor not on the list
will (if they're smart) inform the court. Another way to put it was a
conversation I recently had with a lawyer who handled hundreds of Bankruptcies:
"I never trust the initial filing".

[ Reply to This | # ]

Abuse of Bankruptcy - In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Monday, September 17 2007 @ 02:05 PM EDT
PJ,

When you review the bankruptcy code, can you keep an eye out for what
constitutes Abuse of Bankruptcy? If you look at SCO's assets before Judge
Kimball's decision, do they have enough money to continue normal operations,
that is pay off all of their other creditors and keep the doors open?

Now, if you say that the Sun and Microsoft money are not SCO assets, what
does their balance sheet look like?

Again, the question you asked, is the money SCO mishandled taken out of the
equation before creditors are apportioned their share.

Of course, it might have been triggered by something like:

We understand you lost your claim to the Sun and Microsoft revenue.
According to your last SEC statement this puts you in the red. Per the
conditions in your loan agreement, we can now call in your loan to be paid in
full.

SCO files bankruptcy. It might not have been Novell that caused them to file
bankruptcy, but another creditor calling in a loan. (I can't believe it would
have been Microsoft.)

Oh, those Microsoft licenses. A bunch of Windows OS, Upgrades, MS Office,
IIS, that sort of thing.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: Anonymous on Monday, September 17 2007 @ 03:18 PM EDT
I think the question to ask is at what point a litigant becomes a creditor. I
think the answer is not until the judgment is awarded. This means that Novell
may be a creditor now but IBM is not. Also the "may be" may be only
after appeals are completed.

If so, then it would appear the present creditors can just wind up the empty
bag. Why bother with a trial?

I laugh because if this is what the justice system has become then we may well
be on our way to witnessing the demise of another empire just as the Roman
Empire died.

Its a mockery of justice. A creditor is no longer defined as someone who is
owed money; it is someone who the debtor agrees is owed money. If so it makes
payment of debts more or less optional. All a company needs to do is dispute
what is owed and divide the spoils with its corporate friends.

Since I had a lawyer tell me in essence this is how it works I sure hope others
can say for sure that: No, it isn't so.

[ Reply to This | # ]

Amazing
Authored by: GLJason on Tuesday, September 18 2007 @ 02:30 AM EDT

Sun and Microsoft combined to pay SCO nearly $50 MILLION in licensing fees to finance SCO's lawsuits. Judge Kimball has already ruled that those licenses were in part SVRX licenses. For any part of those licenses that has to do with SVRX, Novell has equitable interest in the proceeds. Somehow SCO ended up with $125,575 and $50,000 in debt to those companies and wishes them to be on the creditor's board to help control SCO's operations, but Novell isn't listed? What lunacy is this? Maybe there's something preventing Novell from controlling SCO in any way since they are in litigation, I don't know... I would like to know how SCO ended up in debt to those companies after receiving millions from them four years ago in one-way licensing agreements.

[ Reply to This | # ]

In "Foxes Petition to Guard the Henhouse" News ...
Authored by: sjvn on Wednesday, September 19 2007 @ 10:01 AM EDT
> Is that not bizarre? That can't be the final list. It can't pass the snort
test, let alone the laugh test.<

While I haven't been reading the code, I have been talking to bankruptcy
lawyers. They tell me that this kind of foxes and the henhouse situation is
commonplace. After looking at the latest 10-Q, I doubt it will make any
difference. If you hadn't gotten any money from SCO yet, you're not going to get
any money in the future. The one exception who may yet see another thin dime
come out of SCO is Boies Schiller thanks to their pre-existing trust
agreements.

Steven

[ Reply to This | # ]

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