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Here Come the Objections to the Asset Sale -- IBM is Baaack
Thursday, November 01 2007 @ 05:03 PM EDT

Both Novell and IBM have filed objections to the proposed assets sale. Novell also responds to the supplemental filing about how fast SCO should pay the undisputed royalties. They still want them immediately because otherwise the royalties "remain at risk in the Debtors' hands." A new Berger Singerman lawyer asks to be added to SCO's team. And a creditor, Bynari, sells his claim to a firm that eats up dying companies' assets/liabilities. I think that's what Argo does, from a quick Google search.

IBM's objections are enjoyable to read. I have missed reading Cravath's filings, so I read that one first. IBM opens with quotations from SCO's representations to the bankruptcy court at the First Day hearing, all of them belied by the precipitous "emergency" motion SCO filed to sell off essentially all of its assets. Remember this? "SCO filed these cases to stabalize its business -- to have a breathing spell"? How about this one: "SCO owes a heavy responsibility to its customers"? Hardy har. I'm sure York will be doing bug fixes. The purpose of Ch. 11 being to gain a little breathing room, not to grab the money and run without even touching the normal bases you are supposed to for such a motion, IBM opposes the sale:

SCO has asked the Court to approve an emergency request to permit the sale of what appears to be much, if not all, of SCO's business assets. The procedure that led to the proposed transaction, the procedure for going forward with it (or an alternative), and the requisite showing of the support for its terms and conditions are all absent. So, too, is any proffered justification for the sale itself or any explanation for SCO's apparent abondonment of its stated intentions when this reorganization proceeding began less than two months ago. Accordingly, IBM requests that the Court deny SCO's Motion.

Ah. IBM is back. The filing is by Cravath and Potter Anderson & Corroon, a Delaware firm. We can read the rest together.

Novell's objection points out that SCO has failed to reveal what relationship, if any, there may be between SCO management and the stalking horse buyer or why this sale is a good idea, not to mention failing to adequately describe what is being sold, since "it offers only a preliminary term sheet". More nuggets in the complete list of things that show the Sale Motion to be deficient:

  • fails to establish grounds for a sale of substantially all the Debtors' assets outside a plan in terms of both why there should be such a sale at all outside a plan and whether this sale is reasonable (e.g., the Debrors offer no description or evidence of prior marketing or other alternative disposition efforts, not any disclosure about the relationship between Debtors and their management, on the one hand, and the stalking horse buyer, on the other);
  • fails to provide adequate information on the factors that may affect what already is a largely illusory, nominal $36 million sale price (e.g., representations and warranties, possible cure amounts for assigned executory agreements);
  • purports to sell assets whose ownership by the Debtors is, to put it mildly, in serious question; and
  • grants the stalking horse buyer very generous breakup fee and cost reimbursement benefits without any justification whatsoever.

Good points. Especially the first one. Here's what I'd suggest: that Novell investigate whether there is a connection between York, IP Innovations/Acacia, and Microsoft. Novell points out that SCO is proposing to sell assets that the US District Court in Utah has already ruled belong to Novell. But it also, Novell says, "seeks to sell other assets as to which Novell has at least partial ownership."

I also enjoyed Novell's handling of the "unclean hands" claim in its Reply in Support of Motion for Order Directing the Debtors to Remit Undisputed Future Royalties to Novell Upon Receipt:

Novell's Hands Are Clean

8. Finally, SCO claims that a supposed breach by Novell of the APA precludes the relief Novell seeks. Putting aside whether Novell breached the APA, which Novell contests, the point is entirely irrelevant to the current motion. Even under SCO's version of events, it has acquiesced to the payment arrangements it describes -- whereby SCO withholds its 5% from the following month's payment -- for over four years.

9. The Debtor establishes no link between Novell's alleged breach some years past and the relief they now seek to prevent, and cite no authority at all supporting their argument. The APA is governed by California law under which, "[t]he misconduct which brings the unclean hands doctrine into operation must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants." Fibreboard Paper Prods. Corp. v. East Bay Union of Machinists 227 Cal. App. 2d 675, 728 (Cal. Ct. App. 1964) ("relief is not denied because the plaintiff may have acted improperly in the past or because such prior misconduct may indirectly affect the problem before the court"). The misconduct must infect the cause of action before the court. Id. This is not the case here: the Motion seeks immediate remittance and the purported breach is over non-payment of administrative fees (which the Debtors admit were eventually paid via setoff). Thus, the "unclean hands" doctrine does not apply....

11. In any event, the Debtors were first to breach the APA, which they did in late 2002 by failing to remit royalties as agreed. See, e.g., Exhibit B. So by their own reasoning, they themselves are prevented from having equity favor them in the first instance. If they are not so prevented, then for the same reason, nor is Novell.

Don't you love it? What's good for the goose is good for the gander.

Here are all the documents:

175 - Filed & Entered: 11/01/2007
Transfer/Assignment of Claim
Docket Text: Transfer/Assignment of Claim. Transfer Agreement 3001 (e) 1 Transferor: Bynari, Inc.(Amt. $5,209.58) To Argo Partners. Filed by Argo Partners. (Gold, Matthew)

176 - Filed & Entered: 11/01/2007
Motion to Appear pro hac vice (B)
Docket Text: Motion to Appear pro hac vice of John D. Eaton. Receipt Number 149415, Filed by The SCO Group, Inc.. (Jones, Laura Davis)

177 - Filed & Entered: 11/01/2007
Reply (A)
Docket Text: Reply to Debtors' Response to Motion for Relief From Automatic Stay to Proceed with District Court Action to (I) Apportion Revenue from SCOscource Licenses and (II) Determine SCO's Authority to Enter into SCOsource Licenses, Etc. (related document(s)[150], [89] ) Filed by Novell, Inc. (Attachments: # (1) Exhibit) (Greecher, Sean)

178 - Filed & Entered: 11/01/2007
Reply (A)
Docket Text: Reply in Support of Motion for Order Directing the Debtors to Remit Undisputed Future SVRX Royalties to Novell Upon Receipt (related document(s)[167], [166], [90] ) Filed by Novell, Inc. (Attachments: # (1) Exhibit A # (2) Exhibit B) (Greecher, Sean)

179 - Filed & Entered: 11/01/2007
Objection
Docket Text: Objection to Emergency Motion of the Debtors for An Order (A) Approving Asset Purchase Agreement, (B) Establishing Sale and Bidding Procedures, and (C) Approving the Form and Manner of Notice of Sale (related document(s)[149] ) Filed by Novell, Inc. (Greecher, Sean)

180 - Filed & Entered: 11/01/2007
Objection
Docket Text: Objection to Debtors Emergency Motion For An Order (A) Approving Asset Purchase Agreement, (B) Establishing Sale And Bidding Procedures, And (C) Approving The Form And Manner Of The Notice Of Sale (related document(s)[149] ) Filed by IBM Corp. (Attachments: # (1) Addendum A # (2) Certificate of Service) (Silverstein, Laurie)


  


Here Come the Objections to the Asset Sale -- IBM is Baaack | 413 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Here Come the Objections to the Asset Sale -- IBM is Baaack
Authored by: Anonymous on Thursday, November 01 2007 @ 05:06 PM EDT
Being from Delaware I have heard of Potter. He has a reputation for being one
of the best if not the best lawyer in Delaware.

[ Reply to This | # ]

Off Topic Unless Microsoft reverses course expect a very different computing world in as little
Authored by: Anonymous on Thursday, November 01 2007 @ 05:12 PM EDT
Unless Microsoft reverses course expect a very different computing world in as little as a year. Like this ....corporations and governments are now running pilot programs featuring Ubuntu or SUSE as alternatives to Vista.

[ Reply to This | # ]

Corrections here...
Authored by: Erwan on Thursday, November 01 2007 @ 05:13 PM EDT
If any...

---
Erwan

[ Reply to This | # ]

News picks discussions here...
Authored by: Erwan on Thursday, November 01 2007 @ 05:21 PM EDT
As usual

---
Erwan

[ Reply to This | # ]

The real off Topic thread here please.
Authored by: waltish on Thursday, November 01 2007 @ 05:21 PM EDT
Make clickable links please.

---
Bring on the Google Adds.

[ Reply to This | # ]

Can the BK judge sumarily insall a trustee?
Authored by: Anonymous on Thursday, November 01 2007 @ 05:40 PM EDT
It seems that debtors-in-possession have proven themselves so incompitent with
the emergency sale scheme that the Judge ought to seriously question whether
current management should be the ones left in charge. Is there anything to stop
the Judge from reversing his previous order allowing the debtors to have
possession and immediately installing a trustee?

[ Reply to This | # ]

Groklaw cited in 177
Authored by: Anonymous on Thursday, November 01 2007 @ 05:44 PM EDT
Used as evidence of widespread public interest in the case, which is used to
argue for lifting the stay.

MSS2

[ Reply to This | # ]

New Readers from Delaware
Authored by: cruss on Thursday, November 01 2007 @ 05:53 PM EDT
I wonder if Groklaw has had any increase in its readership from Delaware. With
all these new lawyers and firms I assume that some of them are finding Groklaw.

I would like to welcome our new readers from "The First State" and say
that I hope Groklaw will be as enlightening and entertaining for you as it has
been for me.

Greetings!

---
security is directly proportional to inconvenience
cruss hcity net

[ Reply to This | # ]

Here Come the Objections to the Asset Sale -- IBM is Baaack
Authored by: DaveAtFraud on Thursday, November 01 2007 @ 05:56 PM EDT
PJ, you may have liked the first point Novell made but I'm still cleaning up the mess I made when I read:
  • purports to sell assets whose ownership by the Debtors is, to put it mildly, in serious question; and
Cheers,
Dave

---
Quietly implementing RFC 1925 wherever I go.

[ Reply to This | # ]

Is This Calculated Thumbing-Of-The-Nose from SCO
Authored by: sproggit on Thursday, November 01 2007 @ 05:57 PM EDT
OK, so I'm not kidding myself here. There is a pretty good chance that the
strategy playing out here was agreed years ago and that certain of the actors (I
suggest this might include present SCO Management) are laughing their collective
socks off.

But is there a cruel twist in the knife here?

Novellb by winning the "ownership dispute" with SCO over who really
owns the Unix Copyrights, effectively sank any chance that SCO had of prevailing
against IBM. SCO might be miffed at that.

So just to "get one back" at SCO, do you suppose that they are going
to try and sell the assets to another party and thereby force Novell into yet
more litigation to recover title to them? Meanwhile, of course, a certain large
software provider would try to co-mingle the dispute over Unix ownership with
Linux and thereby perpetuate a FUD campaign?

Is this like a "scorched earth" policy at work now?



Presumably if it is, success would hinge on SCO's ability to dupe the bankruptcy
court into granting one of SCO's silly motions and then everything gets very
silly, very quickly.

Can somebody please tell me that this couldn't possibly happen?

[ Reply to This | # ]

First glance at 177
Authored by: Anonymous on Thursday, November 01 2007 @ 05:57 PM EDT
SCO had argued that the Utah trial would disrupt their reorganization. Novell
argues that SCO needs the issues settled to know where they are so that they can
make a sensible reorganization plan.

Novell also argues that SCO needs the Utah trial resolved so that they know what
they can sell to York, so SCO really needs the Utah trial to happen swiftly.
Beautiful!

MSS2

[ Reply to This | # ]

Novell's Objection to Emergency Motion...
Authored by: jacks4u on Thursday, November 01 2007 @ 06:33 PM EDT
This doccument is a Hoot! quite entertaining to read.

---
I'm not a Lawyer, this is my opinion only. I may be wrong, but I don't think so!

[ Reply to This | # ]

Novell questions "Good Faith" in York deal-- SCO own emails coroborate the suspicion (redacted)
Authored by: jbb on Thursday, November 01 2007 @ 06:39 PM EDT
N.B: This is a copy of a post by anonymous above with the email address and phone number redacted. The sig is mine.
--jbb

Novell motion to refuse the York-SCO asset sale contains a series of rhetorical questions about whether SCO and York have made secret side deals.

One component of the good faith analysis is the determination that there is no evidence of unlawful insider influence, fraud , collusion or any other improper conduct between the debtors and the prospective purchaser. Page 6.

Was there arm's length bargaining, are there(or might there be) sweetheart arrangements and understandings that might have affected what the personnel involved tried to extract from York? Page 12

SCOX and York have been in close communication on the litigation, dating back at least to 2005.

One of SCOX's, few legal victories was the Feb. 9th denial of IBM first PSJ motions by Kimball. At noon, Bert Young sent out an email to a select group of investors: included in that list was "'Michael Weinberger'" of York Capital.

Michael Weinberger has a thumbnail biography on the York Capital site-- as a Senior Managing Director and a member of the management committee.

The text of Bert Young's email to Weinberger is reprinted below:

Subject: Recent Ruling in IBM Case
Date: Wed, 9 Feb 2005 12:05:37 -0700

All,
Thought you would want to see this ruling that just came out today - where Judge Kimball has denied IBM"s motions for summary judgement. In particular look at footnotes 4 and 5. Looks like we will be going to trial!

Bert
Bert B Young Chief Financial Officer - The SCO Group

It may prove exceptionally interesting if Novell requested discovery on the issue of "good faith"

---
You just can't win with DRM.

[ Reply to This | # ]

Recursive footnote on page 16?
Authored by: Anonymous on Thursday, November 01 2007 @ 06:52 PM EDT
On page 16 of the Novell motion footnote 5 has, within the footnote text, another footnote, also 5.

Won't that lead to a stack overflow?

[ Reply to This | # ]

Novell questions "Good Faith" in York deal-- SCO own emails corroborate the suspicion
Authored by: stats_for_all on Thursday, November 01 2007 @ 06:57 PM EDT
I am reposting this with email and telephone number obscured. I have had a 2nd generation copy of the original email since Feb. 9th, 2005. I have some, but not complete, headers.

Novell motion to refuse the York-SCO asset sale contains a series of rhetorical questions about whether SCO and York have made secret side deals.

One component of the good faith analysis is the determination that there is no evidence of unlawful insider influence, fraud , collusion or any other improper conduct between the debtors and the prospective purchaser. Page 6.

Was there arm's length bargaining, are there(or might there be) sweetheart arrangements and understandings that might have affected what the personnel involved tried to extract from York? Page 12

SCOX and York have been in close communication on the litigation, dating back at least to February, 2005.

One of SCOX's very few legal victories was the Feb. 9th denial of IBM first PSJ motions by Kimball. Nearly immediately, Bert Young sent out an email to a select group of investors: included in that list was "'Michael Weinberger'" of York Capital.

Michael Weinberger has a thumbnail biography on the York Capital site-- as a Senior Managing Director and a member of the management committee.

The text of Bert Young's email to Weinberger is reprinted below:

Subject: Recent Ruling in IBM Case
Date: Wed, 9 Feb 2005 12:05:37 -0700

All,
Thought you would want to see this ruling that just came out today - where Judge Kimball has denied IBM"s motions for summary judgement. In particular look at footnotes 4 and 5. Looks like we will be going to trial!

Bert
Bert B Young
Chief Financial Officer - The SCO Group
801.XXX.5835 byXXXXg@sco.com

It may prove exceptionally interesting if Novell requested discovery on the issue of "good faith"
An interesting sidelight on this email is Bert's citation of Footnote 4 is erroneous. Quote from an original recipient: "I think Bert meant to have us look at footnotes 5 and 6, rather than 4 and 5. Footnote 4 is about "an example of one of many internal inconsistencies in SCO's briefing".

[ Reply to This | # ]

Groklaw Mentioned in GBK-177
Authored by: The Mad Hatter r on Thursday, November 01 2007 @ 07:08 PM EDT

On Page 2 of GBK-177 in footnote 3 Novell mentions Groklaw. I'll bet that Darl
won't be happy when he reads this.

As an aside - PJ may be right in that a paralegal's job in a bankruptcy case is
boring. It may be, I'm not a paralegal and I don't know. I do know that I'm
finding bankruptcy court very exciting - and I think that we owe Darl our thanks
for being dumb enough to file for bankruptcy!

And we all owe PJ our thanks for Groklaw. It's probably the most educational
site on the net.


---
Wayne

http://sourceforge.net/projects/twgs-toolkit/

[ Reply to This | # ]

Rest easy...
Authored by: Anonymous on Thursday, November 01 2007 @ 07:38 PM EDT
There is now no chance of SCO running into a judge that is ignorant of SCO's
shenanigans. IBM and Novell just laid it all out for him.

Wow, I wish I could attend that hearing...

MSS2

[ Reply to This | # ]

180, IBM on Horse Trading
Authored by: webster on Thursday, November 01 2007 @ 08:10 PM EDT
..
[Unfortunately, the cut and paste did not work with this document.]

1. This document continues the theme from the SCO v IBM case. IBM relentlessly
throws back SCO's own words and theories at them. What better argument? SCO
always refutes themselves. SCO asks for Chapter 11 BK in order to protect their
ongoing business. Then they turn around and immediately try and sell it. SCO
then boasts that the deal means $36 million in compensation. So IBM says if it
is worth so much, lets have an arms-length APA and a open bidding process.
Wouldn't that $36 million be better in cash from some other buyer? Especially
for the creditors and SCO?

2. Much of what IBM says makes just common sense. SCO is going to have to list
the assets so people can know what they are bidding on. The only response is to
"specify" the details that IBM insists upon. They are reasonable.
Clearly without these details public, and with the risks to any bidder, like
IBM's interest in the SCO-claimed code, this stalking horse is acting like a nag
already hitched to the team on the SCO wagon. There is more or less to this
deal than meets the eye or the light of day for that matter. A rider who has
been abused knows not to trust any unfamiliar horse. IBM wants details. They
urge the Court to be prudent. Won't SCO love spending some of that severance
money on some neutral Wall Street Appraiser who comes back saying the nag is
lame.

3. Bidding Procedures. IBM argues that bidding protections are meant to
protect the value of the estate, not the bid. Without a binding contract,
knowledge of value, risk and expense to the bidder, there can be no protections.
So if SCO wants it, they will have to show it. SCO is also going to have to
show if they solicited others, on what terms, and if not why not. They point
out that bidder protections have to be denied it their is insufficient
information with which to evaluate the merits of the proposed sale. The pile on
lots of cases to suport this common sense.

4. IBM points out that SCO does not provide information on the sale process.
p. 9. Poor IBM, they simply "can't get no [specific] satisfaction"
from SCO.

5. IBM also notes that since York gets a non-cash bid, the competing bidder
must too. p. 13. Without cash the stalking horse could flush out bids from IBM
and Novell. They would have both sides covered, win or lose.

6. SCO is keeping all potential bidders in the dark. Clearly they don't want
bidders. All their bets are on York. They want York. They don't want York to
be outbid. Only a fool would outbid York with this deal. It is not a real
deal. It must be something dreamed up by the PIPE Fairy and the SCOfolk. The
bid looks like a sham to extend the litigation. Since the bid looks like a
sham, the bk does too. Can this judge be had? [In the snookered sense only, no
York shares in the Grand Caymons!]

7. IBM then argues that not only must one identify the assets to be sold, but
if the assets are disputed, the disputes must be settled by the Court. Wow! If
SCO wants a sale, the judge can rocket through the disputes and sell. One can't
reasonably sell that which one is litigating about. The deal is a put-up job.

8. IBM then exposes the "litigation credit facility" as a $10 million
secured loan that needs approval by statute. SCO doesn't even say how it would
repay this loan in their non-existent "reorganization plan." At this
point in the brief the IBM lawyers lost their concentration because they had
returned from happy hour and they were laughing too hard. They had outdone each
other mocking this APA, and giving names to the Stalking Horse.
"Darlin'" got a big laugh. Fortunately, Silverstien shed her smirk
and snapped back to professionalism.

9. So in summation IBM attacks deep. They don't say it is a bad sale. They
say that there is no proof by SCO to determine whether it is a good business
decision. They are asking the judge to be reasonable. Who could be against
that?

10. SCO shall reply: IBM, what gives? "We had this sucker, York, on the
line and you spoil the deal. Another bidder isn't going to come along like
this." Don't believe it. SCO-York is a marriage made in Trollville.




---
webster

[ Reply to This | # ]

The meat of the matter
Authored by: bezz on Thursday, November 01 2007 @ 08:17 PM EDT
Now we get to see some of the arguments the creditors have to SCO's ostensible
reorganization plan. It will not be easy for the BK Court to ignore these
arguments and any judgment that favors SCO Group's attempt to sell is bound for
appeal.

IBM -- the only document I've read -- summarizes the business case quite well:

SCO Group is based upon litigation and that litigation has been pretty much
eviscerated in Judge K's Court.

SCO Group is trying to sell its assets, including those to which its title is
(at best) unclear. Meanwhile, it seeks to retain its liabilities and claim some
future (possible) assets that MAY come in IF the litigation "assets"
it sells pay off.

It is not clear WHAT a bidder gets for the assets SCO Group proposes to sell.
Let alone what kind of assured revenue is there.

SCO has not proved it owns the assets it seeks to sell and there is substantial
doubt they so own them.

Setting aside $10 million as a secured asset to SCO Group is not proper.

SCO Group has not demonstrated they went for the best deal and this buyer is
qualified. (That is, a patent troll may not be acting in the best interests of
the current customers and future value of what is sold).

[ Reply to This | # ]

So.. What's is Really Going On In Delaware?
Authored by: Anonymous on Thursday, November 01 2007 @ 08:45 PM EDT
It's obvious that all of SCO's gazillion lawyers can't be all that inept or THAT

stupid. Yes, I have heard that SCO layers are supposed to protect their client;

but, is that how one can describe SCO lawyer's actions in Delaware?

Wasn't it a given that ALL the lawyers on the other side would respond in
spades and respond (crush?) every claim, every notion being presented by
SCO's legions of lawyers in the Delaware court?

So what possible scenarios are there?

a) Just to, in some way, set up a story line in order to try to avoid criminal
charges later on?

b) Or... in fact can the courts be bought in Delaware?

What other scenarios?

[ Reply to This | # ]

Sale without Ch11.
Authored by: rfrazier on Thursday, November 01 2007 @ 09:07 PM EDT
It would have been even more exciting if they had been in a position to execute
the sale right before the scheduled court hearing in Utah. God only knows how
that would have been sorted. As it is, the Bankruptcy Court is acting as a
buffer between SCO and their dreams. Given the filings, it appears to me that
this buffer will shortly become a barrier (although, admittedly, I have no
experience following such proceedings).

Given the current state of play, can they back out of the court's protection off
their own bat, and consummate the sale? Even if the court rejects the sale?

Best wishes,
Bob

[ Reply to This | # ]

Here Come the Objections to the Asset Sale -- IBM is Baaack
Authored by: peecee on Thursday, November 01 2007 @ 09:12 PM EDT
There's got to be a movie deal in the works somewhere here. I don't believe
that SCO's lawyers are that bad, although it seems that they have all obtained
their JDs from a Cracker Jack box. I thought Lawyers were only supposed to ask
questions to which they already knew the answer? A good case should be like a
chess match. This is like watching Deep Blue play the 1990 version of
Chessmaster...

[ Reply to This | # ]

Here Come the Objections to the Asset Sale -- IBM is Baaack
Authored by: eggplant37 on Thursday, November 01 2007 @ 09:51 PM EDT
Can you just imagine the flailing about, wailing, and gnashing of teeth over
this one in Utah? Darl and Co must be going through one of those Sword of
Damoclese moments? If you're not familiar with what that is, my favorite
rendition of it is always the Three Stooge's famous pie on the ceiling scene in
their short film, "Hoi Polloi."

[ Reply to This | # ]

SCOBK-179: Infinite Loop
Authored by: sk43 on Thursday, November 01 2007 @ 10:27 PM EDT
In Novell's Objection To Debtor's Emergency Motion [SCOBK-179], on p. 16, footnote 5 contains a reference to ... uh, ... footnote 5. A translation into Fortran gives the following:

5     PRINT, 'Even assuming ... rights.'
      GOTO 5

Judge Gross is about to become dizzy ...

[ Reply to This | # ]

What happens when SCO loses these two motions?
Authored by: devil's advocate on Thursday, November 01 2007 @ 11:11 PM EDT
When, as looks likely, SCO loses the motions for allowing the sale to York, and
the lifting of the stay on the Utah court, what will they do next? I bet you
they have already planned this one out. Can they simply exit chapter 11,
announcing that their "reorganization" is complete, then sell
themselves off to York as planned?

[ Reply to This | # ]

Specificity again
Authored by: Anonymous on Thursday, November 01 2007 @ 11:48 PM EDT
From page 10 of IBM's objections:
First,the description of assets SCO proposes to sell is inadequate. In the Term Sheet and Motion, SCO says the transferred assets include "the intellectual property of the Debtors' relating to the Unix Business", but fails to identify with any particularity what intellectual property is in fact actually related to the Unix Business. The Term Sheet and Motion do not specificaly identify or list source code, object code, computer programs, patents and other assets that are included as part of its sale of the Unix Business.
Ya gotta love it.

[ Reply to This | # ]

New SCO Lawyer
Authored by: bstone on Thursday, November 01 2007 @ 11:51 PM EDT
John D Eaton, the new lawyer SCO wants added to the case is with Berger
Singerman Florida. His background is in bankruptcy cases and according to their
web page, "in addition, Mr. Eaton has represented officers and directors
with respect to breach of fiduciary duty and other claims involving Directors
and Officers insurance policies".

[ Reply to This | # ]

And now we learn if this judge can be had.
Authored by: Anonymous on Friday, November 02 2007 @ 12:06 AM EDT
I think that November 6th is going to be a really big day to learn just how far
the Delaware rabbit hole goes.

Following the documented reference to Groklaw...

Interested Legal Parties, if you are reading, please note that the sustained
interest in this case goes beyond mere enthusiast interest in the legal
machinery that has pursued a myriad of SCO-related litigation in the LINUX space
but has actually extended to a number of technical administrators, engineers,
managers, and decision makers who follow this case due to its potential impact
on liabilities in the datacenter.

SCOs actions, while not exactly based on the most compelling legal bases based
on its separate District Court cases in Novell and IBM, do still pose an
unresolved legal action against a highly prevalent technology product. This
product is used for the basis of derivatives, add-ons, applications that run on
this particular product, services surrounding implementing and maintaining the
product. There is literally a multi-billion dollar ecosystem surrounding the
Linux operating system.

It is in the best interests of the professional information technology industry
and the public at large to see this question at last resolved. For the bankrupcy
court to learn precisely what assets truly belong to the SCO group. To leap to
the crux of this multi-year, multi-case issue:

Whether SCO is a viable ongoing concern for chapter 11 protection or
neccessitates specific performance of judgement followed by appropriate actions
under chapters 7 or 11 dependant upon the circumstances following these legal
outcomes.

[As a note to those who are regulars on this forum, I carry no illusions as to
whether or not this comment will be read by my ostensible target audience.
Rather, I expect that it will not. It still feels good to have gotten it off my
chest and onto my keyboard.]

---
Clocks
"Ita erat quando hic adveni."

[ Reply to This | # ]

Song: Papa was a Darling SCOne
Authored by: darkonc on Friday, November 02 2007 @ 12:40 AM EDT
(with apologies to The Temptations
The Thirty-first of September.
That day I'll always remember, yes I will.
'Cause that was the day that my daddy's company died.
I never got a chance to see his code
Never heard nothing but bad things about bad things that he wrote.
Lawyer, I'm depending on you to tell me the truth.

My lawyer just hung her head and said:
Your papa was a Darling SCOone.
Whatever software he liked, thought he owned
(and when he died), all he left youse a loan.

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

[ Reply to This | # ]

Time to pause
Authored by: bezz on Friday, November 02 2007 @ 12:56 AM EDT
Reading through Novell's objections -- which are substantially similar to IBM's
-- the BK court will rule on nothing come 6 November.

Why? There are too many issues to debate and the court has conflicting
testimony about the viability of SCO Group going forward.

6 November's testimony WILL be good, but everything will be taken under
advisement. The real deals will happen when the legal parties concerned
(creditors, Trustee and SCOX) meet to figure out how to wind this down.

The creditors are aggressive before a committee is established. They will push
harder once the formalities are in place. SCO Group is playing its last cards
and both IBM and Novell is going to trump them.

Three more months to Chapter 7.

[ Reply to This | # ]

  • Time to pause - Authored by: Anonymous on Friday, November 02 2007 @ 02:27 AM EDT
179: Why does SCO want to keep the undisputed royalties?
Authored by: Khym Chanur on Friday, November 02 2007 @ 01:26 AM EDT

From 178 (emphasis added):

SCO does not dispute, because it cannot, that it is in dire financial straits and that it may run low on or out of cash during the reorganization process. Nor does SCO forswear any intent to use Undisputed Future SVRX Royalties to fund its ongoing operations. The only harm the Debtors can show is thus predicated on an improper use of Novell's property, which is forbidden by both the Bankruptcy Code and the APA. (Indeed, why oppose this motion if not to retain the ability to use the Undisputed Future SVRX Royalties.)

I'm looking forward to seeing SCO dance around this point. What will they come up with? Hmmmm, how about this:

Novell damaged SCO's business reputation by saying that SCO might spend money that doesn't belong to them. The only way to cure this damage to their reputation is for SCO to hold onto the money for as long as possible before handing every cent of it over, thus proving that they are trustworthy. If they forswore using the royalties in a legally binding way, then keeping the money before handing it over would only prove that they're afraid of the law, not that they're honorable. Thus, for them to prove their honor before the world, there has to be no legal encumbrance on SCO spending Novell's money, so that when they do end up turning over every cent to Novell is will be obvious it's because of their honorableness and trustworthiness.

---
Give a man a match, and he'll be warm for a minute, but set him on fire, and he'll be warm for the rest of his life. (Paraphrased from Terry Pratchett)

[ Reply to This | # ]

Maybe IBM was hoping for this.
Authored by: Anonymous on Friday, November 02 2007 @ 02:22 AM EDT
IANAL Did IBM and Novell hope that SCO would try to such a fast one?. There is
this third party with whom SCO has shared communications that are now fertile
ground for hunting down gaps in the corporate veil or evidence of criminal
activity. These may be the handles they have been itching to grasp to deter
future recurrences.

I see that the Novell motion may be a bit rushed judging by what appears to be a
typo. Even the IBM motion seems to be lacking the got ever angle covered
quality. How much time did they have left to submit these motions? How much
time does SCO have to file their objection/opposition?

[ Reply to This | # ]

The York Proposal Might be SCO's Escape Act
Authored by: Anonymous on Friday, November 02 2007 @ 02:57 AM EDT
Notice that the York proposal includes splitting ownership of the IBM litigation from the Unix business. This is an interesting little detail, because if SCO wants to carry this principle over to a Novell settlement, then this could be SCO's attempt to negate Novell's right to direct SCO to ignore any supposed Unix license infringements by IBM. That is, SCO would retain the right to sue IBM while Novell would lose any right of direction over SCO on this matter.

In fact, the details of the structure of this York offer might be an important part of SCO's bankruptcy strategy. The plot could go something like this:

  1. The York proposal sets a convenient value on SCO's Unix assets which matches Novell's maximum claims.
  2. The stay is lifted on the Novell litigation. This is probably inevitable, as a bankruptcy court can't really make any rational decisions without finding out what Novell is owed.
  3. The judge in Utah awards Novell an amount which in the worst case does not exceed the value which York has set on the Unix business.
  4. SCO proposes to the bankruptcy court that Novell be granted the Unix business as full payment and full settlement of all claims, citing the York offer as showing an "independent evaluation of fair value". This includes Novell dropping all other litigation against SCO, including the Suse arbitration (which SCO will argue as moot).
  5. If the Utah court awards less than the full amount to Novell, then SCO can still offer Novell the Unix business and ask for cash back to make up the difference (Novell pays SCO).
  6. The York proposal establishes the principles of splitting ownership of the IBM lawsuits from the Unix business, and also the right to sue IBM as being financially valuable. Novell gets the Unix business, but loses all rights of direction over SCO in the IBM case.
  7. SCO exits bankruptcy with no income, but also with few expenses other than legal costs.
  8. SCO uses their remaining rights over the IBM lawsuit to try to set the clock back on the case to the point before Novell got involved. This may involve undoing existing judgements, but that sort of thing is an SCO specialty.
  9. If Novell tries to keep the claims against IBM together with the Unix business (so they can drop them), SCO could argue these claims are "valuable" and Novell must pay "billions" for them. Novell isn't going to pay SCO for the right to sue IBM.
  10. SCO versus IBM totters on.
Effectively, SCO would shed the Novell litigation, shed any control that Novell might have over them, and allow them to turn back the clock on the IBM case. This is exactly the strategy that Baystar wanted SCO to pursue when they were still involved. SCO does a Houdini escape act from the SCO versus Novell disaster and carries on as a pure litigation company.

All SCO needs then is another PIPE fairy. Acacia? York? Someone else?

[ Reply to This | # ]

Ah, now *there's* the gall I've come to expect from SCO
Authored by: Khym Chanur on Friday, November 02 2007 @ 03:49 AM EDT

A couple of things stood out to me in showing that SCO hasn't lost its touch for generating gall. First, the proposed sale would require other (potential) bidders for SCO's assets to prove that they're both solvent enough and competent enough to run what they're getting, and to disclose any ties they might have to SCO, York and other bidders, yet none of this information has made it to the court. Either:

  1. SCO got this information from York, but oops! they just plain forgot to send the information along to the court (silly them). OR
  2. SCO is putting requirements on other bidders that it's not putting on York.

Additionally, if anyone else does enter a counter-bid for SCO's assets, the first counter-bid has to be at least $1.6 million more than York's. But such a large starting overbid isn't all! While only 27.8% of York's bid for SCO is in cash, 100% of the $1.6 million overbid has to be in cash.

Boy, SCO really seems to like York, don't they?

---
Give a man a match, and he'll be warm for a minute, but set him on fire, and he'll be warm for the rest of his life. (Paraphrased from Terry Pratchett)

[ Reply to This | # ]

    Thinking about #175, the least interesting document of the bunch...
    Authored by: thatseattleguy on Friday, November 02 2007 @ 04:36 AM EDT
    ...wherein Argo Partners buys up $5k in SCO debt from some poor stiff, the following deviously crazy strategy occured to me:

    1) set up shell/front company named, say, "Acme Partners" :}
    2) go around to SCO creditors and buy up their debt, probably for pennies on the dollar, but for more than the 'usual' rate
    3) end up being the largest SCO credit on the cheap
    4) receive the ability to exert major influence on the creditors' committee and their decisions
    5) (obligatory slashdot reference) Profit!

    Does any law prevent Novell or IBM from pursuing the above?

    cheers /tsg/

    [ Reply to This | # ]

    Time to Sack the Execs?
    Authored by: DaveJakeman on Friday, November 02 2007 @ 06:53 AM EDT

    From IBM:

    In addition, this high break-up fee and expense reimbursement appear to be payable even if this Court rejects the proposed sale and the assets are later sold to another purchaser in a different auction or under a plan of reorganization.
    Bad Darl! Bad, bad Darl! You been spending big money in bankruptcy without court approval? There's a place for execs that do that.

    ---
    Monopolistic Ignominious Corporation Requiring Office $tandard Only For Themselves

    [ Reply to This | # ]

    Novell v IBM
    Authored by: DaveJakeman on Friday, November 02 2007 @ 09:12 AM EDT
    No, not a lawsuit. These objections to the sale by both Novell and IBM give a
    fascinating side-by-side comparison of the law firms' work. It's maybe not a
    fair comparison, as both were under extreme pressure to file quickly. They are
    both impressive, but IBM's contribution is astounding.

    There's no nice-guy, tough-guy here -- the gloves are off. SCO's lawyers must
    feel beaten to a pulp. How can they succeed against this kind of one-two
    heavyweight opposition?

    ---
    Monopolistic Ignominious Corporation Requiring Office $tandard Only For
    Themselves

    [ Reply to This | # ]

    SCO has hit Wikipedia again..
    Authored by: mdarmistead on Friday, November 02 2007 @ 09:37 AM EDT
    I was looking up references to 'stalking horse' when I ran across this in the
    Wikipedia entry about such:

    An example in bankruptcy

    On October 22, 2007 technology company SCO asked a bankruptcy court to approve a
    deal whereby a purchaser would acquire "substantially all assets used by
    the Company in connection with its SCO UNIX Business and certain related claims
    in litigation." [12] The agreement included a "stalking horse"
    provision: If the purchaser, York Capital Management, were to be designated as a
    stalking horse in subsequent bidding for SCO's assets, and if others outbid
    York, then SCO would have to pay York a $780,000 breakup fee and reimbursement
    of all expenses incurred by York up to $300,000. In this way, York would earn
    it's expenses and $780,000 by acting as the stalking horse and preventing other
    bidders from making lower offers. [13]

    [ Reply to This | # ]

    How many MS feet does a stalking horse have?
    Authored by: mdarmistead on Friday, November 02 2007 @ 10:15 AM EDT
    From the movie Jeremiah Johnson:

    Jeremiah: Wind's right, but he'll just run soon as we step out of these trees.

    Bear Claw: Trick to it. Walk out on this side of your horse.

    Jeremiah: What if he sees our feet?

    Bear Claw: Elk don't know how many feet a horse has!

    [ Reply to This | # ]

    Connections
    Authored by: Anonymous on Friday, November 02 2007 @ 10:53 AM EDT
    "Good points. Especially the first one. Here's what I'd suggest: that
    Novell investigate whether there is a connection between York, IP
    Innovations/Acacia, and Microsoft."

    If there is a connection would this fact be relelant in halting the Microsoft
    antitrust case from winding down?

    [ Reply to This | # ]

    Here Come the Objections to the Asset Sale -- IBM is Baaack
    Authored by: Anonymous on Friday, November 02 2007 @ 11:03 AM EDT
    Here's what I'd suggest: that Novell investigate whether there is a connection between York, IP Innovations/Acacia, and Microsoft.
    I am having a hard time imagining this happening; with Microsoft supplying their oxygen, Novell is not going to stray too far off the marked road, are they...?

    [ Reply to This | # ]

    Sauces
    Authored by: cricketjeff on Friday, November 02 2007 @ 11:47 AM EDT
    Sauce for goose ain't sauce for gander
    When your chef is SCO
    They will show you ain't quite perfect
    White as driven snow

    If they manage so to paint you
    It doesn't mean the same
    When you show they're black as coaldust
    Playing the same game

    Rules is rules is not their mantra
    But "Rules apply to you"
    The way they think the law is written
    They haven't got a clue!

    ---
    There is nothing in life that doesn't look better after a good cup of tea.

    [ Reply to This | # ]

    SCOrched Earth
    Authored by: Anonymous on Friday, November 02 2007 @ 03:50 PM EDT
    I seem to recall an interview with Ralph Yarro, then CEO of the Canopy Group.
    One the questions fielded to Yarro pertained to the amount of litigation
    companies under the Canopy umbrella were filing. Yarro in turn dismissed the
    question but stated that if a decision was made to litigate then it would be a
    'no holds barred' style of litigation. Even if the company were *destroyed* in
    the process.

    This whole litigation mess involving SCO appears to be following Yarro's to the
    'T'.

    krp

    [ Reply to This | # ]

    Great Job, IBM!
    Authored by: GLJason on Monday, November 05 2007 @ 01:29 PM EST

    I didn't really understand the sale until reading IBM's objections. Apparently SCO is really only getting $10 million cash from the sale. They appear to be selling off all of their Unix assets. That's a steal compared to the $100 million they say they paid for them.

    Another $10 million is only in the form of revenue sharing from Linux lawsuits. How is this going to work? Those cases are stayed pending the IBM litigation, which is stayed pending the Novell litigation, which is stayed pending the bankruptcy. When exactly would the Red Hat and Autozone cases go forward? How can SCO simply start up one case, get one they're a defendant in stayed, and then sell them off?

    The "asset" of litigation rights against Linux users shouldn't even be up for sale. That's at direct issue in the IBM case in Counterclaim 10. If IBM wins that, which is my forecast, then this will be a big goose-egg. SCO has completely failed to establish how this should be an asset for sale anyway, what exactly are their rights with regard to Linux? They don't own the UNIX copyrights, and they have shown no code they own that is in Linux despite the IBM case going on for over four years.

    So what is really going on here? Is this other company being used to funnel money into SCO to keep their litigation battles going? Is SCO using this confusing "purchase" to basically let another company with the same puppeteers start suing more Linux users to create FUD? Is it both?

    [ Reply to This | # ]

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