decoration decoration

When you want to know more...
For layout only
Site Map
About Groklaw
Legal Research
ApplevSamsung p.2
Cast: Lawyers
Comes v. MS
Gordon v MS
IV v. Google
Legal Docs
MS Litigations
News Picks
Novell v. MS
Novell-MS Deal
OOXML Appeals
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v Novell
Sean Daly
Software Patents
Switch to Linux
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.

Contact PJ

Click here to email PJ. You won't find me on Facebook Donate Paypal

User Functions



Don't have an account yet? Sign up as a New User

No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

Here's Groklaw's comments policy.

What's New

No new stories

COMMENTS last 48 hrs
No new comments


hosted by ibiblio

On servers donated to ibiblio by AMD.

Reports from the Hearing - Updated 2Xs
Friday, November 16 2007 @ 06:29 PM EST

Whew! We were represented at the hearing, and here's our first report:
Both sides of the courtroom were packed with the lawyers. At least 7 more than on the sign-in sheet. Bert Young flew in to testify regarding CFO, but was never called upon.

The MVP of the day goes to Richard Levin. He was articulate and on-point, and connected with Judge Gross about proceeding at a controlled and orderly pace.

The meat of the matter was that SCO and York were unpersuasive in convincing the court of the "emergency" situation that required hyper-accelerated timelines.

There are more still schedules, exhibits and motions still to be filed. Credit facility. Cross licensing agreement. Security agreement. Sale motion. Sale order.

York wanted another hearing, on at least the bid-procedures to be filed, on this coming Tuesday. The Court said it can all wait until 12/5.

Both sides agreed to handle confidential documents as per normal protocols, and not to get wound up in complex negotiations on drafting special confidentiality agreement language.

And SCO is to provide a witness list enumerating anyone they currently plan on calling to testify based on objections that have already been filed.

Lots of lawyers. If you look on the sign in sheet [PDF], you'll see some heavy guns have joined this wild and crazy party. This is so not about just little ole SCO. York is now represented by three law firms. *Three*. IBM sent in some heavy guns.

First, IBM sent not only David Marriott but also Laurie Silverstein, a heavy hitter when it comes to bankruptcy, with a specialty of representing unsecured creditors. She's with Potter, Anderson & Corroon, and her bio there includes this:

Mrs. Silverstein has been recognized by Chambers USA: America's Leading Lawyers for Business since its inception as "smart and aggressive" and "the first point of call for unsecured creditors."

So IBM has two law firms now, plus no doubt they have in-house counsel.

Who's the new guy for York? Jeffrey W. Levitan, whose bio at Proskauer, a famous firm, by the way, tells us this:

Jeffrey W. Levitan, a recognized member of the Bankruptcy and Corporate Reorganization Bar, is a partner in Proskauer Rose LLP's Bankruptcy and Reorganization Practice Group. Throughout the past twenty years, Jeffrey has had significant involvement in many large and complex corporate reorganizations. He represents and has represented a broad range of clients in Chapter 11 proceedings and restructurings, including debtors, funders of reorganization plans, secured creditors, trustees and creditors committees....

Jeffrey has represented numerous investors and acquirors of financially distressed assets including Mauser-Werke in its acquisition of the assets of Russell-Stanley Corp. pursuant to a prepackaged plan of reorganization, Wycoff and Bayonne Hospitals in their acquisitions of three hospitals from St. Vincent’s Medical Center, and one of the co-proponents of the Olympia & York Chapter 11 Plan. On the creditors' side, Jeffrey represented groups of U.S. Bondholders in opposing two Section 304 proceedings seeking recognition of Argentine restructuring, and represented ML Media in connection with its claims and joint venture interests in the Adelphia bankruptcy cases. He also was retained by the unsecured creditors committee in the Chapter 11 cases of LogoAthletic, Inc., Apex One, Inc. and Scoreboard Inc. He has also represented numerous other claimants, both secured and unsecured, in pursuing claims against debtors.

Jeffrey has represented major licensors in bankruptcy cases involving the sports industry, including SLM International; Fleer/Skybox; Pinnacle Brands Inc.; Starter Corporation; Genesis Direct, and Fruit of the Loom/Pro Player. Also, Jeffrey represented the National Hockey League in connection with the Chapter 11 case filed by the Pittsburgh Penguins and represents numerous professional sports leagues and teams in connection with insolvency related matters.

Finally, Jeffrey has been involved in numerous out-of-court loan restructurings.

Jeffrey is a member of the Bankruptcy and Reorganization Committee of the New York City Bar Association and is a member of the American Bankruptcy Institute.

In 2006, he was listed as one of the 2006 New York Super Lawyers, in the field of bankruptcy. Reading the titles of papers he's authored is depressing enough: "Dismiss That Lawsuit! Recent Delaware Governance Decisions Restrict Creditor Litigation Against Boards of Troubled Companies and Distressed Debt Investors” and "All’s Fair in Love, War and Restructuring: Solutia Bondholders Denied “Equal and Ratable” Lien Status - Implied Covenant of Good Faith Does Not Trump Explicit Indenture Provisions” are two titles. All's fair in love and war -- that feels familiar. Isn't that SCO's theme song?

So, everyone is sending their best. To haggle over some assets that have very questionable worth. Might this be about something else entirely?

Update 1: Mike has a report for us now too:

Today was a very confusing hearing. The judge alluded to meetings in chambers. He also had documents that we did not have so some things did not make much sense.

#1 - Approval of Dorsey & Whitney

A lawyer from Dorsey addressed some concerns of the Trustee.

- Paid on a straight hourly basis. They are being paid by Boies
- Expenses to be paid by the estate
- Will represent SCO in litigation.
- Made some supplement disclosures as requested by the Trustee.

#3 - Motion to approve CFO solutions

Mr. Spector spoke of the ongoing issues with the Trustee. The issues are not resolved. Bert Young was there to testify, but he never got the chance. Deferred until Dec. 5 hearing.

#2 - Approval of Boies, Schiller

I must have missed this one. I do not think it has been resolved with the Trustee.

#4 - Motions on Asset Purchase

Well, things got interesting here. SCO provided copies of the proposed APA to IBM and Novell just before the hearing. Mr. Spector wanted to speak to this issue. Mr. Levin and Mr. Lewis had much to say about it. They wanted the issue deferred until the Dec. 5 hearing so they would have time to absorb the 55-page APA. Mr. Spector spoke of a soon-to-come "credit facility" and "cross license agreement." He wanted a hearing held next Tuesday.

Judge Gross suggested that all the parties confer to see if the could come to agreement on the APA. Both Mr. Lewis and Mr. Levin said basically that they could talk, but they did not see any way they could reach agreement especially since they had not even had a chance to read the APA. So there was a break from 2:30 to 3:15. When they came back they all agreed that they did not agree and more time was needed.

Mr. Spector spoke of York's need to close the deal by year's end. He argued that the next hearing should be 11/20 so there was time to get the deal done.

Judge Gross asked Mr. Spector if there was a reason they could not immediately begin marketing (if there are other interested buyers). Mr. Spector said yes -- there was a reason they could not start marketing now. He said something along they lines of "We have to determine what it is we are selling" -- which brought a good round of laughter from the Novell/IBM table.

Mr. Levin spoke of the assets not being identified. He did not think the York deal closing by year end was realistic. Even if SCO were to do a "private sale" he did not see how it can be done by 12/31. He spoke of York's statements that they had been looking at SCO since 2005, so what's the hurry?

Mr. Lewis jumped on the same bandwagon. He said if York walked away, too bad. He also said closing by year-end was unrealistic.

Mr. Spector introduced Mr. McNutt. Mr. McNutt said that SCO was under a "death sentence" when they finally get back to Judge Kimball. York wants the Unix software business. He wanted to come back Tuesday to discuss the APA. He said there were "compelling business reasons" why they need to close the deal by year end (but neither he nor Mr. Spector ever stated what those reasons are).

Novell was arguing to slow down and do it the right way. SCO and York were arguing to speed things up.

The judge agreed with Novell. The issue will be discussed at the Dec. 5 hearing. Judge Gross said it's important to get it right. He sounded like he was not going to be pushed into hasty decisions, regardless of what SCO and York want. He said "there is a fine line between inconvenience and prejudice". He said he felt the line had been crossed and therefore agreed to Dec. 5 to give Novell and IBM the time they need to review everything.

SCO will get the remaining documents relating to the proposed sale to Novell and IBM by 11/20. Objections are due Nov 30, and replies to those are due by noon on Dec. 4.

I think not all of the APA's schedules and exhibits, if any, will be public. There was discussion on confidentiality and whether formal motions were needed. With prodding from the judge, they all agreed that they would keep the documents confidential among themselves. It sounded like many of the exhibits and schedules relating to the sale will be filed under seal.

There were armies of lawyers there this time. I counted 17 between both sides. There were 3 Groklaw members there. One was going to try and get a copy of the sign in sheet so we can get an accurate list of all the players. Mr. McBride came over and shared some small talk with the 3 of us during the 45-minute break.

David Marriott was there but did not address the judge.

One observation. Beware of Mr. Levin. At one point Mr. Spector said something about a formal objection being needed. Mr. Levin went to the podium and said "Judge, I object". Then he looked at Mr. Spector and said, "Now you have your formal objection on the record". SCO is clearly trying to push the sale through before the end of the year. Novell feels that's just not going to happen. So about everything has been deferred until the Dec. 5 hearing at 10:00 am.

Mr. Levin represented IBM, and he and Mr. Lewis for Novell made a good tag team today.

This round went to Novell....

The hearing ended at 4:00 pm.

It sounds from MikeD's description like the Cluetrain has arrived at the Judge Gross station in Delaware.

Update 2: We have another report now from Groklaw's UD:

Hi PJ,

Just got back from today's hearing a little bit ago and thought I'd send a quick synopsis of what transpired. I'll try to send a more detailed description later.

For some reason the beginnings of these proceedings seem to cover a bunch of points faster than I can write them down, so I'll stick to what was actually covered.

A new lawyer (I think his name is Eric Schiabel) was speaking for SCO making the case that BSF should be able to consult with SCO on this case because even though they are not bankruptcy lawyers, they are very familiar with SCO's business matters and have a lot to offer. Plus they have spent a lot of time already and want to be paid, even though I think they didn't file for certain fees on time. He started off with some explanations about how they are paid hourly by BSF but SCO pays the fees. I think he also said something about waiving the fees from the debtor.

Mr. Spector started talking about the CFO Solutions issue. They want to hire Ken Neilsen, to be paid hourly from CFO Solutions. He has a witness here to testify (Bert Young) that it is proper to do so in this case because he has experience in similiar cases and is an expert in financial and securities matters. After hearing from Mr. Spector what he would say, we never actually hear from Mr. Young. He continues that SCO needs a CFO because it's the eve of their end of financial year.

Mr. McMahon, the US Trustee, says he doesn't plan on interviewing the witness. He had a conversation with Mr. Spector on the way to the courtroom that gave him some new insight into the situation, and they might be able to work things out in the hallway.

Then we get the news that the APA was filed at 1:00 today. All the supporting materials are not filed yet, but more on that later. Mr. Lewis speaks for Novell and says he wants to read the APA because he has concerns about what is being offered for sale. He says how can the assets be given a fair value if they may not be clearly determined yet? He is skeptical that meaningful discussions can be held on this issue today.

Mr. Levin for IBM takes the podium, and says he has numerous issues regarding the bid procedures. They were going to see if they could go into another meeting room to try to resolve them before the 3:00 part of the hearing but doubted that 39 minutes was long enough to do so. He posits that it may make sense to continue this discussion to the later (12/5) hearing, but that since all the parties are here now they can continue talking about it. Judge Gross also doubts this is going to be resolved today.

Mr. Spector speaks for SCO and goes into a little history of the APA saying they had hoped to have it and all supporting materials before the 11/6 hearing, but more and more issues kept coming up as it was being drafted. They had a bunch of people working non-stop in NY and finally got it done. Parts that are still being worked on are the debt service agreement and the cross-licensing agreement and supporting exhibits and schedules. They hope to have them soon. He asks the judge to not adjourn the hearing, but continue it at 3:00 because that is when Mr. McNutt from York was supposed to appear.

Mr. Levin states that he understands Mr. Spector wants to resolve things, but he just brought up a whole host of issues (APA) that are just being put on the table and there is no way they can resolve them in a half hour. He thinks the hearing should be continued to 12/5.

Mr. Lewis agrees with Mr. Levin. There are too many complicated questions that need to be discussed and carefully considered. Plus this motion really isn't an "emergency" any more.

Mr. McMahon agrees and wants to continue the matter to 12/5.

Mr. Spector says let's wait until 3:00-3:15 to make the decision to continue to 12/5. (He wants Mr. McNutt to be able to speak)

After the break, SCO's lawyers now include Mr. McNutt and Mr. Rosser and another gentleman whose name I didn't hear mentioned, but he looks just like the actor that plays the father in the movie American Pie.

The CFO Solutions matter is continued to the 12/5 hearing, but Mr. Spector says they will endeavor to resolve it before then. His partner, Dan Lampert (?) states that they are prepared to go ahead with discussing the bid procedures today.

Mr. Lewis says that there is so much new material to go over that it would be best to continue the matter to 12/5. He says it may be possible he might need to ask for discovery after he reviews everything.

Mr. Levin also wants the bid procedures issue stayed until 12/5. They haven't even seen the exhibits and schedules to the APA and they seem to hold the bulk of the APA's terms.

Mr. McMahon agrees things should be stayed. The podium has a revolving-door feel to it by now. The line forms to the left -- and to the right.

Mr. Spector says that the other attorneys are making this sound more complicated than it is. They don't need to go over the APA in as much detail as they say they do. If this issue is put off until 12/5, then how can they possibly close the sale before 12/31 -- York's cutoff date? (Now we see why this rush is coming now). Sale terms have changed over the course of negotiations, but the sale cutoff has always remained firm. They have to have time to market the IP so they can get its fair market value -- possibly higher than the current offer.

Judge Gross says they can start marketing it now, if they want.

Mr. Spector replies that there are issues with what assets are being marketed (chuckles from most of the opposing lawyers). Then he goes off into a "what if" scenario where they would take the sale private, and no bidding would occur. He later says he just used this as a verbal flourish, and he was not serious (and because the other lawyers are objecting to it in their remarks).

Mr. Levin says that SCO has been working on this deal since 2005, and why has it suddenly turned into a 6-week deadline? What's the rush? The holidays are upon us; year-end issues will complicate matters as it is. He says a private sale would not be warranted without further disclosures.

Mr. Lewis says he is anxious for the estate to generate some revenue -- "after all, we are creditors too". He might not care if York walks on this deal, because there might be a better deal out there. They need to set a procedure and stick with it (don't take sale private). It's not realistic to expect a sale by the end of the year, and it's not in the estate's best interest.

Mr. McNutt is given his chance at the microphone. He says they're not railroading SCO into a bad business deal. There is a great deal of urgency because the debtor is under a pending death sentence. They're about to have a substantial judgement made against them in litigation. (Basically, he's saying, "they need our money"). We are an investment firm, he explains, and they want to get these Unix assets into their fund before year's end. This is just a small, simple deal and not as complicated as it's being made out to be. He thanks the judge for his patience.

Judge Gross says he is a patient man. Emergencies create inconveniences, but the parties here are not just being inconvenienced -- they are being prejudiced. If we go too quickly, the creditors will be prejudiced. He will continue the matter to 12/5. It's not realistic to proceed without more study. It'd be a huge mistake to make a judgement now.

Both sides are to file their positions by 11/30 noon, objections by 12/4 noon.

SCO says they have the sale motion almost done and they'll file by 11/30.

I forget who for the other side says that if it's that close to being ready, why wait until the 30th and only give them a few days to review it? Everyone is popping in and out of their seats now.

SCO submits that they will file their sale motion along with the schedules and exhibits for the APA by this coming Tuesday. Also the credit service and cross licensing portions of the APA as well.

Mr. Levin talks about the need for confidentiality agreements to be in place (for bidders too). Judge Gross agrees.

The hearing on 12/5 will also discuss something about filing some things under seal.

Mr. McNutt wants to make another plea on behalf of York to get this resolved quickly. This delay is not helping his client. It's a simple IP agreement but they want to make sure there is no dispute about what assets they're buying.

Some back and forth discussions about each side noticing the other about their proposed witnesses and objections to witnesses. Both sides agree to play fair.

The 12/5 hearing is scheduled for 10:00 AM.

Well, it looks like I don't have it in me to keep it brief, so there's no more detailed version to follow. I imagine the CFO issues will probably be resolved before the next hearing because it sounded like they were making progress and just have a few more things to look into. SCO and York really were hoping that filing the APA would create movement in the bid/sale agreement arena because they really want this deal to go through asap if not sooner. However, with so much being put on the table at one time, calmer heads are prevailing, and it's just going to have to wait until the 5th. Hopefully we can go over the documents as well when they are filed next week.


Reports from the Hearing - Updated 2Xs | 351 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: JamesK on Friday, November 16 2007 @ 06:36 PM EST
If you got 'em post 'em.

-rw-rw-rw- are the permissions of the beast.

[ Reply to This | # ]

Report from the Hearing
Authored by: GriffMG on Friday, November 16 2007 @ 06:37 PM EST
thank you!thank you!thank you!thank you!

Keep B-) ing

[ Reply to This | # ]

Off topic here
Authored by: JamesK on Friday, November 16 2007 @ 06:38 PM EST
Please make sure all posts are off topic.

-rw-rw-rw- are the permissions of the beast.

[ Reply to This | # ]

News Picks
Authored by: JamesK on Friday, November 16 2007 @ 06:39 PM EST
Please include title.

-rw-rw-rw- are the permissions of the beast.

[ Reply to This | # ]

... three law firms. *Three*.
Authored by: nola on Friday, November 16 2007 @ 06:40 PM EST
I thought the nazgul numbered nine.

Oh, maybe that's three times three :)

[ Reply to This | # ]

This is so not about just little ole SCO
Authored by: Anonymous on Friday, November 16 2007 @ 06:56 PM EST
Ya think? ;-)

Have you thought about movie rights to your book?

[ Reply to This | # ]

About something else?
Authored by: Anonymous on Friday, November 16 2007 @ 07:02 PM EST
About something else, or on someone else's behalf??

You are darn tootin'.

This whole case has been a proxy battle. No way little SCO is the real player,
and you can pretty well tell IBM and Novell don't believe this is just about SCO

I'm just waiting to see if Utah is unstayed.

[ Reply to This | # ]

York's liability
Authored by: ThrPilgrim on Friday, November 16 2007 @ 07:02 PM EST
IANAL and this is from memory.

IIRC there is a statute in English law that states that if you help to fund
someone else's law suite and the judgment goes against them, then you can be
found liable for any financial penalties it that person can not afford to meet
the payments.

If this sale goes through have York, via their $10M litigation credit facility,
just let them selves open to the financial burden of any counterclaims?

[ Reply to This | # ]

Do Judges talk?
Authored by: Anonymous on Friday, November 16 2007 @ 07:21 PM EST
Might Judge Gross have called Judge Kimball or vise versa in order to get/give a
heads-up about the nature of the people/organizations that one was going to be
dealing with?


[ Reply to This | # ]

York's - rush to "buy a pig in a poke"
Authored by: SilverWave on Friday, November 16 2007 @ 07:26 PM EST
Whats that about...
SCO have a bad case thats going to get a lot worse...

so whats the deal with York?

"Something is rotten in the state of Denmark."

This is getting very interesting :)
And the speed of BK Court is breath taking...

Software Patents are leeches on the creativity of mankind.

[ Reply to This | # ]

Notes from the Bizarro Universe
Authored by: Anonymous on Friday, November 16 2007 @ 07:52 PM EST
We need this done in a rush but "We have to determine what it is we are

A truly great response--if we lived in the Bizarro Universe. Novell and IBM
laughed at this but Judge Gross did not. If a judge laughs at a line like this
is it grounds for appeal?

[ Reply to This | # ]

Authored by: Anonymous on Friday, November 16 2007 @ 07:58 PM EST
Methinks me likes Mr. Levin.

[ Reply to This | # ]

"Might this be about something else entirely?"
Authored by: webster on Friday, November 16 2007 @ 08:30 PM EST
Hush Money!

Just exactly what is involved with the matter related to Anderer, Baystar,
Goldfarb etc. is understood perfectly by the SCOfolk.

The SCOfolk have revealed themselves to be avaricious and unscrupulous in their
pursuit of others gains.

The SCOfolk can use their position, knowledge, and declarations, whether true or
not, for further gain and also to protect themselves. It is imperative that the
PIPE Fairy keep them safe and happy.

The PIPE Fairy has other surrogates out there like the SCOnks. They are
watching. They need reassurance. No one is expendable and no one can turn.


[ Reply to This | # ]

Hmm ...
Authored by: sschlimgen on Friday, November 16 2007 @ 08:38 PM EST
There is something in the stuff that SCO is desperately trying to unload that
they do not want Novell to get their hands on.

* They've come up with York as a stalking horse, and working hard to keep York's
backers, connections and motivation hidden.
* They're withholding information from the court and creditors about what is
being sold (I don't believe for a second what Specter said about not knowing).
* They're pushing for an extremely rapid sale process, without time for others
to evaluate even the limited information provided.
* They've included poison pills in the bidding and sale proposals to actively
discourage any other bidders.
* And now they want to file any further information about the assets being sold
under seal.

I strongly suspect that one of the sale items buried in the verbiage of the APA
and schedules is the M$ license that funneled all that money to SCO.

If I understand the cases so far, only Novell's outside counsel has seen that
license; Novell's general counsel and IBM's counsel have not.

If I understand the Novell/OldSCO APA, one of the provisions is that Novell can
"take away" any license from SCO and administer it themselves,
essentially replacing SCO as a party to that contract. And one of the
counterclaims on hold in Utah is a declaration that Novell can do exactly that,
among other rights under the APA.

I'm willing to bet there is some sort of smoking gun in the M$ license that M$
does not want to get out; something they don't want Novell's or IBM's general
counsels to know; something that might impact the more recent patent agreement.

Something that would reveal the depth of collusion between M$, SCO, &
BS&F, and provide the evidence for a major Lanham Act suit against M$ by
Novell & IBM.

My two cents worth

Meandering through life like a drunk on a unicycle.

[ Reply to This | # ]

"Just a simple IP deal"
Authored by: globularity on Friday, November 16 2007 @ 09:24 PM EST
Yorks lawyer is not helping thier case, there has been plenty of material
submitted as to why there is nothing simple about this deal, most importantly
the title of much of the IP, which is about to be resolved by Judge Kimball not
to mention the terms of's APA from Novell. Judge Gross should have smelt
a rat by now, any normal purchaser would want clear title rather than pushing
though a deal before the title was clear.

Windows vista, a marriage between operating system and trojan horse.

[ Reply to This | # ]

Did the judge feel any pressure?
Authored by: Anonymous on Friday, November 16 2007 @ 09:25 PM EST
I mean with all the heavy-hitters in the courtroom, did he feel any pressure?

I mean, we had the guy that helped draft bankruptcy law, the New York Super
Lawyer, and Laurie from IBM, along with the other groups of Lawyers from Novell
and IBM

Seems like the judge didn't sweat it, and they're working together cuz if anyone
tries anything stupid there's enough expertise to have that person shot...

or is it just me?

PS: please somehow make sure all these people are on MY side if I ever end up in
a case like this (yikes!)

[ Reply to This | # ]

Reports from the Hearing - Thanks to Today's Wilmington Three
Authored by: webster on Friday, November 16 2007 @ 09:53 PM EST
1. Thanks to those who took time off to provide these reports. Getting there
takes time and expense. Following and noting the discussion is daunting.
Professional court reporters are disinterested. They've heard it all before.
They are not thinking about the significance of what they are hearing other than
to get the words and punctuation right. Indeed it sometimes seems like they are
recording words as they think about other things. With improvements in sound
recording, reporters are less and less in the courtroom. Our reporters have
their interests in the content and significance to overcome.

2. At the risk of crowding oneself out of the courtroom on December five, it
looks to be a pivotal hearing. The filings should be substantial. The show of
force by both sides was significant. The fifth may be "standing room
only" and "only for Lawyers." They should take reservations and
have an overflow video on the neighboring courtroom like they do in the USDC in
DC. Groklawyers might like to catch Marriott arguing live once in their
lifetime. The briefs should key the audience as to who will argue. Unless the
Trustee and creditors approve, don't be surprised if a mountain of filings force
another delay. There are many notable advocates on all sides. That's why they
are there.

3. The APA is problematic for SCO. They are being called upon to
"specify" once again. [Choke...!] Specificity is risky for SCO.
First of all it is going to have to match everything else they have disclosed,
briefed or argued in all their other litigation. They dare not specify now that
which they refused to specify in earlier litigation. Contradictions are
unacceptable too. Assets adjudged not theirs in the August 10 Kimball order
should also be omitted. Novell in particular could insist that particular
language and exclusions to be put in the APA. This might make it worthless to
York. ....... to say nothing of disputed material. Judge Gross has little
tolerance for the smell of code smeared on experts in his Courtroom. He can
have fun pinning down SCO on lists of included and excluded assets in the
SCO-York APA. It's sort of like putting GPS on an Edsel. The Creditors will
also want to be protected by any other agreements, written or unwritten, between
SCO and York, and by these parties and any third parties about SCO and their
Assets. That should make for some lumpy, throat-swearing, or more witnesses
like Ms. Acheson who are ignorant by design.

4. With such a show of force by the "creditors" the Court and SCO
realize that this will have to be a careful process. It is going to take time.
If it gets done with somebody unhappy, an appeal will take more time. York is
going to spend more on lawyering than their proposed actual cash outlay.

5. Unless SCO convinces the Court that they plan to make a business go of it,
all their assets should go to the creditors who have been ripped-off enough.
How is the York deal going to build a business? A sweatheart deal with a
PIPE-Fairlike, non-IT investment creature just leaves the litigation business
(with more potential creditors, bills and liability) and no creditor relief.
How do they propose to carry on their business and work their way out of Chapter
11 BK? They will have to win all their cases and the Appeals. It is late in
the game. Every batter will have to hit a homer. Creditors want to know these
things. The Judge is going to have to get them the answer.


[ Reply to This | # ]

SCOX-York APA Cross Licensing
Authored by: SpaceLifeForm on Friday, November 16 2007 @ 10:19 PM EST
This makes no sense to me. What does either one
of them have that they could license to the other?

Hmmm. Maybe the 'licenses' that SCOX sold to Microsoft
was really some type of cross licensing agreement,
with the Microsoft to SCOX license being transferable,
and whatever was in the license that was 'sold' to SCOX
is a smoking gun, that they are trying to offload to
a safe haven (York).

York could come up with any kind of junk license to
'cross license' with SCOX. They are just using
'Cross Licensing' to distract from what the real
plan is.


You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Friday, November 16 2007 @ 10:53 PM EST
It re-occurs to me that M$ & Novell are now in bed together, via their
little agreement of a few months ago. Why would M$ care if Novell were to get
it's hands on some info of shenanigans b/t SCO & M$? I'm going to make an
entirely cynical, jaded, conspiracy theorist type of prediction.
Novell is going to play *just* strong enough to look like the injured party, but
IBM and Novell are going to 'lose' this case, or rather enable SCO to win in
bankruptcy court.
Call me what you will, but it is the unnoticed weak point that can sink a whole

[ Reply to This | # ]

SCOGBK-219 Credit Agreement
Authored by: Anonymous on Friday, November 16 2007 @ 11:01 PM EST
Someone (???) is offering a line of credit of up to
$10,000,000, with ME,INC. as [the] Guarantor.

I am anxious for others to read and tell if that
is really what it says :).

[ Reply to This | # ]

A loose thread?
Authored by: Anonymous on Friday, November 16 2007 @ 11:12 PM EST
Doesn't the Unix business as defined by the APA give SCO the right to any Novell
copywrite "needed to run the business"? And if the Unix business
passed to a new owner, say M$, wouldn't they have that same right? What is that
right worth?

[ Reply to This | # ]

BK Court Translation (Typical for a Chapter 7 Conversion)
Authored by: bezz on Friday, November 16 2007 @ 11:23 PM EST
Debtor -- We HAVE to do X, Y and Z REAL fast to emerge as a viable company.

Creditors -- Hold on, this just gives away assets, with something for existing
management, and the proposed Chapter 11 sale is designed to make the creditors
liability go away.

Judge -- Let's talk this over once a creditors committee is formed.

... months later

Creditors committee objects to the Chapter 11 plan proposed by existing
management and it gets converted to Chapter 7. Years of fruitless legal
wrangling over the bleached bones.

[ Reply to This | # ]

Death Sentence
Authored by: Anonymous on Friday, November 16 2007 @ 11:38 PM EST
<i>Mr. Spector introduced Mr. McNutt. Mr. McNutt said that SCO was under a
"death sentence" when they finally get back to Judge

Seems the savy buyer would wait until the death sentence and get the IP at
pennies on the dollar?

No - they are definately trying to get something out of SCO before SCO Ch7's and
everything gets revealed.

That McNutt openly states that SCO is under a death sentence - and Spector does
not object (heck, even brought him in) says tons. They know they do not have
title to the IP they are trying to sell, they know they owe Novell more than
they have, and they know they are liable for IBM's cross-complaints. This is as
clear of a sign to the Judge as you can signal that the Novell case needs to go
first to establish the true nature and viability of SCO re-organization attempt.

[ Reply to This | # ]

Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 05:26 AM EST
>So, everyone is sending their best. To haggle over some
>assets that have very questionable worth. Might this
>be about something else entirely?

I have the same feeling.
Note that the company in super-speed is York and their
argument is: "There is a great deal of urgency because the
debtor is under a pending death sentence."

So why does York have the big fear of this "death sentence"?

My guess is that there are two issues:
1)Death sentence means Chapter 7. A trustee who cares
about the creditors will take over. This trustee can,
legally, put SCO internal documents on the auction block.
If those documents can prove that a third party did some
criminal activity then that third party will have big
problems. Solution? Get those documents before Chapter 7.

2) Rats deserting a sinking ship. As soon as SCO will be
in Chapter 7, no employee, officer or board member will have
any pay or stock value to lose by speaking. Somebody may
be tempted to sell some knowledge to IBM/Novell for money
and/or some king of plea bargain. York's money can
postpone that Chapter 7.

[ Reply to This | # ]

I think I just figured it out (the York deal)
Authored by: eric76 on Saturday, November 17 2007 @ 05:27 AM EST
As I understand it, obligations undertaken by a company in bankruptcy MUST be

For example, years ago a company I had done some consulting work for filed for
bankruptcy owing me about $500 or so. I never got a penny of that back.
However, I got paid every penny for the work I did for them while they were in
the bankruptcy proceedings.

So York wants to buy certain assets for $10,000,000 and making loans. If they
make the loans, no matter what happens, those loans are going to have to be paid
back with interest.

Suppose that the York deal goes through and York gets the assets and loans them
the money. SCO spends the money on lawyers fees.

If SCO loses, then there may be judgements against SCO, but I think the loan
from York will get a far higher priority. So if SCO loses and there is still
some of the loan left and much of the purchase price, York gets their loan back
and Novell and IBM get little or nothing.

If SCO wins, they hit the jackpot and York gets their loan back.

What about Novell's money from licensing fees? I suspect SCO will argue that
that is pre-bankruptcy and takes second place to paying York's loan.

I'm not a lawyer, obviously, and so I may be missing something or
misunderstanding something. But if there were betting, I'd bet that York's loan
repayment would be made before any judgements are paid.

[ Reply to This | # ]

Hey, wait a minute!
Authored by: Ian Al on Saturday, November 17 2007 @ 06:06 AM EST
Mr. McNutt... says they're not railroading SCO into a bad business deal. There is a great deal of urgency because the debtor is under a pending death sentence. They're about to have a substantial judgement made against them in litigation. (Basically, he's saying, "they need our money"). We are an investment firm, he explains, and they want to get these Unix assets into their fund before year's end. This is just a small, simple deal and not as complicated as it's being made out to be...

Mr. McNutt wants to make another plea on behalf of York to get this resolved quickly. This delay is not helping his client. It's a simple IP agreement but they want to make sure there is no dispute about what assets they're buying.

You see? The urgency is all on SCO's part. They need York's money to pay off all the litigation they are about to lose by the end of the year.

Hey, wait a minute! The litigation is stayed until SCO emerge from Chapter 11. They don't need the money until much later. There's no rush. Hey, wait a minute! What's this IP that York want to buy before SCO lose the litigation? If they lose the litigation, they lose the IP. Then they won't have any IP to sell York. Except, that York will have already bought the IP knowing that SCO were sure to lose the litigation and, thus, the IP and that's why York are in such a rush.

I'm glad Mr. McNutt is proposing such a simple IP agreement otherwise I would not be able to understand what the deal was about. Perhaps the lovely Mr. Spector can illuminate.

Mr. Spector spoke of York's need to close the deal by year's end. He argued that the next hearing should be 11/20 so there was time to get the deal done...

Judge Gross says they can start marketing it now, if they want.

Mr. Spector replies that there issues with what assets are being marketed (chuckles from most of the opposing lawyers).

There, you see? Silly Mr. McNutt is confused. It's all about York's need to get the deal over by the end of the year. The hessian sack is lovely. Is that IP or a painted pig wriggling inside? They don't care. Just as long as they get it in time for Christmas. No need to market it to anyone else. This is not the poke others are looking for. I trust Mr. Spector about as far as I can throw him.

For my third witness I would like to call... Microsoft! No, I just used this as a verbal flourish and I am not serious (and the other Groklawyers are objecting to it in their remarks).

You see? Everyone is making such a deal of this sale. It would be better if SCO ignored the rules of the court and just did a deal in private.

I feel confident that we have practically nothing to tell us what the York sale is about, what the patent sale is about and what the SCO gameplan is for Chapter 11. I wonder why they are saying this stuff and doing this stuff to Judge Gross. I suspect he does not know, yet, but I am confident that he will be among the first to understand this lot. He, very sensibly, says he wants more of the jigsaw on the table before he agrees to anything. This is, of course, the second time he has indicated that the situation is insufficiently clear and it must be transparent if it is to proceed.

I suspect his ears pricked up when the US Trustee said

In the Motion, the Debtors do not provide any details regarding their efforts to market their assets for sale prior to executing the Term Sheet with Proposed Purchaser. While such details are relevant to determining whether the Debtors conducted the sale process in good faith (an issue that will be addressed at a later hearing in the event bidding procedures are approved), they are also relevant to evaluating whether this Court should endorse the Debtors' suggested timetable for the auction and sale. The Debtors should make a record regarding their pre-Term Sheet marketing efforts which justifies the relief they are seeking from this Court.
I think he would have been similarly impressed by the US Trustee pointing out that
the U.S. Trustee approached the Debtors and sought the Debtors' agreement that certain provisions of the crisis management protocol would apply to the proposed engagement... The U.S. Trustee understands that the Debtors are presently not willing to agree to any of the aforementioned provisions.
That was about temporary employment of a temporary CFO, but it is not a good indication that SCO are going to respect any of the rules of the court when it comes to the fire-sale, either.

Ian Al

Linux: Genuine Advantage

[ Reply to This | # ]

Novell's APA
Authored by: nola on Saturday, November 17 2007 @ 09:53 AM EST
I seem to remember that the Novell APA contains specific provisions regarding
protection in case of bankruptcy, and I don't understand why that hasn't yet
been mentioned. Not only do certain assets revert to Novell, but Novell gets to
approve any assignment, if I remember correctly.

I can see that SCO desperately wants this sale to proceed so it can determine
where the assets go, and put them out of reach. Obviously, someone else at the
end of the PIPE does also. But hollowing the company while legal action is
stayed is not the BK is supposed to work.

If SCO is facing a "death sentence" then so be it -- it's called
"Chapter 7". Why are we waiting? Time for Judge Gross to convert 11 to
7, stay the sale, allow litigation to process and then oversee carving of the

[ Reply to This | # ]

Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 09:57 AM EST
York is spending some heavy money on lawyers. How do they expect to get it
back? With an investment firm it's all about the bottom line and return on
investment. Do they have a buyer for the SCO assets lined up?

[ Reply to This | # ]

Light of Groklaw - Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 10:05 AM EST
SCO does not want the light of Groklaw to shine on the APA.

"they all agreed that they would keep the documents confidential"

[ Reply to This | # ]

Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 10:07 AM EST

Reading your report I realized you did a very good job. Easy to understand
and to the point. Thank you very much.

[ Reply to This | # ]

Since 2005 ? - Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 11:10 AM EST
I was going to try to dig through the Groklaw time line to see if I could figure
out what happened in 2005 that might have gotten SCO started on this plan B of
simply selling the Unix assets. Was it when there was serious doubt about what
the APA turned over to SCO or was it when the judge asked SCO if this was all
they had, when referring to identify with specificity what it was IBM was

However on another track I find the comment by Mr. Lewis (quoting from the
report, not Mr Lewis.) interesting:

"Mr. Lewis says he is anxious for the estate to generate some revenue --
"after all, we are creditors too". He might not care if York walks on
this deal, because there might be a better deal out there."

I am thinking about the way SCO has characterized the APA as transferring all
rights in Unix. Later when you examine the APA in detail, you find that in fact
all rights are not transfered.

It comes to my mind, that it might be in the best interest of York to walk, and
in fact, they might really want this to die because of that December 31 2007
deadline. It seems SCO is under the gun because of this deadline, and the
"BIG DEAL" is in jeopardy. They haven't even finished defining the
schedules and exhibits. How could any reasonable business perform due diligence
on even a ten million dollar deal in under a month? What kind of investors
would condone such a purchase? They want to determine the market value of the
IP by the end of the year. But they haven't even defined what IP is in the
package. (We know that Unix copyrights for SVRX are not part of the package.
If SCO has talked York into believing that that decision can be turned around
with an appeal of Judge Kimball's decision, then it is a gamble on the part of
York, pure and simple.)

If York is anxious to push this deal through by the end of the year, then the
question is why? On a pure business case it is speculation of the worst kind.
If there is something else going on, then everyone needs to don their tin hats.

I don't know how much money can be realized servicing and supporting dwindling
Unix licenses, but I think all the big boys, AIX, HP, and the old DEC, now also
owned by HP have fully paid up perpetual licenses already. (Sun and Microsoft
are in question, but anybody buying SCO can't expect to get any more from them,
since presumably according to SCO they now have the perpetual thing too.)

On the other hand, there are some very questionable deals going on where
relatively new companies with not a lot of product are going for billions.
Maybe a mere thirty seven million for whatever SCO can legally sell is not out
of the question. Of course I don't understand how part of the purchase price is
the outcome of litigation they are selling.

Does York really think that buying a pile of lawsuits, which to my mind are best
gotten out of as cheaply as possible, will make them money?

(Maybe this is why SCO is trying to sell the suits. We aren't party any more,
York is.) Maybe someone could give the York investors a clue that they should
review the Groklaw archive. I know some people just what the "BIG
PICTURE" and throw money around accordingly. But surely someone on the
staff would give them good advice.

(Hey, don't pay any attention to that Groklaw site. They're just a bunch of
commie, hippie radicals.)

Oops, my mistake, commie, smelly radicals. Have to keep up with the times.
Guess my age is showing.

[ Reply to This | # ]

Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 11:27 AM EST
Contemplate SCO's moves in light of 2 basic legal principles:

1) You can't convey more rights than you have, including rights you have
diminished through your acts while you held the rights, e.g., waiver, estoppel:

2) You can enter into a quitclaim deed and sell "your" right (without
committing fraud per se) even if your ownership amounts to zero, to anything --
hence I can sell you my quitclaim bridge to the Brooklyn Bridge. Now if I
warrant or represent that I actually own it as part of the conveyance, that's a
different story, but as long as I say I am only selling "my" rights
without further substantiation, then I'm in the clear.

Now how do these principles apply? Here's the SCO logic train:
-> tell the BK court that SCO wants to sell, and York wants to buy. This
will bring money to the estate, so SCO is trying to rope the judge into thinking
this is a good thing for the creditors
-> offer a quitclaim deed only
-> York comes back and says -- "Judge, I want to buy, and need to do it
RIGHT NOW, and I've done the due diligence" -- in order to get the judge
favorably inclined to the sale
->However, York also says - "it would be better if I really knew what I
was buying, Judge, and we need to move quickly, so if you could resolve certain
issues that are pending and NOT send it back to Utah, we could do this fast and
I will buy"

So -- this becomes a ploy to get the BK Judge to take the case away from Utah
and Judge Kimball, and thereby to give SCO a chance to re-open settled findings
made by him, rather than bank their hopes solely on the merits of an appeal.

This explains the statements of York's counsel and SCO's counsel, Specter, which
APPEARED to be against SCO's interest. I think they were carefully dropped in,
not a mistake or an unintentional 'honest' moment.


[ Reply to This | # ]

Pretend to hurry, provoke more delay
Authored by: Anonymous on Saturday, November 17 2007 @ 11:38 AM EST

OK, my tinfoil hat is firmly in place.

By PRETENDING to declare an "emergency" and give a year-end
deadline, SCO just provokes more paper filings, and the judge
digs in his heels at being pushed.

Presto, more delay.

[ Reply to This | # ]

Docket #219 - Credit Agreement
Authored by: sylvester on Saturday, November 17 2007 @ 12:07 PM EST
I just gotta love the name: "SENIOR SECURED SUPER-PRIORITY

[ Reply to This | # ]

Why bother with Bankruptcy? - Reports from the Hearing - Updated 2Xs
Authored by: Anonymous on Saturday, November 17 2007 @ 12:17 PM EST

Can you or someone clarify something for me? I keep hearing the phrase "we
don't need to pay Novell the converted funds because 'that' money has already
been spent."

If that's the case, then why didn't SCO just go ahead with case with Judge
Kimball? Why bother with the bankruptcy at all? I understood that the only
question was the percentage of the fees that they owed Novell. Surely at that
point 'that' money had been spent. And even if it hadn't all been spent, surely
they have spent more on legal fees for the bankruptcy then they would have had
to pay Novell out of whatever cash they had on hand at that time.

They wouldn't have to fight with the Bankruptcy court or IBM about the sale to

Did someone panic and not think things through ***AGAIN***?

Did the old CFO resign because he refused to purger himself about what moneys
were spent when? Can the old CFO be called in to testify testify about that in
the Bankruptcy case?

[ Reply to This | # ]

Lift the Novell Stay
Authored by: Anonymous on Saturday, November 17 2007 @ 12:46 PM EST
One of the pending decisions is whether or not to lift the Utah Novell-SCO
It seems to me that this will help clarify what SCO owns, and therefore help
determine the assets it can sell.
Thus, it would behoove the judge to lift the stay.

[ Reply to This | # ]

York sale and Chapter 11
Authored by: Anonymous on Saturday, November 17 2007 @ 01:23 PM EST
I've missed something here--SCO is supposedly reorganizing in order to remain in business, yet if the York sale goes through, it appears to me that SCO would no longer have much, if anything, in the way of ongoing revenue-generating business.

How is this a reorganization, and not a liquidation?

[ Reply to This | # ]

UNIX is viable business?
Authored by: Anonymous on Saturday, November 17 2007 @ 03:23 PM EST
If UNIX is a viable business for York, how is UNIX business not a viable
business for SCOG. If UNIX is a viable business for SCOG, why does SCOG want to
sell the business, and moreover why during Chapter 11?

[ Reply to This | # ]

Revised prediction
Authored by: Anonymous on Saturday, November 17 2007 @ 05:21 PM EST
Disclaimer: My last prediction was a total failure.

I think Gross is going to wait to get a clear idea of whether SCO has any viable
reorganization plan before deciding whether to lift the Utah stay. He may
decide that based on the 12/5 hearing, or it may be some time later, but it
won't be before 12/5.


[ Reply to This | # ]

Lifting the stay - it's all that matters.
Authored by: GriffMG on Saturday, November 17 2007 @ 06:29 PM EST
Judge Gross has the measure of SCO and the legal team.

He knows that the endgame is just stopping Novell from getting control, he knows
that if he lifts the stay SCO will have a final card to play - he's not sure
exactly which card, but he know they have one or two up their sleeves.

I think he will lift the stay on Wednesday and injuct SCO from declaring Chapter
7 and Judge Kimball will decide on the same day, and it will be the end of SCO.

(Queue music...)

Keep B-) ing

[ Reply to This | # ]

This is why I really dislike the US system
Authored by: brian on Saturday, November 17 2007 @ 10:24 PM EST
To summarize; In March of 2003, nearly five years ago,
Caldera filed its suits. August 10, 2007 Judge Kimball
rules that SCO doesn't own the copyrights which guts the
SCO claims. Before the judge can make further rulings SCO
declares Chapter 11 bankruptcy which puts a stay on ANY
further rulings. Now SCO wants to sell "claims against
Linux" to a sleezeball front company called York and the
Utah / Swiss courts are incapable of ruling proclaiming no
SCO "IP" in Linux. To add insult to injury the court in
Delaware is hearing an argument that the Linux
litigation is "valuable assets of the estate that would be
harmed if the Swiss stay is lifted". My jaw hit the floor
when I saw that. Where is justice in all this argument?!?!
The FUD is allowed to continue under the guise of a
new "company" leaving AutoZone, Diamler / Chrysler,
RedHat, IBM and Novell holding the bag of debt they had to
build while SCO was FUDing right along. The Delaware court
to my astonished eyes is going along with it too! That's
the worst part. These courts don't even bother talking to
each other it appears. With the exception of RedHat, it
was SCO who brought suit to everyone else. Where is the
sense of settlement that courts are supposed to bring?!?!

If the Linux litigation claims are so valuable then the
Linux litigation counterclaims should go right with it but
they don't. Again I ask, where is justice in all this?!?!

#ifndef IANAL
#define IANAL

[ Reply to This | # ]

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )