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U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated
Tuesday, May 05 2009 @ 07:32 PM EDT

Here it is, the moment many of you have been waiting for: the U.S. Trustee's office, through its counsel Joseph J. McMahon, Jr., has filed a motion in the SCO bankruptcy proceeding to convert the SCO's Chapter 11 to Chapter 7. And I think this will be your favorite sentence:
Additionally, not only is there no reasonable chance of "rehabilitation" in these cases, the Debtors have tried — and failed — to liquidate their business in chapter 11.
So what's left? Dismissal or, more logically, Chapter 7. SCO's been in Chapter 11 as long as it's supposed to be, and it's tried three times to figure out a "rehabilitation" plan, and nothing panned out. Meanwhile, SCO reports a net negative cash flow of more than $3.5 million in its March 2009 report. $3.5 million since the bankruptcy was first filed in September 2007, and that represents cause to switch to Chapter 7, the Trustee's Office argues, due to "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation." That's $3.5 million that could have been paid to Novell.

I never expected SCO to be rehabilitated. Oh. Different definition. The Trustee's Office means "to put back in good condition; re-establish on a sound, firm basis." I mean to admit it was wrong, turn around and sin no more. Like *that* will ever happen.

It's conceivable SCO could come into court with a done deal, I suppose, with all their paperwork done and in order, as a counter. With SCO, I never say never. I'd want to see the real buyers in the flesh, though, if I were the judge, with their right hands on their heart and their left holding their wallets up before the judge, spilling over with dollars, so to speak.

Um. Real ones.

Here is the filing:

05/05/2009 750 Motion to Convert Chapter 11 Case to a Case Under Chapter 7. Fee Amount $15. Filed by United States Trustee. Hearing scheduled for 6/12/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 5/26/2009. (Attachments: # 1 Notice of Motion # 2 Proposed Form of Order # 3 Certificate of Service) (McMahon Jr., Joseph) (Entered: 05/05/2009)

[ Update: Right on cue, SCO says it will try again, according to Tom Harvey's report in the Salt Lake Tribune:
The timing of the filing caught SCO officers by surprise. CEO Darl McBride had flown into Denver to attend the 10th Circuit hearing.

“We are reviewing the motion that was filed in Delaware today with counsel and will have a detailed response for the court in due course,” McBride said in an e-mailed statement. “We plan to oppose the motion and present our own suggested course of action to the court.”

You are surprised? Incidentally, going into Chapter 7 would not necessarily end the litigation. In fact, it can't on its own. It would be up to the appointed trustee to try to figure out what to do, and the trustee's interest will not dovetail with SCO executives, I'm guessing. For one thing, he'll be wanting to pay the creditors. Like, for example, Novell. And the trustee has no power to terminate the IBM counterclaims. Then there is Red Hat. They are not necessarily willing to drop their claims, since the goal is to establish that there are no legitimate claims against Linux.

As for being surprised today, I'd point out that the SCO lawyers at least knew about this motion yesterday, as you can see for yourself by reading the Certificate of Service [PDF] Plus, at the last hearing, the judge ruled that the period of exclusivity was over, and it was obvious to me, at least, that IBM, Novell and the Trustee's attorney would argue for Chapter 7, and it was left that if anyone wished to file such a motion, the judge would entertain it then, and it was pretty obvious that at least one of the three would do this. So I question why, if I figured this was next, anyone at SCO would be surprised by a motion like this. - End update.]

And we have the motion as text for your reading pleasure, followed, after the double row of stars, by the relevant parts of the statute governing this motion, 11 U.S.C. § 1112, which is referenced throughout:

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

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re
THE SCO GROUP, INC., et al.,
Debtors.

Chapter 11
Case Number 07-11337 (KG)
(Jointly Administered)

Hearing Date: June 12, 2009 at 2:00 P.M.
Objection Deadline: May 26, 2009

MOTION OF THE UNITED STATES TRUSTEE
TO CONVERT CASES TO CASES UNDER CHAPTER 7

In support of her motion for an order converting the above-captioned cases to cases under chapter 7, Roberta A. DeAngelis, Acting United States Trustee for Region 3 ("U.S. Trustee"), by and through her counsel, and based upon information and belief, avers:

PRELIMINARY STATEMENT

The above-captioned cases should be converted to cases under chapter 7 because there is a "continuing loss to or diminution of the [Debtors'] estate[s] and the absence of a reasonable likelihood of rehabilitation" under 11 U.S.C. § 1112(b)(4)(A). The Debtors are a technology "startup" venture. Since the inception of the above-captioned cases nearly two years ago, the Debtors have continued to rapidly lose money; by their own admission, the Debtors have had in excess of $3.5 million of negative cash flow post-petition. This fact, by itself, is sufficient to establish a continuing loss to, or diminution of, the Debtors' estates. Additionally, there is not a reasonable likelihood that the Debtors will be rehabilitated. On three separate occasions over the past twenty-one months, the Debtors have started sale and/or plan processes designed to liquidate and/or

(1)

reorganize their business. All three of those attempts to resolve the cases failed. Under these circumstances, this Court is obligated to either convert the Debtors' cases to cases under chapter 7 or dismiss the cases, whichever is in the best interests of creditors and the estates pursuant to 11 U.S.C. § 1112(b)(1). The U.S. Trustee submits that conversion of the cases to cases under chapter 7 will be in the best interest of creditors and the Debtors' estates.

INTRODUCTION

1. Under (i) 28 U.S.C. § 1334, (ii) (an) applicable order(s) of the United States District Court for the District of Delaware issued pursuant to 28 U.S.C. § 157(a) and (iii) 28 U.S.C. § 157(b)(2)(A), this Court has jurisdiction to hear and determine the Motion.

2. Under 28 U.S.C. § 586, the U.S. Trustee is generally charged with monitoring the federal bankruptcy system. See United States Trustee v. Columbia Gas Sys., Inc. (In re Columbia Gas Sys., Inc.), 33 F.3d 294, 295-96 (3d Cir. 1994) (noting that U.S. Trustee has "public interest standing" under 11 U.S.C. § 307 which goes beyond mere pecuniary interest); Morgenstern v. Revco D.S., Inc. (In re Revco D.S., Inc.), 898 F.2d 498, 500 (6th Cir. 1990) (describing the U.S. Trustee as a "watchdog"). "[I]n any case in which the United States trustee finds material grounds for any relief under section 1112 of [the Bankruptcy Code]," the U.S. Trustee is obligated to apply promptly after making that finding to the court for relief." 28 U.S.C. § 586(a)(8).

3. Under 11 U.S.C. § 307, the U.S. Trustee has standing to be heard on this Motion.

GROUNDS/BASIS FOR RELIEF

Background

4. On September 14, 2007, the Debtors filed the petitions which initiated the above-captioned cases.

(2)

5. To date, this Court has not directed the appointment of a trustee or an examiner in the above-captioned cases.

6. On September 18, 2007, the Office of the U.S. Trustee ("OUST") mailed a notice to the Debtors' top twenty unsecured creditors informing them of the meeting to form an official committee of unsecured creditors. The scheduled date/time for the meeting was September 28, 2007. As of that date, the OUST had not received sufficient expressions of interest to appoint an official committee of unsecured creditors in the above-captioned cases. Accordingly, on September 28, 2007, the OUST filed a statement indicating that an official committee of unsecured creditors had not been formed.

Conversion

7. The U.S. Trustee submits that these cases are ripe for conversion to cases under chapter 7. 11 U.S.C. § 1112(b)(1) provides:

Except as provided in paragraph (2) of this subsection, subsection (c) of this section, and section 1104(a)(3), on request of a party in interest, and after notice and a hearing, absent unusual circumstances specifically identified by the court that establish that the requested conversion or dismissal is not in the best interests of creditors and the estate, the court shall convert a case to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, if the movant establishes cause.1

8. Under 11 U.S.C. § 1112(b)(4)(A), the term "cause" in 11 U.S.C. § 1112(b)(1) includes "substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation."

(3)

9. 11 U.S.C. § 1112(b)(2)(B) indicates that, if the U.S. Trustee moves for conversion under 11 U.S.C. § 1112(b)(4)(A) and establishes "cause" for relief, there are no "unusual circumstances" that would allow this Court to refrain from converting the above-captioned case to a case under chapter 7.

10. Through the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (2005), Congress eliminated this Court's discretion that was previously reflected in the appearance of the permissive word "may" in to 11 U.S.C. § 1112(b) and, through substitution of the mandatory word "shall" for "may," directed this Court to convert or dismiss the case, "whichever is in the best interests of the creditors and the estate," if "cause" is established. 7 COLLIER ON BANKRUPTCY § 1112.04(1) (15th ed. rev. 2005) (". . . as amended in 2005, section 1112(b) circumscribes the court's discretion by directing certain instances in which the court must, and must not, convert or dismiss the case."); cf. Association of Civilian Technicians v. FLRA, 22 F.3d 1150, 1153 (D.C. Cir. 1994) ("The word 'shall' generally indicates a command that admits of no discretion on the part of the person instructed to carry out the directive.").

11. The purpose of 11 U.S.C. § 1112(b)(4)(A) is to "preserve estate assets by preventing the debtor in possession from gambling on the enterprise at the creditors' expense when there is no hope of rehabilitation." In re Lizeric Realty Corp., 188 B.R. 499, 503 (Bankr. S.D.N.Y. 1995) (quoted in Loop Corp. v. United States Trustee (In re Loop Corp.), 379 F.3d 511, 516 (8th Cir. 2004)).

12. "Substantial or continuing loss to or diminution of the estate" is established where a debtor has continuing, negative cash flow post-petition. See Loop Corp., 379 F.3d at 515-16.

(4)

13. "Rehabilitation," as the term is used in 11 U.S.C. § 1112(b)(4)(A), means "to put back in good condition; re-establish on a sound, firm basis." 5 COLLIER ON BANKRUPTCY § 1112.03(2) (15th ed. 1980) (quoted in In re L.S. Good & Co., 8 B.R. 315, 317 (Bankr. N.D. W.Va. 1980)).

14. In these cases, the "continuing loss/diminution" prong of 11 U.S.C. § 1112(b)(4)(A) is satisfied by statements in the Debtors' most recent monthly operating reports, where SCO Operations, Inc. reports net negative cash flow of more than $3.5 million in its March 2009 report (Docket Entry # 743).

15. Additionally, not only is there no reasonable chance of "rehabilitation" in these cases, the Debtors have tried — and failed — to liquidate their business in chapter 11. In the fall of 2007, the Debtors filed a motion seeking approval of emergency sale and bidding procedures and, later, the Debtors filed a copy of their proposed asset purchase agreement with York Capital Management, Inc. The sale process with York failed to move forward. Next, in or about February, 2008, the Debtors proposed that Stephen Norris Capital Partners, LLC ("SNCP") would fund a "100 percent" plan that would make allowed, general unsecured claims whole. Like the York deal, the SNCP deal never materialized. Most recently, in January 2009 the Debtors again initiated a sale/plan process that was abandoned. In sum, there have been three unsuccessful attempts by the Debtors over the span of nearly two years to bring these cases to closure.

16. Under these circumstances, and consistent with 11 U.S.C. § 1112(b)(1), this Court is required to convert the above-captioned cases to cases under chapter 7 or dismiss the cases. In light of the facts and circumstances of these cases, the U.S. Trustee submits that conversion of the cases to cases under chapter 7 is the appropriate course of action.

(5)

RESERVATION OF RIGHTS/CONCLUSION

17. The U.S. Trustee reserves the right to amend and/or supplement this motion.

18. The U.S. Trustee reserves the right to conduct discovery in connection with this motion.

WHEREFORE the U.S. Trustee requests that this Court issue an order converting the above-captioned cases to cases under chapter 7.

Respectfully submitted,
ROBERTA A. DeANGELIS
ACTING UNITED STATES TRUSTEE

BY: /s/ Joseph J. McMahon, Jr.
Joseph J. McMahon, Jr., Esquire
Trial Attorney
United States Department of Justice
Office of the United States Trustee
J. Caleb Boggs Federal Building
[address]
[phone]
[fax]

Date: May 5, 2009

(6)

1 11 U.S.C. § 1112(b)(3) requires that this Court commence a hearing on the U.S. Trustee's conversion motion "not later than 30 days after the filing of the motion . . . unless the movant expressly consents to a continuance for a specific period of time . . . ." The U.S. Trustee consents to the initial scheduling of this motion for June 12.

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

[Here's the referenced statute, and I've marked in red the parts that apply:]

11 U.S.C. § 1112

§ 1112. Conversion or dismissal

...

(b)

(1) Except as provided in paragraph (2) of this subsection, subsection (c) of this section, and section 1104 (a)(3), on request of a party in interest, and after notice and a hearing, absent unusual circumstances specifically identified by the court that establish that the requested conversion or dismissal is not in the best interests of creditors and the estate, the court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, if the movant establishes cause.

(2) The relief provided in paragraph (1) shall not be granted absent unusual circumstances specifically identified by the court that establish that such relief is not in the best interests of creditors and the estate, if the debtor or another party in interest objects and establishes that—

(A) there is a reasonable likelihood that a plan will be confirmed within the timeframes established in sections 1121 (e) and 1129 (e) of this title, or if such sections do not apply, within a reasonable period of time; and

(B) the grounds for granting such relief include an act or omission of the debtor other than under paragraph (4)(A)—

(i) for which there exists a reasonable justification for the act or omission; and

(ii) that will be cured within a reasonable period of time fixed by the court.

(3) The court shall commence the hearing on a motion under this subsection not later than 30 days after filing of the motion, and shall decide the motion not later than 15 days after commencement of such hearing, unless the movant expressly consents to a continuance for a specific period of time or compelling circumstances prevent the court from meeting the time limits established by this paragraph.

(4) For purposes of this subsection, the term “cause” includes

(A) substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation;

(B) gross mismanagement of the estate;

(C) failure to maintain appropriate insurance that poses a risk to the estate or to the public;

(D) unauthorized use of cash collateral substantially harmful to 1 or more creditors;

(E) failure to comply with an order of the court;

(F) unexcused failure to satisfy timely any filing or reporting requirement established by this title or by any rule applicable to a case under this chapter;

(G) failure to attend the meeting of creditors convened under section 341 (a) or an examination ordered under rule 2004 of the Federal Rules of Bankruptcy Procedure without good cause shown by the debtor;

(H) failure timely to provide information or attend meetings reasonably requested by the United States trustee (or the bankruptcy administrator, if any);

(I) failure timely to pay taxes owed after the date of the order for relief or to file tax returns due after the date of the order for relief;

(J) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of the court;

(K) failure to pay any fees or charges required under chapter 123 of title 28;

(L) revocation of an order of confirmation under section 1144;

(M) inability to effectuate substantial consummation of a confirmed plan;

(N) material default by the debtor with respect to a confirmed plan;

(O) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan; and

(P) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing of the petition....


  


U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated | 436 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
The Off-Topic Thread
Authored by: ChrisP on Tuesday, May 05 2009 @ 07:36 PM EDT
Don't get off-off-topic :-)

---
SCO^WM$^WIBM^W, oh bother, no-one paid me to say this.

[ Reply to This | # ]

Corrections here
Authored by: Erwan on Tuesday, May 05 2009 @ 07:36 PM EDT
If any.

---
Erwan

[ Reply to This | # ]

News Picks Thread
Authored by: bugstomper on Tuesday, May 05 2009 @ 07:39 PM EDT
You can pick your friends, and you can pick your news, but you can't pick your
friend's news. Place the news pick item in the title so your friend knows which
comment to pick.

[ Reply to This | # ]

Holy Cow
Authored by: red floyd on Tuesday, May 05 2009 @ 07:41 PM EDT
The Trustee dropped a nuke on SCOXQ

---
I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

The U.S. Trustee reserves the right to conduct discovery
Authored by: Ed L. on Tuesday, May 05 2009 @ 07:42 PM EDT
What a treat! SCO can hardly wait!!

:-)

---
The dream of vengeance is the darkest of dark, sad dreams. -
Stephen R. Donaldson

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: Erwan on Tuesday, May 05 2009 @ 07:42 PM EDT
So what will be the likely effect of this on tomorrow's appeal hearing in Denver?

---
Erwan

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: lordshipmayhem on Tuesday, May 05 2009 @ 07:43 PM EDT
YAHOOOOOOOOOOOO!!!!!!!!!!!!!!!

What took 'em so long? ;)

[ Reply to This | # ]

whoopee! n/t
Authored by: Gringo on Tuesday, May 05 2009 @ 07:43 PM EDT
Great Joy-joy

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: Gringo on Tuesday, May 05 2009 @ 07:46 PM EDT
So "SirHumphrey" reported a surge in trading in SCO stock
yesterday. In hind site- what was that? Insider trading?

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: tknarr on Tuesday, May 05 2009 @ 07:54 PM EDT

It's interesting that the US Trustee emphasizes that the judge doesn't have any discretion in how to handle it. That seems like a pretty strong thing to say to a judge: "Liquidate them or dismiss the bankruptcy case, those are your only choices. You're not permitted to let things continue in Chapter 11 any longer.". It'll be interesting to see which creditors take whose side in this, and how the judge reacts.

SCO's days are numbered, and the number's spinning down rapidly.

[ Reply to This | # ]

The 'It's only a flesh wound' thread - n/t
Authored by: Anonymous on Tuesday, May 05 2009 @ 07:56 PM EDT
Tufty

[ Reply to This | # ]

This is the Red Dress Thread
Authored by: om1er on Tuesday, May 05 2009 @ 08:07 PM EDT
Now?

---
August 10, 2007 - The FUD went thud.

[ Reply to This | # ]

"Dismissal or conversion"
Authored by: Anonymous on Tuesday, May 05 2009 @ 08:10 PM EDT

What are the chances of dismissal, rather than conversion, particularly with the
IBM case still pending? But if it is converted, what happens to the IBM case?
Will there ever be a ruling on the merits?

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: abel on Tuesday, May 05 2009 @ 08:47 PM EDT
"That's $3.5 million that could have been paid to Novell."

Or more accurately... That's 3.5 million of Novell's money they have been able to squander.

[ Reply to This | # ]

Bernanke "expects SCO litigation to end this year unless there is a major time-vortex setback."
Authored by: SirHumphrey on Tuesday, May 05 2009 @ 09:03 PM EDT
http://news.bbc.co.uk/2/hi/business/8034450.stm

"A relapse in litigation would be a significant drag on economic activity
and could cause the incipient recovery to stall," he said ahead of
"appeal court" results expected to be released on Thursday.

Fortunately, scientists have access to the Hubble Space Telescope and are
looking for signs of the end of the litigation which may have leaked out into
the 7th dimension of space, rather than the 11th, where they have currently been
searching.

"All these details will appear in Chapter 7 of my memoirs", he told
reporters. </parody>

[ Reply to This | # ]

Say it ain't so Joe!
Authored by: Anonymous on Tuesday, May 05 2009 @ 09:31 PM EDT
The End? How will I ever find another soap opera that compares?

rhb

[ Reply to This | # ]

What happens now to the licenses that Sco is collecting from?
Authored by: Kilz on Tuesday, May 05 2009 @ 10:00 PM EDT
If I remember right, SCO is supposed to collect fees and give them to Novell.
For doing so they receive 5%. What happens to those contracts/fee's?

[ Reply to This | # ]

SPIN
Authored by: Anonymous on Tuesday, May 05 2009 @ 10:01 PM EDT
How will they spin this.

- SCO previously Caldera once a leading linux provider has gone bankrupt. Can
you trust your business to linux when the companies go under.

-Linux and the GPL was not an issue in this is was a contract claim against
IBM/Novell, there is still a big risk in using linux.

-After much discussion we have decided to drop the lawsuites against IBM and
Novell in exchange for a generous bailout

...

-

[ Reply to This | # ]

assets biding thread
Authored by: Anonymous on Tuesday, May 05 2009 @ 10:27 PM EDT
Assuming that SCO is going to be liquidated, please post below what asset you
wish to purchase and for what price.

[ Reply to This | # ]

Set your Calendar
Authored by: Steve Martin on Tuesday, May 05 2009 @ 10:37 PM EDT
According to the Notice, responses to this Motion are due on or before May 26th.
It'll be interesting to see whether IBM or Novell (both of whom were served with
notice of this Motion) file anything in response. (Not to mention The SCO Group,
of course.)


---
"When I say something, I put my name next to it." -- Isaac Jaffe, "Sports Night"

[ Reply to This | # ]

  • Eeek - Authored by: Anonymous on Wednesday, May 06 2009 @ 09:29 AM EDT
    • Eeek - Authored by: JamesK on Wednesday, May 06 2009 @ 10:44 AM EDT
      • Eeek - Authored by: Anonymous on Wednesday, May 06 2009 @ 11:42 AM EDT
This is very interesting
Authored by: Anonymous on Tuesday, May 05 2009 @ 10:54 PM EDT
One way or another this will light a fire under SCO.

For reasons previously discussed on Groklaw, SCO really, really doesn't want to go Chapter 7. So the next few days should be very interesting in Judge Gross's court.

Will SCO suddenly find a potential buyer? Or inundate Judge Gross's clerk with reams of overlong memorandum arguing against Chap. 7 bankruptcy? Will SCO headquarters suddenly be empty, executive staff departing in sudden haste?

Stay tuned for the next episode of "The SCO Files" ("SCO gets LOST", "As the SCO Turns" :-).

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: Anonymous on Tuesday, May 05 2009 @ 11:52 PM EDT
Thanks Joe!

Gee, a chance to attend the appeal's oral argument right before my birthday AND
a motion for chapter 7 from the trustee a day prior to that.

Now I just need to find a coniferous tree to decor... erm ... wrong holiday.

Seriously, this is so much cooler to watch than my mother in law trying to make
me a cake.

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

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7
Authored by: Yossarian on Wednesday, May 06 2009 @ 12:02 AM EDT
There something I miss.

There are two parties, namely IBM and Novell, that have very
good reasons, and the law on their side, to demand Chapter 7,
or at least firing SCO's officers and have a court nominated
trustee run SCO.

Why did the US Trustee move first?
Was it because IBM's lawyers are just lazy or because they
are "lazy like a fox"? (And I am just too stupid to
understand their play.)

[ Reply to This | # ]

SCO Bankruptcy to Chapter 7 whats left?
Authored by: davidf on Wednesday, May 06 2009 @ 12:20 AM EDT
One question that comes to mind is: What assets are left? Are there any patents
or copyrights that SCO holds that some patent troll might come after?

SCO might be toast (burnt of course)but they do have some assets, if its even
just pens, pencils and erasers. They'll get sold off. Its the Patent Trolls I'm
worried about. We just don't really know what SCO was hanging on to when it
gasped its last few breaths.

cheers,
davidf

[ Reply to This | # ]

Where do you drive the stake in a heartless corporation?
Authored by: kawabago on Wednesday, May 06 2009 @ 01:31 AM EDT
Darl!

[ Reply to This | # ]

Champagne corks popping at Boies, Schiller & Flexner too?
Authored by: Tinstaafl on Wednesday, May 06 2009 @ 01:32 AM EDT
Finally they'll be able to see an end to their losses on this fee capped
meritless case with no chance of a win.

[ Reply to This | # ]

haiSCO
Authored by: Anonymous on Wednesday, May 06 2009 @ 01:49 AM EDT

They may well abSCOnd
with much unpaid, the SCOundrels:
karma keeps the SCOre

[ Reply to This | # ]

Darl Speaks
Authored by: bezz on Wednesday, May 06 2009 @ 02:04 AM EDT
Let us all listen:
“We plan to oppose the motion and present our own suggested course of action to the court.”
I wait with bated breath. I don't know what alternative they plan to offer. They tried (and failed) to sell off EVERYTHING to fund litigation that has a poor chance of succeeding. Oh, and the existing stock holders (who are last in line to recover under a real reorganization plan) get preference over unsecured creditors? Existing equity (stock) is supposed to get canceled unless all creditors get paid first.

Nobody is willing to pay any money for SCO or they would have found someone for the last (gasp) January effort that got delayed until March 30. Delayed by SCO's own failure to schedule a hearing and then dropped.

What do they plan to say to the court? "Novell, IBM, and US Trustee, go into the Candy Mountain Cave!!!"

[ Reply to This | # ]

Start-up?
Authored by: mattflaschen on Wednesday, May 06 2009 @ 02:31 AM EDT
The Trustee says, "The Debtors are a technology “start-
up” venture." This is tragicomic for anyone who knows SCO's long (and
formerly proud) history. At this point, I would have to classify them as a
"shut-down", since they are gradually losing all their assets,
employees, and reason for being. Either way, I think the Trustee's motion is
right on target.

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated
Authored by: Yossarian on Wednesday, May 06 2009 @ 02:36 AM EDT
>the trustee's interest will not dovetail with SCO executives

Sure.
As I see it, the trustee interest is to stop the bleeding.
An obvious way to do that is to estimate the results of the
legal actions. For all those that are not going well just to
settle on a sum close to the probable lose. But the real
"gold mine" may be SCO's internal documents. The Trustee can
sell access to them to an interested party, e.g. IBM, in
return to better settlements. IBM may bet that such documents
will let it pierce the corporate veil and go after SCO's
officers. (And the bet is on a small amount of money.
Liquidation - Novell_claims is pretty close to zero; the
only question is from what side of the zero.)

If I were Darl I'd spend the night burning all documents,
before a court order to preserve them will show up.

[ Reply to This | # ]

To be fair.
Authored by: Anonymous on Wednesday, May 06 2009 @ 03:11 AM EDT
"So I question why, if I figured this was next, anyone at SCO would be
surprised by a motion like this."

The report does say the "The timing of the filing caught SCO officers by
surprise."
Timing seems to be the operative word.

[ Reply to This | # ]

If we read carefully ...
Authored by: Anonymous on Wednesday, May 06 2009 @ 04:13 AM EDT
... Page 4, Item 10.

... through substitution of the mandatory word “shall” for “may,” directed this Court to convert or dismiss the case, “whichever is in the best interests of the creditors and the estate,” if “cause” is established.

[ Reply to This | # ]

  • Item 11 - Authored by: Anonymous on Wednesday, May 06 2009 @ 04:33 AM EDT
So I question why, if I figured this was next, ...
Authored by: Anonymous on Wednesday, May 06 2009 @ 04:53 AM EDT
You wrote,

"So I question why, if I figured this was next, anyone at SCO would be
surprised by a motion like this."...

Do you not usually mention your predictions? Did I miss this one?

Not to be too critical of your fabulous work on groklaw.

[ Reply to This | # ]

Hey, wait a minute!
Authored by: Ian Al on Wednesday, May 06 2009 @ 05:24 AM EDT
What happened to Spector's cram-down attempt? Did I sleep through that one?

Don't tell me that SCO are a couple of chapters short of a book.

---
Regards
Ian Al

Linux: Viri can't hear you in free space.

[ Reply to This | # ]

Something of Interest in the Motion
Authored by: DaveJakeman on Wednesday, May 06 2009 @ 06:36 AM EDT
The purpose of 11 U.S.C. § 1112(b)(4)(A) is to "preserve estate assets by preventing the debtor in possession from gambling on the enterprise at the creditors' expense when there is no hope of rehabilitation."
Good call. Dang! There goes the SCO/BSF lottery ticket.
The U.S. Trustee reserves the right to conduct discovery in connection with this motion.
Oh, no, no, no! SCO wouldn't like that! Apart from the underlying expressed intention, could those be the most significant words in the motion? I can foresee SCO fighting this tooth and nail. There are secrets to be concealed.

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

[ Reply to This | # ]

I suggest
Authored by: maroberts on Wednesday, May 06 2009 @ 06:48 AM EDT
We buy PJ the SCO sign to stick on her front lawn/ top of her apartment/ use as
a coffee table...

[ Reply to This | # ]

Auction the Assets to the highest bidder - U.S. Trustee Moves to Convert
Authored by: Anonymous on Wednesday, May 06 2009 @ 07:02 AM EDT
What exactly are SCO's assets? Does it include the business of collecting Unix
License fees for Novell?

Will Novell have any control over what happens to that?

Will some other worm come out of the woodwork and start this mess all over
again?

The value of SCO is so low that some venture capitalist could probably pick it
up, even in this dismal economy, excluding the liabilities.

[ Reply to This | # ]

Re-arranging Deck Chairs on the Titanic
Authored by: DaveJakeman on Wednesday, May 06 2009 @ 08:43 AM EDT
"We are reviewing the motion that was filed in Delaware today with counsel and will have a detailed response for the court in due course,” McBride said in an e-mailed statement. “We plan to oppose the motion and present our own suggested course of action to the court."
SCO no longer have exclusivity, so any creditor -- Novell, IBM or Petrofsky, for instance -- could suggest a two-word alternative to SCO's forthcoming plan: "Chapter 7".

But I guess the US Trustee's motion for Chapter 7 conversion would trump any of those anyway.

Darl had better come up with something pretty good and very fast. Something better than the previous three failed attempts. His best bet is to ring the PIPE fairy on the Ouija phone, for the Good Ship SCO looks to be going down.

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

[ Reply to This | # ]

And it only took 6 years
Authored by: Anonymous on Wednesday, May 06 2009 @ 08:57 AM EDT

Well, Microsoft got 6 years of "there are legal issues hanging over Linux" for its $10m.

Darl got enough money to retire on in comfort.

On the plus side, the attack on Free Software made us pull together as a community, catalysed by PJ. Maybe it made our community stronger, a bit better able to recognize and respond to attacks. It made me even more cynical about the American legal system than I was to begin with.

Of course SCO isn't quite history yet. But I get the distinct feeling that we're in the end phase.

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated
Authored by: Anonymous on Wednesday, May 06 2009 @ 09:10 AM EDT
Is there something in Novell's APA with SCO regarding the assets in that
contract? If SCO goes away, what happens to all the assets, copyrights and what
not that Novell sold to them? SCO was the collecting agent for Novell. Who
collects now?

Another big question. What happens to UNIX? Do you think Novell will open source
it? At this point; why not?

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated
Authored by: Anonymous on Wednesday, May 06 2009 @ 09:23 AM EDT
You have to admire Old Darl's staying power - whatever his other questionable
personal attributes. The man never gives up! A true believer in the old
saying: "It ain't all over till the fat lady sings!"

"It's only a flesh wound" indeed!

[ Reply to This | # ]

Legal Potential Questions
Authored by: Anonymous on Wednesday, May 06 2009 @ 09:55 AM EDT

Let's say SCOG converts to Chapter 7 and the trustee takes over.

Isn't BSF obligated to the company SCOG - not the BOD?

With the trustee having control over the direction of SCOG, wouldn't BSF then be obligated to the trustee rather than the old BOD?

If less-than-honest happenings were going on at the direction of the old BOD, wouldn't BSF - in order to decrease their own liabilities with those happenings - be more disposed to assisting the trustee to clear all of that up?

At the very least, if BSF had been very forward after examining what SCOG wanted and informed the SCOG BOD in the beginning that they didn't really have a case, wouldn't BSF be predisposed to let the trustee know the same once the trustee is in control?

Curious minds and curious questions...

RAS

[ Reply to This | # ]

Fake surprise
Authored by: Anonymous on Wednesday, May 06 2009 @ 11:59 AM EDT
SCO is shocked, SHOCKED, to find that the trustee would do such a thing.

Or not.

Maybe, as others pointed out, it's the timing, not the motion itself. In
particular, it might be the timing in relation to the appeals court hearing
today. Perhaps Darl was looking fearfully at that hearing as the next extreme
danger that he had to somehow dance his way out of, and he feels sucker-punched
by the trustee. Not that I have much sympathy.

But I still think it's just fake surprise, for public consumption - though who
he thinks the "public" is, I don't know. Does he want to plant the
"poor vicimized SCO" idea in potential jury members, in case he can
ever get a case - any case - in front of a jury?

The motives are unclear to me. I see nothing real to gain, no real benefit from
continuing to pretend. But it still feels like fake surprise to me, even though
I don't know why.

MSS2

[ Reply to This | # ]

U.S. Trustee Moves to Convert SCO Bankruptcy to Chapter 7 - Updated
Authored by: TemporalBeing on Wednesday, May 06 2009 @ 12:55 PM EDT
Well...IBM, Red Hat, and AutoZone will likely be harder to appease, but the
Trustee could probably appease Novell by handing them back everything that was
sold off via the APA (in exchange for little or no monetary compensation) so
they could sell it again if they so chose. They'd have to approve the buyer any
how, so it'd just be simpler that way - and one debt would be vacated - perhaps
two if you include the SuSE arbitration too.

At least, if I were Novell I'd be happy with that and SCO liquidated via Chapter
7.

The others (and possibly Novell via SuSE) will all want a verdict would be hard
for the Trustee to give - completely admitting that Linux does not infringe
period; for one he'd have to do a lot of investigating to verify it so as not to
perjure himself or the office.

[ Reply to This | # ]

Winners and losers?
Authored by: Anonymous on Wednesday, May 06 2009 @ 02:42 PM EDT
The clear message here is that if Microsoft doesn't like what you are doing,
they will hire some little company for $86 million -- doesn't matter if they
have any meaningful IP or not -- and tie you up in courts for over a decade.

Winners:
* Microsoft
* SCO Execs (who were paid mostly in cash, not stock)
* Lawyers (including Darl's brother)

Losers:
* Linux.
* Companies using Linux.

Or did I miss something?

[ Reply to This | # ]

Apparently the Hearing is Over
Authored by: Steve Martin on Wednesday, May 06 2009 @ 02:47 PM EDT

The following now shows up on PACER:

ORDER

Filed May 6, 2009

Before LUCERO, BALDOCK, and MCCONNELL, Circuit Judges.

This matter was argued by counsel and submitted to the court. Stuart Singer argued for the Appellant. Michael Jacobs argued for the Appellee.

Entered for the Court

(signature)
ELISABETH A. SHUMAKER
Clerk of the Court

Way too short. I am looking forward to Clocks' report.

---
"When I say something, I put my name next to it." -- Isaac Jaffe, "Sports Night"

[ Reply to This | # ]

Will a pipefairy come to resque?
Authored by: Anonymous on Wednesday, May 06 2009 @ 02:53 PM EDT
The really interesting question if a pipefairy will appear and lift SCO out from
the bankruptcy court?

If you asked me a year back I would have said it seemed very unlikely, but today
I am not so sure. The linux momentum keep growing stronger so there might
corporations that don't mind throwing good money after bad money just to get
more delay. That they eventually will loose might not be such a big deal, about
the same reasoning as behind the OOXML fiasco. Try to stall if are going to
loose no matter what.

A boost of money that is enough to pay Novell and keep SCO in business as long
as SCO has not been forced to drop the complaints towards Linux might seem like
a bargain if it also keep the corporate veil up.

[ Reply to This | # ]

Really? Chapter 7? :)
Authored by: SilverWave on Wednesday, May 06 2009 @ 06:32 PM EDT
not a lot to say...


... bye bye SCO.


---
RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

Office of the US Trustee (OUST)
Authored by: Anonymous on Thursday, May 07 2009 @ 10:04 AM EDT
I'm really surprised that no one has picked up on this.

oust

tr.v., oust·ed, oust·ing, ousts.

To eject from a position or place; force out: “the American Revolution, which
ousted the English” (Virginia S. Eifert).

Hasn't this been one of the objectives since the beginning, vis-a-vis Darl and
crew??

JOhn in Arkansas

[ Reply to This | # ]

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