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The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Wednesday, August 05 2009 @ 02:51 PM EDT

The judge in the SCO bankruptcy has ruled at last. SCO's motion to let it sell to unXis is denied. There could be an auction later. The motions to convert to Chapter 7 by IBM, Novell and the US Trustee's Office are also denied, but alternative relief is granted, and there will be a Chapter 11 trustee appointed. IBM and Novell agreed that a Chapter 11 Trustee was appropriate if he did not convert to Chapter 7, and that is what he has done. That means presumably that SCO management no longer run this show. Here they are, the Order and Memorandum in the bankruptcy:
890 - Filed & Entered: 08/05/2009
Opinion
Docket Text: OPINION re Motions to Convert and Sale Motion(related document(s)[750], [751], [815], [881]) (LJS)

891 - Filed & Entered: 08/05/2009
Order
Docket Text: ORDER DENYING Motions to Convert and Sale Motion(related document(s)[750], [751], [815], [881], [890]) Order Signed on 8/5/2009. (LJS)

The judge leaned as far as he could to help SCO, denying the three motions to convert. But the U.S. Trustee's Office will now appoint a Chapter 11 trustee. SCO has "abandoned rehabilitation", the judge says, and bet the company on its litigation, so the Chapter 11 trustee will evaluate whether the litigation is realistic or not. The judge doesn't trust anyone not to have an agenda, so he wants a trustee, but he is clearly trying to help SCO survive. And footnote 6 of the memorandum says this about the sale:
After the Hearing, Debtors wrote to the Court to report that Debtors were now prepared to subject the Sale to an auction, under the auspices of an examiner. The Court's ruling means a trustee will review the Sale Motion and take independent action as a fiduciary.
Sigh. The memorandum misspells the proposed buyer, mischaracterizes the Novell litigation, incorrectly states that the AutoZone case is stayed, etc. The judge agreed with IBM that it would be inappropriate to base anything on the litigation, since the judge would have to have a trial first, but even then, the judge writes, he could only guess as to the outcome. But here, despite writing that, he bases his entire decision on the outcome of the litigation. My logical brain is having trouble processing that.

But there is now going to be an independent fiduciary to run the show. At least. But if the judge says even if he had a trial on the litigation, he could only guess as to the outcome, how can an independent fiduciary do any better without even a trial? You tell me.

The judge says he is relying on 11 U.S.C. § 1104, which is what SCO mentioned in its first letter to the judge post-trial, and on him finding "unusual circumstances" even though he acknowledges that there is ample justification for cause to convert. He worries about whether the litigation might be a big payoff for creditors, and he says he's considering other creditors, not just IBM and Novell. Here's the case he also says he is relying on, In re Marvel Entertainment Group, Inc.. Significantly, he says he is relying on 1104(a)(3), though. Here's 1104(a), and notice the distinctions:

§ 1104. Appointment of trustee or examiner

(a) At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee—

(1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause, but not including the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor;

(2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate, without regard to the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor; or

(3) if grounds exist to convert or dismiss the case under section 1112, but the court determines that the appointment of a trustee or an examiner is in the best interests of creditors and the estate.

So despite all the evidence, and even the judge ruling that he finds cause to convert, he says he is relying on (a)(3). Why? To avoid conversion, of course, but on what basis can he find cause and still say he isn't criticizing SCO's conduct? I find it hard to explain, so I'll just leave it at that.

But he also didn't like SCO's suggestion to leave the Board and management in control either. He wants a really neutral party to report to him. He simply doesn't know if SCO's litigation dreams are based in reality or not. Um. They have lost in every courtroom they've entered, but the judge wants someone to investigate just for him. Remember this judge's ruling at the hearing that he wouldn't allow the Hans Bayer emails into the record, in which Bayer wrote that even inside the company, employees including Bayer himself think the litigation is hopeless? See now why IBM fought so hard to get them included? Without them, the judge can say he doesn't know if the litigation is realistic or not. Puh lease. I think that is one clear area where there could be an appeal, frankly, based on the reasons the emails were not allowed in. Or they can just show some new materials to the new trustee. The picture is clear enough.

Oddly, the judge seems to have ignored the recommendation and the arguments of the US Trustee, who wrote this:

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)).
It doesn't say you can gamble if the odds are evaluated and it seems a good gamble. Here's Section 1112(b)(4):
(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;

Just above it, it says when a judge can avoid conversion or dismissal, one of which is required upon establishing cause:
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.

The US Trustee concluded:
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.
If that's true, then can the order be right, since there is an obvious conflict? Unusual circumstances indeed. However, our reporters at the hearing said that all three, IBM, Novell and the US Trustee said either a 7 or an 11 trustee would be acceptable. When we get the transcript, we'll be able to figure out that part.

So. Bottom line? SCO has lost control of the bankruptcy. That assumes the Chapter 11 person appointed isn't Darl's cousin, if you catch my drift. But it's the US Trustee's Office that gets to choose, and it asked for Chapter 7 conversion, if you recall, so that's boding well for a true neutral fiduciary. However, delay is also achieved, as SCO awaits the appeal. Guess what could happen if the appeal is in any significant part successful? Or there might be an appeal of this order. Oddly, the judge writes that preserving the litigation is the reason for the bankruptcy:

These bankruptcy cases arose from and primarily seek to preserve litigation between Debtors and parties over rights to computer operating systems.
What do I know? I thought that was a bankruptcy no no. And here's the part about guesswork:
The Movants insist that only a neutral party should control the process and make the necessary decisions. The Court fully agrees. Where the Court differs from the Movants is that the Movants seek appointment of a Chapter 7 trustee. The Court is convinced that a Chapter 11 trustee better serves the interests of creditors and the estate. At the request of IBM, the Court ruled that it would not consider evidence concerning the merits of the Litigation. IBM was correct that the Court could not decide the merits of the Litigation without conducting a mini-trial and even then, the Court's conclusions would not be more than guesswork of the outcome. Accordingly, the Court is unable to opine on whether the Debtors should continue to pursue the Litigation, but cannot ignore the significance and potential benefit to SCO of the Litigation. The "potential" of the Litigation must, however, be weighed against the reality of the cost. A trustee will be in a better position to make that assessment without the personal and emotional investment of SCO's management. Similarly, a Chapter 11 trustee can evaluate an asset sale independent of Debtors' management's pursuit of the Litigation.
And how will a fiduciary be able to do that, if the judge can't, and even more if he already ruled he shouldn't consider such merits? It seems a strange workaround.

Here's the section about the Sale Motion:

D. The Sale Motion

In May 2009, the OUST, Novell and IBM filed the Conversion Motions. The Court scheduled the Conversion Motions to be heard on June 15, 2009, at 2:00 p.m. The Debtors appeared claiming they had just entered into a sale agreement (the "Sale Agreement") and told the Court that were the Court to approve the sale, Debtors would close the sale, dismiss the case, pay creditors in full and proceed with the Novell Litigation and the IBM Litigation. IBM and Novell objected, expressing the view that given Debtors' history during these cases, the Sale Agreement was a ploy to avoid proceeding on the Conversion Motions. The Court overruled the objection and agreed to consider the latest sale proposal in connection with the Conversion Motions. In fact, the Sale Agreement lacked necessary schedules and exhibits. Debtors did not file the Sale Motion until late on June 22. The Sale Motion proposes a sale to Unixis, Inc. ("Unixis"), of all of Debtors' assets except for its "Mobility" business, the Litigation and such assets as are necessary for Debtors to prosecute the Litigation, assets which Debtors would transfer to Unixis when appropriate to do so. The sale price is $5.25 million consisting of a $250,000 cash deposit, a $2.15 million letter of credit to be drawn upon closing and a $2.85 million letter of credit as a payment toward any final judgment which Novell obtains....

A. The Sale Motion

A sale out of the ordinary course of business is governed by Bankruptcy Code 363(b)(1). Such a sale requires proof that:

(1) there is a sound business purpose for the sale; (2) the proposed sale price is fair; (3) the debtor has provided adequate and reasonable notice; and (4) the buyer has acted in good faith.
In re Delaware & Hudson Railway Co., 124 BR. 169, 176 (D. Del. 1991). Here, the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions. There is no evidence that the sale price is fair because it is just enough for Debtors to dismiss their cases.

The terms are equally, if not more, troublesome. Debtors are retaining the Mobility business that is virtually worthless, the letter of credit to pay a Novell judgment terminates on December 31, 2009, with no guarantee that the Novell Litigation will be concluded. Further, the Court is unable to find based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and questionable timing that Unixis has acted in good faith.

The Court is also very disturbed that the Sale Agreement contains a provision (which Movants refer to as a "poison pill") requiring the transfer of assets to Unixis upon conversion or appointment of a trustee. Here, again, the Sale Motion calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith. There is simply no record upon which the Court can find that the Sale is in the best interests of the creditors and the estate. The Sale Motion is denied as falling short of the required standards.

And my biggest questions: if SCO has abandoned rehabilitation, on what basis is it allowed to stay in Chapter 11? Isn't that the goal of Chapter 11? If the litigation is SCO's only hope, how long are we talking about remaining in Chapter 11? Until a Supreme Court appeal years down the road? And does IBM have to wait to get its litigation going again? Would that not answer the judge's questions about the viability of the SCO litigation better than a fiduciary's guesswork?

You probably want to know a little bit about what a Chapter 11 Trustee means, and what he can do. Here's one thing he can do, sue and be sued:

§ 323. Role and capacity of trustee

(a) The trustee in a case under this title is the representative of the estate.

(b) The trustee in a case under this title has capacity to sue and be sued.

The legal system in the US is a lot of checks and balances. So even if a trustee went bad or whatever, there is a system in place to address any problems. The trustee can hire lawyers, obviously, with court approval. He doesn't have to keep the current ones, but I guess he can:
§ 327. Employment of professional persons

(a) Except as otherwise provided in this section, the trustee, with the court’s approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties under this title.

(b) If the trustee is authorized to operate the business of the debtor under section 721, 1202, or 1108 of this title, and if the debtor has regularly employed attorneys, accountants, or other professional persons on salary, the trustee may retain or replace such professional persons if necessary in the operation of such business.

(c) In a case under chapter 7, 12, or 11 of this title, a person is not disqualified for employment under this section solely because of such person’s employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, in which case the court shall disapprove such employment if there is an actual conflict of interest.

(d) The court may authorize the trustee to act as attorney or accountant for the estate if such authorization is in the best interest of the estate.

(e) The trustee, with the court’s approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed.

(f) The trustee may not employ a person that has served as an examiner in the case.

How do I read that? That the trustee could hire SCO's lawyers. That would, of course, mean that they'd "inform" him that they think SCO has a case. I doubt this worst case scenario would happen, but I'm just showing you how things could be fixed to SCO's advantage, if anyone were trying.

Finally, this part of the memorandum is odd:

The reality is that eliminating Debtors' litigation against them is far more valuable to IBM and Novell than any recovery from Debtors in the bankruptcy cases.
That would be true only if the litigation has value to SCO, which is precisely what the judge said he can't evaluate. But here, he clearly has, albeit wrongly from all I've seen. See what I mean about logic? Either it is appropriate for him to evaluate the litigation or it isn't, but it really ought not to be both at once.

And as for the Marvel case, having now read it, I don't see any application, except contrary to this ruling, because the facts are entirely different. In Marvel Carl Icahn took over the company and ended up wearing two hats, only one of which was debtor in possession, the other being as a creditor, and the other creditors were wondering how fair that was:

Under the Bankruptcy Code, the district court was empowered to appoint a trustee:
(1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause, . . . or

(2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate . . . .

11 U.S.C. § 1104(a). The party moving for appointment of a trustee, in this case the Lenders, must prove the need for a trustee under either subsection by clear and convincing evidence. See Sharon Steel, 871 F.2d at 1226. "It is settled that appointment of a trustee should be the exception, rather than the rule." Id. at 1225. In the usual chapter 11 proceeding, the debtor remains in possession throughout reorganization because "current management is generally best suited to orchestrate the process of rehabilitation for the benefit of creditors and other interests of the estate." In re V. Savino Oil & Heating Co., 99 B.R. 518, 524 (Bankr. E.D.N.Y. 1989). Thus, the basis for the strong presumption against appointing an outside trustee is that there is often no need for one: "The debtor-in-possession is a fiduciary of the creditors and, as a result, has an obligation to refrain from acting in a manner which could damage the estate, or hinder a successful reorganization." Petit v. New England Mort. Servs., 182 B.R. 64, 69 (D. Me. 1995) (internal quotations omitted). The strong presumption also finds its basis in the debtor-in-possession's usual familiarity with the business it had already been managing at the time of the bankruptcy filing, often making it the best party to conduct operations during the reorganization. See Sharon Steel, 871 F.2d at 1226. The facts here, however, militate against invoking this presumption. The Icahn interests took control over Marvel's management six months after the chapter 11 filing. We are not confronted with a debtor who possesses extensive familiarity with the company's operations. It is therefore inappropriate to suggest that the usual presumption should be applied to a Johnny-come-lately debtor-in-possession, especially one that is also a substantial creditor.

The district court determined that the Icahn interests were "unable to resolve conflicts" with creditors of the estate. On the basis of this acrimony, it ordered the appointment of a trustee. We hold that the district court did not abuse its discretion because (A) this acrimony rises to the level of "cause" under § 1104(a)(1), and (B) a trustee would serve the best interests of the parties and estate.

Note that the foundation was 1104(a)(1), not (3) in Marvel. And that's cause. Yet the judge says he isn't relying on (1) but on (3) and that he isn't finding fault with SCO. Why not? Or more accurately, what is the foundation for why not? And (3) is best interests of the creditors and the estate. It says absolutely nothing about the customers, yet the judge writes that his decision was influenced by the needs of customers. The facts in Marvel were not like anything in the SCO case, where SCO isn't wearing two hats, and neither are IBM and Novell, who don't get to decide anything anyway, so it's not applicable or comparable. Not only that, note what the ruling said in Marvel:
We expressly hold that there is no per se rule by which mere conflicts or acrimony between debtor and creditor mandate the appointment of a trustee. In this case, rather, we are faced with circumstances in which the Icahn interests, themselves creditors of the Perelman holding companies, are currently in control of the debtor at the same time that the debtor proposes reorganization plans. In this position, although the Icahn interests are technically and officially fiduciaries to all creditors, they would also be placed in an awkward position of evaluating their own indenture and debt claims. Having found that this unhealthy conflict of interest was manifest in the "deep-seeded conflict and animosity" between the Icahn-controlled debtor and the Lenders and in the lack of confidence all creditors had in the Icahn interests' ability to act as fiduciaries, the district court did not depart from the proper exercise of discretion when it determined sufficient cause existed under § 1104(a)(1) to appoint a neutral trustee to facilitate reorganization.
Emphasis added by me. In Marvel, acrimony was getting in the way of a reorganization:
Moreover, we are impressed by the persuasive reasoning in In re Cajun Elec. Power Coop., Inc., 74 F.3d 599, 600 (5th Cir.) (adopting on rehearing the opinion of dissent in 69 F.3d at 751), cert. denied, 117 S. Ct. 51 (1996), in which the court upheld a trustee appointment based on a finding of acrimony. In that case, the debtor-in-possession's interests conflicted with those of its creditors to such an extent that "the appointment of a trustee may be the only effective way to pursue reorganization."
If SCO were in fact seeing to be rehabilitated, then relying on the case might make sense. But SCO is not. So why would it matter if there are conflicts? In a conversion to Chapter 7, it becomes a non-issue. And can a judge force a debtor to be rehabilitated, after it says it isn't going to try?

P.S. There is no "IBM Linux operating system", as the judge wrote. How can you get so many facts wrong and end up right? Well, you can, but it's hard.

: )

So, in all honesty, I think this is an extremely appealable ruling. Or more exactly, it would be if IBM and Novell hadn't said a Chapter 11 trustee was OK. How do you appeal getting what you said was OK, even if you got it for some illogical reasons? Of course, they didn't ask for a limited Chapter 11 trustee, whose main job appears to be to evaluate SCO's litigation chances and maybe handle an auction.

Update: SCO's comment to the Salt Lake Tribune's Tom Harvey:

In a short statement, SCO said company and its lawyers were reviewing the ruling "and determining the next steps. We're pleased the motion to covert to Chapter 7 [liquidation] was denied."
[ Update: Here's where you can track Federal spending on contracts, OMB Watch, to see if it's true the Navy can't fly its jets without SCO software. There is a 2005 contract with the DOD for $6,286 for "70: Automatic data processing equipment" and described as "SPACE AND NAVAL WARFARE SYSTEMS". ]

Here's the Opinion, as text, followed by the Memorandum:

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

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)
Related Docket Nos.: 750, 751, 815 & 881

ORDER

The Court has pending before it the following motions:

(1) Motion of the United States Trustee to Convert Cases to Cases Under Chapter 7 (D.I. 750) (the "OUST's Motion");

(2) Motion of International Business Machines Corporation (D.I. 751) (the "IBM Motion");

(3) Novell Inc.'s Motion for Conversion (D.I. 753) (the "Novell Motion"); and

(4) Motion for Sale of Property Outside the Ordinary Course of Business Free and Clear of Interests and for Approval of Assumption and Assignment of Executory Contracts and Unexpired Leases in Conjunction With Sale (D.I. 815), as amended (D.I. 881) (the "Sale Motion").

The Court has carefully considered the parties' submissions and conducted an evidentiary hearing. The Court has issued a Memorandum Opinion.

For the reason set forth in the Memorandum Opinion, IT IS ORDERED that:

1. The Oust's Motion, the IBM Motion, the Novell Motion and the Sale Motion are DENIED.

2. The Court directs the Office of the United States Trustee to appoint a Chapter 11 Trustee.

Dated: August 5, 2009

[signature]
KEVIN GROSS, U.S.B.J.

2

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

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)
Related Docket Nos.: 750, 751, 815 & 881

MEMORANDUM OPINION1

SCO Group, Inc. and affiliated entities ("SCO" or "Debtors") filed these bankruptcy cases on September 14, 2007, seeking relief under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 101, et. seq. The Court has before it for decision the following motions (collectively, (1), (2) and (3) are referred to as the "Movants" and the "Conversion Motions"):

(1) Motion of the United States Trustee to Convert Cases to Cases Under Chapter 7 (D.I. 750) ("OUST" and "OUST's Motion");

(2) Motion of International Business Machines Corporation (D.I. 751) ("IBM" and "IBM's Motion");

(3) Novell [Inc.'s] Motion for Conversion (D.I. 753) ("Novell" and "Novell's Motion"); and

(4) Motion for Sale of Property Outside the Ordinary Course of Business Free and Clear of Interests and for Approval of Assumption and Assignment of Executory Contracts and Unexpired Leases in Conjunction With Sale (D.I. 815), as amended (D.I. 881) (the "Sale Motion").

The Court held a lengthy evidentiary hearing on July 27, 2009 (the "Hearing"), and has concluded that the cases require the appointment of a Chapter 11 trustee.

I. JURISDICTION

The Court has jurisdiction over this matter under 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b). Venue is proper in this district under 28 U.S.C. §§ 1408 and 1409. The statutory predicate for the relief requested herein is 11 U.S.C. § 1112(b).

II. FACTS

These bankruptcy cases arose from and primarily seek to preserve litigation between Debtors and parties over rights to computer operating systems.2 A brief discussion of the litigation (collectively, the "Litigation") is therefore both necessary and appropriate.

A. The Litigation

1. Debtors v. Novell

In 1995, Debtors' predecessor-in-interest purchased Novell's UNIX operating system which became one of the world's most successful operating systems. Debtors and Novell

2

were (and remain) in litigation over a dispute involving the ownership of the UNIX copyrights. On May 28, 2003, Novell publicly announced that it, not SCO, owned the UNIX copyrights. Within hours of the announcement, according to SCO, its stock price plummeted. In January 2004, SCO sued Novell in Utah State Court for slander of title to the UNIX copyrights. Novell thereafter removed the case to the United States District Court for the District of Utah ("the Utah Court").3 Novell asserted counterclaims against SCO alleging breaches of an asset purchase agreement between Novell and SCO's predecessor-in-interest, The Santa Cruz Operation, seeking, inter alia, monetary damages for unjust enrichment and requesting an accounting. Novell then amended its counterclaim to seek, inter alia, imposition of a constructive trust over revenue SCO collected from certain of its customers. After the parties filed cross motions for summary judgment, the Utah Court denied SCO's motion for summary judgment and granted Novell's motion for summary judgment in part. The Utah Court held that imposition of a constructive trust was warranted and the amount of Novell's recovery would be determined following a trial. On the eve of that trial, in which Novell sought in excess of $37 million, SCO filed for bankruptcy. This Court granted Novell's motion to lift the automatic stay to enable the trial in the Utah Court to proceed. Following trial, the Utah Court awarded Novell $3.5 million. SCO appealed to the Tenth Circuit Court of Appeals. The parties argued the appeal on an expedited schedule and are presently awaiting a decision. SCO presented a credible prediction, based upon the

3

impending retirement of one of the judges sitting on the appeal, that the Tenth Circuit will issue a decision by the end of August 2009.

2. The IBM Litigation

The dispute between IBM and Debtors is considerably more complicated and does not require detailed discussion for purposes of the Court’s opinion. In its suit which is also pending before the Utah Court, SCO claims that IBM breached its UNIX source code licenses by disclosing restricted information in connection with IBM’s efforts to promote the IBM Linux operating system. The complaint includes claims for breach of contract, unfair competition, tortious interference and copyright infringement. IBM has counterclaimed for breach of contract, violation of the Lanham Act, unfair competition, intentional interference with prospective economic relations, unfair and deceptive trade practices, promissory estoppel and patent infringement. IBM subsequently voluntarily dismissed its claims for patent infringement. Both parties have filed multiple motions for summary judgement which have not been decided.

3. Other Litigation

There are three other actions pending involving SCO either as a defendant or plaintiff.

a. Red Hat, Inc., filed suit against SCO for a declaratory judgment that it has not infringed on copyrights nor misappropriated trade secrets, claiming that the Linux Operating System that it utilizes does not infringe on SCO’s UNIX intellectual property rights. Red Hat also claims that SCO engaged in false advertising, deceptive trade practices, unfair competition, tortious interference with prospective business opportunities, trade libel and

4

disparagement. The action is pending in the United States District Court for the District of Delaware4 and is presently stayed pending the outcome of the IBM Litigation.

b. SCO filed suit against AutoZone, Inc., an action pending in the United States District Court for the District of Nevada.5 SCO alleges that AutoZone ran versions of the Linux Operating System that violate SCO's copyrights. This action is also stayed pending the outcome of the IBM Litigation, Novell Litigation and Red Hat Litigation.

There is also a lawsuit pending in India filed in April 2003, claiming that SCO is obligated to repurchase certain software products and to reimburse the distributor for certain other operating costs. That action remains pending.

4. The International Court of Arbitration Proceeding

In April 2006, Novell and SuSE Linux, GmbH filed a request for arbitration in the International Court of Arbitration in France claiming that SCO granted SuSE the right to use SCO's intellectual property through SCO's participation in the United Linux Initiative in 2002 and that by virtue of Novell's subsequent acquisition of SuSE, Novell acquired SuSE's rights as a member of United Linux. The arbitration is stayed by virtue of the bankruptcy and this Court ruled that the automatic stay is applicable to the Arbitration.

5

B. SCO's Financial Situation

It is an understatement to stay that since the filing of their bankruptcy the Debtors financial situation has greatly declined. Their own Operations Monthly Operating Report for March 31, 2009 (D.I. 743), the latest Monthly Operating Report which Debtors have filed, shows that Debtors have lost $8,652,612 since filing, without taking into account reorganization costs. These losses compare to total assets of $8.3 million of which there is $728,537 of unrestricted cash and net accounts receivable of $1.4 million. The liabilities, in contrast, total $6.9 million (prepetition) and $4.84 million (postpetition). This reflects a 50% reduction of Debtors' assets since filing their cases. The Sale Motion is, in effect, Debtors' concession that they are no longer able to maintain their business operations. As discussed further below, Debtors are seeking the Court's approval of the sale of all of their assets except for their litigation claims and one business, Mobility, which is generating less than $100,000 in revenues per annum.

C. Bankruptcy Proceedings

The Debtors' bankruptcy cases have been fraught with difficulties and have not progressed after nearly 22 months. There was an unsuccessful effort to sell substantially all of their assets to York Management. Debtors filed an emergency sale motion and yet never submitted an executed asset purchase agreement. A second attempted sale to Stephen Norris Capital Partners, LLC, pursuant to a proposed plan likewise failed.

Debtors filed a Debtors' Joint Plan of Reorganization (D.I. 368) and Disclosure Statement (D.I. 369) in January 2009 which Debtors thereafter withdrew. Debtors later filed

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an Amended Joint Plan of Reorganization (D.I. 654) and Second Disclosure Statement (D.I. 655) which Debtors likewise withdrew.

Despite their difficulties, Debtors sought and obtained three extensions of exclusivity (D.I. 329, 502, 562). Debtors sought a fourth extension of exclusivity which the Court denied, in large part because after two continuances of a hearing on the fourth exclusivity motion, exclusivity had already terminated. Accordingly, Debtors are proceeding without the exclusive right to file a plan of reorganization. It is clear that Debtors do not intend to file a plan. Instead, they have declared their intention to sell substantially all of their assets and thereafter seek to dismiss the bankruptcy cases.

D. The Sale Motion

In May 2009, the OUST, Novell and IBM filed the Conversion Motions. The Court scheduled the Conversion Motions to be heard on June 15, 2009, at 2:00 p.m. The Debtors appeared claiming they had just entered into a sale agreement (the "Sale Agreement") and told the Court that were the Court to approve the sale, Debtors would close the sale, dismiss the case, pay creditors in full and proceed with the Novell Litigation and the IBM Litigation. IBM and Novell objected, expressing the view that given Debtors' history during these cases, the Sale Agreement was a ploy to avoid proceeding on the Conversion Motions. The Court overruled the objection and agreed to consider the latest sale proposal in connection with the Conversion Motions. In fact, the Sale Agreement lacked necessary schedules and exhibits. Debtors did not file the Sale Motion until late on June 22. The Sale Motion proposes a sale to Unixis, Inc. ("Unixis"), of all of Debtors' assets except for its "Mobility" business, the

7

Litigation and such assets as are necessary for Debtors to prosecute the Litigation, assets which Debtors would transfer to Unixis when appropriate to do so. The sale price is $5.25 million consisting of a $250,000 cash deposit, a $2.15 million letter of credit to be drawn upon closing and a $2.85 million letter of credit as a payment toward any final judgment which Novell obtains.

III. DISCUSSION

These bankruptcy cases have been pending for 23 months. Were the Court to approve the Sale Motion, Debtors sole business would be the Litigation, putting aside the Mobility business which is of de minimis value. There would be no plan of reorganization and instead, all that the Debtors would have to show for their millions of dollars of post-petition losses is the Litigation. No one can fairly argue that the Court has not been patient with the Debtors. The Court is now unwilling to continue to wait while Debtors' losses mount and the Debtors intend to dismiss the Chapter 11 cases. During the Hearing on the Conversion Motions and the Sale Motion, Debtors' constant refrain of waiting for the Litigation to succeed reminded the Court of Samuel Beckett's play, Waiting for Godot. In that play, one of the characters says:

But that is not the question. Why are we here, that is the question. And we are blessed in this, that we happen to know the answer. Yes, in this immense confusion one thing is clear. We are waiting for Godot to come.

8

Debtors are waiting for "the dough" from the Litigation but the Court must take action to protect the estate and the creditors. The outcome and time to reach finality of the Litigation are both too uncertain, while the continuing losses are not.

A. The Sale Motion

A sale out of the ordinary course of business is governed by Bankruptcy Code 363(b)(1). Such a sale requires proof that:

(1) there is a sound business purpose for the sale; (2) the proposed sale price is fair; (3) the debtor has provided adequate and reasonable notice; and (4) the buyer has acted in good faith.
In re Delaware & Hudson Railway Co., 124 BR. 169, 176 (D. Del. 1991). Here, the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions. There is no evidence that the sale price is fair because it is just enough for Debtors to dismiss their cases. The terms are equally, if not more, troublesome. Debtors are retaining the Mobility business that is virtually worthless, the letter of credit to pay a Novell judgment terminates on December 31, 2009, with no guarantee that the Novell Litigation will be concluded. Further, the Court is unable to find based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and questionable timing that Unixis has acted in good faith.

The Court is also very disturbed that the Sale Agreement contains a provision (which Movants refer to as a "poison pill") requiring the transfer of assets to Unixis upon conversion or appointment of a trustee. Here, again, the Sale Motion calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith. There is

9

simply no record upon which the Court can find that the Sale is in the best interests of the creditors and the estate. The Sale Motion is denied as falling short of the required standards.6

B. The Conversion Motions

The Conversion Motions are premised on Bankruptcy Code Section 1112(b), which provides, in relevant part, that:

(1) [On request of a party in interest, and after notice and a hearing, absent unusual circumstances specifically identified by the court that established 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 Movants establishes cause.

* * *

(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; [or]

* * *

(J) Failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by an order of this court[.]

Section 1112(b) is clear that the Court must dismiss or convert Debtors' case if Movants' establish "cause" which is defined in Section 1112(b)(4). See, e.g., In re Products Int'l Co.,

10

395 BR. 101, 107-09 (Bankr. D. Ariz. 2008).7 The only "but" to the mandatory conversion or dismissal is if a debtor can prove the existence of "unusual circumstances specifically identified by the court" showing that dismissal or conversion is not in the best interests of the creditors and the estate. (The emphasized words, "creditors and estate," are significant to later discussion in this opinion.)

The Movants have proven been cavil that "cause" exists. Debtors are, and do not deny, suffering substantial and continuing losses to and diminution of the estate. The losses are staggering. In addition, Debtors have no reasonable likelihood of rehabilitation. It is beyond peradventure that Debtors have abandoned rehabilitation by seeking to sell its operating business (except for Mobility which produces minimal revenues) and committing thereafter to dismiss its cases. So much for rehabilitation. In addition, Debtors have not filed a disclosure statement or confirmed a plan within the time allowed in Section 1121, and do not intend to do so.

The Debtors point out that the Court must also consider the unusual circumstances that establish that dismissal or conversion are not in the best interests of the estate. These circumstances include the impact upon shareholders, employees and customers. The Debtors argue that customers may be especially harmed because conversion would result in SCO's inability to maintain, service and upgrade its products. Customers depending on SCO

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include McDonald's restaurants, many smaller companies and the U.S. Navy's ability to launch F-18 fighter jets.

The Court is concerned about the impact of conversion on other constituencies, particularly because the Court did not consider the merits of the Litigation based upon the objection of IBM. The Court finds that the Litigation is an "unusual circumstance" which militates against conversion. Whether pursuit of the Litigation is in the best interests of creditors and the estate is something a Chapter 11 trustee must investigate.

There is no question that the Movants have established the requisite "cause" for dismissal or conversion. The Court, however, has found that an "unusual circumstance" exists and that conversion is therefore not in the best interest of the creditors and the estate. Debtors, as an alternative to conversion, request that the Court appoint an examiner.

Debtors' suggestions of the appointment of an examiner or dismissing the cases rather than converting them do not appeal to the Court. An examiner would leave Debtors' management in charge of these cases and only add to the cost of Debtors' bankruptcy. Dismissing the cases will negate an opportunity for an unprejudiced party to evaluate the sale to Unixis and the merits of the Litigation. The Court is persuaded that neither dismissal nor conversion are in the best interests of creditors and the estate. Instead, the Court will order the OUST to appoint a Chapter 11 trustee.

The Movants insist that only a neutral party should control the process and make the necessary decisions. The Court fully agrees. Where the Court differs from the Movants is that the Movants seek appointment of a Chapter 7 trustee. The Court is convinced that a

12

Chapter 11 trustee better serves the interests of creditors and the estate. At the request of IBM, the Court ruled that it would not consider evidence concerning the merits of the Litigation. IBM was correct that the Court could not decide the merits of the Litigation without conducting a mini-trial and even then, the Court's conclusions would not be more than guesswork of the outcome. Accordingly, the Court is unable to opine on whether the Debtors should continue to pursue the Litigation, but cannot ignore the significance and potential benefit to SCO of the Litigation. The "potential" of the Litigation must, however, be weighed against the reality of the cost. A trustee will be in a better position to make that assessment without the personal and emotional investment of SCO's management. Similarly, a Chapter 11 trustee can evaluate an asset sale independent of Debtors' management's pursuit of the Litigation.

The Court's decision to appoint a Chapter 11 trustee sua sponte is based upon Bankruptcy Code Section 1104(a)(3) and In re Marvel Entertainment Group, Inc., 140 F.3d 463 (3rd Cir. 1998). There, the Third Circuit Court of Appeals discussed the strong preference for leaving a Chapter 11 case in the hands of the debtor because of its familiarity with its business. The Court of Appeals nonetheless found that the acrimony between debtor's management and its creditors justified the Chapter 11 trustee's appointment. Here, the strife between Debtors and IBM and Novell in hard fought litigation makes a considered decision by Debtors on the handling and disposition of the cases unlikely. The Court therefore orders the appointment of a Chapter 11 trustee in the best interests of the creditors and the estate.

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The Court fully respects the OUST's authority and ability to select an appropriate trustee. The Court's "two cents," however, is to suggest that the OUST consider appointing a retired judge or litigator since the analysis of the Litigation will serve as the trustee's principal responsibility.

IV. CONCLUSION

The Court's decision is not intended as a criticism of Debtors' efforts or conduct. SCO found their UNIX operating system under attack and sought redress through litigation. Their principal adversaries, IBM and Novell, are wealthy and have used their deep pockets in the Litigation and in these bankruptcy cases to Debtors' disadvantage. As creditors, IBM and Novell are entitled to act in their self-interest and that is what they are doing. The reality is that eliminating Debtors' litigation against them is far more valuable to IBM and Novell than any recovery from Debtors in the bankruptcy cases. The interests of Debtors' other creditors may differ.

The fact remains that Debtors have lost money and have abandoned rehabilitation. They have "bet the Company" on the Litigation. The Court's decision to appoint a Chapter 11 trustee will enable an independent fiduciary to assess the Litigation with the confidence of the Court and without the doubts raised by Debtors' adversaries in the Litigation.

An Order consistent with this Opinion will issue.

Dated: August 5, 2009

KEVIN GROSS, U.S.B.J.

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1 This Opinion constitutes the findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. To the extent any of the following findings of fact are determined to be conclusions of law, they are adopted, and shall be construed and deemed, conclusions of law. To the extent any of the following conclusions of law are determined to be findings of fact, they are adopted, and shall be construed and deemed, as findings of fact.

2 Operating Systems, in simplistic terms, enable software programs to run on computer hardware. They also allow multiple software programs to run simultaneously.

3 The litigation is captionedThe SCO Group, Inc. v. Novell, Inc., Case No. 2:04CV00139 ("the Novell Litigation").

4 The case is captioned Red Hat, Inc. v. The SCO Group, Inc., Civil No. 03-772 (the "Red Hat Litigation").

5 The case is captioned The SCO Group, Inc. v. AutoZone, Inc., CV-S-04-0237-RCJ-LRL (the "AutoZone Litigation").

6 After the Hearing, Debtors wrote to the Court to report that Debtors were now prepared to subject the Sale to an auction, under the auspices of an examiner. The Court's ruling means a trustee will review the Sale Motion and take independent action as a fiduciary.

7 Congressional intent that "shall" really does mean "must" in the convert or dismiss provision is readily apparent. In 2005, Congress removed the word "may" from Section 1112(b) and substituted "shall" if a moving party establishes "cause." Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8. 119 Stat. 23 (2005). Congress clearly intended to make conversion or dismissal mandatory upon proof of "cause."


  


The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated | 855 comments | Create New Account
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The Order - A Chapter 11 Trustee is to be Appointed
Authored by: Anonymous on Wednesday, August 05 2009 @ 02:55 PM EDT
Wow!!

[ Reply to This | # ]

Corrections please
Authored by: Tufty on Wednesday, August 05 2009 @ 02:57 PM EDT
Tufty


---
Linux powered squirrel.

[ Reply to This | # ]

Off Topic here
Authored by: Tufty on Wednesday, August 05 2009 @ 02:58 PM EDT
For all Yer off tropic posts

Tufty


---
Linux powered squirrel.

[ Reply to This | # ]

IANAL questions: What exactly does that mean?
Authored by: Anonymous on Wednesday, August 05 2009 @ 02:59 PM EDT
In particular, does it mean that SCO's management just lost control of the
company?

Can SCO appeal this? (I'm sure they will if they can, and maybe even if they
can't.)

MSS2

[ Reply to This | # ]

Dead Links
Authored by: Anonymous on Wednesday, August 05 2009 @ 02:59 PM EDT
http://www.groklaw.net/pdf/SCOGBK-890.pdf

and

http://www.groklaw.net/pdf/SCOGBK-891.pdf

result in 404.

[ Reply to This | # ]

News picks
Authored by: Tufty on Wednesday, August 05 2009 @ 02:59 PM EDT
all yer news picks

Tufty


---
Linux powered squirrel.

[ Reply to This | # ]

Is this...
Authored by: Tufty on Wednesday, August 05 2009 @ 03:01 PM EDT
...the end of the beginning or the beginning of the end?

Tufty


---
Linux powered squirrel.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed
Authored by: JamesK on Wednesday, August 05 2009 @ 03:01 PM EDT
Finally, Darl & friends have lost control. Now we can start waiting to hear
what the trustee has to say!

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

[ Reply to This | # ]

So it's bye bye Darl
Authored by: billyskank on Wednesday, August 05 2009 @ 03:03 PM EDT
New management, totally unconnected with the old. No more dreams of beelions in
damages. Wonder what the trustee will think of the litigation.

---
It's not the software that's free; it's you.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:07 PM EDT
And now SCO's countermove.

Will they appeal?

Will they turn-off the lights, close the blinds and pretend nobody is home?

Tune-in tomorrow for the next episode of "As the SCO turns."

[ Reply to This | # ]

BSF now works for SCO and the Trustee
Authored by: webster on Wednesday, August 05 2009 @ 03:09 PM EDT
That will be some interesting input.

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We saw it coming but still disappointed.
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:09 PM EDT
We saw it coming and no one should be surprised but I am
still disappointed in the tenacity of Kevin Gross to
disregard the conduct and hard facts of the state of the
business to this point.

Even at the point of ACTUAL monetary insolvency, with letter shenanigans, and
ample cause by his own admission for
conversion, he is still willing to allow the business to
continue albeit with the current management's hands off.

If the appeal comes back positive in any way for SCO, can
they apply to get thier jobs back somehow?

Can any other party appeal the order if they were to choose
to do so? Would they care enough to do it?

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

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What if the trustee finds the fraud?
Authored by: BitOBear on Wednesday, August 05 2009 @ 03:13 PM EDT
So the neutral party trustee is now going to go where nobody else has honestly
been before; deep as necessary into the litigations and business models bank
statements as necessary to find any, if any, healthy business tissue.

What if he finds the fraud? Then what?

I cannot imagine it can be well hidden once the books open.

Can the trustee pierce the corporate veil on the various players or bring
charges against the company or its officers?

Is the trustee duty bound to do so?

Can he settle the litigation with prejudice? Suck-back all those pointless
attorney fees that have been paid since the bankruptcy started?

Can creditors petition the trustee to redress the wrongs already done during the
bankruptcy?

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The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: piperson on Wednesday, August 05 2009 @ 03:15 PM EDT
I guess this is the second best outcome, but the pain of the last six years will
continue somewhat longer.

-tom

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Keeping SCOG alive until appeal ruling?
Authored by: rfrazier on Wednesday, August 05 2009 @ 03:22 PM EDT
It could be that the judge sees that, however we got there, it should be just a
little more time until the appeal court rules. So, put someone else in charge,
see how the appeal turns out, and go from there. That's my guess.

Best wishes,
Bob

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The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: joe on Wednesday, August 05 2009 @ 03:23 PM EDT
From 890 (the link now works):
"It is an understatement to stay that since the filing of their bankruptcy
the Debtors financial situation has greatly declined."
Doh.

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  • A clue? - Authored by: Anonymous on Wednesday, August 05 2009 @ 03:29 PM EDT
I think that ALL Chapter 11 cases should start with a trustee
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:26 PM EDT

Said trustee would certainly be permitted to retain current management if it
deems it appropriate--many bankruptcy cases are due to cash-flow problems
(rather than outright insolvency) and involve no bad faith on the part of the
debtors, and in such cases the best option for creditors is for the company to
reorganize. In many cases, retaining current management is the best option.

But it should be FAR easier for creditors or the OUST to oust management that is
suspected of being incompetent or crooked.

Having management report to a trustee with wide powers to hire/fire would be a
good way to do that.

[ Reply to This | # ]

Unixis vs unXis
Authored by: jto on Wednesday, August 05 2009 @ 03:29 PM EDT

Does the fact that the BKJ continually refers to Unixis instead of unXis (or Unxis) create an appealable option for SCOG?

---
Regards, Jim Elliott

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What does a Chapter 11 Trustee mean?
Authored by: TJ on Wednesday, August 05 2009 @ 03:32 PM EDT
Although the appointment of a case trustee is a rarity in a chapter 11 case, a party in interest or the U.S. trustee can request the appointment of a case trustee or examiner at any time prior to confirmation in a chapter 11 case. The court, on motion by a party in interest or the U.S. trustee and after notice and hearing, shall order the appointment of a case trustee for cause, including fraud, dishonesty, incompetence, or gross mismanagement, or if such an appointment is in the interest of creditors, any equity security holders, and other interests of the estate. 11 U.S.C. § 1104(a).

Source: Appointment or Election of a Case Trustee

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Waiting for Godot
Authored by: turambar386 on Wednesday, August 05 2009 @ 03:32 PM EDT
What a wonderful quote. It so beautifully summed up SCO's entire existence for
the last 6 years.

Gross is my new hero.

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Words to regret in hindsight....
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:36 PM EDT

Ouch, Bottom of page 3 in the ruling:

SCO presented a credible prediction, based upon the impending retirement of one of the judges sitting on the appeal, that the Tenth Circuit will issue a decision by the end of August 2009.
After having following SCOG for so long, does anyone expect SCOG NOT to put out a press release along the lines:
We will prevail. Judge Gross agrees with our assessment of our appeal calling our assessment credible!
Of course, the O'Gara's of the World will jump on that and spin it stating "SCOG credibly predicted their success on appeal".

In the alternative, will this be a sign SCOG and it's team have decided they've pushed luck too far and leave Judge Gross' wording alone?

RAS

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Ok, so we're delayed again... how long does the Trustee have to get out of Chap 11?
Authored by: l8gravely on Wednesday, August 05 2009 @ 03:37 PM EDT
Well... it's about time. And it's a short and sweet order, but lots and lots of
questions to think about now.

1. Will SCO appeal and how can they?

2. Will Trustee, IBM or Novell appeal the ruling and argue that Chap 7 is really
the only solution? Or will they not care, given that management is now out
(figuratively) on it's ear?

3. How much time does the Trustee now have to evaluate the business and either
a) take it out of Chap 11, or b) convert to Chap 7? And under what
circumstances? To me, this is a *key* question to answer.

4. When does the order take effect? Does current management have until 5pm
today to do what they want, or do they immediately have to stop what they're
doing and start putting all power in the hands of the Trustee?

5. Does the Trustee have to keep management, or can he hire temp management?
I.e. how broad are his powers of reorganization and can they be appealed? Does
the Trustee only have to answer to the judge for his actions?

Lots to think about, thank god I'm not a Lawyer, though since I do know a guy
who does Bankruptcy Law, maybe I should ask him what happens now...

Cheers,
John

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Right up to the last page...
Authored by: ka1axy on Wednesday, August 05 2009 @ 03:46 PM EDT
...I thought the Judge "got it". Then, this comes:

" The Court’s decision is not intended as a criticism of Debtors’
efforts or conduct. SCO found their UNIX operating system under attack and
sought redress through litigation. Their principal adversaries, IBM and Novell,
are wealthy and have used their deep pockets in the Litigation and in these
bankruptcy cases to Debtors’ disadvantage."

Now, it's true, he's a bankruptcy judge. But, how could he get the basis of the
litigation so wrong?

Anyway, plenty of slams against tSCOg's way of slipping and sliding. He knows
he's been "gamed", and wants an objective third party trustee in
charge of the burning hulk that is tSCOg.

'Bye, Darl!
'Bye, Ralph!

...don't let the door hit you in the a** on the way out!

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Actually, a neutral party may be just what is needed.
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:47 PM EDT
> He wants a really neutral party to report to him. He simply doesn't know if
SCO's litigation dreams are based in reality or not. Um. They have lost in every
courtroom they've entered, but the judge wants someone to investigate just for
him.

Actually, this might be exactly what is needed, for a completely neutral party,
with plenipotentiary powers, to go in and have a look. We have all worried that
if SCO simply goes under in bankruptcy, the FUD will not go away, that it will
only be said that poor little SCO was overwhelmed by the big money interests.
So, perhaps if a neutral party has a good, hard look and comes up with an
objective statement saying that there was no case to begin with, just a lot of
hot air and a shameless and scandalous attempt to cast lies and aspersions on
the collective and extremely public projects of FOSS and Linux, that would be
the best thing to happen.

Let us continue to hope.

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The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 03:48 PM EDT
The Court’s decision is not intended as a criticism of Debtors’ efforts or conduct. SCO found their UNIX operating system under attack and sought redress through litigation. Their principal adversaries, IBM and Novell, are wealthy and have used their deep pockets in the Litigation and in these bankruptcy cases to Debtors’ disadvantage. As creditors, IBM and Novell are entitled to act in their self-interest and that is what they are doing. The reality is that eliminating Debtors’ litigation against them is far more valuable to IBM and Novell than any recovery from Debtors in the bankruptcy cases. The interests of Debtors’ other creditors may differ.

IMO the court really has swayed as far as possible towards SCO.

  • Yes, SCO found Unix was becoming less popular, but I'm not sure that it was redress that they were after, so much as a lottery win.
  • I can't recall Novell or IBM seeking to delay anything: IMO it's delay has been damaging to them.
  • To the extent that eliminating the litigation is more valuable to Novell and IBM than recovery from SCO, this is at least in part because of SCO's staggering losses, which can only be attributed to SCO management.

    [ Reply to This | # ]

About what was expected
Authored by: snakebitehurts on Wednesday, August 05 2009 @ 03:49 PM EDT
IBM/Novell/Trustee and even SCO all told the Judge a Chap 11 Trustee was
appropriate if he did not convert to Chap 7.

The Trustee would be wise to heed Judge Gross' "two cents" comments on
hiring a retired judge or a litigator. I suspect we'll be back in Judge Gross
courtroom again as SCO fights everything the assigned Trustee decides or
directs.

But this is good news. Finally - a neutral party will be in charge.

So what happens between now and when some one is assigned this case? Has SCO
management been effectively removed as of this judgement?

MikeD

[ Reply to This | # ]

Justice Moves Slowly
Authored by: KayZee on Wednesday, August 05 2009 @ 03:57 PM EDT
PJ has always counselled us that the courts and justice moves slowly. This is
just another grain of sand falling in the sand clock. Eventually it will bury
SCO. But its still frustrating to watch this play out since March 2003. Let's
hope the Examiner figures out quickly that its time to end this.

[ Reply to This | # ]

  • Justice Moves Slowly - Authored by: Anonymous on Wednesday, August 05 2009 @ 04:50 PM EDT
    • Freudian slip? - Authored by: Anonymous on Wednesday, August 05 2009 @ 06:17 PM EDT
The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:02 PM EDT

It would be wonderful to think that the SCOap opera will end its run soon
stay tuned and find out tomorrow if Darl will appeal!
and now for a word from our sponsor:

[ Reply to This | # ]

Judge wrong about AutoZone
Authored by: rsteinmetz70112 on Wednesday, August 05 2009 @ 04:08 PM EDT
The Judge said this about AutoZone;

"This action is also stayed pending the outcome of the IBM Litigation,
Novell Litigation and Red Hat Litigation."

Not that it makes much difference.

---
Rsteinmetz - IANAL therefore my opinions are illegal.

"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk

[ Reply to This | # ]

Could all be judged by an unconnected judge
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:13 PM EDT
"The Court's "two cents," however, is to suggest that the OUST
consider appointing a retired judge or litigator since the analysis of the
Litigation will serve as the trustee's principal responsibility."

If the trustee does appoint on that basis we may well have an interesting
position in that the whole matter could be decided by a judge (retired) or
lawyer who has had nothing to do with any of the legislation.

[ Reply to This | # ]

  • Unconnected judge - Authored by: Anonymous on Wednesday, August 05 2009 @ 05:15 PM EDT
The judge really nailed it.
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:14 PM EDT
Debtors are retaining the Mobility business that is virtually worthless...

Don't you love it? I do!

[ Reply to This | # ]

OK; judge thinks where there's smoke
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:17 PM EDT

There must be fire. Else why would the executives bet the farm on the litigation. That neither Novell or IBM are willing to settle out of court gives him pause. He can't believe that two companies with sound business models and actual profits, wouldn't just pay the blackmail.

So he seeks a neutral view as to the litigation. If there is any reasonable hope, he lets the company stand. Else it converts to Chap 7. I'd call this a wise decision. Except for the fact the even the judge's argument include the poor business skills of the 'debtors'. He noted the last MOR was for March 2009 (before the close of business, July 27), that the debtors had no business plan as such, not even as patent trolling company (which is a business model) and were making no effort to have one.

Also he noted he's bent over backwards for the debtors. But that's not his job. His job, which he seems to have forgotten, is to guard the rights and property of the creditors. In my opinion, he's failed there. Pity federal judge appointments are for a lifetime. I'd like to fire him, as a teaching moment to other federal judges, noting his failure to do his job in a timely way.

I sound like sour grapes? Yes. When one considers that at this time, millions are being forced out of their homes by bankruptcy judges, doing their job, their duty to the law, correctly, it's hard to take a bankruptcy judge failing to do his.

But with the trustee/11, and SCO's lousy chances, I suspect he'll get a the opportunity to do his duty, albeit, slower then he should have.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:18 PM EDT
From the bottom of page 9:
. . . Further, the Court is unable to find based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and questionable timing that Unixis has acted in good faith.

The Court is also very disturbed that the Sale Agreement contains a provision (which Movants refer to as a "poison pill") requiring the transfer of assets to Unixis upon conversion or appointment of a trustee. Here, again, the Sale Motion calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith.

(emphasis mine) How lovely to see the judge has recognized SCO's and Unixis' (sic) actions for what they are. His hackles are up, let's see what happens with the appointment of a trustee.

[ Reply to This | # ]

I Called it!
Authored by: rsteinmetz70112 on Wednesday, August 05 2009 @ 04:22 PM EDT
I'm a little satisfied right now that I called.

For a while I've beleived that the only way to get to the bottom of this mess is
to send in a neutral party. As the Judge pointed out SCO's management has bet
the company on litigation. IBM and Novell are acting in their own self interest.
There isn't anyone looking out for the estate.

This is probably the best option in the interest of the estate.

It also doesn't seem to me this will delay anything much. IBM is still stayed.
AutoZone is moving but just getting underway. Novell is on hiatus while we wait
for the ruling.

---
Rsteinmetz - IANAL therefore my opinions are illegal.

"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk

[ Reply to This | # ]

Taking SCO at its word
Authored by: jpvlsmv on Wednesday, August 05 2009 @ 04:23 PM EDT
There are a lot of areas in the opinion where Judge Gross accepts as fact the
SCO view of the situation, which seems quite odd to me. It's as if he looked
only at some of the legal arguments of the non-SCO parties, but took all of the
SCO history as gospel.

For example:
In A.1, he starts off strongly implying that Novell's announcement of the
copyright fight caused the SCO stock price to plummet. Which is of questionable
factual accuracy at best.

He notes that "Customers depending on SCO include McDonald's restaurants,
many smaller companies and the U.S. Navy's ability to launch F-18 fighter
jets." -- Other than in a letter not representing the navy, is there any
evidence that SCO launches planes?

However, it is reassuring to see that he recognizes the Mobility business as
"virtually worthless".

--Joe

[ Reply to This | # ]

Judge has succumbed to SCO reality distortion field - TBH I'm just glad its not worse.
Authored by: SilverWave on Wednesday, August 05 2009 @ 04:27 PM EDT
Lets just hope that the Trustee isn't infected by the reality distorting field
that is present at SCO.

Obviously the Judge has succumbed.

I thought that Chapter 7 would be the fair and equitable result... so I
expecting this... TBH I'm just glad its not worse.

Judge Bends Over Backwards For SCO is *so* old news if you have been following
this case for any time.

Still at least someone sane will be in charge so that's something...

Also it will be nice to see SCO management losing control.

Ah! I found a silver lining!




---
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 | # ]

3-word summary: SCO wins again
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:38 PM EDT

Incredibly - since he did question the good faith of SCO management - Gross has given SCO what they really wanted.

Of course, they asked for more than they thought they could get. That's standard procedure. But this outcome is probably what they were hoping for.

People here are setting too much store by the "independent Chapter 11 trustee" who is going to be appointed. He or she will not really be independent, but will be subject to influence by SCO management, and will very likely align his/her opinions and policy to SCO management's.

Here's why: the chapter 11 trustee is supposed to run the business. But he/she doesn't know anything about SCO's business - so will need guidance from people who do. Who would that be? SCO's management, of course.

This kind of thing also happens with regulatory agencies set up by the government. They spend a lot of time talking to executives in the businesses they regulate ... so that in the end, they come to hold the same opinions.

[ Reply to This | # ]

SCO Website
Authored by: tedavids on Wednesday, August 05 2009 @ 04:39 PM EDT
Huh. I wonder why the SCO website isn't updated yet?

:D

[ Reply to This | # ]

SCO will quote this ruling endlessly
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:41 PM EDT
Gross obliged them by throwing in all their favorite lines, which you can bet
they will now trumpet loudly as confirming what they've said all along.

First, the sequence of ownership/success... his description of SCO acquiring
UNIX and then it becoming one of the world's leading OS's is just totally
backwards... Unix was already declining steadily before Santa Cruz acquired it.

Second, he talks about their stock price dropping after Kimball's ruling, but
never mentions that it was only where it was because of Darl's hype campaign,
and that even in the immediate drop after the ruling it was still higher than it
had ever been prior to the litigation.

And third, he gives them a pre-written press release with the bit about poor,
poor SCO's Unix being 'under attack' and their having to protect it, and IBM and
Novell using their deep pockets to disadvantage SCO in the litigation,
completely ignoring that SCO's pockets were considerably deepened by the outside
influx of cash from a certain pipe fairy, and that they have disadvantaged IBM
and Novell continuously by their gaming of the courts.

If SCO was looking for quotable ammunition, this ruling ought to have them
bouncing with glee. I expect to see the conclusion paragraph up on their
website by days end.

[ Reply to This | # ]

Merits of the Litigation
Authored by: overshoot on Wednesday, August 05 2009 @ 04:45 PM EDT
Well, if the Court wants an informed legal opinion on the merits of the IBM
Litigation, I do believe that one United States District Judge Dale Kimball
might provide some guidance if freed from the Stay that keeps him from issuing
judgments on the various Motions for Partial Summary Judgment currently before
him.

[ Reply to This | # ]

What will we hear going forward?
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:51 PM EDT
Will the trustee report to the court on a regular basis?

[ Reply to This | # ]

Will the Chapter 11 Trustee finally create a Plan of Reorganization?
Authored by: vb on Wednesday, August 05 2009 @ 04:52 PM EDT
Or will the trustee agree with SCO that they "don't need no stink'n
plan..."

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:52 PM EDT
When?

When do the feds take over?

[ Reply to This | # ]

Chapter 11 Trustee Handbook
Authored by: Nagle on Wednesday, August 05 2009 @ 04:54 PM EDT

Here's the official Chapter 11 Bankruptcy Trustee Handbook, from the US Department of Justice.

One of the first steps is to find every bank account associated with the debtor and move the funds into accounts controlled by the Trustee.

[ Reply to This | # ]

SCO would appeal conversion anyway
Authored by: UncleJosh on Wednesday, August 05 2009 @ 04:54 PM EDT
SCO will probably appeal this decision and almost certainly would have appealed
a conversion to Chapter 7. Either appeal would probably not succeed, but might
well delay things until the appeals court rules. Of course we all know that any
court ruling would not normally stop SCO, so again, more delay.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 04:56 PM EDT
PJ; While reading this report, I realized that there must be something else
going on that the naked eye cannot see: (yes, call me a conspiritist or pass the
tin foil). I recall that Brent Hatch has an VIP father who agreed with Darl
that it could be unconstitutional to develop something and give it away. I just
wonder if there is some kind of pressure put on Judge Gross. He seems to bend
over backward to help sco - just like everyone else except Judge Kimball - but
had to do something, and did as little as he could. Tell me I'm wrong, I'd
certainly like to believe it, but the evidence is compelling.

[ Reply to This | # ]

Chapter 11 Trustee Handbook
Authored by: cmcnabb on Wednesday, August 05 2009 @ 04:56 PM EDT
For those interested in finding out the duties and responsibilities of a Chapter 11 Trustee: Chapter 11 Trustee Handbook (pdf)

---
"When governments fear the people, there is liberty. When the people fear the government, there is tyranny." - Thomas Jefferson

[ Reply to This | # ]

Still some wiggle room - but the spot is getting much tighter
Authored by: PolR on Wednesday, August 05 2009 @ 04:57 PM EDT
This is shifting the game to how SCOG can pull wool over the Trustee's eyes.

Where do you think the Trustee will get his input? Interviews with SCOG
management? Internal documents? The lawyers? Management will tell him a biased
story. BSF and other lawyers won't say anything that may get them sanctioned and
this too will bias the story I think. Internal documents may tip the trustee off
though. But if SCOG has planned for the Trustee arrival, he will be shown
carefully written/selected documents.

I think the attitude of the Trustee will matter. If he thinks he is likely to be
gamed, he will work like an investigator and have a big chance of finding out
what is going on. But if he thinks his job is to reorganize a business in spite
of incompetent management, he might not do the kind of investigations the
situation requires.

The way I understand a Chapter 11 Trustee is his job is to put the company back
on its rails, not to search for evidence of wrong doings. But he may stumble
upon such evidence even without searching for it.

SCOG will try to pull wool over the Trustee's eyes. The Trustee will try to see
for himself what is going on. The situation is perilous to SCOG, but there is
wiggle room. We will see how it turns out.

[ Reply to This | # ]

Not surprised, a little dissapointed.
Authored by: RPN on Wednesday, August 05 2009 @ 05:03 PM EDT
I was prepared to cut Judge Gross some slack up to now but I do believe this
judgment, while at least a positive step forward, is not appropriate to the
situation.

I'm not sure why a Chapter 7 trustee rather than a Chapter 11 one makes any
difference to what the creditors get even if the litigation does work out (ha
ha!). As someone else above put clearly the judges duty is actually at the
bottom line to the creditors not the debtor. In Chapter 11 you cut the genuine
debtor slack and give them a chance. But the bottom line remains the creditors.

It would seem he has not properly read or understood Judge Kimballs ruling or
he'd have more serious doubts about the litigation and its appeal chances and
understand this isn't a living OS we're talking about but a dying one. We could
get shocked again but it seems the odds on the appeal providing any really
substantive questioning of Judge Kimballs ruling are very long.

Oh well. At least there is someone in poking around the mess and getting in
Darl's way. That's a step forward, if not all we had hoped for.

Richard.

[ Reply to This | # ]

The real question
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:04 PM EDT
How much delay did they buy this time?

I assume it takes a while to appoint the trustee and get him up to speed, and
given SCO's penchant for ambiguous and ever shifting relationships between their
subsidiaries, I expect it to take awhile before any of the numbers mean anything
(no, no, it's the other pea...).

ANd then there's appeal... can SCO appeal this? If yes, that's guaranteed, and
how long does that take?

[ Reply to This | # ]

  • Or Novell or IBM - Authored by: Anonymous on Wednesday, August 05 2009 @ 05:19 PM EDT
    • Agreed - Authored by: Anonymous on Wednesday, August 05 2009 @ 05:44 PM EDT
    • Problem is - Authored by: Anonymous on Wednesday, August 05 2009 @ 06:32 PM EDT
An Evil Thought
Authored by: cassini2006 on Wednesday, August 05 2009 @ 05:04 PM EDT

Unlike a judge in a court proceeding isn't supposed to be influenced by information not before the court. However, a trustee is an independent agent.

The trustee can read Groklaw ...

Any speculation as to what the trustee will think?

[ Reply to This | # ]

Judge says: March 31, 2009 is the latest Monthly Operating Report which Debtors have filed
Authored by: SilverWave on Wednesday, August 05 2009 @ 05:06 PM EDT

"Their own Operations Monthly Operating Report for March 31, 2009 (D.I. 743), the latest Monthly Operating Report which Debtors have filed, shows that Debtors have lost $8,652,612 since filing,"

---
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 | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: eggplant37 on Wednesday, August 05 2009 @ 05:17 PM EDT
I honestly never thought I'd see the day. I'm drinking an absinthe to celebrate.


Sorry, Darl, but we'll see ya in the want ads.

[ Reply to This | # ]

Pool: How long to Chapter 7
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:23 PM EDT
Ah, the pessimists here. It's just delay? SCO wishes it were just delay.

My "pool" question: When does the trustee call for conversion to
Chapter 7?

My entry: September 2nd. (For you pessimists: 2009, of course.)

MSS2

[ Reply to This | # ]

I think the judge is saying I'm not an accountant
Authored by: kawabago on Wednesday, August 05 2009 @ 05:28 PM EDT
I think the judge is saying, I'm not a chartered accountant and that is whom is
required to determine what is best for the creditors in this case.

I see his point and grudgingly agree with him.

[ Reply to This | # ]

Hans and the Judge agree
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:31 PM EDT

"...the Mobility business ... is virtually worthless..."

[ Reply to This | # ]

Theyre all tained, I tell you!
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:36 PM EDT
The OUST cant possibly comply with this order, SCO can tell
the court! Certainly any 'retired judge or litigator' who has
had any kind of career will have worked for or litigated
against IBM!

:)

Sorry, couldn't resist.

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

[ Reply to This | # ]

Judge bets on an appeal decision by the end of August 2009. That will be his litmus test.
Authored by: SilverWave on Wednesday, August 05 2009 @ 05:38 PM EDT
This workaround is just a way of waiting until the appeal decision is made.

That decision is going to be his litmus test as to whether this litigation has
any chance of paying off.


"SCO presented a credible prediction, based upon the impending retirement
of one of the judges sitting on the appeal, that the Tenth Circuit will issue a
decision by the end of August 2009."

---
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 | # ]

litigation win = lottery win
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:39 PM EDT
While not perhaps entirely fair to the judge, where he says:
"Accordingly, the Court is unable to opine on whether the Debtors should
continue to pursue the Litigation, but cannot ignore the significance and
potential benefit to SCO of the Litigation."

my mind read that as:
... significance and potential benefit to SCO of winning the powerball lottery.

Except that with the lottery there is a chance that SCO could win.

[ Reply to This | # ]

Frustrating yet reasonable
Authored by: jbb on Wednesday, August 05 2009 @ 05:39 PM EDT
The Court's "two cents," however, is to suggest that the OUST consider appointing a retired judge or litigator since the analysis of the Litigation will serve as the trustee's principal responsibility. ...

The fact remains that Debtors have lost money and have abandoned rehabilitation. They have "bet the Company" on the Litigation. The Court's decision to appoint a Chapter 11 trustee will enable an independent fiduciary to assess the Litigation with the confidence of the Court and without the doubts raised by Debtors' adversaries in the Litigation.

Judge Gross is right. If SCO is telling the truth and IBM and Novell are lying their hats off then SCO has an excellent shot at rehabilitation. In order to decide who is lying their little pointy hat off, someone needs to evaluate the current state of the litigation.

I wonder if there would be any conflict of interest if Judge Dale A. Kimball were appointed as the Chapter 11 Trustee? He is certainly intimately familiar with both the Novell and the IBM litigation. If someone has to come in cold, it will take them a while to wrap their heads around the magnitude and plenitude of SCO's lies. He/She may not be amused especially when they discover that it is documented that SCO knew these were lies from the get-go. Kimball's ruling in the Novell case is very clear. The lack of evidence of infringement in the IBM case is also very clear. The contrast between SCO's statements out of court and their lack of evidence to back up any of their claims in court is breath taking.

There is enough evidence in the public record to make it perfectly clear who has been lying all along. But the interesting thing will be to see if the trustee finds evidence of even fouler deeds that have not yet seen the light of day.

Perhaps a Chapter 11 Trustee is the best possible outcome from the court of Judge Gross. If the trustee is assigned soon, they might have about three weeks to dig for the truth before an expected ruling from the appeals court. This should be more than enough time to evaluate the wisdom of SCO spending other people's money to persue their anti-Linux litigation any further.


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

[ Reply to This | # ]

Before an appeal comes the mediation.
Authored by: clemenstimpler on Wednesday, August 05 2009 @ 05:40 PM EDT
In Delaware, or so it seems, before an appeal is heard in the Federal Court, parties are obliged to participate in a mediation. I guess, this means more delay, even before a trustee can be appointed.

[ Reply to This | # ]

For trustee, I Nominate
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:43 PM EDT

Mr. Mustard of the great Canopy Group shootout.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:44 PM EDT
The judge has some harsh things to say about SCO. Here are a selection of quotes:
  • the Mobility business which is of de minimis value
  • The Court is now unwilling to continue to wait while Debtors' losses mount
  • The outcome and time to reach finality of the Litigation are both too uncertain, while the continuing losses are not.
  • The Court is also very disturbed that the Sale Agreement contains a provision (which Movants refer to as a "poison pill") requiring the transfer of assets to Unixis upon conversion or appointment of a trustee.
  • the Sale Motion calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith.
  • the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions.
  • the Mobility business that is virtually worthless,
  • the Court is unable to find based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and questionable timing that Unixis has acted in good faith.
  • The "potential" of the Litigation must, however, be weighed against the reality of the cost.
  • the strife between Debtors and IBM and Novell in hard fought litigation makes a considered decision by Debtors on the handling and disposition of the cases unlikely.

The judge has just called the Mobility business worthless. He calls the sale price "highly suspect". He accuses SCO and Unxis of acting in bad faith. He says that the existing management are unable to look at the litigation objectively.

I don't know what anyone else thinks, but I call all that a pretty clear condemnation of everything that SCO has done. I expected that the judge might think these things. I never expected him however to come right out and say them. He also says:

The Court fully respects the OUST's authority and ability to select an appropriate trustee. The Court's "two cents," however, is to suggest that the OUST consider appointing a retired judge or litigator since the analysis of the Litigation will serve as the trustee's principal responsibility.

I think that any objective party who took a long hard look at SCO's litigation history would call the major cases hopeless and look for a way to settle as cheaply as possible with all parties concerned.

No doubt the existing SCO management will try to appeal and delay this, but I think this is the end of the road for SCO.

[ Reply to This | # ]

A fiduciary's ability to assess the prospects of "the Litigation"
Authored by: theMutant on Wednesday, August 05 2009 @ 05:46 PM EDT
PJ:
"And how will a fiduciary be able to do that, if the judge can't, and even
more if he already ruled he shouldn't consider such merits?"

IANAL, but is the trustee prevented from considering factors the judge didn't?
It seems to me that the judge refused to consider the letters and the prospects
of the litigation for the purpose of deciding those particular motions. Now
that the judge has reached his decision, and has ordered the appointment of a
trustee, is that trustee restricted from considering those things?

It seems this is not the case, since the judge specifically stated that the
trustee WOULD be able to evaluate the prospects of the litigation to determine
what would be the best course for handling SCO's business.

---
David W. Cooney
the Mutant o)

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:47 PM EDT
This provides a great opportunity for SCO's lawyers to pull the plug on the
litigation. They just need to tell the trustee that, in their opinion, there
is very little chance of success.

I suspect this will happen, since they KNOW there is very little chance, and
they are already on the hook for litigating this, and they don't want to do work
for which they won't be compensated.

[ Reply to This | # ]

This part of the Order is, frankly, offensive.
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:50 PM EDT
"The Court's decision is not intended as a criticism of Debtors' efforts or
conduct. SCO found their UNIX operating system under attack and sought redress
through litigation. Their principal adversaries, IBM and Novell, are wealthy and
have used their deep pockets in the Litigation and in these bankruptcy cases to
Debtors' disadvantage."

SCO under attack by IBM and Novell with their "deep pockets"? What
universe is Gross living in? These cases began with SCO attacking everyone like
a rabid animal, and IBM and Novell have merely been competently defending
themselves.

The Debtors have *always* lost money, that is not IBM and Novell's fault. Maybe
if they were competent to run a business and had avoided suing their own
customers, they might not have the financial woes they now have! Instead, they
were busy breaching their fiduciary duty and illegally converting *millions* of
dollars of Novell's property. Its not like Novell is going to get paid back for
all the monetary harm SCO has caused to them, even if they somehow emerge from
bankruptcy.

Gross should have put them into Chapter 7. They've had 2 years in Chapter 11
and *nothing* has been accomplished except to further diminish the assets of the
estate. If another month goes by without Chapter 7, it will only diminish what
the creditors get even more.

The only good that might come out of this that might make it worth having waited
2 years for, is if the Chapter 11 trustee takes a look at the insides of SCO and
finds all sorts of shading goings-on and it leads to criminal investigations or
piercing of the corporate veil.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Steve Martin on Wednesday, August 05 2009 @ 05:55 PM EDT
Okay.

So now a Chapter 11 trustee is charged by the Court with looking at the
litigation to see if it's worth pursuing.

I have to imagine that one of the first things he'll want to see is the million
lines of infringing code. Or in fact any evidence at all of infringment.

I'm flashing back to Wells' "Is this all you have?" and Kimball's
"an astonishing lack of evidence".

Makes me wanna break out in haiku.....

Gross has spoken out.
The Trustee now is driving.
SCO is sweating blood.



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

[ Reply to This | # ]

The Order - Defective as a Matter of Law
Authored by: Anonymous on Wednesday, August 05 2009 @ 05:56 PM EDT
First: I am NOT a lawyer. But it is clear, in basic logic that the opinion is
legally incorrect.

The key is parts of 1112(b)(1):
" On request of a party in interest, and after notice and a hearing, ->
... exception(1) ... <- the court shall convert a case..."

The command of the statute is explicit: IF X THEN Y.

The only exception to that command is this:
>exception(1)<: "...absent unusual circumstances specifically
identified by the court that established that the requested conversion or
dismissal is not in the best interests of the creditors and the estate..."

The operative test is whether the conversion "...is not in the best
interests of the creditors >AND< the estate.

That is, the judge must specifically find:
>a< that conversion is not in the best interests of the creditors,
AND
>b< that conversion is not in the best interests of the estate.

THE PROBLEM:
Per Exception part >b<,the judge did find (more or less) that conversion
to Chapter 7 was not in the estate's best interest.

BUT Per Exception part >a< the judge did/could not find (with specificity)
that conversion was in the creditor's best interest.

Thus by the failure to meed both parts of the statury two part test, the motions
for coversion should have been granted.

The judge could not plausibly find item >a< because it was the CREDITORs
that were asking for conversion. To say otherwise is to argue that the judge
knows better than IBM, and Novell, what their best interests are. (And no other
creditors appeared in opposition, and the US Trustee also moved for
conversion.)

Worse, the opinion's footnote Seven recognizes that Congress explicitly changed
the law to stop judges doing what this judge just did. (I think that's called
'cocking a snook' ?)

If either IBM or Novell appeals this to the District Court, I think reversal or
outright Chapter 7 is a slam-dunk.

On the other hand this opinion may only be a bump in the road.

But there is a more disturbing undercurrent: The Chapter 11 Trustee is appointed
almost like an Examiner, that is to look at the litigation prospects. But the
judge earlier agreed that he didn't have the >something< needed to move
the litigation into his court. If that >something< is 'authority', then
he's got it right. But if that >something< is 'resources' then this is a
BIG power grab, via the appointed trustee.

Bad Decision.

I am not a lawyer, I don't even play one on TV.
JG



[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied
Authored by: Steve Martin on Wednesday, August 05 2009 @ 05:59 PM EDT
So now that Judge Gross has ordered the appointment of a trustee, does the
"poison pill" provision of the SPA kick in? Or did that agreement die
when Gross denied the Motion to Sell? (The agreement was executed and signed,
after all, and seems to be to be a valid contract. And we all know how The SCO
Group feels about those who breach contracts.)



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

[ Reply to This | # ]

Help with their Press Release
Authored by: mpg on Wednesday, August 05 2009 @ 06:10 PM EDT
They might need some help from us in spinning this one.

I'll start by offering this slant:

"SCOG today announced immediate plans to strengthen their management team
by partnering with an experienced, independent advisor. Although the name of
the new member of senior management was not available at press time, the
individual is reported to have extensive experience in litigation and complex
financial transactions..."

and I'd also suggest a revival of an oldie-but-goodie:

"Darl C. McBride, CEO of the SCO Group, expressed his pleasure with today's
court announcement. 'A neutral thirty-party is what we've wanted all along,'
McBride said. 'That's what we've always said. We just want our day in
court.'"

-mpg

[ Reply to This | # ]

Expected result
Authored by: Anonymous on Wednesday, August 05 2009 @ 06:28 PM EDT
There is apparently still some money left to pay lawyers so the circus must go
on until it is all used up.

[ Reply to This | # ]

An educational exercise - The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale...
Authored by: Anonymous on Wednesday, August 05 2009 @ 06:50 PM EDT
"...they can just show some new materials to the new trustee."

They've been showing materials and showing materials, and it takes years before
the person being shown the materials gets it. Look how long it took to educate
Judge Kimball. They had one trustee assigned to the bankruptcy, and they got
another one, who kept on approving "payments", until he finally asked
for a conversion. Now we have someone else that needs to be educated.

I thought the reason Judge Kimball gave SCO so much latitude was to make his
decision appeal proof. Now we have another judge that has bought the SCO story,
not quite hook line and sinker, but clearly on the line. How many investors
bought the "well it might be a long shot, but if they've got it, it could
be a real windfall" line. You could buy a hundred shares of SCO for less
than a bag of groceries if you want.

So the judge is saying SCO is worth more to IBM and Novell as a empty hole in
the ground, and that's why he is considering SCO's position. Probably because
of these nuisance lawsuits with no merit that keep eating away with legal fees.

It will be interesting to consider what happens with the trustee. If they
decide to continue the litigation, are Bois etc. still on the hook? The thing
is with them legal fees are paid. With any other lawyer, you have to start
laying out money again.

Obviously the trustee will be getting an earful, and probably most of it from
SCO's current management. They are nothing if not experienced salesmen.

[ Reply to This | # ]

BSF's chance to get out of it.
Authored by: Anonymous on Wednesday, August 05 2009 @ 06:52 PM EDT
Maybe I'm giving them too much credit by SCO's lawyers seem to be fairly smart
cookies. Given:
0)They have said they aren't making money on the case any more.
1)There doesn't seem to be a pay out ever coming.
2)They've got to be worried the Trustee/Judge might try to grab back for of the
money SCO has given them.
3)It's been clear that SCO is sliding into BK.

A smart lawyer (and these guys seem to be pretty smart given how long they
have kept things going) would want to cut his losses and exit stage left. I'd
lay good money that they have a paper trail of them saying the litigation is a
lost cause. This gives them an out without loosing face, and an argument that
they were trying their best despite having stupid clients.

[ Reply to This | # ]

What would you do?
Authored by: Anonymous on Wednesday, August 05 2009 @ 07:09 PM EDT
If I was the trustee, I would interview everybody in the company. And the
lawyers. I assume the trustee inherits the privileged client communication - so
he can suddenly get into all the dirty stuff that discovery can not.

BSF will have to tell him what they truly believe about the case.

Until now, BSF would be required to tell everybody that they are 100% the case
will be won. To say anything different would be misrepresentation of their
client.

But now the trustee _is_ the client. They can not lie to the client - if they
believe it is a lost cause they _have_ to tell him. To do otherwise is
malpractice.

[ Reply to This | # ]

A different take on the - ORDER
Authored by: Anonymous on Wednesday, August 05 2009 @ 07:20 PM EDT
Actully, I'm not surprised by the order, and with all repsect to PJ opinion
about the rulling, I find the opinion very balanced.

Here is what I took away from the opinion.

1) TSCOG and BOD have not attempted to rehabiliate the BK cases. I think that
is a harsh and damning statement about TSCOG management.

2) Judge Gross also decided that Novell and IBM have a significant stake in
ending the litigations and thus can not be considered netural parties, or
typical in representing all creditors.

3) By having assigned a US Trustee, a neutral party, with power to see all of
the TSCOG documents and and speak to all of the TSCOG laywers, the assinged
trustee can better assess the strengths and weaknesses of all the litigation,
including the SUSE abritration. This assessment needs to be done whether the BK
cases are in Chapter 11 or Chapter 7, and part of the assessement will be both
potential awards and potential liabilities. TSCOG managment has never wanted to
talk about the potential liabilities which could in the hunderds of millions of
dollars or more. This is not an area of expertise for a BK Judge.

4) By assigning the US Trustee, the Judge gets the needed neutral (ie,
independent assessment of litigation), which will be required for Chapter 7
anyway. Remeber, as a part of the Trustee report, this trustee can make a
recommendation for Conversion to Chapter 7.

5) In the motions by the OUST, IBM and Novell gave the judge to option of
choosing a Chapter 11 Trustee, which the judge elected to pursue.

6) Regardless, of the comments here, TSCOG management lost big time. The TBD
OUST assigned Trustee, is now in charge, with access to all internal information
including TSCOG-attorney communications.

Whether, this is done in Chapter 7 or Chapter 11, in terms of practice, won't
matter much, as this neutral assessment needs to be made either way.

Actually, I believe that Judge Gross to have take the most prudent coarse of
action once he determined the TSCOG mamagment had to go. I remind everyone here
that Judge Gross needs to balance the interest of all of the creditors and
equity holders, and not just the vocal Novell and IBM. I'm not saying Novell's
or IBM's position is wrong, I just don't see anything in Judge Gross's decision
that impacts IBM or Novell negatively. This independent assessment would need
to be done in either case, and report and recommend will before the Judge Gross
as soon as the assigned trusted completes the assessment.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Zak3056 on Wednesday, August 05 2009 @ 07:36 PM EDT
You know, for the last six years, PJ has been the absolute soul of impartiality when it comes to the rulings made by various judges. It's always been "I don't agree with the ruling, but I can understand how they got there." Until today. This is the first time I can recall her being overtly critical of a judicial decision in this case. That says quite a bit about the merits (or lack thereof) of this decision, don't you think?

Honestly, I'm grateful for SCO v. IBM. It's highlighted (if not to the layperson, then at least to the geek segment of the population) just how utterly screwed up the legal system has become. I'm not confident we can do anything about it (the people who have the power to change things are served quite nicely by it) but at least its out there.

[ Reply to This | # ]

When will appeals court rule?
Authored by: Anonymous on Wednesday, August 05 2009 @ 07:49 PM EDT
So looks like the appeal hearing was 3 months ago. Is the ruling expected soon?
Is there something else happening on that front?

[ Reply to This | # ]

How do you appeal getting what you said was OK?
Authored by: ankylosaurus on Wednesday, August 05 2009 @ 07:56 PM EDT
So, in all honesty, I think this is an extremely appealable ruling. Or more exactly, it would be if IBM and Novell hadn't said a Chapter 11 trustee was OK. How do you appeal getting what you said was OK, even if you got it for some illogical reasons?

Maybe IBM and Novell get to go to appeal because SCOG appeals, and then IBM and Novell can point out the illogicalities, and the appeal court can change the decision to Chapter 7 because of the illogicality?

---
The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

Trustee Appointment/Election requirements.
Authored by: rfrazier on Wednesday, August 05 2009 @ 07:59 PM EDT
Here is a link to the 2004 Chapter 11 Trustee Handbook. It lays out the conditions for appointment and/or election. It looks to me like there is very little to be gained in a disputed election of a trustee. But, I've not read it carefully.

Best wishes,

Bob

[ Reply to This | # ]

Who's best interest?
Authored by: polymath on Wednesday, August 05 2009 @ 08:24 PM EDT
Hmmm - bankruptcy is supposed to be adjudicated "in the best interests of
creditors and the estate" - the customers have no standing. I can however
think of two parties who do stand to benefit from keeping a brain dead SCO on
life support: the SCO's lawyers who get to keep the litigation alive and
Microsoft of course. I doubt that this judge has been influenced by Microsoft;
although I have no evidence to support that doubt. Judges often seem to decide
not in favor of a party but in favor of the lawyers, rendering decisions that
maximize billable hours for all council. As lawyers themselves, judges must
automatically identify with council and unconsciously tend to act for their
benefit.

Just saying...

[ Reply to This | # ]

Things that the judge got wrong
Authored by: s65_sean on Wednesday, August 05 2009 @ 08:28 PM EDT
In 1995, Debtors' predecessor-in-interest purchased Novell's UNIX operating system which became one of the world's most successful operating systems.
UNIX was already one of the world's most successful operating systems before 1995, and it was already becoming less successful by the time the APA was executed in 1995.
SCO claims that IBM breached its UNIX source code licenses by disclosing restricted information in connection with IBM’s efforts to promote the IBM Linux operating system.
IBM does not have a Linux operating system. They have contributed to the Linux kernel, but they do not own the OS.
The Court's decision is not intended as a criticism of Debtors' efforts or conduct. SCO found their UNIX operating system under attack and sought redress through litigation. Their principal adversaries, IBM and Novell, are wealthy and have used their deep pockets in the Litigation and in these bankruptcy cases to Debtors' disadvantage.
It was SCO that sought to delay the IBM and Novell cases through motions for extended discovery and other various motions that delayed the outcomes of those cases. If SCO had not sought all of those delays, the litigation would have been over before SCO ran out of money, and they would not have had to file for bankruptcy until after they had final amounts defined that they would owe to Novell and IBM.
SCO filed suit against AutoZone, Inc., an action pending in the United States District Court for the District of Nevada.5 SCO alleges that AutoZone ran versions of the Linux Operating System that violate SCO's copyrights. This action is also stayed pending the outcome of the IBM Litigation, Novell Litigation and Red Hat Litigation.
This was unstayed by the judge in the Autozone case.

I believe that all but the last item above were told to the judge by Darl at the day one hearing, and no one, not IBM nor Novell, nor anyone else ever bothered to tell the judge otherwise, so in the context of these bankruptcy cases, they are true. Darl stated them as facts, and no one disputed them, so they are undisputed facts. If someone had disputed them at some point, the judge would have had less ammunition to claim that a chapter 11 trustee was in the best interest of the creditors and the estate, and so would have been more likely to order a conversion to chapter 7.

[ Reply to This | # ]

Stockholm syndrome
Authored by: Anonymous on Wednesday, August 05 2009 @ 08:31 PM EDT
Think of the poor trustee he/she is going to be holed up
with Darl et al full time ....

[ Reply to This | # ]

  • Stockholm syndrome - Authored by: Anonymous on Wednesday, August 05 2009 @ 09:27 PM EDT
    • ...Firing... - Authored by: mtew on Wednesday, August 05 2009 @ 10:25 PM EDT
      • ...Firing... - Authored by: Anonymous on Thursday, August 06 2009 @ 01:56 AM EDT
    • Stockholm syndrome - Authored by: Anonymous on Thursday, August 06 2009 @ 01:57 AM EDT
The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Anonymous on Wednesday, August 05 2009 @ 08:53 PM EDT
Having read in PJ's previous post What About Chapter 11 With a Trustee
Instead?>, it sounds like a Chapter 11 trustee runs the company with full
fudiciary authority and responsiblity. The current SCO management no longer
has fudiciary responsibility and authority to run the company. Effectively the
trustee replaces Darl. Since the trustee has no financial interest in the
estate and since he has legal liability if he fails to properly perform his
duties, it is likely the trustee will focus on dollars and cents. I suspect the
trustee will not become star stuck like the current SCO management. Unless
there is a very good probability the litigation will succeed, I doubt the
trustee will want it to continue.

The court's ruling seems to anticipate
this: "The Court's decision to appoint a Chapter 11 trustee will enable an
independent fiduciary to assess the Litigation with the confidence of the Court
and without the doubts raised by Debtors' adversaries in the Litigation."

[ Reply to This | # ]

This ruling is appeal proof
Authored by: Anonymous on Wednesday, August 05 2009 @ 09:13 PM EDT
Everyone from SCO, to the OUST, to IBM, and Novell opinioned they could accept
this as an alternative. Everyone got what they wanted: how can they appeal
that? I don't care how bad an opinion he wrote he still came up with a correct
verdict.

As to how to evaluate the litigation business without a trial: sell off both (a
portion of) the litigation proceeds and debts together, if you get a bid
expected to be more than (a large portion of) the cost of finishing the
litigation sell it and proceed with the litigation. If no acceptable bid, then
the litigation is not worthwhile, so settle the lawsuits. This is called market
based valuation and is acceptable for business accounting. The real trick is
producing proper portion sizes other than 100%.

[ Reply to This | # ]

  • This ruling is appeal proof - Authored by: Anonymous on Wednesday, August 05 2009 @ 09:30 PM EDT
  • Not. - Authored by: Anonymous on Wednesday, August 05 2009 @ 10:36 PM EDT
    • Wrong - Authored by: Anonymous on Thursday, August 06 2009 @ 01:58 PM EDT
reorganize or sell assets and dismiss?
Authored by: Anonymous on Wednesday, August 05 2009 @ 09:56 PM EDT
Accordingly, Debtors are proceeding without the exclusive right to file a plan of reorganization. It is clear that Debtors do not intend to file a plan. Instead, they have declared their intention to sell substantially all of their assets and thereafter seek to dismiss the bankruptcy cases.
Can the Ch. 11 try to sell the assets and get the bk dismissed? Or is the trustee supposed to only try to come up with a reorganization plan?

[ Reply to This | # ]

The Order - incredible
Authored by: grouch on Wednesday, August 05 2009 @ 10:43 PM EDT
Gross mismanagement.

The cluelessness, disregard of evidence in favor of assertions, and the disregard of logic and law, beg for harsh criticism. This is a time when I really chafe at the boundaries PJ insists upon. However, unlike some in the legal profession, she's earned my respect.

---
-- grouch

GNU/Linux obeys you.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Anonymous on Thursday, August 06 2009 @ 12:50 AM EDT
Actually, SCO has ongoing litigation (even if on hold), as well as an appeal,
for all of which BSF are the lawyers. The mere advent of the trustee will not
and could not get BSF free of their obligations to SCO with respect to all that,
and I think Webster is correct in that the trustee will be free to demand BSF's
thinking on all that. The trustee inherits all SCO's rights as BSF's client.

That is entirely different than the trustee deciding to employ BSF for any other
purpose. Further, the trustee will be free to direct BSF to cease their
activities with respect to the litigation.

Likewise, I think the trustee will become privy to the source of the pipe fairy
funds.

[ Reply to This | # ]

Sympathy for the Devil
Authored by: webster on Thursday, August 06 2009 @ 01:00 AM EDT

At the expense of repeating what has been discussed here in years past, an attempt is made to explain what happened today. Well, what happened is simple. The Court ordered a trustee for SCO. But the Court did it reluctantly, despite admitting it had reason to do more. Or as PJ put it, the Court was illogical. Be glad he didn't do less.


  1. Sympathy and Reason: These two elements belong in every case, judge or jury. Reason is law and facts. We'll add arguments and logic to the side of reason. It is good to have suitable law and facts on your side. If a party doesn't, they have to argue weaker law and facts. On the side of sympathy is emotion, bias, pity, sex appeal and bathos. With sympathy the other party's facts become doubts; any doubts become your facts. The high school cheerleader alleging first degree sexual abuse against a 55 year-old, toothless junkie will prevail against his defense of consent. Against the senior captain of the team, she will not. Judge Gross sees it as little ole SCO against the world. It is poor SCO against the wealthy giants. He can not comprehend why IBM and Novell have spent the resources they have in this case. He thinks they want to win by overpowering SCO by financial endurance. He is prone to take SCO's statements at face value and forgives their trespasses as reasonable acts of financial desperation. He has seized upon the appeal as do they.

  2. Through a judge's goggles: As the head drudge pointing and sifting deep in the mines of Mount Bankruptcy, his tools are powerful and simple. There are no subtle results. Adjustments are in piles. The balance sheet dictates the few options the law gives him. If the balance sheet is not clear and determinative, he waits some more. His focus is as limited as his actions, protect or destroy. He followed his sympathies and extended protection. He has not been following the SCO litigation for six years. He just sees IBM and Novell bullying them in his court. He does not read Groklaw. He probably doesn't even know where SCO got its litigation money. He probably doesn't know what the GPL is. He probably doesn't know that SCO is a Linux company. He doesn't consider SCO a tool of the Monopoly. [Ya'll were probably waiting for that.] He has no inkling of the links at the bottom of this comment. He accepts that little ol' SCO came under attack. There is nothing more powerful than to have the trier of fact like a party. Not giving the trier of fact a reason not to like you is powerful too. It's why many criminal defendants don't take the stand.

  3. Hindsight --Flamboyance in the Battle of Sympathies: The old hands like IBM and Novell presumed too much. The new guy, the Court, did not know SCO like they knew SCO. That which the old hands saw with scorn, the Court saw with sympathy, even with the payments and missed filings. He knows nothing of the discovery battles, the code, licenses, contracts, the shrinking evidence, and contradictions. On the criminal side he would be the judge who sees the dysfunctional junkie, not the determined criminal. He sees SCO as the little company that could, not the troll with nothing to lose. In the narrow confines of bankruptcy court, the history does not come up. It is the balance sheet now. So in retrospective speculation, early on IBM and Novell should have let little ol' SCO talk a little about the merits and chances of their claims and appeal and blasted them back with the worst, on the record and off. Singer is always there ready to retry the case. They could have brought it on a little in spades. They could have mentioned SCO's evil rich fairies and their odd non-business these many losing years.

    There was a lawyer around DC fondly and appropriately called Wild Bill, god rest his soul. He was flamboyant and argued the doubts and omissions as if they were facts. He talked about them as if he believed them. He used many props and did acrobatics in front of the jury. His language was much closer to that of the streets than academia. If he spelled like he sounded, he would be illiterate. Judges were known to get fed up and blast him right in the well of the court. The juries loved him. They figured if the judge would do that to him, imagine what he would do to his client. He won many verdicts and hung juries. Maybe the creditors could have used him.


Litigation is brutal. It's not over. It's late.

---------webster

Tyrants live their delusions. Beware. Deal with the PIPE Fairy and you will sell your soul.



[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Anonymous on Thursday, August 06 2009 @ 01:49 AM EDT

"Follow the money." -- Deep Thought

[ Reply to This | # ]

SCO and Iqbal
Authored by: Anonymous on Thursday, August 06 2009 @ 02:07 AM EDT
If this new Iqbal rule had been around at the very beginning, would SCO have
been
able to sue either IBM or Novell?

[ Reply to This | # ]

Powerful friends indeed
Authored by: NemesisNL on Thursday, August 06 2009 @ 02:29 AM EDT
I can understand the bold, logic defying, actions of the sco board in the light
of orders like these. It knows it has some powerful friends and can get away
with almost anything. They now also know that their case has fud purpose only
and they do not matter at all. Not going into chapter 7, having a judge declare
he's not sure about the merits of the case..... that's profit. Having management
set aside is just collateral damage... nothing personal..
The real powers behind this case, who eer they might be, had a good day in
court.

[ Reply to This | # ]

Is this the moment to fire up the paper shredders?
Authored by: Anonymous on Thursday, August 06 2009 @ 03:48 AM EDT
I am not familiar with the US bankruptcy procedures, but isn't this the moment
you fire up the paper shredders, turn up the speed to 11 and make sure the
trustee gets a nice, clean and tidy executive's office?

[ Reply to This | # ]

A Chapter 11 Trustee is to be Appointed
Authored by: Anonymous on Thursday, August 06 2009 @ 03:49 AM EDT
How is that handled? In some countries Darl isn't allowed even to answer a phone
call in business nor tell anyone anything from the time on the judge ordered a
trustee. He has to get his coffee be himself. But he has to be in reach for the
trustee at any time. And it's a matter of hours not days until a trustee is
named and on the way. Who is off charge? The CEO, the vice-presidents, the
board?

So can you tell the people outside US justice how that is handled?

[ Reply to This | # ]

As a non-native English speaker ...
Authored by: Anonymous on Thursday, August 06 2009 @ 03:54 AM EDT
... I do now understand where the term "to make a Gross mistake" comes
from. Again, Groklaw is instructive.

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: jrvalverde on Thursday, August 06 2009 @ 03:55 AM EDT
First of all I congratulate the judge for caring so much
about the company, which is much more than management.

I'm thinking of all the people that have been working for years since ATT times
to make UNIX what it is today and deserve to keep their job and security (if
there is anyone and any chance left).

I'm also thinking of the software, having seen many casualties, it would be
dreadful to see another UNIX variant out of the way.

And of customers, who have made large investments on SCO UNIX independent of its
(mis)management and deserve some attention too.

All in all, I think the judge is right in caring for helping keep the company
up. Plus that's his job. I can understand that after so many months hearing SCO
claim how lucky they'd be if hey won the lottery and creditors how unlikely it
is, he does not want to make a decision on that based opnly on court hearsay. He
would need more detail, and that can only be gotten from inside.

> And how will a fiduciary be able to do that, if the judge
> can't, and even more if he already ruled he shouldn't
> consider such merits? It seems a strange workaround.

My guess is the judge' thoughts are that he cannot decide from the bench without
conducting a mini-trial, as he says. And *he* would be conducting a mini-trial,
because he is a judge. And a pointless one, BTW.

Now, an independent trustee needs not make any legal judgement. He only needs
insider knowledge on the odds (remember, SCO has never identified code with
specificity), listen to employees and inside experts (beyond the few managers
that appear in court) to know their opinions, weight it against the costs given
the current company economic shape, see what other alternatives are there for
rehab (if any) and make a *business* judgement, take a *business* strategical
decision on the best way to rehabilitate the company, not a legal decision.

He might decide it is better to invest effort in the UNIX business as the core
asset to make it profitable again, while waiting for the appeal decision
-something current management has ignored into oblivion-.

Or he might decide that it is not worth pursuing litigation -but he'd lose
nothing by waiting for the appeal results before discarding it totally- anyway.


Or he might decide that all other business is worthless beyond rehab, and the
only thing remaining of the empty SCO hull is the vain hope on litigation...
which is doubtful seeing as how there seems to be some interest in the UNIX
business.

Heck, he might even decide that the way to go to keep the UNIX business alive
and even push it forward in the current market is to open source UNIX (now, that
would be a master business move as it would require as per the APA forced full
transfer of copyrights from Novell!), which would be at odds with this meritless
litigation, and require the trustee to toss the litigation away altogether,
settling with Novell and IBM, e.g. offering to open source UNIX as compensation
so they can use it and integrate it with other OSes if they want. Now, *that* is
an idea that might well drive SCO back to the center of the UNIX business stage
and re-set it in a technology leadership position through technical and
development agreements with all other OS vendors (if UNIX is GPL'd then IBM and
Novell can use it for Linux, which would compensate for the litigation, all
others would have to license separately with SCO to use it on proprietary OSes,
existing UNIX vendors do have to keep their licenses, maintaining the licensing
flow back to Novell, and would need new ones for benefitting from any
improvements developed through SCO labs).

Never mind, the point is, it would not be a judgement, but a business strategic
decision, based on deeper inside knowledge that what can be got through a few
hours on court, which is what the judge is actually wanting: a sound business
decision that *might* help this sinking company abandoned by a management that's
only interested in litigation lottery.

Just my 2˘ worth.


---
Jose R. Valverde
EMBnet/CNB

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: jrvalverde on Thursday, August 06 2009 @ 04:09 AM EDT
> And my biggest questions: if SCO has abandoned
> rehabilitation, on what basis is it allowed to stay in
> Chapter 11? Isn't that the goal of Chapter 11? If the
> litigation is SCO's only hope, how long are we talking
> about remaining in Chapter 11? Until a Supreme Court
> appeal years down the road? And does IBM have to wait to
> get its litigation going again? Would that not answer the
> judge's questions about the viability of the SCO
> litigation better than a fiduciary's guesswork?

Easy: the judge sees that current management is only interested in keeping the
litigation and ignores all the rest of the company.

He also sees other people interested in all the rest of the company -but
litigation-.

So, it is possible that management is so single minded about litigation that
they ignore there may be some hope for the rest of the company.

The only way to know is to analyze the company and see whether management is
right in that it is an empty hull where only litigation has any potential value
any longer, or whether management is so blinded by litigation dreams that they
cannot see obvious paths to rehabilitate the company.

So, the judge mistrusts management. Ergo he cannot make a decision based on
management's evaluations. Only way is to appoint a trustee to see if there is
any objective way out.

I think the judge simply wants to give the company a chance (seeing as how
management has left it unsteered in the storm for so long).


---
Jose R. Valverde
EMBnet/CNB

[ Reply to This | # ]

The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Yossarian on Thursday, August 06 2009 @ 04:52 AM EDT
"And my biggest questions: if SCO has abandoned rehabilitation, on what
basis is it allowed to stay in Chapter 11?"

I had answered that before the judge made his decision,
in an article on Sunday, August 02 2009 @ 09:45 PM EDT:

If I were the judge then I'd go for a Chapter 11 trustee.

The reason is pretty simple - the smoke is so thick that it
is hard to see what's really going on. That judge can order
such a trustee to examine SCO and report to the court the
true state of affairs.

[ Reply to This | # ]

My bet now
Authored by: jrvalverde on Thursday, August 06 2009 @ 05:33 AM EDT
If a trustee is indeed appointed...

He will go to SCO and listen. First of all. Current management will tell their
story convincingly, of that I am sure, but he knows it's wrong -or he wouldn't
be there.

Now it will all depend on what the rest of the company says. Unless the trustee
does not drop by the offices at all, if he spends any time there, he is bound to
talk to other workers.

Darl has already shown he doesn't care for anything as long as he keeps control
of litigation, all the rest of the company is a nuisance better sold off.

The other workers do have an interest in keeping their jobs, so they are bound
to offer alternate plans.

What is certain is that most other employees must have felt betrayed by the
unXis deal by now and surely feel no longer any loyalty to current management.
The trustee is bound to hear lots of complaints. Now, if workers are wise, they
will keep complaining limited and talk much more about rosy pictures to get the
company out of BK (and their jobs) to influence the trustee into keeping SCO
alive.

If what we heard at the hearing is true, most of them will say Darl is deluded
and that there is a business in UNIX.

Further, and this now depends on engineering, they might be sympathetic to open
source, they have had contacts with it through Linux and freeware. If they are
really disperate, they may want to try the open source way, same as Sun and QNX
have done.

Now, revitalizing SCO UNIX may have a chance, but is a slim one. Revitalizing an
open SCO UNIX might really be a hit. Not a big one now that Linux has SMP and
Solaris is out, but it might be significant yet (just like Solaris has Dtrace to
offer, I bet SCO UNIX also has some interesting technology too). Maybe enough to
give them a chance to get out of BK and pay creditors.

So, the trustee is bound to hear from current management that everything should
be sold (or stayed) but litigation, and from workers that the company UNIX
business is what needs attention.

If UNIX has given any benefits recently, and given the spurious letters of
support from customers, may be the trustee will be able to negotiate a way out
to refloat SCO and pay creditors. If that is so, then everything could be a win.
If not, then he can call chapter 7.



---
Jose R. Valverde
EMBnet/CNB

[ Reply to This | # ]

The Court's "two cents"
Authored by: DaveJakeman on Thursday, August 06 2009 @ 06:22 AM EDT
The Court fully respects the OUST's authority and ability to select an appropriate trustee. The Court's "two cents," however, is to suggest that the OUST consider appointing a retired judge or litigator since the analysis of the Litigation will serve as the trustee's principal responsibility.
McConnell perhaps? Is that what he's getting at? Is this the fix that's already in?

If McConnell rematerialises in SCO, we will know for sure.

[ Reply to This | # ]

A Most Disturbing Sentence
Authored by: DaveJakeman on Thursday, August 06 2009 @ 06:33 AM EDT
From the Conclusion of the Memorandum Opinion:
The Court's decision to appoint a Chapter 11 trustee will enable an independent fiduciary to assess the Litigation with the confidence of the Court and without the doubts raised by Debtors' adversaries in the Litigation.
That's exactly what Darl has been doing for years: assess the litigation with confidence, without the doubts raised by adversaries in the Litigation. That is what we have come to call the SCOverse.

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I think I've gottit!
Authored by: Ian Al on Thursday, August 06 2009 @ 06:53 AM EDT
I have rushed headlong through PJ's comments in speed-reading/skimming mode and
(carefully considering the facts I have made up) I think I've got it (but, not
for all values of it).

I have one unanswered question: can a Chapter 11 trustee come up with a
rehabilitation plan or a reorganisation plan that the court can accept? By that,
I mean 'may' or 'does (s)he have that power'.

My assumption is that Chapter 7 means liquidation and the parts of the business
are not sold as a going concern. In Chapter 11, I assume that parts of the
business can be sold with part of the cash balance such that the going concern
brings in more from the sale than a simple sale of the assets with all the cash
going to the creditors.

The bit about the mini trial on IBM's claims seems explicable. The judge would
have to hold a mini-trial to ascertain the facts in the IBM litigation and to
listen to the arguments of IBM and Spector. He holds out little chance of coming
up with a sensible decision and I tend to agree with him. On the other hand, the
trustee can do all sorts of research including looking at all the IBM litigation
papers and the findings of Judge Kimball, BS&F and IBM and the astonishing
lack of evidence and the sanctions and the abuse of process and the summaries of
the effects of the Novell SJs and trial on the IBM litigation. The trustee has
much more to work on than a mini-trial would provide.

Finally, Judge Gross has had lots of practice identifying deficient sales
motions and could care less about the correct spelling of Unoxious.

And, last of all, this is not a final decision and can only be appealed with the
agreement of Judge Gross. Neat! I suspect that conversion to Chapter 7 is a
'final' decision in a Chapter 11 bankruptcy.

Anyway, ta ta Darl, ta ta Yarro. Sorry you won't be able to 'help' in the SCOG
rehabilitation.

And, to finish, is it possible to get a replacement keyboard with a heavy duty
refresh key?



---
Regards
Ian Al

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

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Why isnt 890 not on the Epiq docket any more?
Authored by: Anonymous on Thursday, August 06 2009 @ 07:10 AM EDT
They have the order, but not the memorandum. Who decides what goes on the
docket? Can the judge take it back if he wants to correct his spelling
mistakes?

/Andreas

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I read the order differently from PJ
Authored by: Anonymous on Thursday, August 06 2009 @ 07:18 AM EDT

PJ wrote:

Of course, they didn't ask for a limited Chapter 11 trustee, whose main job appears to be to evaluate SCO's litigation chances and maybe handle an auction.

I read the order differently. I believe the Chapter 11 trustee is unlimited and has the full Chapter 11 Trustee powers. (There's nothing in the Order that would limit the Trustee's powers. The Memorandum is just an explanation of why the Order says what it does).

However, the judge has ruled that the litigation "assets" are the only reason SCO is not in Chapter 7. So an important part of the trustee's job will be to look at the litigation and figure out it's value. If the trustee realises the litigation is worthless or a liability, then he might settle it and/or move for Chapter 7.

As for the auction part, the judge just mentioned in a footnote that there was no need for the examiner SCO suggested to oversee the auction. If the Chapter 11 Trustee persuades the Court that an auction is needed, then the Chapter 11 Trustee can oversee it.

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Mildly off topic -Salt Lake Tribune article
Authored by: Anonymous on Thursday, August 06 2009 @ 07:21 AM EDT

An interesting statement in the Salt Lake Tribune article PJ quotes:-

That lawsuit came after another in which SCO accused IBM of violating its ownership of Unix by using that system as a model for improvements to the Linux operating system, a competitor of the SCO products.

Note the accusation now is that Unix is used as a model for Linux, which I don't think anyone has ever denied. The change of language is mildly interesting though hardly earth shattering!

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Could we be biased?
Authored by: Anonymous on Thursday, August 06 2009 @ 10:21 AM EDT
We are all open source supporters here except for the odd shill. We see the
world differently than others, we believe in the goodness of others, in sharing,
and that a greater good can be achieve by working together.

With IBM and Novell on both sides of the table there is a possible conflict of
interest. If SCO goes to chapter 7 then the lawsuits will likely go away,
creditors get a little bit of money, if the law suits continue and the
creditors win they get less money since they have further expenses and SCO
doesn't have any money to pay anyway. If and it's a very big if from our seats,
the tsunami suddenly reverses, SCO would have money again. Most people advise
against going to trial if at all possible.
Dragging out the proceedings to bankrupt the opponent is a common strategy,
except that it has been SCO who has been after the delays.
Could the judge take the push for chapter 7 as a worry on the part of the
creditor that a loss is possible rather than a prudent path to end the
charade.

His remark that the much larger IBM and Novell are picking on poor little SCO
worries me, the little guy is supposed to get a fair shake, IBM is a Goliath,
with one of the best legal teams on the planet, and a big wallet.

Is IBM out spending SCO by a substantial margin?
What about Novell?

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by the time a trustee is appointed/approved waiting for the appeal decision will be a no-brainer
Authored by: UncleJosh on Thursday, August 06 2009 @ 11:13 AM EDT
Who knows, they may not be able to find/agree on one and get the trustee
approved by Judge Gross by September...

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a logical interpretation
Authored by: jiri on Thursday, August 06 2009 @ 11:45 AM EDT
I think most of the illogic goes away if we (a) carefully distinguish between
SCO and its management, and (b) hypothesize that the Court got the impression
that the latter were not entirely diligent and/or less than forthright.

At that point, priority 1 is to get someone who is both diligent and forthright
- a trustee - to replace the management.

For instance, as far as the rehabilitation is concerned - under the hypothesis,
the Judge has no way to tell whether rehabilitation really is unlikely or
whether it's the management that makes it look that way. Taking the word of
litigation adversaries would hardly be wise, and in any case those parties were
OK with a Ch.11 trustee.


Jiri

---
jiri@baum.com.au

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When/Can conversion motions be (re)filed?
Authored by: DMF on Thursday, August 06 2009 @ 01:49 PM EDT
Presumably it's still possible to convert to Chapter 7. So can such a motion be filed / renewed / re-filed by IBM, Novell, or UST? What are the conditions for this to happen?

Or has Da Judge taken all resolution out of the hands of the above?

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Just following the law?
Authored by: GLJason on Thursday, August 06 2009 @ 03:56 PM EDT
The judge said he could not weight the merits of the
litigation with Novell, IBM and others without having a
mini-trial. SCO is continuing downhill to the end, but the
management and lawyers still display optimism about their
legal prospects and the potential windfall that might
result.

Since the judge could not rule on the likelihood, we have a
Chapter 11 Trustee. The Trustee can weigh everything,
including the internal emails that SCO had thrown out and
therefore the judge couldn't consider in rendering his
decision. He can come up with an independent assessment of
the chances of SCO prevailing and whether the company should
just be liquidated while there is still some money to pay
the creditors.

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"SCO found their UNIX operating system under attack"
Authored by: Anonymous on Thursday, August 06 2009 @ 04:12 PM EDT
After the Novell ruling, it should be clear that it isn't
"theirs" in the broad sense it's put here.

I fail to understand how, in a judicial system controlled by
case law, a judge can ignore a court's ruling (that the
copyrights belong to Novell) entirely and go for the "but on
appeal, everything might be different" route. Worse, he's
obviously giving SCO the benefit of the doubt against a
clear court ruling.

That seems awfully lopsided to me.

Even if he allows SCO to bet on the appeal outcome, I don't
see how this would affect a ch. 7 conversion, given that
there is no reorganization plan even for the case that SCO
prevails.
(Don't forget that even if the appeals court overturns the
Novell ruling in part or in whole, this will send the cases
into another loop for several years and SCO can't even show
one potential buyer who is willing to bet on a second round
being more successful.)

So SCO's "plan" can be summarized as:

1. Appeal
2. ?
3. Profit

Although a BK judge is supposed to favour the company in
bankruptcy, I don't see how he is supposed to favour keeping
their dreams alive.
A trustee to independently assess the merits of the
litigation could have been appointed a year ago, not at the
11th hour where everything hinges on the Novell appeal
anyway.

__
magicmulder

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The Order - A Chapter 11 Trustee is to be Appointed; SCO's Sale Motion Denied - Updated
Authored by: Steven W on Thursday, August 06 2009 @ 06:05 PM EDT
PJ, you seem extremely doubtful of the trustees abilities:

But there is now going to be an independent fiduciary to run the show. At least. But if the judge says even if he had a trial on the litigation, he could only guess as to the outcome, how can an independent fiduciary do any better without even a trial? You tell me.

and:

And how will a fiduciary be able to do that, if the judge can't, and even more if he already ruled he shouldn't consider such merits? It seems a strange workaround.

I'm sort of curious as to why you feel that way. First off, you have made clear that there's bigger concerns than deciding if the litigation is a worthwhile gamble. Even if that were the only concern, it seems to me that the judge has made a wise decision. Will the trustee not be able to look at all the information available, perhaps even review transcripts of the cases? Will he or she not be able to communicate with IBM, Novell, and others? He or she must have some legal knowledge and perhaps access to others with skills outside his or her area of expertise? It seems to me that Judge Gross has appointed this trustee to do that legwork for the court. This seems a sage decision so far as I can tell.

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Not odd at all
Authored by: Anonymous on Thursday, August 06 2009 @ 06:40 PM EDT
"The reality is that eliminating Debtors' litigation against them is far
more valuable to IBM and Novell than any recovery from Debtors in the bankruptcy
cases."

SCO has demonstrated that its frivolous action has the capacity to cause tens
of millions of dollars in direct costs and untold damage in the market place.
Quashing this harassment would indeed be a large direct benefit to IBM and
Novel.

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Have you ever noticed
Authored by: The Mad Hatter r on Thursday, August 06 2009 @ 11:45 PM EDT

That we appear to be moving by half steps? Every time you think you've got SCO
nailed to the wall, like Jello, they slip aside.

So they avoid Chapter 7, but the Trustee's Office assigns a neutral trustee (and
hopefully an experienced one) to take over operations. Does this mean Darl is
out, or does he stay on as an advisor? If he stays on as an advisor, well, we
better hope that he doesn't know hypnosis. Though $10 Billion is enough to
hypnotise anyone, including, possibly, the judge.



---
Wayne

http://crankyoldnutcase.blogspot.com/

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appeals?
Authored by: nola on Friday, August 07 2009 @ 11:06 AM EDT
Has anyone seen any evidence of an appeal?

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PJ, I just have to ask....
Authored by: Anonymous on Friday, August 07 2009 @ 12:51 PM EDT
After the trustee/advisor is in place and has intimate knowledge of the inner
works at SCOg, the legal machinery and other details, is that trustee/advisor
subject to subpoena and deposition in SCOg involved litigation?
If SCOg were to file suit against a new defendant, would the Chpt. 11 trustee be
subject to subpoena?

Just curious.

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Judge: "SCO can't be *THAT* stupid can they?"
Authored by: darkonc on Saturday, August 08 2009 @ 12:49 AM EDT
SCO isn't your average run-of-the-mill bankruptcy.

I'm guessing that the judge is having a hard time believing that SCO would be as pig-headed as they are about continuing the litigation if they didn't really think that they had a chance of winning in the long run (he really doesn't know SCO the way that we do).

As such, he's appointing a Trustee to take an independent look at SCO's internal documentation to see if he can figure out the nature of the pot-o-gold that SCO has been so determinedly chasing. If the trustee determines that the pot is real, then the litigation can go ahead.

If the trustee determines (as we have) that the pot is illusory or even non-existent, then appropriate action can then be taken -- probably starting with chapter 7.

It's so much easier to convert a trustee situation to chapter 7 than it is to back out of chapter 7 in the unlikely event that SCO's pot of gold turns out to be real that I can actually understand the judge's cautionary move.

In the larger picture of things (and as someone who has only a cursory understanding of SCO's litigation history), it's a relatively cheap way of preventing a potentially massive blunder, while -- at the same time -- prepping SCO for chapter 7 if things are really as bad as it looks.

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

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Denial of Service
Authored by: Anonymous on Saturday, August 08 2009 @ 04:31 AM EDT
The memorandum misspells the proposed buyer, mischaracterizes the Novell litigation, incorrectly states that the AutoZone case is stayed, etc.

There is no punishment, in practical terms, for inaccuracies or even prevarication. So of course Microsoft, SCO, post-Noorda Novell, and other groups use them liberally. It creates a denial of service among the opposition and eventually burns them out.

For parallel examples look at what Microsoft's dirty bomb of competitor to ODF did to XML work around the world. Work on OpenDocument Format, DocBook, HTML and other XML-based formats dropped off and in some cases stopped progress completely. Instead time was devoted to an absolute waste of paper and a long series of scandals in national and international standardization committees. Brain power is a limited resource. If it gets wasted on correcting mistakes made by those who should know better, then it is not available to maintain or develop the useful technologies.

In terms of economic and political damage in the Western nations, Baitullah Mehsud was just a poser compared to Microsoft executives and their party members.

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My biggest worry now....
Authored by: darkonc on Saturday, August 08 2009 @ 05:42 AM EDT
Is that after talking to Darl &amp. Co. about why they so pig-headedly followed the litigation path, and then going through the legal files, that the Trustee will die laughing. After a few such iterations, it will be impossible to find a trustee willing to risk their life by taking on the file, and Judge Gross will be forced to hand control back to the previous management.

Barring that, however, I think that SCO as we've come to know and love (to hate) it have come to an end.

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

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