decoration decoration

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


Groklaw Gear

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

You won't find me on Facebook


Donate Paypal

No Legal Advice

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

Here's Groklaw's comments policy.

What's New

No new stories

COMMENTS last 48 hrs
No new comments


hosted by ibiblio

On servers donated to ibiblio by AMD.

SCO's Bankruptcy Hearing Monday Is Called Off
Friday, June 18 2010 @ 11:53 AM EDT

SCO's bankruptcy hearing scheduled for Monday in Delaware has been cancelled. The next one will be on July 12 at 1:30, or so they say, so if you were planning to attend on Monday, please rearrange your plans.

This is the third time in a row that SCO has cancelled a bankruptcy hearing. They cancelled in May, and they cancelled in April, and now again they cancel in June. Is there perchance something they'd rather not tell the judge? Something they don't want the creditors to bring up? You think?

I have a question for him. Why isn't SCO in Chapter 7? What is the plan to pay off the Yarro loan so all the assets don't end up in the hands of the man who started this whole fiasco?

I guess Judge Gross will just have to wait to find out SCO not only lost the jury trial, which he knows already, but also SCO's laughable effort to get the copyrights given to them as a present from the judge in Utah anyway. What to do? What to do now? How to stay protected in bankruptcy (so IBM can't eat them alive) while they try to figure out if they can appeal and if so, how. A hearing might be a tad awkward at the moment, I'm guessing.

Well, Ocean Park wants to get paid, and no one complained about the sale of the mobile assets to Darl McBride for $100,000, $60,000 of which goes to Ocean Park, not to mention their regular bills, so there you are. Who needs hearings? A happy ending for them.

Can you think of a single reason why the public should know what's going on with a public company like SCO? They aren't timely filing with the SEC either. Their most recent filing was an amended 8K about the Yarro loan in March. Was this their favorite paragraph, perchance?

The Loan is secured by a lien on substantially all of the assets of the Company. Pursuant to applicable bankruptcy law and the Bankruptcy Court Order approving the Secured Credit Agreement, the Lenders’ lien is senior in priority to all other liens and claims and administrative expenses of the Company.
Can you imagine if the jury had awarded the copyrights to SCO? Can you figure out the plan? But they didn't win. So now what? What's the plan to pay off that loan? With what? Who knows? SCO's most recent monthly operating report is for March.

So the SEC doesn't know they lost before Judge Stewart either. Shouldn't the public know that? I'd call that material info, how about you? I'd call that near total stealth, actually. Perfect. Hide in the closet. Public companies are allowed to do that, right?

Kidding. I suspect they are desperately trying to invent a new strategy. How to stretch this out further is the goal, I'd opine, and in a perfect SCO world, how to snatch victory from defeat in the end. Their lawyers are likely looking over every ruling from Judge Ted Stewart before or during or after the jury trial to see if there is anything they can appeal. Or maybe they are going over the Federal Rules of Civil Procedure looking for another route to the top of the mountain, like fraud or newly discovered evidence? Hahahaha. That'd be so like SCO. But I'm not sure it'd be wise to bring up the subject of fraud, now that I think of it. Here's the time frame: according to the applicable section of the Federal Rules of Appellate Procedure, they have 30 days from the final judgment to file a notice of appeal. June 10th is the date of Judge Stewart's order on their request for the copyrights or a new trial and on the items from the trial that the jury didn't decide. So I think that's the relevant date to begin counting.

Meanwhile, no press release. Not a peep from the company that used to have a mouth as big as the sky.

Here's the text of the notice:

"PLEASE TAKE NOTICE that the omnibus hearing scheduled in the above-captioned case for June 21, 2010 at 3:00 p.m. has been cancelled. The next omnibus hearing is currently scheduled for July 12, 2010 at 1:30 p.m."

And here's the notice itself:

06/17/2010 - 1127 - Notice of Adjournment // Notice of Hearing Cancellation Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 6/21/2010 at 03:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Fatell, Bonnie) (Entered: 06/17/2010)


SCO's Bankruptcy Hearing Monday Is Called Off | 178 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
SCO's Bankruptcy Hearing Monday Is Called Off
Authored by: Anonymous on Friday, June 18 2010 @ 12:10 PM EDT
At what point can creditors start complaining about the constant cancellations
and force a hearing?

[ Reply to This | # ]

SCO's Bankruptcy Court
Authored by: Anonymous on Friday, June 18 2010 @ 12:14 PM EDT
Seriously, do they own the Delaware courthouse or something? Their ability to
control and direct the BK process is incredible.

[ Reply to This | # ]

SCO's Bankruptcy Hearing Monday Is Called Off
Authored by: Anonymous on Friday, June 18 2010 @ 12:23 PM EDT
This has become a big joke. Where is the justice for Linux, Novell and IBM? They
need there money just like everybody else.

[ Reply to This | # ]

SCO's new plan
Authored by: Anonymous on Friday, June 18 2010 @ 12:28 PM EDT
They tried SCOx maybe they need to sell the assets to SCOy, in exchange for
stock in the new and improved SCO.
SCOy can then tell the world that they obtained the rights to sue the word for
billions, and rather than going after companies that have the money to fight, go
after the children and grandparents like the RIAA. A billion dollars is still a
billion even if it is several smaller payments.

[ Reply to This | # ]

Authored by: ankylosaurus on Friday, June 18 2010 @ 12:41 PM EDT
Please use 'mistake --> correct' in the title.

The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

Off topic thread here
Authored by: ankylosaurus on Friday, June 18 2010 @ 12:44 PM EDT
Please make any URLs clickable.

The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

News Picks
Authored by: ankylosaurus on Friday, June 18 2010 @ 12:48 PM EDT
Since news picks change rather rapidly, it can be helpful to include a
(clickable) link to the original item.

The Dinosaur with a Club at the End of its Tail

[ Reply to This | # ]

Appeal time frame?
Authored by: Anonymous on Friday, June 18 2010 @ 12:49 PM EDT
How long does SCO have to file an appeal to Stewart's decision? I ask because I
think it may set the timeline here. Cahn is going to have to make a definite
decision - to appeal, or not to appeal. If the answer is not, it looks to me
like it's Chapter 7 for sure. If the answer is to appeal, then somebody else is
going to have to force Gross to pull the plug on Cahn, or else Cahn is going to
let this farce limp on for another year or two.

But an optimistic reading might be that Novell, IBM, the US trustee, and Gross
are all waiting to give Cahn a chance to do the right thing.


[ Reply to This | # ]

judicial negligence?
Authored by: mcinsand on Friday, June 18 2010 @ 12:59 PM EDT
Although I think I know the answer, is there ever a point where judicial
negligence can be charged? While our system is still one of presumed innocence,
proceedings here have allowed SCOX to squander assets with no rational means for
paying creditors. Does the judge have some responsibility for letting this drag
on at a snail's pace?

[ Reply to This | # ]

SCO requesting Overlength Bankruptcy?
Authored by: Anonymous on Friday, June 18 2010 @ 01:02 PM EDT
Given history, maybe SCO will be requesting an Overlength Bankruptcy....

[ Reply to This | # ]

SCO's Bankruptcy Hearing Monday Is Called Off
Authored by: JamesK on Friday, June 18 2010 @ 01:06 PM EDT
like fraud

This is something I've been wondering about for quite some time. Given all that
gone on, including conversion of funds, shouldn't there be some criminal charges
against the principals. For example, that Yarrow "loan" appears to be
a plain attempt to defraud the creditors.


(I am not a lawyer and I don't play one on TV)

[ Reply to This | # ]

SCO will appeal just for spite
Authored by: Anonymous on Friday, June 18 2010 @ 01:15 PM EDT
How many trials will the 10th Circuit grant SCO? Maybe no more in the Novell
case. If SCO somehow loses in the 10th Circuit, it will go to the Supreme Court,
which will deny certiorari after 6 to 8 months.

But SCO will also ask Gross to unstay IBM, and Gross will agree. Novell will
waive the right of SCO to sue IBM. SCO will appeal that, interlocutory, to the
10th Circuit, which will order a jury trial on the waiver. SCO will lose the
jury trial. IBM's counterclaims will then be tried. SCO will lose the jury trial
(no summary judgments). SCO will appeal that to the 10th Circuit. Who knows

After that, SCO will ask Gross to unstay the Red Hat suit. He will agree.
Another jury trial, although the Red Hat suit will be in the 3rd Circuit, not
the 10th, so sanity may or may not prevail. After all, Cahn comes from the 3rd
Circuit. More appeals there. Supreme Court will deny certiorari.

The U.S. Bankruptcy Trustee's Office, while all this is going on, will have
their feet on their desks collecting their pay. They get paid the same whether
they work or not?

I figure there is at least three more years to go.

[ Reply to This | # ]

How can it be an omnibus hearing?
Authored by: IMANAL_TOO on Friday, June 18 2010 @ 01:38 PM EDT
According to Wikipedia an omnibus hearing: is for pretrial:
An omnibus hearing is a pretrial hearing. It is usually soon after a defendant's arraignment. The main purpose of the hearing is to determine the admissibility of Evidence, including testimony and evidenced seized at the time of arrest.

There is nothing even remotely pretrial about this today. What is the purpose of an omnibus hearing at this stage? .



[ Reply to This | # ]

This going bankrupt sounds pretty cool.
Authored by: Anonymous on Friday, June 18 2010 @ 02:00 PM EDT
"Yeah, I know I owe everybody gazillions of dollars but I'm going to give
my cash-on-hand to my buddies and treat myself to more goodies.

Oh, by the way judge, I'm canceling the hearing again. Live with it."

[ Reply to This | # ]

What else must transpire before IBM could consider piercing a veil or too?
Authored by: tce on Friday, June 18 2010 @ 02:13 PM EDT
What else must transpire before IBM could consider piercing a veil or too?

Does anyone else have standing and cause to go after SCOff(Lof)icers directly?

[ Reply to This | # ]

Death Bed, Shades drawn. Life still present?
Authored by: Anonymous on Friday, June 18 2010 @ 02:33 PM EDT
The SCO death bed has entered the dark and hidden phase. A Ryan Tibbits >> M'OG communique the only emanation.

SCO will pay Novell its escrowed dollars.

Blank Rome has several hundred thousand dollars of unbilled time at risk It has filed no bills since December. Judge Cahn will not file a bill until resolution (cite El Cort).

Boies and Hatch may have billed for the trial expenses, but we have no way of knowing until the perennially missing MOR's are filed. Cahn may have jawboned Boies into eating the expenses from the trial. Hatch seems to have cash needs, so he will likely demand some recompense.

OPA is relatively current with its billings, and accepted CNO's since the March MOR's mean that these charges are payable and should be deducted from the bank balances. The CNO approved deduction for OPA is ($412,495) in my accounting.

ex-Novell escrow, SCO controlled $1,700,000 on March 30 per the last MOR. It gained from sales to the Patent consortium and a regiggered deal to McBride, but cash neutral software sales remains a hopeful and not often achieved target, and the March MOR shows the large semi-annual insurance bill was not yet paid. Any gain on the asset sales would be lost to periodic insurance billing due in April. Payment flows based on approved CNO's to OPA would drop the Cash on hand to $1,300,000 exclusive of any payment to Hatch, Boies, et. al.

SCO has run up its liability to its overseas affiliates (these now exceed $1,400,000) especially England, Germany and India. OPA flew first class to Europe to tell (some subset) of the affiliates that they were now contractors working on a reduced commission structure. Linked-in scrape shows several England staff have moved on to new unrelated jobs. Some of the European names continue to post on Comp.Unix.Sco.Misc, so at least have a nominal commitment to the corpse. The affiliate liability is an ordinary course obligation (??) so may have priority in liquidation. Note that OPA and Blank Rome have billing records showing they are trying to sort out the legal obligation to the affiliates.

Is Blank Rome is working for free? I seriously doubt it. Some professionals have high hourly and accept a substantial shrinkage from unpaid bad debts. Doesn't seem likely in this case.

My hypothesis: Cahn and Blank Rome, before they took the assignment, got a valuation that told them they could sell SCO (the genuine business) for about 1.5x Revenue run. In the summer of 2009, revenue was 11M/year, today it is about 8M/yr. Cahn and BR believed their worst case was liquidation and would produce about $15M, and all liabilities and all their bills would be paid.

They likely held on to this belief through the trial. Within their analysis, the Yarro loan was bankable because it was covered by the overage in the hypothetical sales price vs. total liabilities.

IBM/Nazgul may have suckered Cahn by offering to settle for about 5-8M. Cahn thought that the IBM offer was his backstop, and voted to go big on the trial since he thought he could double the settlement through a sale, and still hold the lottery ticket for the big payoff.

So is Cahn seeking a sale partner based on some revenue-run multiple, is he frantically calling IBM trying to resussitate the expired settlement offer, or is he hunkered down waiting for a miracle?

Yarro's group cannot run the business. The Las Vegas guys (Rex H. Lewis) are in court with the trustee of their bankrupt Ohio bank over land deals gone south, and Rex Lewsis is likely to be taken to the cleaners. There is no capital to subsidize the bleeding. The hedge fund guys may have just ante'd so they could sell their stranded shares into the pre-trial price appreciation, perhaps they also see the now-vanishing revenue run multiple, and think they could market the thing better than OPA.

The only buyer that could extract some cash flow from SCO is Novell, since the evergreen sales to Telecom's in Japan are the only profitable segment of the business and at least half of that money goes to Novell. Novell will continue to receive the royalties as long as viable product is being marketed. Does Cahn have leverage on Novell--saying through OPA, "We will kill the brand unless you buy it off us?" Does Novell care? I doubt it, and expect they are looking forward to selling SUSE-based Telecom switches in Japan.

Yarro roused himself in the winter and pushed a couple of business changes. It seems they are focused big on the soda bottle (which is a guaranteed money hole). The server farm business [, Voonami, Sumavi] got new investment. Various IP traces to Orbiteer don't show much sustainable business-- ad-farming and spam pages seem to dominate. News reporting gave hints that Voonami is selling some sort of security service to Facebook, porn filtering using the database would be an obvious guess. Yarro has kept a core group of employees since being frog-marched out of the Canopy building, Yarro's source of funds to keep this stable of loyal followers sufficiently recompensed to pay for their children's ballet lessons is not obvious.

Sumavi is most interesting, this is the brain child of a Portland based ex-IBM (sales) engineer (Vallard Benincosa) who is writing web-portal User Interface to configure server farms using the command line tool from the xCat project ( xCat uses the Eclipse License). xCat is a IBM subsidized project, Yarro sniping a sales engineer who want to patent his portal and turn it into a commercial biz is an interesting complication.

Did Yarro make a shrewd move with the Sumavi deal. ***Is his plan to sell the portal interface back to IBM to cover a legal settlement side deal?*** This is the Anderer Memo model where Anderer told SCO they needed a pipeline of products to sell Microsoft to cover for the unsavory aspects that might arise from a direct subsidy.

Yarro sold at least 2 other deals to Microsoft before Brian Roberts (Corp Dev) left the Vole to rejoin the exiled Richard Emerson at Evercore. This was the Volution co-investment (fall 2004) and a sale of a SQL database drilldown tool (so obscure I forget the name) in spring 2004. The dollar value of these deals (4M if I remember correctly) and their periodic nature (6 month spacing) make me think the Anderer claim that Corp Dev at MSFT would continue to channel money via product buys survived in cloaked form until about 2005. Another indication that these "investments" were dual purpose is their apparent evaporation following the dismissal of Roberts from Microsoft.

Timing strongly supports the suspicion that Yarro tried to clone the wildly successful DR-DOS shakedown of Microsoft in the SCO v. IBM litigation. Now, there is some suspicions that he trying to clone the MSFT sham-purchase model (as laid out by Anderer) to get a periodic income stream from IBM in exchange for legal peace.

[ Reply to This | # ]

No Chance to Oppose?
Authored by: Anonymous on Friday, June 18 2010 @ 02:56 PM EDT
IANAL, so I don't know where to look for this answer: What provisions are there
for the other interested parties to force SCO to appear at scheduled hearings?
I know they can form a Creditors Committee, but that would required sufficient
effort for no benefit, given that SCO has substantial negative equity. So, I
guess my question really is:

Can an estate remain in Chapter 11 indefinitely? Judge Gross has silenced and
disregarded every voice expressing anything that doesn't support allowing this
debtor to squander the total assets of the estate, leaving nothing left to pay
creditors. Now that the Novell litigation has a final judgment, how can this BK
judge not be more aggressive about making SCO be more forthcoming? What makes
this case special?

[ Reply to This | # ]

Property Recovery?
Authored by: joef on Friday, June 18 2010 @ 05:08 PM EDT
Would Novell have standing to sue to recover their revenue stream, the one
associated with the continuing licensing business? If so, in what court? Could
Cahn as trustee be the defendant? Is there any residual value to be recovered? I
can see that Novell would not wish to acquire the litigation business; there are
too many liabilities associated with that _____. (Use your own description.)

[ Reply to This | # ]

New Blank Rome Bill !!!!
Authored by: _Arthur on Friday, June 18 2010 @ 06:38 PM EDT
Blank Rome just submitted its bill for the work performed in December 2009.
Took them only 6 months to tote it up.


$140,847.00 + $7,019.45

They spent 12 minutes working on Al Petrofsky's phone call...

[ Reply to This | # ]

Picking at SCO's cadaver
Authored by: Anonymous on Friday, June 18 2010 @ 09:05 PM EDT

One big question on my mind is the priority of two key claims to SCO's rapidly dwindling asset base: Yarro's super-priority loan vs Novell's converted funds. Both are about $2 million. Yarro's loan has priority over other claims to SCO's assets, but the converted funds are not SCO's assets. They are Novell's. A move to Chapter 7 would reduce the waste of remaining assets on lawyers and consultants, but who would get what little meat is left on this skeleton? I think that in the event that SCO's pockets are too empty to pay Novell, Novell should seek to pierce the corporate veil and go after past and present executives and directors of SCO for the balance of the converted monies.

[ Reply to This | # ]

Oh PJ, how could you be so mean to SCO?
Authored by: Ian Al on Saturday, June 19 2010 @ 04:04 AM EDT
Ed Cahn isn't afraid of another hearing. It's just that there is not enough
money left for his bus fare to the court room.

Ian Al
SCOG, what ever happened to them? Whatever, it was less than they deserve.

[ Reply to This | # ]

Another meeting called off??
Authored by: ghost on Saturday, June 19 2010 @ 04:59 AM EDT
Well, I guess they are so broke that they can't even afford to attend the
bankruptcy court..

[ Reply to This | # ]

Wasn't there supposed to be a plan?
Authored by: Anonymous on Saturday, June 19 2010 @ 07:26 AM EDT
Help me out people - wasn't there supposed to be a reorganisation plan being
produced? That was the big issue in the bankruptcy wasn't it? What happened to
the plan SCO was supposed to be coming up with?

There was even supposed to be a time limit for SCO to come up with such a plan
wasn't there? That is the deadline Judge Gross famously chose to ignore absent
the possibility that someone might take him out back of the courthouse and shoot

So now that there is no deadline where does that leave us? Does that mean unless
a firing squad shows up at the courthouse to make the Judge do his job then the
case is just going to be allowed to drift?

There seems to be nothing at all happening bankruptcywise right now that I can
see - apart from lots of money being poured down a rathole. I didn't think
companies were allowed to hide in chapter 11 and waste all their assets in this
way. I thought they had to at least pretend to come up with a plan.

[ Reply to This | # ]

SCO assets? Who cares? Novell for sale - SCO's Bankruptcy Hearing Monday Is Called Off
Authored by: Anonymous on Monday, June 21 2010 @ 05:11 AM EDT
Now that Novell is the un-disputed owner of the valuable Unix copyrights, I'm
concerned about someone with a certain agenda going after that company.

SCO Assets? No longer of any concern. Only keep your eyes open for the
expected appeal!

[ Reply to This | # ]

Why isn't SCO in Chapter 7? I think the answer is obvious...
Authored by: GriffMG on Monday, June 21 2010 @ 12:41 PM EDT
If SCO were in chapter 7 he wouldn't be able to bill it any more!

Keep B-) ing

[ Reply to This | # ]

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

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