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SCO To Red Hat Court: Please Don't Make Us Show Our Code Yet
Friday, November 14 2003 @ 04:39 AM EST

There has been a small development in the Red Hat case in Delaware. SCO has filed, on October 24th, its "Defendant's Consolidated Reply in Support of Defendant's Motion to Stay Discovery Pending Resolution of the Motion to Dismiss and Its Motion for Enlargement of Time." That's quite a mouthful, and as the cumbersome name implies, this memorandum is supporting both of their previously filed motions, for a delay pending a ruling on their motion for dismissal or if that doesn't work, for more time to fork evidence over.

This is SCO's new attorney for the Red Hat case, by the way, so it's our first chance to see him at work. They again tell the judge that they don't want to do discovery in Delaware until she rules on their Motion to Dismiss. If they win, they argue, then there is no need for discovery. If they partly win, they might not have to turn everything over that Red Hat is asking for. It wouldn't be fair to make them show their cards now, and then if they win, it's too late to take it back.

Again they argue that most of the issues are going to be handled in the Utah case (of course most isn't generally enough, but they slide right over that point), so in the alternative, they'd like to let the IBM case go to a resolution first and then do Red Hat, like in 2005 or 2006. Say, is that when Longhorn comes out? What a coincidence.

If the judge won't delay that long, they next argue, how about we file a new motion and request a stay or a transfer to Utah, so the two cases can be merged there? They try to undo the damage done in the last SCO filing, where the earlier attorney seemed to be telling the judge that they intended to dump her if she didn't rule their way, and they carefully acknowledge here her discretionary powers. But, they say, it costs a lot to do two cases at once, and it's a waste of judiciary resources to do it in two places, when one will do. (Translation: we'd like to be on our home court in Utah, please.)

SCO's new attorney appears competent, but he is picking up the pieces from the prior attorney, and so he's stuck with what he has in hand. That's always harder, even if the previous attorney did a fine job. It's like taking over someone's side in a chess match after they've already made their opening moves. You're kind of limited by the strategy already in place. But the new attorney does a creditable job trying to sound reasonable, coherent and respectful of the judge, if not of Red Hat. I regret to say that he has, in my opinion, strengthened their hand just a tad, mainly because of his tone of voice, depending on the judge's tolerance for delay. After all, they are asking for a couple of years' delay and that is a lot to ask.

Basically, SCO reiterates the points it made the last time, but this time they discuss the cases Red Hat used and try to distinguish their facts from the facts in the cases. They also accuse Red Hat of not having turned over certain preliminary discovery materials you are supposed to turn over under Rule 26 of the Federal Rules of Civil Procedure. How serious are they about discovery, they ask, if they aren't doing their own discovery as they should? I note, however, that they don't say they themselves have complied with Rule 26 yet, and they seem to be implying that they need to, by mocking Red Hat's characterizing a phone call conference as qualifying as a Rule 26 conference. (It's only after you have the conference that you have to comply with the preliminary discovery requirement.) This is name calling. They are just saying to the judge: we're stallling? They're no better. It's a very weak thrust though, because Red Hat is telling the judge they want to go forward, and SCO is saying they don't want to.

That's about the only thing they can do, because the cases Red Hat offered are sound, so they say things like: we filed our motion on time and the people in these cases didn't, so those cases shouldn't apply to us. We're not stallling as badly as they did. It's not powerful but what can they say?

The bottom line is still that they don't want to have to do discovery now. They don't want to be in Delaware either. But Red Hat has bluntly accused them of stalling, so they feel compelled to answer the accusation.

Their answer? They actually tell the judge all about millions of documents of discovery they have offered in Utah, as proof that they are not stalling. That beats all for stand-up, sit-down, run-around gall, don't you think? Then they attach their Memorandum on Why We Want to Avoid Discovery with IBM, as I call it, or Plaintiff's Memorandum of Law in Opposition to IBM's Motion to Compel Discovery, as they call it, as Exhibit B. All this does is remind the judge in Delaware that IBM felt forced to bring a Motion to Compel Discovery in Utah.

They sort of have to show their side, though, because IBM already gave the judge that Motion to Compel as an exhibit. So this is damage control. Red Hat was very aggressive in its stance, and the best SCO can do is answer the charges and hope for the best. Well, there is one more option, but they seem to have ruled it out. They could just cooperate with discovery instead of digging in their heels and making Red Hat drag them toward compliance.

I can't see how Exhibit B helps them to prove they aren't stallling, though, especially because there are now two Motions to Compel Discovery in Utah, not just one, which would indicate stalling to me. I personally have never worked on a case where there were two motions to compel. I'm not saying it never happens, but it doesn't happen every day either.

And I believe that the million pages of discovery documents they tell this judge about as evidence of their good faith turned out to be a million pages of unusable source code SCO printed out and cynically handed over, according to IBM, and some really old documents from AT&T, which precipitated the Second Motion to Compel Discovery on IBM's part. This is their best proof that they are not stalling? They do have a problem. How do you prove you are not stalling when you are?

I have inserted links to some of the documents they reference, just as an aid to understanding what they are talking about. The links are not in the original, obviously. One of the attorneys in my think tank has agreed to create a page showing all the documents filed and which one goes where. And a programmer friend is working on some visuals to make it easier to understand. Motion practice gets complicated, and it's hard to follow without a map, so we are working on the map. Meanwhile, the links will at least remind you of what goes with what.

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

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
____________________________X
RED HAT, INC.,

Plaintiff,

v.

THE SCO GROUP, INC.,

Defendant.

_____________________________X

Civil Action No. 03-772-SLR

DEFENDANT'S CONSOLIDATED REPLY IN SUPPORT OF DEFENDANT'S MOTION TO STAY DISCOVERY PENDING RESOLUTION OF THE MOTION TO DISMISS AND ITS MOTION FOR ENLARGEMENT OF TIME

The SCO Group ('SCO'), pursuant to the Federal Rules of Civil Procedure and the Local Rules of this Court, hereby files its Consolidated Reply in Support of its Motion to Stay Discovery Pending Resolution of the Motion to Dismiss and related Motion for Enlargement of Time and states as follows:

Shortly after SCO filed its Motion to Dismiss all claims against it, SCO filed its Motion to Stay Discovery. [1] In that Motion, SCO cited a series of cases that dealt with the precise issue before this Court -- the propriety of issuing a brief stay of discovery during the pendency of a potentially dispositive motion to dismiss. Issuance of a stay in these circumstances, as SCO pointed out in its original motion, is entrusted to the sound discretion of this Court. In the instant case, the interests of judicial economy are served by staying discovery because: (1) SCO's Motion to Dismiss, if granted, would be dispositive of the case or, if only granted in part, would greatly limit the discovery in the case and (2) if the Motion to Dismiss is not granted and the Court decides to transfer this matter to Utah as part of the SCO v. IBM case, discovery here would become duplicative. Therefore, SCO argued that good cause plainly exists for this Court to exercise its discretion and stay discovery pending resolution of the outstanding Motion to Dismiss. This Motion for Enlargement did not raise any additional bases. As a result, SCO is filing a consolidated reply in support of both Motions.

In response to the Motions, Red Hat does not address, much less attempt to distinguish, a single case cited by SCO. Instead, Red Hat argues that the Motions were "untimely" and that there has been no showing of good cause. Red Hat is wrong on both counts.

1. SCO'S MOTIONS WERE TIMELY

SCO filed its Motions to Stay and for Enlargement of Time before any responses were due to the discovery. As such, they cannot be considered untimely. Lujan v. National Wildlife Federation, 497 U.S. 871, 895 and n.5 (1990); see Hertz Corp. v. Alamo Rent-a-Car, Inc., 16 F.3d 1126 (11th Cir. 1994); Ritter v. Smith, 811 F.2d 1398 (11th Cir. 1987); Motsinger v. Flynt, 119 F.R.D. 373, 378 (M.D.N.C. 1988) (recognizing that a timely requested enlargement, such as the one requested here, is "readily available."); accord Sherrod v. Piedmont Aviation, Inc., 516 F. Supp. 39, 41 (E.D. Tenn. 1978)(Plaintiff could have "obtained readily an enlargement," had he made a timely request). Indeed, if courts were to adopt Red Hat's position, Fed. R. Civ.P. 6 would be rendered meaningless -- litigants that timely request enlargements of time would nonetheless be required to respond to whatever issue unless they were able to obtain a court order prior to the deadline. According to Red Hat's view of the law, any motion for enlargement that is filed with less than the minimum time allowed for full briefing (at least 20 calendar days) would be a nullity because the litigant could not get a court order prior to the deadline.

The law, not surprisingly, does not support Red Hat's position. In the leading case cited by Red Hat, Standard Chlorine of Delaware, Inc. v. Sinibaldi, 821 F. Supp. 232 (D. Del. 1992), the defendant did not file a motion for enlargement of time or a motion to stay, but instead only filed a motion for protective order. More importantly, in that case, the discovery requests were served on June 24, yet the motion for protective order was not filed until September 28, at least two months after the deadline to respond had passed. Id. at 261. Under these circumstances, this Court understandably denied the motion. The present case, however, is far different. With a potentially dispositive motion to dismiss pending, SCO timely filed before the due date both the Motion to Stay Discovery and the Motion for Enlargement to briefly delay potentially wasted resources while this Court considers the Motion to Dismiss. As the case cited by SCO in its Motions make clear, such action is entirely appropriate and timely. [2]

Red Hat's own conduct in this case undermines its complaints about the timeliness of SCO's Motions and Red Hat's argument that SCO has somehow unilaterally granted itself a stay of discovery or enlargement of time. If Red Hat were serious about good faith discovery obligations, then surely it would have followed up with the farce that it calls the Rule 26 conference. The undisputed facts remaain that Red Hat still has not prepared the draft Rule 26 report, despite assurances by counsel. Moreover, Red Hat has not filed any initial disclosures required under Rule 26. These failures by Red Hat demonstrate that Red Hat itself did not view the brief phone call as anything remotely resembling a Rule 26 conference. Rather, Red Hat's filing of this case and its sweeping discovery requests are nothing other than desperate attempts to interject itself into the issues being litigated in the previously filed SCO v. IBM litigation pending in the District of Utah.

2. SCO HAS DEMONSTRATED GOOD CAUSE.

On the issue of "good cause," Red Hat fails to engage the basic argument, which abounds in the case law cited by SCO, that during the pendency of a motion to dismiss any discovery not directed to that motion is potentially wasteful of time and resources. In fact, the cases Red Hat cites for its arguments against a stay or enlargement of time differ markedly from the circumstances of the instant case.

Red Hat cites, for example, 19th St. Baptist Church v. St. Peters Episcopal Church, 190 F.R.D. 345 (E.D. Penn. 2000) as support for the proposition that courts have denied motions to stay and required depositions to proceed. That case can hardly be considered as support for Red Hat's strident opposition. In 19th St. Baptist Church, the court overruled the defendant's motion to stay the taking of the depositions of four octogenarian and nonagenarian plaintiffs so that their testimony could be perpetuated. Id. at 347. The court allowed the depositions to proceed, noting that critical testimony in the case could be lost forever due to the age and infirmities of the deponents, and that the judiciary has an institutional responsibility for safeguarding the rights of African-Americans under the Reconstruction Amendments. Id. at 349-350. No similar concerns exist here. No testimony will be forever lost if the discovery is delayed until after the Court rules on the motion to dismiss.

In another case cited by Red Hat, In re Towers Fin. Corp: Noteholders Litig., 1996 WL 622386 (S.D.N.Y. Jan. 29, 1996), the issue was whether to lift a two-year old partial stay of discovery in a complex class action entered on a motion to dismiss filed by some, but not all, of the defendants. In deciding to lift the stay, the magistrate judge reasoned that "the stay has been in effect for almost two years and if it were to remain in effect until the remaining motions to dismiss were decided by this Court and reviewed by Judge Knapp (and possibly also the Second Circuit), the stay likely would have to remain in effect for another year or more. The additional delay would be unfair to plaintiffs." Id. at *2. Again, the present issue before this Court is far removed from the issues that must be considered in lifting a two year old stay.

Similarly, the facts and circumstances in Cognex Corp. v. Nat'l Instruments Corp. [3] do not support Red Hat's arguments in the present situation. In Cognex, the defendant had answered and counterclaimed, the parties had agreed to a scheduling order, and had exchanged Rule 26(a)(1) initial disclosures, together with numerous requests for production, admissions, and interrogatories. Following that exchange, the plaintiff moved to stay discovery (Exh. A., D. I. 84) eight months after the Rule 16 Scheduling order was entered (Exh. A., D. I. 25) and three months before discovery cutoff date." Id. Under those circumstances, it undoubtedly made sense for Judge Farnan to reject the plaintiff's motion to stay discovery as a tactical move.

Many of the remaining cases cited by Red Hat do not concern a stay of discovery, but instead involve the separate issue of a stay of the proceedings. Bechtel Corp. v. Laborers' Int'l Union, 544 F.2d 1207 (3d Cir. 1976); Dentsply Int'l, Inc. v. Kerr Mfg., Co, 734 F. Supp. 656 (D. Del. 19990); Gold v. Johns-Manville Sales Corp., 723 F.2d 1068, 1076 (3d Cir. 1983) (denying a motion to stay where the "plaintiffs and crucial witnesses are dying, often of the very diseases that" led to the action). These cases, while focused on a separate issue, actually provide support for SCO's position on this issue and others raised in this action. In Bechtel Corp, 544 F.2d at 1215, for instance, the court noted that district courts have "broad powers to stay proceedings," and that in the exercise of their sound discretion, it is not error to "hold one lawsuit in abeyance to abide the outcome of another which may substantially affect it or be dispositive of the issues." On the issue of a stay, SCO's initial motion acknowledged that such decisions are within the court's discretion. Moreover, as touched upon in the briefing on the Motion to Dismiss, if the court denies the Motion to Dismiss, SCO intends to ask the Court either to transfer the proceedings to Utah or, as in Bechtel, "hold [this] lawsuit in abeyance to abide the outcome of another which may substantially affect it or be dispositive of the issues."

Finally, although not relevant to any of the issues in the Motions, SCO must respond to Red Hat's repeated and baseless assertions that SCO has a nefarious plan to spread "fear, uncertainty and doubt" and as part of this plan refuses to produce discovery as long as possible. As support for this argument, Red Hat attaches a Motion to Compel and the docket sheet from the SCO v. IBM case. The reality is that the previously filed SCO v. IBM case pending in Utah governs many of the issues in this case, which certainly justifies staying or transferring this cause. [sic] For the record to be clear for the present Motions, however, SCO has attached a copy of its response to IBM's Motion to Compel in that case as Exhibit B hereto. Moreover, the Court should also be aware that SCO has produced over one million documents in the IBM litigation and that production continues weekly. These are hardly the tools of a nefarious plan. As SCO suggested in its Motion to Dismiss brief, if the Motion to Dismiss is not granted, in the interest of conserving the parties and judicial resources, SCO intends to ask the Court to stay or transfer the case to Utah, which would obviate the need for expensive, duplicative discovery in two separate fora.

CONCLUSON

As set forth in SCO's timely filed Motion to Stay Discovery and its Motion for Enlargement of Time, a stay of discovery or enlargement of time to respond to discovery is appropriate for the brief period of time while this Court considers SCO's pending Motion to Dismiss.

MORRIS, NICHOLS, ARSHT & TUNNELL

___________________
Jack B. Blumenfeld_
Jack C. Schecter_
(address)
Attorneys for Defendant _
The SCO Group_

OF COUNSEL:

Stephen N. Zack_
Mark J. Heise_
Boies, Schhiller & Flexner, LLP

October 24, 2003 ___________________________________________

[1] Red Hat incorrectly states that SCO did not object to the discovery when served or move to stay at that time "even though its motion to dismiss was then pending." RH Opp. to Motion to Stay, p. 2. In fact, when the discovery was served on September 9, the motion to dismiss was not "then pending," it was filed nearly one week later on September 15.
[2] Indeed, even the cases cited by Red Hat recognize the propriety of staying discovery when a pending motion to dismiss challenges the complaint as a matter of law, like the instant case, as opposed to merely attacking the sufficiency of the allegations. See Coca-Cola Bottling Co. of the Lehigh Valley v. Grol, 1995 WI. 421900*2-3 (E.D. Penn. March 8, 1993).
[3] SCO is unable to refer to the text of Jude [sic] Farnan's opinion in Cognex Corp. v. Nat'l Instruments Corp. because it is unpublished, unavailable on PACER, and was not attached to Red Hat's Memorandum in Opposition as required by Rule 7.1.3 (a) (G). SCO therefore relies only on the information available in the docket sheet attached hereto as Exhibit A.

[Attached as Exhibit A, docket sheet for 1:00cv441, Cognex case; as Exhibit B, SCO's Plaintiff's Memorandum of Law in Opposition to IBM's Motion to Compel Discovery]


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