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To read comments to this article, go here
SCO's Amended Complaint in SCO v. Novell - If At 1st You Don't Succeed . . .
Tuesday, July 13 2004 @ 06:18 PM EDT

Here is SCO's Amended Complaint in the SCO v. Novell case. The clerk's notation about a Second Amended Complaint was inaccurate. It's their first Amended Complaint. It just *feels* like their second.

This is the one that they had 30 days to fix as per Judge Kimballs' instructions, to list special damages the right way. Their second try begins on page 8. The judge practically wrote it for them. But I think they may have failed again.

To remind you of what they were told to do, and so you can see if they have done it, here is the Special Damages section of Judge Kimball's Order. At this point, no one's opinion matters but Judge Kimball's, because Utah is fairly squishy about what is required, and so he presented how he viewed the requirements. It will be his call if he thinks they succeeded.

They mention that potential UNIX customers have told them they won't license UNIX from them, due to the cloud over their ownership:

"At the present time SCO is pursuing claims against third parties for infringement of SCO's intellectual property and contractual rights in UNIX. Defendants in those cases have relied on Novell's claims of ownership in UNIX as a defense to SCO's claims, thereby hindering SCO's ability to protect its copyrights and causing SCO to incur significant additional attorneys' fees and costs..."

Who has used it as a defense? I can't think of any defendant who has done so. Can you? IBM hasn't used it, even if they were a third party. And DaimlerChrysler has defenses related to the Novell contract, mentioning Novell's waiver, but they don't mention a copyright cloud. AutoZone has yet to list any defenses. It's all been motions. It mentions Novell in its Motion to Stay in its list of prior litigation, but that isn't a defense that caused SCO extra expense to respond to. For one thing, it isn't a defense. For another, SCO sued AutoZone, not the other way around, so that was an optional expense and they had to go to Nevada anyway, or chose to. Red Hat sued SCO, so they are not defendants. I think this is a major gaffe on SCO's part. They keep wanting attorneys' fees to be special damages.

And why didn't SCO just tell the potential UNIX customers that they definitely do have the authority to license, regardless of Novell's copyright claims? There is no cloud over that, that I've heard about. So I think that excuse makes no sense. I note they don't list the names of any such customers.

That seems an odd thing to mention, anyway, instead of mentioning that they can't get anyone much to sign up for SCOSource licenses regarding Linux because of Novell. If I were a company approached to take a SCOSource license, I'd definitely want to ask them why they didn't mention such losses in this document. I would ask them, why, if they have the right to demand it, why aren't there any losses listed in this document? Might it be that they have no right to demand such monies and they are afraid to list it in a court of law? They talked about Novell costing them SCOSource business at the last financial teleconference. Where is the allegation here in the courts? Once again, we see the two faces of SCO, one in the media and one in the courts.

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

B. Special Damages

Novell also argues that SCO's slander of title claim should be dismissed because SCO has pleaded only general damages and has failed to plead special damages with specificity as is required under Rule 9(g) of the Federal Rules of Civil Procedure. Valley Colour, Inc. v. Beuchert Builders, Inc., 944 P.2d 361, 364 (Utah 1997). Because special damages are an essential element to a slander of title claim, Novell asserts that SCO has failed to state a cause of action and asks this court to dismiss the claim. SCO argues that Novell has overstated the Rule 9(g) pleading requirement and that it has specifically pleaded special damages by setting forth its loss of pecuniary advantage resulting from customer confusion as to copyright ownership and from its accrual of legal fees.

Rule 9(g) of the Federal Rules of Civil Procedure states that "when items of special damage are claimed, they shall be specifically stated." Fed. R. Civ. P. 9(g). Special damages "are a particular type of damages which are a natural consequence of the injury caused but are not the type of damages that necessarily flow from the harmful act." Hodges v. Gibson Products Co., 811 P.2d 151, 162 (Utah 1991). In Bass v. Planned Mgt Servs. Inc., 761 P.2d 586, 568 (Utah 1981), the court explained the difference between a slander of title claim and a slander or defamation claim as they relate to damages. The court distinguished the types of claims by recognizing that the tort of slander of title is "based on an intentional interference with economic relations. They are not personal torts; unlike slander of the person, they do not protect a person's reputation." Id. The court further explained that "[s]lander of title actions are based only on palpable economic injury and require a plaintiff to prove special damages, whereas injury to personal reputation may be based on both tangible and intangible losses and give rise to presumed and general damages. There are no general or presumed damages in slander of title actions." Id.

A slander of title action requires a plaintiff to establish special damages that consist of "a realized or liquidated" pecuniary loss. Hodges, 811 P.2d at 162. "Special damages are ordinarily proved in a slander of title action by evidence of a lost sale or the loss of some other pecuniary advantage. Absent a specific monetary loss flowing from a slander affecting the saleability or use of the property, there is no damage." See Bass, 761 P.2d at 569. "It is not sufficient to show that the [property]'s value has dropped on the market, as this is general damage, not a realized or liquidated loss." Valley Colour, 944 P.2d at 364.

Although a realized or liquidated pecuniary loss must be established at trial, that does not necessarily answer the question as to the amount of detail a plaintiff must use in pleading such loss in its Complaint. "In Utah there does not seem to be an inflexible rule regarding the pleading of special damages." Cohn v. J.C. Penney Co., 537 P.2d 306, 311 (Utah 1975). Rather, it is simply "a question of whether the pleadings contain such information as will apprise the defendant of such damages as must of necessity flow from that which is alleged." Id. Therefore, "the law does not require that the exact dollar amount of special damages be specifically pleaded." Hodges, 811 P.2d at 162.

However, a "plaintiff must present the circumstances giving rise to the special damages and the elements of injury [it] allegedly suffered." 5 Charles A. Write & Arthur R. Miller, Federal Practice and Procedure, 1311, at 706 (2d ed. 1990). Commentators have noted that there is no reducible formula for the requirements of Rule 9(g), rather "it will depend upon the nature of the claim, the type of injury sustained, and the causal connection between defendant's conduct and the damage." Id.

SCO alleges in its Complaint that

Novell's wrongful claims of copyrights and ownership in UNIX and UnixWare have caused, and continue to cause, irreparable harm to SCO, in the following particulars:

a) Customers and potential customers of SCO are unable to ascertain the truth of ownership in UNIX and UnixWare, and make decisions based thereon; and

b) SCO's efforts to protect its ownership of UNIX and UnixWare, and copyrights therein, are subject to a false cloud of ownership created by Novell.

Compl. 21. The Complaint then states that as a consequence of Novell's conduct, SCO has incurred special damages in an amount to be proven at trial. Compl. 26.

Although the Complaint alleges harm, it does not specifically set forth any type of realized pecuniary loss. To the extent that SCO's Complaint can be read to allege that Novell has caused irreparable harm to SCO's reputation, such damages are general damages. At the oral argument on this motion, SCO argued that because of the alleged customer confusion, customers did not want to enter into license agreements with it. This is a natural consequence of the alleged cloud of ownership and customer confusion and would amount to a realized pecuniary loss. However, SCO did not make such allegations of special damages in its Complaint. In addition, SCO has argued that it is entitled to attorney fees as special damages. However, regardless of whether attorney fees would be available as special damages in this case, SCO did not allege attorney fees as special damages in its Complaint. Rather, SCO alleged only generally that there is a cloud of confusion and that "as a consequence of Novell's conduct alleged herein, SCO has incurred actual and special damages in an amount to be proven at trial."

If this court were to find SCO's pleading of special damages sufficient, it would turn Rule 9(g)'s requirements into mere notice pleading. This court cannot conclude that SCO has given Novell enough information to apprise Novell of the types of damages that flow fromthe alleged cloud of confusion--such as lost sales, lost licenses, attorney fees, or any other it may be seeking. Although a specific amount of damages is not necessary and a specific identification of customers may be impossible, SCO has not given Novell or this court any information as to the scope of customer confusion, its lost business, or made any allegation that there, in fact, has been a realized pecuniary loss as a result of Novell's statements. Accordingly, Novell's motion to dismiss SCO's slander of title claim for failure to specifically plead special damages is granted without prejudice. The court grants SCO thirty days leave to amend its Complaint to plead special damages specifically in accord with Rule 9(g) of the Federal Rules of Civil Procedure.


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