When it rains, it pours, they say. First, SCO files for Chapter 11 bankruptcy protection, and now on the same day Judge Dale Kimball has denied SCO's Motion for Reconsideration or Clarification of the August 10, 2007 Order. Here's his Order [PDF]. I wrote an article earlier today about SCO's Reply Memorandum in support of this motion, and as you'll see, I am not surprised at the denial.
SCO also filed a Notice of Bankruptcy [PDF] also with an attached bankruptcy form. Here's some interesting wording:
PLEASE TAKE FURTHER NOTICE that as a result of the pendency of the
Debtors' bankruptcy cases and the application of 11 U.S.C. § 362(a)(1), the commencement or
continuation of judicial proceedings against the Debtors to pursue prepetition obligations was
automatically stayed. The automatic injunction granted by 11 U.S.C. § 362(a) will remain in
effect until the bankruptcy case is dismissed or closed or until such earlier times as set forth in
11 U.S.C. § 362(c), (d), (e) and (f).
PLEASE TAKE FURTHER NOTICE that contempt proceedings may be
initiated against any party who participates in any violation of the automatic stay, and, pursuant
to the provisions of the Bankruptcy Code, the Bankruptcy Court may award actual damages,
including costs and attorneys' fees (and, in appropriate circumstances, punitive damages) to
compensate the Debtors for loss arising out of violations of the automatic stay.
Nyah, nyah, Novell, you can almost hear them saying. I feel like adding Groklaw to the list of creditors. We'd all saved up to send an attorney to the trial to report on it for Groklaw, and when he tried to cancel the ticket just now, he can't get his money back. So, I guess he could fly to Utah for the sheer glamor of it and check out the great Salt Lake. But no trial for now.
IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF UTAH
THE SCO GROUP, INC.,
Civil Case No. 2:04CV00139DAK
This matter is before the court on The SCO Group, Inc.'s ("SCO") Motion for
Reconsideration or Clarification of the Court's Order dated August 10, 2007. The parties have
fully briefed the motion, and the court concludes that a hearing would not significantly aid in its
determination of the motion. Having carefully considered the memoranda submitted by the
parties and the facts and law relevant to the motion, the court enters the following order denying
SCO seeks reconsideration of the court's determination that while the amended APA
allowed SCO to enter into SVRX Licenses incidentally involved in its rights to sell and license
UnixWare, such incidental licensing did not excuse SCO from paying royalties to Novell for the
SVRX components in those licenses. It is within the court's discretion to reconsider a previous
order. Anderson v. Deer & Co., 852 F.2d 1244, 1246 (10th Cir. 1988).
Rule 54(b) provides that "any order or other form of decision, however designated, which adjudicates fewer than all
adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall
not terminate the action as to any of the claims or parties, and the order or other form of decision
is subject to revision at any time before the entry of judgment adjudicating all the claims and the
rights and liabilities of all the parties." Fed. R. Civ. P. 54(b). In Major v. Benton, 647 F.2d 110,
112 (10th Cir. 1981), the Tenth Circuit explained that
When a court enunciates a rule of law in the course of a given case,
the law of the case doctrine generally requires the court to adhere
to the rule throughout the proceedings. 1B Moore's Federal
Practice P 0.404(1) at 402-03. The rule is one of expedition,
designed to bring about a quick resolution of disputes by
preventing continued reargument of issues already decided.
Roberts v. Cooper, 61 U.S. (20 How.) 467, 481, 15 L.Ed. 969
(1858); White v. Murtha, 377 F.2d 428, 431-32 (5th Cir. 1967).
Unlike res judicata, the rule is not an "inexorable command," but is
to be applied with good sense. Murtha, 377 F.2d at 431-32 . . . .
When a lower court is convinced that an interlocutory ruling it has
made is substantially erroneous, the only sensible thing to do is to
set itself right to avoid subsequent reversal. Lindsey v.
Dayton-Hudson Corp., 592 F.2d 1118, 1121 (10th Cir.), cert.
denied, 444 U.S. 856, 100 S. Ct. 116, 62 L. Ed. 2d 75 (1979) . . . .
Courts have generally permitted a modification of the law of the
case when substantially different, new evidence has been
introduced, subsequent, contradictory controlling authority exists,
or the original order is clearly erroneous. See Fuhrman v. United
States Steel Corp., 479 F.2d 489, 494 (6th Cir.), cert. denied, 414
U.S. 859, 94 S. Ct. 71, 38 L.Ed.2d 110 (1973); Murtha, 377 F.2d at
Although Rule 54(b) allows a court to revisit any order that rules on less than all of the
claims in a case, a motion to reconsider is not appropriate when it merely restates the party's
position taken in the initial motion. A motion for reconsideration is an "inappropriate vehicle to
reargue an issue previously addressed by the court when the motion merely advances new
arguments, or supporting facts which were available at the time of the original motion. Absent extraordinary
circumstances, . . . the basis for the second motion must not have been available at
the time the first motion was filed." Servants of the Paracletes v. Does, 204 F.3d 1005, 1012
(10th Cir. 2000). A motion to reconsider must be made upon grounds other than a mere
disagreement with the court's decision and must do more than rehash a party's former arguments
that were rejected by the court.
SCO asserts that even though Novell argued that it was entitled to royalties if the
licensing of SVRX was incidental, that was not Novell's central argument. SCO also contends
that the issue was not fully briefed because Novell did not argue that it was entitled to SVRX
Royalties for incidental licenses of SVRX until its reply memorandum. But SCO's assertions fail
to recognize that it was SCO who raised the argument regarding incidental licensing of SVRX in
its memorandum in opposition to Novell's motion for partial summary judgment on its Sixth,
Seventh, Eighth and Ninth Claims for Relief. SCO also filed a cross motion for summary
judgment on these claims. SCO asserted that it was not required to pay royalties to Novell under
the Sun and Microsoft Agreements because those agreements are licenses for UnixWare that
license SVRX only incidentally. In making that argument, SCO had the opportunity to raise all
of its arguments with respect to why the APA, as amended, did not require it to pay royalties for
such incidental licenses.
SCO further claims that it presented evidence that the licensing of SVRX in the Sun and
Microsoft Agreements was only incidental to a UnixWare license and that Novell was not
entitled to a royalty for such incidental licenses of SVRX apart from whatever royalty Novell was
entitled to receive pursuant to the APA's provisions regarding UnixWare royalties. Despite the
evidence SCO presented, the court recognized that the parties disputed whether the SVRX
component of the licenses was only incidental and found that there was a question of fact as to
the portion of SVRX technology licensed in the Sun and Microsoft Agreements.
The court understood and analyzed both parties' positions, conducted its own analysis to
interpret the applicable agreements, and explained the reasoning behind its conclusions in its
August 10, 2007 Memorandum Decision and Order. SCO does not contend that any change in
fact or law has occurred since the court's order. SCO merely disagrees with the court's order.
SCO restates its previous arguments and asserts new arguments that were available to it at the
time of the original briefing on this issue. These do not provide grounds for a motion to
Even if the court were to consider SCO's newly asserted argument regarding the failure
of the APA to specify any method for calculating SVRX Royalties in the case of an incidental
license of SVRX, the court concludes that it does not impact its prior analysis of the issue. The
APA made SCO Novell's administrative agent for purposes of passing through SVRX Royalties
and royalties from SCO's future sale of UnixWare products.
It is clear that the royalty obligation with respect to the future sale of UnixWare products
expired on December 31, 2002. Thus, such obligation expired before the Sun and Microsoft
Agreements at issue. SCO's citation to Schedule 1.2(b) § (b)(i)(a) for the proposition that there
was no obligation to pay royalties to Novell is unclear given that the obligation had expired and,
in any event, the section relates to the amount of product that was required to be shipped or
licensed in a year before the royalty obligation began.
The court continues to find that the only provision of Schedule 1.2(b) relevant to the
parties' dispute on this issue is § (f), which relates to whether an SVRX customer has been
validly converted to UnixWare. While the APA terminated SCO's royalty obligations with
respect to UnixWare, it provided for no termination of SCO's obligation with respect to SVRX
Royalties. With respect to SVRX Royalties, SCO had a continuing obligation to pass those
royalties through to Novell.
Section 4.16 allowed SCO to enter into new SVRX Licenses and amendments to existing
SVRX Licenses incidental to its license of UnixWare, but nothing in Section 4.16 attempts to
terminate Novell's right to SVRX Royalties to those SVRX Licenses. Although it is possible
that the provisions of § (f) of Schedule 1.2(b) could terminate the SVRX Royalty obligation with
respect to an existing SVRX customer, SCO makes no attempt to assert that it validly converted
either Sun or Microsoft to UnixWare.
Section 1.2(f) of the amended APA provides that SCO is to provide Novell with a report
detailing its receipt of SVRX Royalties and royalties from Royalty-Bearing Products as
contemplated by Schedule 1.2(b), which is defined as UnixWare products and White Box. Such
reports were to be separately broken down by revenue type, product, customer, etc. To the extent
that SCO licensed SVRX technology incidental to UnixWare and such license had no value,
Section 1.2(f) would still require SCO to notify Novell of its receipt of royalties and break it
down by revenue type and product.
After negotiating new or amended SVRX Licenses with a customer, SCO would have
had all the information necessary for allocating the value for the separate portions of the
agreements. As Novell's fiduciary, SCO was obligated to account and remit the appropriate
amount. The APA sets forth these requirements. The fact that the APA did not include a method
for calculating the value of the SVRX technology licensed does not change the court's
conclusion that it was SCO's fiduciary obligation to carry out that function. The APA plainly
places that duty on SCO.
While a motion for reconsideration should be granted to correct manifest errors of law,
see Phelps v. Hamilton, 122 F.3d 1309, 1324 (10th Cir. 1997), neither SCO's arguments nor the
court's review of its prior order convinces the court that the analysis in its prior order contains
manifest errors of law. SCO also states that insofar as it has misapprehended the court's ruling
on this issue, its motion should be considered a request for clarification. The briefing on this
motion and other pretrial motions demonstrates that SCO has not misapprehended the court's
ruling. Therefore, no clarification is necessary.
For these reasons, SCO's Motion for Reconsideration or Clarification of the Court's
Order dated August 10, 2007 is denied.
DATED this 14th day of September, 2007.
BY THE COURT:
DALE A. KIMBALL
United States District Judge