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In the Ordinary Course of Business
Thursday, November 15 2007 @ 05:41 PM EST

There are a couple of filings in the SCO bankruptcy today, neither of which is particularly earth-shattering, but one of them will help me explain something to you about what happened at the hearing on November 6th with respect to the pro se objection to the motion regarding hiring professionals in the ordinary course of business. It's on my long-standing theme of "Never Appear in Court Without a Lawyer To Represent You".

Here are the filings first of all, and then I'll connect the dots for you:
209 - Filed & Entered: 11/15/2007
Affidavit/Declaration of Service
Docket Text: Affidavit/Declaration of Service (and Service List) Regarding [Signed] Order Granting Debtor The SCO Group Inc.'s Motion to Enforce the Automatic Stay (related document(s)[204] ) Filed by The SCO Group, Inc.. (O'Neill, James)

210 - Filed & Entered: 11/15/2007
Affidavit
Docket Text: Affidavit of Ordinary Course Professional David A. Donohoe, Jr., of Donohoe Advisory Associates LLC Filed by The SCO Group, Inc.. (Attachments: # (1) Affidavit of Service and Service

Note in particular the Affidavit of Ordinary Course Professional? Why did they need to file that, when SCO already got its motion to hire professionals approved? Let me show you.

Both the US Trustee and an equity holder objected to the motion to hire professionals in the ordinary course, but the hearing itself was not helpful in discerning why the latter did so, because he appeared by telephone and the sound level was apparently too low for the transcriptionist to make out all the words. Our eyewitnesses had trouble hearing too. But here's the objection expressed by the equity holder regarding hiring German lawyers to handle litigation there as it appears in the transcript:

And then the second point is on the German litigation. This is not mentioned in the schedules and they claim that this is, you know, in ordinary course of business and that the business would somehow be fairly hindered if they could not (indiscernible). I just donít see any facts to support that....The problem is is that the noticed parties are not just -- the order doesn't just say that those are the only people who get noticed. The order also says those are the only people who have the opportunity to object.

Ms. Jones points out then that "the order is very specific that if there are any supplements, there is an opportunity to review the affidavit." And the court agrees:

THE COURT: Yes.

MS. JONES: And also to object, so I'm not sure I understand the individual's point. But, Your Honor, we can make sure that he does receive a copy of any supplements. And as I said, there is a period of objection in there. ...Your Honor, I believe what I've heard is a concern about what is the German litigation about, Your Honor, not so much about the retention of the ordinary course professional. And Your Honor, I don't know if its something we want to do during the course of this hearing or if we can talk to this individual off-line and tell him what the German litigation is about. But, Your Honor, at this point, the debtor does believe in its business judgment that it does need the retention of the German firm. I don't think there's any dispute as the bona fides of that German firm. And we'd ask that they continue to be on th OCP list, Your Honor.

THE COURT: Mr. Petrofsky, what we'll do is I will have debtor's counsel speak with you about the German litigation. But I do think its appropriate to approve ordinary course counsel for that litigation. And to the extent you've objected on that ground, I'll overrule your objection.

OK. So what went wrong? In my estimation, it was that you have folks not speaking the same language. The judge and all the lawyers are speaking legalese. They know the procedures and they know what an objection ought to cover on that particular motion. It's a motion whereby a debtor lists the entities it wishes to hire post-petition to handle the things that are expected to be needed going forward. A cap is also listed, so if the debtor wishes to pay more than that a month, it has to ask the court's permission. That's all that motion is about, a way to list everyone, so the debtor doesn't have to ask ten or twenty times, once for each professional, and the idea is to make it possible for the Chapter 11 debtor to do business without running to the court every day. So that is what the judge and the lawyers in the room were seeing.

On the other side, there was a concern that, even if it were valid in another context, wasn't appropriate for that particular motion and to make it worse it was presented in plain English to a roomful of people who were in a conversation in legalese. That's why you see Ms. Jones struggling with what the objection is even about. And it is also why the objection was summarily overruled. You can see the judge wasn't sure what the objection was either, in that he says, "to the extent your objection is about XYZ, it's overruled".

It's like everyone in the courtroom is speaking French, and one person comes in and tries to join the conversation but only speaks Italian, which is kind of similar, and he has a French dictionary he refers to from time to time to try to communicate. They are both good languages, and it's not impossible to interact to some degree, but if you want to join a conversation going on in French, you need to speak French to be understood fully and to avoid embarrassing moments we've all experienced when trying to speak a new language. If everyone is speaking legalese, you need to also, and if you don't know that language fluently, you'd be better off hiring a lawyer who does to express your thoughts in the proper language, at the right time, and in the proper procedure. Of course, he might just tell you that you don't have a leg to stand on and would be better off saying nothing at all. But wouldn't you want to know that without finding out in the school of hard knocks?

Now, toward the end of the day, the US Trustee, who had his own seperate objections stood up with a related remark just at the point where the judge is agreeing to sign the order permitting SCO to hire professionals in the ordinary course:

THE COURT: I'm signing the order.

MS. JONES: Thank you.

(Pause)

THE COURT: Mr. McMahon, yes, sir.

MR. MCMAHON: Your Honor, good afternoon.

THE COURT: Good afternoon.

MR. MCMAHON: One comment with respect to the order that I just want to note for the record. It expressly reserves the rights of our office and parties-in-interest who object to the employment and compensation of a specific ordinary course professional when they file an affidavit seeking to be retained. So notwithstanding the debtor's preview of the ordinary course professionals to come on Exhibit A, those rights are expressly reserved under the form of the order.

THE COURT: And I assume that is not agreed, necessarily, to by the debtor's, but understood that that -- that the U.S. Trustee is reserving its rights?

MS. JONES: Yes, sir.

You see in the part I highlighted that he is reserving his rights, but he also points out that the order does permit others, "parties-in-interest" as he calls them, to object to any affidavit that is filed by any professional that SCO wants to hire. So *that* is the proper time to object, when that affidavit is filed, if your objection is to that particular law firm or the amounts or whatever. And that brings us to today's filing, full circle. A firm has now filed its affidavit, now that the general motion has been approved and the order signed. If anyone objected to that particular firm being hired, now would be the proper time to object to them being hired. That's my understanding anyway. Ask your lawyer to explain it to you if you are in a real world situation.

Now, I can't say what all the objection at the hearing was intended to be objecting to based on the transcript. But if it was objecting to hiring any firm at all in Germany, it's probably doomed. If there is litigation by SCO or against SCO's German subsidiary, that isn't stayed, they certainly will be allowed to hire lawyers, and it's pointless to object to that, I think. If there are objections to a particular firm, although I gather that isn't the case here, then objections can be filed when that affidavit appears. But if the objection is to something else entirely, that the litigation should be blocked or not allowed or whatever, then a lawyer's advice is the best way to go, because otherwise you are in alternate universes speaking two different languages, and you know how well that works out. While courts do try to accommodate pro se actors, if they don't even understand what you are saying, there are limitations to the relief you can expect. And if your objection is about something really important, don't you want to maximize your chances of success?

Did you notice in the hearing that when the subject changed to the Utah litigation, both sides swapped in lawyers who knew that part of the story? You know why? It's not just that they were there. It's also because when you learn legalese, and you work in the real world after law school, you generally develop a specialty or specialties. So if your patois is bankruptcy legalese, you won't try to speak patent legalese, unless you've specialized there also. Why? Because law is so, so complex, even lawyers don't try to speak up when they know they are not experts in that area of law. For a nonlawyer to leap into the pool, well, it's like doing a cannonball into a pond of unknown depth. It might work out for you, but if it doesn't, it could be serious.

You can take a look at the final Order [PDF] as signed and compare it with the Proposed Order [PDF], and it's very interesting to see the changes that the US Trustee effectuated. He's watching the money closely, I see, and he's making sure that there are no blank checks. But while the Order as signed spells out notice provisions, you'll see the original order as proposed did also, if you read legalese, and here's the Notice [PDF] that went out [PDF] with the original motion spelling out the opportunity to object. I gather there was an issue regarding supplements that was dealt with to make sure everyone has notice of any changes, so that's that. So, one small corner of the big picture.


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