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Lifting the Stay - Parsing The Details
Friday, December 07 2007 @ 07:44 AM EST

I've been noticing a fair amount of speculation and some confusion over what it was the parties were disputing regarding lifting the automatic stay to go back to Utah, so I thought it would be worthwhile to collect some resources to help out. First, I've collected all the transcripts for all the hearings in the SCO bankruptcy, as well as in SCO v. IBM and SCO v. Novell, on our Transcripts page, to make them easier to find. And second, I've gone through the motion briefs and the hearing transcript to pick out for you the essential bits to make it as clear as possible as to what each side was asking for and who won.

Our saga began with a Novell motion, Novell's Motion for Relief from Automatic Stay to Proceed with District Court Action to (I) Apportion Revenue From SCOsource Licenses and (II) to Determine SCO's Authority to Enter Into SCOsource Licenses, Etc. [PDF]. Novell was asking for the following:
4. By this Motion, Novell seeks to lift the automatic stay to resolve the issues that were before the District Court, including those issues that were the subject of the five‑day trial on its counterclaims....

14. Novell seeks relief from the automatic stay to proceed with the District Court Action to final judgment. Lifting the stay for this purpose will allow the District Court to (I) apportion revenue from certain SCOsource licenses that the District Court has determined or determines that SCO wrongfully retained and (II) determine SCO's authority to enter into SCOsource licenses generally, as well as resolve all other remaining issues in the District Court Action. Decisions on these issues are relevant to SCO's reorganization prospects because, obviously, SCO's post‑petition business model cannot continue to be based on Novell's property....

20. As discussed above, lifting the stay to allow the District Court Action to conclude is merited because the litigation is at a very advanced stage. The parties had already completed pre‑trial motion practice, pre‑trial briefing, and were poised to begin trial the next business day after SCO's petition for bankruptcy relief. The majority of the issues between the parties have already been decided by the District Court on summary judgment, including the item of greatest debate -- ownership of the SVRX copyrights. Given the late stage of litigation, the District Court is uniquely situated to resolve the remaining issues between the parties, which are the apportionment of revenue between the parties that SCO received from the SCOsource licenses and the scope of SCO's authority to enter into SCOsource licenses generally....

24. ... Finally, as discussed above, and as compared to the overall action, the issues that remain to be determined are finite and trial on the majority of those issues is expected to last no more than approximately five days....

27. ... As the majority of the issues between the parties were decided on summary judgment, including, especially, the key issue of ownership of the copyrights, what remains of the litigation largely is focused on determination of SCO's authority to enter into SCOsource licenses generally and on apportionment of revenue from all SCOsource licenses that SCO wrongfully retained. In other words, what remains for determination in the District Court Action are, in essence, damage calculations on an already successful action for Novell. Accordingly, a balancing test under Rexene, whether considered simply or in conjunction with the Sonnax factors, strongly favors lifting the stay to allow the District Court Action to conclude.

CONCLUSION

WHEREFORE, Novell respectfully requests that the automatic stay be lifted so that Novell may proceed with all remaining issues in the District Court Action by whatever means are appropriate and consistent with the District Court's schedule in order to have its claims liquidated, including allowing the District Court to (I) apportion revenue from certain SCOsource licenses that the District Court has determined or determines that SCO wrongfully retained, (II) determine SCO's authority to enter into SCOsource licenses generally, and that the Court grant such other and further relief as is just and proper.

As you can see, the motion didn't ask to lift the stay so it could get Utah to impose a constructive trust. That's because, as you can see from the Novell Trial Brief, filed the same day SCO pulled a switcheroo and filed for bankruptcy just as the trial in Utah was about to begin, that was a separate issue, to be decided, probably by motion, following the 5 day trial. Judge Dale Kimball's ruling on summary judgment motions of the parties on August 10 had already decided that Novell was entitled to a constructive trust, but he said he didn't know how to calculate how much to put in it, so that was what the trial was for, to figure out what SCO owed Novell. Novell didn't need to persuade the judge at trial or argue for a constructive trust as being deserved, as the ruling said that Novell was entitled to one. After the amount was determined, then post trial, Novell would move for the trust:

Based on that recovery, Novell anticipates seeking additional relief in its post-trial briefing, such as a constructive trust. Consideration of such relief is not necessary at trial, which per the Court's direction will focus on the proper apportionment of the SCOsource revenue and on Novell's entitlement to declaratory relief.

At the hearing on the Novell motion to lift the stay on November 6th in Delaware, Novell's attorney Michael Jacobs explained what had happened in Utah already and what was left to do:

MR. JACOBS: And it was a bench trial. So it was not -- we had -- he had -- one of the motions he decided after the summary judgment ruling is that our claims are fundamentally equitable and not legal. There was some shaping of the pleadings that lead to that ruling.

And so the two big issues for trial, and I think this is important, Your Honor, to understand where the constructive trust issue fits. The two big issues for trial were, one, a question whether SCO had the authority to enter into an agreement with Sun and Microsoft that led to SCO's collection of a lot of money that we claim is ours. It's an authority issue.

And then the second issue is having entered into those license agreements, having collected a lot of money, and then having entered into about a million dollars worth of what we might call miscellaneous license agreements, how much of that money should be apportioned to Novell under Judge Kimball's view of the way the asset purchase agreement works. So it was an apportionment trial which was going to decide the, if you will, the gross amount of Novell's claim from your vantage point as a creditor in the bankruptcy.

Then there was going to have to be subsequent phase in which we would address the exact amount of the constructive trust. We anticipated doing that on motion. The two are severable in that sense. What Judge Kimball would be deciding is the gross amounts, if we went back to him for trial. And then we would be going back to him and saying, okay, apply the lowest intermediate balance rule and figure out how much is in the bank account that's traceable and that's our constructive trust. That is, we think, fairly mechanical.

So that's where we were. That's where we would be if you lifted the stay. If your -- if the focus -- the focus of their opposition is the constructive trust.

THE COURT: Yes.

MR. JACOBS: And which is sort of -- which is interesting because they really didn't resist the question of whether we should be back to him for an apportionment trial or a trial, or perhaps we're thinking now a motion for summary judgment on this authority question. The focus was the constructive trust.

You could lift the stay for an apportionment trial and to decide that authority question. And then we can come back to you and we can decide what to do about the construction trust after that's done.

As you can see, Novell's position was that they wanted to lift the stay to decide the two issues that would quantify Novell's claim. After that, Novell didn't care if the "mechanical" tracing part, the trust part, to decide what there was to put into such a trust, went back to Delaware instead of having Utah do that post-trial part. SCO's lawyer, Arthur Spector then spoke, and he agreed that the trial in Utah was not going to include the constructive trust, as that would come afterward, and he agreed with Jacobs that the two parts were severable, and the constructive trust part could be done in Delaware:

MR. SPECTOR: The trial was set to [begin] on September 14th, was, as stated by Novell in its motion, intended to decide nothing more than how much of the royalties received by SCO are royalties to which Novell was entitled. In Novell's September 14th trial brief to the court, prepping the court on how we perceive this case should be handled from hereon, they said, in essence, the tracing issue is a discreet issue and we should cover it after we finish the five-day trial on the apportionment and the authority issues that Mr. Jacobs just talked to us about. That was their suggestion and that's what would have happened because that wasn't teed up for the five-day trial.

So Your Honor, this gets me to the answer that you were asking before. What is it for this Court to do if the Court were inclined to do anything with regard to this case? Well, we would say, you take everything that precedes, we grit our teeth and bear it, and then you say, okay, there's going to be a constructive trust in the amount of whatever its been determined elsewhere, whatever that number is. And here's how much of that is now being held by SCO. And that's how much, through the lowest intermediate balance test, that's how much would be potentially set asideable, if that were a word, for Novell.

This Court could do that. It doesn't need to reinvent the wheel. It doesn't have to pour through 1500 pages of summary judgment briefing or anything else. It's a simply -- its not simply at all. A statement of the issue is simple, but the actual going through it is not simple at all. It is evidence specific. It's difficult because the funds were originally placed four years ago, going on five years ago, I guess. So it would take some time. But it would take time wherever it is. And it's not even proposed to be part of the five-day trial anyway. So, that's where the status, I believe, of the Novell litigations in Utah are all about right now. And as I said before, we don't contest it, I've said it enough times.

THE COURT: Now, you mentioned that I would essentially take the allocation determined -- is that how you stated it? Determined elsewhere.

MR. SPECTOR: Yeah, we're not asking you to do that, Your Honor.

As you can see, both sides agreed that if the stay were lifted, the constructive trust issue, being a separate issue from the trial issues for Utah, could still be handled in Delaware, after Utah decided the allocation. So if nobody was fighting over the two trial issues being handled by Utah, and if Novell didn't care deeply about who did the next part about the trust, what was the fight about?

The dispute between Novell and SCO was over timing, whether to lift the stay and handle the trial in Utah immediately, or whether to let SCO reorganize first:

THE COURT: But it's a timing issue is what you're basically saying.

MR. SPECTOR: Well, that's one thing. If -- I've already discussed why -- well, I haven't discussed wholly why the constructive trust issue is important that it be separated out even though Novell already did separate it out. But we think it ought to be separated out and tried here. But the timing issue is the other issue.

I'll go to that first since Your Honor raised it.

Novell has multiply stated that SCO is trying to avoid certainty or finality and they're the engines of finality and certainty. If you'll only let us get to Judge Kimball and we can have this five-day trial, it would be wonderful. We would have the finality that's necessary and then the debtor would know.

Well, excuse me, the debtor would then know? All it would know is some portion of those evil questioned royalties really do belong to Novell. A dollar amount would be established. It's a liquidation of a claim, that's what it is.

Because the judge already made the major determination of who owns that code, that software. Who owns the copyrights for that, I should say.

That's the major issue in the case. That's the issue of public interest. That's the issue. If they want finality, they should have stipulated to a 54 (b) certification and we would be already arguing our appeals to the Tenth Circuit. If they were really interested in finality and certainty, we wouldn't heard Mr. Jacobs this morning and say, well, you know, really, the way it ought to go is we ought to go back to Switzerland, try the arbitration, then come back to Utah, fit that result into the Utah litigation. Then -- of course, we would have already had a five-day trial on allocation. Then there are other issues that have to be decided based on what happened in Switzerland. And then, we can have our appeal go up.

If we go down that pathway, Judge, we don't get certainty in our lifetime, or we'll be a lot older. Why not do it the way bankruptcy courts and debtor's-in-possession do it in Delaware all the time and New York all the time and lots of other places all the time.

We know this litigation. We proceed in Chapter 11 which is a breathing spell from litigation. We come up with a plan that will resolve if not the litigation in a way that the opponents would be satisfied, at least we say, here's the alternative, Judge. If the company, the debtor, wins this litigation, this is what we're going to do with the proceeds. If we lose the litigation, stockholders are going to most likely be wiped out and what remains are going to go to Novell if it gets a money judgment, which I was told, in order to get -- and this is an side -- I was told that in order to get the waiver of the jury trial that was -- is a big issue recently, in September, they waived, Novell waived their money damages claim. And I'll stand corrected if counsel wants to correct me on that. Is that incorrect?

MR. JACOBS: That is incorrect.

MR. SPECTOR: Okay. Then they would have a claim in the estate if they should win. I just wanted to clarify that. So if we -- if the plan was to, say, we'll look at the alternatives. If we lose the litigation, Novell wins. They'll have a claim and here's how we'll deal with their claim as well as everybody else's, okay. That isn't unusual. Northwest just pulled a plan like that. There's -- our firm represents a creditor with a very, very large antitrust claim and that's going to go to trial post-confirmation in Detroit. There are other creditors with large claims like that. They're going to go to trial post-confirmation in wherever. One of them also is in Detroit. That Your Honor I'm sure knows, that that is not terribly unusual.

We propose that we should be given the same opportunity and not have this case chopped up into little trials all over the world. Switzerland, Utah, then come back here and try to fit that into a plan.

When would we be fitting those results into the plan? The day after Judge Kimball rules on that five-day trial? Well, that's not final. You know darn well, we'd want to appeal that if we can. It may be that Judge Kimball's going to agree with Novell, oh, I'm sorry, we don't have the result of the SUSE arbitration in Switzerland. I can't send this up for appeal yet.

We'd be here forever waiting for that day. We don't think creditors, stockholders or the Court should be held hostage to that type of trial schedule. We should proceed with our Chapter and we shouldn't be held up by that type of litigation.

THE COURT: But Novell says you're about to sell our property.

MR. SPECTOR: Well, you know, its very difficult when you have to deal with generalities because sometimes exceptions and specifics overrule them. You know, he says that -- counsel stated that you can't -- its well-known, the law's plain, you can't sell what you don't own.

THE COURT: Right.

MR. SPECTOR: Sometimes that's true. I know a lot of Chapter trustees who sold causes of action of -- ridiculous causes of action to people. There's really nothing there. I've seen quit claim deeds and personality quit claim deeds type in realty. You buy whatever it is we have. ... So it may be possible that if the stay were lifted or if, after the plan is confirmed, we would have a trial in the five-day -- you know, the allocation issue, that apportionment issue. Perhaps the judge will, indeed, give us a 54(b) certification to go up on appeal at that point.

But right now, where we are with the real reorganization engines going, with 363, 4 and 5 relief and a plan behind it, all coming to the fore in the next month or so, we don't want to be distracted. And most debtors-in-possession wouldn't be forced to distracted to go back to the litigation hell-hole they came from. We do want a resolution. We have to have a resolution. But we don't think this is the time for that resolution.

The constructive trust issue argument, I spoke about earlier, briefly. But I have to reiterate that the issue is one of the exclusive jurisdiction, not concurrent jurisdiction. But the bankruptcy court has exclusive jurisdiction over property of the estate under 28 USC Section 1334. Implicit in that is the determination whether something is or is not property of the estate.

We are not asking Your Honor to do the apportionment issue. We're not asking Your Honor to do a lot of the technical question issues that will be in the Utah case. But we are asking this Court, if there's going to be an issue about the constructive trust tracing, that this court, which is the court you would expect to be the one to do it.

You can see SCO's position was that it wanted to do its reorganization prior to any settlement of the Utah issues. If it had to wait for that, they'd all be old men first. So it wanted a breathing spell. That was the primary issue. It also wanted the bankruptcy court to do the constructive trust, but Novell wasn't really opposing that. The issue in dispute was timing. Now, Novell's attorney, Adam Lewis, next pointed out that SCO's position at the hearing wasn't exactly the same as what it asked for in its brief:

MR. LEWIS: Thank you, Your Honor. ... We're glad to hear that SCO has changed what its position is. We've just heard that SCO, oh, no, we just want to try the tracing issue. That's not what SCO said in its brief. And let me read you, Your Honor, this is from page 19 of their brief. "This Court therefore should make" -- "This Court should, therefore, make any determination as to what or what is not property of the estate and if a constructive trust can be imposed and in what amount."

They were asking this Court to redo the constructive trust issue. But evidently they've abandoned that now and that's fine because we don't think the Court should and they evidently agree. But let's not kid ourselves about what they were arguing. They were arguing this Court should do that because they think of this Court as a more favorable forum.

So Novell's opinion was that SCO was in fact asking the court in Delaware to re-decide an issue already decided in Utah, namely whether there should even be a constructive trust. If you'd like to see for yourself what he was referring to, here's SCO's Memorandum of Law in response to Novell's motion regarding lifting the stay, and on page 19, just as Mr. Lewis said, you'll find those words he quotes. But let's start on page 18 for context, which was SCO's argument that the stay should not be lifted at that time:

4. Policies Underlying the Automatic Stay

The need to maintain the automatic stay in these cases is clearest when the policies underlying the stay are examined. Again, the automatic stay is not imposed simply to protect the debtor; it also exists to protect the creditors of the estate....In the Utah District Court litigation, the Debtors' creditors will not be heard because they are not parties. Instead, that action is a vehicle for Novell to seek to establish whatever rights it has above those of all other creditors of the estate.

In fact, part of the relief that Novell seeks in the lawsuit -- the imposition of a constructive trust -- is a form of relief that strikes at the very heart of a bankruptcy case: it is aimed directly at a determination as to what is or is not property of the estate....

It is beyond cavil that this Court has the exclusive jurisdiction over the estate and estate property....This Court should, therefore, make any determinations as to what is or is not property of the estate, and if a constructive trust can be imposed, and in what amount.

I think you can see why Mr. Lewis said that SCO was asking the court in Delaware to redo an issue that the court in Utah had already decided, namely whether there should be a constructive trust or not. SCO asked the Bankruptcy Court to determine that issue all over again, whether there should even be a constructive trust, something that the Utah court had already expressed Novell was entitled to.

What the SCO brief primarily asked for, which it reiterated at the hearing, was the timing issue. SCO's position, as you can see on page 21, was that it should be only *after* a plan for reorganization was proposed by SCO "in the next few months".

Here's Novell's response [PDF] to SCO's memorandum. It opens by saying that SCO had conceded that Utah was the appropriate place to finish up the issues that had been scheduled for trial there. What was left in dispute were two issues: handling the constructive trust and timing.

Novell points out again that the Utah court had already determined that Novell was entitled to a constructive trust:

Now, based on wholly inapposite case law, SCO argues that this Court should ignore the District Court Order and determine for itself whether Novell is entitled to a constructive trust and, if so, the application of that trust....

In the course of its opposition, SCO transforms the issue of the amount of the constructive trust into whether there is a constructive trust -- a completely different question.... This subtle but momentous shift in the issues is where SCO goes too far...

In support of its contention that this Court should second guess the District Court on whether a constructive trust is appropriate, SCO misleadingly relies on In re Flanagan....In this case, by contrast, with respect to the property over which Novell seeks a constructive trust, the District Court has already held that there is a res belonging to Novell. "In this case, the res is the SVRX Royalties, to which Novell retains all right, title, and interest. This res is traceable to the monies [that SCO] received from the Sun and Microsoft Agreements. SCO's conduct also amounts to a breach of fiduciary duty, conversion, unjust enrichment, and breach of express contract, all of which are sufficient wrongful conduct to impose a construction trust." (District Court Order at 97, internal quotations omitted.) In short, unlike in Flanagan, at issue in the District Court Action now is not whether Novell is entitled to a constructive trust, but on the amount of the trust. SCO should not be allowed to re-litigate the issue of whether there should be a constructive trust before another court under the guise of determining how much is in the trust simply because it did not like the outcome of a litigation it chose to initiate and had a full and fair opportunity to litigate.

You can see, I think, why I wrote the other day that SCO was asking the Delaware court to re-decide an issue that had already been decided. So, the real issue Novell argues next is timing, and it said it needed its claims to be determined "expeditiously".

Certainly, Novell's position at the subsequent hearing on this motion was that Utah could do the mechanical tracing. As for timing, its position was that money was disappearing, and it therefore wanted to lift the stay immediately, which is what the court eventually decided to do. SCO was already saying the money from Sun and Microsoft was gone, and Novell pointed that out:

In term to the harm to us, remember, too, there is also the question of what's happening to the money in the meantime. We've just heard counsel say, well, gee, there's -- we don't think there's anything left. Well, I wonder how that happened, Your Honor. And if the issue of a constructive trust gets delayed and they claim it's a million dollars or less and we claim its more, what's going to happen when that money isn't there at the end. Where's it going to go? Are we going to hear more tracing arguments? Well, we had a million dollars when we filed this case, Your Honor, but you know, we successfully resisted stay relief. We spent all that money in the meantime. We've got lots more money in from other things. We got the sale money. And all that money's gone. All the rest of it, whatever was there.

I don't want to be hearing that when the time comes. Let's get the issue decided now while the bank account is discernible. And what we -- and we know what's in it. And we can -- don't add another six or eight months or a year to the tracing problem.

So, in terms of the harm -- and then the public harm, yes, the major issue about who owns the copyright has been decided. But there are other public interest issues like how much of the other code which somebody might choose to try to license belongs to whom? Some of those licenses from SCO to someone else where the allocation issue, the apportionment issue was still alive, what are those people going to do in the meantime about trying to sublicense or relicense or defend themselves. There are more interests here at stake than simply the estate's interest. ...

Until those apportionment issues are decided, they're not in a -- they're holding up not only their own boat, they're holding up a lot of boats. And the public interest, it seems to me weighs on the side of opening up the locks and letting that water flow so that we know where we stand....

Let's get these issues tried. There's no secret about our wanting to do the tracing in the district court as well. If the Court wants to do that, that's fine. We're not concealing that as the debtor has somewhat disingenuously suggested in its argument. We've always said that openly, that we want to do whatever it takes to finish that litigation. That would include that.

And if that problem develops, let us come back before this Court and deal with that problem. But if we don't at least open the flood gates, then we'll be having these arguments and having to deal with all those problems -- these problems in six months or a year or two years. Thank you, Your Honor.

As you can see, Novell preferred to have Utah do it all, but it didn't deeply care about where the constructive trust matter was decided. It wanted Utah to handle what the trial was originally scheduled to handle, and then get the trust issue handled wherever. What the argument was about was *when*. And Mr. Spector had the last word, and that was precisely what he asked for, a breathing spell for SCO:

The Unix business is a legacy business. There are people out there that think they can make something out of it. The board of SCO thinks maybe reorganization and Chapter is a good way to look -- to get rid of the past and look to the future. And we're vesting money, as you can tell from the agreement, which you haven't seen yet, that there will be money being used to the future investment of ME, Inc. and the things that come with that.

So, this is what reorganization is about. That's what we are about. And we don't think its asking too much to ask the Court to allow us the breathing spell to get this off the ground. I believe that's all I have, Your Honor.

SCO was denied that breathing spell. But that is what it wanted, and why? To sell off the assets to York first. The court in Delaware, in its Memorandum Opinion [PDF], specifically mentioned the timing issue:

The Motion matches the fundamental protection of the automatic stay against the necessity and timing of the adjudication of an issue that is essential in the administration of the bankruptcy case. After careful analysis of the facts and legal standards, the Court will grant the Motion, as set forth below.

And here were the issues originally set for trial, according to Judge Gross:

Following the District Court's decision, the parties were poised to begin a trial to resolve the following issues: (1) the amount of the royalties to which Novell is entitled from certain SCOSource licenses that the District Court determined to be SVRX Licenses and any additional licenses that are determined to be SVRX Licenses; (2) whether SCO had the authority to enter into licensing agreements with Microsoft Corporations and Sun Microsystems; and (3) the amount of funds held by SCO that are subject to a constructive trust.

And here is what the court viewed as being SCO's position:

The Debtors argue that allowing the trial to go forward would require the Debtors and their top management to focus all of their attention on the trial, to the detriment and exclusion of the reorganization efforts at a critical stage in the bankruptcy case. The Court does not agree....

The Debtors urge this Court to follow the holding of the Bankruptcy Court for the Southern District of New York in In re Northwest Airlines Corp., 2006 Bankr. LEXIS 477 (Bankr. S.D.N.Y. 2006) when balancing the hardships of the parties. In Northwest Airlines, the court found that the burden to the estate greatly outweighed that of the creditor and denied a motion for stay relief because (1) the debtors were at a critical stage of the reorganization; (2) the trial would take management attention away from the reorganization; (3) the creditors had not shown any unusual prejudice; and (4) there was no "issue of public health or safety and no indication that the Movants' claims must be resolved before the Debtors can file a feasible plan." Id at *2.

The Debtors argue that the very same reasons to deny the Motion. The Court, however, finds that the fourth point is not present here. As Novell has pointed out in its papers, the Debtors simply cannot file a confirmable plan of reorganization until they know what liability they have to Novell. The resolution of the issues remaining in the District Court litigation will assist the Debtors, not burden them....After an analysis of the facts and equitable considerations, the Court concludes that relief from stay is justified.

The Order [PDF; text] itself was quite clear, that the amount that SCO owes Novell is to be decided by Utah:

ORDERED, that pursuant to 11 U .S.C. § 362(d)(1), relief from the automatic stay is granted for cause to allow Novell to proceed with the Lawsuit at the convenience of the District Court (as defined in the Memorandum Opinion) on the following issues: (1) the amount of the royalties to which Novell is entitled from certain SCOSource licenses that the District Court determined to be SVRX Licenses and any additional licenses that are determined to be SVRX Licenses; and (2) whether SCO had the authority to enter into licensing agreements with Microsoft Corporation and Sun Microsystems.

ORDERED, that the automatic stay is not lifted for a determination of the imposition of a constructive trust, an issue which this Court will adjudicate if and when necessary, following the District Court’s decision in the Lawsuit.

As you can see, the two things Novell asked to go back to Utah to determine immediately were granted, and as for the rest, the stay was not lifted. So how much is owed is a question that belongs to Utah to decide. Whether a constructive trust is appropriately *imposed* is a separate question, and as neither party argued against the constructive trust being handled in Delaware, as you saw, that is where that part will happen, "if ...necessary". Remember that SCO's argument is that all the Microsoft and Sun dollars were spent long ago, and any dollars SCO has now are *different* dollars, not part of the res of any constructive trust. Judge Gross will get to untangle that knot, if the facts of the decision in Utah warrant it. But what if the Utah court decides that what SCO owes is de minimis? That is what their argument will be, Novell says in its trial brief. You wouldn't need a trust for that at all, if SCO wins that argument. But win it in Utah it must.

So, that's the entire story, as best I can trace it out. Hopefully, by presenting all the filings and the transcript in one place, it will clear up any confusion and will deal with any FUD floating around that this was somehow exactly what SCO was angling for and a victory for SCO. SCO lost this motion in a big way, in that it wanted to avoid lifting the stay. It wanted time to dispose of the assets, including assets that Novell believes belong to it. In its response to SCO's Memorandum, Novell pointed out that part of what SCO proposed to sell was the rights to the "Linux Litigation". That litigation, however, is based on copyright infringement claims, which copyrights the Utah court decided belong to Novell for the most part. Obviously, you can't sell what you don't own. So why did SCO file for bankruptcy protection? I think SCO wanted to buy some time by filing for bankruptcy, time to move assets out of harm's way, you might say. It very much tried to avoid having the stay lifted at this time. That was the primary argument it had at the hearing, that it wanted to reorganize first, file a proposed plan, and then finish up the Utah issues. But it lost. I think the best you could say is that it could have lost worse.

It never ceases to amaze me how much effort goes in to trying to prop up this SCO litigation, to try to make it seem like somehow, someday SCO has a fighting chance to show us all that it was right all along. It isn't just one judge who has ruled against SCO, you know. It's all of them so far, the ones that have ruled on anything substantive. Judge Robert C. Jones in the Autozone case and Judge Sue Robinson in Red Hat basically put things on hold until IBM could be decided. But of the judges who have ruled, it's been a clean sweep against SCO. Four judges have now ruled against SCO -- the Magistrate Judge Brooke Wells in Utah District Court, the Honorable Rae Lee Chabot in DaimlerChrysler -- that was a true and utter wipeout: "This case presents no issue on which reasonable minds might differ", Judge Dale Kimball in Utah, and now Judge Kevin Gross in Delaware Bankruptcy Court. Judge Kimball is by no means the only judge to send SCO a clear message.

Here's my question: when every judge it appears before rules against SCO, when does the media accept that this really is the stupidest lawsuit in the history of the world and that SCO keeps losing because it deserves to?


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