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This Month's Modest Bill from Berger Singerman and Some Shares Returned
Friday, January 25 2008 @ 06:33 AM EST

SCO's lawyers, Berger Singerman, have joined the line for their monthly money. December's bill [PDF], however, the firm's fourth interim bill, is for a mere $21,983.00, plus expenses of $159.85. This firm's prior bills were for $65,331, $175,516 and $296,323.25 and expenses of $2,526.40, $5,177.33 and $13,027.33. I think you can see that December's bill represents quite a change, particularly since the first bill was for only a half month, September 14 through the 30th.

Now you see why Novell objected to the leases and noted its concerns about the first Mesirow bill -- it was sending a message, and I'd say it was received loud and clear. Everyone seems to be going on a crash diet in Delaware.

The most intriguing item is on page 12, where the firm says they spent 12.60 hours discussing with co-counsel and conducting research in connection with "the possible removal or transfer of litigation". I don't know if they are trying to escape from Delaware or from Utah. Actually, judging by Exhibit A's page 12, it looks to be about the Wayne Gray trademark litigation. In any case, they began drafting a notice of removal. And on page 11, we learn the firm "communicated with the Debtors with respect to the claim of Sun Microsystems, Inc." I have no idea what it means. The firm also communicated with co-counsel "regarding the Debtors' fourth quarter employee bonuses". Yes. Bonuses.

Exhibit A has an interesting notation also: on 12/10 there was a conference call about resurrecting the York deal. And there is a reference to an "ICC Arbitral Order", a procedural order. That has to be the Swiss arbitration, I assume. And R. Duff Thompson, a Director, has voluntarily returned to SCO 11,923 shares, at no consideration.

The firm once again carefully itemizes its efforts to keep accurate time records and to keep the bill down, stating, for example, beginning on page 7 that they have everyone keep handwritten notes as they go through the day and are very sensitive to the issue of "lumping", and "unless time was spent in one time frame on a variety of different matters for a particular client, separate time entries are set forth in the time reports," they state. Further they reduced the charges for non-working travel time to 50 percent of the usual rate, and "to the extent feasible, BSPA professionals attempt to work during travel."

What is lumping, you ask? Here's a ruling [PDF] that explains it, in a patent case decided in April of 2007, Synthon IP v. Pfizer, No. 05-1267 (E.D. Va. 2007), as reported on the Orange Book Blog. The court decided to award attorneys fees to Pfizer, saying that Synthon had "copied and sought patents on what it knew to be Pfizer's work and then, once those patents had issued, filed against Pfizer what it knew, or should have known with reasonable investigation, was a baseless suit for willful infringement of two invalid patents." So, that made up exceptional enough circumstances that the court felt the plaintiff should pay for the defendant's lawyers. But the amount requested was reduced by 20 percent, and part of the reason was lumping:

Although a review of Pfizer's submissions reveals a reasonable hourly rate for the various attorneys and legal personnel involved, Pfizer's petition is replete with instances of lumping multiple tasks together under the same entry, thereby preventing a confident assessment of the quantum of, and hence reasonableness of, the time expended on each task.... The petition also includes numerous instances of excessive, duplicative, nondescript, unnecessary and/or inefficient work. For these reasons, and based on a review of the record as a whole ... a 20% overall reduction in Pfizer's fee request is reasonable and appropriate in the circumstances...

A client might not know what is reasonable in a legal bill, but another lawyer or a judge will. If your lawyer tells you that he spent 4 hours or 15 hours or 28 hours doing legal research on your case, how do you know what's reasonable and what's just crazy? But lawyers and judges do legal research, so they are more likely to pick up on what seems to be a padded item on a bill or a symptom of inefficiency.

Legal research is an art but it's also a skill, one that requires you to be efficient, to cut off your side-issue curiosity and just focus completely on the immediate task assigned, without letting yourself stray away from that goal. That's harder than it sounds, because it is all so interesting, but at a certain point you have to say, "I know enough now. I found what I need to be assured of the position we can take and what the case law is". And after some years of doing research, you can probably estimate with some degree of accuracy about how long a research project should take, assuming it's not some wild and unusual topic regarding new law and it's within your field.

Lumping, though, makes it quite hard to figure anything out. If your lawyer submits a bill for 5 hours for "legal research, phone meeting with client, and conference call with co-counsel", how can you even guess whether it's reasonable? You don't know how long each task took, so the legal research could be 15 minutes, for all you know, or it could be 4 and a half hours. You know how long you were on the phone, but for the rest, you have to accept what you are told. Who can say? And if the entire month's bill is like that, it's Never Never Land, where no one knows for sure what the lawyer spent time on. And it's all on the honor system. How would you *prove* he didn't spend 4 and a half hours on legal research if he says he did? Judges can't prove it either, but they have a good idea of what's likely to be in the ball park, particularly because they sat through the trial and all the events leading up to it, so they know who did what.

So, that's why this firm always stresses that they didn't lump, they were careful not to duplicate, they kept track daily, they took notes, etc. I believe they do keep track like that, because good firms are very careful with things like this. And, just as a side point, it's why you never want to hire a law firm that is willing to lie for you -- if they'll lie for you, they'll lie to you also, and the lies will likely be on the bill.

Of course, with the focus now on Utah, things were quieter in December than in November, so that's part of the reduced bill too. If you look at the breakdown of the hours, Grace Robson did the lion's share, and she's an associate at the firm. If you recall, she argued the lease motion, whereas it before had always been Arthur Spector, who is a partner. He billed 21 hours to her 33.70 for December, and he charges $100 an hour more than she does. It makes a difference.

But the categories are interesting too. 24.20 hours, the largest chunk, was for "Fee/Employment Application". That wasn't just preparing their own bill. It included working on documents for Tanner and the German lawyers and CFO Solutions and whatnot, but still, it's hardly moving the bankruptcy forward. Only 6.40 was for "Case Administration" and 4.30 for "Plan and Disclosure Statement". This is a bankruptcy as slow as molasses. Or, more accurately, if you've ever been to a race track, it's like getting the horses lined up in the starting gate, only to have a number of false starts, horses causing delays as they skittishly go half in circles or take off before the gun goes off, and the race can't seem to get going into the actual racing part, the purpose for the horses being there at all. Similarly, this feels like a bankruptcy with no finish line.

Here is the filing with all the trimmings:

314 - Filed & Entered: 01/24/2008
Application for Compensation
Docket Text: Monthly Application for Compensation (Fourth) for Services and Reimbursement of Expenses, as Co-Counsel to the Debtors in Possession, for the Period from December 1, 2007 through December 31, 2007 Filed by Berger Singerman, P.A.. Objections due by 2/13/2008. (Attachments: # (1) Notice # (2) Exhibit A # (3) Certificate of Service and Service List) (Jones, Laura Davis)

Thompson's Shares

If you are curious about the shares being returned, and would like to figure out the history of who got what shares, I did a page on insider trades way back when, in 2003, and with regard to Thompson, in addition to that older page covering 2002 and 2003, you'll find more here, regarding a bona fide gift of 5,000 shares and a notation that after the gift, Thompson had 11,923 shares. Oddly, the gift was in 2003; it was reported in 2006. Here's his bio, in the most recent proxy statement, April of 2007. And to impress you further, here's a presentation he made to the USPTO, back when he was a VP and General Counsel at WordPerfect Corporation, all about how damaging software patents are. I know. The former Chairman of the Business Software Alliance and I agree that software patents should never have happened. And here's a quotation of his on the subject, from an article in Science and Technology in 1991:

"I'm not familiar with any type of ligation that is any more costly than patent litigation," says R. Duff Thompson, vice president and general counsel of the WordPerfect Corporation. But Thompson's greatest fear is that software patents will wipe out young, independent programmers, who until now have been the software industry's source of inspiration. Imagine what happens, says Thompson, when "some 23-year-old kid who has a terrific idea in a piece of software is hammered by a demand letter from someone holding a patent."

Yes, one can just imagine. I guess we can count our blessings. At least SCO didn't have any patents.

This S-1 from December of 2005 indicates he held 84,423 shares, and this 424B says the same number, which "Consists of options to purchase 67,500 shares of common stock and 16,923 shares of common stock received for service on the Board of Directors".

Update: Here's the certificate of no objection on the third bill:

312 - Filed & Entered: 01/22/2008
Certificate of No Objection
Docket Text: Certificate of No Objection (No Order Required) Regarding Third Interim Application of Berger Singerman, P.A. for Compensation for Services and Reimbursement of Expenses as Co-Counsel to the Debtors in Possession for the Period from November 1, 2007 through November 30, 2007 (related document(s)[287] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)


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