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To read comments to this article, go here
Two No Objections and One Objection - Updated 3Xs
Friday, February 01 2008 @ 02:48 AM EST

Three new filings in the bankruptcy. Two are certificates of no objection, and there is a pro se objection from a shareholder, who would like to correct SCO's math. If they do, he'll withdraw the objection. He is also concerned that SCO hasn't filed its operating report for December. However, SCO didn't file the November operating report until December 21st. The objection is related to SCO's motion for an extension of exclusivity deadlines , that is to extend the time SCO has to exclusively file a reorganization plan. The shareholder sees little hope that they ever will.

Here are the filings:
315 - Filed & Entered: 01/29/2008
Objection
Docket Text: Objection to Motion by Debtors Under Section 1121(d) for Extension of Exclusivity Deadlines (related document(s)[289] ) Filed by Alan P. Petrofsky (Petrofsky, Alan)

316 - Filed & Entered: 01/30/2008
Certificate of No Objection
Docket Text: Certificate of No Objection (No Order Required) Regarding Second Monthly Application of Pachulski Stang Ziehl & Jones LLP, as Co-Counsel to the Debtors and Debtors in Possession, for the Period from October 1, 2007 through October 31, 2007 (related document(s)[295] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)

317 - Filed & Entered: 01/30/2008
Certificate of No Objection
Docket Text: Certificate of No Objection (No Order Required) Regarding Third Interim Application of Tanner LC for Compensation for Services and Reimbursement of Expenses as Accountants to the Debtors for the Period from December 6, 2007 through January 4, 2008 (related document(s)[300] ) Filed by The SCO Group, Inc.. (Attachments: # (1) Certificate of Service and Service List) (Werkheiser, Rachel)

Update: The court agenda for the hearing on February 5th now lists the objection, making the SCO motion contested. Everything else on that day is uncontested:

318 - Filed & Entered: 02/01/2008
Notice of Matters Scheduled for Hearing (B)
Docket Text: Notice of Agenda of Matters Scheduled for Hearing Filed by The SCO Group, Inc.. Hearing scheduled for 2/5/2008 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Certificate of Service and Service List) (O'Neill, James)

Since the objector himself says he will likely withdraw the objection, it looks like this hearing will be the most boring and the shortest ever. Probably the one to skip.

Update 2: I have been trying to determine if there even is a monthly requirement for SCO to file. I haven't found the answer yet for sure, but this Rule 2015 makes me wonder. In any case, I've put all the resources I've been collecting into a new Bankruptcy resources section on Groklaw's Legal Research page, so we can all research more effectively.

Update 3: OK. Here's the answer. They do have a monthly obligation and the date to file is the 15th of the following month:

MONTHLY FINANCIAL REPORTS

The debtor shall file original monthly financial reports, signed by the debtor or its authorized representative with the Clerk of the Bankruptcy Court and shall serve a copy on the United States Trustee and upon any committee appointed in the case. The monthly reports are to be on a calendar month basis and must be filed no later than the 15th day of the succeeding month.

So they are indeed late. However, they were late in November also, and no one seemed to care. That tells me that SCO must have asked for more time, because their lawyers wouldn't just miss a deadline that mattered. They certainly wouldn't do so twice. Let me explain why I feel so sure about this.

Missing an important deadline is something that law firms don't do. You see it in malpractice cases sometimes, but while I've read about such cases, I've never seen any lawyer I personally knew or worked for miss a deadline. What you see is that the lawyer on the case tracks deadlines; his software does too; his paralegal does too. It's so vital not to miss that it's never left to just one person to keep track of. Before computers, lawyers would have special calendars just to track those things, if only to protect themselves from malpractice allegations. Even if the client doesn't care, the lawyer always does, and it's the lawyer's job to fulfill those requirements, so if SCO was late, I feel confident that lawyers on the level we see in this bankruptcy would simply make sure that they asked for an extension rather than miss a deadline. Mistakes can happen, of course, but not about deadlines, in my experience. Section 2015 is about paying fees to the Trustee, as I read it more carefully, by the way. SCO also has SEC filing requirements, as outlined here, bankruptcy or no.

Here is the objection:

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

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

___________________________________

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

In re

THE SCO GROUP, INC., et al.,

Debtors.
Chapter 11

Case Number 07-11337 (KG)
(Jointly Administered)
Re: Docket No:278

Hearing: February 5, 2008 at 10:00 a.m.
Related Docket No.: 289

OBJECTION OF PETROFSKY TO MOTION BY DEBTORS UNDER
SECTION 1121(D) FOR EXTENSION OF EXCLUSIVITY
DEADLINES (#289)

I, Alan P. Petrofsky, an equity security holder of Debtor The SCO Group, Inc. ("SCO"), object to the "Motion by Debtors Under Section 1121(d) for Extension of Exclusivity Deadlines" (the "Motion"), on the following grounds:

1. As stated in the Motion, the factors the Court should consider in deciding whether to extend the exclusivity period include "The existence of good faith progress toward reorganization" and "Whether the debtor has demonstrated reasonable prospects for filing a viable plan". Motion at paragraph 9(a) and 9(e).

2. The Debtors' monthly operating reports for December, which were due more than a week ago, have still not been filed.

1

3. The November monthly operating report for SCO Operations, Inc. reports a surprisingly rosy bottom line of positive $406,433 for cumulative net income since the date of the petition (dkt #283, dated December 20, 2007, at p. 9, Statement of Operations). However, if one adds the reported profit for the November period, $1,081,019 (Id.), to the reported cumulative loss through the October period, ($1,138,859) (dkt #227, dated November 20, 2007, at p. 9, Statement of Operations), one discovers that -- if those two numbers are indeed correct -- the cumulative net income through the end of November should have been reported as a loss of ($57,840). (There are multiple reasons to suspect that the $1,081,019 reported profit for November is also the result of a favorable error, and I will be asking the Debtors to double-check that figure, but even if it is correct, the reported cumulative income-to-date is almost half a million dollars too high.)

4. The debtors state that they wish "to narrow the issues in dispute with Novell before the Debtors are required to file their plan." Motion at paragraph 14. However, if the Court were to deny the requested relief and decline to extend the exclusivity period, this would not actually create any "require[ment]" for the Debtors to file a plan by any particular date. "The debtor may file a plan ... at any time" (11 U.S.C. 1121(a)). What is at issue is not when the Debtors may file a plan, but how soon other parties may file plans pursuant to 11 U.S.C. 1121(c).

5. Frankly, I do not see much hope that the Debtors nor any other parties will ever file a viable plan of reorganization, and the more likely event seems to be a conversion of the case, per 11 U.S.C. 1112, to a Chapter 7 liquidation. Nevertheless, there is no reason for the Court to place all hope for a viable plan

2

exclusively in the hands of the Debtors when:
(a) Those debtors are currently not even filing their monthly operating reports; and

(b) When the debtors were filing their reports, they were not paying enough attention to the bottom line to even add it up correctly from one month to the next.

For the reasons above, I request that the Court issue an order denying the Motion. However, I expect SCO to file, before the hearing date on this motion, a Monthly Operating Report for December and a corrected Monthly Operating Report for November. If this happens, and the reports are not too obviously flawed, I expect to withdraw this objection.

Dated the Twenty-Ninth day of January, 2008,

/s/ Alan P. Petrofsky
Alan P. Petrofsky, Equity Security Holder
[address, phone, fax, email]

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