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A Question About the SCO's End Game
Sunday, April 06 2008 @ 07:14 PM EDT

Do you think this might be possible? I have been reading about the most interesting Texas case, and I wanted to share it with you, because it has prompted a new thought. It's something that never would have occurred to me had I not read about the Texas dispute.

You know how we've been thinking that SCO's what-we'd-view-as-profligacy-with-money since it filed for Chapter 11 protection might be so that Novell can't get anything? That is still my leading thought, but after I read this account by John Council in Texas Lawyer, now also on Law.com, about a battle over control of a shoe company, I start to wonder.

The case is Jackson Walker v. Spira Footwear, a law firm suing for unpaid fees it says it earned representing the company in a shareholder suit. Its complaint was answered by counterclaims for professional malpractice and breach of fiduciary duty, essentially claiming that the firm did not properly identify who its client was. The law firm denies all improprieties, of course, and I certainly have no way of knowing, but I'd caution you not to assume anything, as anyone can make allegations in a complaint or a counterclaim. It's a very complicated case, but the part I zero in on is an allegation that the value of the company was deliberately brought down so one faction could economically get control of the company's patent.

Note this part:

While the events leading up to Jackson Walker v. Spira Footwear are complicated and involve different factions wrestling for control of Spira, the company's allegations are simple: Jackson Walker forgot who its client was in the Spira shareholder suit, alleges Andy Krafsur, chief executive officer of Spira. It was a "failure to understand that when you represent a company, you don't represent the people from whom you take directions. You represent the entity," he says....

In the Spira shareholder suit, Jackson Walker took orders from new management in the company that was trying to devalue the business as part of a plan to obtain the rights to Spira's most valuable asset -- a patent for running shoe technology known as "wavespring," Spira alleges in the counterclaim....

As alleged in the counterclaim, Jackson Walker and the shareholder faction opposing Andy Krafsur "systematically and intentionally took actions to place the company in financial ruin."

On March 28, Jackson Walker filed a general denial to all of the allegations in Spira's counterclaim, asserting that "at all times it acted in good faith and in a reasonable and prudent manner." ...

On Aug. 11, 2006, the parties in Krafsur v. Krafsur entered into a Rule 11 settlement agreement that gave Andy Krafsur the option to buy David Krafsur and LeVert's shares of Spira for $2 million and take control of the company from the Lebows. If Andy Krafsur did not exercise that opinion, Spira would buy his shares for $2 million over a five-year period, the company alleges in the counterclaim.

When it became apparent that Andy Krafsur would exercise the option, Jackson Walker and Steven Lebow "systematically and intentionally took actions to place the company in financial ruin." In November 2006, the company lost $450,000, while $117,000 in bonuses were paid to certain Spira employees, Spira alleges in the counterclaim....

Once Andy Krafsur had regained control of the company and a new board of directors was appointed, Krafsur dismissed Jackson Walker as the company's firm. On March 5, 2007, Krafsur asked the firm to return Spira's files. That same day, Jackson Walker filed Jackson Walker v. Spira, seeking attorney fees. And on March 5, 2008, Spira filed its counterclaim.

Is a lightbulb turning on in your mind? Perhaps others more skilled than I, and more experienced, will have thought of this possibility already, but I certainly had not. Again, I want to stress that this is a theoretical, something to help us stay alert and notice details that otherwise might go unnoticed, as we try to explain the inexplicable SCO.


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