Today is the day for the hearing on whether or not it will be converted from a Chapter 11 case, with hopes of survival as a business, or whether the judge will send it to liquidation in Chapter 7.
There are three last minute filings. IBM has filed an objection to SCO filing its Appendix under seal and asks the court to strike any argument based on material in the appendix. XAC, formerly known as Amici, which I associate with the Boies Schiller folks, filed an objection to the motions to convert, as has Leap Tide Capital Management, and there's an amended notice of agenda for this afternoon's hearing.
Update: First word from the court, during a ten minute break, indicates that SCO has suggested it has a buyer. That doesn't mean it will avoid Chapter 7 of course, nor does it mean that the bankruptcy court will OK the suggested sale. But it likely does mean more delay, which is what this is likely all about. SCO very much wants to wait until the appeals court rules in SCO v. Novell. How can the court ignore a possible plan, even if all the prior plans proved illusory? Well, it could, but given the way this court has acted, it's realistic, I think, to expect that SCO will be given time to demonstrate whether this is a real plan. Remember I told you litigation is a marathon, not a sprint? But where is proper procedure?
Update 2: OK. I just heard from Webster. Here's the upshot of the day. The judge has decided to set a hearing on the proposed sale:
Recess at 5:50 Frankly, it would not totally amaze me if the three entities that filed motions to convert were to appeal this. If not, SCO got its desired delay. They believe, if you recall, or at least hope that the appeals court in SCO v. Novell may rule by then.
Hearing set for July 16 with backup for July 27. SCO has already moved to make it July 27. combo hearing on convert and Sale.
Here are all the filings:
06/15/2009 - 803 -
06/15/2009 - Objection of International Business Machines Corporation to Debtors Motion to File Appendix Under Seal and Request to Strike Any Argument Based on Such Documents (related document(s) 784 ) Filed by IBM Corp. (Attachments: # 1 Exhibit A# 2 Certificate of Service) (Silverstein, Laurie) (Entered: 06/15/2009)
The XAC/Amici filing is hilarious. They are a litigation support company. They do the documents for you. And they tell the court that they believe in SCO to such a degree they have reduced their bill. They'd like to see SCO continue.
06/12/2009 - 804 -
06/15/2009 - Objection to Motion to Convert Chapter 11 to Chapter 7 Case Filed by XAC, LLC fka Amici LLC (TAS) (Entered: 06/15/2009)
Docket Text: Objection to Motion to Convert Chapter 11 to Chapter 7 Case Filed by Leap Tide Capital Management, Inc. (TAS)
06/15/2009 - 806 -
Amended Notice of Agenda of Matters Scheduled for Hearing (related document(s) 799 ) Filed by The SCO Group, Inc.. Hearing scheduled for 6/15/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # 1 Certificate of Service and Service Lists) (Makowski, Kathleen) (Entered: 06/15/2009)
Now, you tell me. Is there any reason on God's green earth that a company owed over $400,000 would prefer *not* to be paid right now so as to kindly help a company it is not related to in any way so the latter can stay in business? Excuse me if I laugh.
Amici is the document management company that David Boies's children were part owners of, if you recall. He resigned as counsel to Adelphia, after claims were made of a conflict of interest, so as to avoid any appearance of impropriety. The Wall St. Journal reported this at the time:
Mr. Boies in an interview said yesterday he should have fully disclosed his children's' ownership interest in Amici. "I should have made certain that everyone knew about it," he said. He added that "a half dozen, or maybe eight Boies Schiller clients also use Amici." Later, the children sold off their interests, after which Xerox bought Amici:
Mr. Boies also confirmed that members of his family indirectly own stakes in a document-copying company called Echelon Group LLC. . . . There is, says Stanford University law school ethics expert Deborah Rhode, "an appearance of impropriety." It's really up to the client to select a document production firm, not the lawyers. . . . .
Four of Mr. Boies's children had indirect stakes in Amici through a company called Legal & Scientific Systems LLC totaling about 25.5% of the document company. The wife, mother and mother-in-law of Nick Gravante, a Boies Schiller partner, own indirect stakes.
Relatives of Nicholas Gravante, a Boies Schiller partner, also own indirect stakes. The $174 million purchase price would put the stake of Mr. Boies’s children in Amici at more than $26 million. In October 2005, Mr. Boies said his children were in the process of selling their interests. Mr. Boies’s office is out of the country and did not return two calls seeking comment, so it’s unclear whether his kids already cashed out of their Amici investment or are monetizing their stakes with the Xerox transaction.... Don't ask me. I can't reconcile the dates myself. But here is the company, with historic ties to Boies Schiller, and not only through the children, arguing for SCO, and on what expert legal basis would it be qualified to render an opinion on SCO's legal case? And what is it to Amici anyway? Mr. Gravante's specialties listed on Boies Schiller's website are:
Xerox spokeswoman Christa Caron emailed the Law Blog today to tell us that “Xerox was well aware of the past concerns with Amici and Boies — and we covered it in extensive detail during our due diligence process.” Further, she wrote, “I can tell you with great certainty that David Boies and/or his family members had NO direct or indirect ownership of Amici at the time of Xerox’s agreement to acquire the company. Boies family members divested their interest in September 2005.”
Nicholas Gravante's main practice areas include business crimes, commercial litigation, and antitrust and securities litigation.
Incidentally, when SCO filed for bankruptcy, the amount Amici was listed at was $500,650.73, making Amici the largest creditor on SCO's top 20 list. Now they claim the debt was $400,000+ but is now voluntarily reduced. Such kindly folks.
Leap Tide claims to own 8% of SCO, between Leap Tide Partners, Leap Tide Offshore, and a portfolio for AmTrust International Insurance. They bought in back in February of 2005. Wait. Did they just say "offshore"? Why, yes. Yes they did.
They believe in SCO's legal case too, without mentioning their legal foundational basis for such belief, and think it's important in terms of "shaping the industry." What? Like killing off Linux or what do you guys have in mind?
"Under certain circumstances" they'd be interested in providing additional capital. Like if the scam looks like it'll pay off? Kidding. Just kidding. Sorta. I think they mean if SCO wins on appeal. They say they'd like SCO to be able to continue its litigation against IBM and Novell. Oh, *that* kind of shaping of the industry. If SCO goes to Chapter 7, it will jeopardize "the prospects of paying its creditors", they worry.
*Now* they start to worry? I'm thinking 2005 was a better time. Then again, I know nothing about investments and big payoffs from threatening big pocket companies in litigation no one can so far demonstrate has any legal basis.
And it's been six years. Where's the infringing code, SCO? No. Really. Where? Do investors trouble their minds about such things? If not, why not?
Even if you examine it with only logic as your weapon, after not a single court has found in SCO's favor in anything that matters, what would be the basis for believing in their legal case now? I think if they are going to claim that belief, they should at least be compelled to say why they formed such a belief, so we can test out what planet they are on.
None of this is going to mean much to the court, I don't think. SCO has to file some kind of sale of assets to bring in money, I think. And that is what I expect they will do.
Back here on Planet Earth, IBM's filing asks the court to strike the confidential materials in SCO's Appendix and objects to filing it under seal:
IBM, a creditor and equity security holder in these Chapter 11 cases, by its undersigned counsel, submits this objection to the Debtors' motion (the "Motion") [Docket No. 784] to file under seal an appendix to the Debtors' response to motions to dismiss or convert and respectfully requests that the Court preclude the filing of the confidential documents and strike from Debtors' Response any arguments based on such documents.
What is it SCO seeks to file? IBM says it's "a number of unidentified confidential IBM documents". Unidentified? Is SCO kidding? They want to keep it a secret from IBM which documents it wants the court to consider?
Wow. All-time new low, methinks. IBM says SCO's application "violates the protective order pursuant to which the documents in question were produced." That means these are documents from the SCO v. IBM case. But which ones? IBM was not served. It didn't get the appendix, as required by the court rules. So they have to guess as to what documents SCO is relying on.
We're in OMG territory now. I assume the judge's eyes will bug out when he gets to that part. Then SCO's lawyers will claim mistake and dance around a while, I assume, at the hearing which starts shortly. But the moves leave IBM having to "divine" what possible connection confidential documents filed in Utah have to do with a motion to convert to Chapter 7. SCO never explicitly says, IBM complains.
SCO claims there will be a quick resolution of the appeal in SCO v. Novell, IBM notes, but SCO "cannot make any such promise for the IBM litigation." If the Utah court doesn't grant all IBM's summary judgment motions, the trial could be months or even years away.
I'd guess years, given the Boies Schiller track record so far. Then, as IBM points out, there will likely be appeals. If we extrapolate from the Novell litigation, IBM says we can predict that any appellate decision in the IBM case could be no sooner than two years from now. So how, IBM asks, is anything about their litigation relevant to a motion to convert the Chapter 11 cases to Chapter 7 now?
IBM attaches as Exhibit A the protective order, which clearly states that it can be "used only for the purposed of this Action", meaning the SCO v. IBM litigation. That's back in Utah. The SCO bankruptcy in Delaware is not "this Action", then, so SCO should not be allowed to use it, or any arguments based on it, in Delaware, IBM asserts. If they wanted to use it, they are required by the protective order to seek a court order first.
Update: First word from the courtroom, from Webster during a ten-minute break:
ten minute recess. Purchase sale agreement. What does his curt message mean? Someone has offered to buy at least some SCO assets, which is exactly what I expected would happen. We'll see if it flies. Even if it does, it doesn't mean SCO won't head for Chapter 7, only that someone new will own the assets, presumably not the litigation-encumbered assets. But details to follow. Stay tuned. (See above - hearing on the proposed sale has to have its own hearing. Set for July 16. SCO is trying to change it to July 27.
There was one other late filing today, another objection [PDF], this one filed by Al Petrofsky pro se, objecting to Gulf Capital Partners' pro hac vice filings. He questions whether there is any such entity. He relates that the firm told him there was a typo, and the name of the entity is Gulf Capital Advisory LLC, which it claims is a legally registered entity in Delaware.