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The Pelican Briefs - You're the fraudster! No, *you* are!
Thursday, August 20 2009 @ 01:12 AM EDT

The first answer has been filed in the litigation Pelican Equity recently initiated against Robert Brazell, Stephen Norris, Talos Partners, Rama Ramachandran, Darl McBride, and Bryan Cave. The other answers were due on the 19th or in one case on the 17th, but this is the first one to show up on PACER. Pelican Equity is essentially Mark Robbins, from the perspective of us SCO watchers. At the July 27th hearing, his name came up. Remember the guy Darl McBride testified he'd loaned $200,000 to and never got paid back in full? Same guy.

This answer is from Mr. Brazell, Mr. Norris, Talos Partners, and Mr. Ramachandran. Mr. Norris is, of course, the gentleman who signed the unXis-SCO agreement that died aborning. The judge ruled that it seemed to lack the hallmarks of a real deal.

I confess I don't know what to write about this icky case. I guess the best way to handle it is to let it speak for itself. The complaint, alleges the following:

NATURE OF THIS ACTION 1. This action arises out of the defendants' theft of extremely valuable trade secrets, breaches of the fiduciary duties owed by business partners and company employees pursuant to written agreements, misappropriation and unfair competition, violation of the Computer Fraud and Abuse Act, malpractice by a major international law firm, and fraud and deceit.
But this answer [PDF] in effect says, "No, you're the fraudster; you're the con artist". In fact, it goes farther and claims the litigation itself is part of the con.

I must caution that we have no way to know who, if anyone, is telling the truth. Sometimes people do file lawsuits with ulterior motives, after all, and sometimes the motives are to smear victims, because you can say things in court documents without, usually, being sued for libel, so there are those who take advantage of that. So as far as Groklaw is concerned, we have no position. This is included here just to complete the picture. It's happening. It's part of the SCO story. The complaint was handed to the judge at the last SCO bankruptcy hearing, and there was some testimony regarding the plaintiff on the part of both Darl McBride and Stephen Norris, so it's part of the SCO story, and since 2003 Groklaw has covered every SCO event so as to have a complete historical record. In that context then, I'll just let you read them for yourselves.

It's not every day that someone sues a law firm. You need to be brave indeed to try that. But that is what is happening. It's a complex tale of business dealings gone bad. Pelican says it came up with a business idea, one that involves arranging for people who own marketable securities "to pledge those assets as security for loans in amounts constituting substantial percentages of their market value under circumstances in which they could not obtain financing in comparable amounts from traditional lenders" and that under the program borrowers would thus have the benefit of "certain unique and innovative insurance coverage".

The allegation is that the idea was taken by erstwhile partners, web site content grabbed too, and that Robbins got isolated and that the others are now profiting from his concepts and implementations. The law firm, so it is claimed, started by representing Pelican folks, and ended up representing the defendants instead. That's if I understand what it says, which isn't too certain.

But what's clear as a bell is that Robbins says that these folks were drooling over the prospect of billions. In one email, so the complaint alleges, Brazell told Robbins that "[w]e will be on the billionaire list by 2110(sic)." Well. None too soon. I believe that was also the SCO dream.

I have no idea if this complaint in any way represents normal business dealings, but I certainly hope not. And I'll mention in passing that in my experience law firms are very paranoid about never crossing the line regarding who the client is, so I'm from Missouri on that claim. On the other hand, the same firm showed up representing unXis, and that makes me at least stay in focus, given the way that deal was set up. The judge in bankruptcy court wrote this about the deal:

Here, the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions. There is no evidence that the sale price is fair because it is just enough for Debtors to dismiss their cases.

The terms are equally, if not more, troublesome. Debtors are retaining the Mobility business that is virtually worthless, the letter of credit to pay a Novell judgment terminates on December 31, 2009, with no guarantee that the Novell Litigation will be concluded. Further, the Court is unable to find based on this record, the Debtors' history of unsuccessful sale efforts and this sale's peculiar and questionable timing that Unixis has acted in good faith.

The Court is also very disturbed that the Sale Agreement contains a provision (which Movants refer to as a "poison pill") requiring the transfer of assets to Unixis upon conversion or appointment of a trustee. Here, again, the Sale Motion calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith. There is simply no record upon which the Court can find that the Sale is in the best interests of the creditors and the estate. The Sale Motion is denied as falling short of the required standards.

And this is the same law firm. As I say, I have no position. I'm just watching and wondering and telling you what they are saying to and about each other.

The plaintiff claims that after grabbing his business from him, the defendants began a smear campaign against him, including setting up a website to "obliterate" his business and "deflect their misdeeds" -- he says particularly Brazell, who is the founder of Overstock.com, and McBride were involved -- and that they have "littered the Internet with scurrilous postings" on that website, www.skylinecowboy.com and on Yahoo, Twitter and other message boards.

Heaven only knows someone has littered the Internet. But how does he know who is doing that site? More questions than answers at this point. I do not recommend going to that website, by the way. I wouldn't touch it with a ten-foot pole. Nor does an allegation in a complaint make something true. I don't see a claim for libel, either, which seems odd to me. But then again, what if it does prove true? This is the kind of aim-for-the-other-side'-eyeballs litigation that you often see settling fast, since it's humiliating and embarrassing for everyone. Remember the Canopy litigation, how fast that settled? Pelican is asking for compensatory damages of $100,000,000. Gasp.

So that's one side. What about the defendants? These defendants in their answer deny everything Pelican has alleged throughout, paragraph by paragraph, and the defenses at the end are of interest, because they frame what the litigation will be about from these defendants' perspective:

(Improper Plaintiff)
AS AND FOR A FIRST DEFENSE

105. Plaintiff’s claims are barred, in whole or in part, because Plaintiff, which is the alter ego of Robbins and AIP, is not the real party in interest and is not a proper plaintiff for this action.

106. Upon information and belief, AIP filed for bankruptcy on May 27, 2009. As such, all rights, title and interest in any property of AIP, including any rights to sue, belong to AIP and are subject to the bankruptcy proceedings.

(Fraud)
AS AND FOR A SECOND DEFENSE

107. Plaintiff has conspired, and continues to conspire and act in concert with its alter egos Robbins and AIP, as well as others to misrepresent and falsely portray Robbins’s and AIP’s business and assets in an effort to defraud the Talos Defendants, prospective investors and customers, and this Court.

108. In furtherance of this fraudulent scheme, Robbins and AIP falsely represented, among other things:

(a) that they had expertise in the stock loan business;
(b) that they had concluded numerous stock loan transactions;
(c) that they had substantial assets and financial backing, including ownership of a mountain ski resort and an island in the Bahamas; and
(d) that they had developed proprietary business plans, models and other intellectual property for a stock loan business.
109. Robbins and AIP deliberately and fraudulently concealed from the Talos Defendants that the one stock loan that AIP had in fact placed resulted in a lawsuit in the Third Judicial District Court in and for Salt Lake County, State of Utah, brought by the borrower based on, among other things, fraud and misrepresentation by AIP and Robbins, which resulted in the entry of a final judgment against Robbins and AIP in the amount of $2,296,651.38, which judgment remains unsatisfied, and that Robbins is subject to a bench warrant for his arrest issued by the Third Judicial District Court in Utah for contempt of court.

110. Plaintiff, Robbins, and AIP knew these representations to be false and made these misrepresentations and concealed these facts for the purpose of inducing Talos Defendants, as well as other prospective investors and customers, to rely upon the representations, to create a false belief that the AIP stock loan business was real, lawful and legitimate, and to induce them to invest time and money in Robbins’s and AIP’s fraudulent scheme when, in fact, AIP, Robbins and their alleged stock loan business was nothing more than an elaborate con job.

111. The Talos Defendants relied upon and were misled by these misrepresentations and concealments and have been damaged thereby.

112. By bringing this lawsuit Plaintiff has joined with and is acting in furtherance of the fraudulent schemes of Robbins, AIP and others.

113. Plaintiff’s claims are barred, in whole or in part, by Plaintiff’s and Plaintiff’s co-conspirators’ own fraudulent acts.

(Misrepresentation)
AS AND FOR A THIRD DEFENSE

114. Talos Defendants repeat and reallege each of the allegations and responses contained in paragraphs 1 through 113 as if fully set forth herein.

115. Plaintiff’s claims are barred, in whole or in part, by Plaintiff’s and Plaintiff’s co-conspirators’ misrepresentation to Defendants.

(Willful Misconduct and Unclean Hands)
AS AND FOR A FOURTH DEFENSE

116. Talos Defendants repeat and reallege each of the allegations and responses contained in paragraphs 1 through 113 as if fully set forth herein.

117. Plaintiff’s claims are barred, in whole or in part, because of Plaintiff’s and Plaintiff’s co-conspirators’ own willful misconduct and/or unclean acts.

We have yet to hear from McBride. Of course, I'll let you know when his answer shows up.

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