I view the bankruptcy hearings at this point as comic relief, since nothing goes the way any of us here think they should. Bankruptcy court seems like cartoon court to me. So, when I heard that the December 2009 hearing transcript [PDF] was available, I said, Oh, goody!
It doesn't disappoint. This was the hearing primarily about SUSE's motion to lift the stay so it could finish the arbitration in Switzerland. And we have some recent bankruptcy filings, mainly the order letting SCO sell the mobility assets to former CEO of SCO Darl McBride.
I found it beyond comical to read Bonnie Fatell tell the court the history of SCO as she understands it and about its case against Novell and about the SUSE arbitration, and how important it is that SCO finally get its day in court in Utah without distractions. It's funny now, now that SCO lost after they got that day in court, to see her wax lyrical about SCO's meritorious and strong claims. Nowadays, Chapter 11 Trustee Edward Cahn claims he told the court before the trial that they thought SCO had a little better than a 50% certainty of prevailing. Read the transcript for yourself and compare.
The hearing also was about the motion by SCO to be able to sell de minimis assets and sign the new lease and hire Hatch, James & Dodge. And also heard was whether SCO needed to file some info about its finances by firm deadlines, ha ha, like that would ever happen, brought on by motion of Al Petrofsky. But the main event was SUSE's motion. The relief SUSE was asking for in the arbitration included a ruling that SCO didn't own the copyrights, having transferred them to UnitedLinux. And Judge Kevin Gross said no, he wouldn't lift the stay.
SCO lost in Utah before a jury anyway. It's calming to know that, as we read this hearing transcript, because the decision was hard to understand at the time, in that the arbitration seemed foundational to any decision about copyright ownership and particularly any value to those copyrights. But, in the end, it didn't matter, even with SCO catching every single break in bankruptcy court, as it felt back then.
And, as mentioned, there are more recent bankruptcy filings, including the Order saying the sale of the mobility assets, including suddenly all the copyrights, to former CEO of SCO, Darl McBride, was a fine idea. After all, if you can't trust McBride to be responsible with copyrights, who *can* you trust?
Here's the docket on the rest of the filings:
And I loved seeing Judge Gross saying in the transcript, "I realize that there have to be standards" in bankruptcy court.
04/05/2010 - 1105 - Claims Register in alphabetical and numerical order can be viewed upon request at the clerk's office. Filed by Epiq Bankruptcy Solutions LLC fka Bankruptcy Services, LLC. (JRK) (Entered: 04/09/2010)
04/07/2010 - 1103 - Minutes of Hearing held on: 04/07/2010
(vCal Hearing ID (110728)). (related document(s) 1102 ) (SS) Additional attachment(s) added on 4/7/2010 (SS). (Entered: 04/07/2010)
04/07/2010 - 1104 - Order Under 11 U.S.C. Sections 105(A), 363, And 365 And Fed. R. Bankr. P. 2002, 6004, 6006 And 9014 (A) Approving The Sale Of Mobility Business Free And Clear Of All Liens, Claims, Interests And Encumbrances Pursuant To 11 U.S.C. Section 363, (B) Authorizing And Approving The Assumption And Assignment Of Certain Executory Contracts In Connection Therewith, And (C) Granting Related Relief (related document(s) 1066 ) Order Signed on 4/7/2010. (SDJ) (Entered: 04/07/2010)
04/14/2010 - 1106 - Certificate of No Objection Re: Application for Compensation (Twenty-Second Interim) of Tanner LC for the Period From October 1, 2009 Through October 31, 2009 (related document(s) 1096 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 04/14/2010)
But what isn't so funny is realizing that his ruling made it at least conceivable that SCO might win before the jury, or at least Fatell gave him reasons to imagine so, and then, as Novell points out to the court, SCO would have been free to sue not only Novell but who knows who else?
And as you know SCO is now asking the Utah District Court to give them the copyrights anyhow on its claim for specific performance, even though the jury ruled that it didn't get them before under the APA. Just before the trial began, the
parties agreed that they'd let the judge decide that issue, after the jury trial, so that is the next piece. And there are some other claims the judge will be handling, as you can see in this order [PDF] by Judge Ted Stewart in SCO v. Novell. So, we are not out of the woods yet by a long shot. That's not even talking about any appeals.
We'll work on a transcript in text for you next, but I didn't want you to have to wait.
Update: And here it is:
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
THE SCO GROUP, INC.,
Case No. 07- 11337 (KG)
Dec. 3 0, 2009 ( 10:04 a.m.)
TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE KEVIN GROSS
UNITED STATES BANKRUPTCY COURT JUDGE
For the Chapter Trustee:
Bonnie Glantz Fatell, Esq.
Blank, Rome LLP
For Alan P. Petrofsky (Pro Se):
Alan P. Petrofsky
For the SUSE/Novell:
Alan Lewis, Esq. Morrison & Foerster
For an Interested Party: Ted Normand, Esq.
Boies, Schiller & Flexner, LLP
Elaine M. Ryan [phone]
Proceedings recorded by electronic sound recording;
THE CLERK: Please rise.
transcript produced by transcription service.
THE COURT: Good morning, everyone. Thank you and please be seated.
MR. LEWIS: Good morning, Your Honor.
THE COURT: Itís a pleasure to see you all again.
MR. LEWIS: Thank you.
THE COURT: Mr. Lewis, itís been awhile, and itís
good to see you, sir.
MR. LEWIS: Itís always a pleasure to be here, Your
THE COURT: Thank you. Good morning, Ms. Fatell.
MS. FATELL: Good morning, Your Honor. Bonnie
Fatell from Blank Rome on behalf of the Trustee, Mr. Edward
Cahn, whoís here with me today.
THE COURT: Good to have you back, Mr. Cahn.
MS. FATELL: Also on the line, Your Honor, I believe
is Mr. Ted Normand from the Boies, Schiller firm. We filed a
motion pro hac vice late yesterday for his admission and I
ask that he be admitted for purposes of this hearing and able
to participate. He had arranged by telephone in the event he
has any additional comments to the argument with respect to
the SUSE motion.
THE COURT: Thank you. Mr. Normand, you are
admitted for this hearing, and we will sign that order as
soon as it comes to my attention.
MR. NORMAND (TELEPHONIC): Thank you, Your Honor.
MS. FATELL: Your Honor, if I might just walk
through the agenda for this morning -
THE COURT: And one thing I can save you time with
is the CNO orders are all acceptable and will be signed.
MS. FATELL: Okay, thatís perfect.
THE COURT: So, that helps.
MS. FATELL: Okay, then, I think that takes care of
item number 1, item number 2, which is the motion for
authorization to have sale procedures for de minimis assets
approved and certain abandonment procedures.
THE COURT: Yes.
MS. FATELL: Item number 3 was nunc pro tunc
approval to enter into a new lease for the office
headquarters, which it sounds like you have approved.
THE COURT: Yes.
MS. FATELL: Number 4 was the retention of Hatch,
James and Dodge as special litigation counsel.
THE COURT: Yes.
MS. FATELL: Which then takes us to the contested
matters, and I thank you for approving those, Your Honor.
The first contested matter is item number 5 and that is the
motion of Petrofsky for an order compelling the Trusteeís
compliance with reporting requirement and setting reporting
deadlines. Your Honor, we did file monthly operating reports
just prior to filing our response, I believe, and actually I
will cede the podium to Mr. Petrofsky. I donít know if
hereís here or if heís on the phone.
THE COURT: It looks like Mr. Petrofsky is on the
telephone. Good morning, Mr. Petrofsky.
MR. PETROFSKY (TELEPHONIC): Yes, Iím here, thank
you. Good morning, Your Honor.
THE COURT: I have had an opportunity to read the
papers but certainly you may proceed to make some argument.
MR. PETROFSKY (TELEPHONIC): Excellent, thank you,
Your Honor. Okay, I mostly wish to stand on those briefs,
but I will go over a few points. First of all, part of the
information in the monthly operating reports is the statement
of disbursements, and itís clear that there was an October 31
deadline for Rule 2015(a)(5) for the filing of the statement
of disbursements for July through September. That deadline
may be extended by the Court, but the Trustee never sought to
extend it and he missed that deadline by 53 days. Now, the
filing of several MORs just before the objection deadline has
made the motion moot as to statements of disbursements, but I
believe that un-excused tardiness of 53 days should be a
factor when the Court decides whether it should do anything
to address the non-moot reporting issues. Now, moving onto
those non-moot issues, the MORs, in the revised proposed
order, the January 31 deadline for the October MOR is the
same date that the Trusteeís objection stated that he would
be meeting, and the order also says that that date is the
deadline for the November and December reports, which are
presumably being held up by the same fiscal year end
accounting issue, and then going forward, the order would set
deadlines at 20 days after the end of each month and those
deadlines would be extendable for cause. As I described in
the briefs, the lack of any MOR deadlines set by the Court
has been a problem throughout these cases causing unnecessary
confusion for all the parties and the Trusteeís objection did
not identify any harm though it comes from setting some
deadlines. And then lastly on the semi-annual subsidiaries
reports for Rule 2015.3. This rule was adopted on December
1 , 2008, and the Supreme Court ordered that it shall govern
insofar as just and practicable all cases filed before that
date, and I describe in my brief why it would be just and
practicable in these cases. Now, the mere accident of birth
that these cases happen to be commenced before the December
2008 date of the rule change does not justify continuing to
operate the businesses indefinitely with no reports. Weíre
more than a year past the change. Weíre into our third semi-annual period of business operations that are being conducted
after the rule change, and the Supreme Court explicitly chose
not to put in a grandfather clause and have all cases keep
running under the old rules indefinitely. Instead, cases are
to be switched to running under the new rules as soon as just
and practicable. Now the Trustee had a full 17 daysí notice
period of this hearing, and he is free to present any
evidence he wishes today, however, in his objection he
indicates he would not be bringing any evidence today, and he
requested if the Court were at all disposed to ruling against
him on this, that he be given another notice period to
prepare his evidence. Now the new rule itself includes
plenty of leeway for the Court to modify the reporting
requirements upon cause shown, and I have no objection to the
Trustee being given another opportunity to make such a
showing. What I want today is just an order that the mere
accident of birth of when these cases started does not
justify the absence of reports. I donít want the burden of
showing cause to modifying the reporting requirement to be
placed upon the Trustee as it would be in any case that
happened to be filed after December 1, 2008. And thatís it.
Thank you for hearing me.
THE COURT: Certainly. I just have one question for
you because itís never been quite clear to me, Mr. Petrofsky.
MR. PETROFSKY (TELEPHONIC): Yes.
THE COURT: You are a shareholder of the debtors.
MR. PETROFSKY (TELEPHONIC): That is correct.
THE COURT: And may I ask how many shares you own?
MR. PETROFSKY (TELEPHONIC): I own 100 shares.
THE COURT: Okay. And did you buy those shares pre- or post-petition? In other words, before or after the
MR. PETROFSKY (TELEPHONIC): Iíve owned them since
before the case and theyíre listed in the list of
shareholders that was attached to the petition.
THE COURT: Okay. Thank you.
MR. PETROFSKY (TELEPHONIC): Youíre welcome.
THE COURT: Ms. Fatell?
MR. PETROFSKY (TELEPHONIC): And I guess - Iím
THE COURT: No, go on.
MR. PETROFSKY (TELEPHONIC): In case thereís any
suggestion as to, you know, what size that interest is, the
Trustee has personally certified to the Court that the
estateís claims against IBM and Novell are meritorious and
should be proceeded aggressively.
THE COURT: Yes.
MR. PETROFSKY (TELEPHONIC): And those claims seek a
minimum of $5 billion from IBM. Thatís 5 billion with a ďbĒ
as in boy. And should the Trustee succeed on those claims,
the proceeds would be enough to pay off all the creditors
with interest and weíve, you know, more than $200 per share
for the equity holders, which would be more than $20,000 for
me. So, thatís the potential side of the interest.
THE COURT: Alright. Thank you.
MR. PETROFSKY (TELEPHONIC): Youíre welcome.
THE COURT: Now, Ms. Fatell.
MS. FATELL: Thank you, Your Honor. Let me first
address the new ruling -
THE COURT: Yes.
MS. FATELL: - and the suggestion that itís the
burden of the Trustee to -
THE COURT: To show cause.
MS. FATELL: - seek to modify that.
THE COURT: No. As I understand the rule, cause
must be shown by the movant here.
MS. FATELL: Thatís how we understand the rule, Your
THE COURT: Yes.
MS. FATELL: The rule clearly states that it is not
a grandfather rule, that it does not apply to cases that were
already pending. These cases were pending for probably well
over a year, close to two years at the time the rule was
enacted. There was no request by the U.S. Trustee. There
was no other party prior to this date urging the Court to
order the debtors, when they were in possession back in
January Ď09 after the rule was adopted, to comply with this
provision. So, Iím not certain why there suddenly should be
a burden placed on the Chapter Trustee who clearly has
come in well into two years into this case to now address
that rule. I donít think itís applicable, and I donít think
the burden should be on the Trustee to show cause why it
should not comply. I donít think itís required to comply.
So, thatís my response to that. As far as the timely filing
of the monthly operating reports, as we explained in our
response and also in footnotes to the monthly operating
reports and, you know, everybodyís burdened and so I donít
suggest that that is an unending excuse, but certainly for
the early part of the Trusteeís involvement in this case, we
have done the best that we could to comply with the filing of
those reports. We have now filed July, which was prior to
the Trustee being appointed. August, which was prior to the
Trustee being appointed. Have not had an opportunity to go
back and really scrub those and the historical data we did
rely on the people at the company who have previously filed
these reports to prepare them in accordance with how they
were previously filed. Our financial advisors did review
them, so we were comfortable filing them, but we did caveat
to say that as we wind down the year, which is the end of
October, and we review the current financial situation as
well as the financial situation since the Trustee became
appointed that we would reserve the right to go back and make
some modifications to those. So, we are in compliance with
respect to July, August, and September. As to October, that
is the companyís fiscal year-end. That does take additional
time to close those books. We are in the process of that and
we have represented to this Court that we expect that October
and November and hopefully December will be filed timely in
January, certainly October and November. As far as the
request that the Court set an absolute court-ordered
deadline, which is not required by the rules or by any
provisions or guidelines in the U.S. Trusteeís Office, weíre
concerned, Your Honor, that that places an undo burden on the
estate that if we are in need of an extension of time for
whatever reason that the Trustee now has to come into this
court, has to file a motion, has to show cause as to why it
should be granted any type of extension, and we think that
thatís really not an appropriate burden on this estate. We
understand the requirements. We are doing our best to comply
with the guidelines. We will continue to do that, and we do
not expect that weíre going to file - excuse me, that we are
going to run into significant issues that would preclude us
from filing these as close to within the 20-day time period
as the rules require. So, we would request that the motion
and the revised order of Mr. Petrofsky be denied and if the
Court deems that it should be denied without prejudice and he
thinks that he needs to come back in and revisit this issue,
thatís certainly up to him.
THE COURT: Alright.
MS. FATELL: Thank you, Your Honor.
THE COURT: Thank you, Ms. Fatell. Well, let me
just rule, because I do think that I understand the
circumstances, and first of all, as far as the late filing of
the monthly operating reports is concerned and whether they
are excused or unexcused, I think that the circumstances of
the case provide the appropriate excuse for the late filings.
We have a new trustee in the case. He has been working, from
everything that I have seen and reviewed, very, very
diligently. There are major issues and difficulties which
the Trustee is addressing, and so I do believe that the late
filings are excused here, and I for similar reasons am not
going to require a firm deadline for the filing of those
monthly operating reports. I note, for example, that the
Office of the United States Trustee is not present, has not
joined in the motion or has not raised a concern and that is
of course of significance to the Court, and in this
particular case, as I said, I am satisfied with the Trusteeís
diligence and efforts and those of counsel, and I donít think
it appropriate to impose the deadline other than obviously if
it drags on beyond what the Court views to be a reasonable
time then I will notify the parties, perhaps with an order to
show cause or something of that kind why the continued delay
is occurring, but it is to me significant that the Trustee
also had to prepare monthly operating reports for pre-
appointment months which obviously required, I think, much
extra effort on the Trusteeís part. So I do take note of
that and will deny the motion on the monthly operating
reports insofar as the reports for subsidiaries are
concerned, I do note that it was specifically not a
grandfathered rule. It applies in a prospective manner
unless cause is shown, and I donít think that cause has been
shown here why the Court should extend the amended rule to
this debtor, the Trustee in this situation, and I will deny
the motion for the filing of those monthly operating reports
subject to - without prejudice if Mr. Petrofsky would like to
file a motion and present evidence to the Court as to why the
for cause requirement can be met and is met, then certainly I
will reconsider the ruling today, but at the present time, I
have not heard a basis to find that cause should require the
Court or the Trustee to deviate from the clear import of the
revised rule. So, to that extent, I deny the motion on the
monthly operating reports and deny without prejudice the
motion as to compliance with the amended rule requiring
prospectively filings of the subsidiary information.
MS. FATELL: Thank you, Your Honor.
MR. PETROFSKY (TELEPHONIC): Okay, thank you, Your
THE COURT: Thank you, Mr. Petrofsky.
MS. FATELL: Would the Court like us to prepare and
submit an order?
THE COURT: That would be helpful, thank you, thank
you, thatís kind of you.
MS. FATELL: Thank you, Your Honor. Your Honor, the
next item on the agenda is the motion of SUSE for stay relief
to proceed with the arbitration in Switzerland. We did file
an emergency motion for leave to file a particular document
THE COURT: Yes.
MS. FATELL: And if the Court wants to take that up
first or hear argument from SUSEís counsel first and then
deal with that.
THE COURT: I donít know - We can just ask, I think,
if thereís any objection to that motion for the filing under
seal. Mr. Lewis, as I said earlier, itís good to see you
again and welcome back.
MR. LEWIS: Thank you, Your Honor, and as I said
earlier earnestly, itís always a pleasure to be in this
THE COURT: Thank you.
MR. LEWIS: Like a true lawyer, my answer to the
question, Do I have any opposition? is yes and no.
THE COURT: Okay.
MR. LEWIS: I certainly donít object to the filing
of the document under seal if itís to be filed at all.
THE COURT: Okay.
MR. LEWIS: The if itís to be filed at all is the
yes part of the question, and that is, this filing is pretty
late, the eve of the hearing, and I note, Your Honor, that we
filed our motion on the - I think it was the 10th of November.
The Trustee asked for and got an extension to file his
response until - I think we filed on the 9th of November,
until the 10th of December - or 15th of December. That was 35
days. We had a shortened time to file our reply because of
the holiday season and counting back, but thatís okay. Why
this had to be filed on a clear open issue on the eve of the
hearing is just beyond me. I canít see any excuse for it.
Thatís the first question, and this is not the first time in
this case where we have faced eve-of-hearing filings without
any real excuse. The second point, Your Honor, is while we
donít in principle object to the filing of the underlying
document under seal, the declaration contains an opinion in
it by Mr. Tibbitts which is an opinion as to a legal issue,
which I think is inadmissible and inappropriate, and for that
reason we would object to the declaration anyhow because Mr.
Tibbittsí opinion as to the merits of the SUSE proceedings,
if itís to be considered at all, is not an appropriate matter
for this Court to consider. Legal issues are not appropriate
matters for expert opinion and theyíre certainly not
appropriate matters for any opinion. Itís this Courtís
responsibility if this Court wants to get into the details to
look at the facts, not to consider opinions. So, for both of
those reasons, I think itís inappropriate for this document
to be filed. If it had been filed and there had been nothing
to seal it, I would have asked that it be struck anyhow, and
I think thatís the appropriate result here. Weíre prepared
wholly to concede that the SUSE proceeding is contested. We
donít disagree with that. Otherwise, we wouldnít be here.
But thatís about all that the declaration really accomplishes
because what it really did was it simply basically filed an
answer to what amounted to our moving papers in that
proceeding. Thatís where we are.
THE COURT: Yes.
MR. LEWIS: So, I would suggest - I would ask the
Court not to admit it in the first place, because I donít
think the declaration is appropriate for both for timing
reasons and because it contains a legal opinion and even if
it did, I donít think it really adds anything to whatís
already before this Court. Thank you, Your Honor.
THE COURT: Thank you, Mr. Lewis. Why donít we just
at least resolve this issue at the outset.
MS. FATELL: Thank you, Your Honor. Your Honor, as
to the timing of the filing, this is a confidential document.
Itís part of the arbitration in the Swiss Tribunal. It is
not a surprise document to SUSE. They clearly are aware of
the document. They have their own copy of it. Theyíve had
it and certainly in preparing their submissions and their
redacted version of their counter-document that they also
filed in this SUSE arbitration, theyíre aware of this and Iíd
be surprised if they hadnít reviewed it. So, I donít think
there is surprise here. The fact that we filed it as late as
we did, we filed it because it was in response to the reply
brief that was filed on December 23rd, which was just before
the Christmas weekend, and so we filed this as promptly as we
could after that where they said that the Trustee doesnít
even attempt to explain the evidence and arguments that
supposedly support our position. We did not address this
initially because the burden is on SUSE to show that theyíre
going to prevail. We were satisfied with the response that
we filed. In light of their reply, we felt that the Court
should have the opposition papers that were - and a statement
of position that was filed in the Swiss Tribunal similar to
the statement, although redacted, that was filed by SUSE.
So, for that reason we did file it. As far as the
declaration, Your Honor, the purpose of the declaration was
merely to identify the document as true and correct, and to
the extent that thereís an issue with respect to paragraph
(5) of the declaration, Iím happy to have that stricken so
that the declaration from Mr. Tibbitts only states that this
is a true and correct copy of the actual document that was
filed in the Swiss Tribunal. And so, we would request, Your
Honor, that it be permitted to be filed under seal.
THE COURT: Alright, thank you, Ms. Fatell. Does
that help a little bit, Mr. Lewis?
MR. LEWIS: It helps a little bit, Your Honor, and I
appreciate the concession on paragraph (5) of the
declaration, but I really think we have to set some standards
for how this case is going to proceed and the eve of filing
is not an appropriate act here. The issue of the merits of
the SUSE arbitration was teed up by our opening motion. We
discussed the merits and we provided some evidence on it. We
provided some discussion of it. It was clearly an issue for
the reply, the opposition. The fact that in our reply we
commented on the fact that in their opposition they didnít do
what they should have done doesnít give them grounds to
reconsider what their opposition looked like and file what
amounts to a sur-opposition on the eve of the hearing. I
just donít think itís appropriate to permit that here, and I
understand it may kind of be in a some sense no harm, no
foul, but on the other hand, you know, Your Honor, I donít
want this to keep happening. At least when the debtor came
and however inaccurately on the eve of the original hearing
on the motion to convert, the debtor could say, Well, we just
signed the thing up. Thatís not even true here. In 35 days,
the Trustee couldnít figure out that the Trustee needed to
file something that addressed the merits of the litigation,
something that, as the Trustee has said this morning, they
knew about too. Itís been in the pleadings, in the
arbitration right along. So, again, I would urge the Court
to simply not allow the filings so that we have a standard
that we follow here except for really good cause, and I
understand those things can happen, and they do happen and
they have happened, and they may happen again, but we donít
have that here. Thank you, Your Honor.
THE COURT: Well, let me just ask a quick question,
Mr. Lewis -
MR. LEWIS: Yes, Your Honor.
THE COURT: - and that is, are you prejudiced by
the filing. In other words, itís not a surprise document,
and the reason I ask is because - and I realize that there
have to be standards. Bankruptcy is a little bit of an
unusual animal and as a Judge, I like to try to get things
right and it helps me to get it right to be able to consider
all of the evidence and unless a party tells me that they in
some way have been surprised, totally surprised, you know, a
witness that was never disclosed or a document that was never
produced. Is that your situation here?
MR. LEWIS: Your Honor, weíre not totally surprised
because we know what the record is, but the fact that you
know what the record is doesnít mean that someoneís going to
try to use it at the last moment for some reason that hasnít
been anticipated and I suppose in one sense weíre not
prejudiced because we know what their answer, Iíll call it an
answer, has said for sometime -
THE COURT: Right.
MR. LEWIS: - for a long time. On the other hand,
you know, encouraging this kind of last minute thinking
about, Well, gee, how should we bulk up our response because
we didnít really do a great job, encourages people not to put
everything in front of the Court until they see what there is
they need to respond to further. I am in favor of the courts
having everything in front of it. I understand the courts
wanting to have that and wanting to get it right by having
that. The question here is, that could have been the case
without this last moment filing and if we let this go then
weíre going to see this again sometime, and weíre going to be
arguing about it again, and there really is no excuse this
time whereas on other occasions there may be. I mean, from
our perspective, yes, you know, you can ask the question, Was
this something we couldnít expect and so on and so forth,
sort of look at the realities. Look at the realities on the
other side of the coin. In this instance, there is no excuse
for why this was done. Itís as simple as that. But, Your
Honor, I donít think in the end itís necessarily going to
affect the outcome of the proceedings anyhow, although I
donít know what arguments theyíre going to make based upon
that given that Mr. Normanís on the phone, for example. So,
I canít necessarily say it wonít prejudice us, but I
understand the Courtís point of view.
THE COURT: Thank you, Mr. Lewis.
MR. LEWIS: Thank you, Your Honor.
THE COURT: Well, I certainly do appreciate the
concession on paragraph (5) of the declaration and in fact I
was going to rule that it would not be considered by the
Court. As to the document being filed, again, I think that
itís helpful to the Court. It is not prejudicial. I do
appreciate Mr. Lewisí comments that we need to have structure
and we need to have limits, but in this particular case, I
think that given the nature of the document that is being
offered, the fact that the opposition was well-aware of the
document, Iím going to allow the filing. I donít know if I
can stop the filing. I suppose I could have had it stricken,
but in this particular case, Iím not going to strike the
document, the declaration, and I will permit it to be filed
under seal given its nature.
MS. FATELL: Thank you, Your Honor.
THE COURT: Thank you. Mr. Lewis, the merits of
MR. LEWIS: Thank you, again, Your Honor.
THE COURT: Of course.
MR. LEWIS: This is a motion by which SUSE asked the
Court to grant its stay relief to complete an arbitration
that has now been pending for four years and has been stayed
essentially at the request of the debtor for 2 1/2 years in
this case. This arbitration, contrary to anything youíve
read, is important to the outcome of these cases. The debtor
asserts in the Utah litigation, which is about to get started
again in March, that it owns certain copyrights that are
critical to its future, to its ability to reorganize. What
is asserted essentially in the SUSE litigation is that even
if the Utah litigation, if SCO prevails in the Utah
litigation by showing that it acquired the copyrights from
Novell, in the SUSE litigation weíre going to show that SCO
turned around and transferred those copyrights. It doesnít
own them anymore. Thatís whatís at stake in that litigation,
Your Honor, and those copyrights are at the core of the
debtorsí whole reorganization. Theyíve been at the core of
the reorganization since this Court - the Court has
recognized that since the Court granted stay relief two years
ago, almost, for the litigation to resume in Utah, and this
is the other side of that same coin, and if you donít own the
copyrights, you canít sue on them. The billions of dollars
that we hear the litigation is worth from the Trustee, I
wouldnít say necessarily evaporate to the last penny. They
might. Depending on exactly how broad a ruling is obtained
in the SUSE arbitration in SUSEís favor if that happens, but
a lot of that value is going to evaporate. You canít
reorganize these companies. You canít do anything with them
until you know the whole picture, and let me quote, Your
Honor, from paragraph (16) of SCOís reply, SCOís motion to
enforce the stay - to find that the stay applies to the
arbitration from two years ago.
THE COURT: Yes.
MR. LEWIS: This is paragraph (16). In our
opposition we argue there was no jurisdiction, personal, and
so on and so forth, and then we added at the end, ďThat in
any case, in commencing the arbitration, SUSE wasnít really
suing SCO. It was just defending itself.Ē And SCO
responded, ďNo, this is really authentic.Ē And hereís what
SCO says, ďSUSE lastly contends that the Swiss arbitration is
not stayed because the arbitration is not being brought
against the debtor within the meaning of 11 U.S.C. ß 362 (a).
In fact, however, SUSE commenced the arbitration and seeks an
arbitral award of over $100 millionĒ, and hereís the key,
ďplus a declaratory judgment that SCO does not own perhaps
its most valuable asset, the Unix intellectual property.Ē
How much more clear could it be out of SCOís own mouth that
the Swiss arbitration is a key to the value of these key
assets. We donít know exactly what the ruling will be in
Switzerland. We donít know what the scope of the ruling will
be in Switzerland, but even back two years ago, 2 1 /2 years
ago, SCO itself realized and said to this Court that that
ruling could seriously undermine the value of its assets, the
key assets. That hasnít changed. The only thing thatís
changed, Your Honor, is that the Tenth Circuit has reversed
the decision in the District Court which held that Novell
owned the copyrights, never transferred them, and put that
question up for grabs again, and so now this issue becomes
THE COURT: But, let me ask this, if SCO loses in
the Utah litigation in March, itís scheduled for March 8th,
doesnít that moot the arbitration?
MR. LEWIS: It probably largely moots the
arbitration if not altogether, but what happens if it wins?
Then you still have to have this decided. Is the Trustee
prepared to say that the Trustee will agree to a stay of
execution and stay of further proceedings based upon the
result in Utah if itís in the Trusteeís favor until the
arbitration is decided? Which could be - if it doesnít get
going soon, could be several years from now. Why not have
these proceed on a parallel track? The money in an estate,
however limited it is, has to be spent for the central
purposes of the case, and the central purposes of this case
include deciding who owns what when it comes to this
intellectual property. Itís at the heart of the Trusteeís
attempt to prosecute the litigation or sell the litigation
assets or sell the copyrights and so on. The only
consequence of allowing the Utah litigation to go forward and
reach a result that is contrary to Novell without protection
for Novell is that the Trustee gets a period of having a leg
up in the relationships between the parties while he can try
to capitalize on that until it gets further resolved in the
SUSE arbitration, which may be, if it doesnít get started
soon, a couple of years away, and that is totally unfair.
Itís a use of the stay as a sword instead of a defense.
There is no need to - the Trustee has said that the
litigation is worth billions of dollars and has to be pursued
aggressively now. Well that means everything that relates to
that issue has to be pursued aggressively now not just what
suits him or what suits his strategy, and on the question of
limited resources, we donít really have any evidence on that
subject, Your Honor. This is sort of apropos of Mr.
Petrofskyís motion regardless of how you see the motion.
Thereís really very little in the record at this moment about
whatís available. Thereís nothing in the record about how
much it would cost. There is nothing in the record about
what else is going on with the estate, but even if the estate
has limited assets, this arbitration is every bit as
important unless you want the parties to have unequal power
as the Utah litigation, and the only way to have these things
come out and decided more or less at the same time is to get
the Swiss arbitration underway. Everybody acknowledges that
if stay relief is granted today, the Swiss arbitration isnít
going to happen tomorrow. And I want to remind the Court
that the arbitration is nearly done. Thereís one small brief
that SCO needs to file on its counterclaims. All the other
briefing is in. The Tribunalís familiar with everything.
All that remains is for the merits hearing, which will take a
few days and cost some money, at half price, I note, as we
did in our papers except for local counsel, but what else is
the money here for? Thatís the whole point of this estate.
Everybody recognizes that. What are we saving the money for,
even if itís limited. You know, the only party thatís going
to be harmed in the end in terms of the spending of the money
if we win everything, is weíll never see a penny of our own
claim. But thatís okay with us if thatís what it takes to
get this resolved. Thereís no harm to the estate here and
thereís no prejudice certainly because the estate has to know
the answer to this question. The creditors have to know the
answer to this question, and I think itís very important to
get the stay terminated now so that we can notify the
Tribunal that it can get things back on track three and
schedule a hearing which probably wonít take place until
after the Utah trial under any circumstances but will take
place, perhaps, more or less contemporaneously with it. The
parties will have to figure out a way to handle that as they
would have anyhow, because neither set of lawyers can be in
two places at one time. I think it will leave it up to the
parties to handle that problem, but itís got to be done, and
I just canít see a good reason not to do it unless the
Trusteeís seeking an unfair advantage through the
intervention and continuation of a stay that has now been in
place for 2 1/ 2 years, and I add, if the arbitration is not
resumed, who knows what will happen. It may not happen at
all. The Tribunal may just dismiss the proceeding for the
moment. All that money thatís been spent so far will be
wasted. This estate will have to find the money to start
again, as will my client, which will be prejudiced by having
to do the same thing. There just isnít a good reason not to
do this now, Your Honor.
THE COURT: Describe for me, Mr. Lewis, so that I
understand completely, what remains to be done in that
MR. LEWIS: Two things -
THE COURT: Yes.
MR. LEWIS: One, SCO has the opportunity to file a
further brief, one further brief, essentially on its
counterclaims, and the merits hearing. Thatís what remains
to be done. Preparation of witnesses -
THE COURT: Any discovery?
MR. LEWIS: No, itís done.
THE COURT: All done.
MR. LEWIS: Everything - all the record is in, Your
Honor, except for this final brief, and the arbitration will
involve some witnesses and some lawyers in the merits
hearing. Thatís all that remains to be done. Itís some
cost, no doubt, to both sides, but itís not like weíre
starting from scratch and a discovery has to be done and all
the briefing has to be done and so on and so forth.
THE COURT: And how many days do you estimate the
merits hearing would take?
MR. LEWIS: Iíve talked to my co-counsel, whoís been
involved in that, and I have not, and Iíve heard eight days,
maybe. Certainly nothing like the three-week trial in Utah,
not a jury trial. Itís a hearing before a three-member
professional panel according to specified rules where again,
everything is in. Itís basically all in except for this last
brief which SCO probably was in the process of getting ready
anyhow, but even it if werenít, itís not that much additional
to do. Thatís my pitch, Your Honor. Thereís just no good
reason to put this off any longer because it will just either
give the Trustee an advantage if he wins in Utah, if we donít
do it soon or drag things out indefinitely and nether of
those things is appropriate. Thank you, Your Honor.
THE COURT: Thank you. Thank you very much, Mr.
Lewis. Ms. Fatell. Take your time, Mr. Lewis.
MR. LEWIS: Thank you.
MS. FATELL: Thank you, Your Honor. There are some
fundamental flaws in SUSEís argument, and I wanted to go
through those if I may for the Court. Thereís no question
that the ownership of the copyrights is the fundamental issue
that has to be decided first.
THE COURT: Yes.
MS. FATELL: The question, Your Honor, is, where
should that be decided; okay? That issue is squarely before
the Utah District Court. There is a jury trial set for March
8th for three weeks. The parties are fully engaged right now
in trial preparation. We have to remember, Your Honor, that
the SUSE arbitration is an action initiated by SUSE, not SCO,
so the comment that SCO would have to start it all over
again, I donít quite understand, but it is to stop SCO from
suing SUSE for copyright infringement. Now SCO has not yet
sued SUSE at this point in time, and we submit that itís
illogical to even schedule this arbitration on the SUSE claim
to stop litigation that hasnít yet occurred before the
District Court first determines if in fact SCO owns this
copyright. Why we would have these two issues going on
almost simultaneously makes - itís just illogical. If SCO is
wrong, as was just discussed and conceded, the SUSE
arbitration issues are moot. So, itís important to remember,
Your Honor, that the action thatís going on in the District
Court is not just about this infringement, but itís also
about a claim for slander of title. Itís for a breach of
contract. There are a number of claims that are asserted
there, and I need to ask the Court to bear with me as I go
back through this timeline, because I think that thatís very
important here. In 1995, Novell sold the Unix business to
Santa Cruz Operations. In 2001, Santa Cruz sold that
business to Caldera, which was the predecessor of SCO. In
May of 2003, SCO entered into a series of agreements with
SUSE and others to form United Winnicks, which is the issues
that are raised in the Swiss arbitration. In March of 2003,
SCO sued IBM, not Novell, IBM to enforce its copyrights to
the Unix technology. It sued for breach of contract and
copyright claims arising out of Project Monterey which was a
joint venture between IBM and SCO. Novell, seeing that
litigation, directed to go to waive its litigation in its
claims against IBM alleging for the first time since 1995
when the asset purchase agreement was originally signed, for
the first time that those copyrights were never transferred
to SCO, and Novell publicly asserted that it was the owner of
Unix, and consequently in January of 2004, SCO then sued
Novell for slander of title, and as we all know, that case
has been proceeding in the District Court in Utah. The
complaint was later amended. It added copyright
infringement, unfair competition, breach of contract, breach
of duty of good faith and fair dealing and Iím sure some
other allegations that Iíve omitted.
THE COURT: Itís been like a rolling snowball.
MS. FATELL: It has, Your Honor.
THE COURT: Itís gotten larger over time.
MS. FATELL: Over two years later, SUSE in April of
2006 initiated the arbitration with the International
Tribunal in Switzerland. In April of 2006 also, Novell
sought to stay the District Court action to permit that Swiss
arbitration to proceed, and the District Court ruled that the
SCOís action against Novell would proceed, and it would only
stay those infringement claims that related to the Swiss
arbitration, as I understand it, Your Honor. Iím not an IP
expert and I was not involved in the details of this, so I
may have stated it a little broadly, but thatís my
understanding of it. So, the litigation in Utah went
forward, and as we all know, Novell prevailed on the summary
judgment motions and SUSE was nowhere to be found to
interfere and prevent that from going forward. In August of
2007, the District Court ruled in favor of Novell. It
reversed for trial the amount of the royalties due to Novell
from SCO and consequently in September of Ď07, SCO filed for
Chapter 11 . The arbitration was stayed, but the debtor did
come in and asked the Bankruptcy Court to enforce the stay as
to the SUSE arbitration, which the Court did, and in November
of 2007, Novel obtained stay relief from this Court to go
forward in the District Court in Utah to liquidate its claim
for royalties. Again, SUSE was nowhere to be found to object
to that proceeding that Novell was moving forward with going
forward. The Court in Utah held a five-day bench trial and
awarded Novell approximately $2 1/ 2 million. SCO took the
appeal. The Tenth Circuit reversed and remanded back for
trial and at the same time, Mr. Cahn was appointed as the
Chapter 11 Trustee.
THE COURT: Yes.
MS. FATELL: Now we have a jury trial set for March,
less than 2 1/ 2 months from now. Your Honor, I go through
this timeline because itís important for the Court to
appreciate that the Unix copyrights that are at issue were
transferred based on SCOís position in 1995 when that asset
purchase agreement was first signed. It wasnít until 2003
that Novell first asserted that it in fact never transferred
those copyrights, but it held them. But from 1995, Santa
Cruz and then after 2001, SCO conducted the Unix business
without any challenges. The present dispute with Novell
didnít start until 2004. The SUSE arbitration didnít start
until two years later, and again, SUSE has not objected to
any of the activities going on when Novell was in the winner
seat, when Novell was prevailing on the summary judgment
motions, when Novell went forward with its five-day bench
trial on the amount of its royalty payments that were due
from SCO, there was no reason why those issues suddenly
needed to be resolved all at the same time. So Novell has
had its day in court, Your Honor, and it is now time for SCO
to have its day in court, and we submit that the merits of
that copyright dispute are properly before the District
Court. That has to be decided first. Thereís no reason to
put the cart before the horse and decide the SUSE claims
before we know if thereís even a copyright that SUSE alleged
was transferred to it or to United Linux several years later.
We think it is inherently unfair to permit SUSE to interfere
with the sequence of the trial of these issues. As a court
of equity, we submit that one of the things the Court should
consider is the fairness in its deliberations under its 362
and stay relief, and we think it is inherently unfair to now
when SCO finally has its day in court to say, No, weíre going
to stop that, or weíre going to interfere with that and have
another proceeding go forward at the same time. The second
flaw I want to point out is that contrary to some statements
in the pleadings by SUSE, the arbitration is not the most
important asset of the estate, the SUSE issues are not,
quote, ďthe keys to the reorganization kingdomĒ, the Trustee
does not agree that the arbitration needs to be decided
before the Trustee can determine if reorganization or
liquidation is appropriate in this case. The Trustee
believes that the estate has viable claims against Novell for
slander of title. It has strong claims against IBM for
breach of contract, among other claims and among other claims
against Novell, and these are separate from the SUSE issues.
If the estate prevails, the recoveries there will likely pay
all creditors in full and will inure to the benefit of the
equity holders. So, yes, the infringement claims that SUSE
is concerned the debtor may pursue against it at some time in
the future, may have value to this estate. There may be
other claims that this estate will pursue for copyright
infringement against other parties, but the issue today is,
does SCO own those copyrights and does it have valid claims
against Novell and IBM. We also disagree that the Utah
litigation is dependent on the outcome of the arbitration.
We think it is very separate. As was noted by the District
Court when it addressed the arbitration issues there are
different issues here, there are different facts, there are
different contracts, and thereís no reason why they need to
be decided in tandem. With respect to the merits of the SUSE
arbitration, Your Honor, without getting into the details of
the dispute, just briefly, SUSEís claim is grounded on the
unsupported allegation that in 2002 by signing the contracts
for the now defunct United Linux Project, that SCO gave away
its most valuable asset, the intellectual property rights to
its proprietary Unix computer operating system. Gave it away
to SUSE and every other worldwide user of the competing Linux
operating system. Your Honor, itís SCOís position that under
any fair and reasonable interpretation, SUSEís claims lack
merit, that there is no way that SCO would have entered into
those agreements and given away its entire business. Given
the history of SCO and its predecessors, itís worldwide base
of customers who rely on the Unix operating system to run
their businesses, we think it is ridiculous to believe that
by entering into the United Winnicksí agreements that SCO
intended to put itself out of business, which is effectively
what SUSEís position is. Weíve submitted to Your Honor under
seal the position papers that were submitted to the
arbitration panel. They very strongly refute the story that
SUSE has crafted. SCO directs the Tribunal to look at the
entire set of documents that were involved in the United
Linux transaction. It points to very specific provisions
that carves out and reserves and accepts certain assets that
do not go into the United Linux venture. There are witness
statements. There are documents. There are emails that in
SCOís view completely eviscerates the claims of SUSE in that
arbitration, and SCO is very confident that it will prevail
in that arbitration. The testimony of the parties that were
involved in the negotiations are also referenced in the
pleadings and again, it is SCOís position that it did not
assign or transfer its Unix technology to the United Linux
venture. Now, obviously, where not here to decide the
outcome of that arbitration. We address that only to let the
Court know that SCO believes very firmly that that is not a
done deal to go forward with that SUSE arbitration and that
SUSE is right in its position. So, I think the Court then
needs to go through the Rexene factors -
THE COURT: Right.
MS. FATELL: - and see if in fact there is a basis
for stay relief here. The first is the prejudice to the
debtor. Your Honor, just looking at the submissions that
were filed under seal, SCO, as well as SUSE, are likely to
have several witnesses. SCO will have to pay 50 percent of
the costs of the three arbitrators, who we understand bill at
$800 an hour. There will be lawyers from the United States,
and it is true that the Boies, Schiller attorneys have agreed
to bill at 50 percent of their normal fees in this case, but
nevertheless, they still have to be involved. There will be
costs. I suppose in-house counsel will have to attend. We
will need to hire new Swiss counsel because Your Honor our
Swiss counsel, Iím advised, has resigned from the case quite
some time ago. So we would have to get new counsel, bring
that person up to speed, and get them involved in the
proceeding. We will have to bring in experts and I can go on
and on. Your Honor, all of this is required for the Swiss
arbitration to go forward, and itís going to go forward in
Switzerland. It is not a minimal expense for the estate to
cover the costs not only of the preparation for the trial but
all of the expenses of all of these people to be there for
what counsel has suggested could be an eight-day trial which
in my view is a two-week trial. Eight business days, itís a
two-week trial, and thereís a huge expense to have all of
those people transported, housed, fed, et cetera, in
Switzerland. SCO estimates that this cost could be in the
hundreds of thousands of dollars if not approaching a million
dollars, and I base that, Your Honor, on records that weíve
looked at in the debtorsí records that Bois, Schiller to date
has already spent approximately $400,000 on this litigation.
This is not a short hearing. This is not a brief afternoon
argument to the Court. This is a trial, and it will involve
all of the costs that any other trial would involve and
respectfully, I think that SUSE minimizes the cost and the
burden on this estate by suggesting that everything is done
except one brief and preparing and going forward with the
trial. Preparing and going forward with the trial in and of
itself is a huge expense. If the stay is lifted there is no
certainty when the Tribunal will reconvene. If the panel
scheduled this arbitration for even April or May after the
March trial in Utah, Your Honor, preparation surely will
overlap. Thereís no way that SCO could walk into this
arbitration in April or May without spending time preparing
at the same time that it is preparing and going forward with
a three-week jury trial in Utah, and obviously, it is the
same counsel. The MORs recently filed do demonstrate and the
Trustee has represented to this Court previously that this
Court is on a very thin shoestring financially. We are going
through a restructuring. We are trying to create some value
here, but we do not have excess cash lying around to fund two
trials going forward at the same time, particularly, when the
arbitration may be moot if Novell ultimately prevails in
Utah. In terms of balancing the hardships, Your Honor,
thereís no question, as just discussed, proceeding with the
arbitration will be a hardship for these estates. SUSE
states it will only cause a modest incremental burden.
Again, we dispute that. We donít think thereís any hardship
to SUSE in comparison. The arbitration has been in abeyance
for over two years. The copyright issue will be litigated
promptly in the Utah District Court. So that issue is going
to be resolved. If anything, allowing that trial to go
forward to completion will advance the arbitration because
either it will be moot or at least the ownership of the
copyright aspect will have been resolved as to whether it
originally - it now lies with SCO and whether SCO even had
the ability to transfer it as SUSE avers. In terms of the
likelihood of the success on the merits, again, it is SCOís
position that the SUSE claim is merit-less. Iíve already
gone through that, Your Honor, I donít want to burden the
Court with reiterating all of that. The burden is on SUSE to
demonstrate to this Court that it is likely to prevail on the
merits, and we donít think that it has or can meet that
burden. In conclusion, Your Honor, we think that this motion
is just premature. It is an attempt to bury SCO in
litigation costs. We think that the motion should be denied
without prejudice for SUSE to renew the motion at the
appropriate time, and, Your Honor, the litigation in Utah
needs to go forward to its conclusion, and I know SUSEís
going to say, Well, if there are appeals and it takes
forever, weíre harmed and weíre prejudiced. SCO is not suing
SUSE at this point, so I donít see that thereís a prejudice.
Until that ultimate issue is decided, nothing can really
happen in the arbitration. Those issues cannot be decided.
So, if we look at whatís going on in the District Court right
now, SCO could prevail, Novell could prevail, either party
could prevail on some issues and not others. The parties
could go up on appeal or it may be resolved in some other
fashion, but again, until those issues are resolved, the
arbitration should not go forward. I just want to point out,
the Trustee has considered this and shared with me his view
that if there is an appeal, and again, I anticipate SUSE will
be anxious that this appeal will take forever, the legal
issues have already been decided on summary judgment and
theyíve gone up to the Tenth Circuit. The Tenth Circuit has
in essence really laid out a roadmap for how the trial should
proceed, and so, if there is an appeal, it probably would be
very limited to evidentiary rulings and perhaps if thereís a
challenge to the charge to the jury, but the trial judge
really does have a good roadmap how to proceed with this
case, and we donít think that thereís any basis for there to
be a separate action going forward in the SUSE litigation.
There was one - I wanted to just comment, address a couple of
comments that were made. One is that there was a statement
that the Trustee has indicated that the litigation is worth
billions of dollars and that the litigation is therefore
worth bringing. The Trustee never said that it was worth
billions of dollars. He did say that, and Iím not quoting,
but he did say that he thought that there were strong claims
and that they should be aggressively pursued. We think that
- Let me just look at my notes, if I may, Your Honor.
THE COURT: Address for me, Mr. Lewisí concern that
the stay will be used as a sword rather than a shield against
MS. FATELL: Iím struggling with that comment, Your
THE COURT: Because you havenít sued yet.
MS. FATELL: We havenít sued yet. Weíre entitled to
our day in court on the claims that we have brought against
Novell, and weíre finally getting that day in court. I donít
see how weíre suggesting that a Swiss arbitration not be able
to go forward in an action against the debtor and somehow
weíre using the stay as a sword. Iím a little tongue-tied to
try and respond directly because I donít understand how weíre
using the stay as a sword in this case, Your Honor. There is
litigation going forward. We are the plaintiff in that
litigation. Weíre entitled to have that litigation go
forward, and if anything, we think that the statements and
the actions by SUSE to try and interfere with that, and I do
say ďinterfereĒ because I think trying to press forward with
this Tribunal, this arbitration in Switzerland, is an
interference because it will cause the estate to incur
tremendous expense. It will interfere with the logical
progression of deciding these issues, which is the ownership
of the copyrights. It will cause the professionals of the
estate to be torn between two tribunals probably at the same
time. So, I donít see that weíre using the stay and the
ability to proceed with our claims as a sword. If in fact we
prevail and ultimately we prevail, whether we go after SUSE
for copyright infringement is an open issue. Weíve not
waived that claim. Weíre not walking away from it, but we
certainly are not pursuing it at this time, so I donít see
that theyíre harmed by the stay remaining in place, Your
THE COURT: Alright.
MS. FATELL: Does the Court have any further
THE COURT: No, maíam, thank you.
MS. FATELL: Thank you, Your Honor.
THE COURT: Thank you, Ms. Fatell. Mr. Lewis.
MR. LEWIS: Thank you, Your Honor.
THE COURT: In other words, when you were talking
about executing on a judgment, you were talking about in the
event a lawsuit is brought against SUSE or am I -
MR. LEWIS: No, Your Honor.
THE COURT: Did I miss your point, and I may have.
MR. LEWIS: I never accuse a judge for missing a
THE COURT: Well, Iím offering you that opportunity.
MR. LEWIS: So, I will blink and answer the question
this way, Your Honor. The stay should not be used as a
sword. That injunction, pardon the expression, in the case
doesnít limit itself to using it as a sword against the
specific litigant that might be involved in the stay
situation. Hereís whatís going on. If the Trustee wins in
Utah, he then has, presumably, a judgment that says he owns
the copyrights. He has now a judgment against Novell that
says he owns the copyrights, and a judgment saying that he
owns the copyright means that he can sue all kinds of people
for infringement and can proceed to try to execute against
Novell as well. Thatís using the stay as a sword because
that ability to use the copyrights for affirmative relief
against Novell and against others will be without threat for
the moment as long as the SUSE issue remains undecided
because no matter what you were told this morning, the fact
is that the two cases are tied up. Thatís precisely why the
Judge in Utah bifurcated them and sent the other off to
arbitration in the first place, because there was a key piece
of the Utah case that had to be decided elsewhere first, and
I want to remind the Court that no matter what the Trustee
says again this morning, the debtor said in invoking the stay
two years ago that SUSE commenced the arbitration and seeks a
declaratory judgment that SCO does not own perhaps its most
valuable asset. How can you get away from that? Thatís what
- you know, there may be some argument about just what part
of the Code was included or wasnít included and thatís for
later on, but thereís no question that even back then SCO saw
the SUSE arbitration as a threat to its most valuable asset,
its Unix copyrights that it claimed to own and why is that?
Because even if Novell sold those copyrights to SCO as SCO
claims, SCO turned around and transferred them to - or at
least this is our allegation, to SUSE. If you donít own the
copyrights, you canít sue for infringement on them, and
thatís a very simple proposition. Thatís why SCO wanted the
arbitration stopped because it threatened its most valuable
asset. Thereís no way around that, Your Honor. You can talk
about how the copyright issue is set for - thatís going to be
decided in Utah. It is and it isnít. It is in the sense of
deciding whether the copyrights were transferred from Novell
to SCO, but it isnít in the sense that itís not clear that
arbitration wonít turn right around and decide that the
copyrights were then transferred by SCO to United Linux. And
just briefly, to bring you to the merits argument, Your
Honor, two quick points. First of all, the fact that SUSE
hotly contested it doesnít mean that we havenít shown the
very low level of probably success on the merits thatís
required here. Secondly, if you read the language that we
quote, thatís in the District Courtís opinion from that
agreement and the reason we quote it from the District
Courtís opinion is because thatís in the public record and we
could do it safely, if you read the language of the contract,
which is the first and most important place to start, itís
pretty clear thatís what the contract says. Now, SCO has
arguments as to why this or that or the other thing changed
that or didnít mean what it might seem to say on the face of
it. I donít want this Court to decide that today. My only
point is, itís a pretty fair argument on its face, and thatís
pretty much what we have. We have a complaint that quotes
the agreement. We have an answer that makes allegations.
Everybody says his witnesses are going to say this or say
that, thatís enough for us to show probable success on the
merits according to the applicable standards. I donít think
thatís really an issue here. If the chances of our
succeeding were so slim, I donít think weíd be having an
arbitration at all. We wouldnít have spent a lot of money
pouring money into that. You can argue these points, Your
Honor, but beyond a certain point itís like what happened at
the motions to convert. You can get into the merits but you
donít really want to.
THE COURT: I know.
MR. LEWIS: I think itís a fair conclusion that
weíve met the standard, the low standard for probable success
- even a slight probability of success on the merits is
enough. Thatís the standard, and I think weíve met that
standard, and I donít propose to spend a lot more time on
THE COURT: Alright.
MR. LEWIS: Now, in terms of whatís fair or not
fair, and the argument that weíre somehow interfering, I want
to remind the Court that the arbitration was ongoing when
this bankruptcy case was filed. We were about to have
another trial in Utah in September, and the bankruptcyís
filed on the eve of that trial, literally, the Friday before.
THE COURT: Yes.
MR. LEWIS: The Court will remember.
THE COURT: Yes.
MR. LEWIS: We didnít just say, Okay, fine. We
continued with the arbitration because we thought we were
entitled to. We didnít say, Okay, well, we won the summary
judgment, the partial summary judgment in Utah and so, we
donít care anymore. We continued. It was the debtor that
stopped us. This estate that stopped us by bringing itís
motion, claiming that the stay applied, and asking the Court
to enforce it, and the Court so found. Now, with that in
mind and with the summary judgment in our favor, there is a
question at that point whether itís important enough to
continue to bring a stay relief motion given that we now have
a judgment in our favor and weíve been stayed, but thatís
changed now too, Your Honor. Thatís what the timing is all
about. We would have had these two trials pretty close
together as it was anyhow if there had been no bankruptcy.
We donít know when the Tribunal would reset this other trial,
but whatever burden there is on the Trustee and his counsel
to handle two things coming up is the same burden on us, and
Iím sure the parties can find a way with the Tribunal to work
out a proceeding that makes sense in terms of timing. If we
donít get it started now, who knows when it will happen, and
I just donít think there can be any argument that while a
favorable judgment for SUSE in the arbitration may not
resolve every question about the value of the assets. It
clearly affects that value materially. Thatís what the
debtor said in 2007, nothing has changed. Thatís why itís
important to go ahead with this. In terms of the cost, Your
Honor, first of all, we have no real facts in front of the
Court. We just have counselís representations about possible
costs, $400,000, you know, just - itís only cost $400,000 to
get almost there. Sure we have a hearing. Itís at half
price, and the trial in Utah isnít going to cost anything in
lawyersí fees, because thatís on contingency. You know,
there are going to be costs, travel costs, lodging costs,
food costs, maybe expert costs and so on, but weíre not
having that problem in Utah at all. This is going to be the
only thing thatís going to enjoin the estate. We donít
really know what the estate has or doesnít have. We know it
recently settled. I know what the number is with Auto Zone,
MS. FATELL: Objection, Your Honor. This document
was filed under seal. It is not a matter of public record as
to any details -
MR. LEWIS: Iím not going into details.
MS. FATELL: Details other than the fact that it was
MR. LEWIS: Yeah, if youíll let me finish, what was
involved is not clear but the Court is aware of what the
situation is, and we all - but we donít know whatís going on
with the estate. We donít know really whatís been going in
terms of shutting down operations or saving money or
conserving money, but again, I want to emphasize that if
thereís anything that money is in the estate for, is to
determine what the estate has to reorganize with. What
better purpose, what more important purpose if there are
limited resources than that. None. And so, even if it
impinges on the estate and some of its business operations
which the operating reports suggest continue to lose money
despite the fact that the Lewis loss of money was the whole
reason - one of the main reasons this case was converted,
then maybe itís time to shut those down altogether and save
money if thatís what it takes to get through this
arbitration, because itís going to have to happen, and our
point on the shield and sword issue is that if itís done in a
way that offsets the timing sufficiently, the Trustee is
going to have an unfair advantage for some considerable point
of time with respect to the outcome of the Novell litigation
to use that result against Novell and others when that result
could be undermined by what happens in Switzerland. Thatís
THE COURT: I see now. Itís not that they will use
a favorable result in Utah against SUSE, but that they will
use that favorable result.
MR. LEWIS: Yeah. They might use it against us too,
and we have, Your Honor, we do have customers to whom we sub-
license besides Novell. All of thatís up in the air while
this sit around. That is a harm to us in addition to
everything else. Weíd like to know where we stand and after
2 1/2 years, we ought to know where we stand. Thatís a long
time, Your Honor, for this to have been on the back burner,
and while itís true that the Trustee has not been around for
the 2 1/2 years, the Trusteeís been in this case for four
months now. Heís already announced to this Court that he
believes that - heís reviewed the litigation in general and
decided that the claims that the debtor has against Novell
are meritorious and theyíre worth pursuing vigorously.
Thereís no more need for a breathing space if there was one
when the Court agreed that the stay applied and enforced the
stay at the beginning of these cases 2 1/2 years ago. Itís
just not so anymore. Itís time to get these cases wrapped
up, Your Honor, and itís time to get them wrapped up in a
manner that is expeditious and fair, not to have them drag
out another two years while we decide the SUSE arbitration.
So, I submit, Your Honor, that whatever it takes to get that
SUSE arbitration decided and if there is a scheduling issue,
the parties will deal with it, precisely as they would have
dealt with it had there been no bankruptcy. No one wants to
be in two places at the same time, and frankly, I think we
can all take judicial notice of the fact that itís not
possible to be in two places at one time, and so, weíre no
more anxious to be trying the arbitration at the same time
than they are. We would find a way, as they would, to work
with the Tribunal, work with the District Court or wherever
itís going to be to make a schedule that works, and frankly,
if we donít get the arbitration started now, if we donít get
stay relief so that we can go tell the Tribunal that weíre
clear to go, letís talk about what needs to be done, letís
talk about a schedule. They have to fit their schedules too,
there are three arbitrators. Theyíre not just sitting around
waiting for us to say, Okay, guys, see you next week. That
being so, itís not likely that the two are going to conflict
anyhow, but if it starts to develop that way, the parties
will obviously want to fix that because while it may be a
burden on the Trustee to try to try two cases at the same
time, itís a burden on us too. Weíre not too anxious to do
that. Thatís no different for us. So the notion that weíre
trying to interfere because weíve suddenly got interested in
this again, just in light of the history of why weíre where
we are today, which is not our fault, and what we might want
to do and how we could do it, it just makes no sense to
suggest that we want to interfere. The only thing that makes
sense is that the Trustee is looking for a period of time
where he has a judgment he can use as a broad sword while the
risk of being undermined in the arbitration remains somewhere
in the future, and I think thatís totally unfair and
inappropriate for a case thatís 2 1/2 years old where the
Trusteeís already decided where he wants this case to go.
Thank you, Your Honor.
THE COURT: Now, letís assume that I granted a
limited stay relief to permit the Trustee to file the final
brief that you mentioned, Mr. Lewis, in the arbitration and
to commence the scheduling process; would that be a workable
solution here? In other words, I am concerned about a two-
front sort of fight going on, particularly for the Trustee,
and you know, and who the stay is designed to protect at the
moment. But at the same time, I donít want to face a
situation where following that jury trial, assuming for this
purpose that SCO is successful, that there is any substantial
delay in proceeding with the arbitration. For example, I
would not - you know, I perhaps shouldnít indicate my
inclination, but I wouldnít be inclined to continue the stay
while an appeal was pending because we all know how long that
can take, that process, and if for any reason there was then
a remand for further proceedings in the trial court, you
know, then we have delay upon delay. So, I do appreciate the
concern about delay. At the same time, just as a sort of
practical matter, it doesnít quite make sense to be
litigating in Utah when a decision against SCO will probably
moot that whole arbitration and the cost attendant to that
arbitration are obviously a concern to the Court.
MR. LEWIS: Your Honor -
THE COURT: But Iím trying to fashion whether some
limited stay relief can be both efficient and fair.
MR. LEWIS: Your Honor, I guess - I understand the
Courtís concern, concerns of there being two fronts. As Iíve
said, weíre no more anxious for that to happen than the
Trustee is. We canít be in two places at one time. Yes,
Morrison and Foersterís a big firm and all that good stuff,
but first of all -
THE COURT: The witnesses and the -
MR. LEWIS: Yeah, youíve got to get people scheduled
and then furthermore, Your Honor, you know, you donít just
start picking people off the vine this late in the case and
say, Okay, go fight them in Switzerland. You know, Whatís
you name, go fight them in Switzerland.
THE COURT: Right.
MR. LEWIS: You know, youíre going to use the same
people because itís the only thing that makes sense not only
from a cost point of view, but from a result point of view.
THE COURT: Yes.
MR. LEWIS: So, we have the same problem, and as
Iíve said, Your Honor, I am confident that had there been no
bankruptcy and there had been a conflict in the scheduling,
the parties would have figured out a way to work it out. I
imagine they would do the same thing here because itís
survival. It makes no sense to do anything other than that,
and I would suggest, Your Honor, that the best result is
simply to grant stay relief and if a problem develops, let
the parties come back before this Court if they need to, but
what Iím concerned about, Your Honor, if you grant some kind
of limited stay relief, then the Tribunalís going to get the
wrong message about whatís going on and who knows what the
effect is going to be with the Tribunal thatís been waiting a
long time to know whatís going on. I would rather just have
stay relief with the proviso that if a problem develops the
parties will of course confer, and if they confer and we are
somehow intransigent, which we wonít be, but if we were, then
the Trustee would be coming in here complaining about that,
and I donít think weíd want that to happen even if we were
otherwise inclined to be intransigent. And Iím sure the
Tribunal will work with us as well to try to schedule
something that makes sense so we can get the witnesses to the
right places at the right time without being up 24 hours a
day. So, I would ask the Court not to put any limitations,
just to grant us stay relief. You can give us some guidance
unofficially on the record, what youíd like to see and weíll
try to adhere to that guidance, but I am concerned about stay
relief that is limited in some way because of what the
Tribunal may read from that is, you know, weíre not going
ahead because you know what, itís going to get yanked on us
anyhow. Weíre just not interested, and then we are going to
have to start all over again, and it doesnít matter whether
we started the arbitration or they started the arbitration,
both parties are going to have to sink money into it again if
it has to happen again. Now, clearly, if we win in Utah, as
we hope to do, then it seems to me, you know, weíre probably
going to say, you know what, we really donít need this
arbitration anymore or weíll put it off because we donít need
to bear the expense. Thatís pretty much what happened when
the bankruptcy was filed and the Court determined that the
stay applied because we won on the basic ownership issues.
Thatís no so anymore, and the circumstances have changed
dramatically. This case - and I want too emphasize this
again, I know the Courtís aware of it, but itís 2 1 /2 years
old. When are we going to have this decided? When are we
going to know where we stand? I donít think anybody can
contest that whatever the exact scope of the ownership issue
and the resulting right to sue for slander, title, and
copyright infringements and all that other stuff, the exact
scope of that we all donít know, but I think itís fair to
say, and the debtor admitted this in its papers way back
when, that a favorable result for us in Switzerland is going
to impinge seriously on the value of those copyrights even if
SCO owns them. So, itís not like the copyright issue is teed
up for one place and not for another place. Itís teed up in
both places for purposes of this Court. Thatís why the
District Court deferred to the arbitration rather than trying
the thing itself because it didnít make any sense to try it
itself. Itís not going to try it this time either, whether
SCO owns the copyrights for purposes of suing on infringement
because it transferred them to United Linux. Thatís an issue
that was coming up in the District Court and basically the
District Court said, you know what, thatís an arbitration
issue, I have to send this to arbitration, and Iím not going
to bother deciding it even though itís important to decide.
THE COURT: Right.
MR. LEWIS: And the District Court, the little bit
of selective quotations from the District Courtís opinion
doesnít change the fact that the District Court clearly
recognized the interplay between the two. So, I urge the
Court to grant stay relief today with some guidance for the
parties about cooperating, and letís get the show on the road
so we can get this case taken care of one way or the other
before it goes on forever. Thank you, Your Honor. I
appreciate the time.
THE COURT: Thank you, Mr. Lewis, itís been very
helpful, your comments. Yes, Ms. Fatell.
MS. FATELL: Your Honor, if I may, first I do want
to acknowledge that Mr. Normand is on the phone and I donít
know if he wanted to add anything, if I may ask, Your Honor,
to anything thatís been said so far. May we ask Mr. Normand
if he wants to add anything since he is more familiar with
the SUSE litigation?
THE COURT: Mr. Normand, do you have anything to add
to at least what work remains to be done and the scheduling
of the arbitration?
MR. NORMAND (TELEPHONIC): Your Honor, this is Ted
Normand. I would make two points very briefly in part out of
concern that the first point has been mooted given the
direction that Your Honor has at least indicated he may be
going, but I did want to underscore that on the shield/sword
point, we are not currently pursuing any claims for what Mr.
Lewis calls ďinfringementĒ. Ms. Fatell has specified, the
District Court has stayed our claims against SUSE, and we
donít dispute that. So, this trial is not a claim for
infringement nor are we pursuing any claim in any other venue
for infringement, nor after the trial, if we were fortunate
enough to win, would we be able to tell the world that we
have just proved copyright infringement. So, on the
shield/sword argument, I think that falls flat under the
facts. On the second point, and this may be more for Ms.
Fatell to address and she may be on the point of saying this,
I didnít follow Mr. Lewis when he responded to Your Honorís
last question. I donít know why we would allow for even the
possibility of not only parallel proceedings but a proceeding
in the arbitration close in time at all to when the trial was
resolved. And again, maybe I misunderstood Mr. Lewis, but it
would seem to me to make more sense that the Court would
enter some order that made clear that the arbitration
shouldnít proceed within a certain period of months after the
trial or else all the concerns that everyone has been talking
about would be implicated.
THE COURT: Thank you, Mr. Normand. Just help me
out with one thing, and that is, the brief that everyone has
been talking about which remains to be submitted in the
arbitration, what is involved in the filing of that brief?
MR. NORMAND (TELEPHONIC): Well, to some extent, Iím
not the best person to answer that question, but I may be
relative to the people available to Your Honor the best
person to answer the question. Iím not the lead attorney on
the case -
THE COURT: Okay.
MR. NORMAND (TELEPHONIC): - but my understanding
is that is a lengthy, substantive brief that is meant to
reflect all of the evidence that one has gathered and plans
to present to the Tribunal. I donít want to overstate it,
but I think itís the equivalent of a lengthy summary judgment
brief. I think the real expenses that Ms. Fatell has pointed
out would be travel, the length of a two-week trial where,
you know, presumably you show up a week early and get ready,
and paying the arbitrators, which is no small cost, and those
would be, I think, costs that would exceed what would already
be the significant costs of putting together the final brief.
THE COURT: Alright, thank you, Mr. Normand. Ms.
MS. FATELL: Your Honor, since I am gathering from
the Court the direction that you may be going -
THE COURT: I really, when I ask a question, it
really is a question.
MS. FATELL: Okay, well then Iím going to respond to
some of the comments that were made.
THE COURT: Please, please, yes.
MS. FATELL: When the argument was made that SUSE
has presented enough to satisfy the third prong that thereís
a likelihood that they might prevail on the merits, Your
Honor, all theyíve done is acknowledge that thereís a
dispute, and if that where the standard and the threshold,
then any dispute that involved two parties and one of which
was the debtor, would meet that threshold to say, Iím likely
to prevail because I disagree with the debtor. So I donít
think thatís sufficient to meet that prong, and even though I
know it may not be a very high bar, there is a bar there, and
thereís been no ruling, that Iím aware of, on any of the
facts. Thereís been no analysis of the documents at issue.
While I think there was a reference that the District Court
may have looked at the contract briefly in terms of deciding
whether it should go to arbitration, there was not a full
factual and evidentiary hearing on those documents and what
they say, and we submit that there is a full story to be told
and that to the extent that thereís ambiguity and witnesses
are entitled to come in and testify as to the intent of the
parties, again we submit that the debtorsí position will bear
out and they certainly did not intend to transfer in this
transaction all of their interests in Unix. So, we donít
think that theyíve met that burden. In terms of the
arguments that have been made here, I think itís interesting
to note that Novell and SUSE are interchangeably referred to
here as ďweĒ, and weíre really seeing that theyíre seeking
two bites at the apple, and theyíre seeking to get a leg up,
and they are seeking to deny the debtor its day finally in
court on this ownership of copyrights issue by trying to
argue that these are very distinct issues but overlap and
that itís critical that they both be decided very close in
proximity. Again, as Mr. Normand said, as we said
repeatedly, we are not suing SUSE on copyright infringement.
We are pursuing our claims as to the ownership of this
copyright and if down the road we pursue SUSE or anybody
else, SUSEís not here to defend the world. If we sue SUSE
and we prevail or we lose, thatís one issue. We still may
have the basis for some other reason to assert a copyright
claim or some other claim regarding the Unix assets against
third parties. So, I just donít see why that is the ultimate
determination as SUSE wants this Court to believe as to
whether this debtor should reorganize, liquidate, et cetera.
It has options here. They are not tied to the SUSE
arbitration. As I said before, if we prevail against Novell
and IBM, not on copyright infringement but on the other
issues that we have, there could be a substantial recovery to
THE COURT: Yes.
MS. FATELL: And where the case will go from there,
we donít know. Your Honor, even preparing this brief, and
clearly I am less knowledgeable than Mr. Normand as to what
would be involved, but just in terms of the timing, this case
was last - there were activities in this case most recently
in 2007, as everybody has acknowledged.
THE COURT: Yes.
MS. FATELL: So, to suggest that all we have to do
is sit down and knock out a brief in a couple of days, it
seems to me that thereís going to be a lot of time required
to go back and look at the documents, refresh peopleís
memories, you know, review the evidence thatís come out in
the discovery stage in preparing that final submission. I
respectfully suggest that that is not something that can be
done very quickly in very short time, nor should it be done
at the same time that the litigation is going forward in Utah
because again, it will involve the same people. It has too.
THE COURT: Okay.
MS. FATELL: Iím troubled that the Tribunal might
get the wrong impression if the Court grants limited stay
relief. Iím sure that the people who serve on these
Tribunals are very skilled and intelligent and bright people
and understand that litigations go on, on all different
fronts, and to the extent they have a question as to exactly
what limited stay relief means, they can certainly consult
with a U.S. Bankruptcy lawyer, but, Your Honor, to grant stay
relief and throw this into really a black hole, I think would
be very detrimental to this estate. Weíve already
acknowledged that the relief should be denied without
prejudice for them to come back at the appropriate time. We
donít know what will happen in March. We donít know how the
trial will go. We donít know what the parties will resolve,
if anything, what the Court will rule, where that will go.
There needs to be a time after that is completed to see where
the dust settles before we launch into an action by SUSE to
stop us from suing them when weíre not suing them. Iím just
really struggling with how that makes any sense, Your Honor,
and so again, I would urge the Court not to grant stay relief
at this juncture, and I think weíre sort of talking about
crafting - Well, the Court is talking about crafting or
fashioning some type of limited stay relief almost in a
vacuum because again we donít know what will transpire
between now and the conclusion of that trial, and to try and
set a scheduling order or put the parties to work on agreeing
on a scheduling order in that black hole to me seems like it
would not be very productive, and so, I would suggest that we
see what happens with the litigation on this underlying issue
and for all we know, maybe SUSEís going to say, You know
what, Iím not going to stop them from suing us because
theyíre not suing us. They may see the light at some point,
and say, thereís no point in proceeding with this
arbitration, you know, this is going in a different direction
and this is not an issue for us anymore. We just donít know.
THE COURT: Right.
MS. FATELL: And, so, I donít think it makes sense
to burden the estate with those issues at this point in time.
And with that, I will sit down.
THE COURT: Thank you, Ms. Fatell.
MS. FATELL: Thank you.
MR. LEWIS: Your Honor, may I -
THE COURT: Mr. Lewis, you may certainly. Weíve
heard from Mr. Normand -
MR. LEWIS: I appreciate that, youíre very patent.
THE COURT: - and itís your motion and you get the
MR. LEWIS: Okay. I wished that worked at home, Your
THE COURT: I do too.
MR. LEWIS: Can we make that a rule of court? Your
Honor, a couple of things. The idea that weíre asking for
two bites of the apple, we already have two bites of the
apple. Thatís exactly what the District Court decided. It
was going to decide this issue, and then when we brought to
its attention itís really an issue for arbitration, they said
go arbitrate, but it knew it was an important issue for the
Utah litigation. The Utah litigation is essentially not over
until this issue is decided. In fact, one wonders if you can
really have a final judgment in Utah until this issue is
decided. Weíll come to that someday, I suppose, but thatís
what the Court did. It said, you know, Iím going to send
this off and you basically bring the result back and weíll
see where we are. So - and I donít hear the Trustee anywhere
along the line saying, Fine, we wonít seek to enforce
judgment, weíll just let things be cool, as it were, until
the arbitration is decided as well if we win in Utah. I
donít hear that. I only hear, No, donít do anything yet.
Now, on the question of how long itís going to take? It may
take a little while to write the brief, but you know, Your
Honor, itís going to take even longer and things are going to
be even worse the more time we take, and if we donít get this
started now, you know, the Tribunal may look at this and say,
You know what, this is just going to go stale. You guys come
back and weíll form another Tribunal someday if you ever
apply and then weíll be two or three years up. Weíre just
talking about getting this thing back on track, Your Honor.
Weíre not talking about trying it tomorrow. If we wait until
we see what happens in the Utah trial to even think about
getting started again, we may be talking about doing
something a couple of years from now, and where will we be?
Weíll be sort of tied up. The idea that somehow because the
infringement claims arenít teed up at the moment, that the
Swiss arbitration is irrelevant is just nonsense. The value
that SCO has its whole business model, is to sue people for
infringement based upon the copyrights. Thatís what it does.
The one business the Court has heard about in the motions to
convert of servicing some Unix users and so on, thatís not a
big business. Thatís not what this company is about.
THE COURT: Right.
MR. LEWIS: Itís about this litigation. The Court
recognized this when the Court granted stay relief for us to
finish the Utah trial, and the debtor recognized it, once
again, in arguing that the stay should apply to the Swiss
arbitration. Itís not our fault that things have gotten
stale. Itís the debtorsí fault. The debtor filed a
bankruptcy and invoked the stay. Why let them get more stay?
Why take the risk of further delay? Why take the risk of
further costs beyond what is unavoidable right now by further
delaying things? And on the final point, Your Honor, on
terms of what the Court should do today, I donít think this
Court can say that Novell has been outrageous or unreasonable
or uncooperative in this case. In fact, weíve not been here
before this Court very often for the most part. Weíve
granted extensions when they were asked for as we did in this
instance. I asked the Court to trust us to behave
professionally in terms of scheduling, and if we donít, the
Trustee will be in a position to come back and complain to
you. I donít want to be the one who defends that. I donít
think it will happen. But if you donít turn us loose now to
start working with the arbitrator to set a schedule that
works for everybody, which is what we would do anyhow, then
weíre going to be here for another two years. Now if - and
the changes of this happening before the trial in Utah, it
seems to me, are virtually nil. No one really argues that.
And so if we win in Utah, as I fervently hope we do, then
there probably isnít any need for an arbitration and if weíre
determined to go ahead anyhow, having gotten stay relief,
then the Trustee can come in and ask the Court for some
further relief on the grounds that at that point it really is
a waste of the assets of the estate, maybe. Why anticipate
all of that? Letís just get the thing back on track so that
we can get it rolling and get it scheduled. If there are
problems with - this Court left it to the parties to work out
schedules for the discovery and so on in the sale and
THE COURT: Right.
MR. LEWIS: And the Court will recall that was a
difficult problem because of the short fuse, and we actually
had to have a hearing or two, but it worked. The parties
werenít outrageous. We certainly werenít outrageous.
Thereís no reason to suppose we will be again. So I suggest,
Your Honor, that we just get stay relief, letís go tell the
Tribunal that weíre free to proceed, we have some scheduling
issues, we want to schedule this in a way that comports with
the schedule in the Utah trial, and letís see where it goes,
but if we go to the Tribunal with a thing that says the Court
has given us stay relief to tippy-toe, theyíre just going to
throw up their hands maybe and say, You know what, we donít
want to do this. Letís just kill this thing and you guys
come back when Judge Gross tells you to come back. I think
that the only appropriate result today is to grant us stay
relief. We will understand the need to schedule in a
rational fashion, as we would have had there been no
bankruptcy. Thereís no indication, weíve not heard anything
suggested today that the scheduling of the trial in 007 and
the arbitration in 2007 was done in a way where Novell was
trying to - or SUSE were trying to bury the debtor. Why
would we do that now in front of this Court? Thank you, Your
THE COURT: Thank you. Thank you, Mr. Lewis. Well,
I was really hoping to decide it right here and now, but I do
want to give it a little bit more thought, and I want to go
back having been sort of pointed to some of the arguments and
statements in the documents, to go back and actually re-read
those statements in the context of your arguments. I donít
think itís going to be - itís not going to take long to issue
a ruling. I certainly am sensitive to the fact that the
arbitration has been stayed for a long time now, but Iím
equally sensitive and concerned to the fact that we have a
trial date in a very substantial matter which may moot the
arbitration, that that is forthcoming, itís two months away,
but I do want to give it some thought at least as to what if
any sort of limited relief I might be able to fashion or in
the absence of limited relief whether or not to lift the stay
and sort of allow the matter to proceed on a long leash but
with the understanding that if it got out of hand or were
inequitable in someway to the debtor I could sort of - I hate
to say it, but yank back on the leash a little bit. So -
MR. LEWIS: And I donít want to be here when you do
that, Your Honor, so it wonít happen.
THE COURT: Alright. Iíll let you be on the
telephone. So, let me just see where we come out in my
thinking a little bit further and I certainly, as I say, Iím
not going to delay matters by delaying my ruling. So you
will hear from me within the next week, and I do appreciate
it, and in the meantime, I hope it was a good year for
everyone. I hope it will be a better year even in 0 0, and
I wish you a Happy New Year.
MR. LEWIS: Thank you, Your Honor. We wish the same
THE COURT: Thank you.
MS. FATELL: We all do, and thank you for your
THE COURT: Absolutely, counsel. Good day to you.
(Whereupon at 11 : 45 a.m., the hearing in this
matter was concluded for this date.)
I, Elaine M. Ryan, approved transcriber for the
United States Courts, certify that the foregoing is a correct transcript from the electronic sound recording of the proceedings in the above-entitled matter.
/s/ Elaine M. Ryan
January 7, 2010
Elaine M. Ryan [address, phone]