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To read comments to this article, go here
SCO Agrees to Pay the Constructive Trust Money to Novell Now - Updated 2Xs
Friday, June 04 2010 @ 04:31 PM EDT

It's a start! SCO fi...na...l...ly pays the constructive trust monies, what it owes Novell, to Novell: $625,486.90.

From the stipulation:
L. WHEREAS, the 2008 Stipulation provided, among other things, in paragraph 4 that “if Novell prevails in the Appeals with respect to the Constructive Trust Issue, the Agreed Constructive Trust Amount shall be paid to Novell . . . .”

M. WHEREAS, the Court approved the 2008 Stipulation via its Agreed Order [etc.] (filed December 29, 2008 as Dkt. No. 644) (the “2008 Stipulated Order”);

N. WHEREAS, pursuant to the 2008 Stipulation and 2008 Stipulated Order, SCO deposited the Constructive Trust Amount of $625,486.90 into the Constructive Trust Account (as defined in the 2008 Stipulation);

O. WHEREAS, the Appeals have been resolved and there has been a subsequent trial in the Litigation on various issues;

P. WHEREAS, the outcome of the Appeals occurring prior to the trial and of the trial are such that the Agreed Constructive Trust Amount is not subject to further challenge by SCO or modification on any further Appeals or other proceedings in the Litigation;

Q. NOW, THEREFORE, based upon the foregoing Recitals and the provisions of the 2008 Stipulation (including, without limitation, paragraph 4 thereof) and the 2008 Stipulated Order, the Parties agree;

1. Within one week of entry of an order approving this stipulation, SCO shall pay the Agreed Constructive Trust Amount plus the interest it has earned in the Constructive Trust Account to Novell.

2. This stipulation shall not affect any rights, claims or defenses of the Parties except such rights, claims and defenses as relate to or have been decided in connection with the Constructive Trust Issue.

What does it mean? That with respect to this one issue, the constructive trust, SCO cries uncle. There will be no appeal of this issue. Here's the document:
06/04/2010 - 1125 - Certification of Counsel Regarding Stipulation for Payment of Trust Fund to Novell (related document(s) 586 , 644 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 06/04/2010)

I'm imagining the Mofos pointing out, as only they can, the huge bills that Cahn is paying his firm and Ocean Park guys and perchance suggested a reevaluation of priorities? I wonder how much money SCO has left?

To give you an idea of what I mean, OPA wants $60,000 of the $100,000 that Liberty Lane paid to SCO for their patent, in addition to their "regular" services and expenses:

05/28/2010 - 1123 - Certificate of No Objection Re: Monthly Application for Compensation (Sixth) of Ocean Park Advisors, LLC for the Period of March 1, 2010 Through March 31, 2010 (related document(s) 1117 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 05/28/2010)

05/28/2010 - 1124 - Monthly Application for Compensation of (Seventh) of Ocean Park Advisors, LLC for the period April 1, 2010 to April 30, 2010 Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Objections due by 6/18/2010. (Attachments: # 1 Notice # 2 Exhibit A # 3 Exhibit B # 4 Certificate of Service) (Fatell, Bonnie) (Entered: 05/28/2010)

Come on, guys. At least now I can figure out why the price for the patent went up at the very last minute.

For history buffs someday, here's when the parties stipulated to the amount back in 2008, and here's where Novell asked the bankruptcy court to make SCO pay it back then, which was followed by SCO throwing some legal tacks on the road, after which the parties agreed "in principle" on when it would be paid, namely after all appeals were done. Then the Final Judgement in November of 2008 after the first trial in SCO v. Novell, the bench trial before Judge Kimball, ruled like this:

5. With respect to Novell's claims for Constructive Trust/Restitution/Unjust Enrichment (Count VI), Breach of Fiduciary Duty (Count VII), and Conversion (Count VIII), pursuant to the Court's Findings of Fact, Conclusions of Law, and Order dated July 16, 2008, Judgment is hereby entered in favor of Novell for $2,547,817, for the revenues from the 2003 Sun Agreement attributable to the unauthorized amendment of the SVRX confidentiality provisions in Sun's 1994 SVRX buyout agreement with Novell. Pursuant to the parties' agreement reflected in Novell's Unopposed Submission Regarding Prejudgment Interest dated August 29, 2008, that award is increased by $918,122 in prejudgment interest through August 29, 2008, plus $489 per diem thereafter until the date of this Judgment.

6. Further with respect to Novell's claim for a Constructive Trust (Count VI), as reported in Novell's Submission Regarding the Entry of Final Judgment dated August 29, 2008, the parties have reached an agreement as to the amount of the constructive trust ($625,486.90), and the parties will be reporting that amount to the Bankruptcy Court in the related bankruptcy proceeding, if they have not already done so.

SCO appealed, but the appeals court confirmed that it owed Novell for the Sun deal ("For all these reasons, we affirm the district court's ruling with respect to SCO's liability from its 2003 agreement with Sun. "), and so here we all are. That's a hard-earned $625,486.90.

Update: A lot of you are asking about tracing law, so here is a page that explains it, and one more. And to answer your other question, yes, SCO still owes Novell more money than this, but this is a separate fund, representing not a debt but property that was always Novell's but SCO just sat on it and in fact partially used it up. It has priority over debts, because it never belonged to SCO in the first place, so it can be paid now. It's just Novell finally getting its own property back. If, for example, SCO had been the agent who was supposed to pick up a car for Novell and then deliver it, but instead it used it and wrongfully refused to hand it over, and then it sold its engine to somebody. Novell, after asking the court to put the car in constructive trust, then gets the car, minus the engine. To get the value of the engine it would either have to sue SCO some more, pant gasp pant, or more likely sue the guy who got the engine. That's my understanding, anyway.

The rest... well, in a perfect world, if SCO was flush with money, it would have to pay the rest eventually, because the court ordered it to, and the appeals court upheld the judgment. In real life, though, it's bankrupt, has spent its money and is now spending loaned money it is supposed to pay back, hardy har, so it's unlikely that Novell will see the rest. It's not like SCOfolk will take a second job just to pay off its debts. Snort.

Update 2: The judge has approved the stipulation, so Novell gets paid in a week:

06/07/2010 - 1126 - Order (AGREED) Approving Stipulation For Payment Of Trust Fund To Novell. (related document(s) 586, 644) Order Signed on 6/7/2010. (Attachments: # 1 Exhibit A) (JNP) (Entered: 06/07/2010)


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