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SCO's Omnibus Bankruptcy Hearing on June 18th Cancelled, Etc. ~ by pj
Saturday, July 16 2011 @ 05:10 PM EDT

SCO's omnibus bankruptcy hearing scheduled for Monday is put off [PDF] until August, if it happens then either. Anyway, don't go to Delaware on Monday, if you were planning to attend. The notice says "The motion is adjourned to the next omnibus hearing date on August 15, 2011 at 11:00 a.m." Do not hold your breath. I don't know if anything will happen in August either.

Anybody at all surprised? I doubt it, except that there are a number of other filings that together frankly do surprise me some. First, to give context, here's the text of the notice of the adjournment and the one matter being carried over to August:
1. Motion Of The Chapter 11 Trustee For (I) Hearing Pursuant To Article VII Of The Credit Agreement And (II) Entry Of An Order (A) Determining There Is No Default By The Trustee Under The Loan Documents, (B) Directing That The Automatic Stay Remains In Full Force And Effect, And (C) Deeming Wrongful Default Notices Null And Void [Dkt. No. 1269; filed 5/5/11]
Objection deadline: May 16, 2011 (Extended for Lenders) Objections/Responses
Received: None to date
Related Documents: None to date
That tells us that the dispute by the lenders, namely their notice to SCO's Chapter 11 Trustee Edward Cahn that he allegedly has breached the loan and is now in default, is still in the air, even though the claimed deadline for the lenders to respond to the Cahn motion [PDF], asking the court to rule that he is not in default, has come and gone, even after an extension. So whazzup?

Who knows, but I doubt that nothing is going to happen. It's possible, but more likely is that the lenders are considering their options, as they say, and waiting both for the appeals court to rule on SCO's appeal of its loss to Novell and maybe for the bankruptcy court to reach the final end game, as they foreshadowed in their appearance in bankruptcy court:

This Notice of Appearance of proposed counsel, and any subsequent appearance, pleading, claim or suit is not intended nor shall be deemed to waive the interested party’s (i) right to have final orders in noncore matters entered only after de novo review by a district court judge; (ii) right to have the reference withdrawn by the United States District Court in any matter subject to mandatory or discretionary withdrawal; or (iii) other rights, claims, actions, defenses, setoffs or recoupments the interested party is or may be entitled under agreements, at law, or in equity, all of which rights, claims, actions, defenses, setoffs, and recoupments expressly are hereby reserved.
Bills are paid provisionally, and at the very end, there can be changes made. Here are the rules about adversary proceedings. Here are the rules on appealing an order of the bankruptcy court, either within the bankruptcy system or to district court. As you will see, there are options and there could be miles to go before this is done. But it would amaze me if the parties don't already have their strategies in place. Litigation is a marathon, not a sprint, so inactivity as far as the public can see doesn't mean a thing. For that matter, there could be negotiations going on behind the scenes.

Also, the lenders are probably waiting for SCO to tell them what the net proceeds are, for which SCO claims, in the Preliminary Statement in its motion, there is no deadline:

Those purported breaches of the Credit Agreement cannot be the basis for a proper default notice since (1) the proceeds from the sale to unXis, Inc. are still being held in escrow and have not been used or disbursed by the Trustee and (2) the Trustee’s financial advisors are still in the process of determining the net proceeds from the sale (for which there is no deadline by which such determination must be made under the terms of the Credit Agreement). Accordingly, the Chapter 11 Trustee respectfully submits that this Court should enter an order granting the relief requested herein.
Meanwhile, the lenders wait, and we wait.

At issue is who gets the "own" the SCO litigations, in effect, in that the litigations are included in the collateral for the loan. So are copyrights, but that's very much dependent on how the appeals court rules. At the moment, the pre-1995 UNIX and UnixWare copyrights do not belong to SCO.

And if you are surprised that anyone would bother to still fight over these scraps, well, so am I. But the appeal by SCO to the appellate court is technically still pending, and should lightning strike twice, and SCO were to get another reversal or another trial or whatever, somebody obviously thinks it is worth fighting for any litigation damages to be won, if any. There's nothing much else left of SCO, as it is a squeezed turnip, having sold all its software business assets to a company which appears to be doing absolutely nothing visible with them.

When the poet said hope springs eternal, he said a mouthful about the state of Utah. Because while I am no accountant, when I do all the math of SCO's operating accounts as against the bills from professionals the court has authorized to be paid, like Ocean Park's bill now approved in the filings, below, as well as those still pending, like Cahn's lawyer's bills, Blank Rome recently filing all at once eight accumulated bills for a little more than half a million, I don't see how SCO can pay the lenders back, if the court agrees with Cahn that it is only to pay the lenders from any *net proceeds* from the sale to UnXis, which have been whittled down by professional bills in connection with that sale to essentially nothing.

The filings in the SCO bankruptcy since we last looked in:

06/10/2011 - 1297 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 3/31/11 (TSG Group, Inc. f/k/a The SCO Group, Inc., et al.; 07-11337) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Tarr, Stanley) (Entered: 06/10/2011)

06/10/2011 - 1298 - Debtor-In-Possession Monthly Operating Report for Filing Period As of 3/31/11 (TSG Operations, Inc. f/k/a SCO Operations, Inc., et al.; 07-11338) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Certificate of Service) (Tarr, Stanley) (Entered: 06/10/2011)

06/15/2011 - 1299 - HEARING CANCELLED/RESCHEDULED. Notice of Agenda of Matters Scheduled for Hearing. Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 17-Jun-2011 at 02:30 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Certificate of Service) (Tarr, Stanley)

06/27/2011 - 1300 - Certification of Counsel Regarding First and Final Application of Ocean Park Advisors, LLC, Financial Advisor and Investment Banker to the Chapter 11 Trustee of TSG Group, Inc., et al. for Compensation in Connection With Asset Sales (related document(s) 1296 ) Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Attachments: # 1 Exhibit A # 2 Exhibit B) (Tarr, Stanley) (Entered: 06/27/2011)

06/28/2011 - 1301 - Order Granting First and Final Application of Ocean Park Advisors, LLC, Financial Advisor and Investment Banker to the Chapter 11 Trustee of TSG Group, Inc. et al., for Compensation in Connection With Asset Sales. (related document(s) 1296 , 1300 ) Order Signed on 6/28/2011. (JNP) (Entered: 06/28/2011)

07/01/2011 - 1302 - Claims Register in alphabetical and numerical order. Filed by Epiq Bankruptcy Solutions LLC. (Attachments: # 1 numerical) (JRK) (Entered: 07/07/2011)

07/14/2011 - 1303 - Virtual Minutes of: 07/18/2011
Subject: OMNIBUS HEARING.
Appearances: NONE.
Proceedings: VACATED: No matters going forward.
(vCal Hearing ID (132237)). (SS) (Entered: 07/14/2011)

07/14/2011 - 1304 - HEARING CANCELLED/RESCHEDULED. Notice of Agenda of Matters Scheduled for Hearing. Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. Hearing scheduled for 7/18/2011 at 02:30 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # 1 Certificate of Service) (Tarr, Stanley) (Entered: 07/14/2011)

With total assets of $4,939,957 and total liabilities of $12,960,611 (as per filing #1298, page 19), and having sold their only source of ongoing income, however small to another entity, what is there left to pay back the Ralph Yarro lenders?

Ay, there's the rub. It appears there is nothing and never will be anything in the known universe. Hence the carried forward issue of whether the Chapter 11 trustee is in default.

Methinks the country mouse has encountered the city mouse, and there will be nothing left on the plate for the country mouse to nibble on once the city mouse has finished its sophisticated moves.

Some of you might wonder what it means on page 8 of filing #1302, the claims register, that there's an unsecured claim by Claire Eff, Tracey Calhoun, et al, of the NYC law firm Stamell & Schager, for almost $60 million. The claim date is March 7 of 2008. Who are these people and what is this about?

The firm represented "Plaintiffs Executive Committee" regarding the IPO litigation, back when SCO was trying to sell to UnXis in 2008. That settled out like this, with bankruptcy court approval, as described in the 2008 SEC filing, the 10K:

On November 20, 2008, the Bankruptcy Court entered an order, based on a stipulation of the parties, that the plaintiffs in the IPO case would not pursue assets of the company in connection with the case but would only look to insurance coverage to cover any damages that may be awarded to plaintiffs in that case. On October 10, 2008, the judge in the IPO case granted plaintiffs’ request to withdraw, without prejudice, their motion for class certification in the case.
The transcript [PDF] of that April 2, 2008 hearing lists John Crow at that firm as being present, but he didn't speak:
For Plaintiffs,
Executive Committee,
IPO Lit: Stamell & Schager, LLP
By: JOHN CROW, ESQ. [address]
That was the hearing where the then-US Trustee's Office representative, Joseph McMahan, stood up and said he thought it was time to think about a fiduciary.

I'm not an expert on bankruptcy claims registers, but according to this US Legal page, this is what a claims register is:

A claims register refers to a register maintained by a bankruptcy court clerk that contains a list of all of the proofs of claim that have been filed with the bankruptcy court. It will not include claims listed by the debtor on its schedules clerk. A bankruptcy court takes judicial notice of the claims register.
So this appears to be the claim filed with the bankruptcy court. In other words, it's not a debt owed or paid (or still to be paid) by SCO, just a list, as best I can make out, of what the firm claimed originally it was asking for, which then the parties settled out.

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