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SCO Asks the Bankruptcy Court to Let It Destroy Its Business Records ~ pj Updated
Sunday, February 03 2013 @ 03:45 PM EST

SCO, now calling itself TSG, has just filed a motion [PDF] with the bankruptcy court in Delaware asking it to authorize "the abandonment, disposal, and/or destruction of certain surplus, obsolete, non-core or burdensome, property, including, without limitation, shelving, convention materials, telecommunications and computer equipment, accounting and sales documents, and business records."

Ah. "And business recrods." Burdensome to whom? To whom would SCO's business records be burdensome? Not me. I hereby volunteer to pay for storage for those records, in order to preserve them. Obsolete how? Does the bankruptcy court know that SCO has a petition [PDF] before the US District Court in Utah asking the court to reopen SCO's litigation with IBM?

The excuse is money. They are paying to store them, poor dears, as of January 31, I gather, since they ask the court to authorize payments nunc pro tunc back to that date. Either that, or there's more to this story than you can find in the motion. They also ask the court to let it not inform all its creditors about this. Heh heh. Imagine how messy it could get if they all showed up asking for a computer or shelving.

Here is the motion:

01/31/2013 - 1474 - Motion to Approve // Motion for Entry of an Order Authorizing Abandonment, Disposal, and/or Destruction of Property and Payment of Related Expenses Nunc Pro Tunc to January 31, 2013 Filed by Edward N. Cahn, Chapter 7 Trustee. Hearing scheduled for 2/22/2013 at 10:00 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 2/15/2013. (Attachments: # 1 Notice # 2 Proposed Form of Order # 3 Certificate of Service) (Tarr, Stanley) (Entered: 01/31/2013)

Here's how the motion puts it:
The Chapter 7 Trustee currently pays monthly fees to maintain three (3) rental storage units in Utah (the "Storage Units") in which the Obsolete Property is stored. Because the Debtors' estates have no proposed future operations and the Obsolete Property has no independent value to these estates, there is no need to keep the Obsolete Property. The continuing cost to store the Obsolete Property far exceeds any benefit of maintaining the Obsolete Property. The Trustee has determined that disposing of the Obsolete Property will further efforts to eliminate unnecessary costs. The Trustee is exploring various means of disposing of the Obsolete Property, including, without limitation, hiring a former employee of the Debtors on an hourly basis to determine whether certain of the Obsolete Property contains confidential information that may require special disposal. Accordingly, the Trustee respectfully requests authority to dispose of any Obsolete Property as the Trustee deems reasonable and appropriate.
I wonder who they are thinking of hiring? Darl McBride?

Groklaw will pay to house the business records to guarantee their preservation. I am absolutely serious. We'll take them off their hands.

If the court accepted that offer, what then? First Darl paws through them and has a fun time destroying everything the least bit evidenciary. Then an unfortunate fire at a certain storage building in Utah?

Kidding. Sorta. But the offer is real. I mean, if they don't trust them in my hands, at least put them on eBay and make some money for the estate. We'd all buy mementos, I'm sure.

[ Update: A reader has another suggestion: "The first thing that came to mind for me when I read this entry were the duplex scanners from Fujitsu. On the lower end they have scanners such as the ScanSnap iX500 (formerly S1500) series and on the higher end they have a number of models of production/bulk type sheet-fed scanners. Any of these would begin to make short work of digitizing boxes of business records and would make the eventual storage costs no more expensive than the cost of a redundant digital storage system (which itself would still need to be backed up, of course)." - End Update.]

All you need, SCO argues, to dispose of all this evidence -- I mean obsolete property -- is a good business reason. Like it costs money and the estate doesn't have any:

9. The Court should apply the business judgment standard in reviewing a trustee’s decision to abandon property that is either of inconsequential value or burdensome to the Debtors’ estates. See In re Slack, 290 B.R. 282, 284 (Bankr. D. N.J. 2003) (“The trustee’s power to abandon property is discretionary... The court only needs to find the trustee made: 1) a business judgment; 2) in good faith; 3) upon some reasonable basis; and 4) within the trustee’s scope of authority.”)

10. Section 363(b)(1) of the Bankruptcy Code further provides that “[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b)(1). Under Bankruptcy Code section 363(b)(1), courts should generally approve a non-ordinary course transaction if the proposed use of the estate assets is within a trustee’s reasonable business judgment. See e.g., In re Martin, 91 F.3d 389, 395 (3d. Cir. 1996) (stating that the court generally defers to a trustee’s judgment so long as there is a 133091.01601/40205119v.2 legitimate business justification); In re Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (noting that courts have applied the “sound business purpose” test to evaluate motions brought pursuant to section 363(b)); In re Delaware & Hudson R.R. Co., 124 B.R. 169,175-76 (D. Del. 1991) (same).

11. Bankruptcy Rule 6007 provides, in pertinent part, that “[u]nless otherwise directed by the court, the trustee ... shall give notice of a proposed abandonment or disposition of property to the United States trustee, all creditors, indenture trustees, and committees elected pursuant to §705 or appointed pursuant to §1102 of the Code.” Fed. R. Bankr. P. 6007(a) (emphasis added).

12. As a result of the sale of substantially all of the Debtors’ assets during the administration of the Debtors’ chapter 11 cases, these chapter 7 estates no longer need to retain the Obsolete Property in their possession, custody or control. Accordingly, abandonment, disposal and/or destruction of the Obsolete Property are warranted under Bankruptcy Code sections 363 and 554(a).

Here's the request not to have to tell the creditors about this:
14. Finally, due to the nature of the Obsolete Property sought to be discarded, i.e. obsolete equipment and old business records, the Trustee requests that this Court modify the service requirement of Bankruptcy Rule 6007 to eliminate service on all of the Debtors’ creditors. Rather, the Trustee proposes that service of this Motion on the Office of the United States Trustee, any party filing a request for notice pursuant to Bankruptcy Rule 2002 and any parties known by the Trustee who may have an interest in any of the Obsolete Property that is the subject of this Motion is sufficient notice.
Aside from all the other things that make this motion peculiar to me, there is this: SCO still has litigation against IBM that it keeps petitioning the court in Utah to resurrect. Here's the latest petition, filed in June:
1107 Filed & Entered: 06/14/2012 Request to Submit for Decision Docket Text: REQUEST to Submit for Decision re [1095] MOTION to Reopen Case filed by Plaintiff SCO Group. (Attachments: # (1) Exhibit A - TSG Order Granting IBM Stay Modification)(Hatch, Brent)
What if it finally does reopen the case? How obsolete are those business records then? But here's what I remember. When Caldera sued Microsoft, and the parties settled in a super secret agreement, the same thing happened -- they petitioned the court to let it destroy the legal records. Sun opposed and got some of them, but almost all of that valuable history became toilet paper. And the secrecy was for naught, because the details all came out eventually in a later litigations, Novell v. Microsoft, the antitrust dispute over WordPerfect, still ongoing, and Novell v. Canopy, Canopy being once the parent company of Caldera, later calling itself the SCO Group and now calling its sad little self TSG. One of the terms of the agreement, long before the toilet paper caper in 2003, was destruction of papers, and it was Microsoft demanding it.

In one of those Small World moments, I noticed that it was attorney named Paul Grewal handling Sun's efforts to get the Caldera documents. I checked, and sure enough, it's the same Paul Grewal who is now a Magistrate Judge, currently assigned to the Apple v. Samsung litigations in California. In a previous life, he worked for Day Case, later merged with Howry, and the firm had Sun Microsystems as a client back then. Here's a filing [PDF] from Sun v. Microsoft, so you can verify. That case was heard by Judge Frederick Motz, who is the presiding judge in Novell v. Microsoft's antitrust case over WordPerfect.

And here's the bit that will blow your mind. Guess who represented bnetd.org against Blizzard? Case Beer's Paul Grewal. Here's a video of him talking about the case, prior to its resolution. No wonder he can reference Star Trek. Of course, Harvard Business Review won't let you watch unless you have $150 (universities pay half that), speaking of Aaron Swartz and the need for open access to research materials.

Anyway, you know how it is in the bankruptcy court in Delaware. Are they inclined to say yes to SCO, would you say? Me too. So this probably will happen and those business records will go through a shredder and that will be that. Here's a case where a journalist who tried to get some records from AIG lost, the appeals court ruling that the records are not government property, so the public doesn't get to see them. In short, while my offer is real, I don't expect it to be accepted.

Here's SCO's petition to reopen the case in Utah, as text:

Brent O. Hatch (5715)
[email]
Mark F. James (5295)
[email]
HATCH, JAMES & DODGE, PC
[address, phone, fax]

David Boies (admitted pro hac vice)
[email]
Robert Silver (admitted pro hac vice)
[email]
Edward Normand (admitted pro hac vice)
[email]
BOIES SCHILLER & FLEXNER LLP
[address, phone, fax]

Stuart Singer (admitted pro hac vice)
[email]
BOIES SCHILLER & FLEXNER LLP
[address, phone, fax]

Counsel for The SCO Group, Inc.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH

THE SCO GROUP, INC., by and through the
Chapter 11 Trustee in Bankruptcy, Edward N.
Cahn,

Plaintiff/Counterclaim-Defendant,

vs.

INTERNATIONAL BUSINESS
MACHINES CORPORATION,

Defendant/Counterclaim-Plaintiff.

_______________

THE SCO GROUP, INC.’S REQUEST TO
SUBMIT FOR DECISION

Civil No.: 2:03-CV-00294-DN

Honorable David Nuffer

Pursuant to Local Rule 7-3, Plaintiff/Counterclaim-Defendant, The SCO Group, Inc. (“SCO”) respectfully submits this Request to Submit for Decision, requesting the Court to rule on SCO’s pending Motion to Reopen the Case (the “Motion”) in light of the recent order lifting the stay of IBM’s counterclaims by the bankruptcy court presiding over SCO’s Chapter 11 proceedings (the “Bankruptcy Court”). Where IBM agreed in its opposition to the Motion that this Court “should reopen the case when the stay has been lifted as to IBM’s counterclaims” and stipulated in the Bankruptcy Court that “IBM shall not oppose the reopening of the Utah Action,” SCO respectfully submits that the Motion should be granted forthwith.

BACKGROUND

1. On November 4, 2011, SCO filed its Motion to Reopen the Case (Docket No. 1095) in order to proceed with its remaining unfair competition and tortious interference claims. Those claims, which the Chapter 11 Trustee overseeing SCO’s bankruptcy estate deems meritorious, are the only remaining assets of the estate.

2. On November 21, 2011, Defendant/Counterclaim-Plaintiff International Business Machines Corporation (“IBM”) filed its opposition to the Motion. (Docket No. 1100.) Even though the Bankruptcy Code had automatically stayed all of IBM’s counterclaims against SCO without disturbing SCO’s right to pursue its claims against IBM, IBM opposed the Motion on the grounds that litigating SCO’s claims without IBM’s counterclaims “would be inefficient and fundamentally unfair.” (Id. at 1.)

3. Accordingly, IBM asserted that the Court “should reopen the case when the stay has been lifted as to IBM’s counterclaims.” (Id. at 6 (emphasis in original).) In fact, IBM argued for an order “providing that this case shall be reopened within 5 days of the filing of a

1

notice (by any party) that the stay of IBM’s counterclaims has been lifted.” (Id. at 14 (emphasis added).) SCO hereby provides such notice.

4. On November 28, 2011, Judge Waddoups1 scheduled a hearing on the Motion for April 18, 2012. (Docket No. 1101.) Judge Benson subsequently moved the hearing date to April 23, 2012. (Docket No. 1105.)

5. On December 8, 2011, SCO filed its Reply Memorandum in Support of Its Motion to Reopen the Case. (Docket No. 1102.) The Motion was thenceforth ripe for adjudication.

6. On February 16, 2012, while the April 23, 2012 hearing was still pending, SCO and IBM stipulated in SCO’s bankruptcy proceedings to modify the automatic stay of IBM’s counterclaims so as to permit IBM to “defend the Utah action and prosecute its Counterclaims against SCO.” (Ex. A at 4.) As part of that stipulation, IBM also agreed that “IBM shall not oppose the reopening of the Utah Action.” (Ex. A at 5, ¶ 4 (emphasis added).) On February 17, 2012, the Bankruptcy Court entered an order approving the stipulation and modifying the automatic stay “as set forth” in the stipulation. (Id. at 1.)

7. On April 2, 2012, following the transfer of the hearing from Judge Benson’s calendar to this Court’s calendar, the Court vacated the April 23, 2012 hearing.

2

REQUEST

Because SCO’s Motion to Reopen the Case has been pending since December 8, 2011, and was originally set for a hearing to be held on April 18, 2012, SCO respectfully requests that the Court submit the Motion for a decision, pursuant to Local Rule 7-3.

In addition, because IBM agreed that the Court should “reopen the case when the stay has been lifted as to IBM’s counterclaims” and argued for an order “providing that this case shall be reopened within 5 days of the filing of a notice (by any party) that the stay of IBM’s counterclaims has been lifted,” SCO respectfully asks the Court to grant SCO’s Motion forthwith and proceed with the adjudication of the unresolved summary judgment motions in this case, which have been pending since 2006. Indeed, because IBM secured the lifting of the automatic stay on its counterclaims in the Bankruptcy Court by agreeing “not [to] oppose the reopening of the Utah Action,” the Motion should be deemed to be unopposed.

Should the Court grant the Motion, SCO respectfully submits that the Court would benefit from oral argument on the unresolved summary judgment motions and respectfully requests that the Court schedule such argument. In addition, insofar as the Court would benefit from supplemental briefing regarding any changes in the law relevant to the unresolved summary judgment motions, SCO remains prepared to provide such briefing at the Court’s direction.

3

DATED this 14th day of June, 2012.

By: /s/ Brent O. Hatch
HATCH, JAMES & DODGE, P.C.
Brent O. Hatch
Mark F. James

BOIES, SCHILLER & FLEXNER LLP
David Boies
Robert Silver
Stuart H. Singer
Edward Normand

Counsel for The SCO Group, Inc.

____________
1 On November 9, 2011, this case was reassigned to District Judge Clark Waddoups following District Judge Tena Campbell’s recusal (Docket No. 1099); on December 9, 2011, the case was in turn reassigned to District Judge David Sam following Judge Waddoup’s recusal (Docket No. 1103); on December 14, 2011, the case was again reassigned, this time to District Judge Dee Benson, following Judge Sam’s recusal (Docket No. 1104); and on March 31, 2012, following the appointment of this Court to the District Court bench, the case was reassigned to this Court (Docket No. 1106).

4

If I were working on this case for SCO, not that I ever would, and if the lawyers asked me what I thought was going on, I'd tell them that the court is trying to help us not get hit with sanctions for bringing a frivolous case. I mean, the same court already ruled that Novell owns the copyrights SCO was using to sue over, so what in the world is the point?

Maybe SCO now agrees with me, and so it is asking to dump the now-"obsolete" records. But historians would seriously like to see all of that. This was a history-making adventure SCO set off on, backed by Microsoft and Sun money. It's computer history, and those records might just show some interesting details that we don't yet know for sure.

Then again, knowing SCOfolk, maybe not.


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