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The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Saturday, September 15 2007 @ 11:04 AM EDT

Here they all are, the bankruptcy documents for the SCO Group. Note that there is a hearing on Tuesday, the 18th in Delaware, in case any of you are in that beautiful state. I am thinking SCO would like to move there and get away from Judge Kimball and his courtroom in Utah. You think? There is also a NOTICE of Filing for Bankruptcy by SCO Group [PDF] filed in the IBM docket sheet.

Here's the one you really want to read first: Declaration of Darl C. McBride, Chief Executive Officer, in Support of First Day Pleading [PDF].

I misstyped it initially as Fist Day Pleadings. Well, the brain knows what it knows.

This is the document where he tells the court basically why SCO should be allowed to file for Chapter 11 reorganization, which is for companies that are in a fix, but given a reorganization and a little breathing room, think they can remain in business. The judge must agree that it's realistic. Darl reveals that SCO asks the court to approve SCO hiring not one but four different law firms for the bankruptcy. One of them is, you guessed it, Boies Schiller. He asks the court to appoint them as special litigation counsel in the Chapter 11 case.

*Four* law firms? Why doesn't SCO just petition the court for approval to let it take all its money and throw it down a volcano so Novell can't get any?

This is all on pages 34 through 37. The other firms are Dorsey and Whitney as "special corporate counsel". Oh, and he says they need to employ Mesirow Financial Services as their financial advisor in connection with the Chapter 11 cases. And they want the court to let them employ Epiq Bankruptcy Solutions to help with claims noticing management and related services. The other two law firms are new, Berger Singerman and Pachulski Stang Ziehl & Jones. [PJ: Correction: An eagle eye reader spotted this. If you look on Groklaw's Cast page, Berger Singerman is not new to SCO, although new to this case. Look on the IBM Timeline page, and you will see the two lawyers from that firm listed in docket number 11 [PDF], way back in April of 2003, slightly before Boies Schiller showed up.]

No. Not a relative. I have no relatives who would lend a hand to this, I am positive, not even a 5th cousin twice removed.

SCO wants the court to let them pay these people monthly. You know, so they can keep track. One wouldn't wish to have to wait and pay at the end of services rendered. For one thing, lawyers might be able to do math, and they might wonder if they'd ever get paid at the end. SCO already paid one of the lawyers $72,928 plus change, I see in the Laura Davis Jones Affidavit [PDF]. That firm's standard rate for her services is $750 an hour. Paralegals are billed out for less than attorneys, and I see one person listed gets $375 an hour. That sounds like a para. Let's do the math. At that rate, that's 97 hours of work already by the lawyer as of the date of filing. I believe if she worked 24-days nonstop without sleeping, eating or talking on her iPhone, that would be 4 days for the lawyer. Or if the para did it all, then 194 hours, or 8 days. It's likely some combination.

Wait a sec. The Board of Directors swore it authorized the bankruptcy, according to the resolution, on September 13th, and it's now only the 15th. Can't compute. I know. It's corporate math. Well, at least they didn't backdate it.

So, if we assume that the lawyer for the bankruptcy didn't work 24-hour days, although maybe the para had to - joke joke -- would that mean that they've been working on this for at least a week or two? And would that mean that when Darl gave those interviews about SCO not being dead yet that journalists faithfully reported as if it were on stone tablets from heaven, he already knew they were going to file for bankruptcy? Well, many mysteries still to unfold.

Um... Isn't that kind of Novell's money SCO is spending? Why, yes. I think the court in Utah would think so, but we're in Delaware now, boys. Hahahaha.

Keep in mind that Novell has already gotten a ruling from the Utah court that SCO is liable for conversion back on August 10. That money, whatever the amount eventually proves to be, is not a debt, I don't reckon. It's Novell's money. It always was. SCO didn't pay it, but it was never SCO's money, according to my understanding of the ruling. Let me give you an example just to illustrate. If I rob a bank, I can't then run to bankruptcy court and file for protection so I can keep most of the money. That money was never mine, so I can't offer to pay the bank back at 10 cents on the dollar. I have to pay over whatever I stole, 100% or to the limit of what I have left in real life. Of course, I guess I could hire four law firms and some accountants to make sure that's how it works, and by the time we finish studying the law and filing blizzards of paperwork and the lawyers get paid before the decision is actually reached about whose money it is, why, rats. There's no money for the bank. I haven't got it any more. My lawyers do, but what can you do?

You may have noticed at the very bottom of the page of the court's explanation of Chapter 11 bankruptcy the following notes:

NOTES

1. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders.11 U.S.C. § 523(a). The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 11 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. § 523(c); Fed. R. Bankr. P. 4007(c).

So not everything is dischargeable in bankruptcy, and some things can be, but the creditor in certain cases can petition to block. In short, while I don't yet know what exactly Novell's position is in this new and very complex context -- you'd need to research case law to know that, which is likely what Novell is doing as we speak, although it's very possible they expected this and already know what the next move will be -- I think we can expect some moves from Novell. The hearing on all the motions filed will be on Tuesday, September 18, at the bankruptcy court located at 834 Market Street, 6th floor, Courtroom 3, in Wilmington, Delaware at 9:15 AM Eastern. I wouldn't be surprised to see Novell in attendance.

************************************

07-11337-KG The SCO Group, Inc.

Case type: bk Chapter: 11 Asset: Yes Vol: v Judge: Kevin Gross

Date filed: 09/14/2007 Date of last filing: 09/14/2007

History - Doc. - No. - Dates - Description

-- Filed & Entered: 09/14/2007
Case Assigned
Docket Text: Judge Kevin Gross added to case (GVW, )

-- Filed & Entered: 09/14/2007
Case Assigned
Docket Text: Judge Kevin Gross added to case (GVW, )

1 - Filed & Entered: 09/14/2007
Voluntary Petition (Chapter 11)
Docket Text: Chapter 11 Voluntary Petition of The SCO Group, Inc.. Fee Amount $1039. Filed by The SCO Group, Inc.. (Attachments: # (1) Board Resolutions # (2) Certification and List of 20 Largest Unsecured Creditors # (3) Certification and List of Equity Security Holders # (4) Corporate Ownership Statement # (5) Certification and Creditor Matrix) (Jones, Laura Davis)

2 - Filed & Entered: 09/14/2007
Motion for Joint Administration (B)
Docket Text: Motion for Joint Administration Debtors' Motion for Order Directing Joint Administration of Related Chapter 11 Cases Filed By The SCO Group, Inc. Hearing scheduled for 9/18/2007 at 09:15 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Proposed Form of Order)(O'Neill, James)

3 - Filed & Entered: 09/14/2007
Affidavit in Support (BF)
Docket Text: Affidavit in Support Declaration of Darl C. McBride, Chief Executive Officer in Support of First Day Pleadings Filed By The SCO Group, Inc. (O'Neill, James)

4 - Filed & Entered: 09/14/2007
Application to Employ/Retain (BF)
Docket Text: Application to Employ/Retain Debtors' Application, Pursuant to 11 U.S.C. Section 327(a) and Fed. R. Bankr. P. 2014(a) and 2016, for Approval of Employment of Berger Singerman, P.A. as Counsel for Debtors Nunc Pro Tunc to the Petition Date Berger Singerman, P.A. as Counsel for Debtors Filed By The SCO Group, Inc. (Attachments: # (1) Declaration of Arthur J. Spector in Support of# (2) Proposed Form of Order)(O'Neill, James)

5 - Filed & Entered: 09/14/2007
Application to Employ/Retain (BF)
Docket Text: Application to Employ/Retain Application of the Debtors Pursuant to Section 327(a) of the Bankruptcy Code, Rule 2014 of the Federal Rules of Bankruptcy Procedure and Local Rule 2014-1 for Authorization to Employ and Retain Pachulski Stang Ziehl & Jones LLP as Bankruptcy Co-Counsel for the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date Pachulski Stang Ziehl & Jones LLP as Co-Counsel for the Debtors and Debtors in Possession Filed By The SCO Group, Inc. (Attachments: # (1) Statement # (2) Affidavit of Laura Davis Jones in Support of# (3) Proposed Form of Order)(O'Neill, James)

6 - Filed & Entered: 09/14/2007
Motion to Approve (B)
Docket Text: Motion to Approve Debtors' Motion for An Administrative Order Under 11 U.S.C. Sections 105(a) and 331 Establishing Procedures for Interim Monthly Compensation and Reimbursement of Expenses of Professionals and Reimbursement of Expenses of Committee Members Filed by The SCO Group, Inc.. (Attachments: # (1) Proposed Form of Order) (O'Neill, James)

7 - Filed & Entered: 09/14/2007
Motion to Maintain Bank Accounts (BF)
Docket Text: Motion to Maintain Bank Accounts Debtors' Motion for Authority to (I) Maintain Existing Bank Accounts, (II) Continue to Use Existing Business Forms, (III) Continue to Use Existing Cash Management System, and (IV) to Excuse Section 345(b) Deposit and Investment Requirements Filed By The SCO Group, Inc. (Attachments: # (1) Proposed Form of Order)(O'Neill, James)

8 - Filed & Entered: 09/14/2007
Motion to Authorize (B)
Docket Text: Motion to Authorize Debtors' Motion for an Order (I) Authorizing the Debtors to (A) Pay Prepetition Wages, Salaries, Commissions, Employee Benefits and Other Compensation; (B) Remit Withholding Obligations; (C) Maintain Employee Benefits Programs and Pay Related Administrative Obligations; and (II) Authorize Applicable Banks and Other Financial Institutions to Receive, Process, Honor and Pay Certain Checks Presented for Payment and to Honor Certain Fund Transfer Requests Filed by The SCO Group, Inc.. Hearing scheduled for 9/18/2007 at 09:15 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Proposed Form of Order) (O'Neill, James)

9 - Filed & Entered: 09/14/2007
Motion to Pay Sales and Use Taxes (BF)
Docket Text: Motion to Pay Sales and Use Taxes Motion of the Debtors for an Order (I) Authorizing the Debtors to Pay Prepetition Sales and Use, Franchise and Similar Taxes and Regulatory Fees in the Ordinary Course of Business and (II) Authorizing Banks and Financial Institutions to Honor and Process Checks and Transfers Related Thereto Filed By The SCO Group, Inc. (Attachments: # (1) Exhibit A # (2) Proposed Form of Order # (3) Exhibit A)(O'Neill, James)

10 - Filed & Entered: 09/14/2007
Motion Prohibiting Utilities from Discontinuing Service (BF)
Docket Text: Motion Prohibiting Utilities from Discontinuing Service Debtors' Motion for an Order Under Section 366 of the Bankruptcy Code (I) Prohibiting Utility Providers from Altering, Refusing or Discontinuing Service, (II) Deeming Utilities Adequately Assured of Future Performance, and (III) Establishing Procedures for Determining Adequate Assurance of Payment Filed By The SCO Group, Inc. (Attachments: # (1) Exhibit A# (2) proposed Interim Order # (3) Exhibit A)(O'Neill, James)

11 - Filed & Entered: 09/14/2007
Motion to Authorize (B)
Docket Text: Motion to Authorize Motion of the Debtors for an Order Providing that Creditor's Committees are not Authorized or Required to Provide Access to Confidential Information of the Debtors or to Privileged Information Filed by The SCO Group, Inc.. (Attachments: # (1) Proposed Form of Order) (O'Neill, James)

12 - Filed & Entered: 09/14/2007
Application to Employ/Retain (BF)
Docket Text: Application to Employ/Retain Under 28 U.S.C. Section 156(c) Epiq Bankruptcy Solutions as Noticing, Claims and Balloting Agent Filed By The SCO Group, Inc. (Attachments: # (1) Exhibit A # (2) Declaration of Daniel C. McElhinney # (3) Proposed Form of Order)(Jones, Laura Davis)

13 - Filed & Entered: 09/14/2007
Notice of Hearing (B)
Docket Text: Notice of Hearing On First Day Motions Filed by The SCO Group, Inc.. Hearing scheduled for 9/18/2007 at 09:15 AM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. (Attachments: # (1) Certificate of Service and Service List) (Jones, Laura Davis)


  


The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware | 370 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: Anonymous on Saturday, September 15 2007 @ 11:11 AM EDT
I believe, and feel sure, Novel will be there Monday, as it is in their
corporate interest, and almost required that they salvage any monies their owed.
I believe it will be an interesting week.

[ Reply to This | # ]

Off Topic Here Please
Authored by: sproggit on Saturday, September 15 2007 @ 11:13 AM EDT
Please include clickable links in HTML - thanks...

[ Reply to This | # ]

Corrections - if any - here please
Authored by: sproggit on Saturday, September 15 2007 @ 11:14 AM EDT
Please include the details in the Title field of your reply to this post -
thanks.

[ Reply to This | # ]

They Still State the Own UNIX
Authored by: Anonymous on Saturday, September 15 2007 @ 11:20 AM EDT
I do not see how they can legally state this:
"32. The Company acquired certain rights relating to the UNix (including
UnixWare) source code and derivative works and other intellectual property
rights when it
purchased substantially all of the assets and operations of the server and
professional services
groups of The Santa Cruz Operation, Inc. in May 2001. The Santa Cruz Operation
had
previously acquired such UNix source code and other intellectual property rights
from Novell
in 1995, which Novell acquired from UNix System Laboratories, a subsidiary of
AT&T.
Through this process, the Company acquired all UNix source code, source code
license
77477-00 IDOCS_DE: 131025.1 10
agreements with thousands of UNIX vendors, certain UNIX intellectual property,
all claims for
violation of the above mentioned UNIX licenses and copyrghts and other claims,
and the
control over UNIX derivative works. The UNIX licenses the Company obtained has
led to the
development of several UNIX-based operating systems, including but not limited
to Unix Ware
and OpenServer products, IBM's AIX, Sequent's DYNIX/Ptx, Sun's Solaris, SGI's
IRIX and
Hewlett-Packard's HP-UX. These operating systems are all derivatives ofthe
original UNIX
source code owned by the Company."

[ Reply to This | # ]

The reason for filing BK as stated by Darl
Authored by: Laomedon on Saturday, September 15 2007 @ 11:22 AM EDT
From Darl's declaration:

49. The court's summar judgment in favor of Novell held that Novell was entitled to receive at least some portion of the funds received by SCO in 2003 from the Sun and Microsoft Agreements. The trial previously set to commence on September 17, 2007 in the District Court on SCO's claims and Novell's counterclaims is, therefore, now limited to determining the amount of SVRX Royalties to be awarded to Novell and whether a declaratory judgment should be issued that SCO was not authorized to enter into these agreements. Novell claims that it is entitled to the full amount of the Microsoft and Sun payments and to all other SCOSource agreements, which, collectively constitute a principal amount in excess of $26 milion, and, with claimed interest, in excess of $37 milion. Novell also seeks the imposition of a constructive trust on whatever such funds are currently in the Debtors' possession can be properIy traced backed to those transactions. The entry of a substantial judgment against SCO would likely impair the Debtors' ability to conduct their business in the ordinary course and the value of SCO's litigation claims relating to infringement of its intellectual property rights in UNix.

[Emphasis mine]

[ Reply to This | # ]

Balance Sheet?
Authored by: Boundless on Saturday, September 15 2007 @ 11:22 AM EDT
I don't see a statement of financial condition above
(and some of the PDFs were 404 when I looked).

Has SCOX released a statement of assets and liabilities
in this BK action yet?
__________
i.e. is the NOVL money accounted for anywhere,
and if so, as what?

[ Reply to This | # ]

An NDA for the Creditors Committee
Authored by: MathFox on Saturday, September 15 2007 @ 11:24 AM EDT
Looking at http://www.groklaw.net/pdf/SCOGBK-11.pdf [URL typo in the article] it
seems that SCO asks for the court to apply a pretty broad "Non
Disclosure" order on the Creditors Committee, so that creditors may have a
roadblock in obtaining information on the progress of the
"reorganisation".

Is such a request common in bankruptcy procedures or particular to SCO?

---
If an axiomatic system can be proven to be consistent and complete from within
itself, then it is inconsistent.

[ Reply to This | # ]

The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: Anonymous on Saturday, September 15 2007 @ 11:25 AM EDT
Is it possible (legally) for Novell (and/or IBM) to involve themselves in the
bankruptcy filings?

[ Reply to This | # ]

The other law firms
Authored by: Anonymous on Saturday, September 15 2007 @ 11:30 AM EDT
I'm guessing that the extra law firms are to protect Darl & company from
civil & criminal actions arising from their conduct in the management of the
company.

IANAL and *really* wish a lawyer would summarize the situation. Although it's
clear that SCOG is about to experience a caldera collapse, leaving just a
smoking hole in the corporate landscape; it would be interesting to read an
informed commentary.

rhb

[ Reply to This | # ]

Original lawsuits fraudulent; bankruptcy filing also fraudulent
Authored by: Anonymous on Saturday, September 15 2007 @ 11:30 AM EDT

We're shocked, shocked at the latest turn of events.

Does the automatic stay apply to out-of-court comments by
the parties?

Since Kimball hadn't ruled yet on how much SCO owes Novell,
how will the bankruptcy court know what SCO's assets and debts
are?

I know what -- the bankruptcy court can lift the stay regarding
the Novell case so Kimball can supply the missing pieces of the puzzle. May not
mean SCO has to pay right away, but it would
help the bankruptcy court make more informed judgments.

Oh, and will the bankruptcy court mind that SCO claims to own
Unix, when Kimball has ruled otherwise?

Give credit where credit (no pun intended) is due: SCO always
finds new ways to make itself a laughingstock.

[ Reply to This | # ]

The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: Anonymous on Saturday, September 15 2007 @ 11:31 AM EDT
Why do the SCOundrels need FOUR different law firms to sort out their Chap
11????

I mean its not as if they are a vast corporation with massive ledgers to sort
out. Nor is the list of deptors (pizza anyone?) that complicated.

Presumably this is more obfuscation and hand-waving in an effort to make sure
that the whole thing goes on for years and years and the Novell/IBM trials get
put off indefinitely.

Is this sort of thing really permitted in the USA? Surely not!

Yet they have managed to parlay an essentially groundless case into nearly 5
years of inconvenience and expense for lots of other people.

So it goes...



[ Reply to This | # ]

Chance of rejection???
Authored by: rsi on Saturday, September 15 2007 @ 11:31 AM EDT
PJ, what are the chances that this could be rejected in Delaware, due to the
last minute filing on the business day prior to the trial in Utah? Could this
be considered attempted Fraud? (Of course it is, but...)

How strict are the Bankruptcy Courts about these shenanigans? How hard would it
be for Novell and IBM to have this rejected, and sent back to Utah?

[ Reply to This | # ]

Is the APA now terminated?
Authored by: Anonymous on Saturday, September 15 2007 @ 11:43 AM EDT
Is the APA between Novell & SCO now automatically terminated? Most
contracts I have signed contain clauses that specify the contract is terminated
if one of the parties goes into bankruptcy or receivership. (Sorry I'm too lazy
to read the APA myself.)

[ Reply to This | # ]

Boies
Authored by: Anonymous on Saturday, September 15 2007 @ 11:43 AM EDT
So this is how B.S. will get paid extra in the end !

is there anything Novell can do to block this farce and get priority over their
money ?

[ Reply to This | # ]

  • Boies - Authored by: JamesK on Saturday, September 15 2007 @ 06:38 PM EDT
Why Bankruptcy?
Authored by: Aim Here on Saturday, September 15 2007 @ 11:47 AM EDT
I'm reading Darl's filing, and I'm still not entirely sure why he thinks the
bankruptcy court should allow this Chapter 11.

Although he says that people aren't buying Unix no more, nowhere does he claim
that SCO doesn't have the money to pay off it's current debtors (it does - it's
Novell it can't pay off). Darl's filing goes from 'Our competitors are beating
us in the marketplace' to 'We have a lot of court cases, the Novell one might
significantly hurt us' to 'We want the right to let SCO pay ourselves^Wour
workers and hire some lawyers and not have to pay our debts and whatnot'.

Shouldn't a filing of this nature detail SCO's assets, current and future
liabilities and maybe an explanation of why SCO won't be able to pay up? It's
like Darl's skirting the crucial issue, that of the trial that was scheduled for
Monday, which the bankruptcy filing disrupted.

[ Reply to This | # ]

Paid in Advance
Authored by: overshoot on Saturday, September 15 2007 @ 11:55 AM EDT
Bankruptcy lawyers get paid up front to avoid the little conflict of becoming
creditors.

Or that's the plan, anyway.

In this case, since the money is Novell's, they may find themselves having to
pay it all back.

Oops.

[ Reply to This | # ]

SCO V. Novell is not a proceeding against SCO.
Authored by: symbolset on Saturday, September 15 2007 @ 12:08 PM EDT

The various court cases are essential parts of SCO's "SCOsource" business. In Darl McBride's own declaration[PDF] we see this:

The success of the Company's SCOsource business depends on its ability to protect and enforce SCO's rights to proprietary UNIX source code, copyrights and other intellectual property rights. To protect SCO's proprietary rights, the Company relies primarily on a combination of copyright laws, contractual rights and related claims.

Now let's look at the Notice of filing. It says in part:

...the commencement or continuation of judicial proceedings against the Debtors to pursue prepetition obligations was automatically stayed.

Since the proceedings in question are not proceedings against the debtor but rather are brought by the debtor to obtain justice in equity, and since they are an essential part of the debtor's pursuit of their SCOsource business, should they not be allowed to proceed so that the creditors may reap the benefit of their successful pursuit?

Someone here must know an example of whether suits the debtor has brought are stayed during bankruptcy. Here's what Wikipedia has to say about chapter 11:

In enacting chapter 11 of the Bankruptcy code, Congress concluded that it is often the case that the value of a business is greater if sold or reorganized as a going concern than the value of the sum of its parts if the business's assets were to be sold off individually. It follows that it may be more economically efficient to allow a troubled company to continue running, cancel some of its debts, and give ownership of the newly reorganized company to the creditors whose debts were canceled.

Well, then... let them conduct their business and pursue their SCOsource business before Judge Kimball.

[ Reply to This | # ]

Will SCO's lawyers end up paying SCO's bills?
Authored by: Anonymous on Saturday, September 15 2007 @ 12:09 PM EDT

Lew Mettler is now chiming in. Tell me if I'm misinterpreting
him.

He seems to be saying that the non-bankruptcy lawyers may
have to give back their fees, and that SCO can use this money
to pay their debts -- meaning SCO's non-bankruptcy lawyers
will have worked for free.

Tell me I'm mistaken -- oh, and also why, if you please.



[ Reply to This | # ]

Darl's declaration
Authored by: ChrisP on Saturday, September 15 2007 @ 12:15 PM EDT
A couple of quick comments.

Employee count is 123 worldwide! That's not many.

No mention of the Autozone litigation. That's naughty.

---
SCO^WM$^WIBM^W, oh bother, no-one paid me to say this.

[ Reply to This | # ]

The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: ThrPilgrim on Saturday, September 15 2007 @ 12:15 PM EDT
In the first day pleading Darl quotes the stock price of $0.71 as the closing
stock price.

Is there any difference in how BK is handled depending on the capital valuation
of the Co. and if so is their any significance that this appears to be the high
point for the last 2 weeks?

[ Reply to This | # ]

Delaware
Authored by: Anonymous on Saturday, September 15 2007 @ 12:15 PM EDT
I've heard that Delaware is the domestic "Cayman Islands" of bankruptcy law in the US. How fortuitous for SCO to be HQ'd there.

Nowadays, liability insurance and malpractice costs are escalating. It has also become common practice for people to engage lawsuits. Lately it is becoming popular for people to turn to offshore asset protection as a way to ensure that their assets would be safe from all kinds of law suits. Offshore protection of asset trusts is covered by laws of countries like the Cayman Islands. The Cayman Islands’s asset protection laws emphasize assets safety. The Cayman Islands do not implement court decisions of foreign countries. In the United States, however, there are states that are embracing features of offshore protection of assets and trusts. One of these states is Delaware. The state government has enacted laws that allow shelter of assets from claims and liens.

The state of Delaware has allowed individuals to shelter their assets from frivolous suits and hazards. Delaware has created many protection plans in order to protect or shelter various assets. These plans are tailored to specific needs and circumstances. In comparison, the Cayman Islands has much more rigorous laws on bank secrecy. The Caymans also allow free tax on income from these assets. It is no wonder why it is so popular for putting up offshore trusts. A common asset-protecting method is to move your assets to a limited partnership.

Transferring your assets to your offshore trust would ensure that, even if you are sued in the country, your assets would still be safe from claims since they are outside the jurisdiction of the local courts. The claimant would still have to go to the islands to convince the courts there to proceed with the claim. In comparison, in order to protect your assets in Delaware, you could move your asset to a trust, or form a limited partnership, or utilize an offshore asset-protecting trust like that of Cayman Islands’ trust. It is not as secure an option but it can be more convenient. For bullet-proof asset protection most experts recommend a solution involving one or more offshore jurisdictions.

Link

[ Reply to This | # ]

  • Delaware - Authored by: John Hasler on Saturday, September 15 2007 @ 12:25 PM EDT
  • And - Authored by: Anonymous on Saturday, September 15 2007 @ 01:41 PM EDT
    • Maybe not - Authored by: Anonymous on Sunday, September 16 2007 @ 11:34 AM EDT
A "just" bankruptcy ruling
Authored by: Anonymous on Saturday, September 15 2007 @ 12:15 PM EDT
A "just" bankruptcy judge would see that
1) Part of SCO's business is viable.
2) That part deserves to live
3) The current management is the cause of SCO's troubles
4) The creditors are best served by removing the current management.

If the judge were allowed to do so

He would reject any reorganization plan that involved current management staying
on. He would order the new management to make a good-faith effort to settle
current lawsuits and counter-suits. For those lawsuits that remained unsettled,
he would assign a reasonable contingency value to them. He would then give
equity in the new SCO to the creditors that lost money.

He would also forward any evidence of criminal wrongdoing to the appropriate
authorities.

If he found enough evidence to "break the corporate veil" he would do
so.

I do not know bankruptcy law enough to know if he will be allowed to do these
things.

[ Reply to This | # ]

Mataya vs Kissinger
Authored by: Anonymous on Saturday, September 15 2007 @ 12:26 PM EDT
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=9th&navby=case&no
=9416086&exact=1

Despite the importance of the automatic stay as a vital protection of the
bankruptcy debtor, see In re Schwartz, 954 F.2d 569, 571 (9th Cir. 1992), 11
U.S.C S 362(d)(1) allows a bankruptcy court to grant relief from the automatic
stay "for cause." Such relief may include "terminating,
annulling, modifying, or conditioning such stay." Id. S 362(d). Thus, as we
have previously noted, "section 362 gives the bankruptcy court wide
latitude in crafting relief from the automatic stay, including the power to
grant retroactive relief from the stay." Schwartz, 954 F.2d at 572 (citing
2 Collier on Bankruptcy, S 362.07 (15th ed. 1984)). Retroactive annulment,
however, should be "applied only in extreme circumstances. " In re
Shamblin, 890 F.2d 123, 126 (9th Cir. 1989).

The bankruptcy court did not abuse its discretion in finding that retroactive
relief was warranted. The court first found that there would have been cause to
lift the stay prospectively at the time of the Chapter 11 filing because: the
state court claim was sufficiently large such that it would have to be resolved
before Kissinger could complete a reorganization; Kissinger was able to defend
himself in the state court action; and Kissinger's decision to file a Chapter 11
petition just before the state court action was to go to the jury appeared to be
in bad faith. Additionally, the bankruptcy court found that there was additional
cause to annul the stay retroactively to the time of the filing because: the
failure to obey the stay was caused by the state court judge, not the creditor;
and not annulling the stay would either lead to nonsensical results, by
submitting the same case to the same jury that had just rendered a decision, or
impose an unwarranted hardship on the creditors, since retrial would be costly.
The bankruptcy court did not abuse its discretion in finding that these
circumstances warranted retroactive annulment of the automatic stay.

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Bank analogy
Authored by: cmc on Saturday, September 15 2007 @ 12:27 PM EDT
I'm not so sure about that bank analogy. I'm reading this a different way:

"Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable."

Sounds to me that you do get to keep the money unless the bank (or Novell in this case) files and prevails in this action. It's nice to see that you can steal from someone and get to keep the money if they don't go through a legal hassle (thereby wasting even more of their money). Now imagine the bank analogy, but imagine the bank doesn't know who stole the money. They would then be unable to file this action, and boom, you get to keep their money. American justice at its best.

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Bankruptcy Fraud
Authored by: jbb on Saturday, September 15 2007 @ 12:33 PM EDT
Take a look at this page from the Credit Research Foundation.

Find the paragraph that starts "Although concealing assets or making false statements in a bankruptcy proceeding make up the majority of bankruptcy frauds, ...". Then look at the Bankruptcy Fraud Warning Signs. There are three or four I wanted to highlight.

I didn't copy-and-paste the information because of the copyright notice at the bottom of the page.

---
Those who can make you believe absurdities can make you commit atrocities.

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The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: Anonymous on Saturday, September 15 2007 @ 12:36 PM EDT
Now since SCO is not paying Novell anything on their Novell-SCO contract can
Novell use to court to stop SCO from doing anymore UNIX busness and for the
court to now appoint someone to collect the funds from SCO's customers owed to
Novell. Take SCO's revenue stream away from them. In essence just stop SCO's
business in this area?


Yoda 1


zzzz

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Darls SCOsource declaration
Authored by: Anonymous on Saturday, September 15 2007 @ 12:37 PM EDT
I have not read the latest summary judgement order, but Darls rant about
SCOsource and that it is their property...

Doesn't this part of the declaration constitute contempt of court?

Isn't he and SCO obligated to obey and acknowledge the Utah order and declatory
parts of that judgement until it is overturned at appeal?

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P.O.S.
Authored by: Anonymous on Saturday, September 15 2007 @ 12:48 PM EDT
No not point of sale.

Scox can argue that through it's legal action has sought to preserve shareholder
value, #1 obligation of a public company.

Scox's lawyers have no emotional attachment to the outcome & will work as
long as money flows,of course using the excuse of the above.

The legal system has been abused in this case and bankruptcy is just another
avenue to use.

McBrides declaration lists 10 subsidiaries along with operations, 402 common
stock holders of record & 123 full and part time employees. It rambles on
about good employee relations along with the use of subcontractors. McBrides
declaration seems to quote the mind of what Scox believes, assuming he's
speaking on behalf of the collective board.
26 million dollars on research and developement for 2004, 2005 & 2006 is a
lot of money- who did the R&D? and what were they paid? and what is there
relationship if any to Scox's people?

Audits need to be performed to trace the "independant contractor"
status of this statement, strict laws apply to these types of relationships. The
corporate veil can be pierced if one or more of the board members have been
acting in a fashion outside of a "employee" manner, which if you strip
away the fancy titles and wording is all these people are.

The Judicial branch of our government owes us, "We The People" every
exhaustible effort to investigate every aspect in this litigious & now
bankrupt case.



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Conspiracy Theory
Authored by: Anonymous on Saturday, September 15 2007 @ 12:50 PM EDT
I just can't find a sane reason for this. They'll get a new Judge - the only
solid
plus. But the risk seems high that this is just a 'pick your poison' way to end

the company.

So... why would the management pick this particular way? It seems like a
Shell Game, and this allows the shells to be shuffled again. And quite possibly

end up with co-conspiritor/investor types.

But what is the 'pea'? Just the cash? Or are there documents of some sort that
might implicate an investor, or some other third party? Or? What other things
does SCO control that it can reasonably dispose of in here?

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Not surprising or even all that uncommon
Authored by: Anonymous on Saturday, September 15 2007 @ 01:10 PM EDT
SCO would not take this step if they thought they still had a chance of winning
anything. And you can bet Novell and IBM have anticipated this move and are
going to be as involved in the SCO probate process as they can.

Ch 11 has had to have been an option on the table all along in this farce. It's
what you do when you're about to be pushed over the cliff.

They knew they were going to get the financial death-penalty in the Novell case
and now they're just trying to keep the shirt on their back.

This is no WorldComm where they can come back relatively unscathed. They have
nothing of any value to anyone except cash and there's not near enough of that
to go around. They will be lucky not to get tossed into Ch 7 straight away.

Current management is going to be one of the first things on everyone's agenda.
Say goodbye to Darl and his buddies.

This is the end.

Maybe it's not the courtroom dramatic "You lose!" with a thunderous
crash of the gavel and celebrations all around, but that's not how it happens
anyway. It will slowly fade away the way it began, in a sea of pleadings,
filings, and motions.

Good riddance.

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The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: HavingPun on Saturday, September 15 2007 @ 01:20 PM EDT
Am i blind and miss Darl's name on the stockholders list? It would seem to me
that he should have shares listed on there. If not where are they now? And
when did they exchange hands? That may be something the SEC might be asking
about.

---
Have Pun, will travel.
My spelling is not a strong suit.

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Makes me wonder..
Authored by: skr95062 on Saturday, September 15 2007 @ 01:26 PM EDT
This most recent abuse of the system by SCOG has me wondering the following:

1) Would Novell, IBM et all be represented at the initial hearing on Tuesday?

2) If they are, would the court even hear their arguments as to why this filing
under BK law should even be allowed?

3) Would Judge K communicate with the BK Judge the status of the court cases
initiated by the DEBTOR? The ones that the DEBTOR is now is now getting the
short end of the stick in.

If any or all of the above were to happen, how quickly could the BK court DENY
the chapter 11 filing and then nuke any further filings under the BK law due to
abuse of process/ fraudulent filings?

Thus allowing the Novell case to continue to trial and leave IBM to pick at what
is left afterwards.

What I really want to see at the end of all of this is the following
introduction:

Ralph, Darl meet MR. SEC and MR. FBI
MR. SEC, MR. FBI meet Ralph and Darl



---
Where I work the computers
are so human, that when they
make a mistake they blame
another computer.

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No equitable
Authored by: rand on Saturday, September 15 2007 @ 01:32 PM EDT
I've been looking deeper into the bankruptcy statutes, and it appears that Novell and ALL the other cases may qualify for a semi-automatic un-staying of the cases. Basically, a party of interest can petition the court for relief from the automatic stay. The statute says the bankruptcy court "shall grant relief [emphasis added]" if the debtor has no equity in the property and the property is not required for reorganization.

Judge Kimball has already ruled one point: SCOG has no equity interest in SRVx licenses, and the only point left for trial is what % or amount Novell is due.

Of course, SCOG's lawyers may argue that stolen money is required for reorganization ;)

Many, if not most of the other claims in the other cases seem to be declaratory. I haven't checked back on IBM, but they may have dropped all their equitable counter-claims, too.

---
The wise man is not embarrassed or angered by lies, only disappointed. (IANAL and so forth and so on)

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Hearing on Tuesday in Delaware - Risky Business
Authored by: webster on Saturday, September 15 2007 @ 01:40 PM EDT
.
SCO did this to dodge Kimball. Kimball has been kind so far. He has shown
restraint by not imposing a constructive trust. He must feel constrained by the
law because he did not have a specific amount, something he may have needed to
impose such a trust. Note how uncanny it was [at least in retrospect] for SCO
not to argue any amount other than nothing, or even anything in the alternative.
Kimball could have taken SCO's figure and constructed a trust subject to
modification pending further evidence. Kimball would have had a number next
week, even a SCO theory at trial, so they acted this week.

But this just gives them a shot with another judge. It gives Novell a shot too!
They can now go into the Delaware Court, explain what is going on with the Utah
trial, show them Kimball's order, and demand an immediate trust and a caretaker
for SCO. It is a pretty convincing spiel, corroborated by SCO's desperation in
filing the bankruptcy despite 14 milllion in assets. As PJ noted above, you
can't use bankruptcy to shirk your fiduciary obligations.

How will the Bankruptcy Judge react to this? Will he walk in fresh and ignorant
of this case? Will he do some homework beforehand? Novell is sure to give him
something to read.

It may actually be easier for the Bankruptcy judge to impose the constructive
trust or something like it. He may not need a specific number, just a big
claim.

Novell can come in with a little request to just freeze everything for the
moment to maintain the status quo, preserve SCO assets, and sort things out at a
new pace.

Novell may also be content to let them twist in the wind.



---
webster


© 2007 Monopoly Corporation. ALL rights reserved. Yours included.

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Dream Conversation
Authored by: Anonymous on Saturday, September 15 2007 @ 01:55 PM EDT
call for you Your Honor, it's Judge Bob

Hi Bob, what's up?

Hi Dale, good week of golf last week. Anyway, I just checked my calendar and I
think I have one of your case's. Know anything about SCO?


;-)

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The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: MrCharon on Saturday, September 15 2007 @ 01:56 PM EDT
Check out the declartion of Daniel C. McElhinney. PDF Page number 2.

"Among the large Chapter 11 cases in which Epiq is or was retained, as
noticing,
claims and/or balloting agent to debtors are:"...."Worldcom, Inc.,
Case No. 02-13533 (Bank. S.D.N.Y.); and In re
Enron Com.; Case No. 01-16034, among others."

---
MrCharon
~~~~

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Marketroid BS
Authored by: TheBashar on Saturday, September 15 2007 @ 02:00 PM EDT
I love how paragraphs 8 through 31 describe all of SC0's "business
strengths" and it's not until 32 that they describe their SCOsink Business.
As if that isn't their primary function; being litigious bastards.

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Ch11 In the Works A Month Ago?
Authored by: TheBashar on Saturday, September 15 2007 @ 02:12 PM EDT
Darl's drivel says that PSJ's are still undecided. Why was the prepared so long
ago? It would seem they've been working on this for over a month!

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Can Novell send someone to Deleware?
Authored by: Anonymous on Saturday, September 15 2007 @ 02:17 PM EDT
To go before the Bankruptcy court and show them Judge Kimball's rulings, maybe
point out what this is to them? Does bankruptcy law allow for something like
this?

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Let SCO stay in Chapter 11 as long as they want
Authored by: harford on Saturday, September 15 2007 @ 02:17 PM EDT
If I were Novell, I would seriously consider letting SCO stay in bankruptcy for
a long time. If the court cases are stayed, then SCO can't pursue IBM, Red Hat,
or anyone else. At the same time, the bankruptcy court cannot settle Novell's
future claim for SRVX license money, because the amount was never decided.

Novell (& IBM & Red Hat) simply tell the world, especially SCO's
customers, that the court cases will pick up where they left off as soon as SCO
exits bankruptcy.

How many customers will want to buy software & services from a vendor in
bankruptcy and facing a claim of $33M upon exit from bankruptcy? Any reasonable
IT manager won't touch SCO with a 10-foot pole now.

ALSO, I still have not seen an answer to whether the APA automatically
terminates, thus not allowing SCO to distribute anything derived from SRVX.

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what happens to IBM PSJs?
Authored by: Anonymous on Saturday, September 15 2007 @ 02:23 PM EDT
I understand that the Novell trial is stayed, but it is only about how much SCO
owes Novell. So it does not affect Linux any more.

Far more interesting for us is the IBM case. PSJs are fully briefed. Will
Kimball rule on them or are they also stayed due to SCO bankruptcy trick?

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Hoping the Chapter 11 fails.
Authored by: Anonymous on Saturday, September 15 2007 @ 02:36 PM EDT
I sure hope SCO's BK fails. I also wonder if this BK does fail doesn't this
expand on the Novell case? SCO is basically trying to sidestep the trial in
determining what they owe Novell. I would think and hope Novell would file for
additional penalties to be accessed to SCO for this. And the proof is in the BK
filings itself.

This may be wishful thinking but I can always wish and/or hope for this kind of
result.

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"In posession of debtor"
Authored by: gvc on Saturday, September 15 2007 @ 02:39 PM EDT
If I read Darl's declaration right, he's asking to be relieved of the
requirement that he open new bank accounts and label all checks and
correspondence "in posession of debtor."

I wonder, why would a court grant such a request to a company that had been
found guilty of conversion?

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debts for willful and malicious injury
Authored by: gvc on Saturday, September 15 2007 @ 02:43 PM EDT
So, I would think that IBM, Red Hat and others could make the case that their injuries were willful and malicious. No?
debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable

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Incentive plan targets met!
Authored by: TJ on Saturday, September 15 2007 @ 02:47 PM EDT

In 8 Motion to Authorize ¶13 it says:

The Incentive Plan provided eligible Employees with bonuses to the extent that certain revenue and net operating income as well as personal performance objectives were achieved (the "Performance Metrics"). An eligible Employee was eligible to receive a certain percentage of his or her salary as an incentive bonus ranging from 4% up to 70% (4% employee, 8% manager, 12% director, 20% VP, 40% SVP and 70% CEO) with the revenue objective accounting for 40%, the net income objective accounting for 40% and the personal objective for 20% of the eligible incentive bonus) if the Employee achieved or exceeded the Performance Metrics established under the Plan (the "Incentive Bonus"). The potential Incentive Bonus is typically paid 45 days after the end each quarter (if achieving the Performance Metrics). During the quarter ending July 31, 2007 the Debtors' achieved the required Performance Metrics established pursuant to the Incentive Plan.

In my previous comment attached to the article ("Kimball Denies SCO's Motion for Reconsideration/Clarification") I analysed and commented on the board of directors mostly not being stockholders (McBride not a Stockholder!?).

This information on the incentive scheme seems to confirm the observations of several onlookers over recent months that the entire tSCOg saga is orchestrated to milk cash from the cow with little regard for all shareholder interests.

I do begin to wonder if some of the board or senior executives had/have commission/consulting arrangements in place related to the advance-fees paid to the lawyers.

In August 2003, to fund the advance-fees, tSCOg sold a $50 million convertible note to Baystar Capital & Royal Bank of Canada that was finally cancelled in June 2004 (after legal action by Baystar Capital to convert) for "$13 million and 2.1 million shares of common stock" (shares worth about $10.1 million) at that time.

As the saying goes, it's wise to follow the money. Have we seen documents at any time that report on the remuneration of the board of directors and senior executives?

[ Reply to This | # ]

BSF retained?
Authored by: gvc on Saturday, September 15 2007 @ 02:48 PM EDT
I certainly hope the court will not allow BSF to be retained and therefore
profit from their own misdeeds. I see no case that their "expertise"
will be of any benefit to SCO's creditors.

It is true that BSF has records and so on necessary for unraveling the mess, but
can't these be had through subpoena or some such? They were happy to impose
burdensome subpoenas and discovery requests on their victims.

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Cattleback Holdings *red light*
Authored by: Anonymous on Saturday, September 15 2007 @ 03:23 PM EDT
Given the wheels within wheels Yarro companies have been seen to possess I would
look very closely at the Cattleback Holdings. Given the comments made about
"getting our cattleback" it seems like a name that brings up red
lights.

What if SCO has a arrangement with Cattleback where SCO IP, including UNIXware
and "all UNIX copyrights" where used as some sort of collateral. That
could tie things up for some time.


Delaware has a corporation registered as "Cattleback Intellectual Property
Holdings, Inc.". It was registered 7/16/2007. (flagged by Panglozz) on
IV)

The very timelyness of it draws interest.

[ Reply to This | # ]

as usual SCO makes me want to vomit.
Authored by: Anonymous on Saturday, September 15 2007 @ 03:25 PM EDT

What, they're hiring Ipecac Bankruptcy Solutions?

[ Reply to This | # ]

Berger Singerman is not new
Authored by: Steve Martin on Saturday, September 15 2007 @ 03:31 PM EDT

The other two law firms are new, Berger Singerman and Pachulski Stang Ziehl & Jones.

In fact, according to TSG's October 31, 2004 8-K filing, Berger Singerman was one of the three original "Law Firms" engaged for the "SCO Litigation" (along with Boies, Schiller & Flexer and the firm of Kevin McBride). So they've been a part of this from the start, at least on paper.

---
"When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

[ Reply to This | # ]

"Another Fast One From SCO?"
Authored by: Anonymous on Saturday, September 15 2007 @ 03:55 PM EDT
...Why does any of this matter? Well, filing for Chapter 11 does not automatically qualify the petitioner for Chapter 11. The bankruptcy court must still consider the petition and the actual facts. I'm suggesting that SCO may have a bit of trouble actually proving they are insolvent and can't meet their obligations. Would that still be the case a week from now if the trial with Novell were not stayed? There was certainly the possibility the Utah court would find that the licensing revenues SCO received from Microsoft and Sun were subject to the SVRx licensing arrangement and that the bulk of the license fees from those transactions were due Novell (perhaps as much as $25 million). If that were to happen, it would certainly have been within the realm of possibility that Novell could put SCO in Chapter 7 bankruptcy (liquidation). So by this fast (and loose?) move SCO has:

* Stayed the Novell trial;
* Stayed the IBM trial; and
* Avoided possible (and perhaps likely) involuntary liquidation.

One has to ask, though, whether this is just one more vastly clever (or is it only half-vastly clever) move on SCO's part that in the end will make no difference. Staying a trial and dismissing an action are two very different things. In the end, the SCO Group will have to account of its actions. It's just that the accounting will now come a little later, assuming the bankruptcy court grants their petition. In the end I believe the result will be the same: no-SCO.

Walking With Elephants

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Bankruptcy Court Address info!
Authored by: snakebitehurts on Saturday, September 15 2007 @ 04:40 PM EDT
I plan to attend the Tuesday hearing. For those going note that the address is
824 -NORTH- Market Street, Wilmington, DE 19801.

Their phone number is 302-252-2900

If you go to 824 -South- Market Street, you will be 1.6 miles from the right
place .........

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Undischargeable debts
Authored by: Anonymous on Saturday, September 15 2007 @ 06:31 PM EDT
Anyone want to bet that Novel files notice in Deleware for undischargeable debt
due to fraud, which it can't prove until the conclusion of their Utah case.
Which can't go forward until the bankrupcy is discharged.

Classic catch 22, clasic SCO.

The bankrupcy court could pick a number out of the air, require SCO to deposit
that as payment for Novel, then continue with any money left over....

Isn't there some SEC designation for people that act so grossly that they are
prohibited from ever working as an officer of a public company again?

[ Reply to This | # ]

so that means they escape judgement?
Authored by: Anonymous on Saturday, September 15 2007 @ 06:52 PM EDT
So assuming you're right, and assuming Novell will be able to get their money,
that means there will never be a ruling in SCO v. IBM?

[ Reply to This | # ]

My suggestion for Novell
Authored by: Anonymous on Saturday, September 15 2007 @ 07:10 PM EDT
Tell the bankruptcy court how it is: SCO has "mislaid" some of Novell's money, that is money owned by Novell and not part of any debt of SCO. A decision how much of Novell's money had been handled improperly was due at the same day.

So in the interest of judiciary efficiency, the best way to proceed is to let Judge Kimball decide how much of the money in SCO's bank accounts is actually owned by Novell; then we first give all the money in SCO's bank accounts to Novell, if that is not enough we auction off everything owned by SCO, and if that is still not enough, we can go straight to Chapter 7 bankruptcy, where the business is dissolved, instead of having to do all the complicated Chapter 11 stuff.

[ Reply to This | # ]

The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: billposer on Saturday, September 15 2007 @ 07:22 PM EDT

I don't see that there is necessarily any anomaly in the PSZJ billings. PJ's calculations all seem to assume that at most one lawyer and one paralegal were working, but there could have been more. Indeed, the Laura Davis affidavit lists four lawyers and paralegals. 97 lawyer-hours over three days could be done by four lawyers working slightly over 8 hours per day. Over two days it represents six lawyers working just over 8 hours per day. If SCO was in a rush to get the bankruptcy proceedings going, one can imagine a flurry of activity over a short time at the outset.

[ Reply to This | # ]

Debtors seek authorization, but not direction....from Darl's Declaration
Authored by: Anonymous on Saturday, September 15 2007 @ 08:00 PM EDT
That me try to put that in plain English

We'd like permission to continue paying our employees, but not to be forced to
in the event something goes wrong in the future.

Am I close?

[ Reply to This | # ]

Bankruptcy not the solution for SCO?
Authored by: tknarr on Saturday, September 15 2007 @ 08:24 PM EDT

A couple of thoughts come to mind.

First, does bankruptcy actually settle the lawsuits? I know they're stayed, mainly to avoid the company having to continue to pay out legal expenses while trying to reorganize. But normally lawsuits in a bankruptcy case are over people who are owed money or services or product from the bankrupt company. In those cases bankruptcy resolves the underlying issue by discharging the debts involved, and with no issue in question the lawsuit over it can be dismissed. But in this case, the claims being made against SCO aren't for payment from them. Payment is a secondary item, where SCO may be forced to pay fees and costs after Novell and IBM have won their case. The primary things being asked aren't financial, though. Can the bankruptcy court really just force a resolution in those cases, or will they (since they don't involve debts that might be discharged by order of the bankruptcy court) simply continue to be there if SCO emerges from bankruptcy?

In the case of liquidation, can a company's affairs be wound up while a lawsuit is still pending? I don't believe a company can just dissolve on it's own to avoid losing a lawsuit, so can a bankruptcy court order it dissolved while litigation is still ongoing?

[ Reply to This | # ]

Money returned from SCOX exec bonuses?
Authored by: Sunny Penguin on Saturday, September 15 2007 @ 09:04 PM EDT
In my non-laywer opinion:
The real reason for the delay, must be due to the SCOX exec bonuses and stock
options given after that "profitable" (profiteered?)quarter. Delay the
return of SCOX exec money till they can file personal bankruptcy (after stashing
the bonus and stock sale money)

[ Reply to This | # ]

Henry Kevane, BK Specialist
Authored by: Anonymous on Saturday, September 15 2007 @ 10:07 PM EDT
Henry Kevane, of Pachulski Stang Ziehl & Jones (retained by SCO), was interviewed in June 2007 by Novell.

"Although PSZJ is not aware of any current or past relationship with another party that would disqualify or disable PSZJ from representing the Debtors, the Firm hereby discloses, out of an abundance of caution, that in late May 2007, one of PSZJ's partners, Henry Kevane, was contacted by Novell, Inc. ("Novell") regarding possible retention as an expert witness in certain litigation known as the The SCO Group, Inc. v. Novell, Inc., 2:04 CV139DAK, pending in the United States District Court for the District of Utah (the "Novell Litigation"). In connection with the proposed engagement, Mr. Kevane reviewed publicly available documents and met with counsel for Novell in June 2007. Mr. Kevane did not have access to any of Novells privileged information or documents or any non-public documents. Mr. Kevane was not retained by Novell in connection with the Novell Litigation. He has had no involvement in the Novell Litigation. Mr. Kevane has not been involved in the Debtors' chapter 11 cases in any way. In an abundance of caution, the Firm has established an ethical screen to ensure that Mr. Kevane will not be involved in any aspect of the Debtors' chapter 11 cases." [emphasis added]

[.PDF, at pages 2 & 3] http://www.groklaw.net/pd f/SCOGBK-5AffJones.pdf

Henry Kevane's bio at PSZ&J is here:
http://www.pszjlaw.com/at torney-profile-55.html
"Mr. Kevane is the managing partner of the firm's San Francisco office. He has worked on transactional and bankruptcy matters with clients from a variety of industries, and is listed among the "Best Lawyers in America" with other bankruptcy attorneys."
Unfortunately for SCO, Kevane also "holds an AV Peer Rating, Martindale-Hubbell's highest peer recognition for ethical standards and legal ability. Mr. Kevane is admitted to practice in California." [emphasis added]

[ Reply to This | # ]

Difference in the notice filed in IBM case and the one filed in the Novell case
Authored by: SLi on Sunday, September 16 2007 @ 05:43 AM EDT
Did anyone other notice the bankruptcy notice SCO filed in the IBM case has this additional text in the notice that seems to make it a lot less arrogant:
WHEREFORE, the Debtors therefore request that the above-entitled case be taken off the Court’s active calendar pending resolution of the Debtors’ bankruptcy cases.

[ Reply to This | # ]

Summary Judgement.
Authored by: Ian Al on Sunday, September 16 2007 @ 06:50 AM EDT
Well, I have savoured all the comments and shared thoughts about what Novell, IBM, Redhat and others might do. I know a tiny amount more about Chapter 11 bankruptcy and I have finally followed PJ's instructions to read Darl's support of the petition. I was short on some information and have decided to make fair use of part of a comment by Pangloss on IV. It's not enough, but it does what I need for now. What I wanted to do is to thread through the highlights and pull the pieces together into a unified story.

OK, first to table Pangloss' stuff,

The bankruptcy filing claims assets of 14,800m vs. debt of 7,500m (both July 31 and Sept 10th are cited as settlement dates).
We know that SCOG have never made a profit and that revenue is falling. The above assets and debts summary suggests that they have some way to go before becoming insolvent and, indeed, they have said that they plan to go on to the end of litigation on this basis. Their losses continue to be a modest part of their net assets now that they have greatly reduced staff costs.

Darl's support document says that it believes SCOG is right in the litigation and that they are due significant damages. He also accurately details the PSJ's that they have lost, the finding of conversion, that Novell have the copyrights and the right to waive the claims against IBM. Darl also notes the continuing reduction in business and puts that down to competition. Darl does not offer anything about possible reorganisation that will enable SCOG to exit Chapter 11. So, insolvancy is months away rather than years. They have no reorganisation on the table that would reverse the situation and enable them to leave Chapter 11 as a viable business. If at any time they leave Chapter 11 then the Novell, IBM, Redhat and Autozone cases will resume and Darl has told the BK court that they have as good as lost them all, already. The damages and restitution of converted funds from these cases are not current debts and liabilities and the trustee and creditors panel can do nothing about them. They cannot pay them off, pennies to the dollar and nor can they discharge them in any way.

On the face of it, SCOG have to stay in Chapter 11 bankruptcy until they finally hit insolvancy a little earlier than they otherwise would because of the extra lawyers' fees. Leaving its protection leads very quickly to insolvency by litigation. This suggests to me that the petition should fail because they cannot meet the objective of the trustee to produce a viable business. My guess is that the petition hearing will produce a reorganisation plan from SCOG which, on its face, has a chance of turning the company around and that the petition will succeed. However, I think that Novell and, possibly, IBM will produce the court documents which complement Darl's review of the litigation and insist that the issues of convertion and debts for willful and malicious injury by the debtor are dealt with during the Chapter 11 period by unstaying the court actions and paying converted monies and dealing with the damages as a priority debt. I cannot see how they can be ignored by the trustee

There is a loose end. Whose interests must the trustee protect? It won't be the owners. Shareholders are last in this food chain. It won't be the officers and employees. Darl has to make a specific plea to keep paying them. I assume it is the creditors. It seems to be in the creditors interest that debts are payed now. Once SCOG are insolvent they won't be in as good a position to pay the creditors. The trustee must pay back the converted money first. Then the trustee should move them directly to Chapter 7 and liquidate the assets. I don't think that IBM and Redhat will get their damages because it will take too long to complete the cases and SCOG will be an ex-parrot (sorry!) by then.

I would be very interested if Groklawyers have an alternate stitch-up of the SCOG prognosis.

---
Regards
Ian Al

Linux: Genuine Advantage

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Let's Count SCO's Law Firms (Again)
Authored by: DaveJakeman on Sunday, September 16 2007 @ 07:03 AM EDT
At the top of SCO's recent court filings, SCO list:

Hatch, James & Dodge
Boies Schiller & Flexner
Dorsey & Whitney

That's three. Then, in their bankruptcy filing, SCO ask for:

Berger Singerman
Pachulski
Boies Schiller & Flexner
Dorsey & Whitney
Mesirow Financial Services
Epiq Bankruptcy Solutions

Let's assume those last two aren't law firms, so that's just two new ones,
making five.

Then there's Madson & Austin, the law firm SCO uses to attempt to acquire
trademarks that don't belong to them, and are listed as creditors. That's six.

Where does Kevin McBride fit in? Is he still on the case? He's listed as a
creditor. Seven. Are there any others I missed?

Whatever, SCO are truly a litigation company now. It seems they hate to spend
their conversion fund on anything else.


---
Monopolistic Ignominious Corporation Requiring Office $tandard Only For
Themselves

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Arbitration
Authored by: Anonymous on Sunday, September 16 2007 @ 12:54 PM EDT
In Darl's declaration he states:

"The three-person arbitration panel has been selected for the SuSE
Arbitration in SwitzerIand, and that process has commenced. The arbitration has
been scheduled for December 2007 but is stayed due to SCO's bankptcy."

Um... Surely on this applies only to US courts? Also arbitration is not stayable
per se.

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Something to look forward to
Authored by: jbb on Sunday, September 16 2007 @ 01:10 PM EDT
I'm very much looking forward to the interaction between Judge Kimball and the SCOm artists once they are finally back in his courtroom.

  • Buying the old-SCO distribution chain: $100 million.
  • Suing IBM, Linux, and most of the free world: $10 million.
  • Fraudulently filing for bankruptcy: $100,000.
  • Judge Kimball welcoming them back: priceless.

---
Those who can make you believe absurdities can make you commit atrocities.

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The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: kurtwall on Sunday, September 16 2007 @ 11:06 PM EDT

Obviously, SCO know precisely what they are doing vis-a-vis their Chapter 11 filing. Or at least they think they do. I'm sure Novell foresaw this and planned for it. Regardless, how it plays out promises to be entertaining.

SCO continue to amaze me, though. This is the corporate equivalent of a scorched earth policy. Rather than pay Novell the money that is rightfully and legally Novell's, SCO would rather spend it all, leaving nothing behind for anyone to collect by way of damages.

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72,928 - The Bankruptcy Docket & All Filings - Hearing on Tuesday in Delaware
Authored by: Anonymous on Monday, September 17 2007 @ 04:35 PM EDT
Would the lawyer insist on a retainer? 72,928.00, just in case, so that the
lawyer is not a creditor for purposes of the bankruptcy.

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