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Berger Singerman Asks for an Order Allowing it to Pay Itself from Retainer
Friday, October 16 2009 @ 10:53 AM EDT

Things are not so free and easy in SCOland, I gather, now that the Chapter 11 Trustee is running the company. Berger Singerman has filed a motion on its own behalf asking the court to please amend a prior order, the October 5, 2007 Administrative Order Establishing Procedures for Interim Monthly Compensation of Professionals, so the firm can pay itself from the retainer it has in hand. It's been doing that for a while, but it seems the Chapter 11 Trustee notices that there is no explicit allowance to use the retainer in that order. If you remember, he already signaled that he's looking into all the professional fees. So Berger Singerman would like an explicit order from the court saying it's all right to do that.

The motion lists the retainer as being currently $340,536, and they need to dip into it some more because while "Debtors paid the interim monthly payments to the Movant to the best of their reasonable abilities throughout the cases", "eventually cash flow became an issue". Indeed.

I do recall the retainer being mentioned earlier. Here's the paragraph I was remembering from October 2008, a prior bill from Berger Singerman:

5. BSPA has received no payment and no promises for payment from any source for services rendered or to be rendered in any capacity whatsoever in connection with the matters covered by this Application. There is no agreement or understanding between BSPA and any other person other than the partners of BSPA for the sharing of compensation to be received for services rendered in this case. BSPA has received payments during the year prior to the Petition Date in the amount of $425,000 from the Debtors in connection with its prepetition representation of the Debtors. Such amount includes a retainer for postpetition services in the amount of $275,000. BSPA was current as of the Petition Date, subject to a final reconciliation of the amount actually expended prepetition. Upon final reconciliation of the amount actually expended prepetition, any balance remaining from the payments to the Firm was credited to the Debtors and utilized as BSPA's retainer to apply to postpetition fees and expenses pursuant to the compensation procedures approved by this Court and the Bankruptcy Code.
So, it's not that Berger Singerman was secretly doing anything. Clearly, they thought in good faith that the retainer was for the purpose. And they mentioned emailing Ryan Tibbitts about a "cost retainer for ordinary course professionals" in their first billing. But I don't see specific numbers. Exactly how much went from the pre-petition retainer to the post-petition retainer? Dorsey & Whitney also mentioned a retainer, at the November 16, 2007 hearing, but if I understand what was said, it could dip into it if it disclosed it, so others could object. Here's where the firm gave Notice of Intent to Setoff Certain Pre-Petition Fees and Expenses against Pre-Petition Retainer specifically in #352 [PDF] and the accompanying exhibits.

And now that I think of it, didn't Mesirow get a $35,000 retainer too? I surely hope the Trustee is looking at that first bill, speaking of the improvidence standard.

After SCO began having cash flow issues, Berger Singerman started to dip into the retainer. And now the trustee asserts the firm should no longer do so, unless the court explicitly authorizes it:

12. However, in communications with the Movant, counsel for the Trustee has asserted that notwithstanding the Court's interim approval of the Movant's compensation for the services performed and the expenses incurred in the months of June and July, 2009, because the Interim Compensation Order does not explicitly authorize the Movant to draw down on its retainer to pay fees and costs due to it, the Movant should seek and obtain an order of this Court allowing it to draw down on its retainer.
The firm says they believe they are entitled to pay from the retainer, but "out of an abundance of caution" it seeks the order of the Court allowing it to draw down on its retainer as it has become accustomed to doing. Any such payments are, it explains it understands, subject to final approval or, in the alternative, disgorgement. As we learned earlier when we were trying to understand the improvidence standard the US Trustee's Office said would be applied to Boies Schiller's bills, the court can also just reduce the amount to be paid.

So, now Berger Singerman can understand how Novell feels. It's annoying not getting money you believe is due to you, isn't it? No objections to the prior administrative order have ever been filed before, so this represents a big change. The free spending spigot of SCO litigating itself into bankruptcy has been turned down. The judge will likely authorize the payments, of course, but it does show that the party is over.

Here's the motion and accompanying exhibits:

10/15/2009 - 928 - Motion to Amend /Motion for Order Amending Administrative Order Establishing Procedures for Interim Monthly Compensation of Professionals Filed by The SCO Group, Inc.. Hearing scheduled for 11/20/2009 at 02:00 PM at US Bankruptcy Court, 824 Market St., 6th Fl., Courtroom #3, Wilmington, Delaware. Objections due by 11/13/2009. (Attachments: # 1 Notice # 2 Proposed Form of Order # 3 Certificate of Service and Service List) (Makowski, Kathleen) (Entered: 10/15/2009)

Here's the order [PDF] referenced from October 5, 2007, and it was one of the flurry of orders that the judge signed lickety split when the bankruptcy was first filed. There is indeed no reference to using retainers in that order. Here's the order [PDF] authorizing the retainer of Berger Singerman from that same day, and I don't see any wording about a retainer being OK to dip into in that order either.

Wouldn't it be funny if, after all that dancing on behalf of SCO, Berger Singerman could only be paid directly by SCO, and the retainer was instead disgorged to pay creditors like...um... Novell?

Update: I see Maureen O'Gara is reporting that Darl McBride is expecting to be fired shortly. I normally don't link to her, since I have in the past found her reporting to be not as reliable as I'd require to use as a source here. But I can't help but notice that in this article (http://in.sys-con.com/node/1147274) she says that SCO conducted a mock trial of SCO v. IBM. I wonder, since she has an inside track apparently, if she would be able to substantiate that assertion. I've never seen any proof of a mock trial happening, although there have been rumors. Perhaps she would be good enough tell us what law firm conducted the mock trial for SCO?

A reader points out that Berger Singerman is asking to be paid for work done on the proposed deal that the judge himself characterized [PDF] like this:

Here, the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions. There is no evidence that the sale price is fair because it is just enough for Debtors to dismiss their cases. The terms are equally, if not more, troublesome. Debtors are retaining the Mobility business that is virtually worthless, the letter of credit to pay a Novell judgment terminates on December 31, 2009, with no guarantee that the Novell Litigation will be concluded. Further, the Court is unable to find based on this record, the Debtors’ history of unsuccessful sale efforts and this sale’s peculiar and questionable timing that Unixis has acted in good faith.
One struggles to understand the justification for authorization of payment for said work, as the commenter put it. At what point should a law firm tell a client not to go forward with work that will be costly and which is unlikely to achieve the desired goal?

  


Berger Singerman Asks for an Order Allowing it to Pay Itself from Retainer | 273 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections thread here
Authored by: jesse on Friday, October 16 2009 @ 11:01 AM EDT
Thank you

[ Reply to This | # ]

News picks thread
Authored by: jesse on Friday, October 16 2009 @ 11:02 AM EDT
Thank you

[ Reply to This | # ]

Off topic thread
Authored by: jesse on Friday, October 16 2009 @ 11:03 AM EDT
finally.

[ Reply to This | # ]

Why not put the lawyer's fees on hold too?
Authored by: IMANAL_TOO on Friday, October 16 2009 @ 11:07 AM EDT
Why not put the lawyer's fees in bankruptcy cases on hold too? So, that they cannot get paid until the case is "over"

Must be something someone has suggested before.



(OT: BTW, Linux users are growing according statistics from last year )


---
______
IMANAL


.

[ Reply to This | # ]

Berger Singerman Asks for an Order Allowing it to Pay Itself from Retainer
Authored by: rsteinmetz70112 on Friday, October 16 2009 @ 11:32 AM EDT
Is there a detailed accounting of what they already have paid themselves?

Perhaps that's the point, the Trustee wants everything to go through him, and
the court to be sure services were authorized.

Also if the retainer was pre-petition I don't think they have any right to
access it without explicit approval.

---
Rsteinmetz - IANAL therefore my opinions are illegal.

"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk

[ Reply to This | # ]

Berger Singerman Asks for an Order Allowing it to Pay Itself from Retainer
Authored by: Anonymous on Friday, October 16 2009 @ 11:33 AM EDT
In SCOG BK 890 the court finds (emphasis added):

Here, the Debtors offered no evidence of the fairness of the price and, indeed, the price is highly suspect as the sale was clearly a rushed, last ditch effort to avoid the Conversion Motions. There is no evidence that the sale price is fair because it is just enough for Debtors to dismiss their cases. The terms are equally, if not more, troublesome. Debtors are retaining the Mobility business that is virtually worthless, the letter of credit to pay a Novell judgment terminates on December 31, 2009, with no guarantee that the Novell Litigation will be concluded. Further, the Court is unable to find based on this record, the Debtors’ history of unsuccessful sale efforts and this sale’s peculiar and questionable timing that Unixis has acted in good faith.

It looks like BSP wants to be paid for work in the June and July 2009 interim fee applications. It looks like very much of this work was specific to that same sale agreement. I struggle to understand the justification for authorization of payment for said work.

[ Reply to This | # ]

Personally, I don't put much stock in a mock trial in such a situation
Authored by: Anonymous on Friday, October 16 2009 @ 12:46 PM EDT

If it's a mock trial where neither side in the "mock-up" have a stake in the outcome, they have value. For example, doing mock trials as course practice in Law 101.

However, when it's a mock trial put toghether by one side - as in SCOG putting together a mock trial - how .... reasonable can it actually be? In such a trial, would SCOG do their best to present the opposing sides arguments?

For example, during this mock trial - assuming it occurred of course - was the Jury presented with IBM's viewpoint that SCOG does not even own the copyrights to the code they claim is infringed or was the Jury provided with only evidence that SCOG did own the copyrights?

Did SCOG produce the full text from the contracts? Or did they only produce those specific words - out of context - that say what SCOG want them to say as they have done with their court filings?

Additionally, how can they possible know what the opposing arguments are going to be without discovery ending? For example, when SCOG claimed to own control over JFS, did they realize at the time JFS was originally written for OS2 then was ported from there to both AIX and Linux? How could they present IBM's argument on that score if they didn't even know the history?

In such a situation, the side putting together the mock trial can easily structure things in a way they will always win. There's no value in such an exercise except - perhaps - as press release value.

I guess in such a situation, mock trials only start to have value after discovery is closed. Possibly best to also wait for all PSJ's to be filed so one has a full grasp of the opposing arguments as well as available evidence. I guess the PR use of such a situation would have been drastically lessened.

Yea... we performed a mock trial and lost, but we are confident we will still win in a real court!
Perhaps that's why it's mentioned a lot of cases are settled after discovery and before trial.

Of course, that's my humble, non-lawyer, opinion on the strategy of a mock trial wherein the side putting together the mock trial has a vested interest in the value of the outcome for one particular side.

RAS

[ Reply to This | # ]

Mock trial for SCO?
Authored by: Anonymous on Friday, October 16 2009 @ 01:40 PM EDT
Probably done at Siegfried & Jensen's own courtroom

Or maybe conducted by Skyline High School's own debate team.

[ Reply to This | # ]

  • Now, now, Darl... - Authored by: Anonymous on Friday, October 16 2009 @ 01:57 PM EDT
The party isn't over
Authored by: Anonymous on Friday, October 16 2009 @ 02:23 PM EDT
At least, not until the judge tells Berger Singerman that, no, they can't take
that money.

But the party is winding down. The bartender is clearly indicating that it's
last call.

MSS2

[ Reply to This | # ]

    "tremendous value" quote first surfaced in a 9/25/09 Y post
    Authored by: Anonymous on Friday, October 16 2009 @ 02:43 PM EDT
    Maureen O'Gara uses the same "tremendous value" phrasing a one-time poster to a Y message board used on 9/25/09.

    The skich01 nym (created in 2004) can trivially be shown to belong to the same Y log-in that a certain employee of Ralph Yarro, Chris Skillings used in April 2009 when writing in support of an anti-pron initiative of Yarro's.

    skich01
    Re: Trustee to Decide Whether to Pursue Litigation
    20-Sep-09 09:25 pm
    Actually the Trustee, a retired judge, after having reviewed the evidence sees "tremendous value" in the litigation with IBM. The only reason the litigation will not be pursued is if an IBM shill buys out the SCO shareholders and shuts it all down in a "settlement" in everything but name.

    [ Reply to This | # ]

    Mock Trial: "R and D Strategic Solutions"
    Authored by: Anonymous on Friday, October 16 2009 @ 04:57 PM EDT
    The bankruptcy has a full "proof of claim" for R and D Strategic Solutions. This company had contracted for a mock trial on August 23-24, 2007 and had the event canceled at the last minute. The claim is for the initial fee (12,046/two invoices), but the documentation shows the full budget for the never conducted trial.

    The proof of claim documents were tranfered to Argo Partners and reside on the EPIQ docket as claim #73 . Log in/cookie setting to EPIQ may be required for these links to work.

    So the 2007 era mock trial never occured.

    Earlier news reporting in Spring 2004, also mentioned 'mock trials'. There was some speculation that these might have been conducted through "Carr & Farrell", but this is very poorly documented.

    Maureen and Darl may be referring to the rumoured 2004 trial, but the landscape has changed in the time since that effort was attempted.

    [ Reply to This | # ]

    Berger Singerman Asks for an Order Allowing it to Pay Itself from Retainer
    Authored by: Anonymous on Friday, October 16 2009 @ 05:28 PM EDT
    "I see Maureen O'Gara is reporting..."
    ... speaking of mockery!

    [ Reply to This | # ]

    I can't see the value of a mock trial
    Authored by: DaveJakeman on Friday, October 16 2009 @ 05:28 PM EDT
    As we've seen, in a court of law anything can happen and most likely will. Not
    only is the law squishy, but so is what happens during its application.

    A mock trial is like playing both sides of a chess game. What makes chess a
    game is that you don't know what your opponent is thinking. And likewise, you
    can't do a realistic mock trial, because you are not your opponent.

    And a trial is only one aspect of what decides the outcome of a case.

    I can only see it has PR value, which -- surprise, surprise -- is what SCO is
    using it for.

    [ Reply to This | # ]

    Why Is McBride Still Employed?
    Authored by: sk43 on Friday, October 16 2009 @ 07:38 PM EDT
    <<Darl McBride is expecting to be fired shortly.>>

    If you were appointed as a Chapter 11 Trustee, would you want the CEO who led
    the company into its mess to still be around offering you unsolicited advice?
    Fire him, and use the salary money to pay for an interim CEO. Isn't Bruce Cromer
    available?

    [ Reply to This | # ]

    This is unfair to Berger Singerman
    Authored by: Anonymous on Saturday, October 17 2009 @ 03:20 AM EDT

    At what point should a law firm tell a client not to go forward with work that will be costly and which is unlikely to achieve the desired goal?

    Perhaps Berger Singerman did tell the client exactly that. But the client makes the decision.

    [ Reply to This | # ]

    Mock Trial in 2005.
    Authored by: Ian Al on Saturday, October 17 2009 @ 05:05 AM EDT
    If I thought that MoG could remember past the last bottle

    I wonder if this, Dion Cornett On SCOXE's Future, is the mock trial that MoG is recalling?

    It was actually Darl telling folks about it and it was an attempt to talk up the value of the company just after they had been delisted.

    I suspect it is now an attempt to talk up the value of the litigation to support Darl's latest threats. Even if it was more effective than last time, I can't see a seasoned ex-judge losing any sleep over it.

    ---
    Regards
    Ian Al

    Linux: Viri can't hear you in free space.

    [ Reply to This | # ]

    • Mock Trial in 2005. - Authored by: Anonymous on Saturday, October 17 2009 @ 12:04 PM EDT
      • Problem - Authored by: Anonymous on Saturday, October 17 2009 @ 02:27 PM EDT
    Thank You PJ ! thread
    Authored by: DannyB on Saturday, October 17 2009 @ 12:20 PM EDT
    As the fiasco appears to soon be over with, I wanted to take this opportunity to
    say a big Thank You to PJ.

    PJ, thank you for your amazing work, now in its seventh year. You have spent
    more time, effort and frustration on this SCO nonsense than most of us will ever
    know. The organization of documents and manpower has been an invaluable
    resource, source of information, and sometimes even just amusement that many can
    enjoy by just clicking a mouse button. You have suffered stalking and been the
    subject of personal attacks that many of us probably only have a vague hint of.

    Your award winning website deserves even more recognition than it has received.

    I truly hope SCO no longer exists by Christmas 2009. (song: It's beginning to
    look a lot like Chapter 7.)

    Many people have already forgotten SCO and moved on. Thank you for your
    perseverance.

    I hope that the organization of people and resources, and the communities,
    including Groklaw and others that have galvanized around the SCO litigation are
    an ongoing force against existing, new and emerging threats to open source and
    free software.

    Again, thank you so much for your work.


    ---
    The price of freedom is eternal litigation.

    [ Reply to This | # ]

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