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Chapter 11 Trustee Appointed For SCO 89

Posted by timothy
from the why-not-a-trusty-instead dept.
I Don't Believe in Imaginary Property writes "The judge overseeing the SCO Chapter 11 bankruptcy case has issued an order appointing a chapter 11 trustee to oversee SCO's operations. However, the judge's reasoning is far from clear. While the judge believes that SCO has 'abandoned rehabilitation' to bet its future on litigation, he doesn't think it appropriate to convert their case to Chapter 7 liquidation. So SCO's management hasn't been fired yet, but they're no longer fully in charge either. It's not clear why the bankruptcy judge opted for this solution, when even the US Trustee was pushing to fire SCO's management and convert the case to Chapter 7. In short, SCO is still only mostly dead, rather than all dead, and in desperate search of a miracle worker."
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Chapter 11 Trustee Appointed For SCO

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  • by Anonymous Coward on Wednesday August 05, 2009 @06:48PM (#28964751)

    Please, whoever ends up acquiring SCO and their IP, set UnixWare and OpenServer free! Release the source code to both under a very liberal open source license. I hope Novell or whoever else has rights to the code could agree to that.

    • by noidentity (188756) on Wednesday August 05, 2009 @06:50PM (#28964779)
      That would be the ultimate irony, for their code to all become open-source due to their attempts to claim they owned lots of source they didn't. It'd almost make all these years of SCO stories worth it...
      • by Shakrai (717556) on Wednesday August 05, 2009 @07:37PM (#28965385) Journal

        That's not likely to happen unless someone with deep pockets is willing to buy the source code and re-release it under an open source license. The job of the bankruptcy trustee isn't to punish SCO -- under a Chapter 7 his job is to maximize the value of SCO's assets so the creditors get as much of their money back as possible. Under a Chapter 11 his job is to see that they return to business as a viable entity while seeking the best possible deal for the creditors -- but seeing as how SCO has no viable business plan I'd say it's only a matter of time before it becomes a Chapter 7.

        • by Svartalf (2997) on Wednesday August 05, 2009 @09:38PM (#28966527) Homepage

          Unfortunately, I can't see WHEN it will become so. They should have been converted to a 7 filing and the Judge didn't do that much. While appointing an 11 Trustee is a step in the right direction, it's little more than a baby step really.

          I can't see WHY the Judge is erring so far on the side of caution here- there won't be any appealing a 7 conversion at this point as SCO's clearly not restructuring to be profitable again. They're still hoping for the **BIG** litigation score- which will never happen as they didn't have a case in that regard to begin with.

          • Re: (Score:3, Interesting)

            by Shakrai (717556)

            They're still hoping for the **BIG** litigation score- which will never happen as they didn't have a case in that regard to begin with.

            Interestingly enough, that lawsuit could be seen as an "asset" of sorts. When you file bankruptcy you have to list any causes of action or ongoing lawsuits that you are a party to. The theory is that if the cases have merit the US Trustee can take them from you, litigate them to the logical conclusion and use the proceeds to repay your creditors.

            That the US Trustee hasn't already seized their ongoing cases is pretty telling of how much "merit" they have. Of course most of here already knew that. I am s

            • by durdur (252098)

              That the US Trustee hasn't already seized their ongoing cases is pretty telling

              The US Trustee's Office was present in the bankruptcy proceedings but has not up till now been acting as a trustee in charge of SCO's business. Now that the judge has ordered a trustee appointed to oversee the bankruptcy, that trustee will indeed be in charge of the litigation and can determine if it is worth pursuing or not.

          • Re: (Score:2, Insightful)

            by fendragon (841926)

            I can't see WHY the Judge is erring so far on the side of caution here- there won't be any appealing a 7 conversion at this point as SCO's clearly not restructuring to be profitable again. They're still hoping for the **BIG** litigation score- which will never happen as they didn't have a case in that regard to begin with.

            Possibly this: Either way the company will run into the ground and the judge knows that. If the judge ordered Chap. 7 Darl would spend the rest of his life telling everyone how he was cheated out of his litigation fortune and chance to save the company, and it would all be the judge's fault. By letting them carry on, the case will be lost or more likely SCO will run out of money (surely a matter of weeks now). Same result, but this way he can't complain that the court didn't let SCO give it their best shot.

            • by Shakrai (717556)

              If the judge ordered Chap. 7 Darl would spend the rest of his life telling everyone how he was cheated out of his litigation fortune and chance to save the company

              Except that he wouldn't be cheated out of his litigation fortune. If the litigation results in a settlement larger than the debts that SCO owes to it's creditors than the Chapter 7 wouldn't be carried to conclusion and SCO could remain in business as a viable enterprise. If the settlement is smaller than those debts than SCO wasn't going to stay in business anyway.

              The US Trustee would have no interest in shutting down the litigation because whatever money SCO gains from it would be used to pay back their

              • by shentino (1139071)

                Except that the lawyers are going to be on the clock every second the lawsuit is in progress.

                That has to be taken into account as well.

            • by PeelBoy (34769)

              Really? The judge is supposed to care if Darl goes and cries to his friends how he was cheated?

        • Re: (Score:2, Informative)

          by gdshaw (1015745)

          You wouldn't need very deep pockets, and IBM could certainly afford it without blinking, but I don't think they will for the very simple reason that those particular copyrights are of little importance: at worst they can be used to threaten a few of SCO's ex-customers, but that's about all.

          Of somewhat greater importance are the core System V copyrights, but according to the Utah ruling these are owned by Novell. All that needs to happen at this point is for the Utah ruling to stand.

          (Of course, even with th

        • by drinkypoo (153816)

          That's not likely to happen unless someone with deep pockets is willing to buy the source code and re-release it under an open source license.

          SCO Does Not Own Unixware [wikipedia.org]. Keep reading that link to find out what they do own; parts of Unixware derived from SCO UNIX. Even if you bought SCO, the best you could do with that code is sell binary Unixware. You don't have the license to redistribute Novell's source code.

    • Re: (Score:2, Funny)

      by kennedy (18142)

      My kingdom for a mod point. Sigh.

    • Re: (Score:3, Funny)

      by johnthorensen (539527)
      What, no love for XENIX? :-)
    • by sconeu (64226) on Wednesday August 05, 2009 @07:39PM (#28965417) Homepage Journal

      They can't.

      Please see Ransom Love's comment [eweek.com]:

      Indeed, at first we wanted to open-source all of Unix's code, but we quickly found that even though we owned it, it was, and still is, full of other companies copyrights.

    • by Korin43 (881732) on Wednesday August 05, 2009 @07:41PM (#28965451) Homepage
      Would anyone use it even if it was free? I hear a lot about SCO suing people but I don't think I've ever heard someone say they were buying a SCO product..
      • by Bios_Hakr (68586)

        Couldn't you file a public notice that if any of the copyright holders are interested in maintaining their copyright, they should contact so-and-so by such-and-such a date.

        After that date, open the code.

        After all, you couldn't abandon your private property on a public highway and then just leave it there forever.

        • by Desler (1608317)
          No, you couldn't. You seem to be confusing copyright with trademarks. You don't havce to do any maintenance to keep your copyright.
        • Couldn't you file a public notice that if any of the copyright holders are interested in maintaining their copyright, they should contact so-and-so by such-and-such a date.

          No, Copyright doesn't change hands so easily as that. If it did, what's to stop, say, Microsoft from doing that with regards to the Linux code? In a VERY obscure newspaper (it's public, even if only 500 people read it). And then claiming the entire Linux codebase as their own, since its Copyright has obviously been abandoned.

          Or if you

      • Re: (Score:3, Funny)

        by evilviper (135110)

        I hear a lot about SCO suing people but I don't think I've ever heard someone say they were buying a SCO product..

        Some topics just aren't discussed in polite company.

    • Why in the fuck would you want UnixWare when you already have open source Solaris?

  • by Archangel Michael (180766) on Wednesday August 05, 2009 @06:52PM (#28964807) Journal

    "Did you say to blathe? Well as everyone knows, to blathe means to bluff."

    SCO bluffed, and got caught. Miracle Max only works for True Love, not To Blathe

  • by johnthorensen (539527) on Wednesday August 05, 2009 @06:53PM (#28964819)

    ...unless you're a lawyer. Look at the RIAA, SCO, et al. Their 'businesses' are all suffering while the lawyers laugh all the way to the bank.

    It's a damn shame that the trial lawyer lobby is so strong.

    • In short, SCO is still only mostly dead, rather than all dead

      Evil never dies...

    • Re: (Score:3, Informative)

      by Rogerborg (306625)
      I have some bad news for you. Assuming that SCO don't appeal this Order and a chapter 11 Trustee is appointed, what are his options?
      1. Shut the company down and pay the last remaining cash to the creditors. Since there's not enough left in SCO's accounts (now, let alone after Darl & Co loot it) to pay the creditors, this is the option of last resort, and not what a Chapter 11 Trustee is meant to do anyway.
      2. Cut or sell off the loss making parts of the company to fund the profitable bits. But since SCO
  • "desperate search of a miracle worker." Well, we know who the 'miracle worker' would be; Ballmer. The question is, does he come to SCO's aid again?
    • Re:Miracle Worker? (Score:4, Interesting)

      by rasper99 (247555) on Wednesday August 05, 2009 @07:02PM (#28964939)

      There were stories that the CEO of Enron, Ken Lay called the Whitehouse after things collapsed. His call was not taken. Just a few years before he was Uncle Kenny at the BBQs in Crawford, TX. Probably be about the same here.

      • by Shakrai (717556) on Wednesday August 05, 2009 @07:43PM (#28965477) Journal

        There were stories that the CEO of Enron, Ken Lay called the Whitehouse after things collapsed. His call was not taken.

        "Your call has been forwarded to an automated voice messaging system. 'IS THIS THING ON? *tap, tap, tap* HEY THIS IS GEORGE LEAVE A MESSAGE!' is not available. At the tone please record your message. When you are finished recording you can hang up or press '1' for more options. To leave a callback number, press '5'."

  • by johnthorensen (539527) on Wednesday August 05, 2009 @06:57PM (#28964871)
    3D Realms has announced post-reorganization merger plans with SCO Group. SCO shares were up $0.02/share for a gain of 10000% on the news that they would be suing themselves for non-performance.
    • Re: (Score:3, Funny)

      by DMUTPeregrine (612791)
      Verizon executives were said to be confused as to how two-thousandths of a cent could be a 10000% increase, even for SCO.
  • You've been "mostly dead" all day...

  • Thank you for playing SCO.

    please insert credits to continue........
  • by ae1294 (1547521)

    They are... too big to fail... And thus the undead will always walk among you, feasting upon your virgin flesh, forever hungry.. MUHaHaHa

  • by Ungrounded Lightning (62228) on Wednesday August 05, 2009 @07:02PM (#28964937) Journal

    However, the judge's reasoning is far from clear.

    Maybe this is the judge's way of putting a watchdog on 'em to make sure they don't run out the door with or (further) destroy the value of some of the remaining assets before things get settled?

    (Not only am I NAL but I'm especially NA bankruptcy L.)

    • by Ungrounded Lightning (62228) on Wednesday August 05, 2009 @07:24PM (#28965223) Journal

      Looks like that might be it.

      According to the Wikipedia article on chapter 11 [wikipedia.org], chapter 11 lets the company run either under a court-appointed trustee or the "debtor in posession", i.e. the original management acting as a trustee and operating under the same rules, behind the shield of the bankruptcy process. And:

      Appointment of a trustee requires some wrongdoing or gross mismanagement on the part of existing management and is relatively rare.

      Looks like the judge is saying that, while it isn't clear yet whether SCO will be able to emerge from chapter 11 as a viable business or will have to be liquidated under chapter 7, the current management is either grossly mismanaging the company or at least making it appear that they aren't doing as well for the interests of the creditors and stockholders as a trustee would.

      • by darkonc (47285)
        The judge indicated that he wasn't quite clear if SCO's legal claims were really worth chasing. (( I mean, why would someone be so pigheaded about it if there really was no chance of winning??? )) .... so he's suggested a trustee with strong litigation skills ( "...a litigator or former judge") who could go through the legal archives and figure out if SCO has a snowball's chance in hell at the litigation before the final decision to go to chapter 7 is made.
    • by Artifakt (700173) on Wednesday August 05, 2009 @08:11PM (#28965783)

      SCO petitioned at the last minute for an administrator, with less power than a real trustee, to handle only selected parts of a full Chapter 11 proceeding. That's what they liked best. From Groklaw, no one seems to know if such an arrangement was even a legal option.

      A chapter 7 with appointed trustee is what they would like least. That presumes there's no chance of the company ever reorganizing, and the goal is instead to pay off as many of the creditors as possible.

      The judge gave them something in the middle - a standard chapter 11 ,which means he is holding out the chance that some purchase offer might be legitimate and SCO just might rise again.

      If I'm ever facing 20 years in maximum security, I plan to claim house arrest with an ankle bracelet is quite reasonable and customary for whatever I did, and see if the judge will split the difference and give me 5 in minimum security. Who knows, it could work.

      • by AuMatar (183847)

        I'm willing to give them a legit purchase offer. $100 for the whole thing. $200 if I can punch Darl in the face at closing.

        • Re: (Score:3, Funny)

          by Sanat (702)

          You focus on the purchase price.

          I got you covered for the extra $100

          Even if you can't purchase SCO the $100 is still yours for the punch.

    • by drgould (24404)

      However, the judge's reasoning is far from clear.

      My impression is that on the one hand he has SCO telling that they could win billions and billions of dollars from their lawsuits if the judge will just give them a chance, and on the other hand he has IBM, Novell and the US Trustee telling him "let's stick a fork in this turkey and call it done." And he knows neither side is impartial.

      He probably thinks that, unless he wants to research the merits of SCO's case against IBM, Novell and the rest of the world,

  • by JoshuaZ (1134087) on Wednesday August 05, 2009 @07:13PM (#28965087) Homepage
    I'm not a lawyer and by no means an expert on bankruptcy but as I understand it bankruptcy judges are generally very hesitant about converting Chapter 11 to Chapter 7 bankruptcies unless pretty much everyone thinks they should. The general attitude of the American bankruptcy system is that companies should generally be given pretty close to every opportunity to get out to the wholes they've gotten into and that we shouldn't start filling the dirt in over them unless we've got really good reasons. Note also that this doesn't mean that SCO won't go through chapter 7. It just means it isn't going through chapter 7 right now. It could still convert later if things show no sign of improvement.
    • Are criminal proceedings against SCO's officers still a possibility? The SCO corporation may have more assets to work with than are currently in view if it can be shown that its officers have either improperly converted business assets to personal holdings, or contracts with lawyers were illegal and should be voided.

      If there is any possibility like that still out there, the best thing for the stockholders and creditors would be to delay conversion to Chapter 7.

    • Not true. The majority of Ch11 cases wind up either being converted into a CH7 or are ended by filing a liquidating plan under CH11, i.e. all the assets are sold off after which the business ceases. The reasons are pretty clear; a business winds up filing CH11 because they are in serious trouble. Most are not successful in finding a way out of their financial problems.

      What is relatively rare is the appointment of a Trustee in a CH11 case which is invariably done over the objections of the debtor. It's an

  • SCO "Cooooode.............I want to own your COOOOODE!!"
    • And not just any dead - EVIL DEAD! <Ash> Shop smart - shop at S(CO)-Mart! </Ash>
      • And not just any dead - EVIL DEAD! Shop smart - shop at S(CO)-Mart!

        Judge: All right, you litigious screwheads, listen up. This, is my BOOM STICK!

  • My Read (Score:5, Insightful)

    by DannyO152 (544940) on Wednesday August 05, 2009 @07:33PM (#28965327)

    I think the first point about bankruptcy court is that the debtors are given time to reorganize and to become viable and the creditors are given an opportunity to get some of the money they are owed paid back.

    The Judge is saying the guys who were running SCO were not taking bankruptcy seriously. The Judge called them out for bleeding cash, wasting time, requesting and missing multiple extensions on the deadline for them to produce a reorganizing plan, and coming up with the half-baked sales agreements all predicated on, after the particular assets are sold, creditors paid off, and attorneys funded, if, the big vaporous if, there's litigation proceeds, then SCO's owners and managers do very well. When he referenced "Waiting for Godot" and SCO's management "waiting for the dough" and betting the company on litigation, I think he chose the Chapter 11 Trustee plan so that when the appeals in Novell are decided (it is suggested that that will be by Aug. 31) someone with a clear eye can look at that decision and decide if there's truly money for the estate in pursuit of the litigation or whether it's time to turn out the lights. In the decision he repeats SCO's assertion that customers will miss them and I think he does that not as an endorsement of SCO's position but to signal that there is a profitable going concern in the server products and somebody will be glad to be in that business, i.e., there will be a serious buyer.

    Between the lines, I think he does not like what SCO's management has done by following the litigation business model and I further think he sees that the only way for the smaller creditors to get their money back is to put less sue-happy people in charge. I'm sure the judge was not pleased with the way some bills got paid by subsidiaries and how Darl McBride paid for one suitor/rainmaker out of his own pocket. SCO was racing the clock and the clock ran out.

    • Re: (Score:3, Insightful)

      by dbIII (701233)
      Another important thing to note is the "litigation business model" involves paying a lot in legal fees to Darl's brother. IMHO Darl deliberately drove the company into the brick wall that is IBM to direct a lot of SCO's money to his brother. Between the two of them they made a vast amount more from SCO than if Darl had successfully managed the company.
  • As a resident of Santa Cruz, I would expect any authentic "Santa Cruz Operation" to involve growing plants.

    • by sconeu (64226)

      SCO is not the Santa Cruz Operation.

      The Santa Cruz Operation (aka oldSCO or Santa Cruz) sold their OS business to Caldera in 2001. Caldera then changed its name to "The SCO Group" (aka newSCO or the SCOundrels) allegedly to take advantage of the goodwill, but later events (the lawsuit) seem to indicate it was to sow confusion as to their identity.

      Santa Cruz renamed itself to Tarantella after the sale. Tarantella was sold to Sun for $25M in July 2005.

  • by Anonymous Coward on Wednesday August 05, 2009 @07:33PM (#28965343)

    The trustee has to investigate SCO's business. The trustee can decide that SCO's whole 'thing' is a fraud and has no chance of success. The trustee can settle all the cases out of court and on the terms that Novell and IBM dictate. That would put a quick end to the whole thing and Darl and company couldn't appeal the decision.

    If SCO's assets were sold in chapter 7, there is a chance that the litigation would go on for years.

    So, chapter 11 with a trustee might be better than chapter 7.

    • The trustee can settle all the cases out of court and on the terms that Novell and IBM dictate.

      My understanding is that Novell already has a decision, no need to settle. Novell will get theirs first, then the creditors (and whatever IBM's Nazgul manage to squeeze, of course).

  • SCO???? (Score:3, Funny)

    by icedcool (446975) on Wednesday August 05, 2009 @07:43PM (#28965483) Homepage
    Who?
  • It goes on and on my friends. Darl started it seven years ago, how it stops noone will ever know because ... (Repeat)

  • Some Germans may be relieved another boogie man is taking the roll of "safe to ridicule and attack". I expect to see Darl and company show up as targets in many FPS games in the future. Even in the world of PC, blowing out the brainz of SCO executives and lawyers will be acceptable if not glorified.

    Advert: Amazing enemies SCO throws at you next as they bring their dark fantasies to life.
    "thousands of lines of stolen code in Linux..." *budda budda boom*

    • "DO YOU WANT TOTAL WAR?"

      "...fava beans and a nice chianti." *hiss*

      "No, Mr. Bond, I expect you to die."

      vs.

      "thousands of lines of stolen code in Linux..."

      Meh, pretty paltry for a villain.

      Doesn't shout, I don't think he's ever cackled... does he even own a cat?

  • You can kill it, but as long as there is even a remote chace that money can be made it will be back in a sequel.
  • And in strange aeons, even death may die.

  • " It's not clear why the bankruptcy judge opted for this solution..."

    A great many of the gyrations of the case since the crack legal team that defended them came on board, as well as many to come, will make much more sense if you remember one salient point: the deal with the lawyers was that if SCO won, they'd get a cut of the winnings, but if SCO lost, they'd get a cut of the corpse.

    What judge is going to order that his fellow court officers' income for a job well done get cut out of their deal? As long as

    • by mcgrew (92797)

      A great many of the gyrations of the case since the crack legal team that defended them came on board

      I thought it was SCO's executives that were on crack?

  • Once SCO is finally dead and buried, the whole saga is going to make a cracking book up there with the Enron one (and film). I'd like to think it would be a warning to future CEO's on how not to look like a total idiot but I suspect that just goes with the job these days.
  • "Beneath this mask there is more than flesh. There is an idea: The idea that open-source is free for the taking for any company that wishes to steal it and has deep enough pockets for litigating."

    It's gavel-proof.

  • is to behead the entire management team and principal stock owners and then drive a stake through their hearts, and bury them at a crossroads under a full moon. Seriously it couldn't hurt.

Never invest your money in anything that eats or needs repainting. -- Billy Rose

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