[This is the unofficial transcript posted at scofacts.org of the proceeding of which a copy of the official audio recording can be found here: mp3; Full FTR CD.

See also the hearing's agenda, minutes, sign-in sheet, and transcript notice.
See http://scofacts.org/bankruptcy.html for links to recordings of other hearings in this case.
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Motion Hearing, December 30, 2009

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
The SCO GROUP, INC., et al.,
    Debtors.
Chapter 11
Case No. 07-bk-11337-KG
(Jointly Administered)

(The debtors' current names, file numbers at the Delaware Division of Corporations, and Rule 1005 information (IRS employer identification ("EID") numbers and all names used within the six years before the filing of their petitions (September 14, 2001 to September 14, 2007)) are as follows: (1) The SCO Group, Inc., Del. Corp. #3266987, EID 87-0662823, which was named "Caldera International, Inc." prior to May 16, 2003; and (2) SCO Operations, Inc., Del. Corp. #3187414, EID 97-0617393, which was named "Caldera Systems, Inc." prior to September 23, 2002.)

Wednesday, December 30, 2009
10:00:00 Eastern Daylight Time (-0400)

Before the Honorable Kevin Gross, U.S. Bankruptcy Judge

Courtroom 3, 824 N Market St Fl 6, Wilmington DE 19801
Courtroom clerk: Sherry Scaruzzi
Audio recording operator: Jennifer Pasierb

Agenda and Minutes

(See also the "Omnibus Hearing Order" (Docket No. 908, September 4, 2009), the "Notice of Rescheduled Omnibus Hearing" (Docket No. 958, November 12, 2009), the "Amended Notice of Agenda of Matters Scheduled For Hearing on December 30, 2009 at 10:00 A.M." (Docket No. 1014, December 29, 2009), and the "Minute Entry" (Docket No. 1016, December 30, 2009).)

Items 1 through 4: various uncontested matters

Item 5: "Motion of Petrofsky for an Order Compelling the Trustee's Compliance With Reporting Requirements and Setting Reporting Deadlines" (Docket No. 990, December 13, 2009), with exhibits (#990-4), proposed order (#990-3), and notice (#990-2), setting objection deadline of December 23, 2009.

Item 6: "Motion for Relief from the Automatic Stay to Complete International Arbitration" (by Suse Linux GmbH) (Docket No. 951, November 10, 2009), with proposed order (#951-3), and notice (#951-2), setting objection deadline of November 30, 2009 and hearing date of December 22, 2009 (the agenda records that the objection deadline was "extended to December 15, 2009 for the Chapter 11 Trustee").

Item 7: "Motion of Chapter 11 Trustee to (I) File Under Seal Exhibit A to the Declaration of Ryan E. Tibbitts in Support of Objection of Chapter 11 Trustee to SUSE's Motion for Relief From the Automatic Stay to Complete International Arbitration and (II) Shorten Time for Notice and Response Thereto" (Docket No. 1013, December 29, 2009), with proposed order (#1013-4).

Participants

See also the "SIGN-IN-SHEET" (#1016-2)

Identified Speakers (in order of appearance)

Sherry Scaruzzi
Deputy Clerk of Court
824 N Market St Fl 6, Wilmington DE 19801
Kevin Gross autograph Hon. Kevin J. Gross (Pennsylvania bar #27160, admitted 1978 (inactive); Delaware bar #209)
United States Bankruptcy Judge (appointed 2006)
824 N Market St Fl 6, Wilmington DE 19801
(image from http://ecf.deb.uscourts.gov/cgi-bin/show_case_doc?232,109446,0,,)
Adam Aiken Lewis Adam Aiken Lewis (California bar #88736, admitted 1979; Delaware admission pro hac vice (dkt. #44), September 18, 2007)
Attorney for creditors Suse Linux Gmbh and Novell, Inc.
Morrison & Foerster LLP
425 Market St, San Francisco CA 94105
(image from http://mofo.com/images/attorney/407.jpg)
Bonnie G. Fatell Bonnie Glantz Fatell (Pennsylvania bar #34377, admitted 1981; Delaware bar #3809, admitted 1999)
Attorney for Edward N. Cahn, chapter 11 trustee
Blank Rome LLP
1201 N Market St Ste 800, Wilmington DE 19801
(image from http://www.blankrome.com/siteFiles/headshots/A7E4C445CFFD9AA6ED9527B7880C35C5.jpg)
Edward John Normand Edward John "Ted" Normand (New York bar #2783447, admitted 1996; Delaware admission pro hac vice (dkt. #1022), December 30, 2009)
Attorney for Edward N. Cahn, chapter 11 trustee (appearing telephonically)
Boies Schiller & Flexner LLP
333 Main St, Armonk NY 10504
(image from http://www.bsfllp.com/lawyers/data/:v_get/latest/0065/_res/id=sa_Pic3)
Alan P. Petrofsky Alan P. Petrofsky
Equity Security Holder, pro se (appearing telephonically)
PO Box 6263, San Rafael CA 94903
(image from http://petrofsky.org/csua-alpetrof-mirror/al-head.gif)
Edward N. Cahn Edward Norman Cahn (Pennsylvania bar #8007, admitted 1960)
Chapter 11 trustee, pro se
Blank Rome LLP
1201 N Market St Ste 800, Wilmington DE 19801
(image from http://www.blankrome.com/siteFiles/headshots/856D0F637D30F6DC0803C1A380035683.jpg)

Other Appearances (in order listed on sign-in sheet)

Sean T. Greecher Sean T. Greecher (Delaware bar #4484, admitted 2004)
Attorney for creditors Suse Linux Gmbh and Novell, Inc.
Young Conaway Stargatt & Taylor
1000 West St Fl 17, PO Box 391, Wilmington DE 19899
(image from http://www.ycst.com/inc/attimage.php?att=43)
R. Stephen McNeill Rufus Stephen McNeill (Delaware bar #5210, admitted 2008)
Attorney for creditor International Business Machines Corp.
Potter Anderson & Corroon LLP
1313 N Market St Fl 6, Wilmington DE 19801
(image from http://www.potteranderson.com/assets/images/113.jpeg)
Michael A. Jacobs Michael Allen Jacobs (California bar #111664, admitted 1983; Delaware admission pro hac vice (dkt. #171), October 31, 2007)
Attorney for creditors Suse Linux Gmbh and Novell, Inc. (appearing telephonically)
Morrison & Foerster LLP
425 Market St, San Francisco CA 94105
(image from http://mofo.com/images/attorney/235.jpg)

AUDIO AND INCOMPLETE, UNOFFICIAL, UNCERTIFIED TRANSCRIPT

Audio

Index

(10:04:21/+00:00:00) Please rise

(10:06:47/+00:02:26) Petrofsky's argument on reporting requirements motion
(10:11:54/+00:07:33) Trustee's objection to reporting requirements motion
(10:16:03/+00:11:42) Ruling on reporting requirements motion

(10:20:39/+00:16:18) Suse's objection to leave-to-file motion
(10:23:56/+00:19:35) Trustee's reply on leave-to-file motion
(10:25:56/+00:21:35) Suse's sur-reply on leave-to-file motion
(10:30:17/+00:25:56) Ruling on leave-to-file motion

(10:31:34/+00:27:13) Suse's argument on motion to lift stay
(10:43:11/+00:38:50) Trustee's objection to motion to lift stay
(11:05:27/+01:01:06) Suse's reply on motion to lift stay
(11:25:59/+01:21:38) Trustee's sur-reply on motion to lift stay
(11:36:31/+01:32:10) Suse's sur-sur-reply on motion to lift stay
(11:42:52/+01:38:31) Motion to lift stay taken under submission

(11:45:01/+01:40:40) *** RECESS ***

Transcript

(10:04:21/+00:00:00) CLERK: Please rise.

(10:04:25/+00:00:04) Kevin Gross autograph THE COURT: Good morning, everyone. Thank you and please be seated.

(10:04:28/+00:00:07) VOICE: Good morning, your Honor.

(10:04:29/+00:00:08) Kevin Gross autograph THE COURT: It's a pleasure to see you all again.

(10:04:31/+00:00:10) VOICE: Thank you.

(10:04:32/+00:00:11) Kevin Gross autograph THE COURT: Mr. Lewis, it's been a while, and it's good to see you, sir.

(10:04:34/+00:00:13) Adam Aiken Lewis MR. LEWIS: It's always a pleasure to be here, your Honor.

(10:04:36/+00:00:15) Kevin Gross autograph THE COURT: Thank you. Good morning, Ms. Fatell.

(10:04:38/+00:00:17) Bonnie G. Fatell MS. FATELL: Good morning, your Honor. Bonnie Fatell from Blank Rome on behalf of the trustee, Mr. Edward Cahn, who's here with me today.

(10:04:46/+00:00:25) Kevin Gross autograph THE COURT: Good to have you back, Mr. Cahn.

(10:04:48/+00:00:27) Bonnie G. Fatell MS. FATELL: Also, on the line, your Honor, I believe is Mr. Ted Normand from the Boies Schiller firm. We filed a motion pro hac vice late yesterday for his admission, and I ask that he be admitted for purposes of this hearing, and able to participate. He had arranged by telephone, in the event he has any additional comments to the argument with respect to the Suse motion.

(10:05:09/+00:00:48) Kevin Gross autograph THE COURT: Thank you. Mr. Normand, you are admitted for this hearing, and we will sign that order as soon as it comes to my attention.

(10:05:14/+00:00:53) Edward John Normand MR. NORMAND: Thank you, your Honor.

(10:05:17/+00:00:56) Bonnie G. Fatell MS. FATELL: Your honor, if I might just walk through the agenda for this morning.

(10:05:20/+00:00:59) Kevin Gross autograph THE COURT: And one thing I can save you time with is, the CNO orders are all acceptable and will be signed. So, --

(10:05:27/+00:01:06) Bonnie G. Fatell MS. FATELL: Okay, that's perfect.

(10:05:29/+00:01:08) Kevin Gross autograph THE COURT: -- that helps.

(10:05:30/+00:01:09) Bonnie G. Fatell MS. FATELL: Okay, then, I think that takes care of item number one, item number two, which is the motion for authorization to have sale procedures for de minimus assets approved, and certain abandonment procedures --

(10:05:48/+00:01:27) Kevin Gross autograph THE COURT: Yes.

(10:05:48/+00:01:27) Bonnie G. Fatell MS. FATELL: Item number three was nunc pro tunc approval to enter into a new lease for the office headquarters. Sounds like you have approved.

(10:05:56/+00:01:35) Kevin Gross autograph THE COURT: Yes.

(10:05:57/+00:01:36) Bonnie G. Fatell MS. FATELL: Number four was the retention of Hatch, James, and Dodge as special litigation counsel --

(10:06:02/+00:01:41) Kevin Gross autograph THE COURT: Yes.

(10:06:02/+00:01:41) Bonnie G. Fatell MS. FATELL: -- which then takes us to the contested matters, and I thank you for approving those, your Honor. The first contested matter is item number five, and that is the motion of Petrofsky for an order compelling the trustee's compliance with reporting requirements and setting reporting deadlines. Your Honor, we did file monthly operating reports just prior to filing our response, I believe, and -- actually, I will cede the podium to Mr. Petrofsky. I don't know if he's here or if he's on the phone.

(10:06:32/+00:02:11) Kevin Gross autograph THE COURT: It looks like Mr. Petrofsky is on the telephone. Good morning, Mr. Petrofsky.

(10:06:36/+00:02:15) Alan P. Petrofsky MR. PETROFSKY: Yes, I'm here. Thank you. Good morning, your Honor.

(10:06:39/+00:02:18) Kevin Gross autograph THE COURT: I have had an opportunity to read the papers and, um, but certainly you may proceed to make some, uh, some argument.

Supporting argument on reporting requirements motion

(10:06:47/+00:02:26) Alan P. Petrofsky MR. PETROFSKY: Excellent. Thank you, your Honor. Okay, uh, I mostly wish to stand on those briefs, but I will go over a few points.

(10:06:53/+00:02:32) Alan P. Petrofsky Um, first of all, part of the information in the monthly operating -- in the monthly operating reports is the statement of disbursements, and, uh, it's clear that there was an October thirty-one deadline, per Rule 2015(a)(5), for the filing of this -- of the statement of disbursements, for July through September. That deadline may be extended by the Court, but, uh, the trustee never sought to extend it, and he missed the deadline by fifty-three days.

(10:07:20/+00:02:59) Alan P. Petrofsky Now, uh, the filing of several MORs just before the objection deadline has made the motion moot as to, uh, the statements of disbursements, but I believe that unexcused tardiness of fifty-three days should be a factor when the court decides whether it should do anything to address the non-moot reporting issues.

(10:07:38/+00:03:17) Alan P. Petrofsky Uh, now, moving on to those non-moot issues. Um, the MORs. In the, uh, revised proposed order, the January 31 deadline for the October MOR is the same date that the -- the trustee's objection stated, uh, that he would be meeting. Uh, and the order also sets that date as the deadline for the, uh, November and December reports, which, uh, are presumably being held up by the same, uh fiscal-year-end accounting issue.

(10:08:07/+00:03:46) Alan P. Petrofsky Uh, and then going forward, the order would set deadlines at twenty days after the end of each month, and, uh, those deadlines would be extendable for cause. Uh, as I described in the briefs, the -- the lack of any MOR deadlines set by the court has been a problem throughout these cases, uh, causing unnecessary confusion for all the parties, and, uh, the trustee's objection did not identify any harm that would come from setting some deadlines.

(10:08:32/+00:04:11) Alan P. Petrofsky Uh, and then lastly on the semi-annual subsidiaries reports per Rule 2015.3. Uh, this rule was adopted in December 1, 2008, and the Supreme Court ordered that it, uh, shall govern, insofar as just and practicable, in, uh, all cases filed before that date. And I -- I described in my briefs why, uh, it would be just and practicable in these cases.

(10:08:57/+00:04:36) Alan P. Petrofsky Now, the, uh, the mere accident of birth that these cases happened to be commenced before the December 2008 date of the rule change, uh, does not justify continuing to operate the business indefinitely with no reports. Uh, we're more than a year past the change, we're into our third semi-annual period of business operations that are being conducted after the rule change.

(10:09:18/+00:04:57) Alan P. Petrofsky Uh, and the Supreme Court explicitly chose not to put in a grandfather clause and have old cases keep running under the old rules indefinitely. Uh, instead, cases are to be switched to running under the new rules, as soon as just is -- and practicable.

(10:09:32/+00:05:11) Alan P. Petrofsky Uh, now the trustee had a full seventeen days notice period of this hearing, and he is free to present any evidence he wishes today. Uh, however, in his objection he indicated he would not be bringing any evidence today and he requested that -- if -- if the Court were at all disposed, uh, to ruling against him on this, that he be given another notice period to prepare -- to prepare his evidence.

(10:10:53/+00:06:32) Alan P. Petrofsky Um, now the new rule itself includes plenty of leeway for the court to modify the reporting requirement upon cause shown, and -- and I have no objection to the trustee being given another opportunity to make such a showing. What -- what I want today is just an order that the mere, you know, accident of birth, of -- of when these cases started does not justify the abscence of reports, and I want the burden of showing cause to modifying the reporting requirement to be placed upon the trustee, as it would be in any case that happened to be filed after December 1, 2008.

(10:10:27/+00:06:06) Alan P. Petrofsky MR. PETROFSKY: Uh, and that's it. Thank you for hearing me.

(10:10:30/+00:06:09) Kevin Gross autograph THE COURT: Certainly. I -- I just have one question for you because it's never been quite clear to me, Mr. Petrofsky.

(10:10:35/+00:06:14) Alan P. Petrofsky MR. PETROFSKY: Yes.

(10:10:35/+00:06:14) Kevin Gross autograph THE COURT: You are, uh, a -- a shareholder of the debtors.

(10:10:39/+00:06:18) Alan P. Petrofsky MR. PETROFSKY: That is correct.

(10:10:40/+00:06:19) Kevin Gross autograph THE COURT: And, may I ask how many shares you own?

(10:10:43/+00:06:22) Alan P. Petrofsky MR. PETROFSKY: I own one hundred shares.

(10:10:45/+00:06:24) Kevin Gross autograph THE COURT: Okay, and did you buy those shares pre- or post-petition? In other words, before or after the bankruptcy filing?

(10:10:53/+00:06:32) Alan P. Petrofsky MR. PETROFSKY: I've owned them since before the, um, the case, and they are -- they're listed in the list of shareholders that was attached to the petition.

(10:11:00/+00:06:39) Kevin Gross autograph THE COURT: Okay, thank you.

(10:11:02/+00:06:41) Alan P. Petrofsky MR. PETROFSKY: You're welcome.

(10:11:03/+00:06:42) Kevin Gross autograph THE COURT: Ms. Fatell, if you --

(10:11:04/+00:06:43) Alan P. Petrofsky MR. PETROFSKY: And I guess if -- I -- I'm sorry.

(10:11:06/+00:06:45) Kevin Gross autograph THE COURT: No, go on.

(10:11:07/+00:06:46) Alan P. Petrofsky MR. PETROFSKY: Yeah, uh, in -- in case there's, um, you know, any suggestion as to, you know, what -- what size that interest is, um, the trustee has personally certified to the Court that the estates' claims against IBM and Novell are meritorious and should be pursued aggressively.

(10:11:23/+00:07:02) Kevin Gross autograph THE COURT: Yes.

(10:11:24/+00:07:03) Alan P. Petrofsky MR. PETROFSKY: And, uh, those claims seek, uh, a minimum of five billion dollars from IBM. That's, uh, you know, five billion with a B as in boy. And, uh, should the trustee succeed on those claims, the proceeds would be enough to pay off all the creditors with interest, and leave, you know, more than two hundred dollars per share for the equity holders, which be more than twenty thousand dollars for me. So, that's -- that's the potential size of the interest.

(10:11:49/+00:07:28) Kevin Gross autograph THE COURT: All right. Thank you.

(10:11:51/+00:07:30) Alan P. Petrofsky MR. PETROFSKY: You're welcome.

(10:11:52/+00:07:31) Kevin Gross autograph THE COURT: Now, Ms. Fatell.

Trustee's objection to reporting requirements motion

(10:11:54/+00:07:33) Bonnie G. Fatell MS. FATELL: Thank you, your Honor. Um, let me first address the -- the new rule and --

(10:12:01/+00:07:40) Kevin Gross autograph THE COURT: Yes.

(10:12:01/+00:07:40) Bonnie G. Fatell MS. FATELL: -- and the -- the, uh, suggestion that it's the burden of the trustee to --

(10:12:07/+00:07:46) Kevin Gross autograph THE COURT: To show cause.

(10:12:07/+00:07:46) Bonnie G. Fatell MS. FATELL: -- to seek to --

(10:12:08/+00:07:47) Kevin Gross autograph THE COURT: No --

(10:12:09/+00:07:48) Bonnie G. Fatell MS. FATELL: -- modify that. Uh, --

(10:12:09/+00:07:48) Kevin Gross autograph THE COURT: No, as I understand the rule, cause must be shown by the movant here.

(10:12:15/+00:07:54) Bonnie G. Fatell MS. FATELL: That's how we understand --

(10:12:15/+00:07:54) Kevin Gross autograph THE COURT: Yes.

(10:12:15/+00:07:54) Bonnie G. Fatell MS. FATELL: -- the rule, your Honor. The rule clearly states that it is not a grandfather rule, that it does not apply to cases that were already pending. These cases were pending for, probably, over -- well over a year, close to two years at the time the rule was enacted. Um, there was no, uh, no request by the U.S. trustee, there was no other party prior to this date urging the Court to order the debtors when they were in possession back in January '09 after the rule was adopted, um, to comply with this provision. So, I'm not certain why there suddenly should be a burden placed on the chapter eleven trustee, who clearly has come in well into this -- two years into this case, to now, uh, address that -- that rule. I don't think it's applicable, and I don't think the burden should be on the trustee to show cause why it should not comply. I don't think it's required to comply. So that's my response to that.

(10:13:13/+00:08:52) Bonnie G. Fatell As far as the, um, filing -- the timely filing of the monthly operating reports. As we explained in our response and also in footnotes to the monthly operating reports, and, you know, everybody's burdened and so I don't suggest that that is an unending excuse, but certainly for the early part of the trustee's involvement in this case, we have done the best that we could to comply with those -- the filing of those reports. Um, we have now filed July, which was prior to the trustee being appointed, August, which was prior to the trustee being appointed -- have not had an opportunity to go back and really scrub those and the historical data. We -- We did rely on the people at the company, who have previously filed these reports, to prepare them in accordance with how they were previously filed. Our financial advisors did review them, so we were comfortable filing them, but we did caveat to say that as we wind down the year, which is the end of October, and we review the -- the current financial situation as well as the financial situation since the trustee came into, uh, became appointed, that we would reserve the right to go back and make some modifications to those. So, we are in compliance with respect to July, August and September. As to October, that is the company's fiscal year end --

(10:14:31/+00:10:10) Kevin Gross autograph THE COURT: Yes.

(10:14:31/+00:10:10) Bonnie G. Fatell MS. FATELL: That does take additional time to close those books. We are in the process of that, and we have represented and represent to this court that we expect that October and November, and hopefully December, will be filed, uh, timely in January. Certainly October and November.

(10:14:47/+00:10:26) Bonnie G. Fatell As far as the request that the Court set an absolute, court-ordered deadline, which is not required by the rules, or by any provisions or guidelines in the U.S. trustee's office, we are concerned, your Honor, that that places an undue burden on the estate. That if we are in need of an extension of time for whatever reason, that the trustee now has to come into this court, has to file a motion, has to show cause as to why it should be granted any type of extension.

(10:15:19/+00:10:58) Bonnie G. Fatell And we think that that's really not an appropriate burden on this estate, where we understand the requirements, we are doing our best to comply with the guidelines, we will continue to do that, and we do not expect that we're going to file -- um, that, excuse me, that we are going to run into significant issues that would preclude us from filing these as close to within the twenty day time period as the -- as the rules require. So, um, we would request that the -- the motion and the revised order of Mr. Tr-- Petrofsky be denied, and, um, if he -- if the Court deems that it should be denied without prejudice, and he thinks that we -- he needs to come back in and revisit this issue, that's certainly up to him.

(10:15:59/+00:11:38) Kevin Gross autograph THE COURT: All right.

(10:15:59/+00:11:38) Bonnie G. Fatell MS. FATELL: Thank you, your Honor.

(10:16:00/+00:11:39) Kevin Gross autograph THE COURT: Thank you, Ms. Fatell.

Ruling on reporting requirements motion

(10:16:03/+00:11:42) Kevin Gross autograph Well, let me just rule, because I do think that I understand the circumstances, and, first of all, as far as, um, the late filing of the monthly operating reports is concerned, and they're -- whether they are excused or unexcused, um, I think that the circumstances of the case provide the appropriate excuse for the late filings. Uh, we have a new trustee in the case. He has been working -- from everything that I have seen and reviewed -- very, very diligently. There are major, uh, issues and difficulties which the trustee is addressing, and, um, so, I -- I do believe that the late filings are excused here.

(10:16:50/+00:12:29) Kevin Gross autograph And I, for similar reasons, um, am not going to require a firm deadline for the filing of those monthly operating reports. I, um, I note for example that the, uh, office of the United States trustee is not present, has not, uh, joined in -- in the motion, or has not raised a concern, and that is, of course, of significance to the Court, uh, and in this particular case, um, as I said, I am satisfied with the trustee's diligence and efforts and those of counsel.

(10:17:26/+00:13:05) Kevin Gross autograph And, uh, I -- I don't think it appropriate to impose the deadline other than -- obviously, if -- if it -- if it drags on beyond what the Court views to be a reasonable time, um, then I will -- I will notify the parties, perhaps with a -- an order to show cause or something of that kind, um, why the -- the continued delay is occurring, but -- but it is to me significant that the trustee also had to prepare monthly operating reports for pre-appointment, uh, months, which obviously required, I think, uh, much extra effort on the trustee's part, so I -- I do take note of that, and -- and will, uh, will deny the motion on the monthly operating reports.

(10:18:16/+00:13:55) Kevin Gross autograph Insofar as the reports for subsidiaries are concerned, I do note that it was specifically not a grandfathered, um, rule. It applies in a prospective manner, unless cause is shown, and I don't think that cause has been shown here why the Court should, uh, extend the amended rule to, uh, this -- this debtor -- this -- the trustee in this situation, and, uh, I will deny the motion for the filing of those monthly operating reports, uh, subject to -- without prejudice -- if Mr. Petrofsky would like to file a motion and present evidence to the Court as to why the, uh, the for cause requirement has -- can be met and is met, then, uh, certainly, uh, I -- I will reconsider the ruling today, but at -- at the present time I have not heard a basis to find that -- that cause should, uh, require the Court or the trustee to deviate from, uh, the clear, uh, import of the, uh, revised rule.

(10:19:33/+00:15:12) Kevin Gross autograph So, to that extent, I deny the motion on the monthly operating reports, and deny without prejudice the motion as to, uh, compliance with, uh, the amended rule requiring, prospectively, uh, filings of, uh, the subsidiary, uh, information.

(10:19:51/+00:15:30) Bonnie G. Fatell MS. FATELL: Thank you, your Honor.

(10:19:52/+00:15:31) Alan P. Petrofsky MR. PETROFSKY: Okay, thank you, your Honor.

(10:19:53/+00:15:32) Kevin Gross autograph THE COURT: Thank you, Mr. Petrofsky.

(10:19:55/+00:15:34) Bonnie G. Fatell MS. FATELL: Would the Court like us to prepare and -- and submit an order?

(10:19:57/+00:15:36) Kevin Gross autograph THE COURT: That would be helpful. Thank you, thank you, Ms. Fatell. That's --

(10:19:59/+00:15:38) Bonnie G. Fatell MS. FATELL: Thank you, your Honor.

(10:20:00/+00:15:39) Kevin Gross autograph THE COURT: That's kind of you.

(10:20:02/+00:15:41) Bonnie G. Fatell MS. FATELL: Your Honor, the next item on the agenda is the motion of Suse for, um, stay relief to proceed with the arbitration in Switzerland. Uh, we did file a motion, uh, an emergency motion for leave to file a particular document under seal, --

(10:20:19/+00:15:58) Kevin Gross autograph THE COURT: Yes.

(10:20:19/+00:15:58) Bonnie G. Fatell MS. FATELL: -- and if the Court wants to take that up first, we'll hear argument from Suse's counsel first and then deal with that.

(10:20:25/+00:16:04) Kevin Gross autograph THE COURT: I don't know -- we can just ask, I think, if there's any objection to that motion, for the filing under seal. Mr. Lewis, as I said earlier, it's good to see you again, and welcome back.

(10:20:35/+00:16:14) Adam Aiken Lewis MR. LEWIS: Thank you, your Honor, and as I said earlier, earnestly, it's always a pleasure to be in this court.

(10:20:38/+00:16:17) Kevin Gross autograph THE COURT: Thank you.

Suse's objection to leave-to-file motion

(10:20:39/+00:16:18) Adam Aiken Lewis MR. LEWIS: Um, like a true lawyer, my answer to the question, do I have any opposition, is yes and no.

(10:20:46/+00:16:25) Kevin Gross autograph THE COURT: Okay.

(10:20:47/+00:16:26) Adam Aiken Lewis MR. LEWIS: Um, I certainly don't object to the filing of the document under seal, if it's to be filed at all.

(10:20:53/+00:16:32) Kevin Gross autograph THE COURT: Okay.

(10:20:54/+00:16:33) Adam Aiken Lewis MR. LEWIS: The "if it's to be filed at all" is the yes part of the question, and that is, this is a -- this filing is pretty late, the eve of the hearing, and I -- I -- I note, your Honor, that we filed our motion on the, uh, think it was the tenth of Dec--, uh, November. The trustee asked for and got an extension to file his response, uh, until, uh, the -- the, uh, the, uh -- I think we filed on the ninth of November. Until the tenth of December, that was -- or fifteenth of December, that was thirty-five days. We had a shortened time to file our reply, because of the holiday season and counting back, but that's okay.

(10:21:37/+00:17:16) Adam Aiken Lewis Um, why this had to be filed on a clear open issue, on the eve of the hearing, is just beyond me. Uh, I can't see any excuse for it. That's the first question. And this is not the first time in this case where we have faced eve-of-hearing filings, without any real excuse.

(10:21:57/+00:17:36) Adam Aiken Lewis Um, the second point, your Honor, is while we don't in principle object to the filing of the underlying document under seal, the declaration contains an opinion in it, uh, by Mr. Tibbitts, which is an opinion as to a legal issue, which I think is inadmissable, um, and inappropriate, um, and, uh, and for that reason we would object to the declaration anyhow, uh, because Mr. Tibbitts' opinion as to the merits of the lit-- of the Suse, uh, proceedings, if it's to be considered at all, is not an appropriate matter for this court to consider. Legal issues are not appropriate matters for expert opinion, and they're certainly not a mat-- appropriate matters for any opinion. It's this court's responsibility, if this court wants to get into the details, to look at the facts, not to consider opinions.

(10:22:50/+00:18:29) Adam Aiken Lewis So, for both of those reasons, um, I think it's inappropriate for this document to be filed. If it had been filed, and there had been, uh, nothing to seal it, I would have asked that it be struck anyhow. And I think that's the appropriate result here. We're prepared, wholly, to -- to concede that the Suse motion -- the Suse, uh, uh, uh, proceeding, is contested. We don't disagree with that. Otherwise, we wouldn't be here. But that's about all that the declaration really accomplishes, because what it really did was it simply basically filed an answer, to what amounted to our moving papers in that proceeding. That's where we are.

(10:23:29/+00:19:08) Kevin Gross autograph THE COURT: Yes.

(10:23:30/+00:19:09) Adam Aiken Lewis MR. LEWIS: So I would suggest -- I would ask the court not to admit it in the first place, because I don't think the declaration is appropriate for ei-- for both the timing reasons, and because it contains a legal opinion, and, um, even if it did, I don't think it really adds anything to what's already before this court. Thank you, your Honor.

(10:23:47/+00:19:26) Kevin Gross autograph THE COURT: Thank you, Mr. Lewis. Why don't we just at least resolve this -- this issue at the outset.

Trustee's reply on leave-to-file motion

(10:23:56/+00:19:35) Bonnie G. Fatell MS. FATELL: Thank you, your Honor. Your Honor, as to the timing of the filing, um, this is a confidential document. Um, it -- it's a part of the arbitration in the Swiss tribunal. It is not a surprise document to Suse. They clearly are aware of the document. They have their own copy of it. They've had it. And certainly in preparing their submissions, and their redacted version of their counter document that they also filed in this Suse arbitration, they're -- they're aware of this, and I'd be surprised if they hadn't reviewed it. So I don't think there is surprise here.

(10:24:35/+00:20:14) Bonnie G. Fatell The fact that we filed it as late as we did. We filed it because it was in response to the, uh, --

(10:24:41/+00:20:20) Kevin Gross autograph THE COURT: Reply.

(10:24:42/+00:20:21) Bonnie G. Fatell MS. FATELL: -- reply brief that was filed on December twenty-third, which was just before the Christmas weekend, and so we filed this as promptly as we could after that. Where they said that the trustee doesn't even attempt to explain, uh, the evidence and arguments that supposedly support our position, um, we did not address this initially because the burden is on Suse to show that they're going to prevail. We were satisfied with the response that we filed. In light of their reply, we felt that the Court should have the opposition papers that were -- and a statement of position, that was filed in the, um, Swiss tribunal, similar to the statement, although redacted, that was filed by Suse. So, um, for that reason, we did file it.

(10:25:25/+00:21:04) Bonnie G. Fatell As far as the declaration, your Honor. Um, the purpose of the declaration was merely to identify the document as true and correct, and to the extent that there's an issue with respect to paragraph five of the declaration, I'm happy to have that stricken, so that the declaration from Mr. Tibbitts only states that this is a true and correct copy of the actual document that was filed in the Swiss tribunal. And so we would request, your Honor, that it be permitted to be filed under seal.

(10:25:53/+00:21:32) Kevin Gross autograph THE COURT: All right, thank you Ms. Fatell. Does that help a little bit, Mr. Lewis?

Suse's sur-reply on leave-to-file motion

(10:25:56/+00:21:35) Adam Aiken Lewis MR. LEWIS: It helps a little bit, your Honor, but I -- I -- I -- and I appreciate the concession on paragraph five of the declaration, but, but I really think we have to set some standards for how this case is going to proceed, and the eve of filing, uh, is not an appropriate act here. The issue of the merits of the Suse arbitration was teed up by our opening motion. We discussed the merits. We provided some evidence on it. We provided some discussion of it. It was clearly an issue for the reply -- the opposition. The fact that in -- in our reply we commented on the fact that in their opposition they didn't do what they should have done doesn't give them grounds to file a -- to reconsider what their opposition looked like, and file what amounts to a sur-opera-- opposition on the eve of bankruptcy -- uh, on the eve of the hearing. I just don't think it's appropriate to permit that here.

(10:26:46/+00:22:25) Adam Aiken Lewis Um, and -- and I understand it may be -- kind of be in some sense no harm no foul, but on the other hand, you know, your Honor, I don't want this to keep happening. It's just -- it -- it -- is -- is -- at least when the debtor came in, however inaccurately, on the eve of the original hearing on the motion to convert, the debtor could say, well, we just signed the thing up. That's not even true here. In -- in thirty-five days, the trustee couldn't figure out that the trustee needed to file something that addressed the merits of the litigation? Something that, as -- as the trustee's -- has said this morning, they knew about, too. It's been in the pleadings -- in the, uh, arbitration, right along.

(10:27:32/+00:23:11) Adam Aiken Lewis Um, so again I would urge the Court to simply not allow the filing, so that we have a standard that we follow here except for really good cause, and I understand those things can happen, and they do happen, and they have happened, and they may happen again, but we don't have that here. Thank you, your Honor.

(10:27:48/+00:23:27) Kevin Gross autograph THE COURT: Well, let me just ask a quick question, Mr. Lewis --

(10:27:49/+00:23:28) Adam Aiken Lewis MR. LEWIS: Yes, your Honor.

(10:27:50/+00:23:29) Kevin Gross autograph THE COURT: -- and that is, are you prejudiced by the filing? In other words, is -- it's not a surprise document. And the reason I ask is because -- and I realize that there have to be standards. Bankruptcy is a little bit of an unusual animal, and as a judge, I like to try to get things right, and it helps me to get it right to be able to consider, you know, all of the evidence, and, uh, unless a party tells me that they in some way have been surprised, totally surprised -- you know, a witness that was never disclosed, or a document that was never produced. Um, is that the -- is that your situation here?

(10:28:28/+00:24:07) Adam Aiken Lewis MR. LEWIS: Your Honor, we're not totally surprised, because we know what the record is, but the fact is -- the fact that you know what the record is doesn't mean that someone's going to try to use it at the last moment for some reason that hasn't been anticipated. And, uh, I suppose in one sense we're not prejudiced because we know what their answer, I'll call it an answer, has said for some time --

(10:28:51/+00:24:30) Kevin Gross autograph THE COURT: Right.

(10:28:52/+00:24:31) Adam Aiken Lewis MR. LEWIS: -- for a long time. On the other hand, um, encouraging this kind of last-minute thinking of, gee, how should we bulk up our response, because we didn't really do a great job, um, encourages people not to put everything in front of the Court until they see what there is they need -- need to respond to further. I am in favor of the courts having everything in front of them, and I understand the courts wanting to have that, and wanting to get it right by having that.

(10:29:22/+00:25:01) Adam Aiken Lewis The question here is, that could have been the case without this last moment filing, and if we -- if we let this go, then we're going to see this again sometime, and we're going to be arguing about it again. And there really is no excuse this time. Whereas in -- on other occasions, there may be. I mean, from our perspective, yes, you know, you can ask the question, uh, you know, was this we couldn't expect, and so on and so forth, sort of look at the realities. Look at the realities on the other side of the coin. In this instance, there is no excuse for why this was done. It's as simple as that. But, you Honor, I don't think in the end it's necessarily going to affect the outcome of the proceedings anyhow, although I don't know what arguments they're going to make based upon that, um, given that Mr. Normand is on the phone, for example, so I can't necessarily say it won't prejudice us, but I understand the Court's point of view.

(10:30:16/+00:25:55) Kevin Gross autograph THE COURT: Thank you, Mr. Lewis.

(10:30:16/+00:25:55) Adam Aiken Lewis MR. LEWIS: Thank you, your Honor.

Ruling on leave-to-file motion

(10:30:17/+00:25:56) Kevin Gross autograph THE COURT: Well, I certainly do appreciate uh, the, the concession on paragraph five of the declaration, and in fact I was going to -- to rule that, uh, it -- it would not be considered by the Court. Um, as to the document being filed, again I think that it is -- it's helpful to the Court, it is not prejudicial. I -- I do appreciate Mr. Lewis's comment -- comments, that we need to have structure, and we need to have limits, um, but in this particular case, I think that given the nature of the -- of the document that is being offered, uh, the -- the fact that, uh, the opposition was well aware of the document, I, uh, I am going to allow the -- the filing. I -- I don't know if I could have stopped the filing. I suppose I could have had it stricken, but, uh, in this particular case, um, I'm not going to strike the document -- the declaration -- and, uh, I will permit it to be filed under seal, given its nature.

(10:31:18/+00:26:57) Bonnie G. Fatell MS. FATELL: Thank you.

(10:31:21/+00:27:00) Kevin Gross autograph THE COURT: Thank you. Mr. Lewis, the merits of your motion.

(10:31:31/+00:27:10) Adam Aiken Lewis MR. LEWIS: Thank you again, your Honor.

(10:31:32/+00:27:11) Kevin Gross autograph THE COURT: Of course.

Suse's argument on motion to lift stay

(10:31:34/+00:27:13) Adam Aiken Lewis MR. LEWIS: This is a motion by which Suse asks the Court to grant it stay relief to complete an arbitration that has now been pending for four years, and has been stayed at -- essentially at the request of the debtor, for two and a half years in this case.

(10:31:51/+00:27:30) Adam Aiken Lewis This arbitration, contrary to anything you've read, is important to the outcome of these cases. The debtor asserts in the Utah litigation, which is about to get started again in March, that it owns certain copyrights that are critical to its future, to its ability to reorganize. What is asserted essentially in the -- in the Suse litigation is that even if the Utah litigation, uh, if SCO prevails in the Utah litigation by showing that it acquired the copyrights from, uh, Novell, in the Suse litigation we're going to show that the -- it -- No-- uh, SCO turned around and transferred those copyrights. It doesn't own them anymore.

(10:32:36/+00:28:15) Adam Aiken Lewis That's what's at stake in that litigation, your Honor, and those copyrights are at the -- at the core of the debtors' whole reorganization. They've been at the center of the reorganization since this court gra-- the Court has recognized that since the Court granted stay relief, uh, two years ago, almost, for the litigation to resume in -- in Utah, um, and this is the other side of that same Coin. And, um, the --

(10:33:09/+00:28:48) Adam Aiken Lewis If you don't own the copyrights, you can't sue on them. The billions of dollars that we hear the litigation is worth from the trustee, I wouldn't say necessarily evaporate to the last penny -- they might, depending on exactly what -- how broad a ruling is obtained in the Suse arbitration in Suse's favor if that happens -- but a lot of that value's going to evaporate. You can't reorganize these, uh, companies, you can't doing anything with them, until you know the whole picture. And let me quote, your Honor, from paragraph sixteen of the, uh, SCO's reply on SCO's motion to enforce the stay -- to find that the stay applies to the arbitration --

(10:33:55/+00:29:34) Kevin Gross autograph THE COURT: Yes.

(10:33:55/+00:29:34) Adam Aiken Lewis MR. LEWIS: -- from two years ago.

(10:33:56/+00:29:35) Kevin Gross autograph THE COURT: Yes.

(10:33:57/+00:29:36) Adam Aiken Lewis MR. LEWIS: This is paragraph sixteen. In our opposition we argued there was no jurisdiction, personal, and so on and so forth, and then we added at the end that in any case, in commencing the arbitration SCO wasn't -- Suse wasn't really suing SCO, it was just defending itself, and SCO responded, no, this is really offensive, and here's what SCO says:

(10:34:22/+00:30:01) Adam Aiken Lewis "Suse lastly contends that the Swiss arbitration is not stayed because the arbitration is not being brought against the debtor within the meaning of 11 U.S.C. section 362(a). In fact, however, Suse commenced the arbitration and seeks an arbitral award of over a hundred million dollars", and here's the key, "plus a declaratory judgment that SCO does not own perhaps its most valuable asset, the Unix intellectual property."

(10:34:53/+00:30:32) Adam Aiken Lewis How much more clear could it be, out of the -- SCO's own mouth, that the Swiss arbitration is a key to the value of these key assets.

(10:35:03/+00:30:42) Adam Aiken Lewis We don't know exactly what the scope -- what the ruling will be in Switzerland. We don't know what the scope of the ruling will be in Switzerland, but even back two years ago -- two and a half years ago, SCO itself realized, adn said to this court that that ruling could seriously undermine the value of its assets, the key assets. That hasn't changed. The only thing that's changed your Honor is that the tenth circuit has reversed the decision in the district court which held that, um, which held that, uh, Novell owned the copyrights, uh, and never transferred them, and --

(10:35:38/+00:31:17) Kevin Gross autograph THE COURT: Right.

(10:35:38/+00:31:17) Adam Aiken Lewis MR. LEWIS: -- put that question up for grabs again. And so now this issue becomes important.

(10:35:43/+00:31:22) Kevin Gross autograph THE COURT: But, let me ask this, if SCO loses in the Utah litigation in March, wh-- it's scheduled for March eighth, doesn't that moot the arbitration?

(10:35:52/+00:31:31) Adam Aiken Lewis MR. LEWIS: It probably largely moots the arbitration, if not altogether, but it -- but it -- but, what happens if it wins? Then you still have to have this decided. Is -- is -- is the trustee prepared to say that the trustee will agree to a stay of execution and stay of further proceedings based upon the result in Utah that's in the trustee's favor, until the arbitration is decided, which could be, if it doesn't get going soon, could be several years from now? Why not have these proceed on a parallel track?

(10:36:24/+00:32:03) Adam Aiken Lewis MR. LEWIS: The -- the -- the -- the -- the -- the money in an estate, however limited it is, has to be spent for -- for the central purposes of the case, and the central purposes of this case include deciding who owns what, when it comes to this intellectual property. It's at the key, it's at the heart of the trustee's attempt to proce-- prosecute the litigation, or sell the litigation assets, or sell the copyrights, and so on.

(10:36:53/+00:32:32) Adam Aiken Lewis The only consequence, the only consequence of allowing the Utah litigation to go forward and reach a result that is contrary to Novell, without protection for Novell, is that the trustee gets a period of having a leg up in the relationships between the parties, while he can try to capitalize on that, until it gets further resolved in the Suse arbitration, which may be, if it doesn't get started soon, a couple years away, and that is totally unfair. It's a use of the stay as a sword instead of a s-- uh, a defense.

(10:37:33/+00:33:12) Adam Aiken Lewis There's no need to defen-- the trustee has said that the litigation is worth billions of dollars and has to be pursued aggressively now. Well, that means everything that relates to that issue has to be pursued aggressively now. Not just what -- what suits him, or what suits his strategy.

(10:37:54/+00:33:33) Adam Aiken Lewis And, on the question of limited resources, we don't really have any evidence on that subject, your Honor. Um, this is sort of apropos of Mr. Petrofsky's motion. Regardless of how you see the motion, there's really very little in the record at this moment about what's available. There's nothing in the record about how much it would cost. There is nothing in the record about what else is going on with the estate.

(10:38:21/+00:34:00) Adam Aiken Lewis But even if the estate has limited assets, this is -- this arbitration is every bit as important, unless you want the parties to have unequal power, uh, as the Utah litigation. And the only way to have these things come out and decided more or less at the same time, is for -- to get the Swiss arbitration under way. Everybody acknowledges that if stay relief is granted today, the Swiss arbitration isn't going to happen tomorrow. And I want to remind the Court that the arbitration is nearly done. There's one small brief that SCO needs to file, on its -- on its, uh, counterclaims. All the other briefing is in. The tribunal is familiar with everything. All that remains is for the merits hearing, which will take a few days and cost some money -- at half price, I note, as we did in our papers, uh, except for local counsel.

(10:39:20/+00:34:59) Adam Aiken Lewis But, you know, what else is the money here for? That's -- that's the whole point of this estate. Everybody recognizes that. What are we saving the money for, even if its limited? You know, the only party that's going to be harmed in the end if -- terms of the spending of the money, if we win everything, is we'll never see a penny of our own claim. But that's okay with us if it -- that's what it takes to get this resolved. There's no harm to the estate here, and there's no prejudice, certainly, because the estate has to know the answer to this question. The creditors have to know the answer to this question.

(10:39:55/+00:35:34) Adam Aiken Lewis And I think it's very important to get the stay terminated now, so that we can notify the tribunal that it can get things back on track for a -- and schedule a hearing, which probably won't take place until after the Utah trial under any circumstances, but -- but will take place, uh, perhaps, more or less contemporaneously with it. Parties will have to figure out a way to -- to --- to handle that, as they would have anyhow, because they -- neither set of lawyers can be in two places at one time. Um, I think it -- leave it up to the parties to handle that problem.

(10:39:27/+00:35:06) Adam Aiken Lewis But it's got to be done, and I just can't see a good reason not to do it, unless the trustee is seeking an unfair advantage through the intervention and continuation of a stay that has now been in place for two and a half years. And, I add, if the -- if the arbitration is not, uh, resumed, who knows what will happen. It may not happen at all. The arbi-- arbitri-- tri-- tri-- tribunal may just dismiss the proceeding for the moment. All that money that's been spent so far will be wasted. This estate will have to find the money to start again, as will my client, which will be prejudiced by having to do the same thing. There just isn't a good reason not to do this now, your Honor.

(10:41:06/+00:36:45) Kevin Gross autograph THE COURT: Describe for me, Mr. Lewis, so that I understand completely, what remains to be done in that arbitration.

(10:41:14/+00:36:53) Adam Aiken Lewis MR. LEWIS: Two things.

(10:41:15/+00:36:54) Kevin Gross autograph THE COURT: Yes.

(10:41:16/+00:36:55) Adam Aiken Lewis MR. LEWIS: One, the -- SCO has the opportunity to file, uh, a further brief. One further brief, essentially on its counterclaims. And, the merits hearing. That's what remains to be done. Preparation of witnesses, uh --

(10:41:34/+00:37:13) Kevin Gross autograph THE COURT: Any discovery?

(10:41:35/+00:37:14) Adam Aiken Lewis MR. LEWIS: No. It's --

(10:41:36/+00:37:15) Kevin Gross autograph THE COURT: It's all done.

(10:41:36/+00:37:15) Adam Aiken Lewis MR. LEWIS: It's done. Everyth-- Everything, all the record is in, your Honor, except for this final brief. And --

(10:41:40/+00:37:19) Kevin Gross autograph THE COURT: And the --

(10:41:40/+00:37:19) Adam Aiken Lewis MR. LEWIS: -- and the ar-- and the -- and the -- and the arbitration will involve some witnesses and some lawyers that -- in the merits hearing. That's all that remains to be done. There's no great -- I mean it's some cost, no doubt, to both sides, but it's not like we're starting from scratch and then discovery has to be done and all the briefing has to be done, and so on and so forth.

(10:41:58/+00:37:37) Kevin Gross autograph THE COURT: And how many days do you estimate that the merits hearing would -- would take?

(10:42:01/+00:37:40) Adam Aiken Lewis MR. LEWIS: I've talked to my -- my co-counsel, and, um -- who -- who -- who's been involved in that, and I have not. Um, and I -- and I've heard eight days, maybe. Certainly nothing like the three week trial in Utah. Not a jury trial.

(On channel 4:

(10:42:15/+00:37:54) Bonnie G. Fatell MS. FATELL: Did he say eight?

(10:42:16/+00:37:55) Edward N. Cahn MR. CAHN: He said eight. (indiscernible) doesn't sound.

(10:42:22/+00:38:01) Bonnie G. Fatell MS. FATELL: (indiscernible)

(10:42:23/+00:38:02) Edward N. Cahn MR. CAHN: Yeah.

(10:42:27/+00:38:06) Edward N. Cahn And though (indiscernible) can say we start it any week once it's (indiscernible), but we need to have the appellate process resolved.

)

(10:42:16/+00:37:55) Adam Aiken Lewis MR. LEWIS: Um, it's a -- it's a hearing before a three, uh, member, professional panel, according to specified rules, where again, everything is in. It's basically all in except for this last brief, which SCO probably was in the process of getting ready anyhow, but even if it weren't, it's not that much additional to do.

(10:42:35/+00:38:14) Adam Aiken Lewis: That's my pitch, your Honor. Um, it -- just no good reason to put this off any longer, because it will just either give the trustee an advantage if he wins in Utah if we don't do it soon, or drag things out indefinitely, and neither of those things is appropriate. Thank you, your Honor.

(10:42:52/+00:38:31) Kevin Gross autograph THE COURT: Thank you. Thank you very much, Mr. Lewis. Ms. Fatell.

(10:42:57/+00:38:36) Kevin Gross autograph Take your time, Mr. Lewis.

(10:42:58/+00:38:37) Adam Aiken Lewis MR. LEWIS: Thank you.

Trustee's objection to motion to lift stay

(10:43:11/+00:38:50) Bonnie G. Fatell MS. FATELL: Thank you, your Honor. Um, there are some fundamental flaws in -- in Suse's argument, and I -- I wanted to go through those, if I may, for the Court.

(10:43:23/+00:39:02) Bonnie G. Fatell There's no question that the ownership of the copyrights is the fundamental issue that has to be decided first.

(10:43:31/+00:39:10) Kevin Gross autograph THE COURT: Yes.

(10:43:32/+00:39:11) Bonnie G. Fatell MS. FATELL: The question, your Honor, is, where should that be decided, okay. That is issue is squarely before the Utah district court. There is a jury trial set for March eighth, for three weeks. The parties are fully engaged right now in trial preparation.

(10:43:49/+00:39:28) Bonnie G. Fatell We have to remember your Honor, that the Suse arbitration is an action initiated by Suse, not SCO.

(10:43:57/+00:39:36) Kevin Gross autograph THE COURT: Right.

(10:43:57/+00:39:36) Bonnie G. Fatell MS. FATELL: So the comment that SCO would have to start it all over again, I don't quite understand. Um, but, it is to stop SCO from suing Suse for copyright infringement. Now, SCO has not yet sued Suse at this point in time, and we submit that it's illogical to even schedule this arbitration on the Suse claim to stop litigation that hasn't yet occurred, um, before the district court first determines if in fact SCO owns this copyright.

(10:44:30/+00:40:09) Bonnie G. Fatell Why we would have these two issues going on almost simultaneously, uh, makes -- it's just illogical. Um, if SCO is wrong, as was just discussed, and conceded, the Suse arbitration issues are moot. Um, so, it's important to remember your Honor that the action that's going on in the district court is not just about this infringement, but it's also about a claim for slander of title, it's for breach of contract, um, there are a number of claims that are asserted there.

(10:45:09/+00:40:48) Bonnie G. Fatell And I, I need to ask the Court to bear with me as I go back through this timeline, because I -- I think that that's very important here. In 1995, Novell sold the Unix business to Santa Cruz Operations. In 2001, Santa Cruz sold that business to Caldera, which was the predecessor of SCO. In May of 2002, SCO entered into a series of agreements with Suse and others to form United Linux, which is the issues before -- uh, that are -- that are raised in the, um, the Swiss arbitration.

(10:45:45/+00:41:24) Bonnie G. Fatell In March of 2003, SCO sued IBM -- not Novell, IBM -- to enforce its copyrights to the Unix technology. It sued for breach of contract and copyright claims arising out of Project Monterey, which was a joint venture between IBM and Novell.

(10:46:08/+00:41:47) Bonnie G. Fatell Novell, seeing that litigation, directed SCO to waive its litigation and its claims against IBM, alleging, for the first time -- since 1995 when the asset purchase agreement was originally signed -- for the first time, that those copyrights were never transferred to SCO. And Novell publicly asserted that it was the owner of Unix, and consequently, in January of 2004, SCO then sued Novell for slandel-- slander of title. And as we all know that case has been proceeding in the district court in Utah. The complaint was later amended, uh, it added copyright infringement, unfair competition, breach of contract, breach of duty of good faith and fair dealing, and, and, I'm sure some other provis-- allegations that I've omitted. Um --

(10:46:58/+00:42:37) Kevin Gross autograph THE COURT: It's been like a rolling snowball, it's --

(10:46:59/+00:42:38) Bonnie G. Fatell MS. FATELL: It has, your Honor.

(10:46:59/+00:42:38) Kevin Gross autograph THE COURT: -- it just -- it's gotten larger over time.

(10:47:02/+00:42:41) Bonnie G. Fatell MS. FATELL: Over two years later, Suse, in April of 2006, initiated the arbitration with the international tribunal in Switzerland. In April of 2006, also, Novell sought to stay the district court action to permit that Swiss arbitration to proceed, and the district court ruled that the SCO's action against Novell would proceed, and it would only stay those infringement claims that related to the Swiss arbitration, as I understand it, your Honor. I'm not an IP expert, and I was not involved in the details of this, so I may have stated it a little broadly, but that's my understanding of it.

(10:47:44/+00:43:23) Bonnie G. Fatell So the litigation in Utah went forward. And as we all know, Novell prevailed on the summary judgment motions, and Suse was nowhere to be found to prevent -- to -- to interfere and prevent that from going forward.

(10:47:58/+00:43:37) Bonnie G. Fatell In August of 2007 the district court ruled in favor of Novell. Um, it reversed for trial the amount of the royalties due to Novell from SCO, and consequently, in September of '07, SCO filed for Chapter 11. The arbitration was stayed, but, uh, the debtor did come in and ask the bankruptcy court to enforce the stay as to the Suse arbitration, which the Court did.

(10:48:27/+00:44:06) Bonnie G. Fatell And in November of 2007, Novell obtained stay relief from this court to go forward in the district court in Utah to liquidate its claim for royalties. Again, Suse was nowhere to be found to object to that proceeding that Novell was moving forward with, going forward.

(10:48:47/+00:44:26) Bonnie G. Fatell The Court in Utah held a five day bench trial, and awarded Novell approximately two and a half million dollars. SCO took the appeal, the tenth circuit reversed and remanded back for trial, and at the same time Mr. Cahn was appointed as the chapter eleven trustee.

(10:49:04/+00:44:43) Kevin Gross autograph THE COURT: Yes.

(10:49:04/+00:44:43) Bonnie G. Fatell MS. FATELL: Now we have a jury trial set for March, less than two and a half months from now.

(10:49:09/+00:44:48) Bonnie G. Fatell Your Honor, I go through this timeline because it's important for the Court to appreciate that the Unix copyrights that are at issue were transferred, based on SCO's position, in 1995 when that asset purchase agreement was first signed. It wasn't until 2003 that Novell first asserted that it in fact never transferred those copyrights, but it held them. But from 1995, Santa Cruz, and then after 2001, SCO, conducted the Unix business without any challenges. The present dispute with Novell didn't start until 2004. The Suse arbitration didn't start until two years later. And again, Suse has not objected to any of the activities going on when Novell was in the winner's seat. When Novell was prevailing on the summary judgment motions, when Novell went forward with its five-day bench trial on the amount of its royalty payments that were due from SCO, there was no reasons why those issues suddenly needed to be resolved all at the same time.

(10:50:14/+00:45:53) Bonnie G. Fatell So, Novell has had its day in court, your Honor, and it is now time for SCO to have its day in court. And we submit that the merits of that copyright dispute are properly before the district court. That has to be decided first. There's no reason to put the cart before the horse and decide the Suse claims before we know if there's even a copyright that Suse alleged was transferred to it, or to United Linux, several years later.

(10:50:44/+00:46:23) Bonnie G. Fatell Um, we think it is inherently unfair to permit Suse to interfere with the sequence of the trial of these issues.

... (12 MINUTES NOT YET TRANSCRIBED) ...

(11:02:36/+00:58:15) Bonnie G. Fatell MS. FATELL: There was one comm-- I want to just comment -- address a couple of comments that were made. One is that, um, there was a statement that the, um, the trustee has indicated that the litigation is worth billions of dollars, um, and that the litigation is therefore worth bringing. The trustee never [pause] said that it was worth billions of dollars. It did say that, uh, and I'm not quoting, but it did say that it thought that there were, uh, strong claims and that they should be aggressively pursued. Um, we think that, uh, let me just look at my notes if I may, your Honor, um --

(11:03:13/+00:58:52) Kevin Gross autograph THE COURT: Address for me Mr. Lewis's concern, that the stay will be used as a sword rather than a shield, against Suse.

(11:03:26/+00:59:05) Bonnie G. Fatell MS. FATELL: I'm struggling with that comment, your Honor. Um --

(11:03:28/+00:59:07) Kevin Gross autograph THE COURT: Because you haven't sued yet.

(11:03:29/+00:59:08) Bonnie G. Fatell MS. FATELL: We haven't sued yet. Uh, we're entitled to our day in court on the claims that we have brought against Novell. And we're finally getting that day in court. I don't see how we're suggesting that a Swiss arbitration not be able to go forward in an action against the debtor, and somehow we're using the stay as a sword. I -- I -- I'm -- I'm a little tongue-tied to try and respond directly, because I don't understand how we're using the stay as a sword in this case, your Honor.

(11:04:04/+00:59:43) Bonnie G. Fatell Um, there is litigation going forward. We are the plaintiff in that litigation. We're entitled to have that litigation go forward, and if anything we think that the, um, the statements and the actions by Suse to try and interfere with that, and I do say interfere because I think trying to press with this tribunal, this arbitration in -- in Switzerland, is an interference, because it will cause the estate to incur tremendous expense. It will interfere with the logical progression of deciding these issues, which is the ownership of the copyrights. Um, it will cause the professionals of the estate to be torn between two tribunals, probably at the same time.

(11:04:51/+01:00:30) Bonnie G. Fatell Um, so I -- I don't see that we're using this -- the stay and the ability to proceed with our claims as a sword. If in fact we prevail, um, and ultimately we prevail, whether we go after Suse for copyright infringement is an open issue. We have not -- we've not waived that claim, we're not walking away from it, but we certainly are not pursuing it at this time. So, I don't see that they're harmed by the stay remaining in place, your Honor.

(11:05:22/+01:01:01) Kevin Gross autograph THE COURT: All right.

(11:05:22/+01:01:01) Bonnie G. Fatell MS. FATELL: Does the Court have any further questions?

(11:05:23/+01:01:02) Kevin Gross autograph THE COURT: No, Ma'am.

(11:05:24/+01:01:03) Bonnie G. Fatell MS. FATELL: Thank you, your Honor.

(11:05:24/+01:01:03) Kevin Gross autograph THE COURT: Thank you, Ms. Fatell. Mr. Lewis.

Suse's reply on motion to lift stay

(11:05:27/+01:01:06) Adam Aiken Lewis MR. LEWIS: Thank you, your Honor. Um --

(11:05:29/+01:01:08) Kevin Gross autograph THE COURT: In other words, when you were talking about executing on a judgment, you were talking about in the event a lawsuit is brought against Suse, or -- or am I --

(11:05:38/+01:01:17) Adam Aiken Lewis MR. LEWIS: No, your Honor.

(11:05:38/+01:01:17) Kevin Gross autograph THE COURT: Or did I miss your point?

(11:05:39/+01:01:18) Adam Aiken Lewis MR. LEWIS: Um --

(11:05:40/+01:01:19) Kevin Gross autograph THE COURT: And -- and I may have.

(11:05:41/+01:01:20) Adam Aiken Lewis MR. LEWIS: I never accuse a judge --

(11:05:42/+01:01:21) Kevin Gross autograph THE COURT: Well --

(11:05:42/+01:01:21) Adam Aiken Lewis MR. LEWIS: -- of missing the point.

(11:05:43/+01:01:22) Kevin Gross autograph THE COURT: I'm offering you -- I'm offering you that opportunity.

(11:05:45/+01:01:24) Adam Aiken Lewis MR. LEWIS: So, I will blink and answer the question this way, your Honor. If the stay should not be used as a sword, that injunction -- pardon the expression -- uh, in the cases, doesn't limit itself to using it as a sword against the specific litigant that might be involved in the stay situation. Here's what's going on.

... (7 MINUTES NOT YET TRANSCRIBED) ...

(11:12:55/+01:08:34) Adam Aiken Lewis In terms of the costs, your Honor. First of all, we have no real facts in front of the Court. We just have counsel's representations about possible costs. Four hundred thousand dollars, you know, just, four -- and it's only cost four hundred thousand dollars to get almost there. Um, sure, we have a hearing -- it's at half price, and -- and the -- the trial in Utah isn't going to cost anything in lawyers' fees, because that's on contingency. You know, there are going to be costs: travel costs, lodging costs, food costs, maybe expert costs and so on, but we're not having that problem in Utah at all. This is going to be the only thing that's going to drain the estate.

(11:13:37/+01:09:16) Adam Aiken Lewis We don't really know what the estate has or doesn't have. We know it recently settled, uh, uh, we kn-- I know what the number is with Autozone, but --

(11:13:44/+01:09:23) Bonnie G. Fatell MS. FATELL: Objection, your Honor. This document was filed under seal. It is not a matter of public record as to any details.

(11:13:50/+01:09:29) Adam Aiken Lewis MR. LEWIS: I'm not going --

(11:13:50/+01:09:29) Bonnie G. Fatell MS. FATELL: Confidentia--

(11:13:50/+01:09:29) Adam Aiken Lewis MR. LEWIS: -- into details.

(11:13:51/+01:09:30) Bonnie G. Fatell MS. FATELL: -- details other than the fact that it was settled, --

(11:13:53/+01:09:32) Adam Aiken Lewis MR. LEWIS: I --

(11:13:54/+01:09:33) Bonnie G. Fatell MS. FATELL: -- respectfully.

(11:13:55/+01:09:34) Adam Aiken Lewis MR. LEWIS: That's, that --

(11:13:55/+01:09:34) Bonnie G. Fatell MS. FATELL: Tha--

(11:13:55/+01:09:34) Adam Aiken Lewis MR. LEWIS: If you'll --

(11:13:56/+01:09:35) Bonnie G. Fatell MS. FATELL: Settled, period.

(11:13:56/+01:09:35) Adam Aiken Lewis MR. LEWIS: Yeah, if you'll let me finish. What was involved is not clear, but, um, the Court is aware of what the situation is, and we all, uh, and, and -- but we don't know what's going on with the estate. We don't know really what's been going in terms of shutting down operations or saving money or conver-- conserving money.

(11:14:17/+01:09:56) Adam Aiken Lewis But again, I want to emphasize, that -- if -- if there's anything that money is in es-- in the estate for, is to determine what the estate has to reorganize with. What better purpose, what more important purpose, if there are limited resources, than that? None.

(11:14:34/+01:10:13) Adam Aiken Lewis And so, even if it impinges on the estate and some of its business operations, which the operating reports suggest continue to lose money, despite, uh, the fact that, uh, lewis-- loss of money was the whole reason -- one of the main reasons that this case was converted, then maybe it's time to shut those down altogether and save money if that's what it takes to get through this arbitration. Because it's going to have to happen.

(11:14:57/+01:10:36) Adam Aiken Lewis And our point on the shield and sword issue is that if it's done in a way that -- that, uh, offsets the timing sufficiently, the trustee is going to have an unfair advantage for some considerable point of time, with respect to the outcome of the Novell litigation, to use the -- that result against Novell and others, when that result could be undermined by what happens in Switzerland. That's the point.

(11:15:25/+01:11:04) Kevin Gross autograph THE COURT: The -- I under-- I see now. It's -- it's not that they will use the result of -- a favorable result in Utah against Suse, but that they will use that favorable result --

(11:15:33/+01:11:12) Adam Aiken Lewis MR. LEWIS: Yeah, they might use it against us, too. And, and, we have, your Honor, we do have customers, to whom we've sublicensed, besides Novell.

(11:15:41/+01:11:20) Adam Aiken Lewis All of that's up in the air while this sits around. That is a harm to us, um, in addition to everything else. We'd like to know where we stand, and after two and a half years we ought to know where we stand. That's a long time, your Honor, for this to have been on the back burner.

(11:15:57/+01:11:36) Adam Aiken Lewis And while it's true that the trustee has not been around for the two and a half years, the trustee has been in this case for four months now, he's already announced to this court that he believes that the, uh, he's reviewed the litigation in general and decided that the claims that the debtor has against, uh, Novell are meritorious and are worth pursuing vigorously. There's no more need for a breathing space, if there was one when the court agreed that the stay applied and enforced the stay at the beginning of these cases two and a half years ago. It's just not so anymore. It's time to get these cases wrapped up, your Honor, and it's time to get them wrapped up in a manner that is expeditious and fair, not to have them drag out another two years while we decide the Suse arbitration.

(11:16:46/+01:12:25) Adam Aiken Lewis So, I submit, your Honor, that whatever it takes to get that Suse arbitration decided -- and if there is a scheduling issue the parties will deal with it, precisely as they would have dealt with it had there been no bankruptcy. They will -- no one wants to be in two places at the same time, and frankly, I think we can all take judicial notice of the fact that it's not possible to be in two places at one time. And, um, so, uh, we're no more anxious to be trying the arbitration at the same time, than they are. We would find a way, as they would, to work with the tribunal, work to district court, or whatever it's going to be, to make a schedule that works.

(11:17:25/+01:13:04) Adam Aiken Lewis And, uh, and frankly, if we don't get the arbitration started now -- if we don't get stay relief so that we can go tell the arbitra-- the tribunal, that we're clear to go, let's talk about what needs to be done, let's talk about a schedule. They have to fit their schedules too. There are three arbitrators. They're not just sitting around waiting for us to say okay guys, see you next week. Um, that being so, uh, it's not likely that the two are going to conflict anyhow, but if there -- if it starts to develop that way, the parties will obviously want to fix that, because, while it may be a burden on the trustee to try to try two cases at the same time, it's a burden on us too. We're not too anxious to do that. It's no different for us.

(11:18:06/+01:13:45) Adam Aiken Lewis So the notion that we're trying to interfere, uh, because we've suddenly got interested in this again, just, in -- in light of the history of why we're where we are today, which is not our fault, uh, and what we might want to do and how we could do it, it -- it, just makes no sense that we want to interfere. The only thing that makes sense is that the trustee is looking for a period of time where he has a judgment he can use as a broadsword, uh, while hi-- the -- the risk of being undermined in the arbitration remains somewhere in the future, and I think that's totally unfair and inappropriate for a case that's two and half years old, where the trustee's already decided where he wants this case to go. Thank you, your Honor.

(11:18:51/+01:14:30) Kevin Gross autograph THE COURT: Now let's a-- let's assume --

(11:18:52/+01:14:31) Adam Aiken Lewis MR. LEWIS: Yeah.

(11:18:53/+01:14:32) Kevin Gross autograph THE COURT: -- that I granted limited stay relief, to permit the trustee to file a -- a -- the -- the final brief that you've mentioned, Mr. Lewis, um, in the arbitration, and to commence scheduling -- the scheduling process, um. Would that be a workable solution here? In other words, I'm -- I am concerned about a -- a two front, sort of, sort of fight going on. Um, particularly for the trustee, you know, where -- where, uh, the stay r-- the -- the stay is desi-- who the stay is designed to protect for the moment.

(11:19:38/+01:15:17) Kevin Gross autograph But at the same time, I don't want to face the situation where, following that jury trial, assuming, for -- for the-- for this purpose, that SCO is successful, that there is any substantial delay in proceeding with the arbitration. Um, for example, I would not -- I don't -- I, and you know, I -- I perhaps shouldn't, uh, indicate my inclination, but I wouldn't be inclined to continue the stay while an appeal was pending, because we all know how long that can take, that process, and, uh, if for any reason there was then, uh, a remand for further proceedings in the trial court, you know, then we have delay upon delay. So, I -- I do appreciate, um, the concern about delay.

(11:20:25/+01:16:04) Kevin Gross autograph At the same time, just as a sort of practical matter, it doesn't quite make sense to be, uh, litigating in Utah, when a decision against SCO will probably moot that whole arbitration, and, uh, and the costs attendant to that arbitration are obviously, um, of concern to the court.

(11:20:52/+01:16:31) Adam Aiken Lewis MR. LEWIS: You-- your Honor.

(11:20:53/+01:16:32) Kevin Gross autograph THE COURT: But I'm trying to fashion whether some limited stay relief can be both efficient and fair.

(11:21:00/+01:16:39) Adam Aiken Lewis MR. LEWIS: Your Honor, I guess -- I understand the Court's concern, in terms of there being two -- two fronts. As I've said, we're no more anxious for that to happen than the Court is -- than the trustee is. We can't be in two places at one time. Yes, Morrison and Foerster is a big firm and all that good stuff, but, first of all, um --

(11:21:18/+01:16:57) Kevin Gross autograph THE COURT: The witnesses, and the --

(11:21:19/+01:16:58) Adam Aiken Lewis MR. LEWIS: Yeah, and you got to get people scheduled, and then furthermore, your Honor, um, uh, you know, you -- you don't just start picking people off the vine this late in the case and say, okay, go fight 'em in Switzerland, you know -- uh, who are -- what's your name? Go fight 'em in Switzerland.

(11:21:33/+01:17:12) Kevin Gross autograph THE COURT: Right.

(11:21:33/+01:17:12) Adam Aiken Lewis MR. LEWIS: You know, you're going to use the same people, because it's the only thing that makes sense, not only from a cost point of view but from a result point of view.

(11:21:39/+01:17:18) Kevin Gross autograph THE COURT: Yes.

(11:21:40/+01:17:19) Adam Aiken Lewis MR. LEWIS: So we have the same problem. And, as I've said, your Honor, I am confident that had there been no bankruptcy and there had been a conflict in the scheduling, the parties would have figured out a way to work it out. I imagine they would do the same thing here, because, it's survival. It makes no sense to do anything other than that. Um, and I would suggest, your Honor, that the best result is simply to grant stay relief, and if there -- a problem develops, let the parties come back before this court if they need to.

(11:22:07/+01:17:46) Adam Aiken Lewis But let's -- I'm -- what I'm concerned about, your Honor, is if you grant some kind of limited stay relief, um, then the tribunal's going to get the wrong message about what's going on, and who knows what the effect is going to be with a tribunal that's been waiting a long time to -- to know what's going on. I would rather just have stay relief with a proviso that if a problem develops, the parties will of course confer, and if they confer, and we are somehow intransigent, which we won't be, but if we were, then the trustee would be coming in here to -- complaining about that, um, and I don't think we'd want that to happen even if we were otherwise inclined to be intransigent.

(11:22:46/+01:18:25) Adam Aiken Lewis Um, and I'm sure the tribunal will work with us as well, to try to schedule something that makes sense, so we can get the witnesses to the right places at the right time, without being up twenty-four hours a day.

(11:22:57/+01:18:36) Adam Aiken Lewis Um, so I would ask the Court not to put any limitations, just to grant us stay relief. You can give us some guidance, unofficially on the record, what you'd like to see, and we'll try to adhere to that guidance, but I am concerned about stay relief that is limited in some way because what the tribunal may read from that is, you know, we're not going ahead because, you know what, it's going to get yanked from us anyhow. We're just -- we're just not interested. And then we are going to have to start all over again, and it doesn't matter whether we s-- whether we started the, uh, the arbitration, or they started the arbitration, both parties are going to have to sink money into it again if it has to happen again.

(11:23:33/+01:19:12) Edward N. Cahn (indiscernible comments by Cahn on channel 4)

(11:23:34/+01:19:13) Adam Aiken Lewis Now clearly if we win in Utah, as we hope to do, then, um, then it seems to me, you know, we're probably going to say, you know what, we -- we really don't need this arbitration any more, or we'll put it off because we don't need to bear the expense. That's pretty much what happened when the bankruptcy was filed and the Court determined that the stay applied, because we'd -- we'd won on the basic ownership issues. That's not so anymore, and the -- and the circumstances have changed dramatically.

(11:24:05/+01:19:44) Adam Aiken Lewis This case, and I want to emphasize this again -- I know the Court's aware of it, but -- is two and a half years old. When are we going to have this decided? When are we going to know where we stand? I don't think anybody can contest that whatever the exact scope of the ownership issue and the resulting right to sue for slander of title and copyright infringement and all that other stuff, uh, the exact scope of that, we -- we all don't know, uh, but I think it's fair to say, and the debtor admitted this in its papers way back when, that a favorable reesult for us in Switzerland is going to impinge seriously on the value of those copyrights, even if -- even if SCO owns them.

(11:24:46/+01:20:25) Adam Aiken Lewis So it's not like the copyright issue is teed up for one place and not for another place. It's teed up in both places for purposes of this court. That's why the district court deferred to the arbitration rather than trying the thing itself, because it didn't make any sense to try it itself. It's not going to try it this time either -- whether, whether SCO owns the copyrights for purposes of suing on infringement, because it transferred them to, um, United Linux. That's an issue that was coming up in the district court, and basically the district court said, you know what, that's an arbitration issue, I have to send this to arbitration, and I'm not going to bother deciding it, even though it's important to decide.

(11:25:27/+01:21:06) Kevin Gross autograph THE COURT: Right.

(11:25:28/+01:21:07) Adam Aiken Lewis MR. LEWIS: And the -- and -- and the district court -- a little bit of selective quotation from the district court's opinion doesn't change the fact that the district court clearly recognized the interplay between the two.

(11:25:37/+01:21:16) Adam Aiken Lewis So I urge the Court to grant stay relief today, with some guidance for the parties about cooperating, and let's get the -- let's get the show on the road, so we can get this case taken care of, one way or the other, before it goes on forever. Thank you, your Honor, --

(11:25:53/+01:21:32) Kevin Gross autograph THE COURT: Thank you.

(11:25:53/+01:21:32) Adam Aiken Lewis MR. LEWIS: -- I appreciate the time.

(11:25:54/+01:21:33) Kevin Gross autograph THE COURT: Thank you, Mr. Lewis, it's been helpful -- very helpful, your comments. Yes, Ms. Fatell.

Trustee's sur-reply on motion to lift stay

(11:25:59/+01:21:38) Bonnie G. Fatell MS. FATELL: Your Honor, if I may, um. First I do want to acknowledge that Mr. Normand is on the phone and I don't know if he wanted to add anything, if I may ask your Honor, to anything that's been said so far. May, may we ask Mr. Normand if he wants to add anything, since he is more familiar with the Suse litigation?

(11:26:20/+01:21:59) Kevin Gross autograph THE COURT: Mr. Normand, do you have anything to add to at least, what work remains to be done in the scheduling of the arbitration?

(11:26:29/+01:22:08) Edward John Normand MR. NORMAND: Your Honor, this is Ted Normand. I would make two points, very briefly. In part I was concerned that the first point has been mooted, given the direction that your Honor has at least indicated he may be going, but I did want to underscore, that on the shield/sword point, we are not currently pursuing any claims for what Mr. Lewis called infringement. As Ms. Fatell has specified, the district court has stayed our claims against Suse, and we don't dispute that. So, this trial is not a claim for infringement, nor are we pursing any claim in any other venue for infringement, nor after the trial, if we were fortunate enough to win, would we be able to tell the world that we had just proved copyright infringement. So on the shield/sword argument, I think that falls flat under the facts.

(11:27:22/+01:23:01) Edward John Normand On the second point, and this may be more for Ms. Fatell to address, and she may be on the point of saying this, I didn't follow Mr. Lewis when he responded to your Honor's last question. I -- I don't know why we would allow for even the possibility of not only parallel proceedings, but a proceeding in the arbitration close in time at all to when the trial is resolved, and -- and again maybe I've misunderstood Mr. Lewis, but it would seem to me to make more sense that the Court would enter some order that made clear that the arbitration, um, shouldn't proceed within a certain period of months after the trial, or else all the concerns that everyone has been talking about would be implicated.

(11:28:05/+01:23:44) Kevin Gross autograph THE COURT: Thank you, Mr. Normand. Just help me out with one thing, and that is, uh, the brief that everyone has been talking about, which remains to be submitted in the arbitration, uh, what is involved in the filing of that brief?

(11:28:18/+01:23:57) Edward John Normand MR. NORMAND: Well, to some extent, um, I'm not the best person to answer that question, but I may be, relative to the people, uh, available to your honor, the best person to answer the question. I'm not the lead attorney on that case, --

(11:28:29/+01:24:08) Kevin Gross autograph THE COURT: Okay.

(11:28:29/+01:24:08) Edward John Normand MR. NORMAND: -- but my understanding is that is a lengthy, substantive brief that, uh, is meant to reflect all the evidence that, uh, one, uh, has gathered and plans to present to the, uh, tribunal. I don't want to overstate it, but I think it's the equivalent of, uh, a lengthy summary judgment brief. I think the real expenses that, uh, Ms. Fatell has pointed out would be, uh, travel, uh, the length of a two-week trial, where, you know, presumably you show up a week early and, um, get ready. And, uh, paying the arbitrators, which is, uh, no small cost. And, um, those would be, um, uh, I think, costs that would exceed, uh, what would already be the significant costs of putting together, uh, the final brief.

(11:29:14/+01:24:53) Kevin Gross autograph THE COURT: All right. Thank you, Mr. Normand. Ms. Fatell, yes.

(11:29:18/+01:24:57) Bonnie G. Fatell MS. FATELL: Your honor, um, since I am gathering from the Court the direction that you may be going --

(11:29:24/+01:25:03) Kevin Gross autograph THE COURT: I really -- when I ask a question, it really is a question, you know --

(11:29:27/+01:25:06) Bonnie G. Fatell MS. FATELL: Okay, well, then --

(11:29:28/+01:25:07) Kevin Gross autograph THE COURT: I -- I --

(11:29:28/+01:25:07) Bonnie G. Fatell MS. FATELL: -- then I'm going to respond to --

(11:29:29/+01:25:08) Kevin Gross autograph THE COURT: Please.

(11:29:29/+01:25:08) Bonnie G. Fatell MS. FATELL: -- some of the comments --

(11:29:30/+01:25:09) Kevin Gross autograph THE COURT: Please.

(11:29:30/+01:25:09) Bonnie G. Fatell MS. FATELL: -- that were made.

(11:29:31/+01:25:10) Kevin Gross autograph THE COURT: Yes.

(11:29:31/+01:25:10) Bonnie G. Fatell MS. FATELL: Um, uh, when the -- when the argument was made that, uh, Suse has presented enough to satisfy the third prong that the like-- there's a likelihood that they might prevail on the merits. Your Honor, all they've done is acknowledged that there's a dispute. And if that were the -- the standard and the threshold, then any dispute that involved two parties and one of which was the debtor, would meet that threshold, to say I'm likely to prevail because I disagree with the debtor. Um, so I don't think that's sufficient to meet that prong, and, um, even though I know it may not be a very high bar, there is a bar there.

(11:30:11/+01:25:50) ... (4 MINUTES NOT YET TRANSCRIBED) ...

(11:34:22/+01:30:01) Bonnie G. Fatell Um, but, your Honor, to grant stay relief and throw this into, really a black hole, I think would be very detrimental to this estate. Uh, we've already acknowledged that the relief should be denied without prejudice for them to come back at the appropriate time. We don't know what will happen in March. We don't know how the trial will go, what the parties will resolve, if anything, what the court will rule, where that will go. There needs to be a time, after that is completed, to see where the dust settled, before we launch into an action by Suse to stop us from suing them when we're not suing them.

(11:35:04/+01:30:43) Bonnie G. Fatell I'm -- I'm just really struggling with how that makes any sense, your Honor, and so, again, I would urge the Court not to grant stay relief at this juncture, and -- and I think we are sort of talking about crafting -- well, the Court is talking about crafting, or fashioning, some kind of limited stay relief, almost in a vacuum, because, again, we don't know what will transpire between now and the conclusion of that trial. And to try and set a scheduling order, or put the parties to work on -- on agreeing on a scheduling order in that black hole to me seems like it would -- it would not be very productive, and so I -- I would suggest that we see what happens with the litigation on this underlying issue, and for all we know, maybe Suse's going to say, you know what, I'm not going to -- not going to stop them from suing us, because they're not suing us. They may see the light at some point and say, there's no point in proceeding with this arbitration, that, you know, this is going in a different direction and this is -- this is not an issue for us anymore. We just don't know.

(11:36:10/+01:31:49) Kevin Gross autograph THE COURT: Right.

(11:36:10/+01:31:49) Bonnie G. Fatell MS. FATELL: And, so I -- I don't think it makes sense, um, to burden the -- the estate with those issues at this point in time. And with that I will sit down.

(11:36:19/+01:31:58) Kevin Gross autograph THE COURT: Thank you, Ms. Fatell.

(11:36:19/+01:31:58) Bonnie G. Fatell MS. FATELL: Thank you.

(11:36:20/+01:31:59) Adam Aiken Lewis MR. LEWIS: Your Honor, may I --

(11:36:21/+01:32:00) Kevin Gross autograph THE COURT: Mr. Lewis, you may, certainly. We've heard from Mr. Normand, and --

(11:36:22/+01:32:01) Adam Aiken Lewis MR. LEWIS: I appreciate it, your Honor. You're very --

(11:36:24/+01:32:03) Kevin Gross autograph THE COURT: -- and --

(11:36:24/+01:32:03) Adam Aiken Lewis MR. LEWIS: -- patient.

(11:36:24/+01:32:03) Kevin Gross autograph THE COURT: It's your motion, and you get the last word.

(11:36:27/+01:32:06) Adam Aiken Lewis MR. LEWIS: Okay. I wish that worked at home, your Honor.

(11:36:30/+01:32:09) Kevin Gross autograph THE COURT: I do too.

Suse's sur-sur-reply on motion to lift stay

(11:36:31/+01:32:10) Adam Aiken Lewis MR. LEWIS: Can we make that a rule of court? Um, your Honor, um, a couple of things.

(11:36:40/+01:32:19) Adam Aiken Lewis The idea that we're asking for two bites of the apple. We already have two bites of the apple. That's exactly what the district court decided. It was going to decide this issue, and then when we brought to its attention it's really an issue for arbitration it said go arbitrate, but it knew it was an important issue for the Utah litigation. The Utah litigation is essentially not over until this issue is decided. In fact, uh, one wonders if you can really have a final judgment in Utah until this issue is decided. We'll come to that some day, I suppose, but -- but, you know, that's what the court did, it said, you know, I'm going to send this off, and you -- basically bring the result back and we'll see where we are.

(11:37:20/+01:32:59) Adam Aiken Lewis So, um -- and I don't hear the trustee, anywhere along the line, saying, okay, fine, we won't seek to enforce judgment in the mean -- we'll just let things be cool, as it were, until, uh, until the arbitration is decided as well, if we win in Utah. I don't hear that. I only hear, no, don't -- don't do anything yet.

(11:37:44/+01:33:23) Adam Aiken Lewis Now, on -- on the, uh, on -- on the, uh, uh, question of, um, uh, how long it's going to take. It may take a little while to write the brief. But you know, your Honor, it's going to take even longer, and things are going to be even worse, the more time we take. And if we don't get this started now, you know, the -- the -- the tribunal may look at this and say, you know what, this is just going to go stale, you guys come back and we'll form another tribunal some day if you ever apply, and -- and then we'll be two or three years off. We're just talking about getting this thing back on track, your Honor. We're not talking about trying it tomorrow. If we wait until we see what happens in the Utah trial to even think about getting started again, we may be talking about doing something a couple of years from now.

(11:38:27/+01:34:06) Adam Aiken Lewis And -- and where will we be? We'll be sort of tied up. The idea that somehow because the infringement claims aren't teed up at the moment, that the Ut-- the, uh, Swiss arbitration is irrelevant, is just nonsense. The value that SCO has, its whole business model, is to sue people for infringement based upon the copyrights. That's what it does. The -- the rump businesses it's had, that the Court has heard about in the motions to convert, um, of servicing some Unix users and so on, that's not a big businesss, that's not what this company is about.

(11:39:03/+01:34:42) Kevin Gross autograph THE COURT: No.

(11:39:05/+01:34:44) Adam Aiken Lewis MR. LEWIS: Um, it's about this litigation. The Court recognized this, when the Court granted stay relief for us to finish the Utah trial, and the debtor recognized it, once again, in arguing that the stay should apply to the Swiss arbitration.

(11:39:22/+01:35:01) Adam Aiken Lewis It's not our fault that things have gotten stale. It's the debtor's fault. The debtor filed a bankruptcy and invoked the stay. Why let them get more stay, why take the risk of further delay, why take the risk of further costs, beyond what is unavoidable right now, by further delaying things.

(11:39:41/+01:35:20) Adam Aiken Lewis And on the final point, your Honor, on terms of -- of what the Court should do today. I don't think this Court can -- can say that Novell has been outrageous, or unreasonable, or uncooperative in this case. In fact, we've not been here before this court very often, for the most part. Um, we've granted extensions when they were asked for, as we did in this instance. I ask the Court to trust us to behave professionally in terms of scheduling. And if we don't, the trustee will be in a position to come back and complain to you. I don't want to be the one who defends that. I don't think it'll happen.

(11:40:20/+01:35:59) Adam Aiken Lewis Um, but if you don't turn us loose now, to start working with the arbitrator, to set a schedule that works for everybody, which is what we would do anyhow, uh, then we're going to be here for another two years. Now, if -- and the chances of this happening before the trial in Utah, it seems to me, um, are virtually nil. No one really argues that. And so if we win in Utah, as I fervently hope we -- we -- we do, then there probably isn't any need for an arbitration, and -- and -- and if, uh, and if we're, uh, determined to go ahead anyhow, having gotten stay relief, then the trustee can come in and ask the Court for some further relief, on the grounds that it's really -- -- at that point it really is a waste of the assets of the estate, maybe.

(11:41:11/+01:36:50) Adam Aiken Lewis Why anticipate all of that? Let's just get the thing back on track, so that we can get it rolling, and get it scheduled. If there are problemes with the -- This court left it to the parties to work out schedules for the, uh, discovery and so on that had to -- uh, in the sale and conversion motions.

(11:41:29/+01:37:08) Kevin Gross autograph THE COURT: Right.

(11:41:30/+01:37:09) Adam Aiken Lewis MR. LEWIS: And the Court will recall that was a difficult problem because of the short fuse and we actually had to have a hearing or two. But it worked. The parties weren't outrageous. We certainly weren't outrageous. There's no reason to suppose we will be again.

(11:41:42/+01:37:21) Adam Aiken Lewis So I suggest, your Honor, that we just get stay relief. Let's go tell the tribunal that we we're free to proceed; we need to -- we have some scheduling issues; we want to schedule this in a way that, uh, comports with the schedule in the Utah trial. And, let's see where it goes. But if we -- if we go to the Utah court -- the -- the tribunal with -- with this thing that says, the -- the trustee -- the, uh, the Court has given us, uh, stay relief to tippy-toe, they're just going to throw up their hands maybe and say, you know what, we don't want to do this, let's just kill this thing and you guys come back when Judge Gross tells you to come back.

(11:42:18/+01:37:57) Adam Aiken Lewis I think that the only appropriate result today is to grant us stay relief. We will understand the need to schedule in a -- a rational fashion, as we would have had there been no bankruptcy. There is no indication -- we've not heard anything suggested today -- that the scheduling of the trial in, um, in, uh, 2007, and the arbitration in 2007, was done in a way where Novell was trying to -- or Suse were trying to bury the debtor. Why would we do that now in front of this court? Thank you, your Honor.

Motion to lift stay taken under submission

(11:42:52/+01:38:31) Kevin Gross autograph THE COURT: Thank you. Thank you, Mr. Lewis.

(11:42:54/+01:38:33) Kevin Gross autograph Well, I was, I was really hoping to decide it right here and now, but I'm going to just -- I do want to give it a little bit more thought, and I want to go back, having been sort of pointed to some of the arguments and statements in the documents, to go back and actually reread those statements in the context of your arguments.

(11:43:13/+01:38:52) Kevin Gross autograph I don't think it's going to be -- uh, it's not going to take long to issue a ruling. Um, I certainly am sensitive to the fact that the arbitration has been stayed for a long time now, but I'm equally sensitive and -- and concerned -- to the fact that we have a trial date in a very substantial matter, um, which may moot the arbitration -- uh, that that is -- is forthcoming, it's, uh, two months away, and uh, um.

(11:43:50/+01:39:29) Kevin Gross autograph But I do want to give it some thought at least as to what, if any, sort of limited relief I might be able to, um, to fashion, or, in the absence of limited relief, whether or not to lift the stay and, and sort of, uh, allow the matter to proceed on a long leash, but with the understanding that if, uh, if it got out of hand, or were, um, inequitable in some way to -- to -- to -- to the debtor, I could sort of -- I hate to say it, but yank back on the leash a little bit. So, um --

(11:44:24/+01:40:03) Adam Aiken Lewis MR. LEWIS: And I don't want to be here when you do that, your Honor, so it won't happen.

(11:44:27/+01:40:06) Kevin Gross autograph THE COURT: All right. All right, I'll let you be on the telephone. So, let me just see where we come out in my thinking a little bit further, and, uh, and I certainly as I say, I'm not going to delay, uh, matters by delaying my ruling, so you will hear from me within the next week. And I do appreciate it. In the meantime, I hope it was a good year for everyone. I hope it will be a better year, even, in twenty-ten, and I wish you a happy new year.

(11:44:53/+01:40:32) Adam Aiken Lewis MR. LEWIS: Thank you, your Honor, we wish the same to you.

(11:44:54/+01:40:33) Kevin Gross autograph THE COURT: Thank you.

(11:44:55/+01:40:34) Bonnie G. Fatell MS. FATELL: We all do, and thank you for your patience today.

(11:44:57/+01:40:36) Kevin Gross autograph THE COURT: Absolutely, counsel. Good -- good day to you.

(11:45:01/+01:40:40) *** RECESS ***


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