SCO Files for Chapter 11 Bankruptcy

Can you say "the SCO, the" in German? writes "Trading of SCO's stock has been halted on news that SCO has filed for Chapter 11 Bankruptcy. This move just so happens to fall on the eve of SCO's trial with Novell. One would think that their prior boasts were mostly bluster, that they believe they have almost no chance of prevailing at trial, and that they're now desperate to protect their executives from SCO's creditors while seeking yet another delay. From the release: 'The SCO Group intends to maintain all normal business operations throughout the bankruptcy proceedings. Subject to court approval, SCO and its subsidiaries will use the cash flow from their consolidated operations to meet their capital needs during the reorganization process. "We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business critical operations," said Darl McBride, President and CEO, The SCO Group. "Chapter 11 reorganization provides the Company with an opportunity to protect its assets during this time while focusing on building our future plans."'"

What SCO told the court

[rewt66]

I seem to recall[*] that SCO told the court that there was no need for a constructive trust to protect Novell's money, since they (SCO) were in no danger of bankruptcy.

Now SCO is facing the exact same judge on Monday morning over the issue of how much money they owe Novell. I predict an interesting day in court ;-)

* OK, I was reminded of it by something someone (anonymous, so I can't give credit) said on Groklaw.

Caldera?!

[Anonymous Coward]

Hmm, can /. finally get rid of that Caldera logo? Maybe the articles that are only in that category can be archived somewhere. Now what would be a good spot? Me thinks /dev/null will do fine -.-'

Pump and dump

[l2718]

From the point of view of SCO's execs, this has been a pump-and-dump scheme: they filed the IBM (and Novell) lawsuits, got the stock to soar on the hype and in the years since have been quietly selling their stock. But there are others with a stake here (remember all the cash infusions MS arranged?), who probably want the lawsuits to continue. I wonder what the judge thinks now about Novell's motion for a constructive trust?

Re:Who are these people?

[Bill Dimm]

Just two weeks ago:
Sberbank (Savings Bank Of The Russian Federation) Chooses SCO's OpenServer 6 to Upgrade Thousands of Servers [yahoo.com].
They must be feeling really good about that decision now.

Re:w00t!!!!

[Anonymous Coward]

For those of us who aren't regular Groklaw readers, what is the red dress?

Re:Chapter 11

[peragrin]

This is because Novell recently claimed that it should recieve 100% of the Sun & MSFT Sco Source deals plus 7% interest. The APA SCOX loves so much says Novell recieves 100% with Novell refunding 5% back as adminstrative fees.

Either way 95% is roughly 5 million dollars more than all of SCO's value Liquidated. I wonder if the bankruptcy trustee can declare Darl Mcbride's million dollar bonus for those two sales as invalid and ask for it back? I do hope so.

STILL claiming UNIX in the press release!

[Tracy Reed]

The press release http://ir.sco.com/releasedetail.cfm?ReleaseID=264124 [sco.com] says:

"SCO owns the core UNIX operating system, originally developed by AT&T/Bell Labs and is the exclusive licensor to UNIX-based system software providers."

Those SCO guys are a real pantload! Hahahahah

Does anybody find it odd...

[br1an.warner]

That in their press release, they say "SCO owns the core UNIX operating system..." ? Maybe they missed what happened in August? Link to the article on Groklaw [groklaw.net]

Re:Everything I know I learned in kindergarden...

[R2.0]

My coworker tells the same story, but with a different ending. His father made his sister promise NOT to pinch him (sharpened fingernails, drawing blood), and told Larry, in her presence, that he was never to hit his sister, because she was a girl. The penalty would be a whipping with a peach switch.

15 minutes later, she struck again, and Larry punched her in the afce as hard as he could, knocking her down and bloodying her nose. His father, as he was preparing to whip him, ebmoaned Larry's lack of control. Larry responded that he hadn't lost conrol; on the contrary, he had considered it in depth and decided that the punisment was worth it. His Dad said he respected his decision, even though he believed it was the wrong one, and proceeded to whip his ass soundly.

But his sister never went near him again.

Maureen O'Gara / G2 Computer Intelligence

[Anonymous Coward]

"G2 Computer Intelligence" is listed as a debtor by SCOX in their filings, so now we know she's the paided little whore we always suspected her to be.

That's right Maureen, you're fucking out of the fucking closet.

Re:Judge Kimball has next week off

[LWATCDR]

Interesting but will it still be a civil matter? If they made the statement in court that there was no need to put Novells money in a trust because there where not going to file for bankruptcy isn't possible contempt of court or perjury?
If so then then this may not be a civil matter.

Re:Sad, sad news

[Mad Merlin]

They are literally filing for bankruptcy and assuring their customers that they are fine and can rely on them at the same time...

Ah, but it's easy to placate your customers when you don't have any.

Re:Maureen O'Gara / G2 Computer Intelligence

[nuzak]

I think you mean creditor, but yeah there they are / she is as a creditor.

What's funny is how many restaurants are in the list of unsecured creditors. Don't these guys even pay their restaurant tabs?

Need to Look at the Big Picture

[still-a-geek]

Even if SCO loses for good, there is Novell. While it's great that Novell will get the rights to Unix, in the meantime, Microsoft has a vested interest with the company. There may be a day when Microsoft will just buy out/absorb Novell, and MS will own the Unix rights. And MS being a company with really deep pockets and ever more resources, may actually pull off lawsuits ala RIAA against any Unix/Linux user. MS funded SCO indirectly to "help" with the lawsuit. It seems that MS knew SCO was going to lose. Thus, a partnership with Novell with a sweet deal it could not refuse was made. MS does not lose here. MS wins either way. I don't believe this is over by a long shot.

Re:DFWT

[XSforMe]

More like Dont Fuck With the Nazgul [wikipedia.org]

Bad Faith

[maz2331]

Cross-post from Groklaw... I did a quick Google of "bad faith" in regards to bankruptcy filings, and there is apparently precident regarding exactly the same situation as SCO is in. Using bankruptcy just as a tool to thwart other litigation is apparently a BIG no-no. From a non-authoritative source: http://touchngo.com/lglcntr/usdc/bnkrptcy/briefs/bnk45.htm [touchngo.com] "One area ripe for a bad faith dismissal is when the debtor is using a bankruptcy filing as a litigation tactic to either forestall litigation or seek a forum perceived to be more friendly. In Marsch, the court upheld a 'bad faith' dismissal where the chapter 11 petition was filed solely to delay collection of a judgment and avoid posting an appeal bond where the debtor had the financial means to pay the judgment." Also, in addition to dismissing the bankruptcy case, the bankruptcy courts may well impose the "nuclear" sanction - barring SCO from asserting another bankruptcy claim in the future. This would leave them totally exposed to the full wieght of any other judgements, with no way out at all - not even Chapter 7 liquidation. In other words... "you're on your own, Darl..." Is anyone with any expertise in bankruptcy proceedings around to help the community figure out exactly how this works? Something tells me the bankruptcy filing is not going to fly for long, but may expose SCO's legal team to some serious malpractice liability. And... maybe after this little road bump is resolved we'll finally see Kimball bring some real sacnctions down on the SCO side too. This is just getting beyond ridiculous.

Re:Sad, sad news

[wwphx]

There's both direct and indirect employees. A friend of mine installs vertical app systems based on SCO. The software was developed by his employer ages ago before SCO was anywhere near buying Unix from Novell, much less the McBride invasion. He works for a legitimate company who based their business on an OS provider who basically went evil. Now Richard is in a slightly precarious position. He has lots of systems to maintain, but now all of these customers are edgy because they hear bits and pieces regarding SCO, and they know their business depends on it.

Rich's employer sells a similar package based on Windows, but just the two platforms. Care to guess which is the more stable platform? It might have been wise of the company to port their system to a Linux distro, but they are a small company and probably didn't have the resources.

It's not like Rich is in danger of losing his job next week, but it adds to the tension at the office and makes work life that much more unpleasant.