What about settling the SCO v Novell law suit?

Normally, both sides to major litigation do not even seriously consider settling the action until after any summary judgments have been resolved. And, of course, in the SCO v Novell case, Novell won hands down in summary judgment but that decision has been removed and the case remanded back to the trial court for a jury trial.

Now that is just fine and dandy in most cases. Particularly if they are equally funded for the litigation. But, SCO remains bankrupt. Even worse off than before because the decision requiring SCO to pay Novell several millions was affirmed. So now they have to pay up.

And along comes a trustee in bankruptcy to replace the “debtors in possession”. That would be the old SCO management leaving by they back door. They are out as soon as the court can appoint the trustee. Some of the employees may remain in various capacities for the some indefinite period of time but all of the major decisions will be made by the trustee having the approval of the bankruptcy court. The normal course of events requires the trustee deciding what to do about the major issues of the day and having the court approve the decision.

And of course, since the trustee has nothing to gain from hiding things from the court or trying to sneak around spending money on key projects while the company goes down the tube, the court knows that it will be kept fully informed. The relationship between the court and the trustee is really one of trust. The court appoints the trustee. And the court relies upon that trustee to keep it fully informed. No more secret agendas.

But, what about the possible settlement?

As mentioned, once a case gets past the summary judgment stage and a trial is imminent, both parties take the possibility of a settlement much more seriously.

But, in this case, SCO has no money to offer in a possible settlement and it has no money to pursue two major cases. And the trustee has to think about both the Novell and IBM cases as well as Red Hat and AutoZone?.

So even though some of the summary judgments are remanded back to the trial court, SCO is in no financial condition to offer any money in settlement or spend any money to proceed with the litigation. So how can SCO possibly settle? And to make matters worse, both Novell and IBM have counterclaims. Counterclaims that SCO simply can not pay off. The Red Hat and AutoZone? cases are pending as well. They all cost money. Money that the trustee is going to know they do not have.

The outgoing SCO management can crow all they want claiming some form of vindication. But, the truth is that removing a summary judgment against you is a minor victory indeed. Particularly if you can not pay for the costs of going to trial. Not to mention the fact that a trustee will be making that decision. A trustee that the bankruptcy judge suggested have some litigation experience. And I assume that means experience with the costs of pursuing major litigation against well funded opponents. Opponents who themselves can appeal any adverse decision against them.

This is a serious problem for SCO. SCO simply can not settle to make the cases go away. Certainly, both Novell and IBM think they have money coming before they are going to settle. The outgoing SCO management in their effort to force the nuisance law suits upon both Novell and IBM, created financial harm. And, now if they loose, those damages have to be paid off. But, alas, SCO is broke.

And now it would appear that any possible settlement of the SCO cases against Novell, IBM or even Red Hat and AutoZone? would also go before the bankruptcy judge, Judge Gross. That is certainly true if any money is to be paid or if any assets are to be transferred.

A trustee in bankruptcy has absolutely no interest in making any kind of a secret deal. To the contrary, trustees normally refuse to go out on any limb and much prefer to get the courts approval over any major decision. Certainly that is true with the decision could adversely affect the ability of the bankrupt estate to pay off creditors. Note have this is very different than the way the former SCO management perceived things. Previously, anything that the management could get away with was fair game. Not so with a trustee. And that is the primary reason why Judge Gross decided the time was correct to remove the debtors from their possession of SCO assets.

So can the trustee settle the cases?

Normally, yes. But, in this case it gets complicated.

I would expect the trustee (after a sufficient amount of time to get caught up with the pending cases) to entertain the idea of settlement with both Novell and IBM. But, that may not work. Having no money makes it difficult. And both Novell and IBM know that SCO is broke. They are creditors after all.

But, SCO does have some assets that Novell and IBM either want or might want. And it is not just the pending law suits. I am sure that Novell wants back that APA agreement. Novell may not want the UNIX business but the APA itself is a can of worms. They could not get the summary judgments in their favor to stick. At least not as far as the APA is concerned. But, as SCO likes to point out, the ability to license UNIX has a limited value. So while the old SCO management likes to claim that being able to sue IBM for billions is worth a pile of money, others may disagree. We will see if any third party offers real money in order to sue IBM or Novell. Frankly I doubt it. Not based upon what the public now knows about those cases thanks in large part to Groklaw.

Frankly I doubt any one is going to be interested in paying real money in order to sue IBM. Not if they are held liable for any counter charges. And that may be the only terms that the trustee can offer. And, the same may be true for the Novell case. Even though Novell must be paid the couple of million or so, as I recall Novell retained the right to pursue additional counterclaims if the summary judgment did not stick. So suing Novell is not a chance to win but no chance to lose proposition.

The trustee is going to get serious about settling those cases. But, the trustee has very little if anything to offer in settlement. Novell and IBM are not going to be interested in paying any money at all either. They know they can afford to litigate those issues. And they know (as does now the public) what the facts are. Well funded companies do not fear litigation. Bankrupt companies run by a trustee have almost no chance. The trustee is just not going to go out on any limb. And that may be true even if the case is a slam dunk. And we are not there folks. This is a losing case for SCO even if they had plenty of money to proceed through the litigation. And they do not have that.

I would say that Novell is sitting in the cat-bird seat. And that is true no matter what the old SCO management might say about vindication, etc. They are not vindicated at all. At best they are getting the trial they claimed they wanted but hoped to no end they would not have to take. Ask the trustee about vindication. He or she is going to be more worried about being paid for the time to close up this company. Creditors want to be paid. And the only assets that can be sold for cash are needed to settle the pending lawsuits. And SCO does need to either settle the lawsuits, prosecute them at great expense or suffer from a default judgment entered against them.

And to think you thought you wanted to be the trustee?