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SCO's Lawyers Analyzed
byteCoder writes "Today's Wall Street Journal has an article (subscription required) which highlights the arrangement disclosed by this freely available SEC filing made between SCO and its law firm (run by lawyer David Boies) giving the law firm of Boies, Schiller & Flexner LLP 20% of the proceeds from the settlement or of "a sale of SCO during the pendancy of litigation." (Search down for "Arrangement with Counsel".) Apparently, if SCO is taken over while litigation is pending, Mr. Boies' law firm could stand to earn 20% of yesterday's market cap of $247M = $49.4M plus the premium associated with the increase in stock price due to the takeover. Of course, if SCO is successful in getting any part of their requested $3Bn in damages from IBM, the payday to the lawyers would be much greater."
TWW
"Encyclopedia" is to "Wikipedia" what "Library" is to "Some people at a bus stop"
The only motivation I can see for SCO doing this at all is to get some sort of temporary blip in share price so the execs can sell there shares.
OR creating sufficent legal costs for IBM that it's cheaper to buy them than fight it out in the courts.
They might also be trying to cripple linux with uncertainty in much the same way as AT&Ts courtcase did with *BSD years ago, but linux' critical mass is far larger.
Unless of course some guy at SCO what's to buy a heap of IBM stock at a slightly discounted price?
Seriously, there HAS to be a conspiracy theory in here somewhere.
Look, the lawyers are taking 20% plus cash. That's okay for a company whose sole asset depends upon this case. You want your lawyers incentivized on a life-or-death (for the company) case.
Also, one of the "likely" ways to settle the lawsuit would be to buy SCO and get control of the Unix assets. If IBM concludes that they are likely to lose, then they NEED to buy SCO, rather than letting SCO run around destorying Linux. Remember, Linux is worth more to IBM that SCO's current marketcap.
So, if the lawyers are entitled to part of the settlement, should they get part of the sale? Absolutely. The most likely scenario for IBM to "settle" would be to purchase SCO and/or SCO's assets for some sum of money, and then terminate the lawsuit. How could the lawyers NOT be compensated for that when they are entitled to a percentage of a cash settlement?
Alex
How is this a conflict of interest? It would only be a conflict of interest if the lawyers were working for the other side of the argument.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
But it is extremely interesting that the lawyers get 20% of an acquisition cost. That speaks a lot towards motives in bringing the lawsuit.
Who do you get to be an expert to tell you something's not obvious? The least insightful person you can find? -J Roberts
Qui bono.
Just typical really. At the end of the day when we're analysing this - when SCO is loooooong gone and Linux is still alive and kicking - although probably hurt by this - we're not going to have to wonder who benefited from all this. The SCO execs are going to be chuckling into their martinis, the people who bought SCO stock and were smart enough to sell it high are going to feel smug and the lawyers are going to walk away rich.
The Linux community is hurt by this, the shareholders who hold on too long are hurt by this, the employees at SCO are hurt by this, Linux customers (and possibly IBM customers are hurt by this) and the people who are slinging the FUD get to walk away with guaranteed millions.
Is it legal to sue lawyers I wonder? Show that they had a vested material interest in damaging businesses by dragging this out as long as possible? Show that they used deliberately deceitful tactics and were complicit in outright lies, obfuscations and unfair practices and maybe tack on a suit for encouraging their customers to pursue illegal activities (violating the GPL and anything else SCO has done that turns out to be against the law).
Basically, is there a way to mire these guys in court for the rest of their lives to that their guaranteed millions dry up? IBM's got billions to throw at this... is there a business case to be made for making an example of the lawyers themselves? Maybe discourage other unethical lawyers from taking up similar cases and causes? Anyway, just my morning rant. Going to go get more coffee and I'm sure the day will be all smiles and sunshine afterwards.
Sorry, but this is not a standard contingency arrangement. If it was only a percentage of any settlement with IBM, that would be a standard contingency fee arrangement.
The inclusion of a payment based on the value of any sale of the company is definitely interesting and goes directly to the heart of at least one of SCO's strategies.
It doesn't matter. You only have a conflict if you have an interest in a party you are against. Why would a court matter if a law firm has an interest in their own client? The only thing that means is that the law firm might work harder to win the case. Do you think it would be OK for a company to have its in-house attorneys represent it in court? What makes that attorney's conflicts any less than an attorney who works for a firm?
Come play Heroes of Might and Magic Mini online.
Everyone is going to hate me for this. Just note that I have been scathing at SCo and what they are trying to do with OSS.
/PASS=IMALOSERFORFORGETTINGMYPASSWORD /NOPWEXP /PWDMIN=40 /PWDLIFETIME=1 /FLAG=GENPWD
In this case, I cannot say I blame the lawyers. If they did not take that kind of an offer, another firm would, and if you get 3B out of IBM (snowballs chance in hell I know) and you get the typical 40% out of it...damn...
then again, the paranoid in me sees this as being a nice payback to Dave from MS. Make a little dosh, take a crack at being set for life, and oh, if you start to lose we will buy the company at an inflated price, meld all of the IP claims into our own, let the memory of this fade away and try again in a another couple of years. Thanks for the surrender Dave! We love you!
(this post not spell checked)
MCR UAF MOD user
so it is not an issue.
giving the law firm of Boies, Schiller & Flexner LLP 20% of the proceeds from the settlement or of "a sale of SCO during the pendancy of litigation.
The law firm won't receive anything until/unless a) the suit is settled, or b) SCO is sold in the meantime. In the first case the law firm will be collecting its fee from the settlement; they are working on contingency* (as described elsewhere in this thread). In the second, SCO will have a new owner, and the law firm's fee will come out of the money used to buy SCO.
Nutshell version: the law firm will receive $$$, not ownership or equity.
* Insert Lionel Hutz quote here.
PS Of course, IANAL. I didn't RTFA either. D'oh.
I want to drag this out as long as possible. Bring me my protractor.
Of course if they lose, 20% of zero is still zero.
Lawyers get all the money!
Film at 11:00.
What law firm would spend $$ on a case if they knew that the potential outcome could be the buyout of their client by the opposition and not have a condition for remuneration set for this in the representation agreement?
Ok , my client agreed to be bought by IBM so they make out well. The case gets dropped. I'm left with nothing when it was my effort in bringing forth the case that caused the buyout.
Its a logical consideration to have this clause in the contract.
Its not a logical representation contract otherwise.
And if the company is bought out, the lawyers see their money regardless of the half-assed job they have done.
Except why on earth would IBM buy SCO unless they thought they were going to loose the case? IBM has deeper pockets than SCO, and a vested interest in proving that their new business ventures are sound. Buying SCO because it is cheaper than defeating them would make it look like IBM has something to hide.
So this clause is only a reasurance that if the lawyers are doing a good job, with much invested into the discovery, they will not be shafted because SCO decides to sell.
What'll be the arrangement between SCO and Boies with regards to paying IBM's legal fees (which is inevitable when they lose this case, which is inevitable (no, this is not a redundancy))? No doubt the tab will run into millions... Will Boies pick up 20% of that?
Because the loss of faith in their product during a long trial would cost them more? Not an uncommon case at all.
The illegal we do immediately. The unconstitutional takes a little longer.
--Henry Kissinger
Yeah, but this runs contrary to current
You obviously aren't a scumbag. Why should they care about the merits of the case, it the only goal is to make noise and rattle bucks loose from whomever they can. As others have noted here, they already got US$10,000,000 (their share of the US$50M "from" BayStar). And they may well get more before it's over.
Look at it this way (and try to think like a scumbag): if you are attempting extortion, do you really care if the threat you use is factual? Of course not. You only care that it be sufficiently annoying to your target that they will pay rather than endure it. Moreover, if you are being paid to harrass someone (as they clearly are, from the public record), do you care that your claims are true, or meerly that they are sufficently harrassing to satisfy your patron(s) that you are doing your job?
-- MarkusQ
That's the crux of it right there. The lawyer's job is usually to win the court case, and payment is contingent upon that happening. However, in this case SCO doesn't really have a legal prayer. Apparently that fact was discussed right up front--If we're only getting paid if we win, then we're not taking the case, says Boies, because we won't win.
On the other hand, there seemed a strong enough possibility that if they make enough noise and get big blue mad enough, maybe they'll get bought out just to settle things down.
So instead of fighting the court hopeless battle, Boies's primary objective is to inflate the company's stock price. That means getting a lot of attention (hence the invoices to the fortune 1000 companies--that gets them noticed (more so than just the law suit) in places like Fortune and the WSJ. Then, they use their extensive media attention to spread a hell of a lot of FUD. Waves of it, loads of it. They don't hve to prove anything--that a losing battle anyway. They just have to look all important.
And suddenly their stock goes from just pennies to $18/share. As stated by another poster here, Boies has already reaped part of his reward by getting $10M from SCOs recent stock offering.
This is the biggest Wall Street con job since Enron, if not bigger.
"With sufficient thrust, pigs fly just fine. However, this is not necessarily a good idea...."
RFC 1925
The really interesting aspect of this story is the fact that SCO has effectively diluted shareholder equity by 20%. If you're ever looking at financial statements from now on, you have to reduce the numbers by 20% because that's already given away to Boies.
If it were the judge that owned 20%, then well...
some aspects of Windows that are copies of some unix idea get greatly mutated
And sometimes they are not even mutated that much. Open C:\Windows\System32\ftp.exe in Notepad and search for 'copyright'. You will find Universty of California, not Microsoft. It looks like somebody has been using BSD code & I don't recall that fact being mentioned in my EULA for Windows (C:\Windows\System32\eula.txt). After looking at the BSD license, I'm wondering if the second condition was violated.
Think global, act loco
No. It's perfectly common for legal firms to engage in fishing trips like this.
Without wishing to appear xenophobic, this litigous behaviour is an aspect of American culture that I find unattractive, but unfortunately most of the "western" world seems to be following in the US's footsteps with an unhealthy alacrity.
The counter-suits, on the other hand, ARE based upon the fact that SCO does NOT control UNIX, does NOT have the right to issue licenses for linux (which is what they had threatened to do), and that, if there was in fact any SCO code in linux (an assertion that they have failed miserably at every time they tried to "prove" it), it's already covered under their gpl-ed release of Linux.
As for the so-called code, code is not patentable, just copyrightable. Since SCO waited too long between the initial writing of the code and filing for a copyright, their maximum damages are set by statute at $150,000.00. But the suit isn't about that. It's a contract dispute with IBM over terminating Project Monterey.
The GPL specifically forbids SCO or anyone else from encumbering gpl-ed software with additional licenses, so SCO does not have the right to issue licenses for the kernel. As for the GPL's validity in court, the courts have decided in its' favor. see bottom of text: MySQL vs NuSphere
SCO is tainted by its violation of the GPL and the IBM countersuit. Anyone can sue them who has copyrighted material in Linux, and they are potentially infringing on thousands of different peoples and companies IP by violating the GPL. In addition, they are potentially involved in criminal activity if this turns out to be a pump and dump scheme, and no Wall Street company is going to want to be a part of that. This outstanding liability could make SCO worthless for any potential buyer. Who is going to buy a company with open ended legal issues with possible judgements against them greater than the value of the company? Unless SCO settles the legal issues with Linux and IBM, and is free and clear so to speak, no one, not even IBM, will buy them out. The only thing they can do is sell their IP, and close the doors.
This is only a problem if IBM drops their countersuit. Heck if SCO drops their suit, their stock drops, they file bankruptcy, IBM may still pursue them, both to make a point (don't try to blackmail IBM) and to shutdown the FUD with a soild ruling on the GPL.
vi +