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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."
Note also that they get 20% of any equity financing. They've already gotten 10 million from the $50 million Baystar deal. Hardly working on contingency. I mean, yeah, it's a contingency basis, but with a $10 mill downpayment.
> In addition, this modification may result in the payment to such law firm of up to $1,000,000 and
> the issuance of up to 400,000 shares of SCO's common stock.
Okay.. So, they are paying thier lawyers either 1) 20% of the settlement for what they beleive is their most valuble asset (The Unix IP), 2) 20% of the company value, *and* up to $1M + up to 400K stock shares.
Wouldn't it have been cheaper to buy a few law firms? That is a friggin ton of compensation. And for that (plus the small price of their reputations and soul) they get some really bad legal service.
With management making decisions like that it's no wonder the only asset the company really has anymore is stupid. But at least they have plenty.
Let me expand by quoting the NY Bar Associations ethics code (Code of Professional Responsibility)--note to Bar: I claim fair use!
"EC 5-7: The possibility of an adverse effect upon the exercise of free judgement by the lawyer on behalf of the client during litigation generally makes it undesirable for the lawyer to acquire a proprietary interest in the cause of the client of otherwise to become financially interested in the outcome of the litigation... a reasonable contingent fee is permissible in civil cases because it may be the only means by which a non-lawyer can obtain the services of a lawyer of his or her choice..."
So, in your opinion, is this the case? Can SCO not afford an attorney? I suppose, if you were a lawyer, you would argue that they can't afford the attorney of their choice because that particular attorney is demanding a contingency, but this defense is so broad it would make this clause worthless, so it is probably not what the Bar Association meant.
The conflict of interest arises because the attorneys are supposed to represent SCO's best interests. Now, what if SCO's best interests were to drop the litigation and continue as an independent entity? Wouldn't that present an ethical conundrum for Boies et al? To wit: best interests or get paid? I am not saying that the lawyers wouldn't do what is right, only that the conflict exists.
Milo
Normally, MS cannot get into the unix business due to an agreement they signed when they spun off Xenix to a different company (They agreed that they would not compete against the product line they were selling off to someone else, and thus they would not get involved in the unix market again.) But - here's the interesting thing - what's the company they signed this agreement with? SCO. (Not the current people at SCO, mind you, but I would imagine the company still owns that contract even though none of its members are the same people as back then.) So, the ONLY way Microsoft could get into the Unix business legally would be if SCO ceased to exist (or became a part of Microsoft so that MS would be in charge of both sides of the agreement and thus could nullify it.)
I've sometimes suspected that this is the reason some aspects of Windows that are copies of some unix idea get greatly mutated. They can't just use all of the same technology directly the same way without being in danger of producing a unixy enough system that it might violate that previous agreement. So they make stupid changes perhaps just to cover their ass legally.
Don't label something "offtopic" unless you know the topic well enough to tell what's on topic.