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."

Comments

Contingency

[incompetent_bitch]

This is simply known as working on a contingency basis, and there is nothing unusual about it. It essentially means that the lawyer fronts the money during the trial and collects a percentage at the end. This can be very expensive for a law firm, since there is a lot of discovery (depositions are insanely expensive due to transcription costs), they pay for expert testimony which is also very expensive, and have to deplete their own working capital during the trial, in the *hopes* that they win. If they don't, the firm is out a fair chunk of change.
A lot of civil trials do work like this, and I'm not quite sure why this is frontpage worthy.

Re:Contingency

[killmenow]

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.

Re:Contingency

[DunbarTheInept]

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.

Thank god for IBM

[theparanoidcynic]

With such um, motivated oposition I'm glad that we have IBM's ninja attack lawers on our side.

All that and a cool mill

[Resaurtus]

From the SEC filing

> 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.

Big Surprise

[Inexile2002]

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.

Re:Lawyers greedy shock

[pdc]

As I understand it, what is interesting is that the lawyers renegociated their payment arrangements to improve their position in the event the litigation fails -- which implies they think this is a more likely outcome.

Also, there has been a lot of speculation that the real aim of the lawsuit was to get IBM to buy SCO just to shut them up. This arrangement adds weight to this suggestion because the lawyers have been given a big incentive to try to make it come to pass.

The Perfect Slashdot Article

[Schlemphfer]

Today's Wall Street Journal has an article (subscription required)

This article's a dream come true all of us who post on Slashdot without first reading the article. Finally, we've got a good comeback for all those pests who tell us to go RTFA (read the fucking article.)

I hope this begins a trend, and I look forward to many more Slashdot stories centered around articles I don't have subscription privileges to read. You can count on me and hundreds of others to post responses to these stories, confident in the knowledge that we have no clue as to what the article says, and knowing nobody else does either.

Again, fantastic work!

Re:Equity

[milo_Gwalthny]

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.

Read the article without subscribing

[Randar the Lava Liza]

For any WSJ article, just add _print after the /article to read it without subscribing. In this case try http://online.wsj.com/article_print/0,,SB106807618 578400800,00.html?mod=technology_main_whats_news