Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

al_petrofsky

December 30, 2009

The first contested matter at the (still-going) 10:00 AM hearing this morning in In re: SCO Group, Inc. et al. [ http://scofacts.org/nefomatic-test-SCO-Group-bankruptcy.html ], No. 07-11337, Bankr. D. Del. was the remaining non-moot parts of the "Motion of Petrofsky for an Order Compelling the Trustee's Compliance with Reporting Requirements and Setting Reporting Deadlines" [ http://scofacts.org/SCO-Group-bankruptcy-990.pdf ]

Judge Gross denied the motion as to setting any deadlines for the MORs. As to requiring the filing of semi-annual subsidiaries reports on Form 26 per Rule 2015.3, he found that cause had not been shown for applying the new rule to these cases, but he denied the motion without prejudice to a future showing of cause for applying the rule.

Here are the notes that my argument roughly followed:

I mostly wish to stand on the briefs, but I'd like to go over a few points.

First of all, part of the information in the Monthly Operating Reports is the statement of disbursements, and it is clear that there was an October 31 deadline, per Rule 2015(a)(5), for the filing of the statement of disbursements for July through September. That deadline may be extended by the Court, but the trustee never sought to extend it, and he missed the deadline by 53 days.

Now, the filing of several MORs just before the objection deadline has made the motion moot as to statements of disbursements, but I believe that that unexcused tardiness of 53 days should be a factor when the court decides whether it should do anything to address the non-moot reporting issues.

Moving on to those non-moot issues. First, the MORs:

In the revised proposed order, the January 31 deadline for the October MOR is the date that the trustee's objection stated that he would be meeting. The order also sets that date as the deadline for the November and December reports, which are presumably being held up by the same issue, the fiscal-year-end accounting.

Going forward, the order would set deadlines at 20 days after the end of each month, and these deadlines would be extendable for cause. As I described in the briefs, the lack of any MOR deadlines set by the court has been a problem throughout these cases, causing unnecessary confusion for all of the parties. The trustee's objection did not identify any harm that would come from setting some deadlines.

Finally, the semi-annual subsidiaries reports per Rule 2015.3:

This rule was adopted effective December 1, 2008, and the Supreme Court ordered that it shall govern insofar as just and practicable in cases filed before that date. I described in my briefs why requiring these reports would be just and practicable in these cases.

The mere accident of birth that these cases happened to be commenced before the December 2008 date of the rule change does not justify continuing to operate the business indefinitely with no reports. We're more than a year past the change, and we're into our third semi-annual period of business operations that are being conducted after the rule change.

The Supreme Court explicitly chose not to put in a grandfather clause and have old cases keep running under the old rules indefinitely. Instead, cases are to be switched to running under the new rules as soon as just and practicable.

The trustee had a full 17-days notice period of this hearing, and he is free to present any evidence he wishes today. However, in his objection he indicated he would not be bringing any evidence today and he requested that if the Court were at all disposed to ruling against him, that he be given another notice period to prepare his evidence.

The new rule itself includes plenty of leeway for the court to modify the reporting requirement upon cause shown, and I have no objection to the trustee being given another opportunity to make such a showing. What I want today is just an order that the mere accident of birth does not justify the absence of reports, and I want the burden of showing cause to modify the reporting requirement to be placed upon the trustee, as it would be in any case that happened to be filed after December 1, 2008.

Thank you for hearing me.

This colloquy, roughly, followed:

Judge: Thank you, and something I've been wondering: you're a stock holder, is that right?

Petrofsky: Yes.

Judge: And when did you purchase those shares?

Petrofsky: I've owned them since before the cases began. My interest is listed in the list of equity security holders that was attached to the petition.

Judge: And how many shares do you own?

Petrofsky: One hundred.

Judge: Okay, thank you. Ms. Fatell, your response?

Petrofsky: I'm sorry, your honor, may I respond further?

Judge: Yes, please.

Petrofsky: To the extent that there's any question about the size of my interest, I'd like to say that the trustee has personally certified to this court that the estates' claims against IBM and Novell are meritorious and should be pursued aggressively. Those claims seek a MINIMUM of five BILLION dollars from IBM. That's five billion with a B as in boy. Should the trustee succeed on those claims, the proceeds would suffice to pay off all of the creditors with interest and leave more than $200/share for the equity holders, which would mean more than $20,000 for me. So, that's the potential size of my interest.

Judge: Okay, thank you very much.

A few notes from Fatell's argument:

* Subsidiaries reports:

* * We do not believe that the trustee should have any burden to show that this new rule should not be applied to these cases.

* * (Not certain, but pretty sure she said this, approximately:) We're not opposed to the motion being denied without prejudice to Petrofsky making a future motion showing cause.

* * There was no request by the US Trustee for the rule to be applied.

* * There was no such request by any party back in December 2008 when the rule came into effect.

* MOR deadlines.

* * We've been working hard, and had good reason to take a while with the early reports and the reports that are still outstanding. We expect to be caught up by the end of January.

* * We expect to file all the future reports within 20 days after the end of the month or close to it, but placing the burden on the trustee to file a motion to extend an MOR deadline any time the deadline cannot be met would be an unnecessary burden.

Gross's ruling, very roughly:

First, I believe the circumstances of the case provide an excuse for the late filing. I'm generally very satisfied with the trustee's diligence. I believe the late filings are excused.

I'm not going to set hard MOR deadlines. I note the US trustee is not here, and I find that significant.

Going forward, I expect the trustee will file the reports on a reasonable schedule. If I think it's gone beyond reason, I will issue an order to show cause.

Subsidiaries reports: requirement doesn't apply unless someone shows cause to apply it, and I do not find cause here. The motion is denied without prejudice to Petrofsky filing a future motion and showing cause to require the reports.

That brought us to about 10:10.

11:36:19 AM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

BritTim

December 30, 2009

Petrofsky: To the extent that there's any question about the size of my interest, I'd like to say that the trustee has personally certified to this court that the estates' claims against IBM and Novell are meritorious and should be pursued aggressively. Those claims seek a MINIMUM of five BILLION dollars from IBM. That's five billion with a B as in boy. Should the trustee succeed on those claims, the proceeds would suffice to pay off all of the creditors with interest and leave more than $200/share for the equity holders, which would mean more than $20,000 for me. So, that's the potential size of my interest.

I love this. I assume you were expecting this to be brought up. Using SCO's ridiculous claims against them is just beautiful!

I wonder if PJ is going to use this as evidence that you are trying to help SCO in order to collect your $20,000.

3:41:12 PM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

KevinR

December 30, 2009

I too thought this was brilliant.

Gross had just done the "what is your interest worth, oh only $39...." and Al came back with "...but according to Mr Cahn (who you lurve) that's worth $20,000!"

It does show why any equity holder especially a believer would wish to monitor the situation carefully. Any poor choices by the Trustee could cost them Thousands or even Millions. Conversely if the cases fail even a bit the loss to equity is 100% and I suspect the same for Debtors. The lawyers will be paid.

6:30:56 PM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

bystander1313

December 30, 2009

Actually, Al's attempt at being clever probably put the last nail in the coffin containing any slim hope he had of prevailing. One of the things a judge has to consider when deciding on a motion asking him to take some action is what harm will the motion prevent or cause. In Cahn's thought process has to be the question of what harm to Al is Al trying to redress in his motion. By mentioning that his shares would be worth considerably more only if SCO prevailed in their case, Al sets up his official interest as a security holder of SCO as benefiting more from a favorable ruling for SCO. Al never mentioned any other potential harm to himself that he was trying to correct in his motion. That's one reason why his motion almost had to fail.

The questions the judge asked of Al were not just idle chit-chat. He asked them because the answers mattered to him, and Al's response did nothing to further his case. It did apparently play well to the peanut gallery, which may have been Al's intent all along.

7:05:55 PM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

Tim Ransom

December 31, 2009

<<Actually, Al's attempt at being clever probably put the last nail in the coffin containing any slim hope he had of prevailing.>>

So Al answering the judge's questions was an "attempt at being clever"? You are the arbiter of what is "clever" due to your superior intellect? And you are also gifted with extra sensory perception, and a transcendent knowledge of the law?

Could you possibly be a more baselessly arrogant, odious, petty asshole? You have exhibited little to no knowledge of anything but your own idiotic opinions in the years you have spent here intermittently attacking people with your vapid hectoring and doing little else. Yet here you are braying like a jackass in spats about Al's "attempt at being clever" and how it was "the last nail in the coffin containing any slim hope he had of prevailing", as if you are even on the outskirts of approaching the first hint of a clue what you are actually talking about. What would you have had Petrofsly do? Lie about how many shares he owns? I don't even want to know what makes you think pointing out how much they would be worth should SCO get the big payday was "the last nail"in his "slim hope" of "prevailing". He is there as a shareholder after all, isn't he? Gawd.

You have *no idea* what "prevailing" might even mean to Petrofsky, as you can't read his mind. You can't read Gross' mind either. Or Cahn's. In fact, I get the distinct impression that you struggle to read your own mind, which might explain why you tend to post massive excerpts of other people's writing in lieu of actually saying anything coherent. The only concept (IMO) that you have successfully expressed here in your own words is your hilarious delusions of intellectual and, perhaps even more laughable, moral superiority over everyone else. Not to mention that the motion wasn't denied entirely, and made a nice loud public noise about the dearth of real financial information available about SCO. Meanwhile, you have no idea where the goal posts are, and are so convinced of your own omnipotence that you are perfectly, spherically ignorant. Immune to information that would contradict your imperious notions, which apparently appear in the void of your cranium unfettered by reflection or consideration.

Of course it means nothing to one posessed of such indomitable intellect that the *only actual attorney* posting to this board doesn't appear to share your clueless misgivings and opinions about Petrofsky. I mean, what could AllParadox possibly know that you, the boldly anonymous "Bystander"[1] don't? I am sure you could beat him in a cut'n'paste contest!

While I have my own opinion about Petrofsky's involvement, it never occured to me that having one somehow made me intellectually superior to the point where I would call anything he does an "attempt at being clever". While I do get wonderful vicarious enjoyment out of Al's antics, I will confess that I am also of the opinion that *all* Pro Se litigants are morons. Still, I keep an open mind, what with not being experienced enough in that realm to gauge the true value of such maxims. Happily, you are unemcumbered by such introspective considerations, and are willing to share your lack of knowledge with the confidence of a tenured professor:

<<One of the things a judge has to consider when deciding on a motion asking him to take some action is what harm will the motion prevent or cause.>>

That's just fascinating. No, really. I'll bet you actually think you're educating someone here. How endearing.

<<In Cahn's thought process has to be the question of what harm to Al is Al trying to redress in his motion.>>

You state that with such conviction that it *must* be true!

<<By mentioning that his shares would be worth considerably more only if SCO prevailed in their case, Al sets up his official interest as a security holder of SCO as benefiting more from a favorable ruling for SCO.>>

Was that not already obvious to anyone with even half a wit?!?! Good grief. Petrofsky's standing is *based on his holding*, isn't it? But, clearly you think that no one actually knew that until he articulated it out loud. It's not like Petrofsky has had extensive communications with all involved for months now, all signed with his designation as a shareholder or anything.

<<Al never mentioned any other potential harm to himself that he was trying to correct in his motion. That's one reason why his motion almost had to fail.>>

Woah. Just one reason of many, apparently. My sincere thanks for not deeming the great unwashed worthy of hearing what the other reasons are.

Again, you'll excuse me if I find that AllParadox's opinion of Petrofsky's motion carries more weight than yours with me personally. Maybe it's because he's a retired attorney and you're an asshole.

<<The questions the judge asked of Al were not just idle chit-chat.>>

Another revelation!

<<He asked them because the answers mattered to him, and Al's response did nothing to further his case.>>

And you make that assertion based on what, exactly? That's a rhetorical question, as you clearly have no idea. Was Al supposed to lie or something?! The judge asked him how many shares he owns, so he fucking told him. That he added the potential value of his shares may very well have cemented his standing rather than make it appear frivolous, but of course we *cannot know* how it affected anything, can we?! Perhaps Gross was going to dismiss his motion in its entirety, but changed his mind due to Petrofsky's answers. Again - we can't know that, what with not being able to read Gross' mind, can we?

The truth is that your assertion that "Al's response did nothing to further his case" is the thoroughly baseless opinion of an odious asshole expressed as gospel.

<<It did apparently play well to the peanut gallery, which may have been Al's intent all along.>>

Of course, you occupy your own private balcony above the peanut gallery, what with your peerless, transcendent intellect and extensive personal experience in the matters being discussed. At least you finally introduced the qualifier "may" into your gibbering, the first sign of anything approaching thoughful reflection before shooting your cavernous mouth off that I have ever witnessed from you. Baby steps.

[1] Why not find a more apt alias than the hilariously innacurate "Bystander", like "Hyper Arrogant Odiously Verbose Intellectual Gnat Who Attacks People a Lot"?

My New Year's resolution? To make you the sole occupant of my ignore list, so that I never again find myself reading or responding to any more of your thoroughly idiotic posts.

Happy New Year fellow peanut gallery occupants!

10:41:25 AM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

_Arthur

December 31, 2009

Shareholders, as a class, have very little say in a bankruptcy.

Judge Gross, as a Delaware bankruptcy judge (bankruptcy courts being a huge industry in DE), is keenly aware that, if he allowed every 100-shares shareholder to chime in his cases, the system would bog down.
He might also be irked by Al's nagging about him applying the Law of the Land as it is written. Gross has his very own style of bankruptcies management, dubbed the "Gross management"...

His buddy judge Cahn was only to happy to remind him how annoying are those petty shareholders, and whining creditors.

In the future, maybe Al's best approach might be to petition the US Trustee. The trustee has standing to intervene in bk cases and --just as the judge-- a responsibility that the Laws be carried out.

11:56:15 AM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

hpnpilot

December 31, 2009

The US Trustee seems asleep.

It didn't seem that Gross was too annoyed at Al; actually it seemed like he listened and accepted the input on the case.

2:38:22 PM

Re: Motion denied as to setting MOR deadlines, denied w/o prejudice as to Form 26 reports

_Arthur

December 31, 2009

"The US Trustee seems asleep.
It didn't seem that Gross was too annoyed at Al; actually it seemed like he listened and accepted the input on the case."

I agree.

But my feeling is that the judge has several ways to shut AlP up, when he feels like it. What possibly saves AlP's bacon is the absence of a Creditors Comittee.
And also, that Al P interventions make sense, and are solidly grounded in bankruptcy law (except for his standing as a minority shareholder, which is on a more shaky ground (I think)).

We, as the IV/SCOX groupthink, are still puzzled by the extravagant leeway judge Gross lavished on SCOXQ.bk first, and unto the Trustee Judge Cahn now. And Ed Cahn seems to have wholeheartedly embraced the SCO litigation strategy, thus depriving creditors of any hope of ever getting back even one cent on the dollar when Liquidation Day comes.

Let's see if Ed finds a friendly Accounts Receivable factor -slash- shylock, with his jazzy teaser powerpoint presentation. How much Darl planned to make off with True Up compliance last year, $16 Millions ?

4:45:20 PM

Shutting up stockholders

al_petrofsky

January 1, 2010

_Arthur wrote in the parent message (regarding In re: SCO Group, Inc. et al. [ http://scofacts.org/nefomatic-test-SCO-Group-bankruptcy.html ], No. 07-11337, Bankr. D. Del.):

my feeling is that the judge has several ways to shut AlP up, when he feels like it. ... Al P interventions ... are solidly grounded in bankruptcy law (except for his standing as a minority shareholder, which is on a more shaky ground (I think)).

As I cited last week in my reply brief [ http://scofacts.org/SCO-Group-bankruptcy-1007.pdf ] (dkt #1007), the Bankruptcy Code is pretty emphatic about the standing of a stockholder in a chapter 11 case: under a section titled "Right to be heard", congress wrote that "an equity security holder ... may raise and may appear and be heard on any issue in a case under this chapter" (11 U.S.C. §1109(b), cited in the reply brief at footnote 1). See also Senate Report No. 95-989 (1978) ("Subsection (a) [which became subsection (b) in the enacted version] provides, in unqualified terms, that any creditor, equity security holder, or an indenture trustee shall have the right to be heard as a party in interest under this chapter in person, by an attorney, or by a committee." (emphasis added)) and Matter of Marin Motor Oil, Inc., 689 F.2d 445 [ http://scholar.google.com/scholar_case?case=12591804528357576024 ], 451 (3rd Cir. 1982).

If Judge Gross were ever to really, really feel like shutting me up, he might decide that his best option is to just convert the cases to chapter 7 as soon as possible.

12:05:36 AM

Source: Investor Village SCOX [ http://www.investorvillage.com/smbd.asp?mb=1911 ]

Copyright 2009