SCO Group can't liquidate assets; Trustee appointed

Published August 5, 2009 7:09 pm
Lawsuits » Lindon company wants to pursue legal action
This is an archived article that was published on sltrib.com in 2009, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

A bankruptcy judge has refused to liquidate the Lindon-based The SCO Group but also denied the company's motion to sell off most of its software programs assets and continue its lawsuits against IBM and Novell.

Instead, U.S. Bankruptcy Judge Kevin Gross appointed a trustee to supervise the company to help decide what direction to take as SCO battles to stay alive and pursue its high-profile lawsuits.

The judge's ruling keeps The SCO Group alive for now and able to continue to push the sale of its Unix computer operating system to a third party. But the trustee apparently takes control of the company, lessening the role of CEO Darl McBride, while the case continues to play out in the bankruptcy court in Delaware.

In a short statement, SCO said company and its lawyers were reviewing the ruling "and determining the next steps. We're pleased the motion to covert to Chapter 7 [liquidation] was denied."

Novell and IBM could not be reached for comment.

SCO ended up in bankruptcy court in September 2007 shortly after an adverse ruling in its lawsuit against Novell over who owns the rights to the Unix operating system that is used by businesses worldwide to run their computer systems. That lawsuit came after another in which SCO accused IBM of violating its ownership of Unix by using that system as a model for improvements to the Linux operating system, a competitor of the SCO products.

In his ruling, Gross noted that since filing for bankruptcy, SCO's economic condition has deteriorated significantly while it offered several different plans for reorganization and then withdrew them before the latest sale proposal.

"No one can fairly argue that the court has not been patient with the debtors," the judge wrote. "The court is now unwilling to continue to wait while debtors' losses mount."

In trying to sell off its Unix business for $5.25 million, SCO proposed keeping its mobile-applications business and to continue to try to win the litigation against IBM, Novell and several others.

Aside from the mobile business that is of minimal value, Gross said, "Were the court to approve the sale motion, debtors sole business would be the litigation."

The judge said a trustee would be better able to decide what direction to pursue, noting that in taking on the two much more financially powerful companies, SCO's officers "had 'bet the company' on the litigation."

"A trustee will be in a better position to make that assessment without the personal and emotional investment of SCO's management," Gross wrote.

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