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Msg  79886 of 147168  at  2/3/2009 5:41:00 PM  by


Audio of September 16, 2008 bankruptcy hearing; erstwhile swells

From the Scofacts bankruptcy page:

The hearing included about an hour of testimony (at 10:44 to 11:52) from Darl Charles McBride, President of The SCO Group, Inc.. I believe this is the first publicly-available audio of testimony by a SCO executive that includes cross-examination. The first publicly-available audio of testimony by a SCO executive was of the cross-examination-less McBride testimony at the Creditors' meeting on October 18, 2007. See message 47989 (October 27, 2007).

Below are some visuals, followed by a couple of short audio clips, with corresponding transcript excerpts and a little bit of commentary, including a discussion of apocryphal swelling.

Cast of Characters (in order of appearance) (non-speaking characters omitted):

Sherry K. Scaruzzi
Deputy Clerk of Court and Rise Requestor:
(no photo or autograph available)

Hon. Kevin J. Gross (Pennsylvania Bar #27160, admitted 1978 (inactive); Delaware Bar #209)
United States Bankruptcy Judge (appointed 2006):

(image from,109446,0,,)

Kathleen P. Makowski (Pennsylvania Bar #79859, admitted 1997; Delaware Bar #3648), from Pachulski Stang
Attorney for Debtors SCO Group, Inc. et al.:

(image from

Arthur J. Spector (New York Bar #3748621, admitted 1975), from Berger Singerman
Attorney for Debtors SCO Group, Inc. et al.:

(image from

Joseph James McMahon, Jr. (Pennsylvania Bar #77570, admitted 1996), from U.S. Department of Justice
Attorney for acting U.S. Trustee Roberta A. DeAngelis:

(image from,109446,1,,)

Adam Aiken Lewis (California Bar #88736, admitted 1979), from Morrison Foerster
Attorney for Creditor Novell, Inc.:

(image from

President Darl Charles McBride, SCO Group Chief Executive
Witness for the Debtors:

(image from

One bit that had everyone laughing occurred during McBride's testimony. Just after Judge Gross had sustained a hearsay objection, McBride gave an answer that SCO's attorney immediately conceded was "even worse hearsay":

Q [by Arthur Spector, for SCO]: All we know is that after the hearing, the deal unraveled for whatever -- right?

A [by Darl McBride]: Correct. And what --

Q: Okay.

A -- what I can tell you that is not subject to hearsay, because I -- I read it an e-mail this morning before I came over here, but I don't -- can't print it out and show you, is that in October of 2007, York, the managing director we were dealing with, sent me an e-mail saying, "Our counsel has reviewed your claims in the District Court and we agree with you that you will have this turned over on appeal."

MR. [SPECTOR]: Your Honor, my -- I already told Mr. Lewis, I'll stipulate. That's even worse hearsay than the other one!


MR. SPECTOR: And, I'll give you a second --


MR. LEWIS: Worse in a lot of ways, Your Honor.

MR. SPECTOR: I'll give you a second ground for objection. It's already been -- it's duplicative, because he already testified to that --


MR. SPECTOR: -- in less detail.

THE COURT: That testimony will be stricken.

MR. SPECTOR: Thank you, Your Honor.

(transcript at 43:22-44:21, audio at 10:59:04 to 10:59:58, September 16, 2008)

McBride apparently thought that his recounting of someone else's statement could only be "hearsay" if the original statement was something that he had merely "hear[d ]sa[id]", rather than something written that he had read. The applicable definition actually explicitly includes both possibilities for the source statement ("an oral or written assertion"), as well as even "nonverbal conduct" (F.R.Evid. 801(a))).

Here's a 7-minute clip of just Judge Gross's ruling, in which he rejected the time-honored right of falling chips to choose where they may:

Well, allow me to say this because my decision really is not going to turn either on the arbitration or, for that matter, on the ability to initiate the appeal. Because to some extent, in particular, the ability to initiate the appeal, that becomes somewhat lost on me because there is still tremendous uncertainty. Now, I don't know and here's where it does become somewhat significant. I don't know what is in the mind of potential investors. But what I do know is that we are now before the Court or you're now -- the parties are before the Court at a rather sensitive time in this case and that is with the debtor about to head off to continue or implement negotiations. In ma[n]y respects, the litigation in Utah led to two bad -- I'll call them bad -- unfortunate is a better word, plans being proposed. And, if anything, those two earlier plans highlight the significant impact that the pendency of the Utah litigation had on this case. And although for the statutory purposes, the time began running upon the filing of the cases.

From a very practical standpoint, the time has begun -- began ran -- began running when Judge Kimball issued his decision in July. Because it was at that point that this debtor and potential suitors knew what the parameters were, what the reality was, what kind of a deal would make sense, not only from the investor[s'] standpoint but, more importantly, even from the debtor's standpoint.

And in exercising my discretion, I was taken -- and I -- and I don't like to seize on words of counsel because to some degree, you know, they're -- counsels speak and -- and -- and say a lot and I -- I don't like to necessarily just pick on certain expressions. But, Novell's counsel used the word, "let the chips fall where they may." And I don't think that in a Bankruptcy case of this significance, chips just ought to be falling where they may. I think there needs to be some direction.

And to the extent that the Court would deny an extension of exclusivity here, I am fearful that chips may -- may fall all over. And I don't think that that would be in anyone's best interest, including Novell as a creditor of this estate. And I think that this debtor ought to have the opportunity with a successful result in hand from the Utah litigation, to now go out and try to make a good deal which it, frankly, was unable to make at an earlier time when that Utah litigation was, as I said earlier, a sword of Damocles hanging over its head.

And it was clear from those earlier deals that at that point in time, the debtor was acting in desperation. And I have grea -- much greater confidence that the debtor will now be acting with a position of strength in the negotiations and that is going to be useful for everyone. And I am taken by the case law and the factors which the cases discuss and I don't know that I need necessarily to run through all of them and I don't have to find that all of them exist here. But the fact is that this case has been complex because that was a complex piece of litigation that Judge Kimball presided over and very capably.

And there is -- I -- I don't think there's been sufficient time given the pendency of that litigation to ne -- negotiate properly. That is now -- that is now upon us. I think that the debtor has shown every reasonable evidence of good faith progress in -- in the negotiations it is undertaking for a deal. The debtor is paying its debts as they're coming due. I have a sense of reasonable prospects right now that I didn't have six months ago; noone had six months ago.

And the case really, although, a year is not a short time, that the case has been pending, under these circumstances, I said where that litigation was really a tremendous burden for the debtor, it has not been a long time.

So, with all of that in mind, I do think that it is appropriate here for the Court to exercise its discretion to extend the exclusivity. I'm trying to find some help with a reasonable extension of time that is not so short that now we have the debtor operating in its negotiations, if you will, with the Court on its tail.

So, I do want to allow, I think, and appropriately so, some leeway. And what I would propose is to extend the exclusivity, to extend it to the end of the year with the understanding, obviously, that if the debtor arrives at a --at a useful solution and -- and a plan to propose that it could obviously do so sooner, doesn't have to wait until the end of the year, but that at least that will enable the debtor to operate with some degree of flexibility.

And, -- and I do appreciate -- I do appreciate Novell's points. But I think that I've been looking at this from a slightly different angle than even the debtor was looking at and, namely, not placing quite such great weight upon the entry of the final judgment, but rather an opportunity to -- to find some -- some solution in negotiations which are now at hand. So, that is the Court's ruling.

(transcript at 102:3-105:18, audio at 12:14:28 to 12:21:21, September 16, 2008)

Here's where Lewis pointed out that Novell is not the only party other than SCO that might wish to file a plan, and he mused on one specific possibility, with only a faint trace of laughter:

And if someone wants to file a competing plan, what's the bad thing in that? It -- it might be us; you know, it might not be us. It might be someone else. It might be current shareholders who are disaffected, maybe Mr. Petrofsky, our [erstwhile] friend[,] would like to file his own plan with some of his friends o[ver] how to resolve this case.

(transcript at 90:11-16, audio at 11:58:28 to 11:58:46, September 16, 2008)

I was a little surprised during the hearing when I heard him call me "our erstwhile friend", because I was still right there with them all. (I was only appearing telephonically, but that's as "there" as I've ever been.) I guess he was referring to the fact that it had been almost six months since I had filed anything or spoken in court. (Our erstwhile friend IBM had been silent for almost as long. I believe this is largely attributable to SCO not having made any particularly momentous motions during those months. Like me, though, IBM has continued to at least make a silent appearance at every hearing.)

When I saw that the official transcript had Lewis's line as "our swell friend", I thought that maybe I had misheard (and that maybe the swell Lewis, a known wearer of dandy bow ties, was trying to come on to me). Checking the recording, though, it is pretty clear that he said "erstwhile".

Just goes to show that: (1) transcribers don't get every word right; (2) even if they did get every word, the transcript would still be missing all of the prosody (timing and inflection); and, therefore, (3) one shouldn't draw any extraordinary conclusion from a transcript passage before checking the audio recording.

Of course, I'm not suggesting that truth should get in the way of a meme.

I can has swell frend?

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Msg # Subject Author Recs Date Posted
79912 Re: Audio of September 16, 2008 bankruptcy hearing; erstwhile swells deep64blue 8 2/4/2009 4:07:10 AM
80095 Re: Audio of September 16, 2008 bankruptcy hearing; erstwhile swells DeepfriedTurkeyNuts 2 2/6/2009 2:46:39 AM
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