Report from Denver: The SCO v. Novell Appeals Court Hearing

By Pamela Jones
Groklaw

May 06 2009

I must caution, as he does, that you can almost never get a definite idea of how a court will rule just from the hearing, and he explains why. I have to say, though, that from his report, it sounds encouraging to me.

Stuart Singer of Boies Schiller argued for SCO, and I gather he did a fabulous job with very little to work with. Considering that Boies Schiller claims [ http://www.law.com/jsp/article.jsp?id=1202430445901 ] it is "way into the red" on SCO, it's interesting that they still sent one of their very best, a partner in the firm. Michael Jacobs of Morrison & Foerster argued for Novell, and he is consistently excellent. Both attorneys, Clocks says, were spectacular to watch.

I know you are dying to know how it went. I'd say from this report that it went very well indeed. Here's the only possible sticky wicket that I see in the report:

McConnell stated something to the effect that the language for the exclusion in Amendment 2 includes all copyrights and trademarks other than the ones "that are required". He also said that he has no problem with the premise that they have not shown what is required and the appeals court likely will not rule on that, but he didn't see how that would not be an issue for trial.

05/06/2009 - [9656815 [ http://www.groklaw.net/pdf/SCONovellAppeal-9656815.pdf ]] - Case argued by Stuart Singer for appellant and Michael Jacobs for appellee and submitted to Judges Lucero, Baldock and McConnell.

The full report from Clocks:

It's really important to understand that the format of an appeals oral argument is quite different from trial or some motion hearings. The judges are really an active presence here. Basically each side has 15 minutes on the clock in which to make their argument. There is little to no monologuing but rather, right from the start, the judges ask the attorneys questions during their time to probe for information that they need. The judges have already read all of the paperwork before them before walking into the room. They also come to the bench with some things they would like to see come out during oral argument, points of clarification or the attorney's position on a specific subject they are thinking about.

Oh, and remember that the appeals are generally focused on procedure and propriety of action, NOT the facts. Those are the domain of the court of first instance. The appeals court is looking more narrowly at the basic subject of "Should this case go back to the district court with some order to do something different this time?"

When you see the transcript, you will see what I'm talking about. There is a lot of back and forth between the judges and the attorneys. The judges have intelligence (generally) and a measure of wit as well, which comes out during questioning. In a case earlier in the day, there was a real gem where counsel for an immigration petitioner indicated that there was no way for her client to accurately provide an affidavit reflecting testimony from 5 months prior. She noted that any such statement from her client would "be likely to be self-serving." Justice Lucero responded "By all means, that's what the appeals court is all about; parties being self-serving.' [General laughter in the court room.]

I will also warn the folks reading this from generally reading too much into it. You are getting my notes on the questions that were asked and answers given. The judges are asking clarification around specific points that they would like to see more information on, or are looking to see what counsel are thinking about something the judge has already thought of. So let's say the court was leaning one way or another, they may still be asking hard questions around the edges of their leanings on the filed briefs which may be difficult for a party to answer -- even if the judges are leaning in that party's direction!

The case was brought before Carlos Lucero (first Hispanic judge on the 10th, by the way, and has served as president of the Colorado bar association among other posts), Senior Judge Bobby Baldock, and Judge Michael McConnell (for whom this was one of his last days on the bench for argument as he is resigning later this year to take a position at Stanford).

My impression was that Judge Baldock was largely silent, Lucero was coming from the perspective of trying to make the point that much of SCO's argument about getting to parol evidence relies on FIRST finding ambiguity in the contract, and McConnell spent much of his time in a back and forth with the parties over the specific relationship of Amendment 2 to the APA and was trying to find out exactly what amendment 2 did if "copyrights required for" the UNIX business was "a null set" and if that were the case, why does amendment 2 even exist?

Stuart Singer argued for SCO. Singer is amazing, and if he is put in front of a jury, there is no doubt in my mind that we would see some spectacular lawyering.

For those interested, the difference between mediocrity and the class of attorney we had here is shown in the coherence, flexibility, preparation, and articulation of both side's attorneys. They were both coherent and smooth, even on direct examination by the judges. Singer in particular seemed unflappable even when the judges repeatedly interrupted him early on from going down the path of discussing the strength of his client's parol evidence as moot until they determine that there is sufficient ambiguity to address it. Both attorneys felt polished, prepared, and likely had a number of prepared arguments in anticipation of probable questions, with the applicable statutes and cases memorized to support their arguments. They didn't get bogged down trying to make their point even under direct. Also, Singer did a good job with his last couple of minutes weaving in excerpts (out-of-context, to my ears) from Jacobs' argument that made it sound like Novell's position suited SCO's own. Great stuff.

** THESE NOTES ARE NOT COMPLETE (People talk way too fast for that) **

Lucero started, when calling the case, with a note of irony / muted sarcasm, calling the case and docket number and noting that "fortunately, this is not a contentious case." [Laughter in courtroom.]

Singer started for SCO.

Singer stated that the district court's error was in disregarding the ten strong witnesses they had to provide evidence around the business intent and was in the middle of making a statement to the effect that an opposing side usually has difficulty finding one witness from the other side that supports their position and that SCO has ten.

Baldock or McConnell (I didn't write down which) interrupted to note that we hadn't gotten that far yet. The court needs to find ambiguity to get to parol evidence and to look at the strength of your parol evidence; the APA has a plain exclusion for copyrights. Baldock jumped in with "I'm with Judge McConnell, it's pretty clear on this to me."

Singer restated the number of witnesses and was starting a statement around the business evidence that doesn't support that being the intent.

Court (didn't write down which judge said this) said that they "didn't want to get there yet".

SCO stated that "when you look at the APA with amendments it creates ambiguity". Asserted that Amendment 2 transferred the copyrights and the district court did not make their decision within Amendment 2 making any inferences with the reading most lenient to SCO in making summary judgment against them.

The court, McConnell in particular, asked about the chronology of the agreements and some of the work that Novell did to specifically add a clause that stated the effective date of Amendment 2. They asked Singer whether that had any impact on the issue here. Singer stated that it did not and that it is their client's decision that the dating of Amendment 2 within the document is irrelevant. McConnell came back with "I find it mysterious that they would insist on language which you say makes no difference at all."

SCO said that the amendment date does not change how it modifies the APA and that all of the causes of action related to this case are after Amendment 2 was signed anyway. He reiterated SCO's position that Amendment 2's date is irrelevant.

McConnell asked SCO about the differences in language between Amendment 2 and the representations that were made in SCO's brief. The difference of "required for versus "pertains to". "I think we can all agree that required for is narrower than pertains to".

Singer stated that he thought that was arguable and was going to go on and McConnell stated something to the effect of "yet you seem to be making your case based on the 'pertains to' argument when the language is 'required for'"

SCO finished its time saying that they are asking for remand to a jury to appropriately put the issues of whether the contract was clear and whether the copyright transferred before a jury.

Michael Jacobs for Novell then took the podium and stated that there is a chronology to making these kinds of agreements. There are business negotiations that happen that form the basic intent of what they want to do with a legal document. Then there are the legal negotiations where a different team takes over and implements the technical parts to make sure that each party is properly protected in whatever instrument is created to execute the business intent. Bringing in the negotiators from the business portions of the agreement process is irrelevant, and they would be unqualified to provide evidence as they are not competent on the legal mechanisms required to implement the business agreement.

Also stated that when you look at the amendment on top of the APA, it's an integrated whole -- it's not a separate agreement that could create ambiguity between the two.

Lucero asked about whether or not Amendment 2 created ambiguity in a document that was on its face apparently clear in the form of the APA and Amendment 1. Jacobs said to look at it as the "entire package" and that the judge should not have to look at the extrinsic evidence to make a determination on the contracts.

McConnell said that the amendment was a clarification to the APA and if that is a clarification and if the legal language is inconsistent between the agreement and the amendment, does it create an inconsistency?

Jacobs replied to the effect that the amendment is controlling because in the chronology it specifically states that it is amending the terms of the previous agreements.

McConnell stated something to the effect that the language for the exclusion in Amendment 2 includes all copyrights and trademarks other than the ones "that are required". He also said that he has no problem with the premise that they have not shown what is required and the appeals court likely will not rule on that, but he didn't see how that would not be an issue for trial.

Jacobs indicated that 204(a) has to be met and there plainly needs to be an instrument of transfer.

Lucero asked how Novell would characterize the sale.

Jacobs stated that SCO purchased the developers, the business licenses, the sales streams -- much like some of the other business deals. Without the copyrights, they get rights and didn't need ownership of the copyrights to carry on that business.

The court (I didn't note which judge) stated that Jacobs was making it sound like SCO was another licensee when it is the impression of the judges that the deal with Santa Cruz was more expansive than that. Jacobs clarified the way that SCO purchased the business and explained that what they purchased was the right to take over the revenue stream and act as Novell's agent.

SCO took the podium with just another minute or two of time (including a small extension because Novell went over slightly).

Before SCO said anything, McConnell commented that "I hope you will address the 204(a) issue."

Singer stated that he believed that the contracts satisfy 204(a) as 204(a) even lists a memorandum as a means of conveyance for contracts.

McConnell asked, if the first transfer used a bill of sale then how does Amendment 2 relate to that first bill of sale, when there is no other bill of sale for further asset transfer?

SCO replied that they felt that Amendment 2 is like a curative deed in that it was retroactively correcting the bill of sale through a contract to address a loophole that had come up in a dispute with IBM before Amendment 2 had been signed.

McConnell said something about he didn't entirely accept that line of reasoning and treating the contract amendment like a curative deed and Lucero indicated SCO was out of time at that point and made his speech about the appeal being fully briefed.

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Senior Judge Bobby R. Baldock [ http://www.ca10.uscourts.gov/chambers/index.php?id=9 ]

Federal Judicial Service:
U. S. District Court, District of New Mexico
Nominated by Ronald Reagan on May 2, 1983, to a seat vacated by Edwin L. Mechem; Confirmed by the Senate on June 6, 1983, and received commission on June 7, 1983. Service terminated on January 24, 1986, due to appointment to another judicial position.

U. S. Court of Appeals for the Tenth Circuit

Nominated by Ronald Reagan on October 7, 1985, to a seat vacated by Oliver Seth; Confirmed by the Senate on December 16, 1985, and received commission on December 17, 1985. Assumed senior status on January 26, 2001.

Education
New Mexico Military Institute, 1956
University of Arizona College of Law, J.D., 1960

Professional History
Captain, Adjutant General Staff, New Mexico National Guard, 1960-1970
Private practice, Roswell, New Mexico, 1960-1983
Adjunct professor, Eastern New Mexico University, Roswell Campus, 1962-1981

Judge Carlos F Lucero [ http://www.ca10.uscourts.gov/chambers/index.php?id=16 ]

Judge Carlos F. Lucero was appointed to the United States Court of Appeals for the Tenth Circuit by President Clinton June 30, 1995.

Judge Lucero was born November 23, 1940, in Antonito, Colorado. He received a B.A. degree from Adams State College, where he was student body president and the editor of The South Coloradan, and a J.D. degree from the George Washington University Law School in 1964.

Judge Lucero clerked for Judge William E. Doyle, United States District Court for the District of Colorado, during the 1964-1965 term. Prior to his clerkship, he was a staff aide for the United States Senate Judiciary Subcommittee on Administrative Practice and Procedure. He entered private practice in Alamosa, Colorado where he became senior partner of the law firm of Lucero, Lester and Sigmund. He specialized in civil litigation, including water and natural resource matters. He served as president of the Colorado Bar Association in 1977-1978.

Judge Lucero is married to Dorothy Stuart Lucero. He is a member of the American Bar Association, the Colorado Bar Association, of which he was president, the San Luis Valley Bar Association, of which he was president, and the Colorado and National Hispanic Bar Associations. He is a fellow of the American College of Trial Lawyers, International Academy of Trial Lawyers, International Society of Barristers, American Bar Foundation, and the Colorado Bar Foundation, of which he was president.

While in private practice, Judge Lucero served on the Colorado Supreme Court Board of Law Examiners, the ABA Action Commission to Reduce Court Cost and Delay, the advisory board to the ABA Journal, the ABA Committee on the Availability of Legal Services, the Board of Directors of Colorado Rural Legal Services and the CBA Ethics Committee. He served on President Carter's Presidential Panel on Western State Water Policy, and on the Board of Directors of Colorado Rural Legal Services, the Colorado Historical Society, and the Santa Fe Opera Association of New Mexico.

During his years of law practice, Judge Lucero made time available to teach an annual undergraduate level course on Pre-Law Studies for students from diverse backgrounds, as an Adjunct Professor at Adams State College in Alamosa, Colorado.

Judge Lucero's chambers are in Denver, Colorado.

Judge Michael W. McConnell [ http://www.ca10.uscourts.gov/chambers/index.php?id=17 ]

Federal Judicial Service
U. S. Court of Appeals for the Tenth Circuit Nominated by George W. Bush on September 4, 2001, to a seat vacated by Stephen H. Anderson;
Confirmed by the Senate on November 15, 2002, and received commission on November 26, 2002.

Education
Michigan State University, B.A., 1976
University of Chicago Law School, J.D., 1979

Professional History
Law clerk, Hon. J. Skelly Wright, U.S. Court of Appeals for the District of Columbia Circuit, 1979-1980
Law clerk, Associate Justice William J. Brennan, Supreme Court of the United States, 1980-1981
Assistant general counsel, Office of Management and Budget, 1981-1983
Assistant to the solicitor general, U.S. Department of Justice, 1983-1985
Professor, University of Chicago Law School, 1985-1996
Professor, University of Utah College of Law, 1997-2002

04:55 PM EDT

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