Brankuptcy court lifts stay in Psystar/Apple case, litigation will continue

Tue, Jun 23, 2009

Legal, News

About a month ago, Psystar filed for Chapter 11 bankruptcy protection, a move which put a temporary “stay” on its litigation with Apple.  Shortly thereafter, Apple filed a motion with the court seeking to lift the stay, arguing that Psystar’s bankruptcy filing was merely a tactic being used to delay litigation, and to avoid handing over, both in paper form and via deposition, important financial information that  it seems to be purposefully withholding from Apple.

Late last week, the court granted Apple’s motion to lift the stay, and the ongoing litigation between Apple and Psystar will continue.

The automatic stay imposed by 11 U.S.C §362 (a) is lifted to allow the Infringement Action to proceed for all purposes through final judgment; provided that Apple must seek further relief from this Court before executing any money judgment obtained in the Infringement Action against the Debtor’s estate.

As a reminder of where litigation last left off before Psystar filed for Bankruptcy protection, here’s a quick recap:

In early May, Apple filed a motion seeking to compel Psystar to divulge pertinent financial information.  In its filing, Apple noted that Psystar had yet to hand over important documents relating to revenues, profits, purchase receipts, and invoices.  Moreover, Apple wrote that Psystar president Rudy Pedrazza was curiously unable to recall even basic information about the company he’s in charge of running.

Mr. Pedraza, who runs this small company, stated approximately 90 times during the deposition that he did not know or recall answers to basic questions about Psystar’s sales, its general costs and profits, its costs and profits by product line, how it determined its prices and profit margins…

Psystar’s response was shady as usual, as it claimed that it didn’t have the documents requested by Apple and that a number of other requested docs had been lost in a move.  Not surprisingly, the Court gave Psystar until May 18 to produce an array of documents, and gave Psystar until June 3 to provide Apple with a Psystar representative capable of speaking about and knowledgeable of Psystar’s financial info.  A week before that June 3rd deadline, however, Psystar filed for Bankruptcy.


Groklaw has published Psystar President Rudy Pedraza’s failed opposition to Apple’s motion to lift the stay.  It reads in part:

11. Unfortunately, Apple has been busy burying us in discovery in defense of their claim in an attempt to bankrupt us before getting to trial. This has overwhelmed our resources and prevented us from pushing forward with our declaratory relief claim.

By no means do requests for basic financial information constitute “burying us in discovery.”  In fact, handing over financial information is about as straight forward and easy as the discovery process can get.

16. Several times this court has inquired as to whether or not Apple has gotten injunctive relief and the answer to this is No. It has been unable to seek such in over eleven (11) months of litigation. If their case is so cut and dried we would not be allowed to sell our computers.

This statement shows a clear lack of understanding as to what injunctive relief legally entails and when it’s applied.  Also, what’s up with the noticeable grammatical error?  “If their case is so cut and dried” Didn’t an attorney look over Pedrazza’s statement?

The bulk of Pedrazza’s statement essentially accuses Apple of filing needless court motions and discovery requests in an attempt to bankrupt Psystar.  Which is funny, because Psystar seems to have been doing a good job of that themselves.



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