Psystar's legal costs in Apple fight push it into bankruptcy

Computerworld - Psystar, the Mac clone maker battling with Apple that filed for bankruptcy last week, owes the bulk of its outstanding debt to the California law firm that's represented it for almost a year, court documents show.

The Florida-based company, which filed for Chapter 11 protection May 21, owes Carr & Ferrell LLC more than $88,000, and a court-mandated mediator nearly $7,000, according to the bankruptcy petition.

Psystar hired Palo Alto, Calif.-based Carr & Ferrell, a firm noted for its intellectual property expertise, last July, after Apple sued the company over its practice of installing Mac OS X on generic Intel-powered computers.

The money Psystar owes its legal team amounts to 34% of the $259,000 listed as debts to its top 20 creditors. Only a $120,000 loan to the company made by Rudy Pedraza, Psystar's CEO and co-founder, accounts for a larger percentage of the debt. If Pedraza's loan is factored out of the equation -- reducing the "outside" debt to $139,000 -- Carr & Ferrell's bill represents a whopping 63% of the total money owed.

Colby Springer, the lead Carr & Ferrell attorney on the Psystar case, did not respond to questions today, including whether the firm would continue to represent the clone builder.

Psystar also owes $6,800 to the mediation firm Judicial Arbitration and Mediation Services (JAMS). Last October, a federal judge ordered both Psystar and Apple to enter what's called Alternative Dispute Resolution (ADR), a legal process that can include mediation, in an attempt to work out their differences.

Together, the JAMS and Carr & Ferrell debts amount to 37% of Psystar's total debt, and 68% of the money owned to outsiders.

Other creditors include the IRS -- Psystar owes nearly $12,000 in taxes -- and the DHL and FedEx delivery services ($12,700 and $8,000, respectively).