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M for Relief with Respect to Vogel Motion to Liquidate JBs Stocks

No. 10-11202
In the
United States Court of Appeals
for the Fifth Circuit
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NETSPHERE, INC. Et Al,
Plaintiffs
v.
JEFFREY BARON,
Defendant-Appellant
v.
ONDOVA LIMITED COMPANY,
Defendant-Appellee
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Appeal of Order Appointing Receiver in Settled Lawsuit
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Cons. w/ No. 11-10113
NETSPHERE INC., Et Al, Plaintiffs
v.
JEFFREY BARON, Et Al, Defendants
v.
QUANTEC L.L.C.; NOVO POINT L.L.C.,
Appellants
v.
PETER S. VOGEL,
Appellee
▬▬▬▬▬▬▬▬▬▬▬
Appeal of Order Adding Non-Parties Novo Point, LLC
and Quantec, LLC as Receivership Parties
▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
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RESPONSE AND MOTION FOR RELIEF WITH RESPECT TO
VOGEL MOTION TO LIQUIDATE JEFF BARONS STOCKS
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Case: 10-11202 Document: 00511598161 Page: 1 Date Filed: 09/09/2011
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TO THE HONORABLE FIFTH CIRCUIT COURT OF APPEALS:
COMES NOW JEFFREY BARON, Appellant, and subject to the
preliminary Fifth Amendment objection and motion previously filed in this cause,
make this response, objection and motion for relief with respect to Vogels motions
to liquidate Jeff Barons stocks.
1
Vogels motion to liquidate Barons IRAs was
denied by the District Court and has been withdrawn by Vogel, and this response
addresses Vogels motion to liquidate Barons stocks.
I. ARGUMENT AND AUTHORITY
There Are No In Rem Claims Against Jeff Barons Property
Contrary to the underlying basis of Vogels motion, there are no in rem
claims against Jeff Barons property being held in receivership. As a preliminary
matter, an unsecured creditor has, in the absence of statute, no substantive right,
legal or equitable, in or to the property of his alleged debtor. This is true, whatever
the nature of the property. The only substantive right of a simple contract creditor
is to have his debt paid in due course. His adjective right is, ordinarily, at law. He
has no right whatsoever in equity until he has exhausted his legal remedy.
Accordingly, a court does not have equitable jurisdiction to use receivership to
enforce unsecured creditors in personam claims (against the owner of the
1
The three motions involved are (1) 07/05/2011 MOTION filed by Appellee Mr. Peter S. Vogel
of The Receiver's Omnibus Motion to Permit Cashing Out of Stocks and IRAs (Pending Before
the District Court and Filed with the Fifth Circuit Pursuant to District Court Order) [6850979-2];
(2) 07/05/2011 MOTION filed by Appellee Mr. Peter S. Vogel Withdrawing the preceding
Motion [6850979-2]; and (3) 7-07-11 Motion to permit liquidation of non-exempt stocks-but not
the liquidation of the IRA's.
Case: 10-11202 Document: 00511598161 Page: 2 Date Filed: 09/09/2011
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receivership property) before those claims have been reduced to judgment. Pusey
& Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923); e.g., Williams Holding Co. v.
Pennell, 86 F.2d 230 (5th Cir. 1936).
Vogel is ignoring a fundamental principle of law the distinction between
equitable in rem claims against receivership property and in personam claims at
law against the owner of the receivership property individually. Receivership
actions are in rem actions over specific property. E.g. Sumrall v. Moody, 620 F.2d
548, 550 (5th Cir. 1980). In personam actions to establish liability on claims
against individuals do not involve the receivership res. Hawthorne Savings v.
Reliance Ins. Co., 421 F.3d 835, 855 (9th Cir. 2005) (noting the fundamental
distinction between the liquidation of a claim and the enforcement of the claim
after it has been reduced to judgment). After an in personam action has been
liquidated and reduced to judgment, an attempt to execute the judgment against
property is then normally in rem (and, thus, an attempt to execute on a judgment
would seek an interest in the receivership res). Id. Accordingly, only an attempt to
levy against the res made after a judgment has been obtained in personam is an in
rem action that relates to a court's dominion over the receivership res. Id. Vogel is
attempting to create an interest in property that does not exist. The claimants
against Baron have not asserted any legally cognizable in rem claims against the
res property rather, the claimants allege that Mr. Baron personally is obligated in
personam to pay them money for breach of contract. The crucial step of
adjudication of in personam liability against Baron has not occurred. The District
Case: 10-11202 Document: 00511598161 Page: 3 Date Filed: 09/09/2011
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Courts order to pay claimants against Baron has been appealed and the District
Court has been stayed from further proceedings. Notably, a fundamental step of
adjudicating in personam liability is a constitutionally protected step and, with
claims at law, invokes a citizen's right to trial by jury. E.g., Ross v. Bernhard, 396
U.S. 531, 531 (1970). Accordingly, it is premature to seek to liquidate Barons
stocks. The matter is currently on appeal and there are no in rem claims to the
receivership res, only unliquidated in personam claims against Baron. Notably,
the District Court lacks subject matter jurisdiction over those non-diverse in
personam state law claims against Baron personally.
Irreparable Injury and Costs
Vogels motion fails to apprise the Court of the irreparable injury and costs
involved with the liquidation of the stocks. As a primary matter there is a
substantial tax liability which will be incurred with the stocks sale. Additionally,
because the stock market is extremely depressed in value at this time, there is a
very real likelihood that should the Court at a later time determine that Barons
assets should not have been liquidated to pay the alleged claims solicited against
Baron by Vogel, it will not be possible to restore ownership of the stocks currently
held because their market value will have vastly appreciated.
Equitable Considerations
As a matter of equity, the Court should examine, at least on a prima facie
Case: 10-11202 Document: 00511598161 Page: 4 Date Filed: 09/09/2011
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basis the underlying claims for which the stock sale is sought.
2
These claims
have not been tried before any court, the claims were solicited by Vogel and were
presented to the District Court below in a one-sided report that intentionally
excluded all of the exculpatory evidence. SR. v8 p1242-43; SR. v7 p202.
A Better Alternative
Jeff Baron had a million dollars in his savings accounts. He voluntarily
turned over his banking information and material to the receiver immediately upon
imposition of the receivership. Still, the receiver emptied Barons savings accounts
in 'fees'. It is not comprehensible how reasonable costs of protecting a handful of
bank accounts and IRAs (that were voluntarily turned over to the receiver) could
reach a million dollars, emptying the bank accounts where were ordered conserved
by the receivership order. In any case, the only remaining assets of Jeff Baron in
receivership are his exempt IRAs
3
and the stocks receiver now seeks to liquidate.
If the receivership as to Jeff Barons property is now dissolved or stayed
pending appeal, Baron can borrow and pay into the receivership cash in the amount
of the liquidation value of the stocks. There is no reason to keep Baron in
2
A compelling prima facie case is established in the record that the claims solicited by Vogel
against Baron are absolutely groundless. SR. v8 p 1197-1201, 1212- 1243. For example, Doc
522 should be examined. SR. v6 p64. The issues presented in that filing are issues of law based
upon the claimants own evidence and statements and establish that the claim is clearly
groundless, even frivolous. The District Courts response to being presented with the clear
argument establishing the groundless of the claim was to seal the revelation as if it were some
state secret. SR. v6 p64 (sealing Doc 522).
3
Pursuant to Texas Law, the Roth IRA accounts are exempt from execution. Tex.Prop.Code
§42.0021; E.g., In re Youngblood, 29 F.3d 225 (5th Cir. 1994). The IRAs were not property
subject to seizure by the receiver as it is a longstanding principle of law that a receiver may take
into his possession only property which may be taken in execution. Booth v. Clark, 58 U.S.
322, 331 (1855).
Case: 10-11202 Document: 00511598161 Page: 5 Date Filed: 09/09/2011
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receivership his savings accounts have been fully emptied by the receiver.
Allowing Baron to provide a bond in order to be released from the receivership
works no hardship to any party, eliminates the necessity to liquidate the stocks
(should such a necessity exist), and prevents further irreparable injury. Such a
remedy also eliminates the continuing costs of receivership as to Jeff Baron's
property. Further, there is no reason Baron should not be allowed to work and
engage in business transactions as he is currently prohibited from doing by the
receivership order.
II. CONCLUSION & PRAYER
There are no in rem claims asserted against Jeff Barons property held in
receivership, and there is accordingly no basis in law to liquidate his stocks.
Liquidation of the stocks involves costs including taxes and substantial risk of
irreparable injury. The stocks should not be sold until the appeal of the District
underlying issue of the denial of Jeff Barons right to paid counsel and jury trial (or
any trial) to defend the in personam claims asserted against him is resolved.
Jointly, and in the alternative, Jeff Baron prays that the receivership as to
him personally be dissolved or stayed pending appeal and that he be allowed to
post bond in the amount of the stocks sought to be liquidated in return for release
of the stocks and his exempt property from the receivership, and the restoration of
his right to enter business transactions, work, and earn wages.
Case: 10-11202 Document: 00511598161 Page: 6 Date Filed: 09/09/2011
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Respectfully submitted,
/s/ Gary N. Schepps
Gary N. Schepps
Texas State Bar No. 00791608
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
(214) 210-5940 - Telephone
(214) 347-4031 - Facsimile
Email: legal@schepps.net
COUNSEL FOR APPELLANT
CERTIFICATE OF SERVICE
This is to certify that this motion was served this day on all parties who receive
notification through the Courts electronic filing system.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
CERTIFICATE OF CONFERENCE
Counsel for the Vogel and Sherman oppose.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
Case: 10-11202 Document: 00511598161 Page: 7 Date Filed: 09/09/2011


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