REPLY TO SHERMAN’S RESPONSE ON STAY PENDING APPEAL, PAGE 1
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
NETSPHERE, INC., Et. Al. §
Plaintiffs, §
vs. § Civil Action No. 3-09CV0988-F
§
JEFFREY BARON, Et. Al. §
Defendants §
REPLY TO SHERMAN’S RESPONSE [DOC 1041] TO MOTION FOR
LEAVE TO RECONSIDER STAY
TO THE HONORABLE ROYAL FURGESON, SENIOR U.S. DISTRICT
JUDGE:
Defendant Jeff Baron briefs the following six reply issues in challenge
to Sherman’s representations in his response.
1. Sherman’s Disgusting, Deceitful Assault on Mr. Kline’s Spotless
Reputation.
Sherman’s response deceitfully accuses Mr. Kline of being prohibited
from practicing law and being so grossly unethical that “The Court may
safely disregard anything Mr. Kline has to say.” Sherman deceitfully
attempts to make it appear that Kline committed some ethical violation.
Kline has not. Instead, Mr. Kine has a spotless
reputation that he has earned
in over two decades of dedicated service.
Sherman’s disgusting
libel of Mr. Kline and attempt to tarnish Mr.
Kline’s good name is completely groundless and untrue. Contrary to
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Sherman’s deceitful argument, Mr. Kline has a perfect and unblemished
disciplinary record. Mr. Kline is fully licensed, and fully permitted to
practice in federal court. As a technical matter Mr. Kline is flagged by the
state bar for ‘administrative suspension’ for failure to certify MCLE or the
like. However, that has nothing to do with ethics. The local rule of the
Northern District makes clear that ‘administrative suspension’ is not an
‘ethics’ issue and that counsel may fully
continue to practice before this
court regardless of the so called ‘administrative suspension’.
Sherman’s assault on Mr. Kline is particularly disgusting because it is
a libel broadcast to tens of attorneys on the mailing list for this case, and
made in a context where Mr. Kline has no means to respond to the deceitful
implication Sherman makes. Contrary to Sherman’s suggestion, Mr. Kline
has never
been found to have committed any ethical violation of any type.
Why would Sherman make such a deceitful accusation ?
Sherman
has been caught. Attorneys have come forward and disclosed that instead of
—as Sherman had negotiated, and was under a legal duty to do—
immediately closing the bankruptcy and paying all the creditors with the
money Baron funded into Ondova, SHERMAN WENT TO WORK
AGAINST CLOSING THE BANKRUPTCY AND AGGRESSIVELY
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TRIED TO GENERATE CLAIMS. MOREOVER, SHERMAN
AGGRESSIVELY SOUGHT TO GENERATE CLAIMS WHERE NO
CLAIMS EXISTED. Sherman’s duty was to immediate pay all the
Ondova creditors and close the bankruptcy as negotiated in the global
settlement. Instead, Sherman attempted to sink the estate by generating
claims that would not
have been made without his vigorous efforts to create
them. Notably, despite his efforts Sherman succeeded in generating only
two claims. Sherman then lied to this Court and represented that there were
“nineteen” claims, when he succeeded in generating only two
.
2. Sherman is Still Deceitfully Pretending that a Flood of Lawyers
Made Substantial Contribution Claims in the Ondova Bankruptcy.
Sherman’s claims have been shown to be a sham. Sherman’s claims
are false, and clearly established as false by the hard record in black and
white. Contrary to Sherman’s deceitful claim in his Response that “several”
lawyers filed substantial contribution claims in the Ondova bankruptcy, the
record shows that there were only two substantial contribution claims
made. Notably, the very definition of “several” means more than two.
1
Sherman is simply not honest.
1
See http://dictionary.reference.com/browse/several .
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Sherman was not willing to take the risk of perjury to controvert the
evidence against him. By contrast, Mr. Beckham placed himself at risk and
swore under penalty of perjury that Sherman’s counsel did
solicit him.
Notably absent is Sherman’s counsel putting himself under penalty of
perjury saying that he did not.
Mr. Kline, with a spotless ethics reputation spanning over two decades
of practice, corroborated that in September 2010 Beckham told him
Sherman’s counsel had solicited the claims. It is simply not credible that in
September of 2010, Mr. Beckham would have made something like that up
and told it to Mr. Kline. Mr. Beckham’s account of Sherman’s actions in
September 2010 has been independently corroborated by Mr. Kline.
3. Sanction for Mr. Sherman’s Actions.
The question is whether this Court sanctions Sherman’s actions (1) in
the sense of supports and approves them, or (2) in the sense of disapproves
them and will take firm and affirmative action against Sherman and his
counsel. There is no other way to characterize Sherman’s attack on Mr.
Kline other than as despicable and deceitful.
Notably, Sherman does not deny the allegations against him under
oath. Sherman does not
deny contacting Beckham, or multiple other
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lawyers. Sherman does not deny soliciting claims even when told that no
fees were due. Instead, Sherman feels license to deceitfully taint the
reputation of the counsel who have come forward with testimony exposing
what Sherman has been doing.
It is the worst sort of vexatious, ugly conduct for a lawyer to
wrongfully, and groundlessly disparage the good reputation of another in
order to hide his own misconduct. Sherman, moreover knows
that Kline has
an exemplary disciplinary record spanning more than two decades.
Sherman’s deceitful attack on Mr. Kline is a smokescreen to deflect from the
stark reality—the sworn, collaborated testimony that Sherman, through his
counsel, solicited attorneys to generate claims— and did so even when told
that no money was due.
The new testimony offered in Baron’s motion graphically explains the
“claims” that have been presented before this court. Not a single ‘claimant’
has presented an executed contract and shown how Mr. Baron violated any
provision or owed one cent under the agreements. Notably absent with the
“claims” were invoices that had been sent but Jeff Baron refused to pay.
When examined one by one they are all the same. Take for example Mr.
Broome. Unlike some of the ‘claimants’ Mr. Broome did not claim his
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contract was in the file cabinet and would be produced ‘later’ – and then
never produced (as is the case with many of the “claimants”). Mr. Broome
eventually produced his contract with Jeff Baron. The contract is written. It
contains a provision that Broome’s fees are capped at $10,000.00 per month,
and require written authorization to exceed that cap. Broome does not claim
Baron authorized the cap exceeded, and Broome has not presented any
evidence of such authorization. Broome also admits that he was paid
at the
$10,000.00 cap rate. Yet, Broome submits a “claim” for tens of thousands
of dollars. On what basis ? Broome argues that his contract does not
contain any provision capping his fee at $10,000.00 per month. But we have
the contract, in writing, from Broome. We can read the provision in black
and white. There clearly is an express $10,000.00 monthly cap on fees
incurred. Baron paid Broome that amount monthly. No money was due
from Baron. Yet, as the testimony states Sherman solicited attorneys to do,
Broome presented a claim for fees, even though no money was due.
Meanwhile Baron has been deprived of his property, and his most
basic human rights—including the right to engage in business transactions,
to acquire income, to be represented by the paid legal counsel of his choice,
to have a jury hear and decide the claims against him, etc.
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There is now sworn testimony that in a Ponzi like scheme, Sherman
sought attorneys that he solicited to make claims provide the names of other
attorneys that Sherman might also solicit to make claims against Baron and
seek more names of other attorneys to solicit for claims. Sherman has
offered no sworn denial. In fact, Sherman does not offer any denial of the
facts themselves– and offers only deceitful attacks as to the character of the
witnesses against him, and the claim that the conversation in September with
Mr. Beckham was not individually logged by Sherman’s counsel.
4. Sherman’s Smokescreen.
Sherman uses allegations against Baron as a smokescreen. For
example, Sherman argues that Baron ‘obstructed’ proceedings by objecting
to variances between the negotiated agreement of the parties and the
wording in the global settlement draft. Sherman then concedes that “at a
hearing on the Motion to Approve, the Bankruptcy Court discovered that
there were in fact numerous issues”. In other words, Baron’s objections
were not groundless and were not frivolous. The objections were accurate
and found to be well taken by the court. Yet, Sherman creates a smoke
screen, by deceitfully suggesting that Baron’s objections were obstructionist
and groundless.
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Similarly, Sherman generates smoke in alleging that Baron made an
effort to “scuttle the settlement agreement by filing an objection to a motion
by the Trustee to resolve a technical issue”. If a hearing were held on the
issue, this Court would find that it was Sherman working to drag out
finalization by creating needless fights over the pricing of fees charged by
Ondova to Quantec LLC. Baron had funded Ondova with around $2 Million
in cash. Sherman could, and should have paid all the creditors and ended
the bankruptcy. Instead Sherman tried every possible tactic to delay closing
the bankruptcy. Here is a perfect example-- creating a fight with Quantec
over pricing.
There was only a certain cash flow and Sherman knew that by
insisting on a large profit for Ondova, that Quantec would not be able to pay
the registration fees. It was a completely sham controversy manufactured
by Sherman. Since Sherman had negotiated to immediately pay off all the
creditors and end the bankruptcy, there was no legitimate reason for
Sherman to be suddenly concerned with the new pricing for the future renew
fees charged to Ondova. Sherman could have charged cost, or cost plus
one cent. It did not matter, so long as the price was low enough that Quantec
could pay the fees based on its existing revenue. Knowing that, Sherman
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demanded a price he knew Quantec could not pay. Why would Sherman do
that ? He knew it would generate an objection and more billing. MORE
BILLING. Sherman has billed in fees, every cent that Baron placed into
the Ondova estate to pay the creditors. Notably, there was more than a
million dollar surplus over
the amount needed to pay the creditors. Sherman
has billed and taken those funds as well.
5. Sherman Plays Both Sides against the Middle.
Sherman argues in his response that the bankruptcy court learned
Baron failed to meet one of the deadlines in the settlement agreement.
2
The
deadline that wasn’t met, however, was for finding a new trustee for Village
trust. Sherman thus plays both sides of the same issue: Sherman claims
Baron’s failure by September 15, 2010 to secure a replacement trustee for
the village trust was “obstruction”. Yet, previously, Sherman argued that
Baron’s intent (on September 15 2010) to find a replacement trustee was a
bad faith attempt to transfer assets offshore– by replacing one Cook Islands
trustee with another (as had been ordered by the Bankruptcy Court).
In other words, Sherman uses Baron’s difficulty in securing a new
trustee by September 15, 2010 to argue Baron’s “obstruction”, and at the
2
Sherman attempts to link that with the groundless allegation Baron hired four new attorneys and didn’t
pay one of them.
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same time has used Baron’s (court ordered) efforts to secure a new trustee as
“obstruction” by ‘transferring assets off-shore’. It is all garbage, and
hopefully, should appear that way to the Court. If it doesn’t, Baron should
be allowed to hire a trial lawyer (that he has been denied to this point), and
the Court should hold a hearing where Baron (and the Court) have the
benefit of paid trial counsel presenting these facts on Baron’s behalf, and
enable the Court get a firm handle on Sherman’s actions and claims.
6. The Instant Motion, like Jeff Baron’s Original Motion, is for Relief
Pursuant to Fed.R.App.P. 8(a), not Fed.R.Civ.P. 60.
Sherman erroneously argues that Rule 60 bars the requested relief.
However, Fed.R.Civ.P. 60 relates to relief from “Final Judgment”, not to
relief from interlocutory orders. Fed.R.Civ.P. 60(b). In any case, the instant
motion is made pursuant to Fed.R.App.P. 8(a), not Fed.R.Civ.P. 60, and there
is no ‘one year statute of limitations’. Further, Rule 60 places no time
restriction to set aside a judgment for fraud on the Court.
Sherman fraudulently represented to this Court that “nineteen”
lawyers came to the bankruptcy court with substantial contribution claims.
The truth was that only two lawyers came to the bankruptcy court with
substantial contribution claims– and they came only after Sherman
aggressively solicited them to come.
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Contrary to Sherman’s false representations, there were not “several”
substantial contribution claims made. Instead, there were two, and only two.
Moreover, there was a sufficient cash escrow
put up in the Bankruptcy
Court to cover those two claims, if they are found to be valid and Jeff Baron
then found somehow to be responsible to the Ondova estate to pay the
claims. Notably, in Pronske’s amended substantial contribution claim in the
bankruptcy court, he does not claim that Jeff Baron breached any agreement
with him, nor owes him any money. Significantly, there is no claim in the
bankruptcy court against Baron for indemnity as to any substantial
contribution claims. The law does not allow for any such claim to be filed
against Baron, and Sherman has carefully avoided filing such a claim in the
bankruptcy court.
7. Conclusion.
This case clearly got off track. The receivership is off track. A large
part of the responsibility for that rests with Sherman. From day one,
Sherman’s representations were not honest with the Court. Sherman came
to this Court and sold an untrue story—that Baron owed money and
“nineteen” lawyers suddenly showed up with substantial contribution claims
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in the Bankruptcy court, ‘threatening’ the Ondova estate and the settlement
agreement.
Attorneys have recently come forward and provided testimony that
instead of paying the creditors and terminating the bankruptcy as negotiated
in the global settlement, Sherman, through his counsel, fought to keep the
bankruptcy open at all costs by aggressively soliciting attorneys to make
claims against Baron– even when told that no fees were due.
Faced with the sworn testimony clearly depicting what happened,
Sherman has attempted to discredit the attorneys’ sworn testimony.
However, since Sherman is not willing to risk criminal liability for perjury,
he cannot offer controverting testimony. Instead, to obstruct this Court from
granting a stay of the receivership pending appeal, Sherman despicably turns
to a deceitful assault on Mr. Kline’s spotless reputation.
The receivership can, and should by stayed. If desired by the Court,
the Court can require that the LLCs allow the Court a ‘lien’ in the domain
names, and require Court approval for any transfers of the names.
Baron should be allowed all the rights of a free citizen. Those rights
include, for example, the right to work, engage freely in business
transactions, to acquire income, to own and possess property, to hire paid
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counsel, and to the protections of the U.S. Constitution such as the right to
trial by jury.
Respectfully submitted,
/s/ Gary N. Schepps
Gary N. Schepps
Texas State Bar No. 00791608
(972) 200-0000
(972) 200-0535 fax
Drawer 670804
Dallas, Texas 75367
E-mail: legal@schepps.net
APPELLATE COUNSEL
FOR JEFFREY BARON
CERTIFICATE OF SERVICE
This is to certify that this document was served this day on all parties who
receive notification through the Court’s electronic filing system.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
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