No. 10-11202

In the

United States Court of Appeals

for the Fifth Circuit

▬▬▬▬▬▬▬▬▬▬▬

NETSPHERE, INC. Et Al,

Plaintiffs

JEFFREY BARON,

Defendant-Appellant

ONDOVA LIMITED COMPANY,

Defendant-Appellee

▬▬▬▬▬▬▬▬▬▬▬

Appeal of Order Appointing Receiver in Settled Lawsuit

▬▬▬▬▬▬▬▬▬▬▬

----------------------------------------------------------------------------------------

Cons. w/ No. 11-10113

NETSPHERE INC., Et Al, Plaintiffs

JEFFREY BARON, Et Al, Defendants

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Appellants

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

▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

RESPONSE TO VOGEL SEALED MOTION TO HAVE

THE PROPRIETY OF HIS ACTIONS CONFIRMED

AND MOTION FOR EVIDENTIARY HEARING

▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

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TO THE HONORABLE FIFTH CIRCUIT COURT OF APPEALS:

COMES NOW Appellants, and subject to the preliminary Fifth Amendment

objection and motion previously filed in this appeal, make this response with

respect to the 9-02-11 SEALED MOTION noticed in the PACER system on 9-6-11

and filed by Appellee Mr. Peter S. Vogel to confirm propriety of intention not to

make tax filings. [10-11202, 11-10113] [6897932-0].

I. ARGUMENT AND AUTHORITY

Vogel offers no legal authority to support the relief he requests. Like Vogel’s

motion with respect to his willful defaulting on multiple international arbitration

proceedings and resulting willful loss of the assets of the estates of Novo Point,

LLC, and Quantec, LLC,

Vogel again seeks a preemptive finding from the Court

that his actions which are clearly neglectful and improper under the law, have been

proper.

Background of Vogel, his firm Gardere, and Jeff Baron

As early as in 2001, Jeff Baron consulted personally with Peter Vogel with

respect to Vogel defending Baron in litigation regarding Baron’s company,

Ondova. At the time, Baron disclosed material that was expressly confidential and

revealed the way domain names were acquired by the company– with a view to

Vogel defending a lawsuit pending at the time with respect to a disputed domain

name. (Ex. I). In 2003, Baron shared more confidential information with Dawn

Estes, a colleague of Vogel’s at Vogel’s firm Gardere, again in confidence, and

Addressed by Appellants in Document 00511598319 filed 9/9/2011.

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again with a view to Gardere representing Jeff and Ondova. Once again, material

that was expressly confidential was disclosed. As a matter of law, Vogel and his

law firm were under a strict duty to maintain the confidentiality of Baron’s

disclosures. See Nolan v. Freeman, 665 F.2d 738, 739 n.3 (5th Cir. 1982).

However, in 2004 Baron found himself being sued by Gardere on exactly the same

type of claim with regard to the confidential information that he had disclosed to

Vogel and Gardere. In that suit, Gardere was adverse, representing the opponent of

Baron and Ondova, Mike Emke, (Emke v. Compana) prosecuting Emke’s claim of

ownership of the “servers.com” domain. In 2005 this happened again, with

Gardere suing Baron over the same type of claim. (Rolfing Sports, Ex. I). In 2006,

this happened yet again. (FabJob, Inc). Once again, Gardere was suing on the

same type of claim. Gardere had become a specialist in suing Baron and Ondova

for alleged domain registration violations. The suits relied in large part upon the

confidential information Baron had conveyed in confidence to Vogel in seeking the

legal services of Gardere. Notably, the Emke dispute was still in litigation at the

time Vogel was employed as special master. Notably, too, the Emke dispute

became subject of new litigation in the Ondova bankruptcy where Vogel and

Gardere in their receiver roles ostensibly undertook the representation of the

interests of Baron against the interests of their former client Emke with respect to

the very same dispute they had represented Emke over against Baron and Ondova,

and once again took a position of clear conflict of interest and duties. Vogel and

Gardere then turned on its former client Emke and assisted Sherman (the Chapter

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11 Ondova trustee) to allege the Emke suit—in which Gardere had represented

Emke— was actually a fraudulent transaction between Emke and Baron.

Pursuant to Federal law, all of the interconnecting conflicts should have been

disclosed by Vogel before he was employed as special master in the District Court

proceedings below. Federal Rule of Civil Procedure 53(b)(3) strictly requires that

a court may issue an order appointing a special master only after the master files an

affidavit disclosing any ground for disqualification under 28 U.S.C. §455.

However, Vogel willfully failed to make the disclosures and affidavit mandated by

law, and bypassed rule 53(b)(3).

Then, while acting as special master, after the

case fully and finally settled and all that remained was for the District Judge to sign

the stipulated dismissal that had been signed by all parties to the suit, Vogel held

secret consultations with Sherman with respect to having himself (Vogel)

appointed receiver over Baron. SR. v5 p238. Sherman had previously agreed in

writing to settle all claims against Baron, and agreed to the stipulated dismissal of

There are more Vogel conflicts than raised above. There are small, but not insignificant

examples, such as Vogel’s motion (granted by the District Court) as receiver to pay himself for

work as special master out of receivership assets (although no prior order had suggested such

fees or allocation). And, there are larger examples, for example, involving Sherman’s work to

“advise” an individual, Joey Dauben, to submit a ‘claim’ against Baron for Vogel to pay as

receiver. The Dauben ‘claim’ was set up to be a claim against Baron for approximately

$1,000,000.00. (Dauben had never previously asserted any such claim against Baron). Research

by Baron’s counsel uncovered that if the ‘claim’ had been paid, the money would not have gone

to Mr. Dauben. Instead, the money would have gone instead go to pay off a judgment was taken

against Mr. Dauben’s company in 2009-2010. That judgment was taken by, and money from the

judgment’s recovery was due to be paid to– none other than Vogel’s firm Gardere. Accordingly,

in a direct conflict of interest to their receivership roles, Vogel and Gardere would have thus

been a primary beneficiary of the newly ‘discovered’ million dollar Dauben claim against Baron.

After the matter was exposed in a motion for stay filed by Baron, Vogel and Sherman promptly

dropped all mention of Dauben.

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all claims, but decided to go back on his agreement after Baron objected to an

attorney’s fee application filed for Sherman’s attorneys’ fees filed in the Ondova

bankruptcy. After Vogel’s then undisclosed off-the-record meeting with Sherman,

Sherman filed a motion to have Vogel appointed receiver over Baron, and Vogel

then almost immediately personally filed an order signed by Judge Furgeson

appointing Vogel receiver ex parte. After Baron appealed the ex parte

receivership, Vogel (still employed as special master in the case), immediately filed

a motion to have himself appointed receiver over the assets of Novo Point, LLC,

and Quantec, LLC. R. 1717. Vogel later filed additional motions to have himself

appointed as receiver over more than a dozen additional independent legal entities

from around the country and around the world.

FILING TAX RETURNS AND PAYING TAXES: IT’S THE LAW

It should come as no surprise that as a matter of Federal law, Vogel is

required by law to timely file the tax returns and pay the taxes for every entity over

which he has been appointed (by his own motions) receiver. E.g., 26 U.S.C. §§

6012(b)(3), 6151(a). Notably, the Internal Revenue Code ties the duty to pay

federal income taxes to the duty to make an income tax return. See 26 U.S.C.

§6151(a) ("[W]hen a return of a tax is required. . . the person required to make

such return shall .. . pay such tax"). Accordingly, Vogel must pay the tax due on

the income attributable to the receivership entities’ property because §6012(b)(3)

requires him to make a return as the “assignee” of the property. This law is clear

Case: 10-11202 Document: 00511604732 Page: 5 Date Filed: 09/16/2011

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and well established. See e.g., Holywell Corp. v. Smith, 503 U.S. 47, 52 (1992).

VOGEL AND TAXES: What Is Happening

Because the fees he seeks as receiver are so massive in relationship to the

assets placed into his hands as receiver, Vogel has a conflict of interest. The

receivership fees he has billed for himself and his firm come from the same

receivership res that would be used to pay Federal income taxes. Since Vogel has

taken almost all of Baron’s savings account funds in receivership fees (a staggering

fee of around one million dollars), and seeks to be paid over a million dollars more,

his bills directly compete for funds with taxes owed for 2010 and 2011. Vogel has

thus been faced with the choice of paying Federal taxes, or having funds available

to pay his multi-million dollar ‘fees’ billed as receiver. Vogel has chosen the latter.

Accordingly, Vogel has (1) refused to file a single tax return for any

receivership entity since becoming receiver in 2010, (2) has refused to pay any

Federal taxes, (3) has refused to set aside funds for payment of taxes, (4) has

refused to make any quarterly tax reports, and (5) has refused to pay any

quarterly estimated taxes.

While Vogel has billed for filing multiple receivership reports of epic

volume, (touching the most minute minutia), Vogel has noticeably omitted from

his reporting all mention of the amounts of Federal tax liability. Thus, in a

very odd report of financial outlook with respect the entities controlled by Vogel as

receiver, the financial picture entirely omits mention of liability for taxes. Rather,

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the primary liability reported is the reported liability to Vogel for more than a

million dollars of additional fees billed by Vogel and his firm.

Accordingly, in direct and gross violation of his fiduciary duties to the

companies, Vogel has failed to file the companies’ tax returns and has failed to

pay any taxes, and has failed to set aside any funds for the payment of taxes.

The results will obviously be disastrous for the companies.

VOGEL NOW SEEKS TO BE RELIEVED OF LIABILITY FOR HIS GROSS

VIOLATIONS OF DUTY

What Vogel is really seeking is a court order he can later use to absolve

himself of liability for his gross violation of his fiduciary duties as receiver. Vogel

notably offers no legal authority as to why his personal legal duty to file Federally

mandated tax reports should be suspended by Court decree.

Vogel Seeks to Blame Baron and Baron’s Counsel

In what has become a recurring mantra for Vogel, he seeks to excuse all of

his obligations by blaming Baron and his counsel.

Vogel Attempts to Blame Baron’s Appellate Counsel

As a justification for failing to report or pay taxes for any of the more than

dozen entities Vogel had placed under his own receivership Vogel seeks to blame

Baron’s appellate counsel. Vogel alleges that counsel made “False statements

about foreign assets”. Even if that were true, it has nothing to do with Vogel’s

failure to report or pay taxes for the multiple entities he is receiver over. If Vogel

was misled by some false statements about Baron’s holdings, the tax reports of

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those holdings would be incorrect to the extent of the misinformation. But even if

Vogel’s claims about counsel were true (as discussed below they are not), it has

nothing to do with Vogel’s gross and total failure to file tax reports or pay

taxes. Also disturbing about Vogel’s claims with respect to counsel making ‘false

statements’ is the extent to which Vogel’s failure to disclose reaches or crosses the

border of affirmative fraud on this Court. As discussed below, Vogel has offered

this Court Fundamentally misleading representations of the conference quoted by

Vogel. First, with respect to Mr. Barrett, Barrett was never retained by Baron as

his attorney. Rather, Barrett was hired to assist undersigned at two hearings before

the district court. Vogel quotes Barrett as revealing supposed off-shore accounts,

but, what Vogel did not disclose is that Barrett expressly explained this

‘knowledge’ was based on what he believed Schepps said on the record in the

District Court and on the record at a prior meet and confer conference. Those

records speak for themselves and there was never any such statements about any

money in any offshore account. The record is clear that Barrett was merely

expressly offering a purely hearsay opinion based upon what he erroneously

believed was said in prior meetings. See Exhibit M. Since Vogel has copies of

those prior meetings, he fully aware of Barrett’s error. Yet, Vogel passes off

Barrett’s known erroneous hearsay as a material ‘disclosure’ by Baron’s counsel.

Vogel's motion approaches the line of direct deception in making statements such

as (on page 11) that “Barrett states that he was aware of several offshore accounts,

including one that might contain $400,000.00.” Barrett, however, stated the

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opposite, expressly stating on the record he did not think there was any money in

any offshore account. See Exhibit M. On one hand there is what Vogel represents

Barrett said. On the other hand is what the record reflects Barrett said. The

variance is material—especially in the context where Vogel is a receiver, acting as

an officer of the Court.

Vogel Attempts to Blame Jeff Baron

The conference Vogel quotes from was ordered preliminary to filing any

motions to satisfy meet & confer requirements and was not a hearing or a

deposition. At the pre-filing conference Baron was represented by counsel and the

rules of ethics require counsel for the receiver not to seek direct communication

with Baron as a represented party. Baron asserted his Fifth Amendment right to be

represented by counsel when Vogel’s counsel attempted to directly engage him.

Vogel quotes that exchange out of context, as if Baron was in court or in a

deposition and was refusing to disclose the underlying information. Notably,

Baron’s counsel repeatedly offered to provide any information Mr. Baron had

access to if Vogel would simply provide a written list of requested information.

See Exhibit L. Vogel declined to ever request information because, as Vogel is

fully aware, Baron turned over his records at the beginning of the receivership.

Accordingly, Vogel’s representations that Baron refused to provide

information is a clear violation of Vogel’s duty of full disclosure to this Court.

Vogel misleadingly represented to this Court that Baron refused to provide

Case: 10-11202 Document: 00511604732 Page: 9 Date Filed: 09/16/2011

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information. Vogel wholly failed to disclose that Baron’s counsel, on the record,

repeatedly offered to provide all information Baron had access to if Vogel would

simply provide a written list of requested information. Vogel’s failure to disclose is

clearly material.

Vogel has all of the Records of Novo Point, LLC., and Quantec, LLC.

Vogel received all of the books and records of Novo Point, LLC, and

Quantec, LLC., when he seized the companies operations in December, 2010.

has had full control of their business operations since that date. Yet, Vogel has

failed to file any tax report, neither for 2010 taxes, nor for each quarter of 2011.

Similarly, Vogel appears to have taken no formal actions (other than a couple of

phone calls) to secure the records of other receivership companies. For example,

Vogel does not appear to have even served subpoenas on the more than dozen

companies’ registered agents etc. Accordingly, Vogel’s failure to file tax reports

and pay taxes due is attributable to no party other than Vogel.

When Vogel Failed to File, Baron Personally Sought to Have Tax Returns Filed

Out of concern that Vogel was neglecting his duties, and in an attempt to

secure compliance with the federally mandated reporting requirements, Jeff Baron

personally went to Grant Thornton to hire them to file the tax returns. (The firm

had already been paid over $50,000.00 to prepare the reports.) Baron was

informed that the firm would consider representing Baron, and filing on his behalf

Vogel also has Baron’s records— they were turned over at the start of the receivership. Those

records included Bank’s bank records, and the receiver seized Baron’s accounts at the start of the

receivership.

Case: 10-11202 Document: 00511604732 Page: 10 Date Filed: 09/16/2011

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returns, if Vogel gave his permission. Upon information and belief Vogel was

contacted and instructed Grant Thornton not to file any returns. Notably, Vogel

paid Grant Thornton over $50,000.00 in fees to prepare tax reports. Vogel has also

refused to provide Baron any funding to pay a tax attorney to file returns, and

Vogel has refused to provide the necessary information and reports from the

companies to enable Baron to file even his own tax returns. Accordingly, not only

has Vogel failed to fulfill his legally mandated duties to report and pay federal

taxes, but he has affirmatively obstructed Baron’s attempts to secure the filings.

WHEREFORE, Vogel’s motion to have his conduct approved by this Court

should be in all things denied and overruled.

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 APPELLANTS

Case: 10-11202 Document: 00511604732 Page: 11 Date Filed: 09/16/2011

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CERTIFICATE OF SERVICE

This is to certify that this motion 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

COUNSEL FOR APPELLANT

Case: 10-11202 Document: 00511604732 Page: 12 Date Filed: 09/16/2011

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Disputing

Conversations about Dispute Resolution

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Special Master Appointed to Conduct

Global Mediation in Bankruptcy Case

A special master was recently appointed by the Northern District of Texas in

NetSphere v.

Baron (In re Ondova Ltd. Co.), No. 3-09CV988-

RF. The underlying Chapter 11

bankruptcy case involves numerous parties, offshore entities and several related

lawsuits. After the bankruptcy court held four status conferences related to the parties

’

global settlement agreement (GSA), approved by the bankruptcy court on July 28, 2010,

the bankruptcy judge made a “Report and Recommendation”

to Senior District Court

Judge Royal Furgeson which detailed the status of the GSA and recommended the

appointment of a special master to mediate claims arising from the conduct of one of the

parties.

In large part, the bankruptcy court’

s concern regarding the GSA arose from what the

court termed Baron’s “Cavalcade of Attorneys.”

Throughout the bankruptcy proceedings,

Baron “has continued to hire and fire lawyers”

and has instructed these lawyers to file

pleadings against matters resolved by the agreement. The court also expressed concern

that such constant turn-over in the “dozens of sets of lawyers”

hired by Baron has

generated “significant fees . . . to a level that is more than a little disturbing.”

The court

noted that this behavior “smacks of the possibility of violating Rule 11” or, “

troubling,” the possibility that “Baron may be engaging in the crime of theft of services.”

Although the bankruptcy court’s report indicates that there was “

substantial

consummation” of the settlement agreement by most parties, the court nevertheless “

has

had lingering concerns at each of the status conferences regarding Jeffrey Baron’

commitment to completing his obligations under . . . and possibly taking actions to

frustrate . . . [the settlement agreement].”

The court also expressed concern that

Baron’

s practice of continuously switching legal counsel may pose a risk to the bankruptcy

estate and expose other parties to the GSA to unwanted administrative expense.

The bankruptcy court informed Baron that he would no longer be allowed to hire

additional attorneys. He was given the option to retain his current legal counsel

throughout the remainder of the bankruptcy litigation or proceed pro se

. Further, the

bankruptcy court recommended the Northern District of Texas appoint a special master to

conduct a global mediation between Baron and “

various attorneys who may make a

claim”

for reimbursement against the amount of $330,000 set aside by the bankruptcy

court as a “security deposit”

against the financial risks posed against the bankruptcy

estate by the fees incurred by Baron’s attorneys.

After consideration of the bankruptcy court’

s report, the Northern District of Texas

adopted the bankruptcy court’

s recommendation in its entirety and appointed a special

master to the case. Although the case is still pending, Judge Fergeson’

s Order may be

viewed here. The bankruptcy court’

s Report and Recommendation is available at 2010

Bankr. LEXIS 3575 or 2010 WL 4226285 (N.D. Texas).

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Case: 10-11202 Document: 00511604733 Page: 1 Date Filed: 09/16/2011

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haven't physically been the one.

THE COURT: I realize.

This is great testimony. You are supposed to

know everything about your company, and you register the

names, and you know nothing. Why should I allow you to

continue to run the companies? Why don't I put a receiver

in your place to take control of all of these matters and

run your company for you since you don't seem to

understand how it runs or who runs it or what's being done

with it?

THE WITNESS: I think it's just regarding

particular domain names and what's happened with them.

It's difficult to come off the top of my head and explain

what's happened to any particular name.

THE COURT: What about putting someone in

control of your companies? Putting a receiver in control

so that I can know that things are being done correctly?

THE WITNESS: I prefer that I continue to be

able to run the company. But what you decide to do is

what you decide to do.

MR. KRAUSE: Your Honor, may I address the

Court? I have proposed a discovery master to help

alleviate some of these issues. I'm not aware of any

basis to appoint a receiver for these companies. There is

no one making an application for that.

CASSIDI L. CASEY, CSR, 214-354-3139

UNITED STATES DISTRICT COURT

BARON - DIRECT - MACPETE 49

09:46

09:47

7/1/09 Hearing

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Ondova trying to seize any monetization funds. Now, what

you bring to my attention -- And I'll wait to see what

happens in bankruptcy. But what you do bring to my

attention is I don't have control of those monetization

funds and I don't have control of that money. And if

there are third parties that have beneficial interests, I

need to really consider whether or not I will appoint a

receiver in this case. I already have a receiver. I have

a special master, I mean. I might make him the receiver

as well, and I might put all of those funds into the trust

account of the master and make him a special receiver.

Because if I've got beneficial claims of ownership, I

can't let those funds escape. And so I want everybody to

know I'm very worried that there is money out there that

has been and is being and will be generated by the domain

names that are now under Mr. Baron's control perhaps as a

beneficial representative of other people, and I don't

have any control over those. And if I've got claims from

past attorneys, intervenors and so forth, I need to get a

hold of those funds, and I need a receivership. So I'm

telling everybody that right now. Of course, the

plaintiffs are going to have damage claims, and those

funds shouldn't disappear in that regard. So I want

everybody to be thinking about this, but my view is I may

have to create Mr. Vogel as not only a special master but

CASSIDI L. CASEY, CSR, 214-354-3139

UNITED STATES DISTRICT COURT

12:59

13:00

Case 3:09-cv-00988-F Document 68 Filed 09/20/09 Page 26 of 58 PageID 1767

9/10/09 Hearing

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as a receiver. I'll have to talk to him first. He has

never heard this idea before and it might alarm him

MR. VOGEL: Your Honor, I'll do whatever you ask

me to do.

THE COURT: When this case comes back to me, I'm

considering you as receiver and getting you to give notice

to all monetization funds that receive money now or in the

past or in the future from Mr. Baron's domain names and

put them in a receivership until we can figure out who the

owner is.

MR. VOGEL: Whatever you direct, your Honor.

MR. MACPETE: On that particular score, I would

say two things in response to Mr. Lurich. Number one, I

absolutely disagree with him that the representation was

not made to this Court, both your Honor and Judge Lynn.

THE COURT: That's okay. Second.

MR. MACPETE: Worse than that, as I told you at

the beginning of the hearing, I have had Mr. Baron on

cross examination now for four hours in the bankruptcy

court. It resumes again tomorrow at 9:30. During that

four hours of testimony, Mr. Baron testified essentially

that he committed a fraud on my clients in conjunction

with the settlement agreement and on this court in

connection with the preliminary injunction. Let me

explain how that is.

CASSIDI L. CASEY, CSR, 214-354-3139

UNITED STATES DISTRICT COURT

13:01

13:02

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been cut off to the Friedman Figer trust account as a

result of the games Mr. Baron is playing. There is not

money to pay him or Mr. Vogel or the forensic people.

THE COURT: What we're going to do is -- That

probably is another reason why I am going to make Mr.

Vogel a receiver, and he can use whatever investigative

tools he needs to figure out where the domain names are,

set aside monetization funds with fund companies and use

court orders to seize those funds. So there will be money

there. You know, all we're doing is just greatly

complicating this. If everybody could just sit down and

talk about this, it could be different. Now I have a

criminal lawyer on the payroll and Mr. Rasansky is sitting

out there wanting money. I have Mr. Rasansky and Ms.

Aldous sitting out there with their entitlements. Really,

this is one time where somebody ought to sit down and say

how do we get this thing resolved.

MR. MACPETE: He's still looking for the magic

answer, your Honor, and we talked with the bankruptcy

counsel over the Labor Day weekend about the possibility

of trying to sit down and work something out prior to this

hearing tomorrow when he resumes the stand and whether the

bankruptcy judge may appoint a Chapter 11 trustee or

dismiss his bankruptcy case, and we have gotten no

response back. We have tried, but we're not getting

CASSIDI L. CASEY, CSR, 214-354-3139

UNITED STATES DISTRICT COURT

13:11

13:13

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15:37

circumstance

and

the

judge

gives

reason,

they

are

not

15:38

res

judicata

for

anything

else

but

that

matter

alone.

THE

COURT:

Let

make

sure

you

understand

think

Judge

Jernigan

and

are

going

talk.

just

feel

it's

the

best

thing

the

world.

Judge

Jernigan

6 a

very

experienced

judge,

and

she

and

are

going

talk,

and

I'm

going

read

everything

have

been

given

date,

but

I am

going

sit

down

Maybe

I'll

take

her

lunch,

and

she

and

are

going

talk

about

this.

MR.

KEIFFER:

Can

have

opportunity

file

relative

their

points

with

regard

the

137

application

because

think

they

are

massively

overstated

this

Court

admonished

not

do.

THE

COURT:

How

soon

can

you

that?

MR.

KEIFFER:

week

very

heavy

trials

and

the

week

after

that,

but

can

probably

get

you

Monday,

quick

retort

with

regard

those

points

137(d)

and

its

application

here

well

the

functional

situation

have

here

where

somehow

seen

that

judicial

economy

can

bypass,

this

Court

has

admonished

everyone

else

here,

the

rules

and

procedures

that

are

out

here.

THE

COURT:

Well,

you

know,

surely

you

have

good

help

your

firm.

MR.

KEIFFER:

I'm

afraid

firm

relatively

CASSIDI

CASEY, CSR,

214-354-3139

UNITED STATES DISTRICT

COURT

8/18/09 Hearing

Case: 10-11202 Document: 00511604733 Page: 9 Date Filed: 09/16/2011

21 of 67

Case 3:09-cv-00988-F Document 123-1 Filed 11/24/10 Page 2 of 12 PageID 2044

RE:

THE UNITED STATES

BANKRUPTCY

COURT

FOR THE

NORTHERN

DISTRICT

TEXAS

DALLAS

DIVISION

U.s. BANlCRUPTCY COURT

NORTHERN DISTRICT

TEXAS

ENTERED

THE DATE

ENTRY IS

ON THE COURT'S DOCKET

TAWANA

MARSHALL, CLERK '

ONDOVA

LIMITED

COMPANY,

DEBTOR.

Case

No.

09-34784-SGJ-ll

________________________________

NETSPHERE,

INC.,

AL.,

PLAINTIFFS,

VS.

Civil

Action

No.

3-09CV0988-F

JEFFREY

BARON,

AL.,

DEFENDANTS.

REPORT

AND

RECOMMENDATION

DISTRICT

COURT

(JUDGE

ROYAL

FURGESON):

THAT

PETER VOGEL, SPECIAL MASTER, BE

AUTHORIZED

AND

DIRECTED

MEDIATE

ATTORNEYS

FEES

ISSUES

The

undersigned

bankruptcy

judge

makes

this

Report

and

Recommendation

the

Honorable

Royal

Furgeson,

who

presides

over

litigation

the

above-referenced

bankruptcy

case

styled

Netsphere

Baron,

Case

3-09CV0988-F

(the

"District

Court

Litigation").

The

purpose

this

submission

is:

(a)

report

the

status

certain

matters

pending

before

the

bankruptcy

court,

that

are

the

District

Court

Litigation;

and

(b)

REPORT

AND

RECOMMENDATION

PAGE

RE:

THE UNITED STATES

BANKRUPTCY

COURT

FOR THE

NORTHERN

DISTRICT

TEXAS

DALLAS

DIVISION

U.s. BANlCRUPTCY COURT

NORTHERN DISTRICT

TEXAS

ENTERED

THE DATE

ENTRY IS

ON THE COURT'S DOCKET

TAWANA

MARSHALL, CLERK '

ONDOVA

LIMITED

COMPANY,

DEBTOR.

Case

No.

09-34784-SGJ-ll

__________________________________

NETSPHERE,

INC.,

AL.,

PLAINTIFFS,

VS.

Civil

Action

No.

3-09CV0988-F

JEFFREY

BARON,

AL.,

DEFENDANTS.

REPORT

AND

RECOMMENDATION

DISTRICT

COURT

(JUDGE

ROYAL

FURGESON):

THAT

PETER VOGEL, SPECIAL MASTER, BE

AUTHORIZED

AND

DIRECTED

MEDIATE

ATTORNEYS

FEES

ISSUES

The

undersigned

bankruptcy

judge

makes

this

Report

and

Recommendation

the

Honorable

Royal

Furgeson,

who

presides

over

litigation

the

above-referenced

bankruptcy

case

styled

Netsphere

Baron,

Case

3-09CV0988-F

(the

"District

Court

Litigation").

The

purpose

this

submission

is:

(a)

report

the

status

certain

matters

pending

before

the

bankruptcy

court,

that

are

the

District

Court

Litigation;

and

(b)

REPORT

AND

RECOMMENDATION

PAGE

Case: 10-11202 Document: 00511604733 Page: 10 Date Filed: 09/16/2011

22 of 67

CTOFH

UNITED

STATES

DISTRICT

COUp.T

NORTHERN

DISTRICT

TEX1f..S

DALLAS

DIVISION

NETSPHERE

INC.,

MANILA

INDUSTRIES,

INC.;

and

FILED

OCT

I 9

2010

Ci;RK.,

u.s.

btWCT

COURT

MUNISH

KRISHAN

Deputy

1~:'I.J,.I1I.

Plaintiffs,

vs.

CIVIL

ACTION

NO.

3-09CV0988-M

JEFFREY

BARON

and

ONDOVA

LIMITED

COMPANY,

Defendants

ORDER

MEDIATE

DISPUTES

REGARDING

ATTORNEYS

FEES

Based

Bankruptcy Judge Stacey G.

Jernigan's October

12,2010

Report and

Recommendation

that

Peter

Vogel, Special Master, be Authorized and Directed to Mediate

Attorneys Fees Issues this

Court

hereby issues the following Order:

As soon as practical

Peter

Vogel

ordered

mediate all claims against Jeffrey Baron on

behalf

this

Court

and the

Re: Ondova Limited Company, Bankruptcy Case No. 09-34784-

SGJ-11 for legal fees and related expenses, and within

.30

days

the date

this

Order

all

lawyers who have claims for legal

fees

against Jeffrey Baron shall submit confidential reports

fees, expenses,

and

claims to

Peter

Vogel

1601 Elm Street, Suite

.3000,

Dallas,

Texas

75201

by email atpvogel@gardere.com.

the date

this

Order

the attached list and

Schedule F (Creditors Holding Unsecured Nonpriority Claims) includes all known claims for

attorneys fees and expenses.

"f)..

ORDERED

this

~ofOctober,

2010.

~;Q~

OYA

G (

JJRG

It.SON, JR.

SENIOR

U.S.

DISTRICT

JUDGE

ORDER TO MEDIATE DISPUTES REGARDING ATTORNEYS FEES

PAGE 1

Case 3:09-cv-00988-F Document 120 Filed 10/19/10 Page 1 of 2 PageID 2033

Case: 10-11202 Document: 00511604733 Page: 11 Date Filed: 09/16/2011

23 of 67

LIST

ATTORNEYS

WHO

MAY

HAVE CLAIMS

AGAINST

JEFFREY

BARON

Gerrit

Pronske

(Pronske and Patel)

Mike Nelson

Dean

Ferguson

Jeff Hall

Gary

Lyon

David Paccione

Mark

Taylor

Fee

Smith (law firm)

Friedman

and

Feiger

Stephen Jones

ORDER

MEDIATE

DISPUTES

REGARDING

ATTORNEYS

FEES

PAGE

Case 3:09-cv-00988-F Document 120 Filed 10/19/10 Page 2 of 2 PageID 2034

Case: 10-11202 Document: 00511604733 Page: 12 Date Filed: 09/16/2011

24 of 67

UNITED

STATES

DISTRICT

NORTHERN

DISTRICT

DALLAS

DIVISION

NETSPHERE

INC.,

MANILA

INDUSTRIES,

INC.;

and

MUNISH

KRISHAN

Plaintiffs,

u.;).

UJ~jKfl:T

l:UURT

NOR.THERN DISTRICT

TEXAS

T FILED

S r

OCT

252010

.&I~

...

I I

Deputy , • ..",,,..,.,,,,

vs.

CIVIL

ACTION

NO.

8-09CV0988-M

JEFFREY

BARON

and

ONDOVA

LIMITED

COMPANY,

Defendants

AMENDED

ORDER

MEDIATE

DISPUTES

REGARDING

ATTORNEYS

FEES

Based

Bankruptcy Judge Stacey G.

Jernigan's October

12,

2010 Report and

Recommendation

that

Peter

Vogel, Special Master, be Authorized and Directed to Mediate

Attorneys Fees Issues this

Court

hereby issues the following amended Order:

As soon as practical

Peter

Vogel

ordered to mediate all claims against Jeffrey Baron

behalf

this

Court

and the In

Re:

Ondova Limited Company, Bankruptcy Case No. 09-

S4784-SGJ-ll

for legal fees and related expenses, and within so days

the date

this

Order

all lawyers who have claims for legal fees against Jeffrey Baron shall submit confidential

reports

fees, expenses, and claims to

Peter

Vogel

1601

Elm

Street, Suite SOOO, Dallas,

Texas

75201

by email atpvogel@gardere.com.

the date

this

Order

the following

attorneys have claims for attorneys

fees

and expenses:

Gerrit

Pronske

(Pronske and Patel)

Mike Nelson

Dean

Ferguson

Jeff Hall

Gary

Lyon

David Paccione

Mark

Taylor

Fee

Smith

(law firm)

Friedman

and

Feiger

Stephen Jones

ORDERED

this 25th

October, 2010.

Case 3:09-cv-00988-F Document 122 Filed 10/25/10 Page 1 of 1 PageID 2037

Case: 10-11202 Document: 00511604733 Page: 13 Date Filed: 09/16/2011

25 of 67

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

ONDOVA LIMITED COMPANY D/B/A

COMPANA, LLC,

Plaintiff,

vs.

ROLFING SPORTS, INC.

Defendant,

vs.

JEFFREY BARON,

Third-Party Defendant.

CASE NO. 3:05-CV-2411-K

ECF

THE HON. ED KINKEADE

MAGISTRATE JUDGE STICKNEY

BRIEF IN SUPPORT OF PLAINTIFF’S AND THIRD-PARTY DEFENDANT’S

JOINT MOTION TO DISQUALIFY DEFENDANT’S COUNSEL

Gregory H. Guillot (#24044312)

GREGORY H. GUILLOT, PC

Two Galleria Tower Center

13455 Noel Road, Suite 1000

Dallas, TX 75240

Telephone: (972) 774-4560

Facsimile: (214) 515-0411

ATTORNEY FOR PLAINTIFF, ONDOVA LIMITED

COMPANY, d/b/a COMPANA, LLC AND THIRD-PARTY

DEFENDANT, JEFFREY BARON

Case: 10-11202 Document: 00511604733 Page: 14 Date Filed: 09/16/2011

26 of 67

-ii-

TABLE OF CONTENTS

TABLE OF CONTENTS...................................................... -ii-

TABLE OF AUTHORITIES ...................................................-iii-

INTRODUCTORY STATEMENT .............................................. -1-

ARGUMENT............................................................... -6-

GARDERE, AND ALL OF ITS PARTNERS AND ASSOCIATES, MUST BE DISQUALIFIED AS

DEFENDANT’S COUNSEL IN THIS CASE................................ -6-

The Applicable Standards ............................................... -7-

The Canons Applied in this District and Division . . . . . . . . . . . . . . . . . . . . . . . -8-

The Texas Rules........................................... -8-

The Model Rules ......................................... -10-

The “Substantial Relationship” Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-

Gardere’s Representation of Defendant Violates the Texas Rules . . . . . . . . . . . . . . . -15-

Gardere’s Conduct Violates Texas Rule 1.09(a)(2) . . . . . . . . . . . . . . . . . . . . . -16-

Gardere’s Conduct Violates Texas Rule 1.09(a)(3) . . . . . . . . . . . . . . . . . . . . . -17-

Gardere’s Representation of Defendant Violates the Model Rules . . . . . . . . . . . . . . . -19-

Gardere’s Conduct Violates Model Rules 1.9(c) and 1.18(b) . . . . . . . . . . . . . -19-

Gardere’s Conduct Violates Model Rule 1.9(a), Even When Model Rule 1.18 is

Applied................................................. -20-

Gardere’s Conduct Cannot Withstand the Substantial Relationship Test . . . . . . . . . . -23-

The Relevant Social Considerations Favor Gardere’s Disqualification . . . . . . . . . . . -25-

CONCLUSION ...................................................... -26-

Case: 10-11202 Document: 00511604733 Page: 15 Date Filed: 09/16/2011

27 of 67

-iii-

TABLE OF AUTHORITIES

CASES:

Abney v. Wal-Mart, 984 F.Supp. 526 (E.D. Tex. 1997) ............................. -17-

Admiral Insurance Company v. Heath Holdings USA, Inc., No. 3:03-CV-1634-G (N.D. Tex. August

9, 2005) (available at 2005 U.S. Dist. LEXIS 16363) . . . . . . . . . . . . . . . . . . . . -6-, -8-, -10-, -17-

Advanced Display Systems, Inc. v. Kent State University, No. 3:96-CV-1480-BD (N.D. Tex.

November 29, 2001) (available at 2001 U.S. Dist. LEXIS 19466) . . . . . . . . . . . . . . . . . . . . . . -8-

American Sterilizer Co. v. Surgikos, Inc., No. 4089-238-Y (N.D. Tex. June 12, 1992) (available at

1992 U.S. Dist. LEXIS 21542) ................................................ -15-

Brennan’s Inc. v. Brennan’s Restaurants, Inc., 590 F.2d 168 (5 Cir. 1979) . . . . . . . . . . . . .

-13-

Burnett v. Olson, No. 04-2200 (E.D. La. March 18, 2005) (available at 2005 U.S. Dist. LEXIS 4849)

.......................................................................... -14-

Duncan v. Merrill Lynch, Pierce, Fenner & Smith, 646 F.2d. 1020 (5 Cir.), cert. denied, 454 U.S.

895 (1981) ................................................ -6-, -13-, -14-, -16-, -25-

Dyll v. Adams, 3:94-CV-2734-D (N.D. Tex. April 29, 1997) (available at 1997 WL 22918) . -7-

E.F. Hutton & Co. v. Brown, 305 F. Supp. 371 (S.D. Tex. 1969) . . . . . . . . . . . . . . . -6-, -14-, -24-

FDIC v. Cheng, et al, No. 3:90-CV-0353-H (N.D. Tex. 1992) (available at 1992 U.S. Dist. LEXIS

20824) .................................................................... -6-

FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304 (5 Cir. 1995) ..........................

-7-, -8-

Gibbs v. Paluk, 742 F.2d 181 (5 Cir. 1984) ..................................

-14-, -25-

Horaist v. Doctor’s Hosp., 255 F.3d 261 (5 Cir. 2001) ..............................

-7-

In re American Airlines, Inc., 972 F.2d 605 (5th Cir. 1992), reh’g denied, 976 F.2d 732 (5 Cir.

1992), cert. denied, 507 U.S. 912 (1993) .......................-6-, -7-, -9-, -12--18-, -25-

In re Corrugated Container Antitrust Litigation, 659 F.2d 1341 (5 Cir. 1981) . . .

-13--15-, -25-

In re Dresser Industries, Inc., 972 F.2d 540 (5 Cir. 1992) ........................

-7-, -8-

Case: 10-11202 Document: 00511604733 Page: 16 Date Filed: 09/16/2011

28 of 67

-iv-

In re Dupont’s Estate, 60 Cal. App. 2d 276 140 P.2d 866 (1943) . . . . . . . . . . . . . . . . . . . . . . -24-

In re Epic Holdings, 985 S.W.2d 41 (Tex. 1998) .............................. -15-, -23-

In re ESM Government Securities, Inc., 66 B.R. 82 (S.D. Fla. 1986) . . . . . . . . . . . . . . . . . . . -15-

In re Yarn Processing Patent Validity Litigation, 530 F.2d 83 (5 Cir. 1976) . . . . . . . .

-12-, -24-

Islander East Rental Program v. Ferguson, 917 F. Supp. 504 (S.D. Tex. 1996) . . . . . . . . . . -19-

Johnston v. Harris County Flood Control District, 869 F.2d 1565 (5 Cir. 1989), cert. denied sub

nom., Northwest Airlines, Inc. v. American Airlines, Inc., 507 U.S. 912 (1993) . . . . . . . . . . . -12-

Kearns v. Fred Lavery Porche Audi Co., 745 F.2d 600 (Fed Cir. 1984) . . . . . . . . . . . . . . . . . -24-

Matter of Consolidated Bankshares, Inc. 785 F.2d 1249 (5 Cir. 1986) . . . . . . . . . . . . . . . . . .

-7-

McCuin v. Texas Power & Light Co., 714 F.2d 1255 (5 Cir. 1983) . . . . . . . . . . . . . . . . . . . .

-6-

Musicus v. Westinghouse Elec. Corp., 621 F.2d 742, 744 (5th Cir. 1980) . . . . . . . . . . . . . . . . -6-

Resolution Trust Corp. v. Bright, 6 F.3d 336 (5 Cir. 1993)...........................

-7-

Selby v. Revlon Consumer Products, 6 F. Supp.2d 577 (N.D. Tex. 1997) . . . . . . . -15-, -25-, -26-

Senior Living Properties LLC Trust v. Clair Odell Insurance Agency, No. 3:04-CV-0816-G

(available at 2005 U.S. Dist. LEXIS 8993) .................................... -8-, -13-

T.C. Theatre Corp. v. Warner Bros Pictures, Inc., 113 F.Supp. 265 (S.D.N.Y. 1953) . . . . . . -12-

Taylor v. Sheldon, 173 N.E.2d 892 (Ohio 1961) ................................... -24-

Vinson & Elkins v. Moran, 946 S.W.2d 381 (Tex. App. – Houston 1997) . . . . . . . . . . . -13-, -17-

Westinghouse Elec. Corp. v. Kerr-McGee Corp., 580 F.2d 1311 (7 Cir. 1978) . . . . . . . . . .

-24-

Williamsburg Wax Museum, Inc. v. Historic Figures, Inc., 501 F.Supp. 326 (D.D.C. 1980) . -24-

Wilson P. Abraham Constr. Corp. v. Armco Steel Corp., 559 F.2d 250 (5 Cir. 1977) .

-12-, -24-

Woods v. Covington County Bank, 537 F.2d 804 (5th Cir. 1976) . . . . . . . . . . . . . . . . . . . . -6-, -8-

Woolley v. Sweeney, No. 3:01-CV-1331-BF (N.D. Tex. May 13, 2003) (available at 2003 U.S. Dist.

Case: 10-11202 Document: 00511604733 Page: 17 Date Filed: 09/16/2011

29 of 67

-v-

LEXIS 8110) ......................................................-13-, -17-, -20-

FEDERAL RULES:

FED. R. CIV. P. 7(b) .......................................................... -1-

FEDERAL STATUTES:

15 U.S.C. § 1125(d) ......................................................... -21-

28 U.S.C. § 2071 ............................................................ -7-

LOCAL RULES:

LR 7.1 .................................................................... -1-

LR 83.8(e) .............................................................. -8-, -9-

ETHICAL RULES:

MODEL RULES OF DISCIPLINARY CONDUCT, Rule 1.18(d)............................ -22-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.10(a) . . . . . . . . -8-, -10-, -11-, -19--21-, -23-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.10(b) ........................... -12-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18 .....................-10-, -11-, -23-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(a) ........................ -8-, -12-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(b) . . . . . . . . . . . -8-, -10--12-, -19-, -20-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(c) ............... -8-, -10-, -12-, -21-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(d)(1)......................... -22-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(d)(2)......................... -22-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(d)(2)(ii) ...................... -23-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(d)(2)(i) ...................... -22-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9 ......................-10-, -11-, -23-

Case: 10-11202 Document: 00511604733 Page: 18 Date Filed: 09/16/2011

30 of 67

-vi-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9, Comment 3 .................... -21-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9(a) ................. -8-, -12-, -20--23-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9(b) ............................ -12-

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9(c) ................ -8-, -11-, -19-, -20-

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09, Comment 4A . . . . . . . . . -9-, -13-, -16-, -17-

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09, Comment 4B ..................... -18-

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09(a)(2) ................ -9-, -13-, -16-, -17-

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09(a)(3) .................. -8-, -9-, -16--18-

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09(b) .......................-8-, -12-, -18-

TEXAS DISCIPLINARY R. PROF. CONDUCT, preamble, at ¶ 13. . . . . . . . . . . . . . . -8-, -9-, -17-, -18-

TEXAS DISCIPLINARY R. PROF. COND UCT , Rule 1.05 ............................... -17-

TEXAS DISCIPLINARY R. PROF. CONDUCT, Rule 1.05(a) .......................... -9-, -17-

TEXAS DISCIPLINARY R. PROF. CONDUCT, Rule 1.05(b) ............................. -16-

TEXAS DISCIPLINARY R. PROF. CONDUCT, Rule 1.05(b)(2)............................ -8-

TEXAS DISCIPLINARY R. PROF. CONDUCT, Rule 1.06(b)(1)............................ -9-

TEXAS DISCIPLINARY R. PROF. CONDUCT, Rule 1.09 ............................... -12-

OTHER AUTHORITIES:

HARVA RUTH DOCKERY, NOTE, MOTIONS TO DISQUALIFY COUNSEL REPRESENTING AN INTEREST

ADVERSE TO A FORMER CLIENT, 57 Tex. L. Rev. 726 (1979) . . . . . . . . . . . . . -9-, -10-, -16-, -23-

HAZARD & HODES, THE LAW OF LAWYERING § 1.9.111 (1991) ................-9-, -13-, -17-

Case: 10-11202 Document: 00511604733 Page: 19 Date Filed: 09/16/2011

31 of 67

Upon information and belief, the subject firm has operated under the names, Gardere Wynne

Sewell & Riggs, LLP, Gardere & Wynne, LLP, and Gardere Wynne Sewell, LLP, during the relevant

period, and shall be referred to hereinafter as “the Gardere firm,” or “Gardere.”

BRIEF IN SUPPORT OF PLAINTIFF’S AND THIRD-PARTY DEFENDANT’S

JOINT MOTION TO DISQUALIFY DEFENDANT’S COUNSEL

Plaintiff, Ondova Limited Company, d/b/a Compana, LLC (“Compana”), and Third-Party

Defendant, Jeffrey Baron (“Mr. Baron”), by their attorney, and pursuant to, inter alia, FED. R. CIV.

P. 7(b), and LR 7.1, herewith submit their brief in support of Plaintiff’s and Third-Party Defendant’s

Joint Motion to Disqualify Defendant’s Counsel, filed with the Court contemporaneously herewith.

INTRODUCTORY STATEMENT

1. Sometime in 2001 or 2002, Mr. Baron, acting as Compana’s President, contacted

Peter S. Vogel, of the Gardere law firm, seeking representation in connection with Compana’s

business of acquiring newly-deleted domain names, using proprietary and confidential methods,

which allowed Compana to secure generic and descriptive domain names of interest, in advance of

its competitors. See Declaration of Jeffrey Baron Under Penalty of Perjury, attached to Appendix

to Brief in Support of Plaintiff’s and Third-Party Defendant’s Joint Motion to Disqualify

Defendant’s Counsel (“Appendix”) at pp. 3-4. Upon information and belief, Attorney Vogel then

served as Chairman of Gardere’s e-Litigation, e-Commerce, and Computer Technology Practice

Groups, and Mr. Baron and Attorney Vogel had several conversations, as well as a personal meeting

at Gardere’s office, concerning the proposed representation. Appendix at p. 4, ¶ 3.

2. During these conversations, Mr. Baron disclosed confidential information to Attorney

Vogel regarding Compana’s domain name registration activities, and the issues faced in connection

therewith, involving both claims by third parties against Compana, and claims Compana had against

others. Id. Attorney Vogel listened, and appeared willing to accept the engagement, but Mr. Baron

Case: 10-11202 Document: 00511604733 Page: 20 Date Filed: 09/16/2011

32 of 67

-2-

ultimately decided not to engage Gardere, primarily due to cost concerns. Id. Nonetheless, the door

to Gardere’s future representation of Compana was left open, and Mr. Baron expected that his

discussions with Attorney Vogel would be held in strict confidence, as attorney-client

communications. Id.

3. Based in part on his favorable experiences with Mr. Vogel, Mr. Baron contacted

Gardere again in November 2003, and had a series of conversations, electronic mail exchanges, and

facsimile communications with Dawn Estes, another partner in the firm, which continued through

early-December 2003. Appendix at p. 4. The purpose of these communications was to engage

Gardere’s services in connection with several contractual disputes involving Compana’s method of

acquiring newly-deleted domains, and Mr. Baron asked that Gardere consider representing Compana

on a contingency basis therein. Id. Attorney Estes agreed to evaluate the matters, explaining that

she would review and discuss the subject contracts with other members of Gardere, prior to making

a final determination. Id. At the same time, Attorney Estes emphasized that Gardere was well-

positioned to assist Compana with all of its legal needs, touting the qualifications of the firm’s e-

commerce and intellectual property attorneys, including Attorney Vogel’s credentials. Id.

4. During these communications, Mr. Baron explained, in depth, Compana’s domain

name business; Compana’s method of registering newly-deleted domain names, and the problems

Compana faced in the business, including those relating to the contracts at issue. Appendix at p. 5.

In addition to his verbal disclosures to Attorney Estes, Mr. Baron provided her with copies of the

aforementioned contracts, each of which was marked “confidential” and/or included non-disclosure

provisions. Id. See also, Appendix at pp. 9-16. These contracts formed the essence of Compana’s

business model at the time and contained detailed descriptions of the methods Compana used to

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acquire newly-deleted domain names, and the purpose of such acquisitions. Appendix at p. 5.

Identifying portions of Mr. Baron’s electronic mail messages to Attorney Estes in this regard, appear

in the Appendix at pp. 9-16. Certain details have been redacted, to preserve the confidentiality of this

material. Appendix at p. 5.

5. Following further discussions, on December 9, 2003, Attorney Estes mailed a letter

to Mr. Baron, indicating that Gardere had decided not to represent Compana in the subject

contractual disputes. Appendix at p. 5. A copy of this letter, redacted to preserve confidential

information, appears in the Appendix at pp. 17-19. The letter indicated that Gardere would not

charge Compana for fees or expenses incurred in connection with its work, given the decision the

firm had made. Appendix at pp. 5, 18. The letter did not indicate, however, that Gardere might use

or disclose the confidential information and material Mr. Baron had provided, and the provided

material was not returned. Appendix at pp. 5, 18. Thus, Mr. Baron and Compana continued to

expect that these disclosures would be held in strict confidence, as attorney-client communications.

6. As set forth in Plaintiff’s Complaint, at ¶ 17, on October 6, 2005, Defendant filed a

complaint with the National Arbitration Forum, pursuant to ICANN’s Uniform Dispute Resolution

Policy (“UDRP”), asserting that Defendant held exclusive rights in the words, “Golf Hawaii,” which

Compana had registered as a domain; accusing Compana of “cybersquatting,” namely acquiring and

using the domain name in bad faith; assailing Mr. Baron’s character; disparaging Compana’s

business model, and, demanding transfer of the <golfhawaii.com> domain to Defendant. Id. See

also, Appendix at p. 6. Upon reviewing the UDRP complaint, Mr. Baron was shocked to learn that

it was prepared and filed by Gardere, and he promptly advised counsel of his belief that the action

was an egregious betrayal of the confidences entrusted thereto. Appendix at p. 6, ¶ 7.

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7. Based on Compana’s concerns, undersigned counsel wrote to Gardere the same day

the UDRP complaint was received, advising of the conflict of interest; placing the firm on notice that

Compana did not consent to Gardere’s representation of Defendant in the UDRP proceeding, and

requesting that the UDRP Complaint be withdrawn. Appendix at p. 6; Appendix at p. 21.

Compana’s counsel also telephoned Attorney Beverly Bell Godbey, the responsible partner in the

Gardere firm, to discuss the conflict of interest issue. Appendix at p. 6. However, these entreaties

were rebuffed. Id. Rather than responding substantively to Compana’s concerns, Attorney Godbey

simply provided counsel with a copy of Attorney Estes’ letter of December 9, 2003, apparently

believing it sufficient to justify the firm’s assault against Compana, and Mr. Baron’s character and

motives, in the UDRP proceeding. Appendix at pp. 6, 25-26. Compana’s counsel disagreed, and

continued to write Attorney Godbey regarding the issue, but these communications were ignored.

Appendix at pp. 6-7, 26-33. Nonetheless, Gardere did not file further documents in the UDRP

dispute, although it was permitted to do so, and Mr. Baron hoped the firm had come to accept that

it had a conflict of interest and must refrain from additional action against Compana in the case.

Appendix, at p. 7.

8. When the UDRP proceeding was decided in Defendant’s favor on November 28,

2005, and Compana filed the present action to clear its name and prevent transfer of the

<golfhawaii.com> domain, Compana’s counsel wrote Gardere, on December 8, 2005, reminding of

the conflict, and indicating that Compana would file a motion to disqualify Gardere and its involved

attorneys, should the firm enter an appearance on Defendant’s behalf. Appendix at pp. 7, 34.

Nonetheless, on January 3, 2006, Gardere filed an Answer for Defendant herein, with counterclaims

against Compana, and a third-party claim against Mr. Baron personally, alleging, inter alia, that

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Compana’s business model is unlawful; that it acquired and has used the <golfhawaii.com> domain

name in “bad faith,” and that Mr. Baron and Compana are jointly liable for substantial damages to

Defendant as a result. Appendix at pp. 7-8. See also, Defendant Rolfing Sports, Inc.’s Counterclaim,

and Third Party Complaint, at ¶¶ 9, 11, 12, 13, 14, 15, 19, 27, 28, 31, 34, 36, 39, 40, 42, 43, 46, and

49.

9. The proprietary, confidential, trade-secret protected methods used by Compana to

acquire the <golfhawaii.com> domain, in March 2003, when it became newly available for

registration, and Compana’s motives for the acquisition, were the same methods and motives

disclosed to Attorney Vogel in 2001 or 2002, and Attorney Estes in November/December 2003.

Appendix at pp. 7-8. Additionally, the contract involved in the <golfhawaii.com> acquisition was

identical or substantially similar to the agreements reviewed by, and discussed with and among

Gardere, the same year the acquisition occurred. Id. As a result, Attorneys Vogel and Estes, and

presumably, other members of the Gardere firm, are thoroughly familiar with Compana’s business

model; its related trade secrets, and its intended uses for the domain names it has registered. Id.

Accordingly, Compana and Mr. Baron are concerned that the information and material disclosed to

Gardere’s attorneys will be used against them in this proceeding; will be (or have been) disclosed

to Defendant; and/or will vest Gardere, and consequently, Defendant, with an unfair advantage in

this case, based on information divulged in confidence to partners of the firm, in the course of

seeking legal advice. Appendix at pp. 7-8. Additionally, there is a strong appearance of impropriety

in Gardere’s representation of a client adverse to Compana in a case involving the same subject

matter for which Mr. Baron and Compana sought Gardere’s advice.

10. Gardere’s aforesaid conduct violates the ethical standards followed by this Court with

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See also, Musicus v. Westinghouse Elec. Corp., 621 F.2d 742, 744 (5th Cir. 1980); FDIC

v. Cheng, et al, No. 3:90-CV-0353-H (N.D. Tex. 1992) (available at 1992 U.S. Dist. LEXIS 20824).

See also, McCuin v. Texas Power & Light Co., 714 F.2d 1255, 1262-63 (5 Cir. 1983)

3th

[citing Duncan v. Merrill Lynch, Pierce, Fenner & Smith, 646 F.2d. 1020, 1025 n. 6 (5 Cir.), cert.

denied, 454 U.S. 895 (1981)].

See also, E.F. Hutton & Co. v. Brown, 305 F. Supp. 371, 376-77 (S.D. Tex. 1969).

respect to actions against former clients, and prospective clients, with whom attorney-client

relationships have formed, privileges have attached, and/or from whom confidential information has

been received. Moreover, the relationships formed with Attorneys Vogel and Estes, and the

confidences obtained by each, are imputed to every partner and associate in the Gardere firm.

Accordingly, Gardere, and all of its partners and associates, must be disqualified from further

representation of Defendant herein. In support whereof, the following is shown:

ARGUMENT

I. GARDERE, AND ALL OF ITS PARTNERS AND ASSOCIATES, MUST BE

DISQUALIFIED AS DEFENDANT’S COUNSEL IN THIS CASE.

In this Circuit, a motion to disqualify counsel is the proper method by which to call a court’s

attention to an alleged conflict of interest, or other breach of an attorney's ethical duties. In re

American Airlines, Inc., 972 F.2d 605, 610 (5th Cir. 1992), reh’g denied, 976 F.2d 732 (5 Cir.

1992), cert. denied, 507 U.S. 912 (1993). While “disqualification of counsel is an extreme remedy

that will not be imposed lightly,” Admiral Insurance Company v. Heath Holdings USA, Inc., No.

3:03-CV-1634-G (N.D. Tex. August 9, 2005) (available at 2005 U.S. Dist. LEXIS 16363), a court

is nonetheless "obliged to take measures against unethical conduct occurring in connection with any

proceeding before it," In re American Airlines, 972 F.2d at 611 [quoting Woods v. Covington County

Bank, 537 F.2d 804, 810 (5th Cir. 1976)], and courts in the Fifth Circuit are particularly sensitive

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Indeed, the Fifth Circuit has “squarely rejected [a] hands off approach in which ethical rules

‘guide’ whether counsel’s presence will ‘taint’ a proceeding,” holding instead that a rigorous,

“careful and exacting application of the rules in each case,” must be employed to “separate proper

and improper disqualification motions” based on alleged conflicts of interest In re American

Airlines, Inc., 972 F.2d at 611.

See Resolution Trust Corp. v. Bright, 6 F.3d 336, 341 (5 Cir. 1993)(“[a] federal court may

6th

. . . hold attorneys accountable to the state code of professional conduct”). See also, Dyll v. Adams,

3:94-CV-2734-D (N.D. Tex. April 29, 1997) (available at 1997 WL 22918).

to preventing conflicts of interest. Matter of Consolidated Bankshares, Inc. 785 F.2d 1249, 1256

(5 Cir. 1986); In re American Airlines, 972 F.2d at 611.

th 5

A. The Applicable Standards.

Motions to disqualify counsel are governed by state and national ethical standards adopted

by the district court, and applied under federal law. Horaist v. Doctor’s Hosp., 255 261, 266 (5 Cir.

2001)[citing FDIC v. U.S. Fire Ins. Co., 50 F.3d 1304, 1311 (5 Cir. 1995)]; In re American

Airlines, 972 F.2d at 610. The rules promulgated by the local court, under 28 U.S.C. § 2071, provide

the most immediate source of guidance, but are not the sole authority governing motions to

disqualify. U.S. Fire Ins. Co., 50 F.3d at 1312; In re Dresser Industries, Inc., 972 F.2d 540, 543 (5

Cir. 1992). The applicable state code of professional conduct is also an appropriate source of ethical

rules, but federal courts must also consider motions to disqualify under the ethical rules announced

by the national profession, in light of the public interest and the litigant’s rights. In re Dresser

Industries, Inc., 972 F.2d at 543 (holding that the Fifth Circuit’s source for the ethical rules of the

national profession is the American Bar Association). Moreover, a finding that an ethics rule has

been violated, without more, is not sufficient to support disqualification. U.S. Fire Ins. Co., 50 F.3d

at 1314. A court also must take into account the social interests at stake, by considering whether

a conflict has (1) the appearance of impropriety in general, or (2) a possibility that a specific

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See also, U.S. Fire Ins. Co., 50 F.3d at 1312; Advanced Display Systems, Inc. v. Kent State

University, No. 3:96-CV-1480-BD (N.D. Tex. November 29, 2001) (available at 2001 U.S. Dist.

LEXIS 19466); Senior Living Properties LLC Trust v. Clair Odell Insurance Agency, No. 3:04-CV-

0816-G (available at 2005 U.S. Dist. LEXIS 8993).

LR 83.8(e) provides that: “[t]he term ‘unethical behavior,’ as used in this rule, means

conduct undertaken in or related to a civil action in this court that violates the Texas Disciplinary

Rules of Professional Conduct.” Id.

impropriety will occur, and (3) a likelihood that public suspicion from the impropriety outweighs

any social interests which will be served by the lawyer’s continued participation in the case.” Id.

[quoting Dresser, 972 F.2d at 544]. See also Woods, 537 F.2d at 810; U.S. Fire Ins. Co., 50 F.3d

at 1312.

1. The Canons Applied in this District and Division.

The United States District Court for the Northern District of Texas, Dallas Division,

considers the following ethical canons in determining whether disqualification of an attorney is

appropriate,: (1) the ABA Model Rules of Professional Conduct, (2) the Texas Disciplinary Rules

of Professional Conduct, and (3) the local rules of the Northern District of Texas. Admiral Insurance

Company, 2005 U.S. Dist. LEXIS 16363. The Model Rules embody “the national standards utilized

[in] this Circuit in ruling on disqualification motions,” U.S. Fire Ins. Co., 50 F.3d at 1312, while the

Texas Rules are relevant because they govern attorney conduct within Texas generally, and because

the Local Rules and Texas Rules are identical. Id. The relevant provisions of these canons in the

present case are TEX. DISCIPLINARY R. PROF. CONDUCT, Rules 1.05(b), 1.09(a)(2), 1.09(a)(3), and

1.09(b) (the “Texas Rules”), and MODEL RULES OF PROFESSIONAL CONDUCT, Rules 1.9(a), 1.9(c),

1.10(a), 1.18(a), 1.18(b) and 1.18(c) (the “Model Rules”).

a. The Texas Rules

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Texas Rule 1.09, incorporated herein by LR 83.8(e) sets forth the general rule in this Division

regarding prohibited conflicts in actions against former clients, as follows:

(a) Without prior consent, a lawyer who personally has formerly represented a client

in a matter shall not thereafter represent another person in a matter adverse to the

former client:

* * *

(2) if the representation in reasonable probability will involve a violation of

Rule 1.05; or

(3) if it is the same or a substantially related matter.

(b) Except to the extent authorized by Rule 1.10, when lawyers are or have become

members of or associated with a firm, none of them shall knowingly represent a

client if any one of them practicing alone would be prohibited from doing so by

paragraph (a).

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09.

Texas Rule 1.09(a)(2) also references Texas Rule 1.05, which prohibits a lawyer’s use of

confidential information obtained from a former client to that former client’s disadvantage. See TEX.

DISCIPLINARY R. PROF. CONDUCT, Rules 1.09(a)(2) and 1.05(b)(2). Thus, on its face, Texas Rule

1.09 forbids a lawyer from appearing against a former client if the current representation, in

reasonable probability, will involve the use of confidential information, or if the current matter is

substantially related to matters in which the lawyer has represented the former client. Id.; In re

American Airlines, 972 F.2d at 615. Additionally, while referring to “former clients,” the Rule

applies in circumstances where no attorney-client relationship has been formed, to protect

prospective clients, who seek an attorney’s advice, In re American Airlines, 972 F.2d at 612 [citing

TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09, Comment 4A; HAZARD & HODES, THE LAW OF

LAWYERING § 1.9.111 (1991)]. Finally, these prohibitions are imputed to every partner and associate

in the conflicted lawyer’s firm. TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09(b).

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See also, Admiral Insurance Company, 2005 U.S. Dist. LEXIS 16363; MODEL RULES OF

PROFESSIONAL CONDUCT, Rule 1.18(c).

b. The Model Rules.

The American Bar Association’s Model Rule 1.9 is identical to Texas Rule 1.09 in all

important respects. Model Rule 1.9 provides, in pertinent part, that:

(a) A lawyer who has formally represented a client in a matter shall not thereafter

represent another person in the same or a substantially related matter in which that

person’s interests are materially adverse to the interests of the former client unless

the former client consents after consultation.

* * *

(1) use information relating to the representation to the disadvantage of the former

client.

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9. Like the Texas Rules, the Model Rules

impute conflicts under Model Rule 1.9 to all lawyers associated in a firm with the conflicted

attorney. MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.10(a). Moreover, as with the Texas

Rules, the proscriptions of Model Rule 1.9 apply to prospective clients, as well as “former clients,”

pursuant to Model Rule 1.18(b). MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(b).

Model Rule 1.18, encaptioned, “Duty to a Prospective Client,” has no counterpart in the

Texas Rules, and does not appear in the body of federal law in this Circuit governing conflict of

interest situations. Model Rule 1.18 reads, in pertinent part, as follows:

a) A person who discusses with a lawyer the possibility of forming a client-lawyer

relationship with respect to a matter is a prospective client.

(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with

a prospective client shall not use or reveal information learned in the consultation, except as

Rule 1.9 would permit with respect to information of a former client.

adverse to those of a prospective client in the same or a substantially related matter if the

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lawyer received information from the prospective client that could be significantly harmful

to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified

from representation under this paragraph, no lawyer in a firm with which that lawyer is

associated may knowingly undertake or continue representation in such a matter, except as

provided in paragraph (d).

(d) When the lawyer has received disqualifying information as defined in paragraph (c),

representation is permissible if:

(1) both the affected client and the prospective client have given informed consent,

confirmed in writing, or:

(2) the lawyer who received the information took reasonable measures to avoid

exposure to more disqualifying information than was reasonably necessary to

determine whether to represent the prospective client; and

(i) the disqualified lawyer is timely screened from any participation in the

matter and is apportioned no part of the fee therefrom; and

(ii) written notice is promptly given to the prospective client.

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18. The Rule indicates, when read in

conjunction with Model Rules 1.9 and 1.10(a), that an attorney who has received information from

a prospective client (whether privileged or not), may not thereafter use that information to the

prospective client’s disadvantage, and the prohibition extends to all lawyers in the conflicted

attorney’s firm. MODEL RULES OF PROFESSIONAL CONDUCT, Rules 1.18(b); 1.9(c), and 1.10(a).

Moreover, if an attorney has received information from a prospective client that could be harmful

if used against the prospective client in a substantially related matter, neither the lawyer, nor his

partners or associates, may represent the prospective client’s adversary in that matter, absent the

current and prospective clients’ express written consent, or prompt notice to the prospective client;

provided that specified precautions were taken during the initial consultation(s), and that prompt

steps were taken to isolate the conflicted attorney(s), before notice to the prospective client was

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Nonetheless, the substantial relationship test is incorporated in, or mentioned by, a number

of the Model Rules and Texas Rules adopted thereafter. See e.g., Model Rule 1.9(a) and 1.9(b),

Model Rule 1.10(b), Model Rule 1.18(c), Texas Rule 1.06(b)(1), Texas Rule 1.09(a)(3).

dispatched. MODEL RULES OF PROFESSIONAL CONDUCT, Rules 1.18(a) and 1.18(b).

Whereas, Model Rule 1.18 is new; has not been adopted in Texas, and has not been

interpreted in federal jurisdictions with no corresponding state rule, and, whereas, in some respects,

the Rule is inconsistent with the established law of this Circuit, its applicability to the present case

is questionable. Nonetheless, it will be discussed further hereinbelow.

2. The “Substantial Relationship” Test.

In addition to the foregoing ethical canons and social considerations, the Fifth Circuit applies

a “substantial relationship test” to disqualification motions grounded in an attorney’s former

representation of a client. This test is not derived from disciplinary rules, and is not dependent upon

them; rather, it was developed, and exists, at common law. In re American Airlines, 972 F.2d at

617 [citing T.C. Theatre Corp. v. Warner Bros Pictures, Inc., 113 F.Supp. 265 (S.D.N.Y. 1953);

Wilson P. Abraham Constr. Corp. v. Armco Steel Corp., 559 F.2d 250, 252 (5 Cir. 1977); In re

Yarn Processing Patent Validity Litigation, 530 F.2d 83, 89 (5 Cir. 1976)]. Pursuant thereto, a

party seeking to disqualify counsel on grounds of a former representation must establish: (1) an

actual attorney-client relationship between the moving party and the attorney it seeks to disqualify

and, (2) a substantial relationship between the subject matter of the former and present

representations. In re American Airlines, 972 F.2d at 614 [citing Johnston v. Harris County Flood

Control District, 869 F.2d 1565, 1569 (5 Cir. 1989), cert. denied sub nom., Northwest Airlines, Inc.

v. American Airlines, Inc., 507 U.S. 912 (1993)].

With respect to the first element, it is well-established that the existence of an “actual

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Such a strict requirement would undermine the policy underlying the rules against

conflicting representations – the preservation of the attorney-client relationship and the protection

of a client’s confidential information. Senior Living Properties LLC Trust, 2005 U.S. Dist. LEXIS

8993) [citing In re American Airlines, 972 F.2d at 619].

attorney-client relationship” does not depend upon the payment of a fee. Woolley v. Sweeney, No.

3:01-CV-1331-BF (N.D. Tex. May 13, 2003) (available at 2003 U.S. Dist. LEXIS 8110) [citing

Vinson & Elkins v. Moran, 946 S.W.2d 381, 404 n. 15 (Tex. App. – Houston 1997). Indeed, the

Rule applies in cases where an attorney-client relationship has not been formed: a lawyer may not

“switch sides and represent a party whose interests are adverse to a person who sought in good faith

to retain the lawyer.” In re American Airlines, 972 F.2d at 612 [citing TEX. DISCIPLINARY R. PROF.

CONDUCT, Rule 1.09, Comment 4A; HAZARD & HODES , THE LAW OF LAWYERING § 1.9.111 (1991)].

As for the second element, a “substantial relationship” may be found only after the moving

party delineates, with specificity, the subject matters, issues, and causes of action common to the

prior and current representations, and the court engages in a painstaking analysis of the facts and

precise application of precedent.” In re American Airlines, 972 F.2d at 612 (citing Duncan, 646 F.2d

at 1029). The burden of establishing the substantial relationship is on the party moving for

disqualification. 972 F.2d at 612. However, the former and current representations need not involve

identical causes of action – the two causes “need only involve the same subject matter in order to

be substantially related.” In re American Airlines, 972 F.2d at 625 [citing In re Corrugated

Container Antitrust Litigation, 659 F.2d 1341 (5 Cir. 1981); Duncan, 646 F.2d 1020]. Nor must

the movant establish that confidences were divulged in the prior representation – information

provided by a former client is sheltered from use by the attorney against him, regardless of whether

someone else may be privy to it. In re American Airlines, 972 F.2d at 620 [citing Brennan’s Inc. v.

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See also, Burnett v. Olson, No. 04-2200 (E.D. La. March 18, 2005) (available at 2005 U.S.

Dist. LEXIS 4849).

See also, Admiral Insurance Company, 2005 U.S. Dist. LEXIS 16363.

Brennan’s Restaurants, Inc., 590 F.2d 168, 172 (5 Cir. 1979)]. A lawyer who has represented a

client in a substantially related matter must be disqualified whether or not he has gained confidences,

and regardless of whether any advice rendered is relevant, in an evidentiary sense, to the present

litigation. In re American Airlines, 972 F.2d at 618-19 [quoting In re Corrugated, 659 F.2d at

1346]. The prior matter need only be “akin to the present action in a way reasonable persons would

understand as important to the issues involved.” In re Corrugated, 659 F.2d at 1346; Gibbs v. Paluk,

742 F.2d 181 (5 Cir. 1984).

The substantial relationship test is governed by two irrebuttable presumptions. First, once

it is established that the prior matter is substantially related to the present case, the court must

irrebuttably presume that relevant confidential information was disclosed during the former period

of representation. In re American Airlines 972 F.2d at 613; Duncan, 646 F.2d at 1028; In re

Corrugated, 659 F.2d at 1347. This is because, if the presumption were rebuttable – that is, if the

attorney could attempt to prove he did not recall any disclosure of confidential information, or that

no confidential information was in fact disclosed, the purpose of keeping the client’s secrets

confidential could be defeated. The confidences would be disclosed by the attorney during the

course of rebutting the presumption, or if the presumption was considered rebutted, the client would

be put into the anomalous position of having to show what confidences he entrusted to his attorney,

in order to prevent them from being revealed. In re Corrugated, 659 F.2d at 1347. See also, E.F.

Hutton, 305 F.Supp at 395 (attorney cannot defeat motion to disqualify by showing he received no

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See also, HARVA RUTH DOCKERY, NOTE, MOTIONS TO DISQUALIFY COUNSEL

REPRESENTING AN INTEREST ADVERSE TO A FORMER CLIENT, 57 Tex. L. Rev. 726 (1979).

See also, In re ESM Government Securities, Inc., 66 B.R. 82, 84 (S.D. Fla. 1986).

confidential information from the former client; to do so would engender a feeling that the attorney

has escaped on a technicality).

The second irrebuttable presumption governing the “substantial relationship” test is that

confidences obtained by an individual lawyer will be shared with the other members of his firm. In

re American Airlines, 972 F.2d at 614 [citing In re Corrugated, 659 F.2d at 1346; Selby v. Revlon

Consumer Products, 6 F.Supp..2d 577,582 (N.D. Tex. 1997)]. One reason for this presumption is

that it would be virtually impossible for a former client to prove that attorneys in the same firm have

not shared confidences. Another reason is that it helps clients feel more secure. Finally, the

presumption guards the integrity of the legal profession, by removing undue suspicion that the

former client’s interests are not being fully protected. See In re Epic Holdings, 985 S.W.2d 41, 49

(Tex. 1998). This irrebuttable imputation of conflicts is applicable under the substantial relationship

test, “regardless of the size of the firm [or] how many separate offices it may maintain. Senior Living

Properties LLC Trust, 2005 U.S. Dist. LEXIS 8993; American Sterilizer Co. v. Surgikos, Inc., No.

4089-238-Y (N.D. Tex. June 12, 1992) (available at 1992 U.S. Dist. LEXIS 21542, *14).

“Members of a law firm cannot disavow access to [the] confidential information of any one

attorney’s client.” In re Epic Holdings, Inc., 985 S.W.2d at 49.

Regardless of which ethical canon or federal common law standard is applied, Gardere’s

representation of Defendant in this matter comprises a violation.

B. Gardere’s Representation of Defendant Violates the Texas Rules.

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See also, Clarke v. Ruffino, 819 S.W.2d 947, 950-951 (Tex. App.– Houston 1991).

1. Gardere’s Conduct Violates Texas Rule 1.09(a)(2).

Texas Rule 1.09(a)(2) “forbids a lawyer to appear against a former client if the current

representation, in reasonable probability, will involve the use of confidential information gained

from the prior representation,” In re American Airlines, 972 F.2d at 615 [quoting TEX. DISCIPLIN A RY

R. PROF. CONDUCT, Rule 1.09] and the Fifth Circuit has indicated that a former client may disqualify

counsel simply by showing that the former attorney possesses relevant confidential information

contemplated by Texas Rule 1.09(a)(2). In re American Airlines, 972 F.2d at 615. Moreover,

“confidential information” is not limited to “privileged information,” but encompasses ``all

information relating to a client or furnished by the client, ... acquired by the lawyer during the course

of or by reason of the representation . . .. '' TEX. DISCIPLINARY R. PROF. C ONDUCT, Rules 1.09(a)(2),

1.05(a). Thus, a movant may disqualify counsel by “pointing to specific instances where it revealed

relevant confidential information regarding its practices and procedures.” In re American Airlines,

972 F.2d at 615 [citing Duncan, 646 F.2d at 1032].

In the present case, Mr. Baron and Compana have amply identified specific instances in

which confidential information was revealed to Gardere’s attorneys concerning Compana’s business

practices and procedures. Such information was revealed to Attorney Vogel in 2001 or 2002, in the

course of several conversations, and upon information and belief, a personal meeting. Introductory

Statement at ¶¶ 1-2; Appendix at pp. 3-4. Such information was also disclosed to Attorney Estes, and

discussed by her with other attorneys at Gardere, over several weeks in November and December

2003 – the same year Compana acquired the <golfhawaii.com> domain. Introductory Statement at

¶¶ 3, 4, 9; Appendix at pp. 4-5, 8. As a result of these disclosures, Attorneys Estes and Vogel gained

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See also, TEXAS DISCIPLINARY R. PROF. CONDU CT , preamble, at ¶ 13 (“. . there are some

duties, such as of that of confidentiality, that may attach before a client-lawyer relationship has been

established”); Woolley, 2003 U.S. Dist. LEXIS 8110 [citing Vinson & Elkins, 946 S.W.2d 381, 404

n. 15].

a thorough understanding of Compana’s business model and related trade secrets, Introductory

Statement at ¶ 9; Appendix at pp. 7-8, and Attorney Estes also acquired, reviewed, and discussed with

other members of Gardere, specific, confidential, contracts pertaining to Compana’s domain name

acquisition activities. Introductory Statement at ¶¶ 3-4; Appendix at pp. 4-6, 10-16. The

information revealed to Attorneys Estes and Vogel is relevant herein, because, inter alia, it pertained

to Compana’s method and motives for acquiring newly-deleted domains, and the domain name at

issue was “newly-deleted” when acquired by Compana using these methods, for the same reasons,

in 2003. Introductory Statement at ¶ 9; Appendix at pp. 7-8. Moreover, there is a reasonable

probability that this information will be used against Compana and/or Mr. Baron herein, in

contravention of Texas Rule 1.05, and Mr. Baron has expressed concern regarding this likelihood.

Appendix, at pp. 7-8, 21-24, 26-35, 38-40, 43-44. Whereas, Texas Rule 1.09(a)(2) is equally

applicable to information disclosed by prospective clients, In re American Airlines, 972 F.2d at 612

[citing TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09, Comment 4A; HAZARD & HODES, THE

LAW OF LAWYERING § 1.9.111 (1991)] , and its prohibitions are imputed to every partner and

associate in the conflicted lawyer’s firm, TEX. DISCIPLINARY R. PROF. CON DU CT , Rule 1.09(b),

Gardere, and all its partners and associates are prohibited from continuing to represent Defendant

in this case. Abney v. Wal-Mart, 984 F.Supp. 526, 528 (E.D. Tex. 1997); Admiral Insurance

Company, 2005 U.S. Dist. LEXIS 16363.

2. Gardere’s Conduct Violates Texas Rule 1.09(a)(3).

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Texas Rule 1.09(a)(3) provides that “a lawyer who personally has formerly represented a

client in a matter” may not, without prior consent, represent another person in “the same or a

substantially related matter.” TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09(a)(3). Conflicts

under this Rule are imputed to all attorneys in the lawyer’s firm, TEX. DISCIPLINARY R. PROF.

CONDUCT, Rule 1.09(b), and the Rule applies to prospective, as well as former, clients. In re

American Airlines, 972 F.2d at 612. Comment 4B to Texas Rule 1.09 provides that a “substantially

related” matter, “primarily involves situations where a lawyer could have acquired confidential

information concerning a prior client that could be used either to that prior client’s disadvantage or

for the advantage of the lawyer’s current client or some other person. It thus largely overlaps the

prohibition contained in Paragraph (a)(2) of this Rule [i.e., a situation in which representation in

reasonable probability will involve a violation of Rule 1.05's requirements concerning

confidentiality].” TEX. DISCIPLINARY R. PROF. CONDUCT, Rule 1.09, Comment 4B (emphasis

added).

As set forth supra, at p. 17, Gardere acquired confidential information regarding Compana,

that is relevant to the present action, and could be used to Compana’s and Mr. Baron’s disadvantage,

or to the advantage of Defendant herein. Whereas, Texas Rule 1.09(a)(2) concerns the “reasonable

probability” that this information might be used, Texas Rule 1.09(a)(3), as clarified in Comment 4B,

establishes Gardere’s conflict, whether this information is likely to be used or not – as long as the

information “could be used,” a prohibited conflict exists, absent Compana’s prior consent. Whereas,

no such consent has been given, Appendix, at pp. 7-8, 21-24, 26-35, 38-40, 43-44, Gardere, and all

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See Islander East Rental Program v. Ferguson, 917 F.Supp. 504 (S.D. Tex. 1996) (“[i]n

providing two distinct grounds for disqualification, the Rules expand the protections for former

clients beyond those offered by the substantial relationship test”).

of its partners and associates, are forbidden from continuing to represent Defendant in this case.

C. Gardere’s Representation of Defendant Violates the Model Rules.

1. Gardere’s Conduct Violates Model Rules 1.9(c) and 1.18(b)

Model Rule 1.9(c) indicates that “[a] lawyer who has formerly represented a client in a matter

or whose . . . firm has formerly represented a client in a matter shall not thereafter: (1) use

information relating to the representation to the disadvantage of the former client . . ., or (2) reveal

information relating to the representation . . . .” MODEL RULES OF PROFESSIONAL CONDUCT, Rule

1.9(c). This prohibition applies to prospective clients in this Circuit, and is also applied to

prospective clients by Model Rule 1.18(b). MODEL RULES OF PROFESSIONAL CONDUCT, Rule

1.18(b). The prohibition also extends to all attorneys in the subject lawyer’s firm, under the plain

language of Model Rule 1.9(c), Model Rule 1.10(a), and the law of this District and Division.

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9(c), Rule 1.10(a); Woolley, 2003 U.S. Dist.

LEXIS 8110, *32) (“While lawyers are associated in a firm, none of them shall knowingly represent

a client when any one of them practicing alone would be prohibited from doing so by [Model] Rules

1.7, 1.8(c), 1.9 or 2.2").

Attorney Vogel, Attorney Estes, and the additional Gardere lawyers with whom Attorney

Estes discussed Compana’s 2003 disclosures, could not be reasonably be expected to represent

Defendant directly in this case without using (consciously or subconsciously), or revealing

(intentionally or inadvertently), the information Compana disclosed, to Compana’s disadvantage,

or to the advantage of Defendant. Moreover, in such a situation, it would be unconscionable to

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expect Compana to rely on a “promise” that such information, though possessed by these attorneys,

would not be used or revealed in an action filed against it by the same attorneys, regarding the same

subject matter. There is a reasonable probability that this information will be used or disclosed,

and/or has been already. Thus, Attorneys Vogel and Estes, and all other Gardere attorneys who have

shared in, and discussed, Mr. Baron’s revelations on Compana’s behalf, are barred from representing

Defendant herein, under Model Rule 1.9(c) and newer Model Rule 1.18(b), and Gardere’s remaining

partners and associates are similarly barred, by Model Rule 1.9(c), Model Rule 1.10(a), and the

standards followed in this Circuit, District, and Division. MODEL RULES OF PROFESSIONAL

CONDUCT, Rules 1.9(c), 1.18(b), and 1.10(a); Woolley, 2003 U.S. Dist. LEXIS 8110, *32.

2. Gardere’s Conduct Violates Model Rule 1.9(a), Even When Model Rule

1.18 is Applied.

Model Rule 1.9(a) provides that “[a] lawyer who has formerly represented a client in a matter

shall not thereafter represent another person in the same or a substantially related matter in which

that person's interests are materially adverse to the interests of the former client, unless the former

client gives informed consent, confirmed in writing.” MODEL RULES OF PROFESSIONAL CONDUCT,

Rule 1.9(a). This prohibition is imputed to all members of the involved lawyer’s firm, under Model

Rule 1.10(a). MODEL RULES OF PROFESSIONAL CONDUCT , Rule 1.10(a). Comment 3 to Model Rule

1.9 elucidates the meaning of “substantially related matter” as follows:

Matters are "substantially related" . . . if there otherwise is a substantial risk that

confidential factual information as would normally have been obtained in the prior

representation would materially advance the client's position in the subsequent

matter. For example, a lawyer who has represented a businessperson and learned

extensive private financial information about that person may not then represent that

person's spouse in seeking a divorce. Similarly, a lawyer who has previously

represented a client in securing environmental permits to build a shopping center

would be precluded from representing neighbors seeking to oppose rezoning of the

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property on the basis of environmental considerations . . . In the case of an

organizational client . . . knowledge of specific facts gained in a prior representation

that are relevant to the matter in question ordinarily will preclude such a

representation. A former client is not required to reveal the confidential information

learned by the lawyer in order to establish a substantial risk that the lawyer has

confidential information to use in the subsequent matter . . . .

MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.9, Comment 3.

In the present case, Gardere’s attorneys previously consulted with Compana over a period

of several weeks, through its President, Mr. Baron, concerning Compana’s acquisition of newly-

deleted domains, obtaining extensive, private, trade secret-protected information and documents

regarding the manner and methods through which such domain names were acquired; the

motivations for such acquisitions; Compana’s intended uses for the domains, and the problems

Compana faced in the business. Introductory Statement at ¶¶ 1-4, 9; Appendix at pp. 3-6, 8, 10-16.

An ultimate issue in this action is whether Compana’s acquisition and use of one of these newly-

deleted domain names, <golfhawaii.com>, was in bad faith, amounting to willful cybersquatting,

under 15 U.S.C. § 1125(d), et seq., and warranting transfer of the domain to Defendant, with

statutory damages for the alleged violation. This situation is analogous to the example specified in

Model Rule 1.9, Comment 3, where an attorney formerly representing a client in connection with

environmental permits may not later represent another client against him, in an action based on

environmental considerations. Whereas, a number of specific facts gained by Gardere’s attorneys

in the prior matter are relevant to ultimate issues in this case, the respective matters are substantially

related, and Model Rules 1.9(a), and 1.10(a) preclude Gardere’s representation of Defendant herein.

Model Rule 1.18(c), if deemed applicable by the Court, does not alter the foregoing result.

The Rule adds a requirement, for prospective clients only, that the information acquired in the

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previous matter must be “significantly harmful” if used against the prospective client in the later

case. Obviously, Compana would be harmed significantly by Gardere’s use of the confidential

information previously divulged, which included trade secrets relating to Compana’s business model

and domain name acquisition activities, and confidential agreements, with non-disclosure provisions,

pertaining thereto.

Nor may imputation of the Model Rule 1.9(a) violation be avoided herein, through the

procedures outlined in Model Rule 1.18(d). See MODEL RULES OF PROFESSIONAL CONDUCT, Rule

1.18(d). Compana has never consented in writing to Gardere’s representation of Defendant in this

matter, as required by Model Rule 1.18(d)(1), and the alternate requirements of Model Rule

1.18(d)(2) have not been met. First, given the extensive nature of Mr. Baron’s prior disclosures to

Attorneys Estes and Vogel, it cannot be credibly claimed that precautions were taken to limit these

disclosures to information reasonably necessary for Gardere to determine whether it would represent

Compana in the prior disputes. See MODEL RULES OF PROFESSIONAL CONDUCT, Rule 1.18(d)(2).

Indeed, the evidence indicates that Attorney Estes, in particular, encouraged Compana to select

Gardere for all its legal needs, and it should be assumed that the disclosures made were

commensurate with this invitation. Introductory Statement at ¶ 3; Appendix at p. 4. Second,

Gardere’s attorneys in the present and prior matters practice within the same “section” of the firm,

and while Model Rule 1.18(d)(2)(i) permits a “screen” under certain circumstances, there is no

evidence that such a screen was timely employed, or that a screen would sufficiently protect the

information and material disclosed. The Model Rules are not the sole authority governing motions

to disqualify in this Circuit, and the screening procedure referenced in Model Rule 1.18(d)(2) is

contraindicated by both the Texas Rules and the “substantial relationship” test employed by this

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E.g., Woolley, 2003 U.S. Dist. LEXIS 8110, *32 (“While lawyers are associated in a firm,

none of them shall knowingly represent a client when any one of them practicing alone would be

prohibited from doing so by Rules 1.7, 1.8(c), 1.9 or 2.2”); Dyll, 1997 WL 222918, at *2; Selby, 6

F.Supp..2d at 582; American Sterilizer Co., 1992 U.S. Dist. LEXIS 21542, *14; In re Epic Holdings,

Inc., 985 S.W.2d at 49 (“Members of a law firm cannot disavow access to [the] confidential

information of any one attorney’s client”).

Court, which permit no exceptions to the irrebuttable imputation of conflicts under Texas Rule 1.09

and Model Rules 1.9 and 1.10(a). Finally, written notice was not timely provided to Compana, as

required by Model Rule 1.18(d)(2)(ii). As amply evidenced by the correspondence in the Appendix

at pp. 21-46, initial notice of the conflict emanated from Compana’s counsel, and was rebuffed by

defense counsel for more than two months. Id.; Appendix at p. 8. Initially, Gardere responded by

presenting a copy of its 2003 “disengagement letter,” which advised that it would not be representing

Compana in the prior matters, while remaining silent on the subjects of confidentiality and future

conflicts. Introductory Statement at ¶ 7; Appendix at pp. 8, 25. It is apparent from this response that

Gardere believed it had no obligations to Compana, due to its declination of the 2003 engagement,

and that no notice was required. Later, Gardere apparently came to believe that initiating actions

against Compana provided the requisite notice – a proposition antithetical to the letter and spirit of

Model Rule 1.18(d)(2)(ii). See Appendix at pp. 36, 42. In sum, whether or not Model Rule 1.18 is

applied by the Court, Gardere stands in violation of that Rule, as well as Model Rule 1.09(a).

D. Gardere’s Conduct Cannot Withstand the Substantial Relationship Test.

Both elements of the substantial relationship test applied in this Circuit are met in the instant

case. First, there was an actual attorney-client relationship between Compana and Attorneys Vogel

and Estes of the Gardere firm. As stated previously, this element may be satisfied even when an

attorney-client relationship has not been formed, but a person has sought in good faith to retain the

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The same view is reflected in the following opinions, and many others: Kearns v. Fred

Lavery Porche Audi Co., 745 F.2d 600, 603 (Fed Cir. 1984); Westinghouse Elec. Corp. v. Kerr-

McGee Corp., 580 F.2d 1311, 1319 and n. 12 (7 Cir. 1978) (fiduciary relationship between lawyer

and client extends to preliminary consultation by prospective client with view to retention of lawyer

though actual employment does not result); Wilson P. Abraham Constr. Corp., 559 F.2d at 253;

(attorney-client relationship existed between attorney and each co-defendant in a conspiracy case,

due to necessity of consultation); In re Yarn Processing Plant Validity Litig., 530 F.2d at 90

(attorney-client relationship arose by imputation); Williamsburg Wax Museum, Inc. v. Historic

Figures, Inc., 501 F.Supp. 326, 331 (D.D.C. 1980); E.F. Hutton & Co., 305 F.Supp. at 388 (relation

of attorney and client not dependent on payment of a fee or execution of formal contract); Taylor v.

Sheldon, 173 N.E.2d 892, 895 (Ohio 1961) (disclosures made with a view to enlist attorney’s

services are privileged).

lawyer. E.g., In re American Airlines, 972 F.2d at 612. The rationale for this result was well-

expressed in In re Dupont’s Estate, 60 Cal. App. 2d 276 140 P.2d 866, 873 (1943):

If a person in respect to his business affairs or troubles of any kind, consults with an

attorney in his professional capacity, with a view to obtaining professional advice or

assistance, and the attorney voluntarily permits or acquiesces in such consultation,

then the professional employment must be regarded as established, and the

communication made by the client, or advice given by the attorney . . . is privileged.

An attorney is employed – that is, he is engaged in his professional capacity as a

lawyer or counselor – when he is listening to his client’s preliminary statement of his

case, or when he is giving advice thereon, just as truly as when he is drawing his

client’s pleadings, or advocating his client’s cause in open court. It is the

consultation between attorney and client which is privileged, and which must ever

remain so, even though the attorney, after hearing the preliminary statement, should

decline to be retained further in the cause, or the client, after hearing the attorney’s

advice, should decline to further employ him. [citation omitted]. As has been pointed

out in other cases, no person could ever safely consult an attorney for the first time

with a view to his employment if the privilege depended on the chance of whether

the attorney, after hearing his statement of the facts decided to accept the

employment or decline it.

Id. Second, a substantial relationship exists between the subject matter of the former and present

representations. As discussed, supra, at p. 21, an ultimate issue in this case is whether Compana’s

acquisition of the newly-deleted domain name, <golfhawaii.com>, in 2003 constituted “bad faith,”

a determination requiring examination of the circumstances of the acquisition, and Compana’s

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See also, Admiral Insurance Company, 2005 U.S. Dist. LEXIS 16363.

underlying motives therefor. The previous matters involved Compana’s business of acquiring

newly-deleted domain names; its proprietary method of such acquisition, and its motives therefor,

and the <golfhawaii.com> domain was acquired using these methods, for the same motives. The

prior matters were “akin to the present action in a way reasonable persons would understand as

important to the issues involved,” and accordingly, the second element of the substantial relationship

test is met. In re Corrugated, 659 F.2d at 1346; Gibbs v. Paluk, 742 F.2d 181. Thus, it must be

irrebuttably presumed that (1) relevant confidential information was disclosed to Attorneys Vogel

and Estes in the former matters, In re American Airlines 972 F.2d at 613; Duncan, 646 F.2d at 1028;

In re Corrugated, 659 F.2d at 1347, and that (2) the confidences obtained by these attorneys will

be shared with the other members of Gardere. In re American Airlines, 972 F.2d at 614; In re

Corrugated, 659 F.2d at 1346; Selby, 6 F.Supp..2d at 582. Under this test alone, Gardere, and its

partners and associates, must be disqualified from continuing to represent Defendant herein.

E. The Relevant Social Considerations Favor Gardere’s Disqualification.

Gardere’s representation of Defendant in a counterclaim against Compana, and a third-party

complaint against Mr. Baron, in which the very practices Compana disclosed to Attorneys Vogel and

Estes, and for which Compana sought Gardere’s assistance, are condemned as unlawful, warranting

damages and injunctive relief, has a strong appearance of impropriety in general. Moreover, the

possibility that confidences revealed will be disclosed, or will be used to Compana’s and Mr.

Baron’s disadvantage, or to the advantage of Defendant, represent a real possibility that specific

improprieties will occur. Finally, Gardere’s conduct will arouse public suspicions of impropriety

that greatly outweigh any social interests served by its continued participation in this case.

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Both Compana and Mr. Baron have the right to expect that their credibility will not be

impugned by their former attorneys in a substantially related matter, or by other members of the

attorneys’ firm. Selby, 6 F.Supp.2d at 582. Moreover, it would be unfair to force Compana or Mr.

Baron to fight Defendant’s counterclaims and third-party complaint under the specter of unfairness

that has befallen this case. Should Defendant ultimately prevail, Compana and its officer will always

wonder whether Defendant was advantaged by information obtained by Gardere during a relationship

considered sacrosanct by the Court. Additionally, Compana and Mr. Baron will raise the

disqualification issue on appeal if they are on the receiving end of an adverse judgment. A reversal

on this issue might require Defendant to relitigate this case from the beginning with new counsel,

paying for legal expenses to prosecute and defend against this case twice. Plaintiff and Third-Party

Defendant would likely also incur additional expense. Meanwhile, this case is in a very early stage

of litigation and Gardere’s role thus far has been limited to filing an Answer. Accordingly, for the

protection of all parties, Gardere, and all of its partners and associates, should be disqualified from

continuing in this matter. Burnett, 2005 U.S. Dist. LEXIS 4849, at *22.

F. CONCLUSION.

IN VIEW OF THE ABOVE, Plaintiff and Third-Party Defendant request that Defendant’s

current attorneys of record, and all partners and associates within the Gardere firm, be disqualified

from representing Defendant herein, and that the Court award the movants’ reasonable attorney’s

fees and expenses for preparing, filing, and prosecuting the present Motion.

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RESPECTFULLY SUBMITTED:

February 7, 2006 By : s/Gregory H. Guillot

Gregory H. Guillot (#24044312)

GREGORY H. GUILLOT, PC

Two Galleria Tower Center

13455 Noel Road, Suite 1000

Dallas, TX 75240

Telephone: (972) 774-4560

Facsimile: (214) 515-0411

ATTORNEY FOR PLAINTIFF, ONDOVA

LIMITED COMPANY, d/b/a COMPANA, LLC

AND THIRD-PARTY DEFENDANT,

JEFFREY BARON

Certificate of Service

I, Gregory H. Guillot, do hereby certify that a true and correct copy of the foregoing

document was served via CM/ECF upon Beverly B. Godbey, Gardere Wynne Sewell LLP, 1601 Elm

Street, Suite 3000, Dallas, TX, counsel for Plaintiff, on this, the 7 day February 2006.

s/ Gregory H. Guillot

Gregory H. Guillot

Case: 10-11202 Document: 00511604733 Page: 46 Date Filed: 09/16/2011

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Case 3:09-cv-00988-F Document 123-1 Filed 11/24/10 Page 9 of 12 PageID 2051

without

ever

intending

pay

them

the

full

amounts

that

they

charge,

and

then

terminating

them

when

they

demand

payment,

this

court

troubled

that

there

are

possibly

criminal

implications

for

Jeffrey

Baron.

The

bankruptcy

court

has

announced

that

will

not

allow

this

pattern

occur

any

further

these

proceedings,

and

Jeffrey

Baron

will

not

allowed

hire

any

additional

attorneys.

Mr.

Baron

has

been

told

that

can

either

retain

Gary

Lyon

and

Martin

Thomas

through

the

end

the

bankruptcy

case

(which

this

court

does

not

expect

last

much

longer)

can

proceed

pro

se.

The

bankruptcy

court

has

further

warned

Mr.

Baron

that

chooses

proceed

pro

and

does

not

cooperate

connection

with

final

consummation

the

Global

Settlement

Agreement,

can

expect

this

court

recommend

His

Honor

that

appoint

receiver

over

Mr.

Baron,

pursuant

U.S.C.

§§

754

1692,

seize

Mr.

Baron's

assets

and

perform

the

obligations

Jeffrey

Baron

under

the

Global

Settlement

Agreement.

III.

RECOMMENDATION.

alluded

above,

the

bankruptcy

court's

concerns

over

the

above

hiring

and

firing

lawyers

Mr.

Baron

multi-

faceted

(e.g.,

Rule

implications;

frustration

the

Global

The

bankruptcy

court

concerned

that

would

not

have

the

power

appoint

receiver

over

Mr.

Baron,

due

language

section

105

(b)

the

Bankruptcy

Code.

REPORT

AND

RECOMMENDATiON

PAGE

Case: 10-11202 Document: 00511604733 Page: 47 Date Filed: 09/16/2011

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EMERGENCY MOTION OF TRUSTEE FOR APPOINTMENT OF A RECEIVER OVER JEFFREY BARON – Page 2

filed its Report and Recommendation with this Court. On October 19, 2010, this Court adopted

the Bankruptcy Court's Report and Recommendation in its entirety.

2. The Bankruptcy Court's Report and Recommendation addressed Mr. Jeffrey

Baron's continuing and disturbing pattern of hiring and firing attorneys. In the Bankruptcy

Court's Report and Recommendation, the Bankruptcy Court stated that it would no longer

tolerate such behavior and that it would not allow Mr. Jeffrey Baron ("Baron") to hire any

additional lawyers. In fact, the Bankruptcy Court gave Baron two options: (1) retain Gary Lyons

and Martin Thomas through the end of the Bankruptcy Case, or (2) proceed pro se. If Baron

chose the latter opinion, the Bankruptcy Court advised Baron that it would recommend to this

Court that it appoint a receiver over Mr. Baron and all of his assets.

II. RECENT DEVELOPMENTS

3. At a hearing on Wednesday, November 17, 2010, Martin Thomas advised the

Bankruptcy Court that he was terminating his legal representation of Mr. Baron. Mr. Thomas

advised the Bankruptcy Court that he had not been paid, that Mr. Baron had filed a grievance

against him and that Mr. Baron had committed to attend the hearing on November 17, 2010 but

failed to show up. The failure of Mr. Baron to show up on November 17, 2010 was disruptive for

several reasons including that Mr. Baron was advised by Mr. Thomas that he needed to attend

in order to raise objections to the Trustee's Motion for Authority to Reject Executory Contracts

with The Internet Corporation for Assigned Names and Numbers ("ICANN") filed by the Trustee

("ICANN Motion") in the Bankruptcy Case, at Mr. Baron's request, on November 3, 2010. Mr.

Thomas had advised Mr. Baron that he was withdrawing and would not make the objections Mr.

Baron was requesting be made to the ICANN Motion. Mr. Thomas has recently advised the

Trustee that he himself has had to engage counsel to handle matters with Mr. Baron.

4. Additionally, on November 19, 2010, one of Mr. Baron's other attorneys, Gary

Lyon, advised the undersigned counsel for the Trustee that Baron has hired a new attorney to

represent Baron in connection with matters pertaining to the Bankruptcy Case. That attorney is

Case 3:09-cv-00988-F Document 123 Filed 11/24/10 Page 2 of 5 PageID 2039

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Deposition of Receivership Meeting 23

DepoTexas, Inc.

13:52 1 anything that waives his Fifth Amendment privilege. And

13:52 2 we would like to cooperate with you fully and we'd like

13:52 3 to respond in writing if you just give me a list of the

13:52 4 information that you want. And if there's any resources

13:52 5 that I need to fully to respond, for example, an

13:52 6 accountant or something like that, you know, I'll let

13:52 7 the receiver know. And it might just be an easier thing

13:52 8 than having some kind of an inquisition/deposition. And

13:53 9 that will be a super cooperative type of a deal. You

13:53 10 know, I know there's a lot of tension and maybe some

13:53 11 animosity. And that might diffuse things.

13:53 12 And -- and you know, the judge said he

13:53 13 wants us to work together to the fullest extent possible

13:53 14 and turn over a new leaf and, you know, make a second --

13:53 15 second first impression and whatever. And that's what

13:53 16 we'd like to do if -- if -- if we can work together on

13:53 17 that basis. It will still get you the information in

13:53 18 a -- you know, in a less threatening setting. We've got

13:53 19 five attorneys here questioning Jeff. And you know, it

13:53 20 will still get you what you want.

13:53 21 MR. GOLDEN: Let me tell you what we're

13:53 22 going to do in the next few days. The judge stated at

13:53 23 the last hearing that we should file a motion for the

13:53 24 disbursement of attorneys fees to the unpaid attorneys.

13:54 25 And you know, we've collected up those declarations and

Motion conference labeld

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14:53 1 get renewed and the money losing ones that Jeff Harbin

14:53 2 and the others think should not be renewed don't get

14:53 3 renewed. But since we don't have that other source of

14:53 4 funding, we're left with no other choice. I mean, the

14:53 5 judge has made it clear how this is going to go.

14:53 6 And so I go back to the original -- one

14:53 7 of the purposes of this meeting is to collect the

14:53 8 information on those assets. And -- and I've been sort

14:53 9 of taking up Peter Loh's time who has got the specific

14:53 10 questions that I guess we'll either get the Fifth

14:53 11 Amendment for or we won't. But I'll just end by saying

14:54 12 that I urge you to make this easier so it takes less --

14:54 13 takes less professional fees in order to collect up

14:54 14 these funds so that you don't have to suffer the tax

14:54 15 consequence of the IRAs, you don't have to lose the

14:54 16 domain names. But again, it's going to be your choice.

14:54 17 MR. SCHEPPS: That's why I'm suggesting

14:54 18 that we work together and let's cooperate. Give me the

14:54 19 questions that you want, let me take a look at it. If I

14:54 20 need some resources to get your -- your questions

14:54 21 responded to, you know, I'll come to the receiver and

14:54 22 ask for that.

14:54 23 MR. GOLDEN: Why can't you do it now?

14:54 24 Why can't you take a break with Mr. Baron and you're

14:54 25 going to decide one way or the other. If the answer is

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16:16 1 Stan Broome gets without Stan Broome agreeing?

16:17 2 MR. BARRETT: No. I agree.

16:17 3 MR. GOLDEN: So that's the --

16:17 4 MR. BARRETT: I agree.

16:17 5 MR. GOLDEN: And there's -- there's

16:17 6 approximately 25 different declarations we have. So

16:17 7 we're talking 25 different law firms.

16:17 8 MR. BARRETT: Right, right. I think -- I

16:17 9 think it has to be equitable for both sides. I mean,

16:17 10 every claim needs to be really scrutinized and nothing

16:17 11 can be taken at face value. But you know, every --

16:17 12 every lawyer has to be given the opportunity to present

16:17 13 their -- their bill and explain the circumstances under

16:17 14 which they -- they arrived at that bill and provide

16:17 15 documents -- supporting documentation.

16:18 16 MR. GOLDEN: All right. I'm looking at

16:18 17 Exhibit 7 here. This is an e-mail Gary Schepps sent to

16:18 18 Peter Loh February 22, 2011 7:21 p.m. It says here --

16:18 19 this is last night -- To the best of my knowledge, there

16:18 20 is no secret bank account with money overseas.

16:18 21 But to the best of your knowledge, that's

16:18 22 not a true statement, right?

16:18 23 MR. BARRETT: I think there's accounts, I

16:18 24 just don't think there's any money in them.

16:18 25 MR. GOLDEN: Well, there's not a lot of

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16:18 1 money.

16:18 2 MR. BARRETT: There's not a lot of money.

16:18 3 MR. GOLDEN: But what he's saying here is

16:18 4 to the best of my information, there is no secret bank

16:18 5 account with money overseas. You believe that there's

16:18 6 somewhere between five and ten accounts?

16:18 7 MR. BARRETT: Well, three and five

16:18 8 accounts, something like that.

16:18 9 MR. GOLDEN: All right. But this is why

16:18 10 I can't seem to be able to work with Gary Schepps on

16:18 11 these issues because this is a lie. So we're trying to

16:18 12 get to the bottom of the Cook Islands funds. And then

16:19 13 he's sending a lie and then not showing up today.

16:19 14 MR. VOGEL: And calling them secret when,

16:19 15 in fact, you know about them. So it's not much of a

16:19 16 secret, is it?

16:19 17 MR. MACPETE: But just so we have a clear

16:19 18 record, you're nodding your head. But I don't want to

16:19 19 say that that means you're agreeing.

16:19 20 But do you agree that that statement from

16:19 21 Mr. Schepps that there are no secret bank accounts

16:19 22 overseas with money in them, that's a false statement?

16:19 23 MR. BARRETT: Yes. And I thought that --

16:19 24 and while I recall that -- saying that, if I'm not

16:19 25 mistaken, he represented at the last hearing that there

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16:19 1 were and we would get you that information. If I'm not

16:19 2 mistaken --

16:19 3 MR. VOGEL: He told Judge Furgeson?

16:19 4 MR. BARRETT: Yes.

16:19 5 MR. GOLDEN: And that's why just hours

16:19 6 before this meeting begins, about 14 hours before --

16:20 7 MR. BARRETT: I think we took a break and

16:20 8 we went in and we talked and -- we talked, Mr. Schepps,

16:20 9 myself, and Mr. Baron talked. And --

16:20 10 MR. VOGEL: On the 17th?

16:20 11 MR. BARRETT: Yes, on the 17th. And my

16:20 12 recollection was it was a situation where, look, if

16:20 13 there's -- if there's nothing to hide, don't hide it,

16:20 14 you know.

16:20 15 MR. GOLDEN: Right.

16:20 16 MR. BARRETT: So we came back in and

16:20 17 said, there's some accounts, we'll get you the

16:20 18 information.

16:20 19 MR. GOLDEN: That's my recollection. I'm

16:20 20 certain that the February 17th record will reflect that.

16:20 21 MR. BARRETT: Okay. All right.

16:20 22 MR. GOLDEN: And so that's why we're a

16:20 23 bit frustrated -- more than frustrated when 14 hours

16:20 24 before the start of this meeting today, as part of an

16:20 25 excuse to not show up to the meeting, Mr. Schepps made

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16:20 1 this statement. And so --

16:20 2 MR. VOGEL: State the statement.

16:20 3 MR. GOLDEN: -- my question to you is:

16:21 4 The statement that reads, quote, To the best of my

16:21 5 knowledge, there is no secret bank account with money

16:21 6 overseas, unquote, is a false statement?

16:21 7 MR. BARRETT: That's a false statement.

16:21 8 MR. GOLDEN: Not only is there one or

16:21 9 more bank accounts with money overseas, but Mr. Schepps

16:21 10 does have knowledge of that?

16:21 11 MR. BARRETT: Yes. And I believe he

16:21 12 stated on the record that he did at our last meeting.

16:21 13 MR. GOLDEN: So when he says later on,

16:21 14 You have my 100 percent cooperation on this, that's

16:21 15 clearly disingenuous because, in fact, it is -- it

16:21 16 follows something that is an untrue statement.

16:21 17 MR. BARRETT: Disingenuous is a good

16:21 18 characterization.

16:21 19 MR. MACPETE: In fact, when we're talking

16:21 20 about accounts overseas that have some amount of money

16:21 21 in them, there are accounts in the Cook Islands that

16:21 22 have some amount of money in them, correct?

16:21 23 MR. BARRETT: That's correct.

16:21 24 MR. MACPETE: And there's at least one

16:21 25 account in Switzerland that has money in it, correct?

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15:10 1 And the example I gave was Cook Islands assets. And he

15:11 2 said, well, you're going to meet face to face with

15:11 3 Mr. Schepps and you're going to find out that

15:11 4 information and you're going to ask the questions and

15:11 5 you're going to get the answers to the questions on the

15:11 6 Cook Islands assets. So now I'm here. We're going to

15:11 7 ask the questions. And to the extent we leave here

15:11 8 without answers to those questions, that's the report

15:11 9 we're going to give back to the judge, that we came and

15:11 10 we did not end up getting the answers to those

15:11 11 questions. So you can do it any way you want. You can

15:11 12 say, well, the judge ordered Mr. Baron to do it, but he

15:11 13 didn't order the attorneys to do it. You can take that

15:11 14 up with the judge. But I'm saying that I was ordered to

15:11 15 come here and ask those questions and get those answers.

15:11 16 And the fact that I'm going to leave without the

15:11 17 answers, it is not my own doing. It's because of the

15:11 18 lack of cooperation that I'm getting from Mr. Baron and

15:11 19 his counsel.

15:11 20 MR. SCHEPPS: Okay. Well, we just want

15:11 21 to make the statement that we've offered to cooperate

15:11 22 numerous times. We've offered to provide the

15:11 23 information if you would just provide us with what the

15:11 24 questions are, and we can respond to your questions.

15:12 25 But we would like an agreement that our responses don't

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