No. 11-10289
In the
United States Court of Appeals
for the Fifth Circuit
▬▬▬▬▬▬▬▬▬▬▬
NETSPHERE, INC., ET AL,
Plaintiffs
v.
JEFFREY BARON,
Defendant- Appellant
v.
DANIEL J SHERMAN,
Appellee
▬▬▬▬▬▬▬▬▬▬▬
Interlocutory Appeal of Orders
In Receivership on Appeal
▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
BRIEF FOR JEFFREY BARON
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
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
FOR APPELLANT
CERTIFICATE OF INTERESTED PERSONS
The undersigned counsel of record certifies that the following
listed persons and entities have an interest in the outcome of this case.
These representations are made in order that the judges of this Court
may evaluate possible disqualification or recusal.
1. PARTIES
a. Defendant: JEFFREY BARON
b. Defendant: DANIEL J. SHERMAN, Trustee
for ONDOVA LIMITED COMPANY
C. INTERVENOR: RASANSKY, JEFFREY H.
AND CHARLA G. ALDOUS
d. Intervenor: VeriSign, Inc.
e. Plaintiffs: (1) Netsphere Inc
(2) Manila Industries Inc
(3) MUNISH KRISHAN
F. APPELLANTS: (1) NOVO POINT, LLC
(2) QUANTEC, LLC
G. APPELLEE: PETER S. VOGEL
2. ATTORNEYS
a. For Appellant: Gary N. Schepps
Suite 1200
5400 LBJ Freeway
Dallas, Texas 75240
Telephone: (214) 210-5940
Facsimile: (214) 347-4031
b. For Appellee: Gardere Wynne Sewell LLP
(1) Barry Golden
(2) Peter L. Loh
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Telephone (214) 999-3000
Facsimile (214) 999-4667
bgolden@gardere.com
c. For Intervenor VeriSign: Dorsey & Whitney (Delaware)
(1)Eric Lopez Schnabel, Esq.
(2)Robert W. Mallard, Esq.
d. For Intervenor Rasansky and Aldous: Aldous Law Firm
(1) Charla G Aldous
d. For Plaintiffs:
(1) John W MacPete, Locke Lord Bissell & Liddell
(2) Douglas D Skierski, Franklin Skierski Lovall Hayward
(3) Franklin Skierski, Franklin Skierski Lovall Hayward
(4) Lovall Hayward , Franklin Skierski Lovall Hayward
(5)Melissa S Hayward, Franklin Skierski Lovall Hayward
(6) George M Tompkins, Tompkins PC
3. OTHER
a. Companies and entities purportedly seized by the
receivership:
(1) VillageTrust
(2) Equity Trust Company
(3) IRA 19471
(4) Daystar Trust
(5) Belton Trust
(6) Novo Point, Inc.
(7) Iguana Consulting, Inc.
(8) Quantec, Inc.,
(9) Shiloh LLC
(10) Novquant, LLC
(11) Manassas, LLC
(12) Domain Jamboree, LLC
(13) Genesis, LLC
(14) Nova Point, LLC
(15) Quantec, LLC
(16) Iguana Consulting, LLC
(17) Diamond Key, LLC
(18) Quasar Services, LLC
(19) Javelina, LLC
(20) HCB, LLC, a Delaware limited liability company
(21) HCB, LLC, a U.S. Virgin Islands limited liability company
(22) Realty Investment Management, LLC, a Delaware limited
liability company
(23) Realty Investment Management, LLC, a U.S. Virgin
(24) Islands limited liability company
(25) Blue Horizon Limited Liability Company
(26) Simple Solutions, LLC
(27) Asiatrust Limited
(28) Southpac Trust Limited
(29) Stowe Protectors, Ltd.
(30) Royal Gable 3129 Trust
b. Receiver / Mediator / Special Master: Peter Vogel
c. Non-parties seeking money from the receivership res:
1. Garrey, Robert (Robert J. Garrey, P.C.)
2. Pronske and Patel
3. Carrington, Coleman, Sloman & Blumenthal, LLP
4. Aldous Law Firm (Charla G. Aldous)
5. Rasansky Law Firm (Rasansky, Jeffrey H.)
6. Schurig Jetel Beckett Tackett
7. Powers and Taylor (Taylor, Mark)
8. Gary G. Lyon
9. Dean Ferguson
10. Bickel & Brewer
11. Robert J. Garrey
12. Hohmann, Taube & Summers, LLP
13. Michael B. Nelson, Inc.
14. Mateer & Shaffer, LLP (Randy Schaffer)
15. Broome Law Firm, PLLC
16. Fee, Smith, Sharp & Vitullo, LLP (Vitullo, Anthony “Louie”)
17. Jones, Otjen & Davis (Jones, Steven)
18. Hitchcock Evert, LLP
19. David L. Pacione
20. Shaver Law Firm
21. James M. Eckels
22. Joshua E. Cox
23. Friedman, Larry (Friedman & Feiger)
24. Pacione, David L.
25. Motley, Christy (Nace & Motley)
26. Shaver, Steven R. (Shaver & Ash)
27. Jeffrey Hall
28. Martin Thomas
29. Sidney B. Chesnin
30. Tom Jackson
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANTS
STATEMENT REGARDING ORAL ARGUMENT
Appellant does not believe oral argument would be helpful in
determining the issues involved in this appeal. The issues are pure
questions of law determined de novo and involve long established legal
principles. Dispositive issues in the case have been authoritatively
decided, e.g., Griggs v. Provident Consumer Discount Co., 459 U.S. 56,
58 (1982)(The filing of a notice of appeal confers jurisdiction on the
court of appeals and divests the district court of its control over those
aspects of the case involved in the appeal); Cochrane v. WF Potts Son &
Co., 47 F.2d 1026, 1029 (5th Cir. 1931) (absent pleadings asserting a
claim over the receivership property, an order appointing a receiver is
void for lack of subject matter jurisdiction); St. Clair v. Cox, 106 U.S.
350, 353 (1882) (order void unless the District Court acquired
jurisdiction over the party by personal service or voluntary appearance);
Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642 (1923)(Even
where the court which appoints a receiver had jurisdiction at the time,
but loses it ... the first court cannot thereafter make an allowance for
the receiver’s expenses and compensation.) .
TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS .......................................... 3
STATEMENT REGARDING ORAL ARGUMENT..................................... 7
TABLE OF CONTENTS.................................................................................. 8
TABLE OF CONTENTS.................................................................................. 8
TABLE OF AUTHORITIES ......................................................................... 11
STATEMENT OF THE JURISDICTION................................................... 13
ISSUES PRESENTED FOR REVIEW ....................................................... 14
STATEMENT OF THE CASE ...................................................................... 15
STATEMENT OF FACTS ............................................................................. 15
ARGUMENT SUMMARY.............................................................................. 19
ARGUMENT & AUTHORITY ...................................................................... 20
ISSUE 1: Does an interlocutory appeal divest the trial court of
jurisdiction over the matter appealed ?......................................................... 20
Standard of Review ................................................................................. 20
Appeal Divests the District Court of Jurisdiction Over the
Matter Appealed...................................................................................... 20
The District Court was Divested of Jurisdiction over
Receivership Res ..................................................................................... 21
District Court was Divested of Jurisdiction to Tamper with the
Order on Appeal ...................................................................................... 23
Policy Issue: Prejudgment of Validity of Receivership......................... 23
ISSUE 2: Does Due Process require that a party be afforded the
opportunity to be heard on motions before relief is granted
against that party ? ........................................................................................ 25
Standard of Review ................................................................................. 25
Argument ................................................................................................. 25
ISSUE 3: Must a court acquire personal jurisdiction over a third-
party in order to order that third-party into receivership ? .......................... 28
Standard of Review ................................................................................. 28
Argument ................................................................................................. 28
ISSUE 4: Where a single receiver was appointed over multiple
receivership parties and res, did the District Court abuse its
discretion in awarding receivership fees and expenses (1) Without
a showing or finding that the fees and expenses were reasonable or
necessary; and (2) Without regard to which of multiple
receivership parties or for which of a multiple receivership res the
fees were allegedly incurred. .......................................................................... 30
Standard of Review ................................................................................. 30
Argument ................................................................................................. 30
ISSUE 5: Did the District Court err in awarding receivership fees
and expenses where the receiver was prohibited by law from being
appointed as a receiver ?................................................................................. 32
Standard of Review ................................................................................. 32
Argument ................................................................................................. 32
ISSUE 6: Did the District Court err in (1) Awarding receivership
fees and expenses Without allowing the receivership party the
opportunity to hire experienced legal counsel to offer evidence and
argument as to the necessity or reasonableness of the fees and (2)
Denying Baron the right to use his own money to hire counsel to
represent him and protect his rights ? ........................................................... 34
Standard of Review ................................................................................. 34
Argument ................................................................................................. 34
PRAYER........................................................................................................... 36
CERTIFICATE OF COMPLIANCE............................................................ 37
CERTIFICATE OF SERVICE ..................................................................... 38
TABLE OF AUTHORITIES
FEDERAL CASES
Armstrong v. Manzo, 380 U.S. 545, 552 (1965) ...................................................25
Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986)...................29
Coastal Corp. v. Texas Eastern Corp., 869 F.2d 817, 820 (5th Cir. 1989) .......21, 23
Cochrane v. WF Potts Son & Co., 47 F.2d 1026, 1029 (5th Cir. 1931) .......7, 13, 29
Commodity Credit Corporation v. Bell, 107 F.2d 1001 (5th Cir. 1939) ....30, 32, 34
Dayton Indep. School Dist. v. US Mineral Prods. Co., 906 F.2d 1059, 1065 (5th
Cir. 1990) ....................................................................................................20, 24
Devlin v. Scardelletti, 536 U.S. 1 (2002) ..............................................................32
Goss v. Lopez, 419 U.S. 565, 579 (1975)..............................................................25
Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)...............7, 20
International Transactions v. Embotelladora Agral, 347 F.3d 589, 596 (5th Cir.
2003).................................................................................................................26
Johnson v. City of Cincinnati, 310 F.3d 484, 501 (6th Cir. 2002) .........................35
Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 161 (1951)...........26
Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642 (1923) .....................7, 22
Logan v. Zimmerman Brush Co., 455 U.S. 422, 429-430 (1982)..........................25
Middle South Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir.
1986).................................................................................................................29
Mosley v. St. Louis Southwestern Ry., 634 F.2d 942, 946 (5th Cir. 1981)............35
Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987).............29
Palmer v. Texas, 212 U.S. 118, 126 (1909)...........................................................21
Pennoyer v. Neff, 95 US 714, 737 (1878) .......................................................25, 29
Potashnick v. Port City Const. Co., 609 F.2d 1101, 1104 (5th Cir. 1980)........34, 35
Powell v. Alabama, 287 U.S. 45, 53-69 (1932).....................................................35
St. Clair v. Cox, 106 U.S. 350, 353 (1882)........................................................7, 28
Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 89 (1998)...................29
Taylor v. Sterrett, 640 F.2d 663, 668 (5th Cir. 1981) ............................................22
Wabash R. Co. v. Adelbert College of Western Reserve Univ., 208 U.S. 38, 46
(1908)................................................................................................................22
STATE CASES
Horton v. Ferrell, 335 Ark. 366, 981 S.W.2d 88 (1998) ........................................35
FEDERAL STATUTES
28 U.S.C. §§1292(a)(1).........................................................................................15
28 U.S.C. §958 .....................................................................................................35
FEDERAL RULES
FED. R. APP. P. 32(a)(5)......................................................................................39
FED. R. APP. P. 32(a)(6)......................................................................................39
FED. R. APP. P. 32(a)(7)(B).................................................................................39
STATEMENT OF THE JURISDICTION
The Fifth Circuit Court of Appeals has jurisdiction to hear this
interlocutory appeal from the orders of the District Court of the
Northern District of Texas: (1) appointing a receiver, (2) taking steps to
accomplish the purposes of a receivership, including denying Jeff Baron
the ability to hire counsel, (3) directing the sale of receivership assets,
(4) ordering the disposal and disbursement of receivership property;
pursuant to 28 U.S.C. §§1292(a)(1) and (2).
The District Court lacked subject matter jurisdiction to enter the
orders because: (1) The District Court was divested of jurisdiction over
the matter when it was appealed to the Fifth Circuit Court of Appeals;
(2) the District Court lacks personal and subject matter jurisdiction
over the multitude of parties ordered into receivership; and (3) no claim
for relief regarding the property ordered into receivership was pled.
Cochrane v. WF Potts Son & Co., 47 F.2d 1026, 1029 (5th Cir. 1931)
(absent pleadings asserting a claim to support the receivership, an
order appointing a receiver is void for lack of subject matter
jurisdiction, in fact, “their proceedings are absolutely void in the
strictest sense of the term”).
ISSUES PRESENTED FOR REVIEW
ISSUE 1: Does an interlocutory appeal divest the trial court of
jurisdiction over the matter appealed ?
ISSUE 2: Does Due Process require that a party be afforded the
opportunity to be heard on motions before relief is granted against
that party ?
ISSUE 3: Must a court acquire personal jurisdiction over a third-
party in order to order that third-party into receivership ?
ISSUE 4: Where a single receiver was appointed over multiple
receivership parties and res, did the District Court abuse its
discretion in awarding receivership fees and expenses (1) Without
a showing or finding that the fees and expenses were reasonable or
necessary; and (2) Without regard to which of multiple receivership
parties or for which of a multiple receivership res the fees were
allegedly incurred.
ISSUE 5: Did the District Court err in awarding receivership fees
and expenses where the receiver was prohibited by law from being
appointed as a receiver ?
ISSUE 6: Did the District Court err in (1) Awarding receivership
fees and expenses Without allowing the receivership party the
opportunity to hire experienced legal counsel to offer evidence and
argument as to the necessity or reasonableness of the fees and (2)
Denying Baron the right to use his own money to hire counsel to
represent him and protect his rights ?
STATEMENT OF THE CASE
This is an interlocutory appeal from orders entered by the District
Court exercising control of a receivership while the matter is on appeal
to the Fifth Circuit.
STATEMENT OF FACTS
One defendant below, Ondova (through the chapter 11 trustee
who now controls it, Sherman) filed a motion for the District Court to
seize all of the assets of another defendant, Jeffrey Baron, in order to
prevent him from hiring an attorney.
1
Sherman falsely made it look
like the bankruptcy judge desired a receiver over Baron if he hired any
lawyers.
2
The District Judge granted Sherman’s motion ex parte and
later explained: “[T]he receivership is an effort to stop the parade of
lawyers trying to wiggle out of lawful injunctions from judicial officers.
Yes, sir.”
3
1
R. 1578 (paragraph 13, “the appointment of a receiver is necessary under the
circumstances in order to remove Baron from control of his assets and end his
ability to further hire and fire a growing army of attorneys.” ), 1619-1632. One
reason cited by Sherman in his motion was that three business days before, Baron
had hired an attorney to assist in objecting to Sherman’s Attorney’s fee application
in the bankruptcy court where Baron is a creditor. 1576-1577.
2
R. 1576.
3
R. 4593-4594.
The original purpose of the ex parte receivership was clear: Jeff
Baron was warned that he was “prohibited from retaining any legal
counsel” and that if he did “the Receiver may move the Court to find you
in contempt”.
4
To enforce compliance and to stop Jeff from having any
money to hire a lawyer, all of his assets (including his exempt property)
were seized
5
, as were all of his future earnings
6
. Jeff was ordered not to
cash any checks
7
or enter into any business transactions
8
. Jeff Baron
has been this “civil lockdown” since the day the challenged order was
issued ex parte in November 2010. Baron has been forced to live off a
monthly sustenance stipend disbursed to him by the receiver. Under
the express threat of contempt, Jeff Baron has been permitted to
purchase only “local transportation, meals, home utilities, medical care
and medicine.”
9
4
SR. v8 p1213.
5
R. 1620.
6
R. 1622 paragraph F.
7
R. 1620, 1621 paragraph C.
8
R. 1620, 1622, 1627 paragraph A.
9
SR. v8 p1213.
When the receivership was imposed, Baron immediately turned
over his personal documents and files requested by the receiver.
10
Baron’s estate consists essentially of some savings accounts and some
Roth IRAs.
11
Accordingly, the receiver was not left with very much to
do.
Baron appealed the receivership order on Dec. 2, 2010.
12
The receiver then moved to add a multitude of companies into his
receivership (without lawsuits, service, evidence, or the normally
expected process of law).
13
Those companies include:
1. NovoPoint, LLC.
2. Quantec, LLC.
3. Iguana Consulting, LLC.
4. Diamond Key, LLC.
5. Quasar Services, LLC
6. Javelina, LLC.
7. HCB, LLC, a Delaware limited liability company.
8. HCB, LLC, a USVI company.
9. Realty Investment Management, LLC.- Deleware.
10. Realty Investment Management, LLC – USVI.
11. Blue Horizon, LLC.
12. Simple Solutions, LLC.
13. Asiatrust Limited.
14. Southpac Trust Limited.
10
R. 3891.
11
SR. v8 p1007.
12
R. 1699-1700.
13
R. 1717, 3952; SR. v1 p40, and sealed record Doc 609; SR. v2 pp365,405.
15. Stowe Protectors, Ltd.
16. Royal Gable 3129 Trust.
17. CDM Services, LLC
18. URDMC, LLC.
The District Judge made no findings in entering his November
2010, ex parte receivership order. R. 1619-1632. Months later, in
February 2011 the District Court entered findings in denying Baron’s
FRAP 8(a) motion for relief pending appeal. The post-appeal
explanation in those findings is essentially as follows: The District
Court believes Baron was a vexatious litigant (although never
appearing pro se) who owed money in undetermined amounts to his
former attorneys, and therefore should be denied the ability to hire an
experienced trial lawyer to defend himself, and should be stripped of his
possessions without trial “so that justice is done”. SR v2 p358.
While this matter has been on appeal, the District Court has
distributed essentially all of Jeff’s savings account balances to the
receiver and his law firm.
14
The amount is staggering— almost a
million dollars. SR. v8 p990-992.
14
Around $400,000 in a stock portfolio, and IRAs remain, but the stocks are
currently subject to a motion by the receiver to liquidate to pay additional fees, and
the receiver did not pay 2010’s taxes.
ARGUMENT SUMMARY
The District Court below lacked jurisdiction over the receivership
with respect to which the challenged orders were issued. Additionally
there was a breakdown of the basic protections of Due Process, with the
District Court:
(1) issuing orders against non-parties upon whom no service
was made and over whom the District Court lacked
personal jurisdiction;
(2) issuing orders without allowing the mandated
opportunity to respond to the motions seeking relief; and
(3) denying Baron the opportunity to hire experienced
Federal trial counsel.
ARGUMENT & AUTHORITY
ISSUE 1: DOES AN INTERLOCUTORY APPEAL DIVEST THE
TRIAL COURT OF JURISDICTION OVER THE MATTER
APPEALED ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Appeal Divests the District Court of Jurisdiction Over
the Matter Appealed
Jeffrey Baron filed a notice of appeal from the receivership order
on December 2, 2010. R. 1699. The filing of a notice of appeal is an
event of jurisdictional significance– it confers jurisdiction on the court of
appeals and divests the district court of its control over those aspects of
the case involved in the appeal. Griggs v. Provident Consumer Discount
Co., 459 U.S. 56, 58 (1982). The divesture of jurisdiction of the trial
court involves all those aspects of the case appealed. Id. As a matter of
well-established law, the district court loses jurisdiction over all
matters which are validly on appeal. Dayton Indep. School Dist. v. US
Mineral Prods. Co., 906 F.2d 1059, 1065 (5th Cir. 1990) (“rule which we
follow rigorously”). The sole authority of a district court with respect to
a matter on interlocutory appeal is to maintain the status quo of the
case as it rests before the court of appeals. E.g., Coastal Corp. v. Texas
Eastern Corp., 869 F.2d 817, 820 (5th Cir. 1989); Dayton at 1063.
The District Court was Divested of Jurisdiction over
Receivership Res
As an well-established principle of law, the effect of an appeal of a
receivership is that the appellate court is vested with jurisdiction over
the receivership res. E.g., Palmer v. Texas, 212 U.S. 118, 126 (1909).
The Supreme Court held in Palmer “[T]he effect of the appeal was
simply ... that the appellate court still had jurisdiction over the
res the same as the trial court had”. Id. The Supreme Court
explained this rule in Palmer, holding:
“If a court of competent jurisdiction, Federal or state, has
... obtained jurisdiction over the same, such property is
withdrawn from the jurisdiction of the courts of the other
authority as effectually as if the property had been
entirely removed to the territory of another sovereignty”
Id. at 125.
As a well-established rule, “Even where the court which appoints
a receiver had jurisdiction at the time, but loses it ... the first court
cannot thereafter make an allowance for his expenses and
compensation”. Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642
(1923). Once the matter was placed before the Court of Appeals, the
property was in the possession of the Court of Appeals, and “[T]hat
possession carried with it the exclusive jurisdiction to determine all
judicial questions concerning the property.” Wabash R. Co. v. Adelbert
College of Western Reserve Univ., 208 U.S. 38, 46 (1908). As a well-
established principle of law and comity, two courts should not attempt
to assert jurisdiction over the same matter simultaneously. Griggs at
58; Dayton at 1063.
While the matter is on appeal, not only is the district court
divested of authority over the receivership res, but it is without
authority over the matter on appeal, and has no jurisdiction award fees
for the matter while it is on appeal. E.g., Taylor v. Sterrett, 640 F.2d
663, 668 (5th Cir. 1981) (“[T]he District Court was divested of
jurisdiction only as to matters relating to the April 27 and May 12
orders and subsequent orders and, for that reason, fees cannot be
recovered for work relating to these orders.”).
Accordingly, the District Court was without authority to disburse
hundreds of thousands of dollars from the receivership res as ‘fees’.
Docs 274, 275, 276, 278, 283, 284, 292, 294, 295, and 297. SR. v2 pp 367,
368, 369, 371, 377, 378, 411, 413, 414; SR. v3 p44. Similarly the
District Court was without Authority to authorize the liquidation of
receivership assets, nor to restart the 10-clock for expanding the
receiver’s authority. Doc 288; SR. v2 p406 and Doc 293; SR. v2 p412.
District Court was Divested of Jurisdiction to Tamper
with the Order on Appeal
As a matter of established law, “[T]he district court lacks
jurisdiction ‘to tamper in any way with the order then on
interlocutory appeal’ ” Coastal Corp, 869 F.2d at 820. Accordingly,
the District Court was without authority to expand the receivership
order to include a multitude of new receivership parties. Doc 272; SR.
v2 p365 and Doc 287; SR. v2 p405.
Policy Issue: Prejudgment of Validity of Receivership
The validity of the receivership order should be resolved on appeal
before the District Court should be allowed to distribute and disburse
the property of a party which was seized by the District Court’s
receivership order. Otherwise, the District Court can effectively bypass
review by the Court of Appeals by de facto distribution of the
receivership res before the validity of the receivership has been resolved
on appeal. A district court should not be allowed to moot a matter
pending before the Court of Appeals. Dayton, 906 F.2d at 1063.
Accordingly, the challenged orders Doc 275 (SR. v2 p368), Doc 276 (SR.
v2 p369), Doc 294 (SR. v2 p413), Doc 295 (SR. v2 p414), Doc 274 (SR. v2
p367), Doc 278 (SR. v2 p371), Doc 283 (SR. v2 p377), Doc 292 (SR. v2
p411), and Doc 297 (SR. v3 p44), should be reversed.
ISSUE 2: DOES DUE PROCESS REQUIRE THAT A PARTY BE
AFFORDED THE OPPORTUNITY TO BE HEARD ON MOTIONS
BEFORE RELIEF IS GRANTED AGAINST THAT PARTY ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Argument
As a matter of well-established law, failure to afford a party the
opportunity to be heard on a motion seeking relief against them is
fundamentally inconsistent with the notion of due process and orders
issued without such an opportunity are void. E.g. Armstrong v. Manzo,
380 U.S. 545, 552 (1965)(restored the petitioner to the position he would
have occupied had due process of law [the opportunity to be heard] been
accorded to him in the first place); Pennoyer v. Neff, 95 US 714, 737
(1878) (“void as not being by due process of law”); Goss v. Lopez, 419
U.S. 565, 579 (1975) (“The fundamental requisite of due process of law
is the opportunity to be heard”); Logan v. Zimmerman Brush Co., 455
U.S. 422, 429-430 (1982) (due process violated in denying potential
litigants established adjudicatory procedures); Joint Anti-Fascist
Refugee Comm. v. McGrath, 341 U.S. 123, 161 (1951) (“Fairness of
procedure is ‘due process in the primary sense.’ It is ingrained in our
national traditions and is designed to maintain them.”)(citation
omitted); International Transactions v. Embotelladora Agral, 347 F.3d
589, 596 (5th Cir. 2003).
The local rule of the Northern District of Texas allows a
respondent 21 days to respond to motions. N.D. Tex. L.R. 7.1(e) (“Time
for Response and Brief. A response and brief to an opposed motion must
be filed within 21 days from the date the motion is filed.”). The District
Judge did not order or provide any notice that the time would be
shortened, and expressly acknowledged that the time allowed was “a
full twenty-one days to respond to every motion that’s filed”. SR. v4
p863. Accordingly, with respect to Orders Doc 287 (SR. v2 p405), Doc
288 (SR. v2 p406), Doc 285 (SR. v2 p403), Doc 293 (SR. v2 p412) and
Doc 291 (SR. v2 p409), the District Court abused its discretion in
granting relief without allowing Baron the legally mandated
opportunity to respond and be heard on the requested relief. As
discussed above, the District Court’s failure to allow Mr. Baron the
established procedures and opportunity to respond and be heard on the
relief requested against him, constitutes a violation of Due Process and
should render the orders so entered void.
ISSUE 3: MUST A COURT ACQUIRE PERSONAL JURISDICTION
OVER A THIRD-PARTY IN ORDER TO ORDER THAT THIRD-
PARTY INTO RECEIVERSHIP ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Argument
The District Court issued two Orders (Doc 272;SR. v2 p365 and
Doc 287;SR. v2 p405) placing a multitude of companies into the District
Court’s receivership. The orders were granted at the request of the
receiver himself. No service was issued against any of the added
parties, no personal jurisdiction over those parties was obtained, no
hearing was held on the orders, etc. SR. v2 pp 365, 405.
As a fundamental principle of well established law, a court
rending a ruling against a party must first acquire jurisdiction over
that party by personal service or voluntary appearance. St. Clair v.
Cox, 106 U.S. 350, 353 (1882). Before a federal court may exercise
personal jurisdiction over a defendant, the procedural requirement of
service of summons must be satisfied. Omni Capital Int'l, Ltd. v. Rudolf
Wolff & Co., 484 U.S. 97, 104 (1987). Orders issued without personal
jurisdiction are void. Pennoyer v. Neff, 95 U.S. 714, 728 (1878).
Similarly, since there was no claim or controversy concerning the
non-parties added to the receivership, the District Court below lacked
subject matter jurisdiction to place the multitude of companies into
receivership. Cochrane v. WF Potts Son & Co., 47 F.2d 1026, 1029 (5th
Cir. 1931); Steel Co. v. Citizens for Better Environment, 523 U.S. 83, 89
(1998); and see Bender v. Williamsport Area School Dist., 475 U.S. 534,
541 (1986); Middle South Energy, Inc. v. City of New Orleans, 800 F.2d
488, 490 (5th Cir. 1986)(without an actual case or controversy between
the parties within the meaning of Article III of the Constitution there is
no subject matter jurisdiction).
Accordingly, the District Court’s orders (Doc 272;SR. v2 p365 and
Doc 287;SR. v2 p405) should be declared void.
ISSUE 4: WHERE A SINGLE RECEIVER WAS APPOINTED OVER
MULTIPLE RECEIVERSHIP PARTIES AND RES, DID THE
DISTRICT COURT ABUSE ITS DISCRETION IN AWARDING
RECEIVERSHIP FEES AND EXPENSES (1) WITHOUT A
SHOWING OR FINDING THAT THE FEES AND EXPENSES
WERE REASONABLE OR NECESSARY; AND (2) WITHOUT
REGARD TO WHICH OF MULTIPLE RECEIVERSHIP PARTIES
OR FOR WHICH OF A MULTIPLE RECEIVERSHIP RES THE
FEES WERE ALLEGEDLY INCURRED.
Standard of Review
Receivership fee allowances are reviewed for abuse of discretion.
Commodity Credit Corporation v. Bell, 107 F.2d 1001 (5th Cir. 1939).
Argument
A series of orders challenged in this appeal, Doc 275 (SR. v2 p368),
Doc 276 (SR. v2 p369), Doc 294 (SR. v2 p413), Doc 295 (SR. v2 p414),
Doc 274 (SR. v2 p367), Doc 278 (SR. v2 p371), Doc 283 (SR. v2 p377),
Doc 292 (SR. v2 p411), and Doc 297 (SR. v3 p44), award fees to the
receiver, his law partners, and ‘professionals’ employed by the receiver.
With respect to the motions seeking such fees, there was no argument
or evidence offered that the fees were reasonable or necessary. The fees
moreover were billed for work on multiple receivership res, for work
involving multiple receivership parties, but were not segregated in any
way, and were charged randomly against any particular receivership
party or res. The District Court entered no findings of fact or law in
support of its granting the motions for payment of the fees.
Accordingly, the District Court abused its discretion in granting the fee
awards.
ISSUE 5: DID THE DISTRICT COURT ERR IN AWARDING
RECEIVERSHIP FEES AND EXPENSES WHERE THE RECEIVER
WAS PROHIBITED BY LAW FROM BEING APPOINTED AS A
RECEIVER ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824. The discretionary aspects of
receivership fee allowances are reviewed for abuse of discretion.
Commodity Credit, 107 F.2d at 1001.
Argument
On July 9, 2009, the District Court employed Peter Vogel as a
special master in the case below. R. 394. While still in his role as
special master, Vogel consulted ex parte with Sherman (who then
controlled the defendant Ondova) with respect to the motion to appoint
himself (Vogel) as a private receiver over Mr. Baron’s assets. SR. v5
p238. Vogel was also a special master when he moved to add additional
parties under his own receivership. R. 1717. A special master employed
by the Court is an officer of the court. E.g., Devlin v. Scardelletti, 536
U.S. 1 (2002). Further, courts which have considered the issue have
held that a special master is a judge sitting in the case in which he is
employed. E.g., Horton v. Ferrell, 335 Ark. 366, 981 S.W.2d 88 (1998);
Vereen v. Everett, Dist. Court, (ND Georgia 2009, No. 1:08-CV-1969-
RWS).
Congress mandated in 28 U.S.C. §958 that any person (1) holding
any civil office or (2) employed by any judge of the United States shall
not be appointed a receiver in any case. Accordingly, Peter Vogel could
not be appointed a receiver because he was employed by the District
Judge as a special master at the time he was appointed receiver. A
clear public policy purpose of the statute is to prevent conflict of
interest. The possibility that a special master in a case would consult to
have himself appointed as receiver over a party in the lawsuit where he
presently sat as a judge, violates the most fundamental notations of an
independent judiciary. If the motive of personal profit is allowed to
enter the side of the bench behind which judges and special masters sit,
the very foundation of an independent, impartial judiciary is
threatened. For this reason, the fees awarded to Peter Vogel and his
law should be reversed.
ISSUE 6: DID THE DISTRICT COURT ERR IN (1) AWARDING
RECEIVERSHIP FEES AND EXPENSES WITHOUT ALLOWING
THE RECEIVERSHIP PARTY THE OPPORTUNITY TO HIRE
EXPERIENCED LEGAL COUNSEL TO OFFER EVIDENCE AND
ARGUMENT AS TO THE NECESSITY OR REASONABLENESS OF
THE FEES AND (2) DENYING BARON THE RIGHT TO USE HIS
OWN MONEY TO HIRE COUNSEL TO REPRESENT HIM AND
PROTECT HIS RIGHTS ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824. The discretionary aspects of
receivership fee allowances are reviewed for abuse of discretion.
Commodity Credit, 107 F.2d at 1001.
Argument
Baron repeatedly moved to be allowed access to his own money in
order to hire attorneys to represent him. E.g., R. 2720; SR. v2 p384 (Doc
264). However, the District Court did not allow Baron to hire counsel.
E.g., Doc 316 (SR. v4 p119).
The Fifth Circuit has held that a civil litigant has a constitutional
right to retain hired counsel. Potashnick v. Port City Const. Co., 609
F.2d 1101, 1104 (5th Cir. 1980). Moreover, the Fifth Circuit has held
that “the right to counsel is one of constitutional dimensions and should
thus be freely exercised without impingement.” Id. at 1118; Mosley v.
St. Louis Southwestern Ry., 634 F.2d 942, 946 (5th Cir. 1981). An
individual's relationship with his or her attorney “acts as a critical
buffer between the individual and the power of the State.” Johnson v.
City of Cincinnati, 310 F.3d 484, 501 (6th Cir. 2002). The Supreme
Court has held that a party must be afforded a fair opportunity to
secure counsel “of his own choice” and that applies “in any case, civil or
criminal” as a due process right “in the constitutional sense”. Powell v.
Alabama, 287 U.S. 45, 53-69 (1932).
That basic right was denied Baron by the District Court below.
The order denying Baron the right to hire an experienced Federal trial
attorney and the orders issued against Baron while he was deprived of
that basic constitutional right should be reversed.
PRAYER
Appellant, jointly and in the alternative requests the following
relief:
(1) That the challenged orders be reversed.
(2) That the challenged orders be found to be void ab initio.
(3) That costs be taxed against the Appellees.
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
FOR APPELLANT
JEFF BARON
CERTIFICATE OF COMPLIANCE
WITH TYPE-VOLUME LIMITATION, TYPEFACE
REQUIREMENTS, AND TYPE STYLE REQUIREMENTS
1. This brief complies with the type-volume limitation of FED. R.
APP. P. 32(a)(7)(B) because: this brief contains 5,456 words.
2. This brief complies with the typeface requirements of FED. R.
APP. P. 32(a)(5) and the type style requirements of FED. R. APP. P.
32(a)(6) because: this brief has been prepared in a proportionally spaced
typeface using MS Word 2000 in 14 and 15 point century font.
DATED: August 12, 2011.
CERTIFIED BY: /s/ Gary N. Schepps
GARY N. SCHEPPS
COUNSEL FOR APPELLANT
CERTIFICATE OF SERVICE
This is to certify that this brief 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 APPELLANTS
