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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
NETSPHERE, INC.,
MANILA INDUSTRY, INC.,
AND MUNISH KRISHAN
PLAINTIFFS,
v.
JEFFREY BARON AND
ONDOVA LIMITED COMPANY,
DEFENDANTS
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CIVIL ACTION NO. 3:09-cv-0988-L
JEFFREY BARON’S OBJECTION
TO MOTION TO ENFORCE ORDERS
[Responds to ECF Doc 1419]
TO THE HONORABLE SAM A. LINDSAY,
UNITED STATES DISTRICT JUDGE:
NOW COMES, Jeffrey Baron (“Baron”), and hereby files this OBJECTION to Motion to
Enforce Orders, and for cause, would respectfully show:
1
I.
SPECIFIC ADMISSIONS AND DENIALS
1. Jeffrey Baron hereby provides the following specific admissions and denials with
respect to the allegations made by Payne on behalf of Novo Point, LLC and Quantec, LLC
(“LLCs” or “Movants”) in their Motion to Enforce Orders (the “Motion”).
Paragraph 1. Admitted. However, this Court also stated in said order, at footnote 1 on page 1:
“As herein discussed, the court will not consider evidence or conduct proceedings
regarding the ownership of Novo Point LLC or Quantec LLC or the companies’
1
Contemporaneously with the filing of this Objection, Baron has filed an Appendix in Support of Objection to
Motion to Enforce Orders, referred to herein as the “Appendix”.
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assets that are at issue.” On page 9 of said order the Court ruled as follows:
“. . . While the ownership of Novo Point and Quantec may
have been relevant in the bankruptcy proceeding, such a
determination is not relevant or necessary to comply with the Fifth
Circuit’s mandate that the receivership, the creation of which was
determined to be improper, be wound down expeditiously. Thus,
any such determination is outside of the court’s jurisdiction. For
the same reason, the court does not and will not have jurisdiction
in this case over any claims and disputes regarding the ownership
of the receivership.”
The Court summarized Payne’s request allegedly on behalf of Novo Point and
Quantec for a twelve month injunction as follows:
“. . . Novo Point and Quantec assert that if any party has an
adverse claim to the assets of Novo Point and Quantec, these
claims can be resolved by filing lawsuits against Novo Point and
Quantec, just as they would have done if there had been no
receivership.
2
Although Novo Point and Quantec contend that the
court lacks jurisdiction to conduct proceedings to determine the
ownership of the Novo Point and Quantec assets or claims as to
those assets, they request that the court enter an order enjoining
any such third party actions for twelve months.
As to such request, the Court ruled:
“Applying this test to the case at hand, the court concludes that the
requested injunctive relief is not necessary to effectuate a winding
down of the receivership in this case, and the parties have not
pointed to any other authority that would permit the court to enjoin
parties not before the court. Accordingly, the court declines to
enter an order enjoining third-party actions regarding the Novo
Point and Quantec assets for sixty days to twelve months.”
David McNair is not a party in the captioned case. There is no evidence that
Baron has participated in any of the alleged conduct discussed in the Motion.
Baron specifically denies that he is directing the actions of McNair or
participating in any fashion in such alleged conduct. The Motion is moot by
virtue of the very order relied upon by Movants, and is unsupported by any
evidence, reliable, credible or otherwise, not even an affidavit or declaration
swearing to facts. Baron would welcome the opportunity for an evidentiary
2
By the way, that is exactly what the true owners of the LLCs have done in Civil Case No. 14-cv-01552-L, pending
before this Court.
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hearing so that Movants might present evidence to support their ad hominem and
scurrilous allegations, including allegations that Baron and McNair hired “Mafia
Bosses”. At such hearing, the Court could also determine the authority of Payne
and Katz to even file pleadings on behalf of Movants. Such request is made
below.
Paragraph 2. Denied.
Paragraph 3. Denied as to Baron. Baron has no control over and does not direct the actions of
McNair. Page 3 of Movants’ Appendix does not support the allegations that
Baron is engaged in any of the activities alleged.
Paragraph 4. Denied. Baron disputes that either Lisa Katz or Payne has the authority to
represent the interests of Movants and disputes that either Lisa Katz or Payne
have any ownership interest in Movants.
Paragraph 5. Baron is without sufficient information to admit or deny such allegations, and
denies same for pleading purposes.
Paragraph 6. Baron is without sufficient information to admit or deny such allegations, and
denies same for pleading purposes.
Paragraph 7. Denied. Such allegations are unsupported by any admissible evidence, are
scurrilous and violate rule 11.
Paragraph 8. Baron is without sufficient information to admit or deny such allegations, and
denies same for pleading purposes.
Paragraph 9. Denied that Baron has engaged in any such activities.
Paragraph 10. Denied that Baron has engaged in any such activities. Baron denies that he has
hired a “Mafia Boss”. Such allegations are scurrilous and vexatious and violate
28 U.S.C. §1927.
3
Paragraph 11. Denied.
Conclusion Denied.
II.
ARGUMENTS AND AUTHORITIES
2. As this Court is aware, numerous parties and judges have questioned Payne’s
authority to represent the LLCs. Payne’s Motion is yet another example of Payne and his client
3
28 U.S.C. § 1927 provides:
“Any attorney or other person admitted to conduct cases in any court of the United States or any
Territory thereof who so multiplies the proceedings in any case unreasonably and veraciously may
be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees
reasonably incurred because of such conduct.”
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contact, Lisa Katz, acting without authority of the owners and managers of the LLCs. After
hearing testimony, the bankruptcy court believed that Katz was nothing more than a
Payne/Schepps’ straw-man, acting at their direction and control. In a letter to the Fifth Circuit
Court of Appeals, a copy of which was filed with this Court as a part of ECF Doc 912 (page 10
of Ex “A”), Judge Jernigan wrote:
To be clear, not only did the alleged client-representative (Lisa Katz) for Novo
Point, wholly emasculate the position of attorneys Gary Schepps and Christopher
Payne (i.e., their position that she was in control of Novo Point and had given them
instructions for Novo Point), but Gary Schepps behaved with an utter lack of candor
and respect to the bankruptcy court by asserting the Fifth Amendment privilege not
to testify, rather than explain how he had any corporate or legal authority to file
This is a reference to Gary Schepps asserting the Fifth Amendment privilege and
not testifying rather than explain how he had any corporate or legal authority to file
court papers for Novo Point.
3. Baron believes this Court is required to act under the teachings of In re American
Airlines, 972 F.2d 605 (5th Cir. 1992) cert denied, 113 S. Ct. 1262 (1993), where the Circuit
Court stated:
We have squarely rejected this hands-off approach in which ethical rules “guide”
whether counsel's presence will “taint” a proceeding, holding instead that a
“[d]istrict [c]ourt is obliged to take measures against unethical conduct occurring
in connection with any proceeding before it.” [citations omitted].
Id. at 611.
A. Background
4. Movants are limited liability companies formed and in good standing under the
laws of the Cook Islands. The documented corporate history is set out in the sworn supplemental
affidavit of attorney Mr. David McNair dated June 24, 2014 (“McNair Supplemental Affidavit”),
Case 3:09-cv-00988-L Document 1423 Filed 09/11/14 Page 4 of 9 PageID 68998
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previously filed in the captioned Civil Action,
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establishes the authority of RPV to act as Trustee
for the Trust and establishing the authority of Mr. McNair as the Manager of the LLCs.
5. Payne has never established the basis of his authority to act as counsel for either
Novo Point or Quantec.
5
Payne has the burden of proof to establish that he has such authority.
B. Katz’s Authority is Limited by Contract
6. Payne apparently bases his authority upon Eliza Katz (“Lisa Katz”) and an
assertion that SouthPac (the prior trustee) and Corporate Director Management Services, Inc.
(the prior manager of the LLCs) approved his retention. Such rationale fails for several reasons.
7. Lisa Katz was allegedly retained by written agreement dated May 23, 2011
(“Katz/Novo Agreement”), the terms of which are subject to Cook Islands law. Katz has declared
she has a substantially identical agreement with Quantec.
8. Section 5 of the alleged Katz/Novo Agreement limits her authority by requiring
prior written consent of the principal:
(a) With the consent of the Manager to sign on behalf of the Company any note,
contract, deed, bill of sale, mortgage, lease or other commitment purporting to
bind the Company to any action;
(b) With the consent of the Manager to acquire, hold, lease, encumber, pledge,
option, exchange, or otherwise dispose of real or personal property (or rights or
interests therein) of any nature whatsoever as may be necessary or advisable for
the operation of the Company; …
(m) With the prior consent of the Manager to control any matters affecting
the rights and obligations of the Company, including the employment of
4
See ECF Docs 1416-1-1416-2, pages 1-221, filed in the captioned Civil Action. To avoid repetitive filing of
the same documents, Baron incorporates by reference the McNair Supplemental Affidavit as
though fully set forth herein.
5
Indeed, the Court expressly prohibited counsel from representing either LLC other than Mr. Cox and Mr. Jackson.
See Doc 1377 filed 03/11/14, Page 2 of 8, referencing Doc 106. This order was never changed. There is no
substitution on file with the Court.
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attorneys to advise and represent the Company, the conduct of any litigation
and the settlement thereof, and any other incurring of legal expenses; …”
The agreement may not now be rewritten.
C. The LLCs Did Not Consent to Payne’s Retention Herein
9. Payne has previously asserted SouthPac and CDMS consented to his retention in
2011.
6
However, the “authority” attached to Doc 1360 (the “Ondova Consent”) expressly limited
his representation to a specific bankruptcy matter (09-34784-sg11).
7
Doc 1360. The documents
do not establish Payne’s authority in this Civil Action.
10. Judge Jernigan’s letter, noted above, provided that Payne was expressly
prohibited from appearing before the Bankruptcy Court, stating:
“As further described below, the undersigned bankruptcy judge entered its
order striking the said notices of appeal out of a concern that attorney
Gary Schepps (and another attorney acting with Mr. Schepps, attorney
Christopher Payne) were purporting to act for the entity Novo Point
without any genuine corporate or legal authority.”
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11. Judge Jernigan further noted that she had issued an Order Finding Olson/Payne
Have No Authority [DE # 605], in which she ruled that attorney Payne and his firm, and attorney
Dennis Olson and his firm, had no authority to appear in the Bankruptcy Court for Novo Point
and that they were prohibited from appearing before the Bankruptcy Court in the future for Novo
Point “without filing first a motion for authority to do so.” Judge Jernigan stated that “any such
motion must be supported by compelling evidence including live testimony from Brian Mason
6
Payne, filed Doc 1360, entitled Reply of Novo Point LLC and Quantec LLC to Baron’s Response on Vogel’s Status
Report [Docs 13565-6]. See Exhibit “A” (page 9 of 9 thereof).
7
The Ondova Consent uses the term “Proceeding” – a defined term to mean only the bankruptcy matter. At the time
the Netsphere Action was pending. The narrow definition was thus an intentional limitation.
8
ECF Doc 912, p. 7.
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and Lisa Katz (the human beings who supposedly gave authority to Payne/Olson to take legal
positions for Novo Point).”
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12. Payne has previously argued: “A lawyer’s duties to a client ‘extend only to
dealings within a scope of the underlying relationship of the parties.’”
10
At most, Payne was
authorized to act in the bankruptcy only.
D. The Prior Court Orders Do Not Sustain Payne’s Authority
13. Payne has also referenced the authority of Lisa Katz as noted in this Court’s order
of February 28, 2014 (Doc 1368). In this Court’s subsequent orders of March 3, 2014, (ECf Doc
1369) and March 11, 2014 (Doc 1379), this Court clarified that it refused to issue any ruling as to
the ultimate control of the LLCs or to establish findings as to the owner of either company. The
March 11th Order states: “For the reasons previously explained, the court concludes that it would
be improper for it to conduct proceedings regarding the ownership of Novo Point LLC and
Quantec LLC” (ECF Doc 1379, p. 2, lines. 8-10; Doc 1368, p. 11).
14. The February 28th order directed the Receiver to deliver assets to Katz because
Katz was the last caretaker of record, not because the Court conducted a hearing, upon notice,
with pleadings framing the issue of whether Katz had the exclusive or non-exclusive authority
over the LLCs for any or all purposes, or that Katz was the authorized agent. In fact, the Court
did not frame the issue or conduct a hearing at all, largely because the Court specifically
determined that, in the context of the captioned Civil Action, the Court lacked subject matter
jurisdiction to make such determination.
9
ECF Doc 912, page 9, footnote 2. Emphasis added.
10
In Civil Action 3:14-cv-01552-L, see Payne’s Motion to Dismiss, ECF Doc 37, p. 11, citing Joe v. Two Thirty
Nine Joint Venture, 145 S.W.3d 150, 159(Tex.2004).
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E. Payne Has Been Terminated From All LLC Representation
15. Additionally, it should be noted that on February 18 2014, David McNair issued a
notice terminating (i) Payne’s authority as counsel in any capacity, and (ii) any agreement Katz
had with the LLCs (“Termination Notice”).
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16. Payne therefore lacks authority and is in violation of the Texas Disciplinary Rules
of Profession Conduct to continue to claim he represents the LLCs. See TEX. DISCL. RULES
OF PROF. CONDUCT 1.12, 1.06, 1.07 and 1.08.
17. Despite all of the evidence otherwise, Payne has chosen to merely dispute the
purported authority of RPV and Mr. McNair while presenting no affirmative evidence that he is
indeed acting on behalf of his principal or provide any evidence he has investigated Ms. Katz’s
authority upon whom he relies.
PRAYER
WHEREFORE, Baron respectfully requests that this Court conduct a hearing on the
authority of Payne and Katz represent the LLCs, and to strike pleadings filed by Payne where he
purports to represent the LLCs but as to which he can prove no authority. Baron prays for such
other and further relief as is just.
11
See ¶¶39-42 of McNair Supplemental Affidavit, ECF Docs 1416-1 to 1416-2 in the captioned Civil Action, pp. 5-
6, 190-202. A March 4th (pp. 196-202) email ratifying the Termination Notice and confirming McNair’s authority
was sent to both Katz and Payne by email on March 4, 2014
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Respectfully submitted this 11
th
day of September 2014.
/s/ Stephen R. Cochell
Stephen R. Cochell, Esq.
The Cochell Law Firm, P.C.
7026 Old Katy Road, Ste. 259
Houston, Texas 77096
Telephone: (713)980-8796
Facsimile: (214) 980-1179
srcochell@cochellfirm.com
Attorney-in-Charge for Jeffrey Baron
Leonard H. Simon, Esq.
PENDERGRAFT & SIMON, LLP
TBN: 18387400; SDOT No. 8200
Admitted to Practice in NDOT
THE RIVIANA BUILDING
2777 Allen Parkway, Suite 800
Houston, Texas 77019
Telephone: (713) 528-8555
Facsimile: (832) 202-2810
lsimon@pendergraftsimon.com
Co-Counsel for Jeffrey Baron
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the foregoing was served
via ECF on all parties receiving ECF Notices in the above-captioned case on September 11,
2014.
/s/ Leonard H. Simon
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