No. 10-11202
In the
United States Court of Appeals
for the Fifth Circuit
▬▬▬▬▬▬▬▬▬▬▬
NETSPHERE, INC. Et Al,
Plaintiffs
v.
JEFFREY BARON,
Defendant-Appellant
v.
ONDOVA LIMITED COMPANY,
Defendant-Appellee
▬▬▬▬▬▬▬▬▬▬▬
Appeal of Order Appointing Receiver in Settled Lawsuit
▬▬▬▬▬▬▬▬▬▬▬
----------------------------------------------------------------------------------------
Cons. w/ No. 11-10113
NETSPHERE INC., Et Al, Plaintiffs
v.
JEFFREY BARON, Et Al, Defendants
v.
QUANTEC L.L.C.; NOVO POINT L.L.C.,
Appellants
v.
PETER S. VOGEL,
Appellee
▬▬▬▬▬▬▬▬▬▬▬
Appeal of Order Adding Non-Parties Novo Point, LLC
and Quantec, LLC as Receivership Parties
▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
REPLY BRIEF FOR APPELLANT JEFFREY BARON
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Case: 10-11202 Document: 00511542409 Page: 1 Date Filed: 07/15/2011
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 JEFFREY BARON
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TABLE OF CONTENTS
TABLE OF CONTENTS.................................................................................. 3
TABLE OF AUTHORITIES ........................................................................... 6
REPLY ISSUES PRESENTED FOR CONSIDERATION ...................... 10
REPLY STATEMENT OF FACTS .............................................................. 11
Mr. Baron Did Not Fire 19 Law Firms.................................................. 11
The District Court Made No Finding As To The Validity of The
Alleged Debt ............................................................................................ 11
No Threat to Ondova’s creditors, no evidence of “Disruption” or
Halted Progress ....................................................................................... 12
Other Sherman Facts Not Supported by the Record............................ 12
ARGUMENT SUMMARY.............................................................................. 13
The Granted Motion Expressly Sought Receivership to Seize
All of Jeff Baron’s Property so that He could Not Hire an
Attorney ................................................................................................... 13
Receivership is Not Authorized as a Remedy for Vexatious
Litigation ................................................................................................. 15
Fifth Amendment Due Process .............................................................. 16
The Fourth Amendment........................................................................... 16
ARGUMENT & AUTHORITY ...................................................................... 18
REPLY ISSUE 1: THE POST-DEPRIVATION FRAP 8(A)
HEARING DID NOT CURE THE LACK OF A PRE-
DEPRIVATION HEARING REQUIRED BY THE FIFTH
AMENDMENT ............................................................................................... 18
A Matter of Established Law ................................................................. 18
This Rule also Applies to allegations of Vexatious Litigation ............. 19
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Whatley v. Philo....................................................................................... 19
Appeal divests the Trial Court of Jurisdiction Over the Matter
Appealed .................................................................................................. 20
REPLY ISSUE 2: FAILURE OF DUE PROCESS WITH
RESPECT TO THE FRAP 8(A) HEARING .................................................. 23
Factual Background of the FRAP 8(a) Hearing.................................... 23
Failure Due Process ................................................................................ 24
REPLY ISSUE 3: RECEIVERSHIP IS NOT AUTHORIZED AS A
REMEDY FOR VEXATIOUS LITIGATION ................................................ 28
Controlling Access to the Court ............................................................. 28
Pre-Filing Injunction is the Authorized Remedy for Vexatious
Litigation ................................................................................................. 29
The limits of Inherent Power: De Beers................................................. 31
Seizing Jeff Baron’s Assets was not Necessary to Enable the
Court to Exercise any of its Powers ....................................................... 33
Sherman’s Argument: ............................................................................. 34
The Specific Remedy of Equity Receivership is Not Authorized
to be Used as a Stand-Alone Remedy .................................................... 40
REPLY ISSUE 4: THERE IS A CONSTITUTIONAL RIGHT TO
ASSOCIATE WITH AND RETAIN LEGAL COUNSEL ............................. 41
REPLY ISSUE 5: THE SEIZURE OF ALL OF JEFF BARON’S
PROPERTY IS OBJECTIVELY UNREASONABLE AND THUS
VIOLATES THE FOURTH AMENDMENT................................................. 42
REPLY ISSUE 6: A RECEIVER’S FIDELITY BOND IS NOT A
MOVANT’S BOND TO COMPENSATE FOR DAMAGES
CAUSED IN CASE OF WRONGFUL ENJOINMENT................................ 47
REPLY ISSUE 7: INVOLUNTARY SERVITUDE ...................................... 50
CONCLUSION ................................................................................................ 51
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CERTIFICATE OF COMPLIANCE............................................................ 55
CERTIFICATE OF SERVICE ..................................................................... 56
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TABLE OF AUTHORITIES
FEDERAL CASES
Animale Group Inc. v. Sunny's Perfume Inc., 256 Fed.Appx. 707 (5th Cir. 2007)
(unpublished).....................................................................................................38
Baum v. Blue Moon Ventures, LLC, 513 F. 3d 181, 187
(5th Cir. 2008).............................................................................................28, 30
Boddie v. Connecticut, 401 U.S. 371, 378 (1971).................................................26
Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532, 543 (1985).............................20
Connecticut v. Doehr, 501 U.S. 1, 4 (1991) ..........................................................49
Dailey v. Vought Aircraft Co., 141 F. 3d 224, 230 (5th Cir. 1998) .................18, 27
Dayton Indep. School Dist. v. US Mineral Prods. Co., 906 F.2d 1059, 1063
(5th Cir. 1990)...................................................................................................21
De Beers Consol. Mines, Ltd. v. United States, 325 U.S. 212, 220 (1945).....31, 32,
35, 36
Desarrollo, SA v. Alliance Bond Fund, Inc., 527 U.S. 308, 318 (1999) ................37
Elrod v. Burns, 427 U.S. 347, 373 (1976) .............................................................49
Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546, 552 (2005)...........28
Farguson v. MBank Houston, NA, 808 F.2d 358, 360 (5th Cir. 1986) ..................28
Farmhand, Inc. v. Anel Engineering Industries, Inc., 693 F.2d 1140, 1146
(5th Cir. 1982)...................................................................................................21
Fuentes v. Shevin, 407 U.S. 67, 82-85 (1972).......................................................18
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Gordon v. Washington, 295 U.S. 30, 37 (1935) ........................................15, 16, 40
Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982)...................20
Hale v. Townley, 45 F.3d 914 (5th Cir. 1995).......................................................43
Harrington v. Colquitt County Board of Education, 449 F.2d 161, at 267-268
(5th Cir. 1971)...................................................................................................48
In re Fredeman Litigation, 843 F.2d 821, 826 (5th Cir. 1988)...............................34
In re Hartford Textile Corp., 681 F.2d 895, 897 (2d Cir. 1982).............................30
ITT Community Development Corp. v. Barton, 569 F.2d 1351, 1360
(5th Cir. 1978).............................................................................................32, 37
John Deere Co. v. American Nat. Bank, Stafford, 809 F.2d 1190, 1192
(5th Cir. 1987)...................................................................................................27
Kelleam v. Maryland Casualty Co. of Baltimore, 312 U.S. 377, 381 (1941).........15
Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375,380 (1994)....29, 53
Local Loan Co. v. Hunt, 292 U.S. 234, 245 (1934)..............................................50
Marshall Durbin Farms, Inc. v. National Farmers Org., Inc., 446 F.2d 353, 356
(5th Cir. 1971)...................................................................................................26
McCuin v. Texas Power & Light Co., 714 F.2d 1255 (5th Cir. 1983) ...................41
Mosley v. St. Louis Southwestern Ry., 634 F. 2d 942, 945-946
(5th Cir. 1981)...................................................................................................41
Natural Gas Pipeline Co. v. Energy Gathering, Inc., 2 F.3d 1397, 1409
(5th Cir. 1993)...................................................................................................37
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Phillips v. Chas. Schreiner Bank, 894 F.2d 127, 131 (5th Cir.1990) .....................49
Powell v. Alabama, 287 U.S. 45, 53 (1932) ..............................................25, 26, 41
Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923)...............................15, 45
Qureshi v. U.S., 600 F.3d 523, 526 (5th Cir. 2010).........................................19, 29
Registration Control Systems v. Compusystems, Inc., 922 F.2d 805, 807
(Federal Cir. 1990) ............................................................................................26
Roberts v. United States Jaycees, 468 U.S. 609, 618 (1984) .................................41
Scaife v. Associated Air Center Inc., 100 F. 3d 406, 411 (5th Cir. 1996).............43
Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 342 (1969)..........20
Spallone v. United States, 493 U.S. 265, 280 (1990).............................................53
Tucker v. Baker, 214 F.2d 627, 631 (5th Cir. 1954)..............................................40
United States v. First Nat. City Bank, 379 U.S. 378, 85 S.Ct. 528 (1965).......34, 35
United States v. Hall, 472 F.2d 261, 267 (5th Cir.1972)........................................48
US v. Stewart, 93 F.3d 189, 192 (5th Cir. 1996) ...................................................42
Whatley v. Philo, 817 F.2d 19 (5th Cir. 1987) ......................................................19
White v. Balderama, 153 F.3d 237, 241 (5th Cir. 1998)........................................42
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FEDERAL STATUTES
11 U.S.C. § 105(b)................................................................................................45
11 U.S.C. §503(b)(4) ............................................................................................44
FEDERAL RULES
FED. R. APP. P. 32(a)(5)......................................................................................55
FED. R. APP. P. 32(a)(6)......................................................................................55
FED. R. APP. P. 32(a)(7)(B).................................................................................55
FED. R. APP. P. 8(a)(1)..................................................................................23, 24
FED. R. APP. P. 8(a)(2)(A)(ii)..............................................................................12
FED. R. CIV. P. 65(c)...........................................................................................47
FED. R. CIV. P. 7.................................................................................................26
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REPLY ISSUES PRESENTED FOR CONSIDERATION
Reply Issue 1: The post-deprivation FRAP 8(a) hearing did not cure
the lack of a pre-deprivation hearing required by the Fifth
Amendment
Reply Issue 2: Failure of due process with respect to the FRAP 8(a)
hearing
Reply Issue 3: Receivership is not authorized as a remedy for
vexatious litigation
Reply Issue 4: There is a Constitutional right to associate with and
retain legal counsel
Reply Issue 5: The seizure of all of Jeff Baron’s property is
objectively unreasonable and thus violates the Fourth Amendment
Reply Issue 6: A receiver’s fidelity bond is not a movant’s bond to
compensate for damages caused in case of wrongful enjoinment
Reply Issue 7: Involuntary Servitude
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REPLY STATEMENT OF FACTS
Mr. Baron Did Not Fire 19 Law Firms
The record does not support Sherman’s factual assertion that Jeff
Baron hired and fired 19 law firms. For the dozen or so actions over the
past half-decade listed in Sherman’s record citation, the record does not
disclose who of the over dozen independent entities involved as
defendants hired the firms, or how the representation ended.
The District Court Made No Finding As To The Validity
of The Alleged Debt
Significantly, the record does not support Sherman’s factual
allegation that “Most of the lawyers had not been paid the amounts
owed them”. (Sherman’s Principal Brief, “Sherman’s Brief”, page 3). The
District Court’s judicial notice cited to by Sherman expressly states there
is no finding as to the validity of the alleged debt. SR. v2 p361.
Additionally, the ‘claims’ giving rise to alleged debt have been shown to
be groundless and to have been solicited. SR. v8 pp1197-1201,1212-1235.
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No Threat to Ondova’s creditors, no evidence of
“Disruption” or Halted Progress
The record does not support Sherman’s factual assertions
(Sherman’s Brief, pages 2-3): (1) that the grounds of Sherman’s motion
for receivership were to prevent “continued disruption of the Bankruptcy
and District Court proceedings”, (2) that claims threatened the ability of
Ondova to pay unsecured creditors, and (3) that the appearance of new
lawyers sometimes completely halted progress toward winding up the
bankruptcy and dismissing the District Court lawsuit.
Other Sherman Facts Not Supported by the Record
Mr. Baron’s motion for stay was not held pending the outcome of
proceedings, but was denied without prejudice. Sherman errs in
averring that Baron filed a motion “falsely claiming that the District
Court had denied his Emergency Motion”. The District Court declined
to grant emergency relief and put off the hearing on relief to a date 40
days after the receivership was imposed. Mr. Baron then moved for
emergency relief in the Court of Appeals pursuant to the second tier of
FRAP 8(a)(2)(A)(ii), averring that the district court had failed to afford
the emergency relief requested.
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ARGUMENT SUMMARY
The Granted Motion Expressly Sought Receivership to
Seize All of Jeff Baron’s Property so that He could Not
Hire an Attorney
In an act unprecedented in the history of American jurisprudence,
the District Court below granted a motion to seize all of an individual’s
assets in order to prevent them from hiring an attorney.
1
As explained
by the District Judge: “[T]he receivership is an effort to stop the parade
of lawyers trying to wiggle out of lawful injunctions from judicial
officers. Yes, sir.”
2
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”.
3
In case that threat was not
sufficient, in order to stop Jeff from having any money to hire a lawyer,
all of his assets (exempt and non-exempt) were seized
4
, as were all of
his future earnings
5
. Jeff was ordered not to cash any checks
6
or enter
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.
2
R. 4593-4594.
3
SR. v8 p1213.
4
R. 1620.
5
R. 1622 paragraph F.
6
R. 1620, 1621 paragraph C.
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into any business transactions
7
.
Jeff Baron has been in a civil lockdown since the day the
challenged order was issued ex parte. Since that day, Mr. Baron has
been forced to live off a monthly sustenance stipend from the remaining
dollars of his life savings disbursed to him by the receiver. Under the
express threat of contempt, Jeff Baron is allowed to purchase only
“local transportation, meals, home utilities, medical care and
medicine.”
8
Mr. Baron’s business, savings, right to work, and life as a
free member of society were taken from him by the challenged order.
Further, unless this Court grants relief, Jeff Baron’s savings
accounts have been stripped from him forever. 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. The
amount is staggering— almost a million dollars. SR. v8 p990-992.
9
Only by order of this Court (1) reversing the receivership order, (2)
ordering the receivership assets disbursed while the matter has been on
appeal returned, and (3) ordering the receivership costs be born by the
7
R. 1620, 1622, 1627 paragraph A.
8
SR. v8 p1213.
9
Only $23,182.52 was left in Mr. Baron’s savings accounts by the start of June. Id.
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Appellee, can the property that has been unreasonably and without Due
Process of law been taken from Jeff Baron be restored to him.
Receivership is Not Authorized as a Remedy for
Vexatious Litigation
The only basis for the receivership put forth by Sherman is that
Mr. Baron was guilty of vexatious litigation. Sherman argues that
equity receivership seizing all of a citizen’s property is an authorized
remedy for vexatious litigation. However, equity receivership is not
authorized as a means of providing any form of final relief. Pusey &
Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923) (“[R]eceivership is not
final relief.”). The District Court has discretion to impose a receivership
only where it is ancillary to some other final equitable remedy sought in
the property which is pending before the court. Kelleam v. Maryland
Casualty Co. of Baltimore, 312 U.S. 377, 381 (1941). The Supreme
Court established nearly a hundred years ago that receivership was
only authorized as an intermediate remedy to preserve property
pending adjudication of disposition of that property. Gordon v.
Washington, 295 U.S. 30, 37 (1935). As held by the Gordon Court,
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“There is no occasion for a court of equity to appoint a receiver of
property of which it is asked to make no further disposition.” Id.
Fifth Amendment Due Process
Sherman argues that the post-deprivation, post-appeal TRAP 8(a)
hearing provided ‘due process’ for the prior ex parte seizure of Jeff
Baron’s assets and the firing of his trial counsel. As discussed in the
briefing below, such an argument is contrary to settled law. Further, if
a post-deprivation, post-appeal, hearing could satisfy the requirements
of due process, it does not in this case because there was also a failure of
Due Process with respect to the post-deprivation hearing. With respect
to the post-deprivation hearing, Mr. Baron was denied the opportunity
to retain experienced trial counsel, his documents were stripped from
him, and he was denied the opportunity to conduct discovery.
The Fourth Amendment
The Fourth Amendment to our Constitution should protect every
citizen against the unreasonable seizure of their property. That
Constitutional protection is fundamental to freedom in our society.
However, the words “Fourth Amendment” are noticeably absent from
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Sherman’s responsive briefing. There are two core Fourth Amendment
protections involved in this appeal:
(1) Objective reasonableness.
Objective reasonableness is required before a citizen’s
property may be seized. Objective reasonableness is an issue
of law reviewed de novo on appeal.
(2) Probable Cause upon sworn oath.
As a core procedural protection against unreasonable
seizure, no warrant for the seizure of a citizen’s property
may issue without probable cause shown upon sworn oath or
affirmation. However, no oath or affirmation of probable
cause preceded the issuance of the challenged order.
Sherman has not contested either the factual or legal
argument briefed on this issue.
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ARGUMENT & AUTHORITY
REPLY ISSUE 1: THE POST-DEPRIVATION FRAP 8(A) HEARING
DID NOT CURE THE LACK OF A PRE-DEPRIVATION HEARING
REQUIRED BY THE FIFTH AMENDMENT
A Matter of Established Law
Sherman erroneously argues that because Jeff Baron had notice of
post appeal hearings in which he sought relief pursuant to the rules of
appellate procedure, a pre-deprivation hearing was not required.
(Sherman’s Brief, page 24). Sherman ignores the Fifth Circuit’s holding
in Dailey v. Vought Aircraft Co., 141 F. 3d 224, 230 (5th Cir. 1998) (a
post-deprivation hearing does “not repair the district court's violation of
her rights to due process under the Constitution and the court rules”).
The law regarding this issue is well established in the context of seizure
of property and specifically of wages. Eg. Fuentes v. Shevin, 407 U.S. 67,
82-85 (1972) (“[N]o later hearing and no damage award can undo the
fact that the arbitrary taking that was subject to the right of procedural
due process has already occurred.”).
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This Rule also Applies to allegations of Vexatious
Litigation
Prior notice and hearing are established mandatory pre-requisites
for declaring litigants vexatious. Sherman’s own cases establish this
principle. E.g. Qureshi v. U.S., 600 F.3d 523, 526 (5th Cir. 2010) (citing
Fuentes v. Shevin, 407 U.S. 67, 80, 92 (1972)).
Whatley v. Philo
Sherman relies upon Whatley v. Philo, 817 F.2d 19 (5th Cir. 1987)
as his sole authority for the proposition that no pre-deprivation hearing
was required in the proceedings below. Sherman’s reliance is misplaced.
The constitutional requirements of ex parte receivership are not
addressed in Whatley. The Whatley appellant conceded that he enjoyed
“no clearly established constitutional right to pre-deprivation notice and
hearing in the circumstances of [that case]”. Id. at 21. Whatley
involved a statutory scheme regulating title insurance. Id. at 21, fn. 5.
Appellant does not argue a per se constitutional prohibition
against seizing property ex parte. Rather, there are Due Process
safeguards required in granting ex parte relief seizing a citizen’s
significant property interest, and there is a constitutional prohibition
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against granting such ex parte relief where those safeguards are
absent.
10
Those safeguards were absent in the proceedings below.
There is also a per se prohibition against pre-hearing seizure with
respect to an individual’s most basic property rights. Those rights have
been recognized to include an individual’s right to work and right to
wages earned. E.g. Sniadach v. Family Finance Corp. of Bay View, 395
U.S. 337, 342 (1969), Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532,
543 (1985). Both of these rights were taken from Mr. Baron by the ex
parte order challenged in this appeal and, as a matter of established law,
a post-deprivation hearing, if one were held, is not sufficient to satisfy
constitutional Due Process. Id. R. 1620, 1622, 1628.
Appeal divests the Trial Court of Jurisdiction Over the
Matter Appealed
An 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”. Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58
(1982). Accordingly, the district court was without jurisdiction to hear
10
Jeff Baron’s Principal Brief, pages 61-63.
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new arguments and evidence in support of the receivership order once it
had been appealed. Coastal Corp. v. Texas Eastern Corp., 869 F.2d 817,
820 (5th Cir. 1989). As explained by the Fifth Circuit in Dayton Indep.
School Dist. v. US Mineral Prods. Co., 906 F.2d 1059, 1063 (5th Cir.
1990), a district court does not have the power to “alter the status of the
case as it rests before the Court of Appeals”.
Sherman offers a partial quote from Farmhand, Inc. v. Anel
Engineering Industries, Inc., 693 F.2d 1140, 1146 (5th Cir. 1982), that a
district court may “support” its judgment post-appeal. The Farmhand
holding uses the word “support” but clearly refers to a district court’s
authority to maintain the status quo created by an appealed from order.
Id. Farmhand’s “support” is the power to “to enforce its order by civil
contempt proceedings.” Id. This is not the authority to alter the status
of an order on appeal by holding new hearings on the motion and
entering findings to “support” (in the sense of ‘prop up’) the order on
appeal. As the Fifth Circuit has held in Coastal Corp., 869 F.2d at 820,
“the district court lacks jurisdiction ‘to tamper in any way with the
order then on interlocutory appeal other than to issue orders designed
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to preserve the status quo of the case as it sat before the court of
appeals.’”
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REPLY ISSUE 2: FAILURE OF DUE PROCESS WITH RESPECT
TO THE FRAP 8(A) HEARING
Factual Background of the FRAP 8(a) Hearing
1. Timing of the Hearing
Although multiple requests for an emergency hearing were made,
the District Court postponed the FRAP 8(a) hearing until December 17,
2010, started and then continued the hearing to January 4, 2011, some
40 days after Jeff Baron’s property was seized. R. 27-34.
2. Motion Strictly Limited as an Appellate Motion Pursuant
to FRAP 8(a)
Baron filed his notice of appeal on December 2, 2010 and the next
day filed for relief expressly “pursuant to Federal Rule of Appellate
Procedure 8(a)(1)”. R.1699, 1702. The motion specified the specific
designation of the provision of the Federal Rules under which the
motion was filed. That Rule was FRAP 8(a)(1). Id. The district judge
expressly understood and accepted the motion as a post appeal motion
and ruled that “this matter would fall within the scope of
representation of Mr. Baron’s appellate counsel, Mr. Schepps,
who states in the instant motion that his representation is
limited to the appeal of the Order Appointing Receiver.”
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R. 3557. The FRAP 8(a) motion did not request a re-hearing, but
requested pursuant to FRAP 8(a)(1) either stay or vacation of the order.
R. 1702, 1708-1709. Baron argued that the order could be vacated
pursuant to FRAP 8(a)(1) because the order was void ab initio. R. 4404.
Notably, the burden at the FRAP 8(a) hearing was upon Jeff
Baron as movant. The district court ruled against Jeff because it found
“that Baron has not met his burden to show that the Court should stay
the Receivership”. SR v2 p 359.
Failure of Due Process
On December 13, Mr. Baron moved the District Court to be allow
access to his money to hire an experienced Federal trial counsel to
represent him before the District Court. R. 2720. In his motion
Mr. Baron noted that:
(1) His personal papers and money had been seized,
and
(2) He had no way to fairly defend himself without: (A)
access to his money to hire experienced Federal
trial counsel to represent him before the trial court,
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(B) his papers and evidence, and (C) an opportunity
to conduct discovery.
Id.
The district court denied Mr. Baron’s requests. R. 3557. The
district court refused to allow Mr. Baron any discovery. R. 3565-3566.
The district court denied Mr. Baron’s request to have access to his own
money in order to hire experienced trial counsel to represent him at the
hearing. R. 2720, 3557.
The District Court erred because Mr. Baron was entitled to be
“afforded the fair opportunity to secure counsel of his own choice.”
Powell v. Alabama, 287 U.S. 45, 53 (1932) (emphasis added). Moreover,
the District Court’s refusal to afford Mr. Baron the opportunity to
secure counsel of his own choice is a denial of due process in the
constitutional sense. Id. at 69. Prior to the ex parte receivership order
Mr. Baron was represented by an AV rated trial attorney, and was in
possession of his papers and documents, and could have defended
himself at a hearing to appoint a receiver if that hearing was heard
before the receivership was imposed upon him. R. 3890-3892. Upon his
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appointment, the receiver fired Mr. Baron’s trial counsel and seized his
documents. Id. A fundamental violation of due process should be clear
when party is put to defend the seizure of their property and the forced
firing of their trial attorney
11
, after their documents have been seized
and their trial counsel has been fired by the court’s receiver. Id.
Additionally, the particularity requirement in Rule 7 requires that
a non-movant be afforded notice of the grounds upon which relief is
based, in order to provide that party with a meaningful opportunity to
respond. Fed.R.Civ.P. 7; e.g., Registration Control Systems v.
Compusystems, Inc., 922 F.2d 805, 807 (Federal Cir. 1990). The Fifth
Circuit has held “The right of defendants to present controverting
factual data is illusory unless there is adequate notice of plaintiffs’
claims.” Marshall Durbin Farms, Inc. v. National Farmers Org., Inc.,
446 F.2d 353, 356 (5th Cir. 1971). The Constitution requires that the
opportunity to be heard be granted in a meaningful manner. Boddie v.
Connecticut, 401 U.S. 371, 378 (1971). As a basic matter of due process,
a district court cannot issue relief based on grounds not advanced by the
11
Mr. Baron’s appellate counsel handles Federal appeals, not Federal trials. He has
never on his own handled a Federal trial, bench or jury, and has always relied upon
experienced co-counsel for trials in the Federal court. SR. v5 p1256.
Case: 10-11202 Document: 00511542409 Page: 26 Date Filed: 07/15/2011
moving party in their motion. See John Deere Co. v. American Nat.
Bank, Stafford, 809 F.2d 1190, 1192 (5th Cir. 1987) (summary judgment
context); and cf. Vought Aircraft Co., 141 F.3d at 230 (sanctions
context). Notably, the motion for receivership did not allege the matters
found by the trial court in its post-appeal order denying Mr. Baron’s
FRAP 8(a) motion. For example, the motion for receivership did not
allege that Jeff was a vexatious litigant, or had “engaged in a
consistent pattern and practice during this federal litigation of
defrauding his own counsel”, or that there was a threat Jeff would move
his assets. R. 1575-1579. Yet, these are precisely the asserted
justifications Sherman argues in his briefing.
Case: 10-11202 Document: 00511542409 Page: 27 Date Filed: 07/15/2011
REPLY ISSUE 3: RECEIVERSHIP IS NOT AUTHORIZED AS A
REMEDY FOR VEXATIOUS LITIGATION
Controlling Access to the Court
The Fifth Circuit has based a court's power to control vexatious
litigants on the inherent power of the court to protect its jurisdiction
and judgments and to control its docket. Farguson v. MBank Houston,
NA, 808 F.2d 358, 360 (5th Cir. 1986). The inherent power of a district
court to deter vexatious litigation that has been recognized by the Fifth
Circuit extends to the imposing of pre-filing injunctions to control access
to the court. E.g., Baum v. Blue Moon Ventures, LLC, 513 F. 3d 181,
187 (5th Cir. 2008).
There is a wide chasm between (A) inherent jurisdiction over
access to the court, and (B) jurisdiction over a citizen's property not
subject to any claim or controversy before the court. The district courts
of the United States are “courts of limited jurisdiction”. Exxon Mobil
Corp. v. Allapattah Services, Inc., 545 U.S. 546, 552 (2005). While courts
have been recognized to have the jurisdiction to lock a vexatious litigant
out of the courthouse,
12
they have not been recognized to have the
12
E.g., Baum, 513 F. 3d at 187.
Case: 10-11202 Document: 00511542409 Page: 28 Date Filed: 07/15/2011
inherent jurisdiction to lock a litigant out of the litigant's own house.
Cf. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375,380
(1994)( “the power asked for here is quite remote from what courts
require in order to perform their functions” ).
Pre-Filing Injunction is the Authorized Remedy for
Vexatious Litigation
The cases that Sherman has briefed set out the well-established
precedent that the authorized remedy for controlling vexatious
litigation is pre-filing injunction. Every vexatious litigation case cited
by Sherman has the same holding: the authorized remedy is injunction.
The cases cited by Sherman do not support his argument to the
contrary on this issue. For example:
1. Sherman argues Qureshi to hold there is a general “power to
create a remedy” for vexatious litigants (Sherman’s Brief,
page 6). However, the Qureshi Court ruled that “we hold
that a pre-filing injunction like the one imposed here
falls within ... the court’s jurisdiction.” Qureshi, 600 F.3d
at 526.
Case: 10-11202 Document: 00511542409 Page: 29 Date Filed: 07/15/2011
2. Sherman argues Baum v. Blue Moon Ventures, LLC, 513
F.3d 181 (5th Cir. 2008) to hold that a court can enter
whatever orders it feels are necessary to control a vexatious
litigant (Sherman’s Brief, page 10). However, Baum holds
that “A district court has jurisdiction to impose a pre-filing
injunction to deter vexatious, abusive, and harassing
litigation”. Id. at 187. Moreover, the pre-filing injunction
must preserve “the legitimate rights” of the litigant. Id.
3. Sherman argues In re Hartford Textile Corp., 681 F.2d 895,
897 (2d Cir. 1982) to hold that courts have been
traditionally allowed enter whatever orders they feel are
necessary to control a vexatious litigant. (Sherman’s Brief,
pages 13-14). However, Hartford holds “The equity power of
a court to give injunctive relief against vexatious
litigation is an ancient one which has been codified in the
All Writs Statute,”. Id. at 897.
Case: 10-11202 Document: 00511542409 Page: 30 Date Filed: 07/15/2011
The Court can control access to its door by locking its door and
placing the key in the hands of a judge to supervise access— That is
pre-filing injunction. The Court does not need to, and is not authorized
to, go to a litigant’s house and smash his legs so that he can’t come
around any more.
The limits of Inherent Power: De Beers
Sherman argues that ‘Federal Courts also have the power to
appoint receivers where equity requires it to insure compliance with the
orders of the Court’. (Sherman’s Brief, page 14). However, that is
exactly what the law expressly prohibits. The Supreme Court held in
De Beers Consol. Mines, Ltd. v. United States, 325 U.S. 212, 220 (1945),
that the court’s inherent authority to ‘protect is jurisdiction and
authority’ does not extend to the power to provide security that its
orders will be complied with. Id. De Beers expressly holds that
“[P]roviding security for compliance with other process which
conceivably may be issued” is not authorized.
Sherman also errs in concluding that the injunction sought in De
Beers was not intended to protect the exercise of the court’s power.
Case: 10-11202 Document: 00511542409 Page: 31 Date Filed: 07/15/2011
(Sherman’s Brief, page 13). That was clearly the intention— the
injunction in De Beers was intended as “a method of providing security
for compliance with other process which conceivably may be issued”. De
Beers, 325 U.S. at 220. De Beers held that a district court lacks
authority to order the “requisition of such security on the footing of a
complaint in equity”. Id. As the Supreme Court explained in De Beers,
the power to disable a party’s use of property as security for compliance
with possible decrees of the court has never been thought justified in
the “long history of equity jurisprudence”. Id. at 222.
Sherman acknowledges that De Beers holds that the All Wits Act
and inherent powers authority are justified only in order to preserve the
court’s subject matter jurisdiction or necessary to processing a
litigation. Id. at 826. (Sherman’s Brief, page 10). However, Sherman’s
argument ignores the meaning of that holding. The Fifth Circuit made
clear in ITT Community Development Corp. v. Barton, 569 F.2d 1351,
1360 (5th Cir. 1978) that there are limitations to the scope of inherent
powers. One limit is that inherent powers “be used only as required for
the performance of duties” (emphasis in original). Id. Pivotally, there
Case: 10-11202 Document: 00511542409 Page: 32 Date Filed: 07/15/2011
is no duty or power of the district court that it could not exercise
without seizing Jeff Baron’s property.
Seizing Jeff Baron’s Assets was not Necessary to Enable
the Court to Exercise any of its Powers
The receivership ordered against Jeff Baron was not necessary to
protect the District Court’s exercise of any its powers. For example:
(1) The District Court has power to authorize or reject the
appearance of any attorney before it and does not need to
seize Jeff Baron’s assets in order to exercise that power.
(2) The District Court has power to delay proceedings or to
refuse to delay them. The District Court did not need to
seize Jeff Baron’s house keys in order to exercise its power
to control its docket.
(3) The District Court has power to sign the stipulated
dismissal with prejudice entered into by the parties in the
lawsuit below. Stripping Jeff Baron of his property was not
necessary for the District Court to exercise that power.
(4) The bankruptcy court has power to allow, disallow, set a
deadline for filing, and sanction any groundless filings with
Case: 10-11202 Document: 00511542409 Page: 33 Date Filed: 07/15/2011
respect to claims for substantial contribution. The District
Court did not have to seize all of Jeff Baron’s assets for the
bankruptcy court to exercise its authority over substantial
contribution claims.
Notably, Sherman offers no explanation as to why or how seizing
all of Jeff’s assets met the standard in Fredeman that the seizure be
“essential to preserving the court’s subject matter jurisdiction or
processing the litigation”. In re Fredeman Litigation, 843 F.2d 821, 826
(5th Cir. 1988). A stipulated dismissal of all claims in the lawsuit was
entered into by all parties in the suit below. R. 2346-2355. All the
District Court needed to do to complete the pending case was to sign the
dismissal order.
Sherman’s Argument:
1. United States v. First Nat. City Bank
Sherman appears to attempt to make up for the lack of necessity
discussed above by citation to United States v. First Nat. City Bank, 379
U.S. 378, 85 S.Ct. 528 (1965), although it is unclear how the case
supports Sherman’s position. In First Nat. City, the Supreme Court
Case: 10-11202 Document: 00511542409 Page: 34 Date Filed: 07/15/2011
noted that review of a statutory grant of authority must be in light of
the public interest involved. Id. at 383.
13
The Supreme Court in First
Nat. City Bank held:
Unlike De Beers Mines v. United States, 325 U.S. 212,
there is here property which would be “the subject of the
provisions of any final decree in the cause.”
Id. at 385.
The case at bar is like De Beers and unlike First Nat. City Bank— the
property subject to the challenged order in this appeal was not subject
to any claim in the underlying suit. That is one of the key issues raised
in this appeal —the pivotal distinction between authority over property
subject to claims before the court and lack of authority over property
“not subject to any final decree in the cause”.
2. Receivership is Authorized as a form of Final Relief if it
has a Purpose
Sherman also argues that receivership is authorized as a form of
final relief where it is a means to achieve a desired end. (Sherman’s
Brief, page 12). However, Sherman has offered no authority for allowing
13
The court’s review of a statutory grant of authority is in contrast to the review of
the exercise of inherent power, which is reviewed in light of Chancery Court
practices.
Case: 10-11202 Document: 00511542409 Page: 35 Date Filed: 07/15/2011
the appointment of a receiver to seize an individual’s property that was
not subject to a claim pled before the Court.
Sherman argues that Gordon merely forbids receivership where it
can accomplish no purpose. (Sherman’s Brief, page 12). However, in
Gordon there was a clear purpose requested of the Receivership. In
Gordon, the movant was not happy with the way a trustee was
handling certain property. Id at 33-34. The movant complained that
interest on many of the mortgages in a certain mortgage pool had not
been paid, and little effort was being made by the trustee to compel
payment of the taxes on the mortgaged properties. Id. The court placed
the properties into receivership to provide a remedy. The ‘end sought’
was to have the interest collected on the mortgages and effort made to
have the debtors pay taxes on the mortgaged property. However, in
reversing the lower court’s decision the Supreme Court explained that
receivership is not a form of equitable relief which a court is authorized
to give. Rather, receivership must be “ancillary to some form of final
relief which is appropriate for equity to give” Id. at 39. Moreover, that
form of final equitable relief must involve disposition of the property
Case: 10-11202 Document: 00511542409 Page: 36 Date Filed: 07/15/2011
placed into receivership. Id. at 37 (“there is no occasion for a court of
equity to appoint a receiver of property of which it is asked to make no
further disposition.”).
14
The Supreme Court and the Fifth Circuit have delineated, with
clarity, the strict limitations on the authorized exercise of a court’s
inherent or equitable powers. That deline
