No. 10-11202
In the
United States Court of Appeals
for the Fifth Circuit
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NETSPHERE, INC. Et Al,
Plaintiffs
v.
JEFFREY BARON,
Defendant-Appellant
v.
ONDOVA LIMITED COMPANY,
Defendant-Appellee
▬▬▬▬▬▬▬▬▬▬▬
Appeal of Order Appointing Receiver in Settled Lawsuit
▬▬▬▬▬▬▬▬▬▬▬
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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
▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
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EMERGENCY MOTION FOR LIMITED STAY, DISSOLUTION OR
OTHERWISE TO ALLOW JEFF BARON TO DEFEND HIS
INTEREST IN THE “SERVERS.COM” DOMAIN IN THE ONDOVA
BANKRUPTCY PROCEEDINGS
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Case: 10-11202 Document: 00511655466 Page: 1 Date Filed: 11/04/2011
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Cons. w/ No. 11-10289
NETSPHERE, INC., ET AL, Plaintiffs
v.
JEFFREY BARON, Defendant- Appellant
v.
DANIEL J SHERMAN, Appellee
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Cons. w/ No. 11-10290
NETSPHERE, INC. ET AL, Plaintiffs
v.
JEFFREY BARON, ET AL, Defendants
v.
QUANTEC L.L.C.; NOVO POINT L.L.C., Non-Party Appellants
v.
PETER S. VOGEL, Appellee
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Cons. w/ No. 11-10390
NETSPHERE, INC. ET AL, Plaintiffs
v.
JEFFREY BARON, Defendant – Appellant
v.
QUANTEC L.L.C.; NOVO POINT L.L.C., Appellants
v.
ONDOVA LIMITED COMPANY, Defendant – Appellee
v.
PETER S. VOGEL, Appellee
----------------------------------------------------------------------------------------
Cons. w/ No. 11-10501
NETSPHERE, INC. ET AL, Plaintiffs
v.
JEFFREY BARON, Defendant – Appellant
QUANTEC L.L.C.; NOVO POINT L.L.C., Appellants
CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P.,
Appellant
v.
PETER S. VOGEL; DANIEL J. SHERMAN, Appellees
Case: 10-11202 Document: 00511655466 Page: 2 Date Filed: 11/04/2011
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Interlocutory Appeals of
Orders in Receivership on Appeal
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From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
Hon. Judge William R. Furgeson Presiding
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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/Appellant: JEFFREY BARON
b. Defendant/Appellee: 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
Case: 10-11202 Document: 00511655466 Page: 3 Date Filed: 11/04/2011
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 Vogel: 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 Appellee Sherman:
Munsch Hardt Kopf & Harr, P.C.
(1) Raymond J. Urbanik, Esq.
(2) Lee J. Pannier, Esq.
3800 Lincoln Plaza / 500 N. Akard Street
Dallas, Texas 75201-6659
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
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
Case: 10-11202 Document: 00511655466 Page: 4 Date Filed: 11/04/2011
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
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(28) Southpac Trust Limited
(29) Stowe Protectors, Ltd.
(30) Royal Gable 3129 Trust
b. Receiver / Mediator / Special Master: Peter Vogel
c. Non-party attorneys seeking fees 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 APPELLANT
Case: 10-11202 Document: 00511655466 Page: 6 Date Filed: 11/04/2011
TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS........................................................................... 2
TABLE OF CONTENTS ................................................................................................................ 6
BACKGROUND.............................................................................................................................. 8
The Emke-Vogel Connection ...................................................................................8
The Emke Settlement...............................................................................................8
Baron Prevented From Protecting his Property Rights .............................................9
Vogel Working Against Receivership Estates.........................................................10
Background of Sherman-Vogel and the Receivership.............................................12
STANDARD IN GRANTING STAY PENDING APPEAL........................................................ 16
ARGUMENT & AUTHORITY.................................................................................................... 17
A. LIKELIHOOD OF SUCCESS ON APPEAL – LEGAL ANALYSIS....................... 17
THE RECEIVERSHIP ORDER IS UNCONSTITUTIONAL................................17
THE RECEIVERSHIP ORDER IS NOT AUTHORIZED IN EQUITY.................19
THE POST-APPEAL LEGAL JUSTIFICATIONS OFFERED FOR THE
RECEIVERSHIP ARE LEGALLY GROUNDLESS..............................................19
B. IRREPARABLE INJURY.................................................................................................. 22
C. NO SUBSTANTIAL HARM TO OTHER PARTIES................................................... 23
D. PUBLIC INTEREST........................................................................................................... 23
CONCLUSION.............................................................................................................................. 24
PRAYER......................................................................................................................................... 24
TABLE OF AUTHORITIES ........................................................................................................ 27
CERTIFICATE OF SERVICE..................................................................................................... 29
CERTIFICATE OF NOTICE....................................................................................................... 29
Case: 10-11202 Document: 00511655466 Page: 7 Date Filed: 11/04/2011
TO THE HONORABLE JUSTICES OF THE FIFTH CIRCUIT COURT OF
APPEALS:
COMES NOW JEFFREY BARON, Appellant, and moves for an emergency
order issued by Monday, November 7, allowing Baron to retain counsel of his
choice and to file an objection to the sale of the domain name “servers.com” in the
Ondova bankruptcy proceedings
1
. All Baron seeks by this motion is the
opportunity to exercise his right as a citizen of the United States to be heard in
court to defend his legal rights in the domain name “servers.com”.
Sherman, the chapter 11 trustee in the Ondova bankruptcy, has filed a
negative-notice motion to sell the “servers.com” domain. See Exhibit B. Unless
Baron is allowed to object by Monday, November 7, he will be unable to stop the
approval and sale of the name, and the purchaser of the name will cut off his rights.
This motion does not seek to take anything out of the receivership res, but rather,
the emergency relief requested is necessary to protect a substantial
receivership asset from liquidation and loss and involves no cost to the
receivership estate.
This Honorable Court has stayed the District Court below from liquidating
or distributing any further receivership assets. Vogel, the receiver, and Sherman
have therefore moved over to the Bankruptcy Court (which has not been stayed), in
an attempt to ‘end run’ the stay imposed on the District Court and liquidate
Baron’s recently vested interest in “servers.com” via the bankruptcy proceedings.
1
Northern District of Texas (Dallas) bankruptcy case 09-34784-sgj11.
Case: 10-11202 Document: 00511655466 Page: 8 Date Filed: 11/04/2011
BACKGROUND
The Emke-Vogel Connection
In 2003 a dispute arose between Mike Emke and Ondova (f/d/b/a Compana)
over the domain “servers.com”. Emke claimed he owned the name. Peter Vogel’s
law firm, Gardere, represented Emke in the dispute, and was attorney of record for
Emke in at least two Federal suits spanning almost half a decade.
2
Then, in July
2009, Judge Furgeson announced that he was going to appoint Vogel as special
master in the lawsuit below. Pressure was placed on Baron and he was intimidated
into believing that if he did not immediately settle his lawsuit with Emke
(involving “servers.com”), there would be consequences in the lawsuit below
(involving half a million domain names). Accordingly, Baron settled the suit with
Emke on July 6, 2009. Exhibit A. Three days later, the order appointing Vogel as
special master was formally entered in the proceedings below. R. 394.
The Emke Settlement
The Emke settlement transferred most of the rights to “servers.com” to a
new entity (Servers, Inc., a Nevada corporation). The new corporation’s stock was
owned 50/50 by Ondova and Emke. No one disputes Ondova’s right to ownership
of the Servers, Inc. stock. However, the Emke settlement expressly reserved an
interest in the domain name for Emke and Baron personally. Pursuant to the
agreement, Baron and Emke reserved a security and reverter interest in the
2
Northern District of Texas cases: (1) Compana, LLC v. Emke et al. (3:03-cv-02372-M); and
(2) Compana, LLC v. Emke et al 3:05-cv-00285-L.
Case: 10-11202 Document: 00511655466 Page: 9 Date Filed: 11/04/2011
domain name, reverting ownership on the condition that the corporation was ever
placed into receivership. Specifically the Emke settlement agreement (Exhibit A)
provides:
“In the event of insolvency, receivership and/or other default of the
jointly owned company, the domain name <servers.com> shall
revert to Jeff Baron and Mike Emke, to be owned jointly and
equally. To this degree, these two principals shall maintain a first
lien and security interest in the domain name superior to any other
investor, equity holder or creditor.”
Recently, on October 18, 2011, the Ondova Bankruptcy Court Judge entered
an order placing Servers, Inc. into receivership. Exhibit C. Accordingly, as a
matter of Texas and Nevada state law, Baron and Emke became 50/50 owners of
the domain name “servers.com”. The domain name has been appraised at
$1,400,000.00 to $4,200,000.0 in value. Accordingly, Baron’s legal interest in 50%
of the domain name is substantial— valued between $700,000.00 and
$2,100,000.00.
Baron Prevented From Protecting his Property Rights
Baron, however, has been prohibited by the receivership order (challenged in
this appeal) from exercising any of his legal rights. Sherman argues that Vogel (as
receiver) holds all of Baron’s rights. See Exhibit D. Yet, Vogel and his firm
Gardere, have a clear conflict of interest litigating against Gardere’s former client
with respect to a matter for which Gardere represented that client against Ondova
and Baron. Vogel, moreover, has taken positions that are clearly not in Baron’s
Case: 10-11202 Document: 00511655466 Page: 10 Date Filed: 11/04/2011
interest nor reasonably calculated to protect Baron’s interest. Rather, Vogel has
actively attempted to orchestrate fabricated incidents to ‘prove’ that Baron is
“despicable” (Vogel’s term).
3
Vogel Working Against Receivership Estates
Vogel has failed to take actions to protect receivership assets or to fulfill the
duties normally associated with a receiver, such as defending arbitration claims
against receivership assets, or filing tax returns and paying federal taxes for the
multiple receivership entities under Vogel’s receivership, etc.
4
This is also
illustrated by Vogel’s filings in the Bankruptcy Court, as shown by the following
example: Prior to the global settlement, Sherman claimed ownership of about a
dozen domains. That ownership was contested, and Baron’s counsel sent a letter
confirming that the domains listed in a letter (in which Sherman claimed
ownership of the domains) were the domains considered to be in dispute. Vogel
initially claimed these domains were owned by Ondova. Novo Point LLC’s Cook
Island manager hired counsel to move to have the domains turned over to the
receivership. In that motion it was clearly established that Ondova did not have
3
See, e.g., GENERAL RESPONSE TO MOTIONS FOR FEES FOR VOGEL, HIS
PARTNERS, AND OTHER “RECEIVER PROFESSIONALS” (Document 00511600278 in
case 10-11202 filed on 9/12/2011) (describing the Vogel’s orchestrated attempt to falsely make it
appear that Baron was harassing, intimidating, and ‘obstructing’) (at pdf page 14, et.seq.); and
SR. v5 pp102-110 (the emails with Vogel’s office’s digital IDs proving the affair was an
orchestrated set-up by Vogel).
4
See Document 00511604732 filed on 9/16/2011 in case 10-11202 (Failure to pay any taxes or
file any tax returns) and Document 00511618411 Filed 09/29/2011 in Case 10-11202 (Refusal to
defend Domain Name arbitration disputes).
Case: 10-11202 Document: 00511655466 Page: 11 Date Filed: 11/04/2011
title to the names, and that title to those domain names was transferred to Novo
Point LLC in the global settlement. See Exhibit E.
At the hearing related to that motion, it was admitted —on the record— that
Sherman and Vogel had agreed that all of the domains except one (mondial.com)
were the property of Novo Point, and would be turned over to Novo Point.
Exhibit F. However, instead of enforcing the rights of Novo Point—even as were
expressly agreed on the record, Vogel subsequently filed a motion making it look
(falsely) like Baron’s counsel had agreed that the disputed names belonged to
Ondova. See Exhibit G. First, Vogel attached an affidavit that the whois
information showed Ondova as the owner of “Petfinders.com”. However, the
whois information of nearly all of Ondova’s domains listed Ondova as the owner
as a privacy protection feature for the actual owner. ICANN (the international
internet organization that regulates domain names) prohibits a registrar (such as
Ondova) from registering its own names. It would have been impossible for
Ondova to be both owner and registrar.
In any case, Ondova had quitclaimed all of its domain name inventory to
Blue Horizon in 2005. Exhibit E. Blue Horizon then quitclaimed those names to
Novo Point in the global settlement agreement. All of this Vogel hides from the
Court. Instead, Vogel pastes a giant header “12 Domains that are registered and
owned by Compana” to ‘mock up’ an e-mail from Gerrit Pronske to make it look
like it is confirming that fact, when the Pronske letter is actually confirming the
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opposite—that the 12 names are disputed names. See Exhibit G. In short, Vogel
‘mocked up’ a letter to create false evidence against the position and rights of the
receivership parties, in an effort to support Sherman’s sale of Petfinders.com in a
private, non-auction sale for $25,000.00.
5
Background of Sherman-Vogel and the Receivership
In September 2010 the Ondova bankruptcy estate had some $2,000,000.00 in
cash and only around $900,000.00 in claims— ie., more than a million dollar
cash surplus. This was achieved when Baron agreed for Ondova to take all of the
settlement proceeds in the global settlement because he was promised by the
Ondova chapter 11 trustee (Sherman) that:
“[I]f I were going to be entering into this settlement agreement,
that … once the creditors were paid, that there would be a
significant amount of money that was left over, that would come
back, that would stay, you know, in a company that I would have
at the end of the day. … I was told that obviously if you look at
the settlement agreement, I individually am not getting any, a
penny from it myself. … the settlement agreement was that
Ondova was going to be able to walk away out of the bankruptcy,
after it paid its creditors, with a large amount of cash, and we
were thinking maybe even a million dollars.”
Barons testimony before the Bankruptcy Court on 9/15/2010.
Doc 470, Page 95 in Ondova Bankruptcy (case no. 09-34784-sgj11).
Sherman should have immediately closed the Ondova bankruptcy in
September 2010 when there was the MILLION DOLLARS CASH surplus.
Sherman’s counsel let the truth slip out in the District Court, admitting “The
5
“Petfinders.com” has been appraised at $2,000,000.00 to $6,000,000.00.
Case: 10-11202 Document: 00511655466 Page: 13 Date Filed: 11/04/2011
negotiation was to pay the debts and give the keys back to Mr. Baron. But that
didn't happen.” R. 4598:11-12. Instead, Sherman kept the bankruptcy open and ran
up over $300,000.00 in additional attorney fees.
Baron eventually objected. Within three business days of Baron’s objection,
Sherman and Vogel had Baron placed into receivership (with Vogel as receiver) ex
parte in the district court case (where Vogel was employed as special master).
Sherman notably did not act on his own, but filed his motion seeking to appoint
Vogel as receiver over Baron only after secret consultations with Vogel.
6
After
consulting with Vogel, Sherman filed the receivership motion falsely representing
that the Bankruptcy Judge ordered that if Baron fired his counsel and proceeded
pro se that a receivership was to be placed over him.
7
What the Bankruptcy Judge
actually stated was:
“I am thinking very, very carefully about doing a Report &
Recommendation to Judge Will Furgeson that he appoint a receiver
over Mr. Baron and his assets pursuant to 28 U.S.C., 20 Section 754
and 1692 so that a receiver can seize assets and perform the
obligations of Jeff Baron under the settlement agreement.”
Ondova Bankruptcy Doc 470 at 58.
However, by November 2010 when Sherman and Vogel had Vogel
appointed ex parte as receiver over Baron, Baron had already fully performed all
of his settlement agreement obligations.
8
Thus, Sherman did not allege Baron was
6
SR. v5 p238.
7
R. 1576.
8
It has been alleged that a de minimis $2,500.00 payment obligation had been skipped.
Case: 10-11202 Document: 00511655466 Page: 14 Date Filed: 11/04/2011
in breach of the settlement. Rather, Sherman’s motion falsely represented the
receivership was to be imposed merely if Baron fired his bankruptcy counsel and
proceeded pro se. Yet, simply misrepresenting the Bankruptcy Court’s order was
not sufficient—Sherman and Vogel still had to show that Martin Thomas (who was
Baron’s counsel in the bankruptcy court) was fired. So a fraudulent story was
fabricated that Baron filed an ethics complaint against Thomas, didn’t pay him,
and thereby caused Thomas to withdraw.
9
The story was false and fabricated, but
it was not the only one.
Another story was also needed because Baron was also represented in the
bankruptcy court by Stan Broome. Accordingly, with Broome’s participation a
false claim was fabricated that (1) Broome’s fee contract contained no provision
capping his monthly fees at $10,000.00 per month; (2) Baron wrongfully refused to
pay more than that amount, and thus (3) Broome was owed tens of thousands of
dollars and withdrew. The fabricated claim was sufficient to obtain the ex parte
receivership order, but eventually Vogel was forced to produce Broome’s contract.
When that happened, the “claim” was shown to be completely fabricated. See SR.
v8 p1212 (the written terms in Broome’s contract, imposing a $10,000.00 per
month cap on fees incurred and requiring express written authorization to exceed
the cap); SR. v5 pp426-430 (Broome’s fraudulent statements denying the existence
9
R. 1576.
Case: 10-11202 Document: 00511655466 Page: 15 Date Filed: 11/04/2011
of such a term in his contract).
10
Notably, Vogel was intimately involved in the ex parte proceedings to
appoint himself as receiver over Baron, and Vogel personally filed the receivership
order. R. 27, 1604. Baron appealed the receivership and Vogel then, on his own
motions, moved for a long list of companies to be added as receivership parties and
placed in his hands as receiver. Other than brutally punishing Baron— limiting his
access to medical care, keeping him from owning an operating vehicle, keeping
him from traveling outside of Dallas, keeping him from having heat or air-
conditioning, prohibiting from being allowed to earn any money or engage in any
business transactions, and burning up his COBRA coverage, etc.— literally, the
receivership has achieved nothing other than to: (1) prevent Baron from hiring any
legal counsel, (2) create a list of groundless, non-diverse state law attorney fee
‘claims’ against Baron (solicited by Vogel); and (3) provide a platform for Sherman
and Vogel to run up fee demands to a combined total of over FOUR MILLION
DOLLARS.
As a fundamental principle of equity, “Fraud vitiates everything it touches.”
White v. Union Producing Co., 140 F.2d 176, 178 (5th Cir. 1944). Accordingly, the
receivership over Baron should be dissolved. The undersigned counsel, unpaid by
order of the District court, despite Herculean efforts to bring the matter to the
10
The evidence is black and white. There is no ambiguity. However, when confronted with
the evidence that the receivership had been procured through fabricated allegations, the District
Court sealed that portion of the record. SR. v7 p379.
Case: 10-11202 Document: 00511655466 Page: 16 Date Filed: 11/04/2011
attention of this Honorable Court, has been apparently previously unable to
sufficiently articulate the factual and legal situation involved in the proceedings
below, and this Honorable Court has declined to grant a general stay or to dissolve
the receivership. This Honorable Court, has, however, stayed the proceedings in
the District Court below, preventing the further distribution of Baron’s assets (and
the assets of multiple more ‘receivership entities’ that were placed by the District
Court into Vogel’s hands upon Vogel’s own motions) to attorneys fees for Vogel,
Sherman and Vogel’s “professionals”.
Baron should not be denied the fundamental right of a citizen to be heard
in court to protect his own assets. On paper, Baron is represented in the
Bankruptcy Court by Martin Thomas, but Thomas has refused to take any action
before the Bankruptcy Court on Baron’s behalf. See Exhibit D. Notably, Thomas
is one of the attorneys who participated in allowing the District Court to believe
the fabricated allegations asserted in Sherman’s motion to appoint a receiver over
Baron, including, ironically, that Baron had filed an ethics complaint against
Thomas, and that Thomas had withdrawn as Bankruptcy Court counsel.
STANDARD IN GRANTING STAY PENDING APPEAL
The Fifth Circuit has adopted the four factor test set out in Virginia
Petroleum Job. Ass'n v. Federal Power Com'n, 259 F.2d 921 (DC Cir. 1958) to
determine whether stay pending appeal should be granted. Belcher v. Birmingham
Trust National Bank, 395 F.2d 685 (5th Cir. 1968). Those factors are:
Case: 10-11202 Document: 00511655466 Page: 17 Date Filed: 11/04/2011
(1) Likelihood of success on the merits; (2) A showing of irreparable injury if the
stay is not granted; (3) Whether granting the stay would substantially harm the
other parties; and (4) Granting of the stay would serve the public interest. Id.
ARGUMENT & AUTHORITY
A. LIKELIHOOD OF SUCCESS ON APPEAL – LEGAL ANALYSIS
THE RECEIVERSHIP ORDER IS UNCONSTITUTIONAL
The seizure clause of the Fourth Amendment prohibits the unreasonable
interference with possession of a person’s property. Severance v. Patterson, 566
F.3d 490 (5th Cir. 2009). The seizure ordered by the District Court was purely
arbitrary—ordered without a trial on the merits of any claim, and entered based on
no objective guidelines or guiding principles. See e.g., Skinner v. Railway Labor
Executives' Assn., 489 U.S. 602, 613-614 (1989) (Fourth Amendment guarantees
the privacy, dignity, and security of persons against arbitrary acts by officers of the
Government). Accordingly, the receivership order was issued in violation of the
Fourth Amendment and should be declared void.
Further, the Supreme Court has held that where the taking of one's most
basic property rights is so obvious, no extended argument is needed to conclude
that absent notice and a prior hearing, the order violates the fundamental
principles of due process. Sniadach v. Family Finance Corp. of Bay View, 395
U.S. 337, 342 (1969). The Supreme Court has held that there is a “root
requirement that an individual be given an opportunity for a hearing before he is
Case: 10-11202 Document: 00511655466 Page: 18 Date Filed: 11/04/2011
deprived of any significant property interest”. Boddie v. Connecticut, 401 U.S. 371,
379 (1971); Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532, 543 (1985). The
Supreme Court has also held that the hearing must be granted before the
deprivation of basic property rights, and no later hearing can cure the constitutional
violation. Fuentes v. Shevin, 407 U.S. 67, 81-82 (1972). Further, where the
property interest is not basic such that pre-trial deprivation may be constitutionally
effected, the Supreme Court has held that a showing of exigent circumstances is
mandatory and has suggested that a bond to compensate for wrongful deprivation
and a detailed affidavit setting out the grounds are also required. Connecticut v.
Doehr, 501 U.S. 1, 10, 18 (1991).
However, the District Court’s order appointed a receiver and seized all of
Baron’s property and rights, without any bond to compensate Baron for wrongful
deprivation, and without any type of hearing prior, and was not supported by
affidavit nor showing of any exigent circumstance. The ex parte receivership order
should therefore be declared void for lack of due process of law. See Pennoyer v.
Neff, 95 U.S. 714, 737 (1878) (“such proceeding is void as not being by due
process of law”); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291
(1980) (“rendered in violation of due process is void in the rendering”); Margoles
v. Johns, 660 F. 2d 291,295 (7th Cir. 1981)(“void only if the court that rendered it
lacked jurisdiction ... or if it acted in a manner inconsistent with due process of
law”).
Case: 10-11202 Document: 00511655466 Page: 19 Date Filed: 11/04/2011
THE RECEIVERSHIP ORDER IS NOT AUTHORIZED IN EQUITY
The Supreme Court has held that receivership is not authorized as a stand-
alone-remedy. Gordon v. Washington, 295 U.S. 30, 37-38 (1935). Accordingly, as
a matter of established law, the district court lacks authority to administer
receivership as a remedy for ultimate relief. Id. at 38. This Honorable Court has
similarly held that equity receivership is authorized only to conserve property
where distribution of that property is sought pursuant to some other equitable
form of relief. Tucker v. Baker, 214 F.2d 627, 631 (5th Cir. 1954). No other
equitable relief has been sought against Baron’s property. Receivership in this case
is therefore not a remedy authorized by law.
THE POST-APPEAL LEGAL JUSTIFICATIONS OFFERED FOR THE
RECEIVERSHIP ARE LEGALLY GROUNDLESS
The basis offered to defend the receivership are legally groundless, as
follows:
1. Baron is alleged to be a ‘vexatious’ litigant who fires attorneys to disrupt
the court proceedings. An individual in a civil case, as a matter of law, cannot
interfere with a court’s jurisdiction by firing his attorney. The worst a party
can do is hurt their own presentation by being forced to litigate without the
assistance of counsel. Since that is the statutory right of every individual litigant in
federal court— to proceed pro se, the act of firing an attorney, or a thousand
attorneys can work no involuntary or improper cost on the court. See Winkelman ex
Case: 10-11202 Document: 00511655466 Page: 20 Date Filed: 11/04/2011
rel. Winkelman v. Parma City School Dist., 127 S. Ct. 1994, 2007 (2007). A court
can simply decline to accept new counsel to appear before it. Further, substitution
of counsel has no effect under the rules of procedure upon any deadline, time limit,
etc. Finally, every substitution of counsel occurred with court approval. Even if
Baron changed lawyers every week, the Court approved it. Accordingly,
substitution of counsel, as a matter of law, cannot be ‘vexatious litigation’. Baron
submitted to the Court’s authority and received permission for every substitution of
counsel. The alleged conduct lacks the “stubborn resistance to authority”
necessary to justify punishment by the court. E.g., John v. State of La., 828 F.2d
1129, 1132 (5th Cir. 1987).
2. Baron is alleged to have defrauded attorneys. That is a state law issue
outside of the jurisdiction of the District Court. It is a claim in law, and does not
invoke receivership rights. The ‘claims’ have been discussed in recent appellate
briefings and shown to have been solicited by Vogel and Sherman and to be
groundless. These claims are not even ‘good faith’ disputes by lawyers. Rather,
they are groundless and fraudulent claims, and have been shown to be so. Up until
today, the Fifth Circuit has required that a person be placed on trial and a
verdict be entered against them before their property can be seized for alleged
debts. That is a healthy system. The Fifth Circuit should maintain it. Where a
person is denied the right to hire with their own money experienced trial
counsel of their own choice, and their property is seized, and then a ‘summary
Case: 10-11202 Document: 00511655466 Page: 21 Date Filed: 11/04/2011
hearing’ is held on an expressly one-sided report excluding all exculpatory
evidence, the system is unhealthy and invites the filing of ‘claims’ of the type
now seen in this case.
3. Baron is alleged to risk the Ondova bankruptcy by firing his attorneys.
This claim deserves careful attention. The Bankruptcy Code sets up the right of
every creditor to have his reasonable attorneys’ fees paid by the bankruptcy estate
when the creditor has provided a substantial benefit to the estate. The creditor can
seek reimbursement, or his attorneys can seek payment directly. 11 U.S.C.
§503(b)(3)(D); and see e.g., In re DP Partners Ltd. Partnership, 106 F. 3d 667,
671-673 (5th Cir. 1997). The argument that somehow Baron should be put in
receivership to prevent him hiring lawyers who will then make substantial
contributions to the Ondova estate and seek payment for it, is legally frivolous and
has no support in law. If the creditor has paid the professional who made the
contribution, the creditor is entitled to reimbursement from the bankruptcy estate.
Id. If the professional has not been paid by the creditor, the professional is entitled
to be paid directly from the bankruptcy estate. 11 U.S.C. §503(b)(4); and see e.g.,
In re Consolidated Bancshares, Inc., 785 F.2d 1249,1253 (5th Cir. 1986). In either
case, by law the party responsible for paying the cost of any qualifying substantial
contribution is the bankruptcy estate and not the creditor who makes the
contribution. It should be noted that to qualify as a substantial contribution, the
benefit provided to the estate must be greater than the expense of the claim. E.g., In
Case: 10-11202 Document: 00511655466 Page: 22 Date Filed: 11/04/2011
re DP Partners, 106 F. 3d at 673. In summary, the imposition of a receivership in
order to force a creditor to pay the costs of substantial contributions to the
bankruptcy estate—an obligation imposed by law upon the estate— involves the
use of a prohibited means (see 11 U.S.C. §105(b)), to controvert the clear statutory
framework of the Bankruptcy Code.
B. IRREPARABLE INJURY
It is well settled that the loss of constitutional freedoms for even minimal
periods of time constitutes irreparable injury. Deerfield Med. Center v. City of
Deerfield Beach, 661 F.2d 328, 338 (5th Cir. 1981).
If the “servers.com” domain is allowed to be sold by the Bankruptcy Court,
the buyer will cut off Baron’s property right in the asset, and it cannot be
subsequently restored. See, e.g,. American Grain Ass'n v. Lee-Vac, Ltd., 630 F.2d
245, 247 (5th Cir. 1980). All Baron is seeking is to be restored his right to assert
his legal right to protect his own property in court proceedings. The property is
unique and represents a unique business opportunity selling internet server services
via the internet at “servers.com”. The Bankruptcy Court Judge will have the
opportunity to determine the merits of the right asserted by Baron.
Notably, Baron cannot recover damages later against Ondova. Since Mr.
Baron is the equitable owner of Ondova, any recovery against the Ondova estate
would just be taken out of Baron’s own pocket. Accordingly, as a very real matter
the damages threatened are irreparable.
Case: 10-11202 Document: 00511655466 Page: 23 Date Filed: 11/04/2011
C. NO SUBSTANTIAL HARM TO OTHER PARTIES
Baron is seeking the right to assert his rights before the Bankruptcy Court.
The Bankruptcy Court will determine the substantive issues in the first instance.
No party can be harmed.
D. PUBLIC INTEREST
There is a compelling public interest in upholding the U.S. Constitution:
Protecting an individual’s rights in his property in court proceedings. There are
important public interests served by granting the relief requested by Mr. Baron. It
is frightening to think that after an individual objects to fees in a bankruptcy case,
that the federal courts would allow that individual to: (1) have all his assets and
private documents stripped from him, (2) become a ward of the court– incarcerated
in ‘house arrest’ in one city, (3) be prohibited from earning a wage or engaging in
business transactions, (4) be prohibited from hiring legal counsel to protect his
rights, and (5) be prohibited from defending his rights to his own property in court.
Case: 10-11202 Document: 00511655466 Page: 24 Date Filed: 11/04/2011
CONCLUSION
The District Court below suspended ex parte Mr. Baron’s constitutional
right to own, access, and control, and defend his own property in court. The order
exceeds the authority of a district court and violates the US Constitution. This
Honorable Court Stayed the District Court from further liquidation or distribution
of receivership assets. However, Vogel and Sherman have moved over to the
Ondova Bankruptcy Court which was not stayed and are seeking to liquidate
receivership assets via the Ondova bankruptcy proceedings. Next Monday,
November 7, is the deadline for an objection to the sale of “servers.com”. Baron
requests the opportunity to assert his right to ownership of 50% of servers.com and
prevent the irreparable sale of his interest in the asset, and the loss of that unique
property.
PRAYER
Wherefore, Jeffrey Baron prays:
(1) That this Honorable Court consider and grant this motion on an
expedited basis, and enter a limited Stay of the Order Appointing Receiver over
the person and property of Mr. Baron signed by the District Court below on
November 24, 2010 [Docket #124, and Docket #130, Entered 11/30/2010], or to
fully or partially dissolve the receivership, and to allow Baron to be represented by
counsel of his choice in the Ondova Bankruptcy proceedings in order to object to
Case: 10-11202 Document: 00511655466 Page: 25 Date Filed: 11/04/2011
the sale of the domain name “servers.com” and to protect Baron’s property
interest in that domain name.
(2) Jointly and in the alternative, prayer is re-urged that the receivership be
dissolved or stayed because it serves no articulable purpose authorized by law and
clearly is causing irreparable injury to Jeff Baron by suspending his constitutional
rights, including fundamental rights such as his freedom of expression (he is
prohibited from owning a website to tell his story); his right to earn wages, to
conduct business transactions, to hire paid counsel, (all these are expressly
prohibited by the District Court’s order), etc.
(3) Jointly and in the alternative, prayer is again re-urged that the
receivership be partially dissolved or stayed so that Mr. Baron be allowed to (A)
work freely, (B) engage in business transactions, (C) receive wages, (D) receive
and cash checks, (E) retain counsel of his choice, and to exercise all other rights of
a free citizen of the United States including the right to retain counsel with his own
money. If the Court considers granting this relief and finds need to retain Mr.
Baron’s non-exempt, or even exempt and non-exempt property in receivership, at
least a partial stay or dissolution of the receivership, as prayed for herein, will
restore some fundamental rights to Mr. Baron.
Case: 10-11202 Document: 00511655466 Page: 26 Date Filed: 11/04/2011
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
COUNSEL FOR APPELLANT,
JEFFREY BARON
Case: 10-11202 Document: 00511655466 Page: 27 Date Filed: 11/04/2011
TABLE OF AUTHORITIES
FEDERAL CASES
American Grain Ass'n v. Lee-Vac, Ltd., 630 F.2d 245, 247 (5th Cir. 1980)..........22
Belcher v. Birmingham Trust National Bank, 395 F.2d 685 (5th Cir. 1968) ...16, 17
Boddie v. Connecticut, 401 U.S. 371, 379 (1971).................................................18
Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532, 543 (1985).............................18
Connecticut v. Doehr, 501 U.S. 1, 10, 18 (1991)...................................................18
Deerfield Med. Center v. City of Deerfield Beach, 661 F.2d 328, 338 (5th Cir.
1981).................................................................................................................22
Fuentes v. Shevin, 407 U.S. 67, 81-82 (1972).......................................................18
Gordon v. Washington, 295 U.S. 30, 37-38 (1935) ...............................................19
In re Consolidated Bancshares, Inc., 785 F.2d 1249,1253 (5th Cir. 1986)............21
In re DP Partners Ltd. Partnership, 106 F. 3d 667, 671-673 (5th Cir. 1997)....21, 22
John v. State of La., 828 F.2d 1129, 1132 (5th Cir. 1987).....................................20
Margoles v. Johns, 660 F. 2d 291,295 (7th Cir. 1981)...........................................18
Pennoyer v. Neff, 95 U.S. 714, 737 (1878) ...........................................................18
Severance v. Patterson, 566 F.3d 490 (5th Cir. 2009) ...........................................17
Skinner v. Railway Labor Executives' Assn., 489 U.S. 602, 613-614 (1989) ........17
Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 342 (1969)..........17
Tucker v. Baker, 214 F.2d 627, 631 (5th Cir. 1954)..............................................19
Case: 10-11202 Document: 00511655466 Page: 28 Date Filed: 11/04/2011
Virginia Petroleum Job. Ass'n v. Federal Power Com'n, 259 F.2d 921 (DC Cir.
1958).................................................................................................................16
White v. Union Producing Co., 140 F.2d 176, 178 (5th Cir. 1944) .......................15
Winkelman ex rel. Winkelman v. Parma City School Dist., 127 S. Ct. 1994, 2007
(2007)................................................................................................................20
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980) ..............18
FEDERAL STATUTES
11 U.S.C. §105(b).................................................................................................22
11 U.S.C. §503(b)(3)(D).......................................................................................21
11 U.S.C. §503(b)(4) ............................................................................................21
Case: 10-11202 Document: 00511655466 Page: 29 Date Filed: 11/04/2011
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 APPELLANT
CERTIFICATE OF NOTICE
This is to certify that notice of the filing of this request for emergency relief was
provided by telephone to the Clerk of the Fifth Circuit Court of Appeals and to
counsel for the Appellee.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
Case: 10-11202 Document: 00511655466 Page: 30 Date Filed: 11/04/2011
