Motion to Strike Notice of Transmittal filed by Jeff Baron Doc 201

MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING WITHDRAWAL OF REFERENCE [DOC 
118] - Page 1 
IN THE UNITED STATES DISTRICT COURT 
FOR THE NORTHERN DISTRICT OF TEXAS 
DALLAS DIVISION 
    
NETSPHERE, INC.,        §  Civil Action No. 3-09CV0988-F 
MANILA INDUSTRIES, INC., and    § 
MUNISH KRISHAN,       § 
  Plaintiffs.         § 
                        § 
    v.                     §   
                        § 
JEFFREY BARON, and      §   
ONDOVA LIMITED COMPANY,    § 
  Defendants.        § 
 
MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING 
WITHDRAWAL OF REFERENCE [DOC 118] TO CLARIFY RECORD 
FOR HEARING ON STAY PENDING APPEAL  & BRIEF IN SUPPORT 
 
TO THE HONORABLE ROYAL FURGESON, U.S. DISTRICT COURT JUDGE: 
   COMES  NOW,  Jeffrey  Baron,  Appellant,  and  respectfully  requests  this 
Court  to  clarify  the  record  of  proceedings  and  strike  the  Notice  of  Transmittal 
Regarding Withdrawal of Reference [DOC 118]. 
1. The report and recommendation attached by the bankruptcy court to the 
transmittal is not a report regarding withdrawal of reference.  
2. The bankruptcy court’s report was transmitted in violation of the Federal 
Rules  of  Bankruptcy  Procedure.  Bankruptcy  Rule  9033,  which  governs  the 
procedure for transmittal of reports and recommendations and mandatorily requires 
that the report shall be filed with relationship to proceedings which were heard by 
the bankruptcy Court.  The bankruptcy Court conducted no hearing on the subject 
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MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING WITHDRAWAL OF REFERENCE [DOC 
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of the report, and the filing of such report is accordingly not in conformity with the 
Bankruptcy Rules. 
3. The required  opportunity to object to the report was also circumvented.  
The Rules of Bankruptcy Procedure require that “The clerk shall serve forthwith 
copies  on  all  parties  by  mail  and  note  the  date  of  mailing  on  the  docket”  and 
“Within 14 days after being served with a copy of the proposed findings of fact and 
conclusions of law a party may serve and file with the clerk written objections which 
identify  the  specific  proposed  findings  or  conclusions  objected  to  and  state  the 
grounds for such objection.”   F.R.Bankr.P. 9033.  This procedure was not followed.   
Less than 14 days after the drafting of the report, the district court adopted the 
report, circumventing the statutory objection period. 
   4.  The  bankruptcy  court  lacked  subject  matter  jurisdiction  to  make  the 
report.    The  bankruptcy  court  erroneously  concluded  that  it  had  jurisdiction  to 
make the recommendation because “there could conceivably be an impact on the 
Ondova  bankruptcy  estate,  if  attorneys  who  represented  Jeffrey  Baron  and  his 
related  entities  go  unpaid  and  make  ‘substantial  contribution’  claims against  the 
bankruptcy  estate.”    Since  the  right  to  reimbursement  is  owned  primarily by the 
creditor and based on contribution to the estate, whether the attorney is paid or not 
is irrelevant to any conceivable impact on the bankruptcy estate.   
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If a creditor pays an attorney who provided the services creating a substantial 
contribution to the bankruptcy case, that creditor is entitled to file a claim and recover 
his expenses.  E.g., In re Energy Partners, Ltd., 422 BR 68 (Bankr.S.D.Tex. 2009).   
An example of this rule applied in by the Fifth Circuit Court of Appeals is Matter of 
DP Partners Ltd. Partnership, 106 F. 3d 667 (5th Cir. 1997).   
In DP Partners HFG  incurred $150,700  in attorney's  fees.  The Court held 
that “reasonable compensation for professional services rendered by an attorney or 
an accountant of an entity whose expense is allowable under paragraph (3) of this 
subsection”  and  that  “under  the  plain  language  of  the  statute,  if  HFG  meets  the 
requirements of section 503, it shall recover administrative expenses. This statutory 
mandate  permits  of  no  discretionary  calls  by  the  courts.”    Accordingly  the  Court 
held  HFG  was  “entitled  to  actual  and  necessary  expenses  incurred  in  making  a 
substantial  contribution  to  DP's  Chapter  11  reorganization,  including  reasonable 
professional fees.”  
So,  if  a  creditor  pays  attorney’s  fees  for  work  which  made  a  substantial 
contribution  to  the  bankruptcy  case,    the  creditor  is  entitled  to  file  a  claim  and 
receive reimbursement as was HFG in the DP Partners case.   
   If the same creditor does not pay the attorney, then the attorney is entitled to 
file a claim to receive the same reimbursement directly. E.g., In re Texaco, Inc., 90 
B.R. 622 (S.D.N.Y. 1988). 
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   Accordingly, there is no conceivable impact to the bankruptcy estate arising 
out of a creditor’s payment or non-payment of attorney’s fees and the bankruptcy 
court is without subject matter jurisdiction to issue recommendations regarding the 
subject—especially where  there  is no formal dispute or state litigation regarding 
the alleged claims. 
 
   FOR  THE  FOREGOING  REASONS,  Mr.  Baron  respectfully  requests  this 
Court  to  strike  the  Notice  of  Transmittal  Regarding  Withdrawal  of  Reference 
[DOC 118]. 
 
                          Respectfully submitted, 
 
                          /s/ Gary N. Schepps       
                          Gary N. Schepps 
                          State Bar No. 00791608 
                          Drawer 670804 
                          Dallas, Texas 75367 
                          (214) 210-5940 
                          (214) 347-4031 Facsimile 
                          APPELLATE COUNSEL FOR  
                          JEFFREY BARON 
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MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING WITHDRAWAL OF REFERENCE [DOC 
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CERTIFICATE OF SERVICE 
This  is  to  certify  that  this  was  served  on  all  parties  who  receive  notification  
through the Court’s electronic filing system. 
/s/ Gary N. Schepps       
                          Gary N. Schepps 
 
 
CERTIFICATE OF CONFERENCE 
This  is  to  certify  that  the  undersigned  called  conferred  with  Mr.  Raymond  J. 
Urbanik, attorney  for DANIEL  J.  SHERMAN, Trustee  for  ONDOVA LIMITED 
COMPANY, and they oppose. 
/s/ Gary N. Schepps       
                          Gary N. Schepps 
 
 
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