No. 11-10501
In the
United States Court of Appeals
for the Fifth Circuit
▬▬▬▬▬▬▬▬▬▬▬▬▬▬
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
▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Interlocutory Appeal of Orders
in Receivership on Appeal
▬▬▬▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
Hon. Judge William R. Furgeson Presiding
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
BRIEF FOR APPELLANTS NOVO POINT, L.L.C.,
QUANTEC, L.L.C., AND JEFFREY BARON
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
Case: 11-10501 Document: 00511625994 Page: 1 Date Filed: 10/06/2011
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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
▬▬▬▬▬▬▬▬▬▬▬▬▬
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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
▬▬▬▬▬▬▬▬▬▬▬▬▬
Appeal of Order Adding Non-Parties Novo Point, LLC
and Quantec, LLC as Receivership Parties
▬▬▬▬▬▬▬▬▬▬▬▬▬
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Cons. w/ No. 11-10289
NETSPHERE, INC., ET AL, Plaintiffs
v.
JEFFREY BARON, Defendant- Appellant
v.
DANIEL J SHERMAN, Appellee
▬▬▬▬▬▬▬▬▬▬▬
Interlocutory Appeal of Orders in Receivership on Appeal
▬▬▬▬▬▬▬▬▬▬▬
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Case: 11-10501 Document: 00511625994 Page: 2 Date Filed: 10/06/2011
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
----------------------------------------------------------------------------------------
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
▬▬▬▬▬▬▬▬▬▬▬▬▬▬
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
Hon. Judge William R. Furgeson Presiding
Case: 11-10501 Document: 00511625994 Page: 3 Date Filed: 10/06/2011
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 APPELLANTS
NOVO POINT, L.L.C.,
QUANTEC, L.L.C., and
JEFFREY BARON
Case: 11-10501 Document: 00511625994 Page: 4 Date Filed: 10/06/2011
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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: JEFFREY BARON
b. Defendant: DANIEL J. SHERMAN, Trustee
for ONDOVA LIMITED COMPANY
C. Intervenors: RASANSKY, JEFFREY H.
AND CHARLA G. ALDOUS
d. Intervenor: VeriSign, Inc.
e. Plaintiffs: (1) Netsphere Inc
(2) Manila Industries Inc
(3) MUNISH KRISHAN
F. APPELLANTS: (1) NOVO POINT, L.L.C.
(2) QUANTEC, L.L.C.
(3) JEFFREY BARON
(4) CARRINGTON, COLEMAN, SLOMAN &
BLUMENTHAL, L.L.P.
G. APPELLEES: (1) PETER S. VOGEL
(2) DANIEL J. SHERMAN
Case: 11-10501 Document: 00511625994 Page: 5 Date Filed: 10/06/2011
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2. ATTORNEYS
a. For Appellants Novo Point, LLC., Quantec, LLC., and Jeffrey
Baron:
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
d. For Intervenor VeriSign: Dorsey & Whitney (Delaware)
(1) Eric Lopez Schnabel, Esq.
(2) Robert W. Mallard, Esq.
d. For Intervenor Rasansky and Aldous:
Case: 11-10501 Document: 00511625994 Page: 6 Date Filed: 10/06/2011
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Aldous Law Firm
Charla G Aldous
f. 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
Case: 11-10501 Document: 00511625994 Page: 7 Date Filed: 10/06/2011
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(20) HCB, LLC, a Delaware limited liability company
(21) HCB, LLC, a U.S. Virgin Islands limited liability company
(22) Realty Investment Management, LLC, a Delaware limited
liability company
(23) Realty Investment Management, LLC, a U.S. Virgin
(24) Islands limited liability company
(25) Blue Horizon Limited Liability Company
(26) Simple Solutions, LLC
(27) Asiatrust Limited
(28) Southpac Trust Limited
(29) Stowe Protectors, Ltd.
(30) Royal Gable 3129 Trust
b. Receiver / Mediator / Special Master: Peter Vogel
c. Non-parties seeking money from the receivership res:
1. Garrey, Robert (Robert J. Garrey, P.C.)
2. Pronske and Patel
3. Carrington, Coleman, Sloman & Blumenthal, LLP
4. Aldous Law Firm (Charla G. Aldous)
5. Rasansky Law Firm (Rasansky, Jeffrey H.)
6. Schurig Jetel Beckett Tackett
7. Powers and Taylor (Taylor, Mark)
8. Gary G. Lyon
9. Dean Ferguson
10. Bickel & Brewer
11. Robert J. Garrey
12. Hohmann, Taube & Summers, LLP
13. Michael B. Nelson, Inc.
14. Mateer & Shaffer, LLP (Randy Schaffer)
15. Broome Law Firm, PLLC
16. Fee, Smith, Sharp & Vitullo, LLP (Vitullo, Anthony “Louie”)
17. Jones, Otjen & Davis (Jones, Steven)
18. Hitchcock Evert, LLP
19. David L. Pacione
20. Shaver Law Firm
21. James M. Eckels
Case: 11-10501 Document: 00511625994 Page: 8 Date Filed: 10/06/2011
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22. Joshua E. Cox
23. Friedman, Larry (Friedman & Feiger)
24. Pacione, David L.
25. Motley, Christy (Nace & Motley)
26. Shaver, Steven R. (Shaver & Ash)
27. Jeffrey Hall
28. Martin Thomas
29. Sidney B. Chesnin
30. Tom Jackson
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANTS
Case: 11-10501 Document: 00511625994 Page: 9 Date Filed: 10/06/2011
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STATEMENT REGARDING ORAL ARGUMENT
Appellants do not believe oral argument would be helpful in
determining the issues involved in this appeal. Dispositive issues in
this appeal raise questions of law involving established legal principles
that have been authoritatively decided, e.g., Griggs v. Provident
Consumer Discount Co., 459 U.S. 56, 58 (1982) (Filing of a notice of
appeal confers jurisdiction on the court of appeals and divests the
district court of its control over all aspects of the case involved in the
appeal); Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642
(1923) (Even where the court which appoints a receiver had jurisdiction
at the time, but loses it ... the first court cannot thereafter make an
allowance for the receiver’s expenses and compensation); Scott v. Neely,
140 U.S. 106, 109-110 (1891) (Seventh Amendment right to jury trial
cannot be dispensed with nor can it be impaired by blending with a
demand for equitable relief); and Bollore SA v. Import Warehouse, Inc.,
448 F.3d 317 (5th Cir. 2006) (Receivership cannot be used to adjudicate
alter ego claims).
Case: 11-10501 Document: 00511625994 Page: 10 Date Filed: 10/06/2011
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TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS ..........................................5
STATEMENT REGARDING ORAL ARGUMENT...................................10
TABLE OF CONTENTS...............................................................................11
TABLE OF AUTHORITIES.........................................................................15
STATEMENT OF THE JURISDICTION ..................................................21
ISSUES PRESENTED FOR REVIEW .......................................................22
STATEMENT OF THE CASE .....................................................................24
STATEMENT OF FACTS ............................................................................24
The “Claims” Solicited by the Receiver .................................................28
The 28 U.S.C. §144 Affidavit .................................................................38
The District Judge Refused to Review the Legal Sufficiency of
the Facts Stated in the Affidavit ...........................................................38
ARGUMENT SUMMARY.............................................................................40
ARGUMENT & AUTHORITY .....................................................................42
ISSUE 1: Does interlocutory appeal divest the trial court of
jurisdiction over the matter appealed ?.......................................................... 42
Standard of Review ................................................................................42
Appeal Divests the District Court of Jurisdiction Over the
Matter Appealed.....................................................................................42
The District Court was Divested of Jurisdiction over
Receivership Res.....................................................................................43
Policy Issue: The Right to Appellate Review of a Receivership
Order .......................................................................................................46
Case: 11-10501 Document: 00511625994 Page: 11 Date Filed: 10/06/2011
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ISSUE 2: Does Due Process require that a party be afforded the
opportunity to be heard on motions before substantive relief is
granted against that party ? ........................................................................... 47
Standard of Review ................................................................................47
Argument ................................................................................................47
ISSUE 3: In the absence of a statute, is a court authorized to use
receivership to provide a remedy for unsecured creditors’ in
personam claims against an individual before they have been
reduced to judgment ? ..................................................................................... 50
Standard of Review ................................................................................50
Argument Overview ...............................................................................50
The District Court’s Erroneous View of Equity Receivership..............51
Overview of Equity Receivership Power ...............................................52
Equity Receivership is Only Authorized as an Interlocutory,
Ancillary Remedy ...................................................................................52
Carrington-Coleman’s Erroneous Argument ........................................54
In Personam vs. In Rem Claims ............................................................56
Baron’s Unsecured Alleged Creditors Have No Right in the
Receivership Property ............................................................................58
Exercise of Receivership Power Must be Closely Scrutinized..............60
ISSUE 4: Did the District Court abuse its discretion, act outside of its
jurisdiction, or exceed its authority in ordering that Baron, an adult
citizen, must involuntarily compromise disputed claims against him ?............... 62
Standard of Review ................................................................................62
Subject Matter Jurisdiction ...................................................................62
Abuse of Discretion.................................................................................63
The Seventh Amendment ......................................................................65
Case: 11-10501 Document: 00511625994 Page: 12 Date Filed: 10/06/2011
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ISSUE 5: Did the District Court err in granting relief against
Baron and his property held in receivership while prohibiting
Baron (1) from being represented by paid counsel, (2) from hiring
experienced federal trial counsel, and (3) from hiring expert
witnesses to testify as to the necessity and reasonableness of the
fees claimed ?.................................................................................................... 68
Standard of Review ................................................................................68
Argument ................................................................................................68
ISSUE 6: Once an affidavit is filed pursuant to 28 U.S.C. §144, is
further activity of the Judge circumscribed to making a
determination as to the legal sufficiency of the facts stated in the
affidavit ? .......................................................................................................... 71
Standard of Review ................................................................................71
Argument ................................................................................................71
ISSUE 7: Where the same receiver was appointed over multiple
receivership parties and estates, did the District Court abuse its
discretion in awarding receivership fees and expenses (1) without a
showing or finding that the fees and expenses were reasonable or
necessary; (2) without regard to which of multiple receivership
estates the fees were allegedly incurred; and (3) where the receiver
was prohibited by law from being appointed as a receiver ?.......................... 73
Standard of Review ................................................................................73
Established Limitations on Receivership Fees.....................................73
No Evidence of Necessity or Reasonableness, and No
Segregation of Fees across Multiple Receivership Estates ..................75
Vogel Was Prohibited by Law from Being Appointed Receiver ...........76
ISSUE 8: Can a receivership be used as a vehicle to make third
parties liable as ‘reverse alter-egos’ of a party ?............................................ 78
Standard of Review ................................................................................78
Receivership May Not be Used to Determine an Alter Ego
Claim.......................................................................................................79
Case: 11-10501 Document: 00511625994 Page: 13 Date Filed: 10/06/2011
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Bollore SA v. Import Warehouse, Inc.....................................................79
If there had been a trial on Alter Ego, Novo Point and Quantec
would have prevailed as a matter of law...............................................80
Novo Point and Quantec Are Not Parties to the Lawsuit ....................82
Materially Missing Steps with Respect to the LLCs ............................82
ISSUE 9: Did the US District Court in the Northern District of
Texas have jurisdictional authority to appoint the manager of a
LLC in the Cook Islands ?............................................................................... 84
Standard of Review ................................................................................84
Argument ................................................................................................84
PRAYER .........................................................................................................87
CERTIFICATE OF COMPLIANCE ...........................................................88
CERTIFICATE OF SERVICE.....................................................................89
Case: 11-10501 Document: 00511625994 Page: 14 Date Filed: 10/06/2011
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TABLE OF AUTHORITIES
F
EDERAL CASES
Alberto v. Diversified Group, Inc., 55 F.3d 201, 203 (5th Cir. 1995) .....81
Alemite Mfg. Corporation v. Staff, 42 F.2d 832 (2nd Cir.1930) .............82
Armstrong v. Manzo, 380 U.S. 545, 552 (1965).......................................47
Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316
(8th Cir. 1993)........................................................................................78
Bank of Commerce & Trust Co. v. Hood, 65 F.2d 281, 283-284
(5th Cir. 1933)........................................................................................74
Bollore SA v. Import Warehouse, Inc., 448 F.3d 317
(5th Cir. 2006)................................................................10, 41, 79, 80, 83
Booth v. Clark, 58 U.S. 322, 331 (1855) ............................................57, 85
Castillo v. Cameron County, Texas, 238 F.3d 339, 347
(5th Cir. 2001)........................................................................................62
Chandler v. Fretag, 348 U.S. 3, 10 (1954) ...............................................70
Coastal Corp. v. Texas Eastern Corp., 869 F.2d 817, 820
(5th Cir. 1989)........................................................................................43
Cochrane v. WF Potts Son & Co., 47 F.2d 1026, 1028
(5th Cir. 1931)........................................................................................63
Consolidated Rail Corp. v. Fore River Ry. Co., 861 F.2d 322, 326-27
(1st Cir. 1988) ........................................................................................78
Case: 11-10501 Document: 00511625994 Page: 15 Date Filed: 10/06/2011
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Davis v. Board of School Com'rs of Mobile County, 517 F.2d 1044, 1051
(5th Cir. 1975)........................................................................................71
Dayton Indep. School Dist. v. US Mineral Prods. Co., 906 F.2d 1059,
1065 (5th Cir. 1990).........................................................................42, 46
Desarrollo, SA v. Alliance Bond Fund, Inc.,
527 U.S. 308, 310 (1999) .......................................................................56
Devlin v. Scardelletti, 536 U.S. 1 (2002) .................................................76
District Court, Santibanez v. Wier McMahon & Co., 105 F.3d 234, 241
(5th Cir. 1997)........................................................................................51
Finn v. Childs Co., 181 F.2d 431, 436 (2nd Cir. 1950)............................74
Forex Asset (and US v. Durham, 86 F.3d 70 (5th Cir. 1996) .................55
Forgay v. Conrad, 47 U.S. 201, 204-205 (1848).......................................53
Freedman's Sav. & Trust Co. v. Earle, 110 U.S. 710, 718 (1884) ..........51
Gordon v. Washington, 295 U.S. 30, 37 (1935) .......................................53
Goss v. Lopez, 419 U.S. 565, 579 (1975)..................................................47
Great-West Life & Annuity Ins. Co. v. Knudson,
534 U.S. 204 , 213-214 (2002) ...............................................................55
Griffin v. Lee, 621 F.3d 380, 388 (5th Cir. 2010) ....................................63
Griggs v. Provident Consumer Discount Co.,
459 U.S. 56, 58 (1982) ...............................................................10, 40, 42
Case: 11-10501 Document: 00511625994 Page: 16 Date Filed: 10/06/2011
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Guaranty Trust Co. of New York v. Fentress, 61 F. 2d 329, 332
(7th Cir.1932).........................................................................................85
Guaranty Trust Co. v. York, 326 U.S. 99, 105 (1945).............................67
Hartford Life Ins. Co. v. IBS, 237 U.S. 662, 671 (1915) .........................85
Hawthorne Savings v. Reliance Ins. Co., 421 F.3d 835, 855
(9th Cir. 2005)........................................................................................57
In re Imperial ‘‘400’’ ""National, Inc., 432 F.2d 232, 237
(3rd Cir. 1970)........................................................................................74
In re Volkswagen of America, Inc., 545 F.3d 304, 310
(5th Cir. 2008)........................................................................................64
International Transactions v. Embotelladora Agral, 347 F.3d 589, 596
(5th Cir. 2003)........................................................................................48
Johnson v. City of Cincinnati, 310 F.3d 484, 501 (6th Cir. 2002) ..........69
Joint Anti-Fascist Refugee Comm. v. McGrath,
341 U.S. 123, 161 (1951) .......................................................................48
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941).............81
Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642 (1923) .....10, 44
Liverpool & C. Ins. Co. v. Orleans Assessors,
221 U.S. 346, 354 (1911) .......................................................................57
Logan v. Zimmerman Brush Co., 455 U.S. 422, 429-430 (1982) ............47
Case: 11-10501 Document: 00511625994 Page: 17 Date Filed: 10/06/2011
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Marbury v. Madison, 1 Cranch 137, 173-180 (1803)...............................63
McClure v. Ashcroft, 335 F.3d 404, 408 (5th Cir. 2003) .........................64
Meyerson v. Council Bluffs Sav. Bank, 824 F. Supp. 173, 177
(S.D. Iowa 1991) ....................................................................................58
Mitchell v. Maurer, 293 U.S. 237, 244 (1934) ........................................62
Morris v. Jones, 329 U.S. 545, 549 (1947) ...............................................60
Mosley v. St. Louis Southwestern Ry., 634 F.2d 942, 946 (5th Cir. 1981)
..........................................................................................................69, 70
Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co.,
484 U.S. 97, 104 (1987) .........................................................................85
Ortiz v. Fibreboard Corp., 527 U.S. 815, 846 (1999)...............................66
Palmer v. Texas, 212 U.S. 118, 126 (1909)..............................................43
Parrish v. Board of Com'rs of Alabama State Bar, 524 F.2d 98, 100
(5th Cir. 1975)..................................................................................40, 72
Pennoyer v. Neff, 95 US 714, 737 (1878).................................................47
Potashnick v. Port City Const. Co., 609 F.2d 1101, 1104
(5th Cir. 1980)..................................................................................69, 70
Powell v. Alabama, 287 U.S. 45, 53-69 (1932) ..................................69, 70
Prima Tek II LLC v. Polypap, SaRL, 318 F. 3d 1143 (Fed. Cir. 2003) ..84
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Pusey & Jones Co. v. Hanssen, 261 U.S. 491 (1923)
..................................................................................53, 54, 58, 59, 61, 79
Rosen v. Siegel, 106 F.3d 28, 34 (2d Cir. 1997).......................................78
Ross v. Bernhard, 396 U.S. 531, 531 (1970)............................................58
Scott v. Neely, 140 U.S. 106, 109-110 (1891) ..............................10, 40, 66
Sec. & Exch. Comm'n v. Forex Asset Mgmt. LLC, 242 F.3d 325, 331
(5th Cir. 2001)........................................................................................54
Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 362 (2006)
................................................................................................................55
Solis v. Matheson, 563 F.3d 425, 437 (9th Cir. 2009) .............................78
Sommers Drug Stores Co. Emp. P. Sharing Trust v. Corrigan, 883 F.2d
345, 353 (5th Cir. 1989).........................................................................81
St. Clair v. Cox, 106 U.S. 350, 353 (1882) ...............................................85
Stuart v. Boulware, 133 U.S. 78, 82 (1890).............................................74
Sumrall v. Moody, 620 F.2d 548, 550 (5th Cir. 1980) .............................57
Taylor v. Sterrett, 640 F.2d 663, 668 (5th Cir. 1981) .............................44
Tucker v. Baker, 214 F.2d 627, 631 (5th Cir. 1954)..........................60, 78
United States v. Arizona Fuels Corp., 739 F.2d 455, 459 (9th Cir. 1984)
................................................................................................................53
United States v. Cauble, 706 F.2d 1322, 1347 (5th Cir. 1983)...............60
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US v. Wallach, 935 F.2d 445, 462 (2nd Cir. 1991) ..................................59
Wabash R. Co. v. Adelbert College of Western Reserve Univ., 208 U.S.
38, 46 (1908)...........................................................................................44
Williams Holding Co. v. Pennell, 86 F.2d 230 (5th Cir. 1936) ...............59
Williams v. McKeithen, 939 F.2d 1100, 1105 (5th Cir. 1991) ................69
Williamson v. Berry, 49 U.S. 495, 536 (1850) .........................................62
S
TATE CASES
Horton v. Ferrell, 335 Ark. 366, 981 S.W.2d 88 (1998) ..........................76
F
EDERAL STATUTES
28 U.S.C. §§1292(a)(1)..............................................................................21
28 U.S.C. §455 ..........................................................................................78
28 U.S.C. §958 ..........................................................................................77
U.S. Const. amend. VII ............................................................................65
FEDERAL RULES
FED. R. APP. P. 32(a)(5) ..........................................................................88
FED. R. APP. P. 32(a)(6) ..........................................................................88
FED. R. APP. P. 32(a)(7)(B) .....................................................................88
Fed.R.Civ.P. 53(b)(3) ................................................................................78
Fed.R.Civ.P. 82 .........................................................................................63
N.D. Tex. L.R. 7.1(e) .................................................................................48
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STATEMENT OF THE JURISDICTION
The Fifth Circuit Court of Appeals has jurisdiction to hear this
interlocutory appeal from the orders of the District Court of the
Northern District of Texas: (1) appointing a receiver, (2) taking steps to
accomplish the purposes of a receivership, including denying Jeff Baron
the ability to hire counsel, (3) directing the sale of receivership assets,
and (4) ordering the disposal and disbursement of receivership property;
pursuant to 28 U.S.C. §§1292(a)(1) and (2).
The District Court lacked jurisdiction to enter the orders
challenged on appeal because: (1) the District Court was divested of
jurisdiction over the matter when it was appealed to the Fifth Circuit
Court of Appeals; (2) the District Court lacks subject matter jurisdiction
both over Baron’s assets and over the unpleaded, non-diverse state law
claims against Baron, and (3) the District Court lacks personal
jurisdiction over the multitude of new parties ordered into receivership
without service of process or hearing.
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ISSUES PRESENTED FOR REVIEW
ISSUE 1: Does interlocutory appeal divest the trial court of
jurisdiction over the matter appealed ?
ISSUE 2: Does Due Process require that a party be afforded the
opportunity to be heard on motions before substantive relief is
granted against that party ?
ISSUE 3: In the absence of a statute, is a court authorized to use
receivership to provide a remedy for unsecured creditors’ in
personam claims against an individual before they have been
reduced to judgment ?
ISSUE 4: Did the District Court abuse its discretion, act outside of its
jurisdiction, or exceed its authority in ordering that Baron, an adult
citizen, must involuntarily compromise disputed claims against him ?
ISSUE 5: Did the District Court err in granting relief against
Baron and his property held in receivership while prohibiting
Baron (1) from being represented by paid counsel, (2) from hiring
experienced federal trial counsel, and (3) from hiring expert
witnesses to testify as to the necessity and reasonableness of the
fees claimed ?
ISSUE 6: Once an affidavit is filed pursuant to 28 U.S.C. §144, is
further activity of the Judge circumscribed to making a
determination as to the legal sufficiency of the facts stated in the
affidavit ?
ISSUE 7: Where the same receiver was appointed over multiple
receivership parties and estates, did the District Court abuse its
discretion in awarding receivership fees and expenses (1) without a
showing or finding that the fees and expenses were reasonable or
necessary; (2) without regard to which of multiple receivership
estates the fees were allegedly incurred; and (3) where the receiver
was prohibited by law from being appointed as a receiver ?
ISSUE 8: Can a receivership be used as a vehicle to make third
parties liable as ‘reverse alter-egos’ of a party ?
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ISSUE 9: Did the US District Court in the Northern District of
Texas have jurisdictional authority to appoint the manager of a
LLC in the Cook Islands ?
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STATEMENT OF THE CASE
This is an interlocutory appeal from orders entered by the District
Court exercising control of a receivership while the matter is on appeal
to the Fifth Circuit.
STATEMENT OF FACTS
One defendant below, Ondova (through Sherman, the chapter 11
trustee who now controls it) filed a motion for the District Court to seize
all of the assets of another defendant, Jeffrey Baron, in order to prevent
Baron from hiring an attorney.
1
Sherman falsely made it look like the
bankruptcy judge desired a receiver over Baron if he hired any
lawyers.
2
The District Judge granted Sherman’s motion ex parte and
later explained: “[T]he receivership is an effort to stop the parade of
lawyers trying to wiggle out of lawful injunctions from judicial officers.
Yes, sir.”
3
1
R. 1578 (paragraph 13, “the appointment of a receiver is necessary under the
circumstances in order to remove Baron from control of his assets and end his
ability to further hire and fire a growing army of attorneys.” ), 1619-1632. One
reason cited by Sherman in his motion was that three business days before, Baron
had hired an attorney to assist in objecting to Sherman’s Attorney’s fee application
in the bankruptcy court where Baron is a creditor. 1576-1577.
2
R. 1576.
3
R. 4593-4594.
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The original purpose of the ex parte receivership was clear: Jeff
Baron was warned that he was “prohibited from retaining any
legal counsel” and that if he did “the Receiver may move the
Court to find you in contempt”.
4
To enforce compliance and to stop
Jeff from having any money to hire a lawyer, all
of his assets (including
his exempt property) were seized
5
, as were all of his future earnings
6
.
Jeff was ordered not to cash any checks
7
or enter into any business
transactions
8
. Jeff Baron has been this “civil lockdown” since the day
the challenged order was issued ex parte in November 2010. Baron has
been forced to live off a monthly sustenance stipend disbursed to him by
the receiver. Under the express threat of contempt, Jeff Baron has been
permitted to purchase only
“local transportation, meals, home utilities,
medical care and medicine.”
9
4
SR. v8 p1213.
5
R. 1620.
6
R. 1622 paragraph F.
7
R. 1620, 1621 paragraph C.
8
R. 1620, 1622, 1627 paragraph A.
9
SR. v8 p1213.
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When the receivership was imposed, Baron immediately turned
over his personal documents and files requested by the receiver.
10
Baron’s estate consists essentially of some savings accounts and some
Roth IRAs.
11
Accordingly, the receiver was not left with very much to
do. Baron appealed the receivership order on Dec. 2, 2010.
12
The receiver
then moved to add a multitude of companies into his
receivership (without lawsuits, service, evidence, or the normally
expected process of law).
13
Those companies include:
1. NovoPoint, LLC.
2. Quantec, LLC.
3. Iguana Consulting, LLC.
4. Diamond Key, LLC.
5. Quasar Services, LLC
6. Javelina, LLC.
7. HCB, LLC, a Delaware limited liability company.
8. HCB, LLC, a USVI company.
9. Realty Investment Management, LLC.- Deleware.
10. Realty Investment Management, LLC – USVI.
11. Blue Horizon, LLC.
12. Simple Solutions, LLC.
13. Asiatrust Limited.
14. Southpac Trust Limited.
15. Stowe Protectors, Ltd.
16. Royal Gable 3129 Trust.
10
R. 3891.
11
SR. v8 p1007.
12
R. 1699-1700.
13
R. 1717, 3952; SR. v1 p40, and sealed record Doc 609; SR. v2 pp365,405.
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17. CDM Services, LLC
18. URDMC, LLC.
The District Judge made no findings in entering the original
November 2010, ex parte receivership order against Baron and an
initial set of companies. R. 1619-1632. Months later, in February 2011
the District Court entered findings in denying Baron’s
Fed.R.App.P. 8(a) motion for relief pending appeal. The post-appeal
explanation in the Fed.R.App.P. 8(a) findings is essentially as follows:
The District Court believes Baron was a vexatious litigant (although
never appearing pro se and never sanctioned) who owed money in
undetermined amounts to his former attorneys, and therefore should be
denied the ability to hire an experienced trial lawyer to defend himself,
and should be stripped of his possessions without trial “so that justice is
done”. SR v2 p358.
While this matter has been on appeal, the District Court has
distributed essentially all of Baron’s savings account balances to the
receiver and his law firm.
14
The amount is staggering— almost a
14
Around $400,000 in a stock portfolio, and IRAs remain, but the stocks are
currently subject to a motion by the receiver to liquidate to pay additional fees, and
the receiver did not pay 2010 taxes.
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million dollars. SR. v8 p990-992.
The “Claims” Solicited by the Receiver
In addition to the receiver (and his firm’s) personal fees, the
receiver solicited claims (SR. v8 p1242-43) against Baron by former
attorneys of the receivership entities and presented the “claims” to the
District court in a one-sided ‘report’ that intentionally excluded
all of the exculpatory evidence. SR. v7 p202. Baron moved the
District Court for the opportunity to:
(1) retain experienced Federal trial counsel to defend the ‘claims’;
(2) the opportunity to conduct discovery with respect to the
claims; and
(3) the opportunity to retain an expert witness with respect to the
reasonableness of the alleged fees.
SR. v5 p139 [Doc 445].
However, the District Court did not grant Baron any of the
requested relief, and instead sealed
from the public view Baron’s
motion, objections, and response to the one-sided receiver’s ‘report’. SR.
v7 p379; and see Doc 458 (itself also sealed). Baron then filed a detailed
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briefing rebutting the alleged claims (SR. v5 p1313 [Doc 577]). The
District Court sealed that too. SR. v7 p379. Baron had also filed
additional evidence. SR. v5 p1369 [Doc 507]; SR. v6 p70 [Doc 523]. The
evidence was rejected by the District Court. SR. v6 pp116, 124. The
receiver’s initial motion for ‘approval’ of the claims against Baron was
denied by the District Court. SR. v6 p94 [Doc 527]. The receiver then
filed a new
motion seeking approval of the ‘former attorney’ alleged
claims against Baron. SR. v7 p194. Five business days later, the
District Court granted the new motion (ignoring the defensive evidence
previously filed by Baron), and before Baron was able to file a response
to the new motion. SR. v7 p349. Notably, although Baron had
previously directed the District Court’s attention to evidence refuting
the fee allegations made by claimants, the District Court did “not
question the evidence presented by the Receiver”. SR. v6 p94. The
issues involving the unpleaded ‘claims’ awarded
15
(in the total sum of
$870,237.19) by the District Court against Baron include, for example,
15
The District Court did not evaluate the claims per se but decided that the claims
would “likely” be successful if tried, ordered Baron to settle with the claimants in
the amount set by the District Judge, and authorized the receiver to pay the claims
out of any of the receivership estates. SR. v7 p349.
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the following:
16
1. Mr. Broome ‘claimed’ more than the $10,000.00 per-month
capped fee he was paid by Baron. ‘Exhibits 4-5b’ referenced
at SR. v7 p363.
17
Broome’s argument is that Mr. Baron paid
him based on a $10,000.00 monthly fee cap but his contract
did not
contain any term limiting the amount of fees that
may be incurred in any month. SR. v5 pp426, 427. However,
Broome’s contract (submitted by Broome) clearly contains (in
writing) an explicit and unambiguous provision limiting the
amount of fees that may be incurred to $10,000.00 per
month. There is no ambiguity. Broome’s contract expressly
states a capped monthly fee limit setting the maximum
amount of fees that could be “incurred”, and expressly
16
The nine “claims” discussed below constitute approximately 80% of the total
dollar amount in “claims” presented. The factual underpinnings of the remaining 16
“claims” are similar to the nine discussed below. However, a full factual discussion
of each of the remaining claims would exceed briefing length limitations. See
‘Exhibits’ referenced at SR. v7 p362-369. Notably, the District Court made no
specific factual findings with respect to any individual “claim”. SR. v7 p349.
17
The attorney’s allegations were filed as sealed documents, and the Appellants’
motion for access to the sealed portions of the record on appeal was denied by the
appellate motion panel. Accordingly, Appellants are unable to provide more
detailed citation to the record with respect to the ‘claim’ allegation documentation,
(hereinafter referenced as ‘Exhibit __’).
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requires formal written authorization to exceed the capped
amount. SR. v8 p1212 (and see SR. v7 p379). No written
authorization to exceed the monthly fee cap was alleged in
Broome’s “claim”, and no written authorization to exceed the
agreed upon monthly cap has been produced by Broome.
Rather, Broome falsely swore that his contract did not
contain any provision to limit the amount of fees that could
be incurred monthly. SR. v5 pp426-427.
2. Ms. Crandall ‘claimed’ fees based on her allegation that she
had a written contract (which she could not produce) at an
hourly fee of $300/hour. ‘Exhibit 16’ referenced at SR. v7
p364. However, per Crandall’s own invoice, Crandall billed
(and was paid), at a flat
monthly fee. SR. v6 p77; SR. v6 p70-
76. There is no ambiguity. Crandall’s invoice (which was
paid) clearly states that “60.1” hours of work were performed
and the “Flat Rate” due was $5,000.00. SR. v6 p77.
3. Mr. Pronske was paid $75,000.00 up front for his work in the
bankruptcy court, and later alleged that the $75,000.00 was
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just an initial retainer. ‘Exhibit 24’ referenced at SR. v7
p365. Pronske demanded an additional fee of $241,912.70.
Id. However, Pronske admitted that “There are no
engagement agreements relating to the representation” and
for almost a year after receiving the $75,000.00 fee and
working on the case, Pronske sent no contract, no
engagement letter, no bill, no invoice, no demand for
payment, and no hourly work report alleging that the flat fee
payment was actually a ‘retainer’. SR. v8 p1218 and ‘Exhibit
24’. Also, the only
“invoices relating to the Representation”
(which Pronske alleges ended in July 2010), were printed up
in February 2011, after the claims were solicited by the
receiver, and some seven months after Pronske’s
representation ended. Id.
4. Mr. Ferguson’s ‘claim’ sought more than the $22,000.00
capped fee he agreed to in writing and that was paid. SR. v8
p1220. Ferguson offered several conflicting factual scenarios,
the latest being that he is allowed to violate his engagement
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agreement and charge more than the agreed upon (and paid
in full) capped fee because he was ‘defrauded’. Id. Ferguson
alleged that Baron ‘fraudulently’ represented that the money
would be paid from his million dollar trust and not from his
pocket personally because he was personally “destitute”
(according to Ferguson). Id. It is, however, undisputed that
the trust’s money is just as green and in US Dollars, just the
same as if it had come from Baron’s pocket, and Ferguson
was paid the agreed upon fee. Notably, in his original sworn
testimony before the District Court at a Fed.R.App.P. 8(a)
hearing, Ferguson offered a different story. R. 4443, 4445.
At the FRAP 8(a) hearing, to explain the additional fee
‘claimed’ in light of the agreed fee at which Ferguson was
paid, Ferguson claimed the agreed fee was only to August 21
and based on a 33% time demand. Id. In his new ‘claim’
Ferguson tells a new story to avoid the written
agreed upon
fee cap. Ferguson’s new story contradicts his original
version and now admits that the cap did apply through
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August 31, and with full time work contemplated (as is
stated in Ferguson’s written agreement), but should not
apply since Ferguson claims Baron ‘fraudulently’
represented the money (which was paid in full) was coming
from Baron’s million dollar trust. SR. v8 p1220.
5. Mr. Lyon submitted a ‘claim’ for more than the $40/hour fee
he charged and was paid. His argument is that his fee was
really $300/hour (and around $260/hour is due him),
although he could not produce his written contract. ‘Exhibit
19’ referenced at SR. v7 p361. However, Lyon’s own email
(distributed to other attorneys) states his rate was the
$40/hour rate he was paid. SR. v5 p1376. In this undisputed
evidence, Lyon bragged– in writing– that his rate of
$40/hour gave Baron ‘more bang for the buck’ so that Lyon
should be given more work to do. Id.
6. Mr. Taylor submitted a ‘claim’ for additional fees beyond the
money he was paid (in full) pursuant to the $10,000.00 per
month fee cap expressly called for in his written contract.
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‘Exhibit 18’ referenced at SR. v7 p365. Unlike Broome,
Taylor did not deny his fees were capped at $10,000/month
(as stated in his written contract). Instead, Mr. Taylor
claims entitlement to a contingency fee even though the
contingency provided for in his contract was not met. Id.
When the case settled at a substantial loss, Taylor made no
claim that the contingency in his contract was met, and
made no disclosure of any contingency amount which would
be due; rather, Taylor confirmed in writing
that only a very
small (hourly) fee would be billed. SR. v5 pp1370, 1380.
Subsequently, Taylor decided he wanted a contingency fee
payment after all, and asked for $42,000.00. SR. v5 p 1378.
The District Court, although no suit was filed in the District
Court, and with no explanation of how the ‘contingency’
amount had been calculated, awarded Taylor $78,058.50.
SR. v7 p365.
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7. Ms. Schurig submitted a ‘claim’ for more than the million
dollar fee she has been paid. Her ‘claim’ was for work
performed– without any contract– for a company neither
owned nor managed by Baron—AsiaTrust. SR. v8 p1223.
Schurig does not allege that Baron ever agreed or undertook
to pay the debts of AsiaTrust, yet the District Court awarded
her $93,731.79 “claim” for unpaid fees. Id.; SR. v7 p364.
8. Bickel-Brewer submitted a ‘claim’ for more than the
$200,000.00+ fee it was paid nearly half a decade ago. The
current amount claimed due is around $40,000.00– the
amount of the work billed by Bickel-Brewer, without
explanation, for fees preceding
its representation of Baron
plus additional fees for seeking payment of the claimed fees.
Bickel-Brewer’s contract does not call for payment of any
pre-engagement work, and there is no explanation of what
the work was for, or why Baron is in any way liable to pay it.
SR. v8 pp1224-1235; ‘Exhibit 20’ referenced at SR. v7 p365.
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9. Mr. Garrey submitted a ‘claim’ for two weeks work. Garrey
originally demanded a million dollar fee for that alleged
work. SR. v4 p104. Recently, Mr. Garrey has lowed his
million dollar ‘claim’ to a $52,275.00 “claim” for the alleged
two weeks work. ‘Exhibit BLANK’ referenced at SR. v7 p361.
Garrey, however, has admitted that he agreed in writing to a
fixed rate employment at $8,500.00 per month, for the period
covering the two weeks he claims to have worked. Id. In his
“claim” Garrey notably alleges that he expended a
significant amount of time in representing Baron in part
because he was “asked to object to the fee requests of the
Receiver’s counsel, and I was asked to devise a strategy to
remove the Receiver and the Receiver’s counsel.” SR. v8
p1217. Garrey, however, admitted that his alleged two week
representation ended on November 16, 2010, well before
the
application for the appointment of a receiver had been made.
Id.
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The 28 U.S.C. §144 Affidavit
On or about April 27, 2011, the District Judge issued sealed
findings that statements made about an attorney in filings were
‘unfounded’. Doc 458 (under seal). No hearing was held and no briefing
was submitted on the issue. Accordingly, it appeared that the District
Judge had no basis other than bias to make such findings. In light of
the foregoing, after a careful review of a series of actions and
statements by the District Judge, counsel for Baron came to believe that
there was a good faith basis to conclude that due to the District Judge’s
personal bent of mind (developed well before the filing of the District
Court lawsuit), Baron could not receive fair and impartial treatment.
Doc 497 filed 4/27/11 (ordered under seal). Baron then submitted an
affidavit pursuant to 28 U.S.C. §144, certified to by counsel. Id.
The District Judge Refused to Review the Legal
Sufficiency of the Facts Stated in the Affidavit
The District Judge refused to review the legal sufficiency of the
facts stated in Baron’s §144 affidavit, and ruled that Baron could not
submit an affidavit that made factual allegations, but must instead
submit an affidavit that cited specific portions of the court record. SR.
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v5 p1470. The District Court also sealed Baron’s affidavit so that it was
hidden from the public. Id. Baron filed a supplemental affidavit that
added quotations from the record, including the quoted text and the
hearing date, and removed the ‘sealed’ facts from the affidavit. Doc.
521 (also ordered under seal). The District Judge then struck and
placed that affidavit under seal on the grounds that the affidavit “failed
to give citation to the record as to every statement by the Court”. SR.
v6 p122. The District Judge ordered that any supplemental affidavit
could not contain any off-the-record statements made by the District
Judge, and must be confined to statements the Judge made on the
record. Id.
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ARGUMENT SUMMARY
This appeal presents core issues that have been authoritatively
decided, as follows:
(1) The District Court below lacked jurisdiction to issue the orders
challenged in this appeal. Griggs v. Provident Consumer
Discount Co., 459 U.S. 56, 58 (1982) (filing of a notice of appeal
confers jurisdiction on the court of appeals and divests the
district court of its control over the aspects of the case involved
in the appeal).
(2) The District Court should have ceased all action in the case until
the legal sufficiency of the factual allegations made in Baron’s
§144 affidavit had been ruled on. Parrish v. Board of Com'rs of
Alabama State Bar, 524 F.2d 98, 100 (5th Cir. 1975).
(3) The District Court erred in holding that it could appoint a
receiver over an individual and thereby waive the individual’s
Constitutional right to trial by jury. Scott v. Neely, 140 U.S. 106,
109-110 (1891) (Seventh Amendment right to jury trial cannot be
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dispensed with nor can it be impaired by blending with a
demand for equitable relief).
(4) The District Court erred in attempting to use receivership to
adjudicate alter ego claims. Bollore SA v. Import Warehouse,
Inc., 448 F.3d 317 (5th Cir. 2006) (receivership cannot be used to
adjudicate alter ego claims).
Additionally, there was a breakdown of the basic protections of
Due Process in the proceedings below, with the District Court:
(1) issuing orders against non-parties upon whom no service
was made and over whom the District Court lacked
personal jurisdiction;
(2) issuing orders without allowing the opportunity
mandated by the rules to respond to the motions seeking
substantive relief; and
(3) refusing to allow Baron to be represented by (1) paid
counsel and (2) an experienced Federal trial lawyer.
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ARGUMENT & AUTHORITY
ISSUE 1: DOES INTERLOCUTORY APPEAL DIVEST THE
TRIAL COURT OF JURISDICTION OVER THE MATTER
APPEALED ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Appeal Divests the District Court of Jurisdiction Over
the Matter Appealed
Jeffrey Baron filed a notice of appeal from the receivership order
on December 2, 2010. R. 1699. The filing of a notice of appeal is an
event of jurisdictional significance– it confers jurisdiction on the court of
appeals and divests the district court of its control over those aspects of
the case involved in the appeal. Griggs v. Provident Consumer Discount
Co., 459 U.S. 56, 58 (1982). The divesture of jurisdiction of the trial
court involves all those aspects of the case appealed. Id. As a matter of
established law, the district court loses jurisdiction over all matters
which are validly on appeal. Dayton Indep. School Dist. v. US Mineral
Prods. Co., 906 F.2d 1059, 1065 (5th Cir. 1990) (“rule which we follow
rigorously”). The sole authority of a district court with respect to a
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matter on interlocutory appeal is to maintain the status quo of the case
as it rests before the court of appeals. E.g., Coastal Corp. v. Texas
Eastern Corp., 869 F.2d 817, 820 (5th Cir. 1989); Dayton at 1063.
The District Court was Divested of Jurisdiction over
Receivership Res
As a long-established principle of law, the effect of an appeal of a
receivership is that the appellate
court is vested with jurisdiction over
the receivership res. E.g., Palmer v. Texas, 212 U.S. 118, 126 (1909).
The Supreme Court held in Palmer “[T]he effect of the appeal was
simply ... that the appellate court still had jurisdiction over the
res the same as the trial court had”. Id. The Supreme Court
explained this rule in Palmer, holding:
“If a court of competent jurisdiction, Federal or state, has
... obtained jurisdiction over the same, such property is
withdrawn from the jurisdiction of the courts of the other
authority as effectually as if the property had been
entirely removed to the territory of another sovereignty.”
Id. at 125.
Similarly, as a long-established rule of law, “Even where the court
which appoints a receiver had jurisdiction at the time, but loses it ... the
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first court cannot thereafter make an allowance for his expenses and
compensation”. Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642
(1923). Once the matter was placed before the Court of Appeals, the
property was in the possession of the Court of Appeals, and “[T]hat
possession carried with it the exclusive jurisdiction to determine all
judicial questions concerning the property.” Wabash R. Co. v. Adelbert
College of Western Reserve Univ., 208 U.S. 38, 46 (1908). As an
established principle of law and comity, two courts should not attempt
to assert jurisdiction over the same matter simultaneously. Griggs at
58; Dayton at 1063.
While the matter is on appeal, the district court is divested of
authority over the matter on appeal, and has no jurisdiction award fees
for the matter while it is on appeal. E.g., Taylor v. Sterrett, 640 F.2d
663, 668 (5th Cir. 1981) (“[T]he District Court was divested of
jurisdiction only as to matters relating to the April 27 and May 12
orders and subsequent orders and, for that reason, fees cannot be
recovered for work relating to these orders.”).
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Accordingly, the District Court was without authority to disburse
hundreds of thousands of dollars from the receivership res awarded as
‘fees’, and the following orders should therefore be reversed: Doc 533
(SR. v6 p103), Doc 532 (SR. v6 p101), Doc 535 (SR. v6 p107), Doc 574
(SR. v7 p348), Doc 529 (SR. v6 p98), Doc 462 (SR. v5 p230), Doc 573
(SR. v7 p347), Doc 530 (SR. v6 p99), Doc 461 (SR. v5 p229), Doc 464
(SR. v5 p232), Doc 539 (SR. v6 p113), Doc 543 (SR. v6 p118), Doc 536
(SR. v6 p109), Doc 473 (SR. v5 p412), Doc 463 (SR. v5 p231), Doc 542
(SR. v6 p117), Doc 537 (SR. v6 p110), Doc 538 (SR. v6 p111), Doc 531
(SR. v6 p100), and Doc 540 (SR. v6 p114). Similarly the District Court
was without authority to authorize the liquidation of receivership assets
or to approve assessments against those assets and Doc 575 (SR. v7
p349) should therefore be reversed. Finally, the District Court was also
without authority to approve the propriety of the receiver’s actions with
respect to the receivership res, and accordingly, Doc 459 (SR. v5 p227)
should also be reversed.
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Policy Issue: The Right to Appellate Review of a
Receivership Order
The validity of the receivership order should be resolved on appeal
before
the District Court should be allowed to distribute and disburse
the property of a party that was seized by the District Court’s
receivership order. Otherwise, the District Court can effectively bypass
review by the Court of Appeals by distribution of the receivership res
before the validity of the receivership has been resolved on appeal. A
district court should not be allowed to moot a matter pending before the
Court of Appeals. Dayton, 906 F.2d at 1063. Accordingly, the challenged
orders listed above should be reversed.
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ISSUE 2: DOES DUE PROCESS REQUIRE THAT A PARTY BE
AFFORDED THE OPPORTUNITY TO BE HEARD ON MOTIONS
BEFORE SUBSTANTIVE RELIEF IS GRANTED AGAINST THAT
PARTY ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Argument
As a matter of established law, failure to afford a party the
opportunity to be heard on a motion seeking substantive relief against
them is fundamentally inconsistent with the notion of due process and
orders issued without such an opportunity are void. E.g. Armstrong v.
Manzo, 380 U.S. 545, 552 (1965) (restored the petitioner to the position
he would have occupied had due process of law [the opportunity to be
heard] been accorded to him in the first place); Pennoyer v. Neff, 95 US
714, 737 (1878) (“void as not being by due process of law”); Goss v.
Lopez, 419 U.S. 565, 579 (1975) (“The fundamental requisite of due
process of law is the opportunity to be heard”); Logan v. Zimmerman
Brush Co., 455 U.S. 422, 429-430 (1982) (due process violated in
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denying potential litigants established adjudicatory procedures); Joint
Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 161 (1951)
(“Fairness of procedure is ‘due process in the primary sense.’ It is
ingrained in our national traditions and is designed to maintain
them.”)(citation omitted); International Transactions v. Embotelladora
Agral, 347 F.3d 589, 596 (5th Cir. 2003).
Local Rule 7.1(e) of the Northern District of Texas provides that a
respondent shall be allowed 21 days to respond to motions. N.D. Tex.
L.R. 7.1(e) (“Time for Response and Brief. A response and brief to an
opposed motion must be filed within 21 days from the date the motion is
filed.”). The District Judge did not
order or provide any notice that the
time would be shortened, but rather notified the parties that the time
allowed was “a full twenty-one days to respond to every motion that’s
filed”. SR. v4 p863. Accordingly, with respect to Orders: Doc 575 (SR.
v7 p349), Doc 533 (SR. v6 p103), Doc 532 (SR. v6 p101), Doc 535 (SR. v6
p107), Doc 574 (SR. v7 p348), Doc 529 (SR. v6 p98), Doc 462 (SR. v5
p230), Doc 573 (SR. v7 p347), Doc 530 (SR. v6 p99), Doc 461 (SR. v5
p229), Doc 464 (SR. v5 p232), Doc 539 (SR. v6 p113), Doc 543 (SR. v6
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p118), Doc 536 (SR. v6 p109), Doc 463 (SR. v5 p231), Doc 542 (SR. v6
p117), Doc 537 (SR. v6 p110), Doc 538 (SR. v6 p111), Doc 531 (SR. v6
p100), Doc 540 (SR. v6 p114), and Doc 459 (SR. v5 p227), the District
Court abused its discretion in granting relief without allowing the
Appellants the opportunity to respond and be heard on the requested
relief as provided for by the applicable rules of procedure. A party is
clearly prejudiced when it is not allowed to respond to the
reasonableness and propriety of fee claims, and clearly a party is
prejudiced by the failure to allow the party to respond and be heard
with respect to multiple ‘claims’ for alleged liability for breach of
contract. As discussed above, the District Court’s failure to allow the
Appellants the established procedures and opportunity to respond and
be heard on the relief requested against them constitutes a violation of
Due Process and should render the orders so entered void.
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ISSUE 3: IN THE ABSENCE OF A STATUTE, IS A COURT
AUTHORIZED TO USE RECEIVERSHIP TO PROVIDE A
REMEDY FOR UNSECURED CREDITORS’ IN PERSONAM
CLAIMS AGAINST AN INDIVIDUAL BEFORE THEY HAVE
BEEN REDUCED TO JUDGMENT ?
Standard of Review
Questions of law are review de novo. E.g. In re Fredeman, 843 F.2d
at 824; Gandy Nursery, Inc. v. US, 318 F.3d 631, 636 (5th Cir. 2003).
Argument Overview
This issue addresses the question:
18
“Does the law authorize a court to skip the trouble of
lawsuits and trials by simply placing an individual’s
property into receivership and redistributing the
property to pay alleged unsecured debts of the
individual as the court finds ‘equitable’ ?”
An overview of the answer, “No”, is as follows:
1. Receivership is not authorized as an alternative
system of justice. Rather, receivership is a very limited
ancillary remedy to conserve property subject to some
other claim in equity.
18
Issue 4, at page 62, addresses the related issues of: (1) The District Court’s lack of
subject matter jurisdiction over non-diverse state law claims, and (2) The
constitutionality of adjudication of disputed claims at law without trial.
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2. An individual’s unsecured debts are not property of
the individual and are not subject to receivership with
respect to that individual.
The District Court’s Erroneous View of Equity
Receivership
In the erroneous view of the District Court:
(1) Receivership is an independent substantive remedy that
divests individuals of their property without trial and
transmutes the property into “equitable assets” held by
the Judge. SR. v7 p353-356.
19
(2) Those “equitable assets” can then be redistributed to
alleged general creditors based on the Judge’s sense of
“equity”. Id.
(3) By appointing a receiver over a citizen the Court can
freely waive a citizen’s Constitutional rights. SR. v7
19
The authority erroneously relied upon by the District Court, Santibanez v. Wier
McMahon & Co., 105 F.3d 234, 241 (5th Cir. 1997), notably does not hold that
receivership is a remedy available to general creditors to create equitable assets.
Rather, Santibanez holds that “[R]eceivers may be appointed ‘to preserve property
pending final determination of its distribution in supplementary proceedings in aid
of execution.’ In addition, ‘receivership may be an appropriate remedy for a
judgment creditor
…’ ”. Id. at 241 (inner citation omitted). The holding in
Santibanez is fully consistent with the well-established principle of law that a
receivership conserves property for specific claims of ownership or equitable interest
in that specific property. E.g., Gordon v. Washington, 295 U.S. 30, 37 (1935). By
stark contrast, “To constitute equitable assets, the trust imposed by the party, or by
the court, must be for the benefit of creditors generally”. Freedman's Sav. & Trust
Co. v. Earle, 110 U.S. 710, 718 (1884). Thus, there is a fundamental
difference
between (1) the interlocutory seizure of property by receivership for the benefit of
parties holding an existing right to an equitable remedy in the receivership
property so that the court can provide that remedy (Gordon at 38); and (2) seizure of
property for the creation of a trust for the benefit of unsecured general creditors
(“equitable assets”).
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p356-357. In other words, in the District Court’s
erroneous view, since a court, through its receiver, can
waive a citizen’s Constitutional rights for them, a
District Court can take away all of a citizens “legal
rights” with respect to their property, and redistribute
the property without regard to all the Constitutional
protections recognized by law. Id.
As discussed below, the District Court has fundamentally erred
with respect to the Constitution and the law of equity receivership.
Overview of Equity Receivership Power
As a matter of well-established law, equity receivership is neither
an independent nor substantive remedy. Rather, as discussed below,
receivership is a special remedy that can be used only
as an ancillary
remedy to preserve property so that property can be disposed of
pursuant to some other recognized equitable remedy that was properly
pleaded and that the court has jurisdiction to impose.
Equity Receivership is Only
Authorized as an
Interlocutory, Ancillary Remedy
The Supreme Court held over a century ago that receivership is
“interlocutory only
, and intended to preserve the subject-matter in
dispute from waste or dilapidation, and to keep it within the control of
the court until the rights of the parties concerned can be adjudicated by
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a final decree”. Forgay v. Conrad, 47 U.S. 201, 204-205 (1848). The
Supreme Court has held this limitation is a fundamental principle of
law imposed by the limitations on the equity authority granted to a
court. Gordon v. Washington, 295 U.S. 30, 37 (1935) (receivership must
be “ancillary to some form of final relief which is appropriate for equity
to give”). While summary proceedings have been recognized as proper
to determine what property should be held in the receivership res, such
proceedings have not been recognized as proper to determine who
should ultimately be entitled to possession of that res. United States v.
Arizona Fuels Corp., 739 F.2d 455, 459 (9th Cir. 1984) (summary
proceedings are appropriate to determine right to possession, although
not ultimate rights to title or ownership).
As a matter of established law, receivership is not a substitute for
trial nor a substantive remedy. See Pusey & Jones Co. v. Hanssen, 261
U.S. 491, 497 (1923). The rule of law is clear. As the Supreme Court
held in Pusey:
“[T]he appointment of a receiver is merely an ancillary
and incidental remedy. A receivership is not final relief.
The appointment determines no substantive right; nor is
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it a step in the determination of such a right. It is a means
of preserving property”
Id.
Carrington-Coleman’s Erroneous Argument
In their Principal Appeal brief, Carrington-Coleman glosses over
the well-established principle that receivership is merely an ancillary
remedy that determines no substantive rights. On page 8 of its brief,
Carrington-Coleman erroneously mis-cites Sec. & Exch. Comm’n v.
Forex Asset Mgmt. LLC, 242 F.3d 325, 331 (5th Cir. 2001) as holding
that the distribution of receivership assets is an equitable remedy.
There is no such substantive remedy in equity, and a careful reading of
Forex Asset reveals this fundamental error in Carrington-Coleman’s
argument. The holding in Forex Asset expressly states that the
equitable remedy the holding refers to is the remedy of restitution
. Id.
Specifically, Forex Asset holds:
“[I]n entering a restitution order, adherence to specific
equitable principles, including rules concerning tracing
are ‘subject to the equitable discretion of the court.’
”
Id.
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Notably, equitable restitution is an independent equitable remedy
and can be imposed regardless
of the existence of a receivership.
20
In
both Forex Asset (and US v. Durham, 86 F.3d 70 (5th Cir. 1996), the
case relied upon by Forex Asset) the receivership was purely ancillary to
the ultimate relief afforded (i.e., equitable restitution). In both cases,
the receivership provided a mechanism to secure property so that the
ultimate relief of equitable restitution could be effectively carried out by
the court. Accordingly, when this Honorable Court in Forex Asset (and
Durham) referenced a court’s “acting pursuant to its inherent equitable
powers” those powers were not some new, independent power in equity
20
Equitable Restitution is different than restitution generally. E.g., Sereboff v. Mid
Atlantic Medical Services, Inc., 547 U.S. 356, 362 (2006) (‘[N]ot all relief falling
under the rubric of restitution [was] available in equity.’). Equitable Restitution is
an equitable remedy that involves in rem recovery of specific property. Id. As the
Supreme Court held in Sereboff:
“To decide whether the restitutionary relief sought by Great-West was
equitable or legal, we examined cases and secondary legal materials to
determine if the relief would have been equitable ‘[i]n the days of the
divided bench.’ Ibid. We explained that one feature of equitable
restitution was that it sought to impose a constructive trust or
equitable lien on "particular funds or property in the defendant's
possession." Id., at 213. That requirement was not met in Knudson,
because ‘the funds to which petitioners claim[ed] an entitlement" were
not in Knudson's possession,’. Thus, for restitution to lie in equity, the
action must seek not to impose in personam liability on the defendant,
but must seek in rem recovery to restore to the plaintiff particular
funds or property in the defendant's possession. See Great-West Life &
Annuity Ins. Co. v. Knudson, 534 U.S. 204 , 213-214 (2002).”
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arising out of the existence of a receivership, to distribute a party’s
assets as a court feels is ‘just and equitable’. Rather, the powers
referenced in Forex Asset and Durham were specific powers in equity to
provide an established form of substantive relief that equity is
empowered to give— Equitable Restitution.
By contrast, the creation of a new equitable remedy to allow a
court to simply seize property in receivership and then distribute the
property based on the court’s sense of ‘equity’ would directly violate the
holding of Grupo Mexicano de Desarrollo, SA v. Alliance Bond Fund,
Inc., 527 U.S. 308, 310 (1999). The Supreme Court held in Grupo
Mexicano that “[T]he equitable powers conferred by the Judiciary Act of
1789 [do] not include the power to create remedies previously unknown
to equity jurisprudence”. Id.
In Personam vs. In Rem Claims
Moreover, if receivership were authorized as a means of providing
final relief, providing a remedy with respect to the alleged unsecured
debts of Baron would still fall well outside the District Court’s
receivership authority. The short explanation for this is that, as a well-
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established rule of law, a receiver may only be placed over property.
E.g., Booth v. Clark, 58 U.S. 322, 331 (1855). Debt, however, “is not
property in the hands of the debtor”. Liverpool & C. Ins. Co. v. Orleans
Assessors, 221 U.S. 346, 354 (1911). Accordingly, the in personam
claims against Baron for his alleged debts are not part of the
receivership res and adjudication of those claims falls well outside of the
receivership itself.
A longer explanation is as follows: Receivership actions are in rem
actions over specific property. E.g. Sumrall v. Moody, 620 F.2d 548, 550
(5th Cir. 1980). As a matter of established law, in personam actions to
establish liability on claims against individuals do not involve the
receivership res. Hawthorne Savings v. Reliance Ins. Co., 421 F.3d 835,
855 (9th Cir. 2005) (noting the fundamental distinction between “the
liquidation of a claim and the enforcement of the claim after it has been
reduced to judgment”). Accordingly, only an attempt to levy against the
res made after a judgment has been obtained in personam
involves an
in rem action that relates to a court's dominion over the receivership
res. Id.
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The District Court fundamentally erred in, out of a “sense of
justice”, attempting to create an interest in property that does not exist.
See Meyerson v. Council Bluffs Sav. Bank, 824 F. Supp. 173, 177 (S.D.
Iowa 1991). The ‘claimants’ do not have, and have not asserted, any
legally cognizable in rem claims against the res property. Rather, the
claimants allege that Mr. Baron personally is obligated in personam to
pay them money for breach of contract. Accordingly, the District Court
erred in attempting to bypass the crucial step of adjudication of in
personam liability. Notably, the fundamental step of adjudicating in
personam liability is a constitutionally protected step, and with claims
at law like those asserted against Baron, a citizen's right to trial by jury
is invoked. E.g., Ross v. Bernhard, 396 U.S. 531, 531 (1970).
Baron’s Unsecured Alleged Creditors Have No
Right in
the Receivership Property
Unsecured Creditors Have No Rights in the Property of their Debtor
Baron’s unsecured creditors have no rights in a receivership
because, in the absence of statute, they have no substantive right, legal
or equitable, in or to his property. See Pusey, 261 U.S. 491 at 497. This
is true, whatever
the nature of the property. Id. The only substantive
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right of a simple contract creditor is to have his debt paid in due course
and his recourse for non-payment is a suit at law
. Id. Moreover, such a
creditor has no right whatsoever in equity until he has exhausted his
legal remedy. Id. Accordingly, as matter of well-established law, a court
does not have equitable jurisdiction to use receivership to enforce the
unsecured creditors’ in personam claims (against the owner of the
receivership property) before those claims have been reduced to
judgment. Id.; e.g., Williams Holding Co. v. Pennell, 86 F.2d 230 (5th
Cir. 1936). The District Court’s Order [Doc 575] to pay alleged
unsecured creditors of Baron should therefore be reversed. SR. v7 p349.
Distinction between Receivership of a Corporation and Receivership
of an Individual’s Property
It is notable that unlike an individual, control of a corporation is a
property interest. E.g., US v. Wallach, 935 F.2d 445, 462 (2nd Cir.
1991). Similarly, ownership rights in a corporation constitute property.
See 11 Fletcher Cyclopedia of the Law of Private Corporations § 5097,
at 92 (Perm. ed. 1990). Thus, claims against a corporation which has
been taken into the hands of a receiver are claims against the
receivership res. By contrast, claims against the corporation's
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shareholders (the owners of property) are in personam. E.g., Morris v.
Jones, 329 U.S. 545, 549 (1947) (the liquidation of a claim against a
person “[I]s strictly a proceeding in personam”); and see e.g., United
States v. Cauble, 706 F.2d 1322, 1347 (5th Cir. 1983) (taking property
interest held by a person is in personam and not in rem). Accordingly,
the in personam claims against Baron, are not in rem claims against the
receivership res and fall well outside the District Court’s subject matter
jurisdiction and authority with respect to the receivership res.
Exercise of Receivership Power Must be Closely
Scrutinized
This Honorable Court has held that “[R]eceiverships for
conservation have a legitimate function but they are to be watched with
jealous eyes lest their function be perverted.” Tucker v. Baker, 214 F.2d
627, 631 (5th Cir. 1954). This Court held in Tucker that:
“A receivership is only a means to reach some legitimate
end sought through the exercise of the power of the court
of equity; it is not an end in itself. Where a final decree
involving the disposition of property is appropriately
asked, the court, in its discretion, may appoint a receiver
to preserve and protect the property pending its final
disposition. For that purpose the court may appoint a
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receiver of mortgaged property to protect and conserve it
pending foreclosure, or of property which a judgment
creditor seeks to have applied to the satisfaction of his
judgment.”
This Honorable Court’s holding in Santibanez, 105 F.3d at 241 is
consistent with the holding in Tucker and the Supreme Court’s holdings
in Gordon, Pusey, Forgay, etc. Receivership is authorized when a
judgment
creditor seeks to have a defendant’s property applied to the
satisfaction of his judgment. The District Court erred in confusing the
rights of a judgment creditor with those of unsecured general creditors.
Attempting to use receivership to seize a citizen’s property in order to
redistribute the property to unsecured general creditors is not
authorized by law. E.g., Pusey 261 U.S. at 497. It is also prohibited by
the Constitution. U.S. Const. amend. VII. Accordingly, the District
Court’s “FINDINGS OF FACT, CONCLUSIONS OF LAW, AND
ORDER ON ASSESSMENT AND DISBURSEMENT OF FORMER
ATTORNEY CLAIMS” entered 5/18/2011 (Doc 575) should be reversed.
SR. v7 p349.
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ISSUE 4: DID THE DISTRICT COURT ABUSE ITS DISCRETION,
ACT OUTSIDE OF ITS JURISDICTION, OR EXCEED ITS
AUTHORITY IN ORDERING THAT BARON, AN ADULT CITIZEN,
MUST INVOLUNTARILY COMPROMISE DISPUTED CLAIMS
AGAINST HIM ?
Standard of Review
The discretionary aspects of a District Court’s rulings are
reviewed for abuse of discretion. E.g., Commodity Credit, 107 F.2d at
1001. Issues of authority, jurisdiction, and constitutionality are based
on questions law and are subject to independent review, de novo. See
e.g., Castillo v. Cameron County, Texas, 238 F.3d 339, 347 (5th Cir.
2001).
Subject Matter Jurisdiction
Lack of subject matter jurisdiction cannot be waived. E.g.,
Mitchell v. Maurer, 293 U.S. 237, 244 (1934). Subject matter
jurisdiction arises out of the matter in controversy between the parties
before the court. Williamson v. Berry, 49 U.S. 495, 536 (1850). Federal
courts are not courts of general jurisdiction; they have only the power
that is authorized by Article III of the Constitution and the statutes
enacted by Congress pursuant thereto. See, e. g., Marbury v. Madison, 1
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Cranch 137, 173-180 (1803). The claims of Baron’s former attorneys are
state law claims between non-diverse parties and invoke no federal
question. Griffin v. Lee, 621 F.3d 380, 388 (5th Cir. 2010). Accordingly,
the District Court was without subject matter jurisdiction over the
claims, and was without power to order Baron to settle the claims.
Notably, a receivership cannot endow the District Court with any
subject matter jurisdiction it did not already posses. Cochrane v. WF
Potts Son & Co., 47 F.2d 1026, 1028 (5th Cir. 1931) (seizure in
receivership does not endow a court with subject matter jurisdiction
over the property seized “[U]nless the subject-matter was by proper
pleadings already before the court”). While Rule 66 permits the
appointment of receivers under the Federal Rules, the rules do not
extend the jurisdiction of the district court. Fed.R.Civ.P. 82.
Abuse of Discretion
As discussed in the Statement of Facts, above, the groundless
nature of the ‘claims’ is clear from the evidence and documents in the
record. A district court abuses its discretion if it relies on clearly
erroneous factual findings. E.g., In re Volkswagen of America, Inc., 545
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F.3d 304, 310 (5th Cir. 2008). The District Court relied on no evidence
nor basis in law to find Baron “could quite possibly be found liable to
some of the claimants .. for punitive damages”. SR. v7 p358.
Accordingly, the District Court abused its discretion in making such a
finding. Similarly, the District Court found that “if the Former
Attorney Claims were to be litigated, Baron would likely lose at trial”.
However, no evidence was offered as to the likely outcome of any trial
.
Notably, the receiver’s “report” as to the claims was one-sided and
intentionally omitted all of the exculpatory evidence in Baron’s favor.
SR. v7 p202. Accordingly, the District Court abused its discretion in
making its findings.
If District Court’s adjudication of the “claims” were otherwise
authorized by law and the Constitution, a Court’s adjudication must be
based on the legal rights of the parties, not upon what the outcome
would “likely” be if the claims were tried. The District Court made no
findings with respect to the underlying facts of any specific “claim”. A
court abuses its discretion where it misapplies the law. E.g. McClure v.
Ashcroft, 335 F.3d 404, 408 (5th Cir. 2003). Accordingly, the District
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Court abused its discretion in awarding claims based on what would
‘likely’ happen if the claims were tried.
The District Court similarly abused its discretion in failing to
allow the period of time required by the local rules (21 days) for a
response to the receiver’s motion for relief granted by the District Court,
and abused its discretion granting the receiver’s motion only 7 days
after it was filed, without notice of any shortened response period. SR.
v7 p194 (filed 5/11/11); SR. v7 p349 (entered 5/18/11).
The District Court also abused its discretion in denying Baron the
right to be represented by paid counsel, and refusing to consider Baron’s
affidavit evidence because Baron was unwilling to submit to cross-
examination (at a prior hearing) without the representation of paid
counsel. SR. v7 p366.
The Seventh Amendment
As a matter of fundamental law in the United States, “In Suits at
common law, where the value in controversy shall exceed twenty
dollars, the right of trial by jury shall be preserved”. U.S. Const. amend.
VII. The matter is one of well-established law. As the Supreme Court
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held Court in Scott v. Neely, 140 U.S. 106, 109-110 (1891):
“The Constitution, in its Seventh Amendment, declares
that "in suits at common law, where the value in
controversy shall exceed twenty dollars, the right of trial
by jury shall be preserved." In the Federal courts this
right cannot be dispensed with, except by the assent of the
parties entitled to it, nor can it be impaired by any
blending with a claim, properly cognizable at law, of a
demand for equitable relief in aid of the legal action or
during its pendency. Such aid in the Federal courts must
be sought in separate proceedings, to the end that the
right to a trial by a jury in the legal action may be
preserved intact. In the case before us the debt due the
complainants was in no respect different from any other
debt upon contract; it was the subject of a legal action
only, in which the defendants were entitled to a jury trial
… a proceeding to set aside alleged fraudulent
conveyances of the defendants, did not take that right
from them, or in any respect impair it.”
The “former attorney” alleged claims are clearly claims in
contract. Accordingly, the District Court’s order mandating Baron to
compromise the disputed attorneys’ claims is a direct violation of the
Seventh Amendment. See e.g., Ortiz v. Fibreboard Corp., 527 U.S. 815,
846 (1999)(court mandated settlement of claims violates the Seventh
Amendment). As a fundamental restriction on a court’s exercise of
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power, “[T]he constitutional right to trial by jury cannot be evaded.”
Guaranty Trust Co. v. York, 326 U.S. 99, 105 (1945). The District
Court’s order entered 5/18/2011 (Doc 575) should accordingly be
reversed. SR. v7 p349.
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ISSUE 5: DID THE DISTRICT COURT ERR IN GRANTING
RELIEF AGAINST BARON AND HIS PROPERTY HELD IN
RECEIVERSHIP WHILE PROHIBITING BARON (1) FROM
BEING REPRESENTED BY PAID COUNSEL, (2) FROM HIRING
EXPERIENCED FEDERAL TRIAL COUNSEL, AND (3) FROM
HIRING EXPERT WITNESSES TO TESTIFY AS TO THE
NECESSITY AND REASONABLENESS OF THE FEES CLAIMED ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824. The discretionary aspects of
receivership fee allowances are reviewed for abuse of discretion.
Commodity Credit, 107 F.2d at 1001.
Argument
Baron repeatedly moved to be allowed access to his own money in
order to hire attorneys to represent him. E.g., R. 2720; SR. v2 p384-390
(Doc 264); SR. v5 p139 (Doc 445). However, the District Court did not
allow Baron to hire counsel. E.g., Doc 316 (SR. v4 p119). The District
Court went so far as to order that Baron’s appellate counsel could not be
paid during the pendency of the receivership and sealed Baron’s motion
to hire counsel so that it would not be viewed by the public. R. 4580-
4581; SR. v7 p379.
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This Honorable Court has held that a civil litigant has a
constitutional right to retain hired counsel. Potashnick v. Port City
Const. Co., 609 F.2d 1101, 1104 (5th Cir. 1980). Moreover, this
Honorable Court has held that “the right to counsel is one of
constitutional dimensions and should thus be freely exercised without
impingement.” Id. at 1118; Mosley v. St. Louis Southwestern Ry., 634
F.2d 942, 946 (5th Cir. 1981). An individual's relationship with his or
her attorney “acts as a critical buffer between the individual and the
power of the State.” Johnson v. City of Cincinnati, 310 F.3d 484, 501
(6th Cir. 2002). Further, the Supreme Court has held that a party
must be afforded a fair opportunity to secure counsel “of his own choice”
and that applies “in any case, civil or criminal” as a due process right
“in the constitutional sense”. Powell v. Alabama, 287 U.S. 45, 53-69
(1932). That basic right was denied Baron by the District Court below.
As a fundamental cornerstone of Due Process, the Constitution
guarantees every citizen the right to a meaningful opportunity to be
heard in a meaningful manner. Williams v. McKeithen, 939 F.2d 1100,
1105 (5th Cir. 1991). As a matter of established law, this means the
Case: 11-10501 Document: 00511625994 Page: 69 Date Filed: 10/06/2011
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right to be represented by paid legal counsel. E.g., Mosley, 634 F.
2d at 946; Powell, 287 U.S. at 53; Chandler v. Fretag, 348 U.S. 3, 10
(1954); Potashnick v. Port City Const. Co., 609 F.2d 1101, 1104 (5th Cir.
1980). In the proceedings below, Jeffrey Baron was denied this
fundamental right. Accordingly the substantive orders
21
issued against
Baron and his property while he was deprived of that basic
constitutional right should be reversed.
21
Doc 527 (SR. v6 p94), Doc 575 (SR. v7 p349), Doc 533 (SR. v6 p103), Doc 532 (SR.
v6 p101), Doc 534 (SR. v6 p105), Doc 535 (SR. v6 p107), Doc 574 (SR. v7 p348), Doc
529 (SR. v6 p98), Doc 462 (SR. v5 p230), Doc 573 (SR. v7 p347), Doc 530 (SR. v6
p99), Doc 461 (SR. v5 p229), Doc 464 (SR. v5 p232), Doc 539 (SR. v6 p113), Doc 543
(SR. v6 p118), Doc 536 (SR. v6 p109), Doc 463 (SR. v5 p231), Doc 542 (SR. v6 p117),
Doc 537 (SR. v6 p110), Doc 538 (SR. v6 p111), Doc 531 (SR. v6 p100), and Doc 540
(SR. v6 p114),
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ISSUE 6: ONCE AN AFFIDAVIT IS FILED PURSUANT TO 28
U.S.C. §144, IS FURTHER ACTIVITY OF THE JUDGE
CIRCUMSCRIBED TO MAKING A DETERMINATION AS TO
THE LEGAL SUFFICIENCY OF THE FACTS STATED IN THE
AFFIDAVIT ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Argument
This Honorable Court has held that “Once the motion is filed
under § 144, the judge must pass on the legal sufficiency of the
affidavit, but may not pass on the truth of the matters alleged”. Davis
v. Board of School Com'rs of Mobile County, 517 F.2d 1044, 1051 (5th
Cir. 1975). Baron filed his motion and affidavit under §144,
22
and
pursuant to 28 U.S.C. §144 and the clear precedent of this Honorable
Court, the District Court must
pass on the legal sufficiency of the
affidavit. Id. This Honorable Court has expressly held in Parrish v.
Board of Com'rs of Alabama State Bar, 524 F.2d 98, 100 (5th Cir.
22
Doc 497. The affidavit was sealed by the District Judge and Appellant’s motion
for access to the sealed portion of the record was denied by the motion panel on
appeal. Accordingly, more specific citation to the record cannot be provided.
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1975)(emphasis) that:
“The threshold requirement under the §144
disqualification procedure is that a party file an affidavit
demonstrating personal bias or prejudice on the part of
the district judge against that party or in favor of an
adverse party. Once the affidavit is filed, further
activity of the judge against whom it is filed is
circumscribed except as allowed by the statute. In
terms of the statute, there are three issues to be
determined: (1) was the affidavit timely filed; (2) was it
accompanied by the necessary certificate of counsel of
record; and (3) is the affidavit sufficient in statutory
terms?”
However, the District Judge below: (1) refused to accept the
factual allegations in Baron’s §144 affidavit as true; (2) refused to pass
on the legal sufficiency of facts stated in the Baron’s §144 affidavit, and
(3) continued his normal activity in the case. Because the District
Judge’s authority to act was circumscribed by law as discussed above,
the District Judge lacked authority to issue subsequent orders, and
those orders
23
should therefore be reversed.
23
Doc 527 (SR. v6 p94), Doc 575 (SR. v7 p349), Doc 533 (SR. v6 p103), Doc 532 (SR.
v6 p101), Doc 534 (SR. v6 p105), Doc 535 (SR. v6 p107), Doc 574 (SR. v7 p348), Doc
529 (SR. v6 p98), Doc 573 (SR. v7 p347), Doc 530 (SR. v6 p99), Doc 539 (SR. v6
p113), Doc 543 (SR. v6 p118), Doc 536 (SR. v6 p109), Doc 542 (SR. v6 p117), Doc 537
(SR. v6 p110), Doc 538 (SR. v6 p111), Doc 531 (SR. v6 p100), Doc 540 (SR. v6 p114),
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ISSUE 7: WHERE THE SAME RECEIVER WAS APPOINTED
OVER MULTIPLE RECEIVERSHIP PARTIES AND ESTATES,
DID THE DISTRICT COURT ABUSE ITS DISCRETION IN
AWARDING RECEIVERSHIP FEES AND EXPENSES (1)
WITHOUT A SHOWING OR FINDING THAT THE FEES AND
EXPENSES WERE REASONABLE OR NECESSARY; (2) WITHOUT
REGARD TO WHICH OF MULTIPLE RECEIVERSHIP ESTATES
THE FEES WERE ALLEGEDLY INCURRED; AND (3) WHERE
THE RECEIVER WAS PROHIBITED BY LAW FROM BEING
APPOINTED AS A RECEIVER ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824. The discretionary aspects of
receivership fee allowances are reviewed for abuse of discretion.
Commodity Credit Corporation v. Bell, 107 F.2d 1001 (5th Cir. 1939).
Established Limitations on Receivership Fees
While a District Court enjoys great discretion in determining the
compensation of a receiver, that discretion has clear bounds. As a
preliminary matter, the receiver’s compensation should correspond with
the degree of responsibility and business ability required in the
management of the affairs entrusted to him and the perplexity and
Doc 551 (SR. v6 p125), Doc 541 (SR. v6 p116), Doc 544 (SR. v6 p119), and Doc 550
(SR. v6 p124)
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difficulty involved in that management. Stuart v. Boulware, 133 U.S.
78, 82 (1890). A receiver looks for compensation to the receivership
estate, which may belong, in equity, largely to others than those who
have requested the receiver’s services, and the receiver should have in
mind the fact that the total aggregate of fees must bear some
reasonable relation to the estate's value. Cf. In re Imperial “400”
National, Inc., 432 F.2d 232, 237 (3rd Cir. 1970); Finn v. Childs Co., 181
F.2d 431, 436 (2nd Cir. 1950). Critically, compensation paid to a
receiver from a receivership estate must be for actual services provided
by the receiver to that estate. E.g., Commodity Credit Corporation v.
Bell, 107 F.2d 1001, 1001 (5th Cir. 1939). Where the same receiver is
appointed over multiple receivership estates, the charge to each estate
should be based on the work performed by the receiver for that
particular estate. Bank of Commerce & Trust Co. v. Hood, 65 F.2d 281,
283-284 (5th Cir. 1933) (fees and expenses must be charged against
each fund held by receiver as if separate receivers had been appointed
for each and an “[A]ccurate inquiry ought to be made as to what time
and services counsel and receiver gave to each fund, and what part of
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their expenses were in fact necessary for each.”); and e.g., Butterwick v.
Fitzpatrick, 2008 Cal. App. LEXIS 1293 (4th Appellate Dist., 1st Div.,
February 15, 2008). The District Court considered none of these
mandated factors, and therefore abused its discretion in granting the
receivership fees.
No Evidence of Necessity or Reasonableness, and No
Segregation of Fees across Multiple Receivership
Estates
A series of orders challenged in this appeal
24
award fees to the
receiver, his law partners, and ‘professionals’ employed by the receiver.
With respect to the motions seeking such fees, there was no argument
or evidence offered that the fees were reasonable or necessary. The fees
moreover were billed for work on multiple receivership estates, for work
involving multiple receivership parties and multiple receivership res;
however, the fees were not segregated in any way and were charged
apparently arbitrarily against any particular receivership party or
24
Doc 533 (SR. v6 p103), Doc 532 (SR. v6 p101), Doc 534 (SR. v6 p105), Doc 535 (SR.
v6 p107), Doc 574 (SR. v7 p348), Doc 529 (SR. v6 p98), Doc 462 (SR. v5 p230), Doc
573 (SR. v7 p347), Doc 530 (SR. v6 p99), Doc 461 (SR. v5 p229), Doc 464 (SR. v5
p232), Doc 539 (SR. v6 p113), Doc 543 (SR. v6 p118), Doc 536 (SR. v6 p109), Doc 463
(SR. v5 p231), Doc 542 (SR. v6 p117), Doc 537 (SR. v6 p110), Doc 538 (SR. v6 p111),
Doc 531 (SR. v6 p100), and Doc 540 (SR. v6 p114).
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estate. The District Court entered no findings of fact or law in support
of its granting the motions for payment of the fees. Accordingly, the
District Court abused its discretion in granting the fee awards.
Vogel Was Prohibited by Law from Being Appointed
Receiver
Background
On July 9, 2009, the District Court employed Peter Vogel as a
special master in this case. R. 394. While still in his role as special
master in this case, Vogel consulted ex parte with Sherman (who then
controlled the defendant Ondova) with respect to the motion to appoint
himself (Vogel) as a private receiver over Mr. Baron’s assets. SR. v5
p238. Vogel was also a special master in this case when he moved to
add Novo Point, LLC., and Quantec, LLC., under his own receivership.
R. 1717. A special master employed by the Court is an officer of the
court. E.g., Devlin v. Scardelletti, 536 U.S. 1 (2002). Further, courts
which have considered the issue have held that a special master is a
judge sitting in the case in which he is employed. E.g., Horton v.
Ferrell, 335 Ark. 366, 981 S.W.2d 88 (1998); Vereen v. Everett, Dist.
Court, (ND Georgia 2009, No. 1:08-CV-1969-RWS).
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28 U.S.C. §958 Prohibited Vogel’s Appointment as Receiver
Congress mandated in 28 U.S.C. §958 that any person (1) holding
any civil office or (2) employed by any judge of the United States, shall
not
be appointed a receiver in any case. Accordingly, pursuant to
Federal law, Peter Vogel could not be appointed a receiver because he
was employed by the District Judge as a special master at the time he
was appointed receiver. A clear public policy purpose of the statute is to
prevent conflict of interest. The possibility that a special master in a
case would privately consult behind closed doors to have himself
appointed as a private receiver over a party in the lawsuit where he
presently sat as a judge, violates the most fundamental notations of an
impartial judiciary. If the motive of personal profit is allowed to enter
the side of the bench behind which judges and special masters sit, the
very foundation of an independent, impartial judiciary is threatened.
For these reasons, regardless of the character and intentions of those
involved, the fees awarded to Peter Vogel and his law firm should be
reversed.
25
25
Vogel’s multiple conflicts of interest are not merely theoretical. For example,
after his appointment as receiver, Vogel as receiver moved, without any explanation
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ISSUE 8: CAN A RECEIVERSHIP BE USED AS A VEHICLE TO
MAKE THIRD PARTIES LIABLE AS ‘REVERSE ALTER-EGOS’
OF A PARTY ?
Standard of Review
This Honorable Court has held that a district court's decision to
grant appoint a receiver is subject to “close scrutiny” on appeal. Tucker,
214 F.2d at 631. Equity receivership has been recognized as an
“extraordinary” remedy to be “employed with the utmost caution”. See
e.g., Solis v. Matheson, 563 F.3d 425, 437 (9th Cir. 2009); Rosen v.
Siegel, 106 F.3d 28, 34 (2d Cir. 1997); Aviation Supply Corp. v. R.S.B.I.
Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993); Consolidated Rail
Corp. v. Fore River Ry. Co., 861 F.2d 322, 326-27 (1st Cir. 1988). Issues
based on questions law underlying a court’s decision are subject to
as to why payment should come from receivership funds, to be paid out of the
receivership funds for his work as special master. SR. v4 p 541. Notably, Vogel was
employed as special master in the case below, even though his law firm represented
another plaintiff against the defendants below, Ondova and Baron, in another
dispute that was still in litigation against the same defendants and involved one of
the very same assets (“servers.com”) involved in the case below. SR. v8 p424. The
District Court took the unusual step, expressly prohibited by the Federal Rules, of
appointing Vogel as special master without requiring Vogel to file a conflicts
affidavit. Vogel’s employment as special master in the case below was thus
undertaken in clear violation of Federal Rule of Civil Procedure 53(b)(3), which
strictly requires that a court may issue an order appointing a special master only
after the master files an affidavit disclosing any ground for disqualification under
28 U.S.C. §455. (Vogel and Gardere’s decade long history of conflicts involving
Baron predating
the lawsuit below is detailed in Document 00511400011 filed
3/2/2011 in Fifth Circuit case 10-11202).
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independent review, de novo. In re Fredeman, 843 F.2d at 824.
Receivership May Not
be Used to Determine an Alter
Ego Claim
As discussed below, as matter of established law receivership may
not be used to determine (or bypass the determination of) an alter ego
claim. Moreover, as a matter of long settled law receivership
“determines no substantive right; nor is it a step in the determination of
such a right.” E.g., Pusey, 261 U.S. at 497 (1923).
Bollore SA v. Import Warehouse, Inc.
The issue was presented to this Honorable Court in Bollore SA v.
Import Warehouse, Inc., 448 F.3d 317 (5th Cir. 2006). In Bollore, the
district court entered an order appointing a receiver over an alleged
‘alter ego’ entity, and ordering turnover of property. Id. at 321. This
Honorable Court vacated the receivership and ruled that turnover
orders do “not
allow for a determination of the substantive rights of
involved parties” and may not
be used “as a vehicle to adjudicate the
substantive rights of non-judgment third parties”. Id. at 323. This
Honorable Court held that this rule ultimately springs from due process
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concerns. Id. (such a remedy “completely bypasses our system of
affording due process.”).
As explained by this Honorable Court in Bollore, alter ego
proceedings are substantive proceedings arising out of state law. Id. at
324. Pursuant to Texas law, a party must pursue their alter ego
proceedings in a separate trial on the merits. Id. No such proceedings
were plead against Novo Point or Quantec, and no such trial was ever
held.
As in Bollore, because no independent trial was held against Novo
Point or Quantec to establish an alter ego claim, the District Court’s
order that cash and assets from the receivership estates of Novo Point,
LLC, and Quantec, LLC, can be used to pay alleged creditors of Jeffrey
Baron should be vacated. Id. at 326.
If there had been a trial on Alter Ego, Novo Point and
Quantec would have prevailed as a matter of law
If Novo Point and Quantec had been served with citation and
appeared as parties in a lawsuit seeking to impute liability upon them
under an alter ego or reverse piercing theory (neither of which has
occurred), they would have prevailed at trial as a matter of law. The
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first step to a claim for piercing the corporate veil (although notably, no
such claim was plead or heard) is to determine which jurisdiction’s law
controls the issue. E.g., Sommers Drug Stores Co. Emp. P. Sharing
Trust v. Corrigan, 883 F.2d 345, 353 (5th Cir. 1989). Novo Point, LLC
and Quantec, LLC are incorporated under the laws of the Cook Islands.
The law of the Cook Islands therefore applies. See e.g., Alberto v.
Diversified Group, Inc., 55 F.3d 201, 203 (5th Cir. 1995); Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Pursuant to Cook
Islands law, there is no basis to impose reverse alter-ego liability. Art.
45, Cook Islands Limited Liability Companies Act (2008).
26
Accordingly, because receivership cannot be used to determine (or
bypass the determination) of an alter ego claim, and the companies
have not been determined in any trial to be alter-egos of Jeffrey Baron,
the District Court’s order allowing application of the companies assets
to the alleged debts of Baron should be reversed.
26
The same result would be reached in applying Texas corporate law. As explained
by the Fifth Circuit in Bollore, “Texas courts will not apply the alter ego doctrine to
directly or reversely pierce the corporate veil unless one of the ‘alter egos’ owns
stock in the other.” Id. at 325. Since Jeff Baron owns no stock in either Novo Point,
LLC, nor Quantec, LLC, alter-ego liability would not apply.
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Novo Point and Quantec Are Not Parties to the Lawsuit
Novo Point and Quantec are not parties to the lawsuit below. As
Justice Hand explained nearly a century ago, “[N]o court can make a
decree which will bind anyone but a party; a court of equity is as much
so limited as a court of law …. its jurisdiction is limited to those who
therefore can have their day in court”. Alemite Mfg. Corporation v.
Staff, 42 F.2d 832 (2nd Cir.1930).
Materially Missing Steps with Respect to the LLCs
The District Court has erroneously attempted to convert the
unliquidated in personam claims against Baron into in rem claims
against the LLC entities. The District Court erred in skipping two
fundamental steps: First, the claims need to be liquidated and
converted to judgments against Baron. Pursuant to the Constitution of
the United States and the Fifth and Seventh Amendments, converting
the claims to judgment requires jury trials since the claims are claims
at law exceeding twenty dollars. Secondly, if claims are adjudicated
and converted into judgments against Baron, liability against Baron
still has to be converted into liability of the LLC entities. That requires
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a separate determination as to whether the LLC entities are liable
under the law for Baron's debts. Bollore SA v. Import Warehouse, Inc.,
448 F.3d 317, 323 (5th Cir. 2006). As discussed above, as a matter of
established law, the LLC entities are not liable for Baron’s personal
debt. However, instead of taking the path of due process, the
District Court skipped both of two critical steps discussed above,
and used instead an ad hoc ‘shortcut’. The District Court’s order
authorizing application of the LLC entities’ assets for the payment of
the claims against Baron should therefore be reversed. SR. v7 p349
(Doc 575).
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ISSUE 9: DID THE US DISTRICT COURT IN THE NORTHERN
DISTRICT OF TEXAS HAVE JURISDICTIONAL AUTHORITY
TO APPOINT THE MANAGER OF A LLC IN THE COOK
ISLANDS ?
Standard of Review
Issues based on questions law are subject to independent review,
de novo. In Re Fredeman, 843 F.2d at 824.
Argument
Novo Point, LLC and Quantec, LLC, exist as legal entities
pursuant to laws of the sovereign government of the Cook Islands, a
member of the British Commonwealth. R. 850, 2110. The two
companies are owned by a Cook Islands trustee, SouthPac Trust
International, Inc. (“SouthPac”). R 4681. SouthPac is an internationally
recognized and well respected trustee, recognized as a proper and
lawful litigant by the Federal Circuit Court of Appeal and multiple US
Federal Courts. E.g., Prima Tek II LLC v. Polypap, SaRL, 318 F. 3d
1143 (Fed. Cir. 2003). SouthPac, however, is not a party to the lawsuit
below and has not been served with any process in the proceedings
below. Accordingly, the District Court did not acquire personal
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jurisdiction over SouthPac. Omni Capital Int'l, Ltd. v. Rudolf Wolff &
Co., 484 U.S. 97, 104 (1987) (“Before a federal court may exercise
personal jurisdiction over a defendant, the procedural requirement of
service of summons must be satisfied”); St. Clair v. Cox, 106 U.S. 350,
353 (1882) (“The courts … must have acquired jurisdiction over the
party … whether the party be a corporation or a natural person.”).
While a US district court has jurisdiction to place into
receivership the assets of a foreign company that are located within the
district in which the Court sits, the Supreme Court has held that a
district court does not have power to directly affect property located in
foreign jurisdictions. E.g., Booth v. Clark, 58 U.S. 322, 333 (1855);
Guaranty Trust Co. of New York v. Fentress, 61 F. 2d 329, 332 (7th
Cir.1932). Similarly, the Supreme Court has held that the sovereign
where the company is chartered has “jurisdiction of all questions
relating to the internal management of the corporation.” Hartford Life
Ins. Co. v. IBS, 237 U.S. 662, 671 (1915).
Pursuant to the law of the Cook Islands, the sovereign pursuant to
whose laws Novo Point, L.L.C., and Quantec, L.L.C. are chartered, the
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membership rights of the owners of the companies may not be executed
upon by judicial process or otherwise controlled by any court other than
the courts of the Cook Islands. Art. 45, Cook Islands Limited Liability
Companies Act (2008). A treaty between the United States and the
Cook Islands obligates the United States to recognize Cook Islands’
sovereignty.
27
Accordingly, while the District Court below may have
jurisdiction to seize the property of Novo Point, LLC and Quantec, LLC
that is located within the Northern District of Texas, the District Court
has no authority to change or appoint the Cook Islands’ manager of the
companies, an act by virtue of Cook Islands’ law that can be performed
only by the courts of the Cook Islands and the owners of the LLCs. Art.
26, Cook Islands Limited Liability Companies Act (2008). The District
Court thus lacked authority and jurisdiction to change the companies’
international management, and the order of the District Court
attempting to do so should be reversed. SR. v4 p777 (Doc 362).
27
Paragraph Five of the “Treaty on Friendship and Delimitation of the Maritime
Boundary Between the United States of America and the Cook Islands”, signed at
Rarotonga on 11 June 1980, and ratified by the US Senate June 21, 1983.
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PRAYER
Appellants, jointly and in the alternative requests the following
relief:
(1) That the challenged orders be reversed.
(2) That the challenged orders be found to be void ab initio.
(3) That costs be taxed against the Appellees.
Respectfully submitted,
/s/ Gary N. Schepps
Gary N. Schepps
Texas State Bar No. 00791608
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
(214) 210-5940 - Telephone
(214) 347-4031 - Facsimile
Email: legal@schepps.net
FOR APPELLANTS
NOVO POINT, LLC.,
QUANTEC, LLC., and
JEFFREY BARON
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CERTIFICATE OF COMPLIANCE
WITH TYPE-VOLUME LIMITATION, TYPEFACE
REQUIREMENTS, AND TYPE STYLE REQUIREMENTS
1. This brief complies with the type-volume limitation of FED. R.
APP. P. 32(a)(7)(B) because: this brief contains 12,836 words, excluding
the parts of the brief exempted by FED. R. APP. P. 32(a)(7)(B)(iii).
2. This brief complies with the typeface requirements of FED. R.
APP. P. 32(a)(5) and the type style requirements of FED. R. APP. P.
32(a)(6) because: this brief has been prepared in a proportionally spaced
typeface using MS Word 2000 in 14 and 15 point century font.
DATED: October 6, 2011.
CERTIFIED BY: /s/ Gary N. Schepps
GARY N. SCHEPPS
COUNSEL FOR APPELLANT
Case: 11-10501 Document: 00511625994 Page: 88 Date Filed: 10/06/2011
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CERTIFICATE OF SERVICE
This is to certify that this brief was served this day on all parties
who receive notification through the Court’s electronic filing system.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANTS
Case: 11-10501 Document: 00511625994 Page: 89 Date Filed: 10/06/2011
