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