WAIVER OF REPLY AND MOTION FOR IMMEDIATE RULING ON MOTION TO VACATE
RECEIVERSHIP AND ALTERNATIVE MOTION TO STAY PENDING APPEAL - 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. § MOTION FOR EMERGENCY RELIEF
§
JEFFREY BARON, and §
ONDOVA LIMITED COMPANY, §
Defendants. §
WAIVER OF REPLY AND MOTION FOR IMMEDIATE RULING ON
MOTION TO VACATE RECEIVERSHIP AND ALTERNATIVE MOTION
TO STAY PENDING APPEAL
TO THE HONORABLE ROYAL FURGESON, U.S. DISTRICT COURT JUDGE:
COMES NOW, Jeffrey Baron, Appellant, and requests the Court to rule on
his Motion to Stay.
This Court has found Mr. Baron’s motion warrants expedited consideration
and accordingly ordered the Trustee to file a response to the motion by today,
December 10, 2010.
This Court generously allowed 5 days for Mr. Baron to reply to any
response. Mr. Baron waives his reply to the Trustee’s response in order that
the Court can enter a ruling today.
USCA5 1731
WAIVER OF REPLY AND MOTION FOR IMMEDIATE RULING ON MOTION TO VACATE
RECEIVERSHIP AND ALTERNATIVE MOTION TO STAY PENDING APPEAL - Page 2
This Court considered and issued a ruling on the Trustee’s motion to appoint
the receiver the same day it was filed. This Court considered and ruled on
Verisign’s motion to vacate within 1 day of its filing.
Attached hereto is a copy of the Motion for Stay filed in the Court of
Appeals, providing a clear briefing of Mr. Baron’s statement of the relevant law.
Mr. Baron is entitled to relief on grounds established as a matter of law. Because
the order involves the impingement of constitutional rights, irreparable injury is
established as a matter of law.
Attached hereto and incorporated herein are two declarations. The first
establishing that as a very real matter Mr. Baron is ill. The stress of the seizure of
all his property has led to the point that Mr. Baron is now experiencing heart
problems. This is not a ‘self- report’. This is a medical diagnosis based on an
EKG and requiring referral of Mr. Baron to the immediate care of a cardiologist.
The second declaration establishes that domain names subject of this lawsuit
are now under immediate threat of liquidation.
WHEREFORE Jeffrey Baron prays that this Honorable Court:
(1) Rule today on Mr. Baron’s motion to Vacate and in the alternative
Stay pending appeal the receivership order entered in this case.
USCA5 1732
WAIVER OF REPLY AND MOTION FOR IMMEDIATE RULING ON MOTION TO VACATE
RECEIVERSHIP AND ALTERNATIVE MOTION TO STAY PENDING APPEAL - Page 3
(2) Jointly and in the alternative issue an order today prohibiting the
liquidation of any property seized or controlled by the receiver
pending ruling by this Court and an opportunity, if applicable, for
a ruling by the Court of Appeals on Mr. Baron’s motion to stay.
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
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
USCA5 1733
WAIVER OF REPLY AND MOTION FOR IMMEDIATE RULING ON MOTION TO VACATE
RECEIVERSHIP AND ALTERNATIVE MOTION TO STAY PENDING APPEAL - Page 4
CERTIFICATE OF CONFERENCE
This is to certify that the undersigned conferred with Mr. Raymond J. Urbanik, attorney
for DANIEL J. SHERMAN, Trustee for ONDOVA LIMITED COMPANY, and he is
opposed to this motion for expedited consideration of the motion for stay.
/s/ Gary N. Schepps
Gary N. Schepps
USCA5 1734
DECLARATION
OF
JEFFREY
BARON
1. My name is Jeffrey Baron. I am competent to make this declaration.
The facts stated in this declaration are within my personal knowledge and
are true and correct. I have knowledge
of
the stated facts which I learned as
the result
of
witnessing the facts and events stated herein.
2. Attached is a true and correct copy
of
a medical report about me with
private information redacted.
I declare under penalty
of
perjury that the foregoing is true and correct.
Signed
this
/ 0
day
of
December,
2010,
in
Dallas,
Texas.
i/
Jeffrey
Baron
DECLARATION
OF
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BARON
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USCA5 1737
DECLARATION
OF
JEFFREY
BARON
1.
My name is Jeffrey Baron. I am competentto make this declaration. The facts stated
in this declaration are within my personal knowledge and are true and correct. I have
knowledge of the stated facts which I learned as the result
of
witnessing the facts and
events
stated
herein.
2. Pursuant to the 'global settlement agreement' in this case, agreed to by the Ondova
Chapter
11
Trustee and approved by the Ondovabankruptcy court, a very specific group
of unique domain names was to be transferred to Quantec, LLC and NovoPoint, LLC.
3. The receiver appointed by the District Court has taken control
of
the registration
of
those unique domains, and now immediate steps are being taken by the receiver to
liquidate the names.
4. There are more than 200,000 unique domain names involved, many
of
which are
extremely valuable. Each domain names is unique and once lost cannot be replaced. Each
domain presents a unique business opportunity based upon the uniqueness
of
the name.
5. There is no legitimate or lawful basis to liquidate the domain names, since I am not
a judgment creditor. The receiver has already seized more than sufficient assets to cover
whatever its needs are.
The
Bankruptcy Court has also previously ordered me to put
hundreds
of
thousands
of
dollars in trust with the Chapter
11
Trustee, which money is
still being held.
I declare under penalty
of
perjury that the foregoing is true and correct.
Signed
this
/ Q
day
of
December,
2010,
in
Dallas,
Texas.
DECLARATION OF JEFFREY BARON - Page Solo
USCA5 1738
Case No. 10-11202
______________________________________________________________________
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
______________________________________________________________________
Netsphere, Inc. et. al.,
Plaintiffs
v.
Jeffrey Baron,
Defendant / Appellant
Daniel J. Sherman
(Ondova Limited Company)
Defendant / Appellee
______________________________________________________________________
Interlocutory Appeal of Order Appointing Receiver
From the United States District Court
Northern District of Texas, Dallas Division
Civil Action No. 3-09CV0988-F
____________________________________________________________________________
EMERGENCY MOTION TO STAY ORDER APPOINTING
RECEIVER OVER JEFFREY BARON PENDING APPEAL
____________________________________________________________________________
Respectfully submitted,
/s/ Gary N. Schepps
Gary N. Schepps
Texas State Bar No. 00791608
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
(214) 210-5940 - Telephone
(214) 347-4031 - Facsimile
Email: legal@schepps.net
COUNSEL FOR JEFFREY BARON
USCA5 1739
-1-
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. Appellant/Defendant: JEFFREY BARON
b. Appellee/Defendant: DANIEL J. SHERMAN, Trustee
for ONDOVA LIMITED COMPANY
c. Intervenor: VeriSign, Inc.
d. Plaintiffs: (1) Netsphere Inc
(2) Manila Industries Inc
(3) Munish Krishan
2. ATTORNEYS
a. For Appellant: Gary N. Schepps
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
b. For Appellee: Munsch Hardt Kopf & Harr, P.C.
(1) Raymond J. Urbanik, Esq.
(2) Lee J. Pannier, Esq.
3800 Lincoln Plaza
500 N. Akard Street
Dallas, Texas 75201-6659
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
c. For Intervenor: DORSEY & WHITNEY (DELAWARE) LLP
(1) Eric Lopez Schnabel, Esq.
(2) Robert W. Mallard, Esq.
USCA5 1740
-2-
d. For Plaintiffs:
(1) John W MacPete, Locke Lord Bissell & Liddell
(3) Douglas D Skierski, Franklin Skierski Lovall Hayward
(4) George M Tompkins, Tompkins PC
(5) Melissa S Hayward, Franklin Skierski Lovall Hayward
3. OTHER
a. Companies and trusts Siezed:
(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., Shiloh
(9) LLC, Novquant, LLC
(10) Manassas, LLC
(11) Domain Jamboree, LLC
(12) Genesis, LLC.
b. Receiver: Peter Vogel
c. Counsel for Receiver: Gardere Wynne Sewell LLP
(1) Peter Vogel
(2) Barry Golden
(3) Peter L. Loh
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
USCA5 1741
-3-
I. TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS .......................................................... 1
I. TABLE OF CONTENTS ............................................................................................ 3
II. SUMMARY ................................................................................................................ 4
III. STATEMENT OF THE CASE................................................................................ 4
IV. STANDARD IN GRANTING STAY PENDING APPEAL ................................... 7
V. ARGUMENT & AUTHORITY................................................................................. 8
A. LIKELIHOOD OF SUCCESS ON APPEAL ..............................................................8
Appointment of a receiver in this case is prohibited by law ...................................... 8
The purpose for which the receiver was sought is also clearly
unconstitutional......................................................................................................... 10
The means of the receivership order is clearly unconstitutional .............................. 11
The application for receivership was grossly defective ........................................... 11
The order appointing receiver was issued without even minimal procedural
due process and should be declared void.................................................................. 14
B. IRREPARABLE INJURY...........................................................................................15
Deprivation of constitutional rights is irreparable injury as a matter of law............ 15
Serious and irreparable harm to Mr. Baron personally............................................. 16
No party from which to recover damages ................................................................ 18
C. NO SUBSTANTIAL HARM TO OTHER PARTIES...............................................18
D. PUBLIC INTEREST...................................................................................................19
VI. CONCLUSION ....................................................................................................... 20
VII. PRAYER ................................................................................................................ 20
VIII. TABLE OF AUTHORITIES .............................................................................. 21
CERTIFICATE OF SERVICE .................................................................................... 23
USCA5 1742
-4-
TO THE HONORABLE FIFTH CIRCUIT COURT OF APPEALS:
COMES NOW JEFFREY BARON, Appellant, and pursuant to Federal Rule of
Appellate Procedure 8(a)(2) moves this Honorable Court to stay the District Court’s
Order Appointing Receiver over Mr. Baron and all his assets signed on November 24,
2010 [Docket #124, and Docket #130, Entered 11/30/2010] in the District Court below,
pending appeal of that order to this Court pursuant to 28 U.S.C. §1292(a)(2).
The granting of this motion is appropriate because the Appellant Jeffrey Baron
has substantial likelihood of success on appeal, and is suffering immediate and
irreparable injury from the District Court’s order.
II. SUMMARY
The relevant law is clear and longstanding. There is no basis in law to appoint a
receiver in this case and the law expressly prohibits such an appointment.
Moreover, the District Court’s order appointing receiver was issued without due
process for a clearly improper and unconstitutional purpose, and squarely violates the
Constitution of the United States. The damages being inflicted upon Mr. Baron by
virtue of the order are very real, harsh, and irreparable.
III. STATEMENT OF THE CASE
This motion and appeal arise out of a breach of contract lawsuit filed in the
District Court.
1
In this lawsuit Netsphere sought to enforce an alleged contract entered
into with Jeffry Baron and Ondova Limited Company. (Exhibit B). Subsequent to the
1
Netsphere, Inc., et.al., v. Jeffrey Baron, and Ondova Limited Company, Civil action no. 3-
09CV0988-F in the Northern District of Texas.
USCA5 1743
-5-
filing of the lawsuit, Ondova was forced to file for bankruptcy protection. Thereafter,
all claims and controversies in the District Court lawsuit settled. (Exhibit C).
Jeffrey Baron is not in bankruptcy. Mr. Baron is a defendant in the District
Court lawsuit and the beneficial owner of the equity of Ondova, the company in
bankruptcy.
Mr. Baron became concerned that the attorney for the trustee in the Ondova
bankruptcy, Mr. Raymond J. Urbanik, was charging grossly excessive fees
2
. Mr. Baron
filed an objection to Mr. Urbanik’s latest fee application (over three hundred thousand
dollars) in the bankruptcy court. (Exhibits A, D).
Mr. Urbanik then filed in the District Court breach of contract lawsuit a motion
to appoint a particular receiver over Mr. Baron. Mr. Urbanik sought to have Mr. Baron
stripped of all his possessions and for that receiver to take possession of Mr. Baron in
the nature of a guardianship so that Mr. Baron would be unable to hire legal counsel.
(Exhibit E).
Mr. Urbanik cited as the sole necessity for his motion that “13. Therefore, 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.”
3
(Exhibit E).
2
Cloaked with authority and legitimacy as the attorney for the bankruptcy trustee, Mr. Urbanik
has effectively drained all the assets of Ondova through massive attorney fee billings. Mr.
Urbanik has billed about a million dollars in fees, a sum greater than all of the combined
creditors’ claims against the small company. In other words, it would have been cheaper just to
pay all the claims than Mr. Urbanik’s bill. Notably, Mr. Urbanik’s incredible fees did not
remove most of the claims. (Exhibit D).
3
Mr. Urbanik offered the unusual theory that some of Mr. Baron’s former counsel were making
USCA5 1744
-6-
Without providing any notice and the opportunity for Mr. Baron to be heard,
without any supporting affidavits, and without the entry of any findings, the District
Court below entered an order stripping Mr. Baron of all his possessions and appointed
the receiver requested by Mr. Urbanik over Mr. Baron’s person and property.
4
(Exhibit F).
The receiver then seized all of Mr. Baron’s assets, appeared in the bankruptcy
court asserting to hold all of Mr. Baron’s rights, and withdrew the objection to Mr.
Urbanik’s fee application. (Exhibit G). The bankruptcy court then sealed Mr. Urbanik’s
fee application so that it could not be examined by the public. (Exhibit H).
Appellant filed a motion in the District Court seeking an order vacating the
appointment of a receiver over Jeffrey Baron and in the alternative the issuance of a
stay pending appeal. (Exhibit I). Appellant twice requested from the District Court, at a
three day interval, emergency consideration of his request for emergency relief.
(Exhibit J). Appellant’s counsel has phoned the chambers of the District Court and has
now for several days attempted to secure a ruling. According to the District Court’s law
claims in Ondova’s bankruptcy case (which has no connection to the district court action)
asserting they benefited Ondova, and therefore Mr. Baron needed to be stripped of all his assets.
Assuming, arguendo that Mr. Baron has any control over what his former attorneys do in the
bankruptcy court, an order by the bankruptcy court that claims from former counsel of Mr. Baron
will not be allowed as claims against Ondova Limited, would solve the problem.
4
The order appointing receiver and seizure actions of the receiver actually go further, seizing the
assets of retirement and spendthrift trusts for which Mr. Baron is the beneficiary, as well as the
assets of the companies owned by the spendthrift trusts. Again, Mr. Baron is not in
bankruptcy and is not a judgment debtor. A court is moreover absolutely prohibited from
attempting to appoint a receiver in a bankruptcy case. 11 U.S.C. §105(b).
No party has made any claim to any property right in any of Mr. Baron’s assets. Rather, the
express and only purpose of the receivership and summary confiscation of all of Mr. Baron’s
property is to prevent Mr. Baron from being able to hire legal counsel. (Exhibit E).
USCA5 1745
-7-
clerk the District judge has been off traveling, and they were not able to contact him.
Mr. Baron is currently being deprived of most of his civil rights. (Exhibit F). All
his assets, bank accounts, and credit cards have been seized. Mr. Baron’s right to a jury
trial with respect to other’s claims against him (and his claims against them) has been
suspended, and it is the receiver who now decides what claims will be paid from Mr.
Baron’s money. The receiver has already waived Mr. Baron’s rights with regard to the
objection to Mr. Urbanik’s fees. Daily more money is being siphoned from Mr. Baron’s
assets as more and more ‘costs of receivership’ are incurred.
The emotional and physical impact on Jeffrey Baron has been debilitating. The
impact to his health from the stress and restricted access to food and treatment has
reached the point that further delay in waiting for the District Court is no longer an
option. Emergency relief is necessary. (Exhibit A).
IV. STANDARD IN GRANTING STAY PENDING APPEAL
The Fifth Circuit has adopted the four standards set out in Virginia Petroleum
Job. Ass'n v. Federal Power Com'n, 259 F.2d 921 (DC Cir. 1958) to determine whether
stay pending appeal should be granted. Belcher v. Birmingham Trust National Bank,
395 F.2d 685 (5th Cir. 1968). Those factors are: (1) Whether the movant has made a
showing of likelihood of success on the merits; (2) Whether the movant has made a
showing of irreparable injury if the stay is not granted; (3) Whether the granting of the
stay would substantially harm the other parties; and (4) Whether the granting of the stay
would serve the public interest. Id.
USCA5 1746
-8-
V. ARGUMENT & AUTHORITY
A. LIKELIHOOD OF SUCCESS ON APPEAL
Appointment of a receiver in this case is prohibited by law
As a matter of longstanding Federal law, an unsecured contract creditor
5
has, in
the absence of statute, no substantive right, legal or equitable, in or to the property of his
debtor and may not be granted an order of receivership against the debtor. Pusey &
Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923).
Mr. Sherman (in whose putative name Mr. Urbanik filed the motion for
receivership) is neither individually nor as trustee a judgment creditor of Jeffrey Baron.
Mr. Sherman neither individually nor as trustee has any ownership interest in Mr.
Baron’s property. Accordingly, as a matter of law Mr. Sherman lacks standing to bring
a motion for appointment of a receiver under Federal law. Williams Holding Co. v.
Pennell, 86 F. 2d 230 (5th Cir. 1936). As Pusey explains “[A]n unsecured simple
contract creditor … has no right whatsoever in equity until he has exhausted his legal
remedy. After execution upon a judgment recovered at law has been returned
unsatisfied he may proceed in equity by a creditor's bill.” Pusey at 497.
The Fifth Circuit has recognized three grounds under Federal law pursuant to
which a District Court may appoint a receiver: (1) the appointment of a receiver can be
sought “by anyone showing an interest in certain property or a relation to the party in
5
The putative movant for receivership below, Daniel J. Sherman, is not a creditor of Mr.
Baron’s. The opposite, Mr. Baron is a creditor of the bankruptcy estate. Further, with respect to
any actual claims Mr. Sherman or Ondova Limited might have against Mr. Baron (none have
been asserted), the District Court notably lacks subject matter jurisdiction as there is no diversity
of citizenship.
USCA5 1747
-9-
control or ownership thereof such as to justify conservation of the property by a court
officer”; (2) receivers may be appointed “to preserve property pending final
determination of its distribution in supplementary proceedings in aid of execution”; and
(3) receivership may be an appropriate remedy for a judgment creditor who: (a) “seeks
to set aside allegedly fraudulent conveyances by the judgment debtor”, (b) “has had
execution issued and returned unsatisfied”, (c) “proceeds through supplementary
proceedings pursuant to Rule 69”, (d) “seeks to subject equitable assets to the payment
of his judgment”, or (e) “otherwise is attempting to have the debtor's property preserved
from dissipation until his claim can be satisfied.” Santibanez v. Wier McMahon & Co.,
105 F. 3d 234, 241 (5th Cir. 1997)(emphasis).
The appointment of a receiver to prevent a defendant from hiring legal counsel is
not one of the three grounds recognized by the Fifth Circuit, nor by the Supreme Court.
The appointment of a receiver is subject to close scrutiny by the appellate court.
Tucker v. Baker, 214 F. 2d 627, 631 (5th Cir. 1954). Appointment of a receiver where
there is no claim to the assets seized is strictly prohibited— there is no occasion for a
court to appoint a receiver of property of which it is asked to make no further
disposition. Id. Accordingly, to prevent an individual from being able to hire an
attorney can never be a lawful purpose for the appointment of a receiver.
Similarly, the appointment of a receiver can not be used as a means to provide
substantive relief. Kelleam v. Maryland Casualty Co. of Baltimore, 312 U.S. 377, 381
(1941). The Supreme Court has frequently admonished that a federal court should not
USCA5 1748
-10-
appoint a receiver where the appointment is not a remedy auxiliary to some primary
relief which is sought. Id. As explained by this, and the Supreme Court, Receiverships
“are to be watched with jealous eyes lest their function be perverted.” Id.; Tucker at
631. The appointment of a receiver in order to force an individual to do something
having nothing to do with the property seized is a gross perversion of Receivership.
The purpose for which the receiver was sought is also clearly unconstitutional
The Fifth Amendment to the United States Constitution establishes 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, “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). A defendant 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).
If in any case, civil or criminal, a state or federal court were arbitrarily to refuse
to hear a party by counsel, employed by and appearing for him, it reasonably may not
be doubted that such a refusal would be a denial of a hearing, and, therefore, of due
process in the constitutional sense. Chandler v. Fretag, 348 U.S. 3, 10 (1954). A
USCA5 1749
-11-
necessary corollary is that “a defendant must be given a reasonable opportunity to
employ and consult with counsel; otherwise, the right to be heard by counsel would be
of little worth.” Id.
The means of the receivership order is clearly unconstitutional
The seizure clause of the Fourth Amendment prohibits the unreasonable
interference with possession of a person’s property. Severance v. Patterson, 566 F.3d
490 (5th Cir. 2009). The seizure ordered by this Court was purely arbitrary—based on
no case law or statute, ordered without a trial on the merits of any claim, and entered
based on no objective guidelines or guiding principles.
The application for receivership was grossly defective
Most Federal courts of appeal have held that a receivership is an “extraordinary”
equitable remedy to be “employed with the utmost caution” and “granted only in cases
of clear necessity.” 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).
Accordingly, the circuits that have addressed the issue have held that the district
court has discretion to appoint a receiver “only after evidence has been presented and
findings made showing the necessity of a receivership.” E.g., Solis, 563 F.3d at 438. ,
The Fifth Circuit has noted six factors considered as indicating the need for a
receivership in those circumstances where the appointment of a receiver is permitted by
USCA5 1750
-12-
Federal law, (e.g., supplementary proceedings in aid of execution, etc..). Santibanez,
105 F. 3d at 241-242. Those factors are:
(1) A valid claim by the party seeking the appointment;
(2) The probability that fraudulent conduct has occurred or will occur to frustrate
that claim;
(3) Imminent danger that property will be concealed, lost, or diminished in value;
(4) Inadequacy of legal remedies;
(5) Lack of a less drastic equitable remedy; and
(6) Likelihood that appointing the receiver will do more good than harm.
In addition for failing to allege a lawful grounds for the issuance of an order
appointing receiver, the application for receivership below failed to allege
6
any of the six
factors recognized by the Fifth Circuit. There is no claim against Mr. Baron by the party
seeking the appointment. There is no allegation of fraudulent conduct. There is no danger
of property being concealed or lost. There is no allegation of inadequacy of legal remedies.
There is no allegation that a less drastic equitable remedy was not available. There is no
reference in the application to the harm that appointing a receiver would do. (Exhibit E).
In sum, a legally groundless motion
7
sought for an unlawful purpose by a party
lacking standing as a matter of law. The result has been the suspension of almost every
civil liberty of Mr. Baron, taking all his property, suspending his right to contract, his
right to privacy, his right to privileged communications with his attorneys, and, by
design, impairing is right to travel and to hire legal counsel to defend and protect his
6
And the District Court below failed to enter supporting findings as to.
7
Brought in a court lacking subject matter jurisdiction over the non-diverse parties.
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rights.
While those who have inflicted this upon Mr. Baron are now gorging themselves
on his money, Mr. Baron is effectively imprisoned in Dallas, dependent like an
indentured servant on the whims and desires of a Receiver that the District Court below
has ordered may lord over him. (Exhibits A, F).
And Mr. Baron’s ‘crime’ ? Jeffrey Baron tried to object to Mr. Urbanik’s
milking of almost all the equity—almost one million dollars for attorney’s fees for the
bankruptcy trustee— from the small company in which Baron is the beneficial equity
holder. Of course, there are two sides to every story. As Mr. Urbanik expressly stated
in his motion, appointing a receiver over Mr. Baron and all his assets is one sure way to
stop Mr. Baron from hiring an “army of lawyers” to defend his rights against what he
was concerned were improper, unlawful actions on the part of Mr. Urbanik.
8
8
Mr. Urbanik’s motion makes the seemingly supported, but totally irrelevant complaint that Mr.
Baron hired quite a few lawyers and didn’t pay his bill. Firstly, that is not a legal basis to
appoint a receiver and seize an individual’s assets. Mr. Baron is not in bankruptcy. If he owed
money to his former counsel they can sue and recover for any fees due. But Mr. Urbanik’s
claims don’t stand up to a close examination. Firstly, he conflates the counsel retained for
Ondova and other companies with Mr. Baron’s counsel. Secondly, although not in short supply,
when each is individually examined the attorney’s claims against Mr. Baron seem dubious at
best. For example, the attorney that Mr. Urbanik highlighted by attaching a lawsuit to his motion
for receivership (exhibit b to Mr. Urbanik’s motion) is suing Mr. Baron for one million dollars.
Close reading of the petition reveals that the attorney had no contract, and worked less than two
weeks. Notably, that same attorney’s previous employer has sued the attorney in an unrelated
lawsuit, alleging fraud, theft, breach of fiduciary duty, and other grossly unethical practices.
(Exhibit K).
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The order appointing receiver was issued without even minimal procedural
due process and should be declared void
Where the taking of one's property is so obvious, it needs no extended argument
to conclude that absent notice and a prior hearing the order violates the fundamental
principles of due process. Sniadach v. Family Finance Corp. of Bay View, 395 U.S.
337, 342 (1969). Even the temporary taking of property that is not in execution of a
final judgment is a “deprivation” as contemplated by the constitution and “had to be
preceded by a fair hearing”. Fuentes v. Shevin, 407 U.S. 67 (1972). Notably, due
process requires an evidentiary hearing prior to the deprivation of some type of
property interest even if such a hearing is provided thereafter. Mathews v. Eldridge, 424
U.S. 319, 333.
The District Court’s order appointing receiver was not preceded by any type of
hearing prior, and was not even supported by affidavit. It is therefore void for lack of
procedural due process. See Pennoyer v. Neff, 95 U.S. 714, 737 (1878) (“such
proceeding is void as not being by due process of law”); World-Wide Volkswagen Corp.
v. Woodson, 444 U.S. 286, 291 (1980) (“rendered in violation of due process is void in
the rendering”); Margoles v. Johns, 660 F. 2d 291,295 (7th Cir. 1981)(“void only if the
court that rendered it lacked jurisdiction ... or if it acted in a manner inconsistent with
due process of law”). (Exhibit L).
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B. IRREPARABLE INJURY
Deprivation of constitutional rights is irreparable injury as a matter of law
It is well settled that the loss of constitutional freedoms for even minimal
periods of time constitutes irreparable injury. Deerfield Med. Center v. City of
Deerfield Beach, 661 F.2d 328, 338 (5th Cir. 1981). Accordingly, the receivership
order—expressly designed to interfere with Mr. Baron’s constitutional right to hire legal
counsel— involves irreparable injury as a matter of law.
Similarly, each day, in fact each hour that Mr. Baron is deprived of property
taken by an unreasonable seizure, as a matter of law he is suffering irreparable injury.
Similarly, with each piece of private and personal information about his private
life and affairs that Mr. Baron is compelled to disclose, his constitutional right to
privacy is either threatened or in fact being impaired. This “mandates a finding of
irreparable injury”. Deerfield at 338.
When a persons’ very right to control assets is stripped from them, a cascade of
constitutional rights are impaired. It is the right to own and control property that is the
cornerstone of a democratic society. For example, suspending an individual’s right to
possess property directly acts to impair their First Amendment interests by depriving
them of access to the primary medium of public expression—paid advertisements.
Such an impairment of an individual’s First Amendment freedoms, for even minimal
periods of time constitutes irreparable injury. Elrod v. Burns, 427 U.S. 347, 373-4
(1976).
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Serious and irreparable harm to Mr. Baron personally
As detailed in Mr. Baron’s declaration attached hereto as Exhibit A, and
incorporated herein by reference, the receivership is imposing acute and irreparable
injury to Mr. Baron personally :
1. He is living in constant fear, day and night. Threatened with contempt, is
a prisoner to the constant demands and threats of the receiver. He is
forced, by threat of jail for contempt of the order, to comply with the
whims of the receiver.
2. He is being, against his will, forced to reveal all sorts of private, personal
information.
3. He is suffering emotionally, is becoming despondent, and feels constantly
threatened with contempt and even jail.
4. He is suffering from attacks of shortness of breath and dizziness to the
extent that he cannot stand upright.
5. The loss of all of his assets without a trial is causing Mr. Baron to become
severely depressed, compounded by the fact that his freedom, and privacy
to freely seek medical and psychological care and support has been
stripped from him.
6. With every piece of private and attorney-client information that the
receiver and his adversary obtain from him, Mr. Baron feels that he is
being exploited.
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7. MR. BARON’S SENSE OF SELF CONTROL HAS BEEN TAKEN
FROM HIM, NO LESS THAN IF HE HAD BEEN THROWN IN
JAIL.
8. Mr. Baron cannot travel – his money has been taken from him.
9. Mr. Baron cannot hire lawyers to defend himself.
10. Mr. Baron’s health and medical condition as a very real matter are rapidly
deteriorating under the stress of the receivership order.
11. Mr. Baron is not able to sleep and is suffering from frequent panic attacks,
and nausea.
12. Mr. Baron’s diabetes is worsening under the stress of the District Court’s
order and he is no longer able to control his blood sugar level causing his
blood glucose levels to jump over 500 (normal readings are less than 100).
13. Mr. Baron is deprived of the fundamental right to manage his own affairs,
and make decisions about his own assets.
There is no way to quantify the damage done to Jeffrey Baron’s veins and
arteries each day caused by his inability to control his blood sugar levels due to the
stress naturally arising out of being stripped of his assets and control over his life.
Similarly, there is no way to prove the amount of damages Mr. Baron is suffering from
being unable to choose how his money is invested and his assets managed. Jeffrey
Baron is suffering irreparable injury.
USCA5 1756
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No party from which to recover damages
Mr. Baron is faced with a situation where the wrongful actors carry a mantle of
immunity. E.g. Boullion v. McClanahan, 639 F.2d 213 (5th Cir. 1981). To the extent
that absolute judicial immunity attaches to the actions of Mr. Urbanik in his capacity as
attorney for a bankruptcy trustee, Mr. Baron has no party from which to seek redress for
his damages.
Since Mr. Baron is the equitable owner of Ondova (the entity ultimately in who’s
name Mr. Urbanik has acted), any recovery against Ondova would just be taken out of
Mr. Baron’s own pocket. Accordingly, as a very real matter the damages being caused
to Mr. Baron, including the ever-increasing costs of the receiver and the receiver’s
attorney, are irreparable.
C. NO SUBSTANTIAL HARM TO OTHER PARTIES
This case has settled. Moreover, no party has a legitimate interest in denying
Mr. Baron his constitutional right to legal counsel of his choice. If such an interest
could be constitutionally served, an injunction prohibiting Mr. Baron from retaining
counsel would serve the same interest, without taking away Mr. Baron’s constitutional
right to own and possess property.
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D. PUBLIC INTEREST
There is a compelling public interest in upholding the US Constitution.
Protecting an individual’s rights in his property and his privacy, and his right to hire
legal counsel of his choice, are important public interests served by granting the relief
requested by Mr. Baron.
It is frightening to think that if an individual refuses to pay the excessive
demands of an attorney or desires to object to grossly excessive fees sought by an
attorney in a bankruptcy case, that instead of a right to trial by jury or impartial hearing
before a judge, he can have all his assets and private documents stripped from him, and
become a ward of the court– incarcerated in ‘house arrest’ in one city, and prohibited
from hiring legal counsel to protect his rights.
The actions taken against Mr. Baron shock the conscious. Prior to the filing of
this appeal his attorneys were told by the receiver that they were fired, and Mr. Baron
was warned— including warnings made in writing—that he faced contempt and going
to jail if he dared attempt to hire an attorney to protect his rights. (Exhibit A).
Appellate counsel believes the deprivations Mr. Baron’s has been—and at this
hour is still subject to— are grave. Appellant prays this Court agrees.
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VI. CONCLUSION
The District Court below suspended Mr. Baron’s constitutional right to own,
access, and control his own property, for the purpose of denying Mr. Baron the
ability to retain counsel. Such an order is unlawful and violates the US
Constitution.
VII. PRAYER
Wherefore, Jeffrey Baron prays that this Honorable Court consider and grant this
motion on an expedited basis, and Stay pending appeal the Order Appointing Receiver
over the person and property of Mr. Baron signed by the District Court below on
November 24, 2010 [Docket #124, and Docket #130, Entered 11/30/2010].
Respectfully submitted,
/s/ Gary N. Schepps
Gary N. Schepps
Texas State Bar No. 00791608
5400 LBJ Freeway, Suite 1200
Dallas, Texas 75240
(214) 210-5940 - Telephone
(214) 347-4031 - Facsimile
Email: legal@schepps.net
COUNSEL FOR MOVANT,
JEFFREY BARON
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VIII. TABLE OF AUTHORITIES
FEDERAL CASES
Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316
(8th Cir. 1993) ..................................................................................................... 11
Belcher v. Birmingham Trust National Bank, 395 F.2d 685 (5th Cir. 1968)............7
Boullion v. McClanahan, 639 F.2d 213 (5th Cir. 1981)......................................... 18
Chandler v. Fretag, 348 U.S. 3, 10 (1954)........................................................ 10, 11
Consolidated Rail Corp. v. Fore River Ry. Co., 861 F.2d 322, 326-27
(1st Cir. 1988)...................................................................................................... 11
Deerfield Med. Center v. City of Deerfield Beach, 661 F.2d 328, 338
(5th Cir. 1981) ..................................................................................................... 15
Elrod v. Burns, 427 U.S. 347, 373-4 (1976)........................................................... 15
Fuentes v. Shevin, 407 U.S. 67 (1972) ................................................................... 14
Johnson v. City of Cincinnati, 310 F.3d 484, 501 (6th Cir. 2002) ......................... 10
Kelleam v. Maryland Casualty Co. of Baltimore, 312 U.S. 377, 381 (1941) .... 9, 10
Margoles v. Johns, 660 F. 2d 291,295 (7th Cir. 1981)........................................... 14
Mathews v. Eldridge, 424 U.S. 319, 333................................................................ 14
Mosley v. St. Louis Southwestern Ry., 634 F.2d 942, 946 (5th Cir. 1981) ........... 10
Pennoyer v. Neff, 95 U.S. 714, 737 (1878) ............................................................ 14
Potashnick v. Port City Const. Co., 609 F.2d 1101, 1104 (5th Cir. 1980)............. 10
Powell v. Alabama, 287 U.S. 45, 53-69 (1932)...................................................... 10
Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923)........................................8
USCA5 1760
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Rosen v. Siegel, 106 F.3d 28, 34 (2d Cir. 1997) .................................................... 11
Santibanez v. Wier McMahon & Co., 105 F. 3d 234, 241 (5th Cir. 1997) ........ 9, 12
Severance v. Patterson, 566 F.3d 490 (5th Cir. 2009)............................................ 11
Sniadach v. Family Finance Corp. of Bay View, 395 U.S. 337, 342 (1969) ......... 14
Solis v. Matheson, 563 F.3d 425, 437 (9th Cir. 2009) ........................................... 11
Tucker v. Baker, 214 F. 2d 627, 631 (5th Cir. 1954) ................................................9
Virginia Petroleum Job. Ass'n v. Federal Power Com'n, 259 F.2d 921
(DC Cir. 1958)........................................................................................................7
Williams Holding Co. v. Pennell, 86 F. 2d 230 (5th Cir. 1936)................................8
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980).............. 14
FEDERAL STATUTES
11 U.S.C. §105(b) ......................................................................................................6
28 U.S.C. §1292(a)(2)................................................................................................4
FEDERAL RULES
Federal Rule of Appellate Procedure 8(a)(2).............................................................4
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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 and by e-mail to:
Raymond J. Urbanik, Esq.
MUNSCH HARDT KOPF & HARR, P.C.
3800 Lincoln Plaza
500 N. Akard Street
Dallas, Texas 75201-6659
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
CERTIFICATE OF NOTICE
This is to certify that notice of the filing of this request for emergency relief was
provided by telephone to the Clerk of the Fifth Circuit Court of Appeals and to
counsel for the Appellee.
CERTIFIED BY: /s/ Gary N. Schepps
Gary N. Schepps
COUNSEL FOR APPELLANT
USCA5 1762
