No. 11-10501

In the

United States Court of Appeals

for the Fifth Circuit

▬▬▬▬▬▬▬▬▬▬▬▬▬▬

NETSPHERE, INC. ET AL,

Plaintiffs

JEFFREY BARON,

Defendant – Appellant

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Appellants

CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P.,

Appellant

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

▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬

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No. 10-11202

In the

United States Court of Appeals

for the Fifth Circuit

▬▬▬▬▬▬▬▬▬▬▬▬▬

NETSPHERE, INC. Et Al, Plaintiffs

JEFFREY BARON, Defendant-Appellant

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

JEFFREY BARON, Et Al, Defendants

QUANTEC L.L.C.; NOVO POINT L.L.C., Appellants

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

JEFFREY BARON, Defendant- Appellant

DANIEL J SHERMAN, Appellee

▬▬▬▬▬▬▬▬▬▬▬

Interlocutory Appeal of Orders in Receivership on Appeal

▬▬▬▬▬▬▬▬▬▬▬

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Cons. w/ No. 11-10290

NETSPHERE, INC. ET AL, Plaintiffs

JEFFREY BARON, ET AL, Defendants

QUANTEC L.L.C.; NOVO POINT L.L.C., Non-Party Appellants

PETER S. VOGEL, Appellee

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Cons. w/ No. 11-10390

NETSPHERE, INC. ET AL, Plaintiffs

JEFFREY BARON, Defendant – Appellant

QUANTEC L.L.C.; NOVO POINT L.L.C., Appellants

ONDOVA LIMITED COMPANY, Defendant – Appellee

PETER S. VOGEL, Appellee

----------------------------------------------------------------------------------------

Cons. w/ No. 11-10501

NETSPHERE, INC. ET AL, Plaintiffs

JEFFREY BARON, Defendant – Appellant

QUANTEC L.L.C.; NOVO POINT L.L.C., Appellants

CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P.,

Appellant

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

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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

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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

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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:

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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

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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

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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

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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).

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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

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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

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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

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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

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TABLE OF AUTHORITIES

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

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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

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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

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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

TATE CASES

Horton v. Ferrell, 335 Ark. 366, 981 S.W.2d 88 (1998) ..........................76

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.

Sherman falsely made it look like the

bankruptcy judge desired a receiver over Baron if he hired any

lawyers.

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.”

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.

R. 1576.

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”.

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

, as were all of his future earnings

Jeff was ordered not to cash any checks

or enter into any business

transactions

. 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.”

SR. v8 p1213.

R. 1620.

R. 1622 paragraph F.

R. 1620, 1621 paragraph C.

R. 1620, 1622, 1627 paragraph A.

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.

Baron’s estate consists essentially of some savings accounts and some

Roth IRAs.

Accordingly, the receiver was not left with very much to

do. Baron appealed the receivership order on Dec. 2, 2010.

The receiver

then moved to add a multitude of companies into his

receivership (without lawsuits, service, evidence, or the normally

expected process of law).

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.

R. 3891.

SR. v8 p1007.

R. 1699-1700.

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.

The amount is staggering— almost a

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

(in the total sum of

$870,237.19) by the District Court against Baron include, for example,

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:

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.

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

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.

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:

“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.

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.

(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

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.

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

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

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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

issued against

Baron and his property while he was deprived of that basic

constitutional right should be reversed.

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,

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.

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

should therefore be reversed.

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

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

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.

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).

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.

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.

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).

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

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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

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No. 10-11202

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NETSPHERE, INC. et al.,

Plaintiffs,

JEFFREY BARON,

Defendant/Appellant,

ONDOVA LIMITED COMPANY,

Defendant - Appellee.

----------------------------------------------------------------------------------------------------

Consolidated with No. 11-10113

NETSPHERE, INC., et al.,

Plaintiffs,

JEFFREY BARON, et al.,

Defendants,

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Movants – Appellee,

PETER S. VOGEL,

Appellee.

----------------------------------------------------------------------------------------------------

Consolidated with No. 11-10289

NETSPHERE, INC., et al.,

Plaintiffs,

JEFFREY BARON,

Defendant,

DANIEL J. SHERMAN,

Appellee.

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----------------------------------------------------------------------------------------------------

Consolidated with No. 11-10290

NETSPHERE, INC., et al.,

Plaintiffs,

JEFFREY BARON, et al.,

Defendants,

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Movants – Appellants,

PETER S. VOGEL,

Appellee.

----------------------------------------------------------------------------------------------------

Consolidated with No. 11-10390

NETSPHERE, INC., et al.,

Plaintiffs,

JEFFREY BARON,

Defendant/Appellant,

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Movants – Appellants,

ONDOVA LIMITED COMPANY,

Defendant – Appellee,

PETER S. VOGEL,

Appellee.

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----------------------------------------------------------------------------------------------------

Consolidated with No. 11-10501

NETSPHERE, INC. et al.,

Plaintiffs,

JEFFREY BARON,

Defendant - Appellant,

QUANTEC L.L.C.; NOVO POINT L.L.C.,

Movants -Appellants,

CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL, L.L.P.,

Appellant,

PETER S. VOGEL,

Appellee,

DANIEL J. SHERMAN,

Appellee.

BRIEF OF APPELLEE PETER S. VOGEL, RECEIVER IN

CONSOLIDATED APPEALS 11-10290, 11-10390, AND 11-10501

Barry M. Golden

Texas Bar No. 24002149

Stacy R. Obenhaus

Texas Bar No. 15161570

Gardere Wynne Sewell, LLP

1601 Elm Street, Suite 3000

Dallas, Texas 75201

Tel: 214.999.3000

Fax: 214.855.4667

Counsel for Peter S. Vogel, Receiver

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PETER S. VOGEL, RECEIVER’S

CERTIFICATE OF INTERESTED PERSONS

The undersigned counsel of record for Appellee Peter S. Vogel, Receiver

certified that the following listed persons and entities as described in the fourth

sentence of Rule 28.2.1 have an interest in the outcome of this case. These

representations are made in order that the judges of this court may evaluation

possible disqualification or recusal.

A. Parties

1. Defendant/Appellant:

2. Defendant/Appellee:

3. Movants/Appellants:

4. Appellee:

5. Appellant:

6. Plaintiffs:

Jeffrey Baron

Daniel J. Sherman, Trustee for

Ondova Limited Company

(1) Quantec, LLC

(2) Novo Point, LLC

Peter S. Vogel, Receiver

Carrington, Coleman, Sloman &

Blumenthal, L.L.P.

(1) Netsphere, Inc.

(2) Manila Industries, Inc.

(3) Munish Krishan

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B. A

ttorneys

1. For Defendant/ Appellant

Jeffrey Baron and

Movants/Appellants

Quantec, LLC and Novo

Point, LLC:

2. For Defendant/Appellee

Daniel J. Sherman,

Trustee for Ondova

Limited Company:

3. For Appellee Peter S.

Vogel, Receiver:

4. For Appellant Carrington,

Coleman, Sloman &

Blumenthal, L.L.P.:

5. For Plaintiffs Netsphere,

Inc., Manila Industries,

Inc., and Munish Krishan:

Gary N. Schepps

5400 LBJ Freeway, Suite 1200

Dallas, Texas 75240

(214) 210-5940 (Telephone)

(214) 347-4031 (Facsimile)

MUNSCH HARDT KOPF & HARR,

P.C.

ichard M. Hunt

Raymond J. Urbanik

Lee J. Pannier

Dennis Roossien

3800 Lincoln Plaza

500 N. Akard Street

Dallas, Texas 75201

(214) 855-7500 (Telephone)

(214) 855-7584 (Facsimile)

GARDERE WYNNE SEWELL LLP

Peter S. Vogel

Barry Golden

Stacy Obenhaus

Peter L. Loh

3000 Thanksgiving Tower

1601 Elm Street

Dallas, Texas 75201

(214) 999-3000 (Telephone)

(214) 999-4667 (Facsimile)

CARRINGTON, COLEMAN, SLOMAN

& BLUMENTHAL, L.L.P.

. Michael Sutherland

Thomas F. Allen, Jr.

901 Main Street, Suite 5500

Dallas, Texas 75202

(214) 855-3000 (Telephone)

(214) 855-1333 (Facsimile)

LOCKE LORD BISSELL & LIDDELL

ohn W. MacPete

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iii

FRANKLIN SKIERSKI LOVALL

HAYWARD

ouglas D. Skierski

Peter Franklin

Erin Lovall

Melissa Hayward

TOMPKINS PC

eorge M. Tompkins

C. Other

1. Companies and entities subject to the District Court’s Order

Appointing Receiver:

a. The Village Trust

b. Equity Trust Company IRA 19471

c. Daystar Trust

d. Belton Trust

e. Novo Point, Inc.

f. Iguana Consulting, Inc.

g. Quantec, Inc.

h. Shiloh LLC

i. Novquant, LLC

j. Manassas, LLC

k. Domain Jamboree, LLC

l. Novo Point, LLC

m. Quantec, LLC

n. Iguana Consulting, LLC

o. Diamond Key, LLC

p. Quasar Services, LLC

q. Javelina, LLC

r. HCB, LLC, a Delaware limited liability company

s. HCB, LLC, a U.S. Virgin Islands limited liability

company

t. Realty Investment Management, LLC, a Delaware

limited liability company

u. Realty Investment Management, LLC, a U.S. Virgin

Islands limited liability company

v. Blue Horizon Limited Liability Company

w. Simple Solutions, LLC

x. Asiatrust Limited

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y. S

outhpac Trust Limited

z. Stowe Protectors, Ltd.

aa. Royal Gable 3129 Trust

bb. CDM Services, LLC

cc. URDMC LLC

2. Non-Party Claimants:

a. West & Associates, LLP

b. Pronske and Patel P.C.

c. Carrington, Coleman, Sloman & Blumenthal, LLP

d. Aldous Law Firm

e. Rasansky Law Firm

f. Schurig Jetel Beckett Tackett

g. Powers Taylor, LLP

h. Gary G. Lyon

i. Dean Ferguson

j. Bickel & Brewer

k. Robert J. Garrey

l. Hohmann, Taube & Summers, LLP

m. Michael B. Nelson, Inc.

n. Mateer & Schaffer, LLP

o. Broome Law Firm, PLLC

p. Fee, Smith, Sharp & Vitullo, LLP

q. Reyna Hinds & Crandall

r. Jones, Otjen & Davis

s. Hitchcock Evert, LLP

t. David L. Pacione

u. Shaver Law Firm

v. James M. Eckels

w. Joshua E. Cox

x. Friedman & Feiger, LLP

y. Jeffrey T. Hall

z. Sidney B. Chesnin

aa. Kevin F. D’Amour, P.C.

CERTIFIED BY: /s/ Barry M. Golden

Barry M. Golden,

Attorney of Record for Peter S. Vogel, Receiver

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STATEMENT REGARDING ORAL ARGUMENT

The Receiver submits the Trustee’s Brief on Appeal (the “Trustee’s Brief,” a

true and correct copy of which is attached hereto as Exhibit A) as the Receiver’s

principal brief in the consolidated appeals 11-10290, 11-10390, and 11-10501 (as

to the part of that appeal filed by Mr. Baron, Novo Point, LLC, and Quantec, LLC

(the “Baron Appellants”) but not the part filed by Carrington, Coleman, Sloman &

Blumenthal, L.L.P. (“CCSB”)) and incorporates the Trustee’s Brief by reference.

In doing so, the Receiver adopts the Trustee’s statement regarding oral argument

put forth in the Trustee’s Brief. (See Exhibit A.)

As to CCSB’s appeal in Case No. 11-10501, the Receiver request that the

Court not order oral argument and that the Court expedite its ruling on CCSB’s

appeal.

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TABLE OF CONTENTS

PETER S. VOGEL, RECEIVER’S CERTIFICATE OF INTERESTED

PERSONS ......................................................................................................... i

STATEMENT REGARDING ORAL ARGUMENT ............................................... v

JURISDICTIONAL STATEMENT .......................................................................... 1

STATEMENT OF THE CASE .................................................................................. 2

STATEMENT OF FACTS ........................................................................................ 3

I. Consolidated Appeals. ..................................................................................... 3

II. CCSB Appeal. .................................................................................................. 3

A. The Former Attorney Claims. ............................................................... 4

B. The Trustee Stated His Intention to Pay CCSB’s Claim. ..................... 4

C. Motions to Approve Assessments. ........................................................ 5

D. Hearing on the Motions to Approve Assessments. ............................... 6

E. The Disbursement Order. ...................................................................... 7

F. CCSB’s Motion to Reconsider. ............................................................. 8

SUMMARY OF ARGUMENT ................................................................................. 9

ARGUMENT ........................................................................................................... 10

I. CCSB concedes that this Court lacks jurisdiction to hear the CCSB

Appeal. ........................................................................................................... 10

A. CCSB concedes that the Court lacks jurisdiction due to CCSB’s

Motion to Reconsider. ......................................................................... 10

B. CCSB concedes that the Court lacks jurisdiction because the

Disbursement Order is not an appealable interlocutory order. ........... 11

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vii

II. CCSB waived any objection to its Former Attorney Claim being

unded by the Trustee and not the Receiver. ................................................. 13

A. The Trustee repeatedly advised the Receiver that the Trustee—

and not the Receiver—would be funding CCSB’s Former

Attorney Claim. ................................................................................... 13

B. CCSB repeatedly failed to object to its Former Attorney Claim

being funded by the Trustee. ............................................................... 13

1. Prior to the hearing on CCSB’s Former Attorney Claim,

CCSB failed to oppose the Receiver’s three written

motions not to fund such claim. ................................................ 13

a. CCSB failed to oppose the Receiver’s March 17, 2011

request not to fund CCSB’s Former Attorney Claim. .... 13

b. CCSB failed to oppose the Receiver’s March 18, 2011

request not to fund CCSB’s Former Attorney Claim. .... 14

c. CCSB failed to oppose the Receiver’s March 24, 2011

request not to fund CCSB’s Former Attorney Claim. .... 15

d. CCSB failed to oppose the Receiver’s March 24, 2011

request not to fund CCSB’s Former Attorney Claim. .... 15

2. At the hearing on CCSB’s Former Attorney Claim,

CCSB failed to object to the Trustee’s arguments not to

have the Receiver fund such claim. .......................................... 16

III. CCSB has failed to show it is harmed by the Disbursement Order. ............. 17

CONCLUSION ........................................................................................................ 18

CERTIFICATE OF SERVICE ................................................................................ 19

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viii

TABLE OF AUTHORITIES

Page(s)

CASES

Citibank, N.A. v. Data Lease Fin. Corp.,

645 F.2d 333 (5th Cir. 1981) .............................................................................. 12

Martinez v. Tex. Dept. of Criminal Justice,

300 F.3d 567 (5th Cir. 2002) .............................................................................. 13

N.C.R.R. v. Swasey,

90 U.S. 405 (1874) .............................................................................................. 12

Resolution Trust Co. v. Smith,

53 F.3d 72 (5th Cir. 1995) .................................................................................. 12

Ross v. Marshall,

426 F.3d 745 (5th Cir. 2005) .............................................................................. 11

Simmons v. Reliance Standard Life Ins. Co.,

310 F.3d 865 (5th Cir. 2002) .............................................................................. 11

Wark v. Spinuzzi,

376 F.2d 827 (5th Cir. 1967) .............................................................................. 12

STATUTES

8 U.S.C. § 1292(a)(2) ............................................................................... 2, 9, 11, 12

28 U.S.C. § 2111 ...................................................................................................... 17

OTHER AUTHORITIES

Fed. R. App. P. 4(a)(4)(A) ....................................................................................... 11

Fed. R. App. P. 4(a)(4)(B)(i) .................................................................................... 11

Fed. R. Civ. P. 52 ..................................................................................................... 11

Fed. R. Civ. P. 59 ..................................................................................................... 11

Fed. R. Civ. P. 61 ..................................................................................................... 17

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JURISDICTIONAL STATEMENT

The Receiver submits the Trustee’s Brief as the Receiver’s principal brief in

the consolidated appeals 11-10290, 11-10390, and 11-10501 (as to the part of Case

No. 11-10501 filed by the Baron Appellants but not the part filed by CCSB) (the

“Consolidated Appeals”) and incorporates the Trustee’s Brief by reference. (See

Exhibit A.) In doing so, the Receiver adopts the Trustee’s jurisdictional statement

put forth in the Trustee’s Brief. (Id.)

The Receiver makes an additional jurisdictional statement as to CCSB’s

appeal in Case No. 11-10501 (the “CCSB Appeal”). CCSB concedes in its Motion

to Dismiss in Part and to Lift Stay, or to Abate (“CCSB’s Motion to Dismiss”) that

this Court does not have jurisdiction to hear an appeal from the district court’s

Findings of Fact, Conclusions of Law, and Order on Assessment and Disbursement

of Former Attorney Claims [Docket No. 575] (the “Disbursement Order”). [Fifth

Circuit Document No. 00511562712.] Specifically, CCSB concedes that this

Court lacks jurisdiction “because CCSB timely filed a Motion to Reconsider or to

Alter or Amend the district court’s [Disbursement] Order” and “the district court

must be given the opportunity to hear CCSB’s Motion to Reconsider before this

Court entertains any appeal of the Order itself.” [Id. at p. 1.] Additionally, CCSB

concedes that this Court lacks jurisdiction because “the [Disbursement] Order itself

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does not appear to be an appealable interlocutory order under 28 U.S.C. §

292(a)(2).” [Id. at p. 7.]

STATEMENT OF THE CASE

There are a total of six appeals to this Court arising out of the Receivership:

Case Nos. 10-11202, 11-10113, 11-10289, 11-10290, 11-10390, and 11-10501.

The Receiver is a named appellee in four of the six appeals: Case Nos. 10-10113,

11-10290, 11-10390, and 11-10501 (i.e., the Consolidated Appeals and the CCSB

Appeal). On June 21, 2011, the Court granted the Receiver’s motion to adopt the

Trustee’s amicus brief in Case No. 11-10113 as the Receiver’s principal brief in

that appeal. [See Fifth Circuit Document Nos. 00511504433, 00511515192, and

00511515841.] On October 3, 2011, this Court consolidated all six appeals under

Case No. 10-11202. [Fifth Circuit Document No. 00511620824.]

The Receiver submits the Trustee’s Brief as the Receiver’s principal brief in

the Consolidated Appeals and incorporates the Trustee’s Brief by reference. (See

Exhibit A.) In doing so, the Receiver adopts the Trustee’s statement of the case

put forth in the Trustee’s Brief. (Id.)

The Receiver provides an additional statement of the case as to the CCSB

Appeal. This case arises from CCSB’s appeal of the Disbursement Order in which

the district court ordered a disbursement of $0 out of the receivership estate to

CCSB because “[t]he Trustee for Ondova has advised the Receiver that this claim

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will be paid through the Ondova bankruptcy estate.” [Docket No. 575 at 15.]

CSB complains that the Disbursement Order errs by not disbursing CCSB’s full

$224,233.27 claim for attorneys’ fees out of the receivership estate. CCSB brings

this appeal of the Disbursement Order even though (1) its motion to reconsider the

Disbursement Order (“CCSB’s Motion to Reconsider”) is still pending before the

district court, rendering any appeal of such order ineffective; (2) CCSB concedes

that the Disbursment Order is not an appealable interlocutory order; (3) by failing

to raise it to the district court, CCSB waived any objection to its attorneys’ fees

claim being paid through the Ondova bankruptcy estate and not the receivership

estate; and (4) CCSB has not been harmed by the Disbursement Order since its

claim will be funded through the Ondova bankruptcy estate.

STATEMENT OF FACTS

I. Consolidated Appeals.

The Receiver submits the Trustee’s Brief as the Receiver’s principal brief in

the Consolidated Appeals and incorporates the Trustee’s Brief by reference. (See

Exhibit A.) In doing so, the Receiver adopts the Trustee’s statement of facts put

forth in the Trustee’s Brief. (Id.)

II. CCSB Appeal.

The Receiver provides an additional statement of facts as to the CCSB

appeal.

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A. T

he Former Attorney Claims.

On November 24, 2010, the district court issued its Order Appointing

Receiver (the “Receivership Order”), in which it appointed Peter S. Vogel to serve

as the Receiver for Baron and multiple “Receivership Parties” with the full power

of an equity receiver. [Docket No. 124; see also Docket No, 575 at ¶ 2.] One of

the goals in issuing the Receivership Order and creating the Receivership was for

the Receiver to collect evidence regarding the claims of numerous lawyers who

Baron engaged, accepted services from, but failed to pay, leading to multiple

claims against Baron and his related entities for unpaid services (the “Former

Attorney Claims”). [Docket No. 575 at ¶¶ 1-3.] With the district court’s guidance,

instructions, and orders, the Receiver was to disburse assets to resolve the Former

Attorney Claims. [Id.]

B. The Trustee Stated His Intention to Pay CCSB’s Claim

The district court ordered the Receiver to collect evidence regarding the

Former Attorney Claims, assess such evidence, and file the evidence and

assessment with the district court. [Id. at ¶ 4.] In the course of fulfilling his duties,

the Receiver collected the Declaration of Michael Sutherland on behalf of CCSB,

in which CCSB alleges a Former Attorney Claim of $224,233.27. [See Docket No.

350 at Ex. B, Appx. 62-65.] On multiple occasions during January through April

2011, the Trustee informed the Receiver that CCSB’s claim would be paid through

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the Ondova bankruptcy estate. [S

ee, e.g., Docket No. 634 at Exs. A – D, Appx. 1-

15.]

C. Motions to Approve Assessments.

On March 7, 2011, the Receiver fully complied with the district court’s

instructions and filed The Receiver’s First Assessment Regarding Former Baron

Attorneys (the “Assessment”). [Docket No. 349; see also Docket No. 575 at ¶ 4.]

In the Assessment, the Receiver noted with respect to CCSB’s claim that “[t]he

Trustee for Ondova Limited Company . . . has advised the Receiver this claim will

be paid through the Ondova bankruptcy estate.” [Docket No. 349 at p. 9 n.16.]

Subsequently, the district court ordered the Receiver to continue collecting

evidence regarding the Former Attorney Claims and to file a motion to approve the

Assessment as well as any additional assessment performed by the Receiver based

on new evidence. [Docket No. 575 at ¶ 5.] The Receiver fully complied and on

March 17, 2011, filed The Receiver’s Motion to Approve Assessment and

Disbursement of Former Attorney Claims. [Docket No. 396; see also Docket No.

575 at ¶ 5.] On March 18, 2011, the Receiver filed The Receiver’s Second Motion

to Approve Assessment and Disbursement of Former Attorney Claim. [Docket No.

400; see also Docket No. 575 at ¶ 5.] On March 24, 2011, the Receiver filed The

Receiver’s Third Motion to Approve Assessment and Disbursement of Former

Attorney Claims. [Docket No. 411; see also Docket No. 575 at ¶ 5.] In each of

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these three motions, the Receiver stated a “proposed disbursement” of $0 for

CSB’s claim, stating that “[t]he Trustee for Ondova Limited Company . . . has

advised the Receiver that this claim will be paid through the Ondova bankruptcy

estate.” [Docket Nos. 396 at 16, 400 at 3, and 411 at 5.] CCSB did not file an

objection or response in opposition to any of the Receiver’s motions to approve the

assessments and disbursements of Former Attorney Claims.

D. Hearing on the Motions to Approve Assessments

On April 28, 2011, the district court held a hearing on the Receiver’s three

motions to approve assessments and disbursement of Former Attorney Claims.

[See Docket No. 634 at Ex. E (the April 28 hearing transcript).] Three CCSB

attorneys appeared at the hearing. [Id. at Ex. E, Appx. 19, 21.] All three CCSB

attorneys were present when the Trustee’s counsel stated the Trustee—and not the

Receiver—would be funding CCSB’s claim. [Id. at Ex. E, Appx. 22-24.] Nobody

from CCSB objected. [Id.]

On May 6, 2011, the district court denied the Receiver’s three motions to

approve assessments and disbursements without prejudice and ordered the

Receiver to file a fourth motion with specific instructions “to recalculate its

proposed disbursements taking into account the Court’s cap of $400.00 per hour

and resubmit its Motion to Approve Assessment and Disbursement of Former

Attorney Claims with new disbursement totals.” [Docket No. 527; see also Docket

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No. 575 at ¶ 6.] The Receiver fully complied and on May 13, 2011, filed T

Receiver’s Fourth Motion to Approve Assessment and Disbursement of Former

Attorney Claims. [Docket No. 569; see also Docket No. 575 at ¶ 6.] In this fourth

motion, the Receiver again stated a “proposed disbursement” of $0 for CCSB’s

claim, stating that “[t]he Trustee for Ondova Limited Company . . . has advised the

Receiver that this claim will be paid through the Ondova bankruptcy estate.”

[Docket No. 569 at 28.] CCSB did not file a response in opposition or objection to

the Receiver’s fourth motion to approve assessments and disbursement of Former

Attorney Claims.

E. The Disbursement Order.

On May 13, 2011, the Receiver filed The Receiver’s Notice of Submission to

the Court of Findings of Fact, Conclusions of Law, and Order on Assessment and

Disbursement of Former Attorney Claims with the Receiver’s proposed Findings

of Fact, Conclusions of Law, and Order on Assessment and Disbursement of

Former Attorney Claims attached as Exhibit A. [Docket No. 570.] In his proposed

order, the Receiver again stated a “proposed disbursement” of $0 for CCSB’s

claim, stating that “[t]he Trustee for Ondova Limited Company has advised the

Receiver that this claim will be paid through the Ondova bankruptcy estate.”

[Docket No. 570 at Ex. A.]

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On May 18, 2011, CCSB filed its O

bjection to Receiver’s Proposed

Findings of Fact, Conclusions of Law, and Order on Assessment and Disbursement

of Former Attorney Claims, requesting “entry of an order which awards it the full

amount of its attorney’s fees claim from the receivership proceeds.” [Docket No.

572.] On the same day, the district court entered the Disbursement Order in which

it ordered a disbursement of $0 to CCSB because “[t]he Trustee for Ondova has

advised the Receiver that this claim will be paid through the Ondova bankruptcy

estate.” [Docket No. 575 at 15.] Also on May 18, 2011, the Baron Appellants

filed their Notice of Appeal of the Disbursement Order and twenty-nine other

interlocutory orders. [Docket No. 576.] On May 24, 2011, the district court issued

its Order Regarding Baron’s Notice of Appeal to the United States Court of

Appeals for the Fifth Circuit in which it advised the parties that it is stayed from

taking further action in the matters involved in the Baron Appellants’ appeal of,

among other things, the Disbursement Order. [Docket No. 586.]

F. CCSB’s Motion to Reconsider.

On June 15, 2011, CCSB filed its Motion to Reconsider or to Alter or

Amend and Brief in Support (“CCSB’s Motion to Reconsider”) requesting the

district court to “reconsider the [Disbursement] Order and modify, alter, or amend

it to provide that CCSB’s claim will be paid with the receivership assets.” [Docket

No. 613 at 3.] CCSB’s Motion to Reconsider is still pending before the district

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court. On the same day, CCSB filed its C

onditional Notice of Appeal of the

Disbursement Order, stating that CCSB “does not believe that the [Disbursement]

Order is an appealable order or judgment . . . [b]ut in the event the Fifth Circuit

Court of Appeals disagrees, CCSB wishes to pursue its own appeal from the

[Disbursement] Order . . ..” [Docket No. 614.] On July 5, 2011, the Receiver filed

The Receiver’s Response to Carrington’s Motion to Reconsider or to Alter or

Amend with the district court. [Docket No. 633.]

SUMMARY OF ARGUMENT

The Receiver submits the Trustee’s Brief as the Receiver’s principal brief in

the Consolidated Appeals and incorporates the Trustee’s Brief by reference. (See

Exhibit A.) In doing so, the Receiver adopts the Trustee’s summary of argument

put forth in the Trustee’s Brief. (Id.)

The Receiver provides an additional summary of argument as relates to the

CCSB Appeal. This Court does not have jurisdiction to hear the CCSB Appeal of

the Disbursement Order because, as CCSB concedes, (1) once CCSB filed its

Motion to Reconsider, any appeal of the Disbursement Order was rendered

ineffective and this Court was divested of jurisdiction, and (2) the Disbursement

Order is not an appealable interlocutory order under 28 U.S.C. § 1292(a)(2). To

the extent this Court has jurisdiction, CCSB waived its objections to the

Disbursement Order by failing to raise them to the district court in response to (1)

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the Receiver’s four motions to approve assessment and disbursement of Former

ttorney Claims and (2) the Trustee’s statements on the record to the district court

(during the hearing on the Receiver’s motions to approve assessment and

disbursement of Former Attorney Claims at which CCSB’s counsel were present)

that the Trustee—and not the Receiver—would be funding CCSB’s claim. Lastly,

CCSB cannot show that it has been harmed by the Disbursement Order’s order that

CCSB receive $0 from the receivership estate because CCSB’s Former Attorney

Claim will be funded through the Ondova bankruptcy estate.

ARGUMENT

The Receiver submits the Trustee’s Brief as the Receiver’s principal brief in

the Consolidated Appeals and incorporates the Trustee’s Brief by reference. (See

Exhibit A.) In doing so, the Receiver adopts the Trustee’s arguments put forth in

the Trustee’s Brief. (Id.) Additionally, the Receiver makes the following

arguments as to the CCSB Appeal.

I. CCSB concedes that this Court lacks jurisdiction to hear the CCSB

Appeal.

A. CCSB concedes that the Court lacks jurisdiction due to CCSB’s

Motion to Reconsider.

On August 4, 2011, CCSB filed its Motion to Dismiss in Case No. 11-

10501. [Fifth Circuit Document No. 00511562712.] In such motion, CCSB

argues that “[t]his Court lacks jurisdiction because CCSB’s Motion to Reconsider

is still pending in the district court.” [Id. at p. 5.] Because the same grounds used

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by CCSB to argue that the Baron Appellants’ appeal of the Disbursement Order

hould be dismissed are equally applicable to CCSB’s appeal of the Disbursement

Order, the Receiver will quote CCSB’s argument directly:

Under Federal Rule of Appellate Procedure 4, the filing of certain

post-decisional motions, including motions under Federal Rules of

Civil Procedure 52 and 59, suspends or renders dormant a notice of

appeal until the district court disposes of the motions. Fed. R. App. P.

4(a)(4)(A); see Simmons v. Reliance Standard Life Ins. Co., 310 F.3d

865, 868 (5th Cir. 2002). If a notice of appeal is filed before such a

motion has been disposed of, the notice is not “effective.” Fed. R.

App. P. 4(a)(4)(B)(i). Only the disposition of the motion will revive

the notice of appeal and “effectively place[] jurisdiction in the court of

appeals.” Ross v. Marshall, 426 F.3d 745, 752 n. 13 (5th Cir. 2005)

(quoting Fed. R. App. P. 4 Advisory Committee Note (1993

Amendments)). This is true “whether the motion was filed before or

after the notice of appeal.” Id. at 751-52.

In this case, the Baron Parties filed their Notice of Appeal on May 18,

2011, only hours after the district court entered its Order. (Docs. 575,

576)[.] Once filed, this motion rendered the Baron Parties’ Notices of

Appeal ineffective and divested this Court of jurisdiction. Fed. R.

App. P. 4(a)(4)(B)(i); see Ross, 426 F.3d at 751-52.

[Id. at pp. 5-6.]

B. CCSB concedes that the Court lacks jurisdiction because the

Disbursement Order is not an appealable interlocutory order.

In its Motion to Dismiss, CCSB further argues that “the [Disbursement]

Order itself does not appear to be an appealable interlocutory order under 28

U.S.C. § 1292(a)(2).” [Fifth Circuit Document No. 00511562712 at p. 7.]

Because the same grounds used by CCSB to argue that the Baron Appellants’

appeal of the Disbursement Order should be dismissed are equally applicable to

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CCSB’s appeal of the Disbursement Order, the Receiver will quote CCSB’s

rgument directly:

[T]he [Disbursement] Order itself do not appear to be an appealable

interlocutory order under 28 U.S.C. § 1292(a)(2). Section 1292(a)(2)

provides for jurisdiction of appeals from interlocutory orders

“appointing receivers, or refusing orders to wind up receiverships or

to take steps to accomplish the purposes thereof, such as directing

sales or disposals of property.” 28 U.S.C. § 1292(a)(2). The

[Disbursement] Order does not appoint the Receiver; that appointment

occurred in another, earlier order. (Doc. 130) Nor does it “refus[e] to

wind up” the Receivership.

Likewise, the [Disbursement] Order does not “take steps to

accomplish the purposes thereof” because it is conditioned on the

Receiver obtaining the money to pay claims. (Doc. 575 ¶ 35) This

Court has stated that a conditional payment order does not fit within

the narrow exception of 28 U.S.C. § 1292(a)(2). See Citibank, N.A. v.

Data Lease Fin. Corp., 645 F.2d 333, 337-38 (5th Cir. 1981) (“an

order directing a sale of property but not determining . . . the specific

property to be sold” is not appealable) (citing N.C.R.R. v. Swasey, 90

U.S. 405, 405 (1874)); see also Wark v. Spinuzzi, 376 F.2d 827, 827

(5th Cir. 1967) (no appellate jurisdiction over order that Receiver

“maintain control and possession” of certain property).

d. at pp. 7-8 n.8.]

While this Court has interpreted section 1292(a)(2) to encompass orders directing the

mmediate turnover or sale of assets, research has revealed no case in which this Court has found

jurisdiction to consider an order directing conditional payment of unspecified property. See

Resolution Trust Co. v. Smith, 53 F.3d 72, 77 n.2 (5th Cir. 1995).

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II. C

CSB waived any objection to its Former Attorney Claim being funded

by the Trustee and not the Receiver.

A. The Trustee repeatedly advised the Receiver that the Trustee—and not

the Receiver—would be funding CCSB’s Former Attorney Claim.

Throughout the course of the Receivership, the Trustee advised the Receiver

that the Trustee—and not the Receiver—would be funding CCSB’s claim through

the Ondova bankruptcy estate. [See, e.g., Docket No. 634 at Exs. A – D.]

B. CCSB repeatedly failed to object to its Former Attorney Claim being

funded by the Trustee.

As detailed below, CCSB failed to object to its Former Attorney Claim

being funded by the Trustee on several occasions before the district court. This

Court has a “long established course of refusing, absent extraordinary

circumstances, to entertain legal issues raised for the first time on appeal.”

Martinez v. Tex. Dept. of Criminal Justice, 300 F.3d 567, 574 (5th Cir. 2002).

Accordingly, CCSB waived any complaint regarding its Former Attorney Claim

being funded by the Trustee and not the Receiver.

1. Prior to the hearing on CCSB’s Former Attorney Claim, CCSB

failed to oppose the Receiver’s three written motions not to

fund such claim.

a. CCSB failed to oppose the Receiver’s March 17, 2011

request not to fund CCSB’s Former Attorney Claim.

On March 17 2011, the Receiver filed The Receiver’s Motion to Approve

Assessment and Disbursement of Former Attorney Claims (“First Motion”)

[Docket No. 396] and an accompanying sealed appendix (“First Appendix”).

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[Docket No. 397]. The First Appendix contained a declaration from CCSB

egarding its Former Attorney Claim. [Docket No. 397 at Ex. B, Appx. 62-65.]

The First Motion summarized CCSB’s Former Attorney Claim, noting that the

total amount of the claim was $224,233.27. [Docket No. 396 at 9.] Importantly, in

the First Motion, the Receiver concluded that the Court should not approve

CCSB’s Former Attorney Claim because the Trustee advised the Receiver that the

claim will be paid through the Ondova bankruptcy estate. [Id. at 16.] The

Receiver served CCSB with the First Motion; so, CCSB had notice of the

Receiver’s request that the Court not approve CCSB’s Former Attorney Claim.

CCSB, however, did not file a response in opposition. Thus, CCSB waived any

objection.

b. CCSB failed to oppose the Receiver’s March 18, 2011

request not to fund CCSB’s Former Attorney Claim.

On March 18, 2011, the Receiver filed The Receiver’s Second Motion to

Approve Assessment and Disbursement of Former Attorney Claims (“Second

Motion”). [Docket No. 400.] The Second Motion again summarized CCSB’s

Former Attorney Claim, noting that the total amount of the claim was $224,233.27.

[Id. at 2.] The Second Motion again concluded that the Court should not approve

CCSB’s Former Attorney Claim because the Trustee advised the Receiver that the

claim will be paid through the Ondova bankruptcy estate. [Id.] The Receiver

served CCSB with the Second Motion; so, CCSB had notice of the Receiver’s

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request that the Court not approve CCSB’s Former Attorney Claim. CCSB,

owever, did not file a response in opposition. Thus, CCSB waived any objection.

c. CCSB failed to oppose the Receiver’s March 24, 2011

request not to fund CCSB’s Former Attorney Claim.

On March 24, 2011, the Receiver filed The Receiver’s Third Motion to

Approve Assessment and Disbursement of Former Attorney Claims (“Third

Motion”). [Docket No. 411.] The Third Motion again summarized CCSB’s

Former Attorney Claim, noting that the total amount of the claim was $224,233.27.

[Id. at 5.] The Third Motion again concluded that the Court should not approve

CCSB’s Former Attorney Claim because the Trustee advised the Receiver that the

claim will be paid through the Ondova bankruptcy estate. [Id.] The Receiver

served CCSB with the Third Motion; so, CCSB had notice of the Receiver’s

request that the Court not approve CCSB’s Former Attorney Claim. CCSB,

however, did not file a response in opposition. Thus, CCSB waived any objection.

d. CCSB failed to oppose the Receiver’s March 24, 2011

request not to fund CCSB’s Former Attorney Claim.

On May 13, 2011, the Receiver filed The Receiver’s Fourth Motion to

Approve Assessment and Disbursement of Former Attorney Claims (“Fourth

Motion”). [Docket No. 569.] The Fourth Motion again summarized CCSB’s

Former Attorney Claim, noting that the total amount of the claim was $224,233.27.

[Id. at 28.] The Fourth Motion again concluded that the Court should not approve

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CCSB’s Former Attorney Claim because the Trustee advised the Receiver that the

laim will be paid through the Ondova bankruptcy estate. [Id.] The Receiver

served CCSB with the Fourth Motion; so, CCSB had notice of the Receiver’s

request that the Court not approve CCSB’s Former Attorney Claim. CCSB,

however, did not file a response in opposition. Thus, CCSB waived any objection.

2. At the hearing on CCSB’s Former Attorney Claim, CCSB failed

to object to the Trustee’s arguments not to have the Receiver

fund such claim.

On April 28, 2011, the Court held a hearing on the First Motion, the Second

Motion, and the Third Motion. Appearing at the hearing were three CCSB

attorneys (two current CCSB attorneys, Michael Sutherland and Prescott Smith,

and one former CCSB attorney, David Coale). [See Docket No. 634 at Ex. E (the

April 28 hearing transcript), Appx. 19, 21.] All three CCSB attorneys were present

when the Trustee’s counsel stated to the Court that the Trustee—and not the

Receiver—would be funding CCSB’s Former Attorney Claim.

MR. URBANIK: Ray Urbanik for Daniel Sherman, Trustee. The

Trustee has completed the claims objection process

in the Ondova bankruptcy case. No other party has

filed any other objections, and the Trustee is

moving to wind up the bankruptcy case. It's our

position if anyone was going to challenge claims in

the bankruptcy case, it would be Mr. Vogel, the

receiver for Mr. Baron. Mr. Vogel has elected not

to, and we have collaborated with them in

connection with the review of claims. So Mr.

Baron has no standing in the bankruptcy court to

bring any claims objections.

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. . .

HE COURT: Thank you. And the six firms in bankruptcy, those

matters are all before me as well as I understand it,

Mr. Urbanik, based upon your earlier statement.

MR. URBANIK: Your Honor, there are six firms that have filed

substantial contribution motions in the bankruptcy

court. All six of those firms are part of the

receivership review of attorney fee claims. For

those six firms, our view is they will be paid from

the receivership and if the assessment motions are

approved. We have our own separate claims, for

example, Mr. Rasansky, Carrington

Coleman.

Those aren't part -- Although the receiver may

have reviewed those, the Trustee has agreed to

pay those claims. So there were some claims in the

bankruptcy case that were substantial contribution

and some claims that were not, and we have

worked with the receiver to reconcile who's paying

which claims.

[Id. at Ex. E, Appx. 22-24 (emphasis added).] Yet, nobody from CCSB objected.

[Id.] Thus, CCSB waived its objection.

III. CCSB has failed to show it is harmed by the Disbursement Order.

Under 28 U.S.C. § 2111, “[o]n the hearing of any appeal or writ of certiorari

in any case, the court shall give judgment after an examination of the record

without regard to errors or defects which do not affect the substantial rights of the

parties.” See also Fed. R. Civ. P. 61 (“At every stage of the proceeding, the court

must disregard all error and defects that do not affect any party’s substantial

rights.”).

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As stated above, the Trustee has on multiple occasions advised the Receiver

nd the district court that CCSB’s Former Attorney Claim will be paid through the

Ondova bankruptcy estate. [See, e.g., Docket No. 634 at Exs. A – E, Appx. 1-24.]

Since the Trustee will pay its Former Attorney Claim, CCSB cannot show it has

been harmed by the district court’s Disbursement Order.

CONCLUSION

The District Court’s Order Appointing Receiver and subsequent orders (to

the extent appeal of such orders are not dismissed due to mootness and/or their

interlocutory nature) should be affirmed.

Respectfully submitted,

/s/ Barry M. Golden

Barry M. Golden

Texas Bar No. 24002149

Stacy R. Obenhaus

Texas Bar No. 15161570

GARDERE WYNNE SEWELL LLP

3000 Thanksgiving Tower

1601 Elm Street

Dallas, Texas 75201

Tel: 214- 999-3000

Fax: 214-855-4667

E-mail: bgolden@gardere.com

E-mail: sobenhaus@gardere.com

Counsel for Peter S. Vogel, Receiver

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CERTIFICATE OF SERVICE

I hereby certify that, on October 21, 2011, a true and correct copy of this

document was served via the Court’s ECF system on all counsel of record.

/s/ Barry M. Golden

Barry M. Golden

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