1
No.
13-10121
(and Consolidated
Cases)
In
the
United States Court of Appeals for
the Fifth
Circuit
No.
13-10121
JEFFREY
BARON,
Appellant
v.
DANIEL J. SHERMAN
Chapter 11 Trustee
Appellee
Appeal from Order Closing Case
(Civil Action No. 3:12-cv-00367-F)
On Appeal from
United States Bankruptcy Court
Northern District of Texas, Dallas Division
Bankruptcy Petition No. 09-34784-sgj11
APPELLANT’S CORRECTED REPLY TO TRUSTEE’S
RESPONSE TO EMERGENCY MOTION FOR STAY
PENDING APPEAL
Appellant, Jeffrey Baron, hereby files his Corrected Reply to Appellee’s
Response to his Emergency Motion for Stay Pending Appeal.
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The sole change in Appellant’s Reply corrects a factual statement concerning the
timing of the Trustee’s filing of a suggestion of bankruptcy, which is located at the
bottom of page 2 through the top of page 3.
Case: 13-10121 Document: 00512425198 Page: 1 Date Filed: 10/30/2013
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First, the Trustee accurately states that there was a suggestion of bankruptcy
filed with this Court by the Trustee’s counsel. However, Mr. Baron has a
substantial Fifth Amendment interest in protecting his assets while he is appealing
the Order for Relief entered by the Bankruptcy Court. This is true despite the fact
that both courts have denied a stay pending appeal of the involuntary bankruptcy
proceeding.
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The Trustee urges the Court to adopt a position that basically
deprives litigants of the right to oppose the imposition of an involuntary
bankruptcy and then sell his assets while he is pursuing the judicial process. This
violates fundamental principles of due process.
The Appellee is attempting to create confusion by confusing the two orders
at issue and the two separate and distinct bankruptcies. The Appellee accurately
states that he filed a suggestion of bankruptcy in this Court, but his suggestion of
bankruptcy appears to have been made as part of a strategy to circumvent the
bankruptcy process and sell <servers.com> as part of the Ondova bankruptcy and
circumvent the Chapter 7 process.
While the instant appeal was pending, the Appellee moved to sell the
<servers.com> asset for the second time
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, in violation of the automatic stay in
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Mr. Baron anticipates taking further action regarding the district court’s denial of
the stay, for reasons set out below.
3
Appellee’s motion was filed on August 14, 2013.
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Appellant’s personal involuntary bankruptcy case
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and undermining this Court’s
jurisdiction in the subject matter of this appeal. Approximately one month later,
the Trustee came to this Court and filed a suggestion of bankruptcy attempting to
to stay this appeal concerning sale of <servers.com> the very same asset that he
had just asked the Ondova bankruptcy court to liquidate. Appellee cannot have it
both ways, taking offensive action against Appellant in the Ondova case and then
requesting that the appeal of such action be stayed because Mr. Baron is in a
Chapter 7 bankruptcy.
Further, the Appellee’s argument is misleading in that he incorrectly refers
to a different order than the order on appeal, suggesting that Appellant did not
request a stay. As set out in Appellant’s motion to this Court, a motion for stay the
First Sale Order, the order on appeal in the instant case, was requested in the
District Court and was summarily denied (Appendix J). The District Court gave
no reason for denying the motion.
The Appellee avoids discussion of the First Sale Order because the Second
Sale Order (entered on Appellee’s motion a year after the order on appeal was filed
in this Court) seeks to modify the order while on appeal, which interferes with the
jurisdiction of this Court and cannot be allowed. Indeed, appellate courts can
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The Ondova bankruptcy is separate and distinct from the personal involuntary
bankruptcy brought against Baron and pending appeal in the Northern District of
Texas.
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hardly allow appeals to be filed and then have the order modified at the request of
litigants in such a way as to moot an appeal.
Although the stay motion in the Chapter 7 case is irrelevant to a
determination of the instant motion, Appellee apparently suggests that Baron will
not obtain relief from the involuntary bankruptcy. In making this assertion,
however, Appellee falsely states that Appellant “failed to seek a stay of the Order
For Relief” (Response at 2). The Trustee’s assertion contradicts the facts
recounted by Judge O’Connor’s in his Order recognizing that a stay was requested
from the bankruptcy court and his Court.
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In attempting to focus this Court on Appellant’s involuntary bankruptcy, the
Trustee fails to distinguish the Chapter 7 case from the Ondova bankruptcy case,
from which the order in this case was appealed. The Trustee’s motion to sell
Appellant’s individual property in the Ondova bankruptcy violated the automatic
stay in the separate, personal involuntary bankruptcy case. This smacks of
gamesmanship designed to circumvent the bankruptcy process to sell an asset in
the wrong case but simultaneously undermining this Court’s jurisdiction. As
argued in Appellant’s motion, a Section 363 sale denies the parties due process in
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Appellant has just filed his opening brief in support of reversing the order for
relief. The Trustee in Appellant’s involuntary bankruptcy case has not taken any
action in the instant appeal.
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determining the ownership of an asset. Ownership must be determined first and
then a Section 363 sale conducted, if appropriate. The Court should require the
Trustee to file the right procedure in the right case. While Mr. Baron has been
castigated for alleged “vexatious” litigation tactics, the Trustee’s litigation tactics
are inappropriate and reveals bad faith.
Moreover, this Court, in the Netsphere case, did stay the sale of all domain
names subject to the receivership order indefinitely, and the receivership order
applied to all of Jeff Baron’s assets, including his ownership interest in
servers.com. Exhibit G. See Netsphere, 703 F.3d at 305, 309 (“The receivership
ordered in this case encompassed all of Baron’s personal property….”). The Court
ultimately made the stay on sale of the domain names permanent. Id. at 314 n.2
(stay on sale of domain names made “permanent”).
Finally, the Trustee’s argument regarding on the order denying the stay in
the Chapter 7 case is irrelevant to the instant appeal for another reason. The
district court simply got the basic facts wrong. The District Court incorrectly
concluded that the district court’s earlier interlocutory May 18, 2011 order in the
Netsphere case held that the receivership creditors were entitled to over $800,000
in unpaid fees and was not affected by this Court’s reversal. 3:13-0461, Dkt. 22 at
11-12. Simply stated, this Court held that these claimants were “non-judgment
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creditors,” held “disputed claims” not subject to the equitable jurisdiction of a
federal court and reversed and vacated this order. Netsphere, 703 F.3d at 305-306.
The root problem presented in the involuntary case involves the imposition
of an involuntary bankruptcy by non-judgment creditors with disputed claims, that
were and are collaterally estopped by this Court’s decision in Netsphere, Inc. v.
Jeff Baron, et.al., 703 F.3d 296 (2012). This Court found that these creditors were
non-judgment creditors. If the petitioning creditors were non-judgment creditors in
Netsphere, it strains credulity to believe that these same non-judgment creditors
somehow became judgment creditors that allows relief in a federal bankruptcy
court. The filing of the involuntary petition was nothing more than an attempt to
circumvent this Court’s judgment and mandate in the Netsphere decision.
Respectfully submitted,
/s/ Stephen R. Cochell
Stephen R. Cochell
7026 Old Katy Road, Ste. 259
Houston Texas 77096
(713)980-8796 (telephone)
(713)980-1179 (facsimile)
COUNSEL FOR APPELLANT
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.
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CERTIFIED BY: /s/ Stephen R. Cochell
Stephen R. Cochell
COUNSEL FOR APPELLANT
Case: 13-10121 Document: 00512425198 Page: 7 Date Filed: 10/30/2013
