No. 12-10489

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.,

Non Party – Appellants

ONDOVA LIMITED COMPANY,

Defendant – Appellee

PETER S. VOGEL,

Appellee

Appeal of Asset Disposal Orders in Ex Parte Receivership

Imposed to Prevent Jeff Baron from Hiring Counsel and

to Force Settlement of Non-Diverse Unpled

Non-Party Former Attorney Fee Claims Alleged against Jeff Baron

From the United States District Court

Northern District of Texas, Dallas Division

Civil Action No. 3-09CV0988-F

EMERGENCY MOTION FOR STAY PENDING APPEAL

OF ORDER TO LIQUIDATE NON-PARTY ASSETS AND DISTRIBUTE

RECEIVERSHIP RES

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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/Appellant: JEFFREY BARON

b. Defendant/Appellee: DANIEL J. SHERMAN, Trustee

for ONDOVA LIMITED COMPANY

c. Intervenor: 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 LLC

(2) Quantec LLC

(3) Jeffrey Baron

g. Appellee: Peter S. Vogel

2. ATTORNEYS

a. For Appellant: Gary N. Schepps

Suite 1200

5400 LBJ Freeway

Dallas, Texas 75240

Telephone: (214) 210-5940

Facsimile: (214) 347-4031

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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

c. For Intervenor VeriSign: Dorsey & Whitney (Delaware)

(1) Eric Lopez Schnabel, Esq.

(2) Robert W. Mallard, Esq.

d. For Intervenor Rasansky and Aldous: Aldous Law Firm

(1) Charla G Aldous

d. 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

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(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

(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-party attorneys seeking fees 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

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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

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 APPELLANT

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TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS .......................................................... 2

TABLE OF AUTHORITIES.......................................................................................... 7

A. Relief Sought & Standard .................................................................................... 9

B. Jurisdiction of the Court of Appeals................................................................. 11

C. Background ......................................................................................................... 14

The District Judge’s Action to Take Matters His Own Hands and Seize

Property Ex Parte to Forcibly Pay on Unpled Allegations Baron Owed

Money to Former Non-Party Lawyers...................................................................... 15

Then, a Motion to Support the Court’s Order was Filed .......................................... 16

Then, the District Court was Stayed ......................................................................... 16

The Matters Subject of the District Court’s Orders Challenged on this

Appeal are Before this Honorable Court, and Some have been Ruled on by

this Honorable Court................................................................................................. 18

The District Court’s Personal and Family Relationship to the Key

Beneficiaries of the District Court’s Orders were Disclosed in Appellate

Briefings on March 27, 2012 – and the District Court then Radically

Changed its Approach............................................................................................... 17

D. Likelihood of Success on Appeal ....................................................................... 18

Appeal Divests the District Court of Jurisdiction Over all Aspects of the

Case Appealed........................................................................................................... 19

The District Court was Divested of Jurisdiction over the Receivership Res ........... 20

Secret Ex Parte Proceedings ..................................................................................... 21

Fees may not be Paid in Unauthorized Receiverships.............................................. 22

The Sherman Fee Award has Absolutely No Basis in Law ...................................... 23

E. Irreparable Injury .............................................................................................. 26

F. No substantial Harm if Stay Granted ............................................................... 28

G. Conclusion ........................................................................................................... 29

CERTIFICATE OF EMERGENCY ........................................................................... 30

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TABLE OF AUTHORITIES

FEDERAL CASES

Atlantic Trust Co. v. Chapman,

208 U.S. 360, 373 (1908) .....................................................................................22

Belcher v. Birmingham Trust National Bank,

395 F.2d 685 (5th Cir. 1968)..................................................................................9

Booth v. Clark,

58 U.S. 322, 331 (1855) .......................................................................................12

Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and

Human Resources,

532 U.S. 598, 602 (2001) .....................................................................................23

Coastal Corp. v. Texas Eastern Corp.,

869 F.2d 817, 820 (5th Cir. 1989)........................................................................20

Cochrane v. WF Potts Son & Co.,

47 F.2d 1026, 1029 (5th Cir. 1931)......................................................................22

Connecticut v. Doehr,

501 U.S. 1, 19 (1991) ...........................................................................................15

Dayton Indep. School Dist. v. US Mineral Prods. Co.,

906 F.2d 1059, 1063 (5th Cir. 1990)............................................................. 19, 20

Forgay v. Conrad,

47 U.S. 201, 204-205 (1848)................................................................................22

Gannett Co. v. DePasquale,

443 U.S. 368, 412 (1979) .....................................................................................21

Gordon v. Washington,

295 U.S. 30, 37 (1935) .........................................................................................22

Griggs v. Provident Consumer Discount Co.,

459 U.S. 56, 58 (1982) .................................................................................. 19, 20

Key Tronic Corp. v. United States,

511 U.S. 809, 815 (1994) .....................................................................................24

Kos Pharmaceuticals, Inc. v. Andrx Corp.,

369 F.3d 700, 726 (3rd Cir. 2004)........................................................................28

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Lion Bonding & Surety Co. v. Karatz,

262 U.S. 640, 642 (1923) .............................................................................. 21, 22

Palmer v. Texas,

212 U.S. 118, 126 (1909) .............................................................................. 12, 20

Stern v. Marshall,

131 S.Ct. 2594, 2615 (2011) ................................................................................25

Tanzer v. Huffines,

412 F.2d 221, 222 (3rd Cir. 1969)........................................................................22

United States v. Larchwood Gardens, Inc.,

420 F.2d 531, 534 (3rd Cir. 1970)................................................................. 23, 24

Wabash R. Co. v. Adelbert College of Western Reserve Univ.,

208 U.S. 38, 46 (1908) .........................................................................................21

FEDERAL STATUTES

28 U.S.C. § 2004......................................................................................................22

28 U.S.C. §1651.......................................................................................................12

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TO THE HONORABLE JUSTICES OF THE FIFTH CIRCUIT COURT OF

APPEALS:

NOW COME Appellants Novo Point LLC and Quantec LLC and Appellant

Jeffrey Baron, defendant, and respectfully move this Honorable Court to enter

orders, to (1) immediately and temporarily stay the orders of the District Court

pending consideration of this motion and (2) staying the orders of the District

Court pending appeal. In support Appellants respectfully show:

A. Relief Sought & Standard

Appellants seek a stay pending appeal pursuant to Federal Rule of Appellate

Procedure 8(a). The criteria for a stay pursuant to Rule 8(a) are well established,

as follows. The movant must show: (1) likelihood of success on the merits, (2)

irreparable injury if the stay is not granted, (3) absence of substantial harm to the

other parties from granting the stay and (4) service to the public interest from

granting the stay. E.g., Belcher v. Birmingham Trust National Bank, 395 F.2d 685

(5th Cir. 1968).

The stay is sought jointly and in the alternative for the following orders:

a. [DOC 906] The District Court’s Order GRANTING IN PART THE

RECEIVER’S 883 MOTION FOR APPROVAL OF

ADMINISTRATIVE COSTS AND TO DISBURSE CASH AND

SELL DOMAIN NAMES TO FUND ADMINISTRATIVE COSTS.

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(Ordered by Judge Royal Furgeson on 5/3/2012) (Entered:

05/03/2012).

b. [DOC 904] The District Court’s Order ORDER: Defendant Jeffrey

Baron should retain trial counsel for his representation in the

underlying suit. (Ordered by Judge Royal Furgeson on 5/3/2012)

(Judge Royal Furgeson) Modified on 5/3/2012 (Furgeson, Royal).

(Entered: 05/03/2012).

c. [DOC 903] The District Court’s Order GRANTING THE

RECEIVER’S FIFTEENTH APPLICATION FOR

REIMBURSEMENT OF FEES INCURRED BY MARTIN THOMAS

886 (Ordered by Judge Royal Furgeson on 5/3/2012) (Entered:

05/03/2012).

d. [DOC 902] The District Court’s Order GRANTING THE

RECEIVER’S SIXTH APPLICATION FOR REIMBURSEMENT OF

FEES INCURRED BY THOMAS JACKSON 602 (Ordered by Judge

Royal Furgeson on 5/3/2012) (Entered: 05/03/2012).

e. [DOC 901] The District Court’s Order GRANTING THE

RECEIVER’S FOURTH APPLICATION FOR REIMBURSEMENT

OF FEES INCURRED BY MARTIN THOMAS 593 (Ordered by

Judge Royal Furgeson on 5/3/2012) (Entered: 05/03/2012).

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f. [DOC 897] The District Court’s Order GRANTING THE

RECEIVER’S MOTION TO RELEASE RECEIVER FROM

OBLIGATION OF FILING TAX RETURNS FOR CERTAIN

RECEIVERSHIP PARTIES (Ordered by Judge Royal Furgeson on

5/3/2012) (Entered: 05/03/2012).

g. [DOC 896] The District Court’s Order granting doc 467 Motion for

Attorney Fees (Ordered by Judge Royal Furgeson on 5/3/2012)

(Entered: 05/03/2012).

B. Jurisdiction of the Court of Appeals

Federal Rule of Appellate Procedure 8(a)(1) provides that a motion for stay

of an order “must ordinarily be presented to the district judge in the first instance.”

The District Court had previously advised this Honorable Court that a stay of the

asset sales to allow appeal would be proper. SR. v9 p97. However, Baron

presented his motion to the District Court, requesting a ruling last week and no

relief was granted by the District Court. The District Court has instructed appellate

counsel for Novo Point LLC and Quantec LLC not to make motions seeking relief

for the non-party Appellants in the District Court. Accordingly, this motion for

stay is sought from this Honorable Court pursuant to Federal Rule of Appellate

Procedure 8(a)(1).

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When property is placed into a receivership, it is taken into possession by

the court through its representative, the receiver. See Booth v. Clark, 58 U.S. 322,

331 (1855). As a matter of binding precedent, when a receivership order is

appealed the effect of the appeal is that the appellate court has “jurisdiction over

the res the same as the trial court had”. Palmer v. Texas, 212 U.S. 118, 126 (1909).

Accordingly, this Honorable Court currently holds possession and jurisdiction over

the assets of Baron, Novo Point LLC and Quantec LLC. R. 3934, 4306.

Accordingly, pursuant to 28 U.S.C. §1651, this Honorable Court may issue “all

writs necessary or appropriate in aid of their respective jurisdictions”. If the

District Court’s orders authorizing sale and distribution of receivership assets—

cash and domain names owned by Novo Point LLC and Quantec LLC— are not

stayed, this Honorable Court will be divested of jurisdiction over that part of the

receivership estate. Staying the sale of receivership res is necessary to protect this

court’s possession and jurisdiction of the receivership estates that are the subject of

appeals pending before this Honorable Court.

Notably, for almost a year the District Court respected the jurisdiction of this

Honorable Court over the receivership res. A year ago, the District Court entered

an order that it was stayed

from taking further action on the matters on appeal

before this Honorable Court. SR. v8 p166. Accordingly, the District Court ordered

that all motions concerning the receivership be made before this Honorable Court.

SR. v8 p1189. This Honorable Court has acknowledged its jurisdiction over the

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receivership pending appeal, and has ruled on many orders regarding the

receivership res that have been pled before it. For example, one of those matters

was Sherman’s motion to pay his attorneys’ fees for the Defendant Ondova with

the assets of the non-parties Novo Point LLC and Quantec LLC, and/or to allow

the District Court to rule on his motion.

This Honorable Court declined to

allow the District Court to rule on the matter at this time and declined to grant

the relief requested by Sherman at this time. Rather, this Honorable Court ruled

that this Honorable Court would carry the motion with the case.

Similarly, the

other motions ruled on by the District Court and challenged in this appeal (or

equivalent motions) are currently pending before this Honorable Court.

The

District Court is aware of this, and in acting to divest this Honorable Court of

jurisdiction over the matters, ordered Vogel to withdraw the motions pending

before this Honorable Court. (Doc. 906).

Doc. 511738402 filed on 1/26/2012 in case 10-11202.

Doc. 511759009 filed on 2/15/2012 in case 10-11202.

E.g., Vogel’s “Second Sealed Ex Parte Motion For .. Liquidation of Assets”. (See response to

Vogel’s motion filed as Doc. 511781078 filed on 3/07/2012 in case 10-11202); Doc. 511831730

filed on 4/23/2012 in case 10-11202; Doc. 511831693 filed on 4/23/2012 in case 10-11202; etc.

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C. Background

In August, 2010, all claims pled in the lawsuit fully and finally settled and

all parties entered a stipulated order of dismissal with prejudice as to all claims.

R. 2109, et.seq., 2346-2356. There were two sets of claims asserted in the suit, as

follows:

(1) A diverse breach of contract claim brought by the

plaintiffs against the defendants Jeff Baron and his

company Ondova. R. 38-51. And,

(2) A non-diverse breach of contract claim brought as an

intervention against the same defendants by a law partner

of the District Judge’s brother-in-law, Charla Aldous, and

attorney J. Rasansky.

R. 385, et. seq.

Both the plaintiffs’ claim and the Aldous/Rasansky claim fully and finally settled in

August 2010. R. 2346-2356.

Two days after his brother-in-law’s law partner filed for intervention, the District Judge appointed a

partner at his sister-in-law’s former law firm to act as special master in the case. R. 394-396. The

appointment was ordered in violation of the mandatory requirements of Fed.R.Civ.P. 53(b)(3). The

District judge later appointed that same partner, Vogel, as mediator and, ex parte, as receiver.

R. 1574,1604. As receiver, Vogel moved for Novo Point LLC and Quantec LLC to be included into

his receivership. Vogel then arranged secret asset sales (complained of in a prior appeal) in order to

pay himself, his firm and ‘professionals’ over a million dollars. The million dollars in fees challenged

on that appeal were awarded by the District Judge without hearing, and were in addition to previous

fee awards to Vogel and his firm, also without hearing, totaling a million dollars and which were

taken by the District Court from Baron’s savings accounts, and emptying them. R. 1717, sealed Doc.

Nos. 424/425,480; SR. v8 p1007, pp990-992. This appeal challenges more secret sales to pay more yet

more ‘fees’ to Vogel and his firm and ‘professionals’ approved by the District Court, again, without

hearing, or supporting findings of fact, etc..

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The District Judge’s Action to Take Matters His Own Hands and

Seize Property Ex Parte to Forcibly Pay on Unpled Allegations

Baron Owed Money to Former Non-Party Lawyers

Several months later, the District Court was apparently concerned with

grievances against Jeff Baron, primarily the allegation that Baron owed money to a

series of former attorneys.

The allegations were not pled in the lawsuit before the

District Court.

However, on November 24, 2010, The District Court decided to

take matters into his own hands ‘in the interest of justice’.

In off-the-record ex

parte proceedings and without supporting pleadings, affidavits, service of process,

findings, etc., the District Court signed an order placing Jeff Baron and a long

series of non-party entities into receivership.

No affidavits, evidence, or sworn

showing was made to establish the cause for seizing the property subject of the

receivership. No bond was ordered to protect any party should the receivership

order be found wrongful.

No claim of exigent circumstances was made. The

While no findings were entered in support of the ex parte receivership order signed November

24, 2010, In February 2011 the District Court entered findings in denying Baron’s

Fed.R.App.P. 8(a) motion for relief pending appeal. SR. v2 p339, et. seq.

Other than of the partner of District Judge’s brother-in-law and Rasansky,

Id.

R. 1619-1632. The order was signed at 1:15pm. SR. v11 p83. No findings were entered in

support of the receivership order. It is unclear who drafted the order. Information about the ex

parte, off-the-record proceedings came to light from information provided by third parties and

examination of the creation time of key documents. See SR. v11 p82-84.

This basic constitutional requirement for ex parte action against private property relates to the

mandatory concern for the rights and possible injury that may be inflicted on the innocent should

the ex parte action be wrongful. The District Court failed to take any

steps at the time the ex

parte order was entered to protect the rights of Jeff Baron. As a matter of established law, that

one-sided approach to justice is a violation of Due Process of Law. Connecticut v. Doehr, 501

U.S. 1, 19 (1991).

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property ordered seized by the receiver was not subject to any claim pled, and no

party was served with process in relationship to the receivership proceedings.

Then, a Motion to Support the Court’s Order was Filed

Later in the day after the receivership order was signed, a motion seeking the

order was filed. R. 1716; SR. v11 p82-83. The sole grounds stated in the motion

for the need for a receivership was to prevent Jeff Baron from hiring legal counsel

to defend himself. R. 1578, ¶13. The District Court instructed the receiver, Peter

Vogel, to investigate and prosecute the allegations against Baron, but (according to

the receiver’s position) to ignore all exculpatory evidence

. SR. v7 p202.

Then, the District Court was Stayed

Multiple motions for stay of the receivership were denied by this Honorable

Court between December 8, 2010 and March 29, 2011, as follows: December 8,

2010 (No. 00511315299); December 20, 2012 (No. 00511327536); February 25,

2011 (No. 00511394852); March 3, 2011 (No. 0051140089); March 29, 2011 (No.

00511427530). The District Court was noticed and aware of each such order of

this Honorable Court. In light of the denial of a stay pending appeal to lift the

receivership and seizure of assets, on May 5, 2011 and June 20, 2011, the District

Court entered stay orders (Doc. 586 and Doc. 616) acknowledging that pursuant to

the binding precedent of this Honorable Court and U.S. Supreme Court, the

District Court was divested of jurisdiction over the matters on appeal and therefore

a formal stay was entered against further jurisdiction by the District Court over

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the receivership while the matter was on appeal to this Honorable Court, so that the

receivership res would be controlled by the Court of Appeals. SR. v8 p166; SR. v8

p1189.

The District Court’s Personal and Family Relationship to the Key

Beneficiaries of the District Court’s Orders were Disclosed in

Appellate Briefings on March 27, 2012 – and the District Court

then Radically Changed its Approach

On March 27, 2012, The District Court’s personal and family relationship to

key parties in interest and principal beneficiaries of the District Court’s orders with

respect to the receivership were disclosed in appellate filings before this Honorable

Court. The District Court then radically changed its approach and took a different

tact with this case, as follows: The District Court immediately ordered that a status

conference be held, and at that status conference attempted, apparently, to justify

the secret ex parte proceedings that were held with Sherman and Vogel

and

announced that the Court would now take a new course. The District Court then

entered an order declaring that because of the rulings of this Honorable Court to

Although the existence of the proceedings has been clearly established in the record from

material provided by outside sources (SR. v11 p83), Sherman, Vogel, and District Judge have

still not acknowledged the secret proceedings took place, as follows: Sherman has affirmatively

denied that the proceedings took place (Doc. 4 filed in Case 3:12-cv-00387-B on 02/17/12 at

Page 2) and Vogel and the District Judge have maintained their silence on the issue. Notably, in

addition to Sherman’s written confirmation to third parties that proceedings were held at 1:15pm

in which the District Judge signed the receivership order (the motion for receivership was printed

later that day), the District Clerk’s records show that Sherman’s motion to appoint receiver was

filed at 3:40pm and Vogel personally filed the order appointing him as receiver at 3:41pm. It is

obviously not possible within the space of the single minute between 3:40pm and 3:41pm for all

of the following to have occurred: (1) the District Court to (a) be notified of the motion on the

CM/ECF system, (b) review the motion, (c) print an order, (d) sign the order, and (e) deliver the

signed order to Vogel’s office; and then for (2) Vogel to (a) scan in the order and (b) upload the

order to the Court’s CM/ECF.

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which the District Court’s stay order was made subsequent to, that the stay order

should now be vacated and the District Court was now empowered to divest this

Honorable Court with jurisdiction over the receivership res. (Doc. 878).

Accordingly, the District Court has announced that the District Court no

longer recognizes this Honorable Court’s jurisdiction over the matters on

appeal, and has now actively attempted to divest this Honorable Court of exclusive

control over the receivership res by entering orders as to its distribution of the res,

apparently as quickly as possible. The District Court has also reverted to its former

practice of entering its rulings (on most of the motions) without allowing for

response by the parties adversely affected by the motions, and ruling on motions

that are materially ex parte. Similarly, the District Court is clearly aware that Jeff

Baron is not represented in the trial court—The District Court’s receiver fired

Baron’s trial counsel in 2010— yet the District Court has proceeded to rule

apparently in a rush, as quickly as possible.

The Matters Subject of the District Court’s Orders Challenged on

this Appeal are Before this Honorable Court, and Some have been

Ruled on by this Honorable Court

This Honorable Court has acknowledged its jurisdiction over the

receivership pending appeal, and has ruled or postponed ruling on many orders

regarding the receivership res that have been pled before it. For example, as

discussed above, this Honorable Court ordered that it would carry with the case

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Sherman’s motion for payment and liquidation of receivership assets. (See

Document 511759009 filed in Case 10-11202 on 2/15/2012).

D. Likelihood of Success on Appeal

Appeal Divests the District Court of Jurisdiction Over all Aspects

of the Case Appealed

As a well-established principle of law, two courts should not attempt to

assert jurisdiction over the same matter simultaneously. Griggs v. Provident

Consumer Discount Co., 459 U.S. 56, 58 (1982) (“[A] federal district court and a

federal court of appeals should not attempt to assert jurisdiction over a case

simultaneously. 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.”;

Dayton Indep. School Dist. v. US Mineral Prods. Co., 906 F.2d 1059, 1063 (5th

Cir. 1990)(“When one aspect of a case is before the appellate court on

interlocutory review, the district court is divested of jurisdiction over that aspect of

the case.”) .

A notice of appeal from the receivership order was filed on December 2,

2010. R. 1699. As a matter of binding precedent, 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

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involved in the appeal. Griggs at 58. The divesture of jurisdiction of the trial court

involves all those aspects of the case appealed. Id. As a matter of well-established

law, the district court loses jurisdiction over all matters which are validly on

appeal. Dayton at 1065 (Griggs is “follow[ed] rigorously” by this Honorable

Court). The sole jurisdiction of a district court with respect to a 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 the

Receivership Res

As an well-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.

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The Supreme Court has ruled that “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 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).

Secret Ex Parte Proceedings

The Supreme Court has described secret judicial proceedings as “a menace

to liberty”. Gannett Co. v. DePasquale, 443 U.S. 368, 412 (1979). The

receivership and the order for sale subject of this motion all involve ex parte, secret

proceedings in the District Court, in which advocacy in the trial court has been

allowed only against Baron and the entities whose assets have been seized by

Vogel.

The assets ordered liquidated by the District Court have not been

disclosed to either Baron or the LLCs. Similarly, no hearing was held and no

response or argument was allowed regarding the reasonableness of Vogel’s private

sales. In the same way the receivership was imposed, the decision to approve the

sale of the assets was made in secret

between Vogel and the District Court. (Doc

Sherman was privy to the District Judge’s signing of the receivership order On November 24,

2010 at 1:15pm. SR. v11 p83. A motion for receivership (R. 1575) was, however, not filed until

later that day at 3:40pm, as reflected in the Clerk’s records.

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883, sealed and ex parte). Similarly, the sales themselves were not to be by open,

public auctions as required by law, absent “extraordinary circumstances”. 28

U.S.C. § 2004; e.g., Tanzer v. Huffines, 412 F.2d 221, 222 (3rd Cir. 1969). Rather,

the sale of the assets was arranged secretly by Vogel, to secret buyers at secret

prices.

Fees may not be Paid in Unauthorized Receiverships

Receivership itself is authorized to conserve property that is subject to

equitable claims in property, pending adjudication of those equitable claims in the

property. E.g. Forgay v. Conrad, 47 U.S. 201, 204-205 (1848); Gordon v.

Washington, 295 U.S. 30, 37 (1935). Receivership is not authorized to seize an

individual’s assets in order to pay for a Court’s investigation of state law claims

against that individual, and is not authorized as a means of preventing a party from

being able to hire legal counsel to represent them. See e.g. Id. There were no

claims pled against Baron’s property or Novo Point LLC or Quantec LLC or the

LLCs’ property. Accordingly, as a matter of controlling precedent, the District

Court lacks subject matter jurisdiction to impose the receivership. Cochrane v. WF

Potts Son & Co., 47 F.2d 1026, 1029 (5th Cir. 1931). Because the District Court

lacked jurisdiction, and because the receivership was not authorized by law, Vogel

and his ‘professionals’ may not be awarded fees from the receivership estates.

Atlantic Trust Co. v. Chapman, 208 U.S. 360, 373 (1908); and see e.g., Lion

Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642 (1923).

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Notably, Vogel’s fees are extensively for investigating and arguing for the

disposition of the estates’ res. The Supreme Court has held that a receiver “[I]s to

stand indifferent between the parties, and may not be heard either in the court

which appointed him, or in the appellate court, as to the rightfulness of any order

which is a mere order of distribution between the parties”. Accordingly, Vogel is

not entitled to fees for work not authorized by law. Similarly, much of Vogel’s fees

are for defending his personal interests and defending his expenses on appeal.

Such fees should not be chargeable against the receivership estates. United States

v. Larchwood Gardens, Inc., 420 F.2d 531, 534 (3rd Cir. 1970).

The Sherman Fee Award has Absolutely No Basis in Law

The fees awards challenged in this appeal include hundreds of thousands of

dollars ($379,761.18) awarded to Sherman as a party and co-defendant and not a

receivership professional.

No legal basis was offered by Sherman for the

award.

Similarly, no basis in law was found by the trial court in granting the

award. As a matter of fundamental law, under the “American Rule” Sherman must

pay his own litigation costs and is not entitled to raid the assets of non-party Novo

Point LLC and Quantec LLC to pay for the massive

attorneys fees he has run up.

E.g., Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and

Human Resources, 532 U.S. 598, 602 (2001) (“a general practice of not awarding

[DOC 896] The District Court’s Order granting doc 467 Motion for Attorney Fees (Ordered by

Judge Royal Furgeson on 5/3/2012) (Entered: 05/03/2012).

SR. v5 p236.

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fees to a prevailing party absent explicit statutory authority”); Key Tronic Corp. v.

United States, 511 U.S. 809, 815 (1994); United States v. Larchwood Gardens, Inc.,

420 F.2d 531, 534-535 (3rd Cir. 1970) (“the law imposes on a party the duty to pay

his own fees and expenses” and thus such fees “are not proper charges against the

receivership estate”).

There is not even a colorable basis in law

for the fees awarded to Sherman.

Rather, the award comes in the context where the District Judge and its receiver

view appealing the District Court’s orders as “vexatious litigation” and justifying

receivership over the litigant. (See e.g., page 20 of Document 511837088 filed on

4/26/2012 in case 12-10003). Further, the orders of the District Court come in a

context where the District Court explained to Baron as follows:

 “Say you win [on appeal] and there is no receiver. It doesn't make any

difference. This is going on and on and on until Mr. Baron has nothing

I mean actually everything

is depleted. I gather that Mr. Baron is worth

lots of money. But it may be that we sell all the domain names. We may

sell all of his stock. We may cash in all of his CD's, and we may seize all

of his bank accounts …. to bring Mr. Baron to a penurious

condition”

(SR. v4 p1042-1043).

 “You are a fool, a fool, a fool, a fool to screw with a federal judge, and if

you don't understand that, I can make you understand it” (R. 223).

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In short, the challenged award represents a usurpation of power to take

actions that are clearly not designed to serve any lawful purpose. Instead the

challenged order is one of brute power aimed at the redistribution of private

property not directed by any guiding principle of law but based solely upon the

District Judge’s private conceptions of ‘justice’, however well intentioned they

may be. The District Court appears to see its role as that of a sovereign, lording

over the community, explaining “I have the force of the Navy, Army, Marines and

Navy behind me”, (R. 224), “Just remember, I do have access to the Army, Navy,

Marines and Air Force”, (R. 286).

However, the role of a federal court is not to force itself upon the community

and take by brute force the private property of businesses and individuals. Rather

the constitutional role of the Article III courts is to be “the guardian of individual

liberty”. Stern v. Marshall, 131 S.Ct. 2594, 2615 (2011). The District Judge

below threatened to order the death of a litigant (R. 218) and, as discussed above,

expressed his intention to dissipate all of the litigant’s property before the District

Court’s rulings could be heard on appeal (SR. v4 p1042). It is the constitutionally

mandated role of this Honorable Court to guard against the District Court's

carrying out its threats. This motion prays that this Honorable Court will fulfill

that role.

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E. Irreparable Injury

The public’s perception and confidence in the federal judicial system will be

tarnished if the District Court is permitted to violate the authority and jurisdiction

of this Honorable Court. Two courts cannot exercise jurisdiction over the same

matter at the same time. This Honorable Court has, at its discretion, decided what

matters it would allow the District Court to rule on pending appeal, and which

matters would be held for decision pending resolution of the appeal. Allowing a

district court to unilaterally divest the Court of Appeals of its power and

jurisdiction over the subject of matters on appeal directly threatens the integrity of

the appellate process and threatens public confidence in the federal court system.

Vogel and Sherman filed motions before this Honorable Court seeking to use

the res controlled by this Honorable Court in different ways. This Honorable Court

has not

granted the relief that Vogel and Sherman have requested, and, has instead

ruled that Sherman’s motion will be carried with the case

, and has, to this point,

not permitted to District Court to proceed on Vogel’s latest motions. Substantial,

irreparable injury to public confidence in the appellate process will be caused if

Sherman and Vogel are allowed to simply go around the jurisdiction of this

Honorable Court and obtain a favorable ruling from the District Court for the same

matters ruled on by this Honorable Court (not to the satisfaction of Vogel and

Document: 00511759009 filed in Case 10-11202 on 2/15/2012.

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Sherman) and for matters currently pending before this Honorable Court – while

this Honorable Court has jurisdiction over the receivership res on appeal.

Further, Vogel and Sherman argue that there can be no appeal from an order

to pay them fees or liquidate assets unless the order is stayed. If that is found to be

the law, failure to stay will deprive the injured parties their right to appeal.

Notably, a substantial amount of assets of Novo Point LLC and/or Quantec LLC

have been ordered liquidated by the District Court in non-auction, private insider

sales arranged by Vogel.

The attorneys and “professionals” to whom the payments are being directed

will be unable, upon information and belief, to repay the money should the awards

be reversed on appeal. Over two million dollars has already been ‘distributed’ to

Vogel and his ‘professionals’ (mostly his law partners), although the companies

were shuttered by Vogel in 2010. That the mammoth fees are a generated billing

exercise is clearly

demonstrated, for example, by Doc. 887, a four page ‘notice’

generated by partners of Vogel in order to inform the District Court in five sections

that “the Receiver sent Mr. Baron his living expenses for May 2012 directly via

U.S. regular mail” as ordered by the District Court (Doc. 884).

Finally, it is undisputed that domain names represent the entire business

enterprise of Novo Point LLC and Quantec LLC. By definition, the value of that

business is directly dependent upon the goodwill associated with the domain names

as their entire value exists based on their name. That is all they are—names. If

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control of the names is lost and placed in the hands of a third party, the companies

will have lost control of the use and reputation associated with those names.

Threat of reputation loss has been recognized as irreparable. E.g., Kos

Pharmaceuticals, Inc. v. Andrx Corp., 369 F.3d 700, 726 (3rd Cir. 2004).

Notably, there are no exigent circumstances requiring that the sales occur

immediately and, granting an emergency stay is necessary to protect the

jurisdiction of this Honorable Court over the receivership res currently in the

possession of this Honorable Court.

F. No substantial Harm if Stay Granted

There is no substantial harm to any party or the public interest. This

Honorable Court has jurisdiction over the receivership res and has the authority to

determine how motions relating to that res will be handled. A stay would merely

respect the jurisdiction and authority of this Honorable Court of the matters which

have been appealed to that Honorable Court. Notably, Vogel and Gardere have

already previously been paid by the District Court over two million dollars in fees

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.

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G. Conclusion

Wherefore, Appellants pray that this Honorable Court grant this Motion for

Stay Pending Appeal and for such other and further relief to which they may show

themselves justly entitled.

Respectfully submitted,

/s/ Gary N. Schepps

Gary N. Schepps

Texas State Bar No. 00791608

5400 LBJ Freeway, Suite 1200

Dallas, Texas 75240

(972) 200-0000 - Telephone

(972) 200-0535 - Facsimile

Email: legal@schepps.net

COUNSEL FOR APPELLANTS

CERTIFICATE OF SERVICE

This is to certify that this brief was served this day on all parties who receive

notification through the Court’s electronic filing system.

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANTS

Case: 12-10489 Document: 00511848491 Page: 29 Date Filed: 05/08/2012

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CERTIFICATE OF CONFERENCE

This is to certify that counsel for Vogel opposes the stay requested by this motion,

and counsel for Sherman has not stated their position. Both parties were notified

of the filing of this emergency motion..

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANTS

CERTIFICATE OF NOTICE

This is to certify that notice of the filing of this request for emergency relief was

provided by telephone to the Clerk of the Fifth Circuit Court of Appeals and to

counsel for the Appellees.

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANTS

CERTIFICATE OF EMERGENCY

This is to certify that the facts giving rise to the need for emergency relief are true

and complete.

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANTS

Case: 12-10489 Document: 00511848491 Page: 30 Date Filed: 05/08/2012