UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION

In Re: Ondova Limited Company, Debtor § Case No. 09-34784-SGJ-11

Jeffrey Baron §

Appellant §

vs. §

Daniel Sherman §

Appellee §

[1122] Order Approving Trustee's Motion for Authority to Sell Property of the Estate, Approving Sale

Procedures and Setting Hearing on Final Approval of Sale. Entered on 9/24/2013

VOLUME 3

APPELLANT RECORD

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Receiver?

MR. LOH: Your Honor, we'd like to call Gary Schepps

to the stand.

THE COURT: All right.

MR. LOH: For the same purpose, we'd like him to

answer -- to testify as to what other evidence, if any, he has

to substantiate the allegations that he's made in his objection

and in the e-mail from this morning.

MR. SCHEPPS: I object to this, Your Honor.

THE COURT: Let me ask this first. Mr. Schepps, are

you going to have any evidence to put on today?

MR. SCHEPPS: No, but the evidence that I was going to

ask to be admitted today has already been admitted through the

Trustee.

THE COURT: Okay. You don't have a witness to put on?

MR. SCHEPPS: No. I was just -- documentary. And the

documentary evidence that I had was self -- is self-

authenticating under Rule 902(9) and 903. So -- and it's been

admitted already.

THE COURT: All right. I'm going to overrule your

objection to taking the stand. Given that you have serious

allegations with no witnesses of your own, I'm going to give

the procedure a little bit of latitude. But we really need to

make it very short, Mr. Loh. Okay? So, Mr. Schepps, if you

could raise your right hand to be sworn in.

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GARY SCHEPPS, RECEIVER'S WITNESS, SWORN

DIRECT EXAMINATION

BY MR. LOH:

Q Okay. Mr. --

MR. LOH: Your Honor, --

BY MR. LOH:

Q Mr. Schepps, state your name for the record, please.

A Gary Schepps.

Q Okay. And are you, in one of your capacities, the attorney

for Jeff Baron?

A Yes.

Q And did you have an occasion, Mr. Schepps, to send an e-

mail to Mr. Golden? Sometime before this hearing this morning,

you sent him an e-mail; is that right?

A I've sent him several e-mails.

Q Okay.

MR. LOH: Can I approach the witness?

THE COURT: You may.

BY MR. LOH:

Q There's an e-mail here that we've had admitted as R-3. Do

you see that e-mail, Mr. Schepps?

A Sure.

Q Okay. Do you recall sending that e-mail to Mr. Golden this

morning?

A Well, that's only part of the e-mail chain. That's --

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that's part of it.

Q And then --

A That's not the complete e-mail.

Q The entire e-mail chain is in the record as evidence, Mr.

Schepps. I'm going to ask you --

A That's not true.

Q I'm going to ask you about this particular e-mail that you

sent to Mr. Golden this morning. Other than what has been

discussed here today, do you have knowledge of any other

evidence with regard to the sale of Petfinders.com to support

Mr. Baron's position?

A Nothing other than what's been admitted --

MR. THOMAS: Your Honor, I object. This is not

relevant. It goes to the Receiver's performance and not to the

sale here. Mr. Baron has not said evidence. If there's no

evidence, then the Court rules without that evidence. These

inquiries into he asked Mr. Schepps about information

communicated from Mr. Baron, I don't know Mr. Schepps'

relationship with Mr. Baron. It may be attorney-client

privileged. But again, it's not relevant to the sale of

Petfinders.

THE COURT: Okay. Overruled. A little latitude.

BY MR. LOH:

Q Do you have any other information -- you make -- let me

stop. Let me -- strike that. You make several allegations in

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that e-mail about suppression of evidence, internal records,

and other documents supporting Mr. Baron's position that Ondova

is not the owner of Petfinders.com. Other than what has been

presented here today before the Court, is there anything else

to your knowledge that the Court should be made aware of?

A Not that I brought with me today.

Q Okay. What did you not bring with you today that is

evidence of that position?

A I'm not prepared to discuss that.

Q And why wouldn't you be prepared to discuss that, Mr.

Schepps?

A I don't know.

Q So, you have knowledge of evidence that would support these

allegations, yet you chose not to bring it with you today?

A I didn't say that.

Q Well, what did you do? Did you either decide to bring it

or you didn't decide to bring it?

A The e-mail stands on its own, Mr. Loh. The Court's going

to do what the Court's going to do. My evidence that I was

going to admit has been admitted when the Trustee admitted the

-- its Exhibit #1, and I believe that it's admitted for all

purposes, and the exhibits that are attached thereto are the

exhibits that I was going to introduce, because they don't need

any authenticating witness for their introduction.

Q So would it be fair to say, Mr. Schepps, that you're the

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one who's suppressing the evidence?

A That's not fair to say, no.

Q Tell the Court, Mr. Schepps, give the Court an inventory of

each piece of evidence that you have that supposedly supports

Mr. Baron's positions on the ownership of Petfinders.com.

A Mr. Baron doesn't take a position on the ownership of

Petfinders.com, and I'm not here representing Mr. Baron in any

capacity today.

Q What evidence do you have that for whatever reason you

didn't decide to bring with you today that supports the

position that's been put forth before this Court that Ondova

does not own Petfinders.com?

A It's the evidence that was admitted in Trustee's 1.

Q You just told the Court, Mr. Schepps, that there's other

evidence that you didn't bring with you today. What is that

evidence?

A I didn't tell the Court that.

Q Yes, you did.

A I did not. I'm sorry.

Q Were you mistaken?

A I might have been mistaken. I mean, you're just playing a

game to try to get the Receiver out of --

THE COURT: Okay. I don't want to hear lawyer-

arguing. I want to hear evidence.

BY MR. LOH:

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Q You've alleged suppression of evidence, Mr. Schepps. Do

you believe that there's any other evidence that exists that

has been the subject of this suppression?

A Oh, I believe there is, yes.

Q Okay. And what evidence is that?

A I didn't bring -- I'm not prepared to discuss that today.

I'm sorry.

Q And why did you not bring it with you today?

A Because I didn't think that this was going to be coming up

today.

Q But this is a hearing on the sale of Petfinders.com.

A I understand. And the Court's heard all the evidence

already.

MR. GOLDEN: Your Honor, the Receiver would request an

instruction from the Court to require the witness to answer to

state if there's any evidence that he didn't bring here today

that he believes has been suppressed. Because he's saying, "I

just choose not to," and that doesn't seem to be an appropriate

answer in a court. So we would just request respectfully that

the Court instruct him to provide the answer.

THE COURT: Mr. Schepps, is there any other evidence

you are aware of --

THE WITNESS: Well, the --

THE COURT: -- that refutes the Trustee's evidence

that Ondova -- i.e., Compana -- owned Petfinders.com?

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THE WITNESS: Well, the Receiver did a document dump

on me with about --

THE COURT: Okay. Yes --

THE WITNESS: Five -- five --

THE COURT: That was actually a yes or no question.

Is there any evidence you're aware of that refutes the

ownership by Ondova of Petfinders.com?

THE WITNESS: Well, Your Honor, just --

THE COURT: Yes or no?

THE WITNESS: Well, it's not a yes or no -- it's not a

yes or no answer, because --

THE COURT: You are either aware of evidence germane

to who owns Petfinders.com or not.

THE WITNESS: Well, --

THE COURT: Yes or no?

THE WITNESS: Well, Your Honor, can I just briefly,

for 15 seconds, explain? The Receiver sent over about 5,000

pages of documents with each domain name that's owned by

Quantec and Novo Point, and it has the domain name -- it's like

an Excel spreadsheet -- and who the actual owner is. And so I

would need -- I believe that Petfinders.com could be in there,

and I have those, and they're in randomized order. They're not

in any -- and I'd have to go through the documents that were

provided to me by the Receiver to see if Petfinders.com is one

of the names in the 5,000 pages of domain names that were

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provided to me. That's -- so I could be aware of some

additional evidence if Petfinders.com is listed as an asset of

Novo Point in the documents that the Receiver gave me. That's

what I'm trying to say.

BY MR. LOH:

Q Isn't it true, Mr. Schepps, that that list of domain names

was provided to you in electronic form?

A I don't remember.

Q Isn't it true, Mr. Schepps, that because it's in electronic

form, it would be fairly easy to type in, in the search bar,

"Petfinders.com" and see if that name appears in the electronic

form of the list?

A Yes, if it was provided to me in electronic form.

Q It was. I'll represent to you to you that it was, and I'll

represent to the Court that it was.

MR. LOH: We have nothing further.

THE COURT: Anything further as far as questions of

this witness?

MR. URBANIK: No, Your Honor.

THE COURT: All right. Thank you, Mr. Schepps.

You're excused.

THE WITNESS: Thank you, Your Honor.

(The witness steps down.)

THE COURT: All right. As I understood it, no one has

any more evidence with regard to the Petfinders motion.

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Correct? Speak now or forever hold your peace.

(No response.)

THE COURT: All right. Mr. Urbanik, to recap, the

Trustee has put in evidence that Ondova or Compana is the owner

-- i.e., the registrant -- of this Petfinders.com domain name.

He has put in evidence in the form of testimony from Mr.

Nelson, in the form of documents regarding WHOIS information

that were admitted through Mr. Nelson, and then we have an e-

mail from Mr. Baron's former counsel, Mr. Pronske, indicating

Ondova owned the Petfinders name. We also have evidence from

the Trustee that this is a trademark-infringing name, which

calls into credibility any value inherent in the name if owned

by anyone other than the trademark owner, Discovery.

That being the only evidence we have as to ownership, we

have the Trustee's request to sell to -- again, let me get the

exact name -- it's Discovery Communications, --

MR. URBANIK: LLC.

THE COURT: -- LLC, for $25,000 cash. It would be

free and clear of all interests, and it would be with full

releases, mutual releases on either side. Is there anything

more to your motion than I have just recapped?

MR. URBANIK: Your Honor, you've covered everything.

We would like the order simply to be free and clear of any and

all liens, claims and encumbrances, and furthermore that the

Court finds based on the evidence presented today that

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Discovery Communications is a good faith purchaser for value,

has no connections whatsoever to any of the parties in the

case, and therefore is entitled to the protections of

Bankruptcy Code Section 363(m).

We would ask that all objections be overruled. There was

only one timely response, that of the Receiver, simply asking

that we put on evidence today of the estate's ownership, which

we believe we have. Every other reply has been time-barred.

There are no other timely responses except the Receiver's. The

response date was October 31, 2011.

THE COURT: All right. Counsel on the phone, Mr.

Rothleder, do you have anything you wanted to add before the

Court rules?

MR. ROTHLEDER: No, Your Honor. We have nothing

further to add.

THE COURT: Okay. Anything else? Mr. Schepps, again,

I have not ruled on your standing. I find your standing highly

doubtful. What did you want to say? In the microphone.

MR. SCHEPPS: I would just object, Your Honor, that

they've asked for a waiver of the 14-day automatic stay to

appeal, and we would just object to the Court waiving the 14-

day automatic stay.

THE COURT: All right.

MR. SCHEPPS: Thank you, Your Honor.

THE COURT: All right. The Court hereby grants the

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motion of Trustee Daniel J Sherman to sell Petfinders.com, the

domain name, free and clear of all interests to Discovery

Communications, LLC.

This authority is granted under 363 of the Bankruptcy Code.

The Court finds the evidence of both Mr. Sherman and Mr. Nelson

credible and unrefuted here today that Ondova Compana is the

current owner and registrant of Petfinders.com. And as earlier

noted, the Court finds the evidence credible that it is a

trademark-infringing name which affects significantly the value

of the name in any holder other than Discovery Communications,

LLC.

So the Court finds it is an exercise of reasonable business

judgment of the Trustee to enter into a sale of the name to

Discovery Communications, LLC. The Court finds the $25,000

sale price to be fair and reasonable under all of the

circumstances. The Court does find Discovery Communications,

LLC, which has trademarks in Petfinders, to be a good-faith

purchaser for value. The Court finds this to be an arms-length

transaction. And again, the sale is free and clear of all

interests.

The Court reserves the right to supplement with a more

detailed written order. The Court does find it appropriate and

there being good cause to waive the 14-day stay on

implementation of the order, which the Court does have the

discretion to do. And so the Court does hereby waive the 14

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days and allows the Trustee to immediately go forward with the

sale.

All right. So, Mr. Urbanik, we'll look for an order from

you.

Can we quickly, and I do mean quickly, address the Servers

and Sedo sale procedures? Let me ask. We don't have any -- we

do or we don't have objections on that one?

MR. URBANIK: No objections, Your Honor.

THE COURT: Okay. So I of course ruled in an

adversary proceeding a couple of weeks ago, in declaratory

judgment fashion, that Mr. Sherman had authority to sell both

the estate's interest and Mr. Emke's interest in Servers.com.

So this is, I guess, supplemental to that ruling, as far as

asking approval for the procedure for the sale, correct?

MR. URBANIK: Yes, Your Honor. If I may, I might ask

the Court to indulge me to allow me to just sort of present

both motions in tandem, since the Court has had a full two-day

trial on the issue of the sale of Servers.com.

DANIEL J. SHERMAN, TRUSTEE'S WITNESS, PROFFER

MR. URBANIK: As the Court is aware, there was a two-

day adversary proceeding trial in Adversary No. 11-03181-sgj-

11, where the issue of the name and the sale of the name and

how it was to be sold was tried over two days. The Court found

in favor of the Trustee that the name should be sold by the

Trustee and that the Trustee should employ the domain name

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broker Sedo.com to conduct the sale.

Your Honor, with respect to the motion to employ Sedo,

rather than amend the prior motion, we filed a brand new

motion. However, the Court has previously approved Sedo.com to

conduct the sale of the domain name. Sedo.com is the -- is one

of the largest Internet domain name brokers in the United

States, if not the world, and it has sold some of the best-

returned Internet domain names in the past few years. We did

extensive research regarding which entity should sell this

domain name, and based on the Trustee's research and due

diligence and in his business judgment felt that Sedo.com would

be the best entity to assist the Trustee in selling this domain

name.

The commission that we've negotiated with Sedo.com is their

standard commission of 15 percent, which the Trustee has found

is standard in the industry. They offer the 15 percent

commission both on broker-assisted sales and online auction

sales. Because this is viewed as a more valuable name, we've

requested that this be a broker-assisted domain name sale.

However, in the event that something happens, it may become an

online auction sale.

The Court has previously approved that Sedo.com is

disinterested, and we would simply ask the Court to again

employ -- authorize the employment of Sedo.com to sell the

name, with a 15 percent commission. In the event there is no

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need for further hearing, we'd like the authority to just

conduct the sale and close, and we'll put that in the order.

And if the purchaser would like a separate motion and an order,

we can come to court for that as well.

So, Your Honor, we would ask the Court approve the

employment of Sedo to conduct the sale.

With respect to our motion for authority to sell property,

I would like to just make a few comments. The Internet domain

name Servers.com was specifically referenced in the global

settlement agreement that was approved in July 2010. In the

global settlement agreement, Provision 3(e) on Page 7

identified that Servers.com was a name owned by Ondova. That

settlement agreement was executed -- was approved and executed

by all of the parties, including Quantec, Inc., Novo Point and

Quantec, LLC, Novo Point, LLC, Mr. Baron, and all of the other

Baron entities. There is no question whatsoever that

Servers.com is an Ondova name.

Furthermore, no party intervened timely in the litigation

against Mr. Emke in the adversary proceeding, claiming some

right to the domain name Servers.com. The name is believed to

have significant value. The only pleading regarding

Servers.com that's been filed recently was the one of Mr.

Schepps with the Fifth Circuit Court of Appeals last Friday,

November 5th, which the Fifth Circuit ruled on yesterday. In

its ruling, the Fifth Circuit says, "It is ordered that the

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emergency motion of Appellant Jeffrey Baron for limited stay,

dissolution or otherwise to allow Jeffrey Baron to defend his

interest in the Servers.com domain in the Ondova bankruptcy

proceedings is denied." And that's from Fifth Circuit Judges

Garza, Southwick and Haynes.

It is undisputed that it's an Ondova name, Your Honor. The

Fifth Circuit has even ruled on that. And we would therefore

like authority to proceed with our sale of the domain name

using Sedo.com.

So I've just sort of presented Your Honor the motion to

sell and the motion to employ Sedo. If the Court approves

these, I will prepare appropriate orders on each motion and

upload them this afternoon.

THE COURT: All right. Mr. Sherman, would that be

your proffer, and would it be true and correct and the same as

you would have testified had you taken the stand?

MR. SHERMAN: It is. It is, Your Honor.

THE COURT: All right. Anyone wish to cross-examine

Mr. Sherman on these bases?

MR. LOH: We've been provided two very brief questions

for Mr. Sherman from Mr. Thomas that the Receiver would like to

pose to him.

THE COURT: All right. Mr. Sherman, you are still

under oath, I will remind you. And please take the stand.

CROSS-EXAMINATION

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BY MR. LOH:

Q Thank you, Mr. Sherman. Just real quickly, with regard to

Servers.com, we of course --

MR. LOH: I'll just note again for the record, Your

Honor, that in Receiver's Exhibit R-4 we have kind of a general

objection that was conveyed to the Receiver from Mr. Thomas

that Mr. Baron objects to any sale of any domain name. And

then in addition to that general objection that we wanted noted

for the record from the Receiver, there were these two very

brief questions.

BY MR. LOH:

Q Mr. Sherman, do you have any knowledge as to whether, when

Servers, Inc. became insolvent and then was placed under

receivership, Jeff Baron's personal interest in the name

reverted back to him?

A Say what?

Q I'll say it again. Do you have any knowledge as to

whether, when Servers, Inc. became insolvent and then was

placed under receivership, Jeff Baron's personal interest in

Servers.com in fact reverted back to Jeff Baron?

A I have no such knowledge.

Q Do you know whether or not Jeff Baron's interest in

Servers.com reverted to any other person or entity?

A No.

Q Okay.

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MR. LOH: Pass the witness.

THE COURT: Any other questions of Mr. Sherman?

MR. SCHEPPS: Your Honor, may I be allowed, as amicus

for Mr. Baron, to ask a couple of questions?

MR. URBANIK: We would oppose the request. The Fifth

Circuit has ruled that Mr. Baron has no standing on this

matter.

THE COURT: Okay.

MR. URBANIK: There's not been an objection timely

filed by October 31st.

THE COURT: Okay. I --

MR. SCHEPPS: Your Honor, can I --

THE COURT: You know what? I've seen the Fifth

Circuit ruling.

MR. SCHEPPS: But that's -- but that's what I would

just like to point out to the Court, the relevant provision of

the Fifth Circuit ruling. And I'd like to point out to the

Court, as an amicus, the relevant portion of the Trustee's

Exhibit #13 that was admitted earlier today. I'd just like to

show those two things to the Court, if I may.

THE COURT: Okay. Overruled. I think you

misunderstand what an amicus is. You're purporting to

represent many parties in interest.

All right. Anything further as far as evidence on this?

MR. URBANIK: No redirect, and we have no other

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evidence, Your Honor.

THE COURT: All right.

MR. URBANIK: Thank you.

THE COURT: Thank you, Mr. Sherman. You're excused.

(The witness steps down and is excused.)

THE COURT: All right. The Court approves both the

motion to approve sale procedures -- I'm sorry. Mr. Golden,

did I leave something out?

MR. GOLDEN: We just again, and I'm sorry to slow this

down, but we wanted to make sure that the record is clear that

Mr. Thomas has no evidence that he wishes to present to the

Court through the Receiver or that Mr. Schepps has no evidence

that he wishes to present to the Court through the Receiver.

THE COURT: Okay. I thought when I asked "Any more

evidence?" I had, you know, --

MR. GOLDEN: I didn't jump up soon enough.

THE COURT: -- addressed that. Anybody have evidence?

MR. SCHEPPS: Can I speak to the Receiver for 30

seconds to one minute and just point out a couple of things to

him very, very --

THE COURT: Go ahead and speak to him for 30 seconds,

but I'm --

(Counsel confer.)

THE COURT: All right. We've had --

MR. URBANIK: I'm ready to respond to the point Mr.

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Schepps is making to the Receiver. There is --

MR. SCHEPPS: I'm just talking to the Receiver. The

Receiver --

THE COURT: Okay. You asked for 30 seconds. We

either have more evidence or we don't. What do we have?

MR. GOLDEN: Your Honor, can we make this quickly in

terms of putting Mr. Schepps on the stand and just ask him the

question, "Please provide all evidence that you think is

relevant"? That would certainly give the Receiver cover in

terms of presenting all the evidence that he has been given

from Mr. Baron.

THE COURT: All right. Five minutes tops. Again, I

--

MR. GOLDEN: We promise.

THE COURT: I -- you know, evidence. We're hearing

lawyers, lawyers, lawyers, lawyers. Evidence.

Mr. Schepps, you're still under oath from the prior

swearing-in. Okay.

MR. GOLDEN: Thank you, Your Honor.

GARY SCHEPPS, RECEIVER'S WITNESS, PREVIOUSLY SWORN

DIRECT EXAMINATION

BY MR. LOH:

Q Mr. Schepps, you're back now on the stand. Is that

correct?

A Yes.

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Q And you are -- purport to have evidence with regard to Mr.

Baron's interest in Servers.com. Is that right?

A Well, the evidence has already been admitted today as

Trustee's Exhibit 13.

Q Okay. And what is that evidence, or how would you like it

presented to the Court?

A If the Court would notice that Trustee's Exhibit 13, IV,

says, "Security Interest in Name. In the event of insolvency,

Receivership and/or other default of the jointly-owned company,

the domain name Servers.com shall revert to Jeff Baron and Mike

Emke, to be owned jointly and equally. To this degree, these

two principals shall maintain a first lien and security

interest in the domain name superior to any other investor,

equity holder or creditor."

And then I would like the Court to take -- to ask the Court

to take judicial notice that it imposed a receivership over the

name Servers.com. I think the date was on October the 18th.

So the imposition of the receivership over Servers.com sprung

Servers.com out of Ondova and into Emke and to Baron.

And the other piece of evidence that I have is the Court's

-- is the Fifth Circuit's ruling that was handed down

yesterday, which has been filed with this Court this morning as

Document #681, and it clearly recognizes that Mr. Baron has an

interest in the name Servers.com, that Mr. Urbanik read into

the record a few minutes ago. "It is ordered that the

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emergency motion of Appellant Jeffrey Baron for a limited stay,

dissolution, or otherwise to allow Jeffrey Baron to defend his

interest in the Servers.com domain in the Ondova bankruptcy

proceedings is denied." So, clearly, an interest of Mr. Baron

was recognized by the Fifth Circuit.

THE COURT: Anything further?

THE WITNESS: No, Your Honor.

BY MR. LOH:

Q Anything else?

A No.

THE COURT: Okay. You're excused.

THE WITNESS: Thank you, Your Honor.

(The witness steps down.)

MR. GOLDEN: All right.

MR. GOLDEN: Your Honor?

THE COURT: Any other evidence?

MR. GOLDEN: Your Honor, Mr. Thomas has asked us on

behalf of Mr. Baron if we could call Damon Nelson to the stand.

I would request permission to be able to do that, and so we

could simply ask him the question of, as manager of Novo Point,

LLC, do you have any knowledge as to the ownership of the

domain name Servers.com? And then we'll leave it at that.

MR. URBANIK: Your Honor, the settlement agreement

from last summer is already in the record and the owner is

Ondova Limited. Mr. Nelson cannot add anything. I've asked

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the Court to take judicial notice of Paragraph 3 of the

settlement agreement, where Mr. Baron and all of his entities

acknowledge that Ondova is the owner. I don't see that adding

-- having testimony of Mr. Nelson adds to that.

THE COURT: Okay. I sustain that objection. I will

take judicial notice of that. And I'll take judicial notice of

two days of trial testimony I heard and other evidence I heard

in the adversary involving Servers.

All right. Anything else in the way of evidence?

MR. LOH: No, Your Honor.

MR. URBANIK: No, Your Honor.

THE COURT: All right. The Court grants the 363(b)

sale motion of Trustee Daniel Sherman requesting authority to

enter into procedures to sell the domain name Servers.com. And

the Court also approves, as part and parcel of that, the

application of Mr. Sherman to employ Sedo.com at a 15 percent

commission to market and attempt the sale of Sedo.com. The

Court does find that the Trustee is exercising reasonable

business judgment in proposing the sale procedures. They do

appear to be fair and aimed at exposing the domain name to the

marketplace in an adequate fashion to attempt to achieve fair

value.

The Court finds these procedures to be in the best interest

of the estate. The Court reserves the right to supplement, but

the Court does approve under 363 the sale motion, and under 327

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and 328 the application to employ Sedo. Any objections still

pending are overruled.

Mr. Urbanik, I am fine with the mechanism proposed where

the Trustee simply comes back and files a notice reporting the

result. However, at the same time, if any purchaser does want

a specific hearing and sale order, we can have a subsequent

hearing to do that.

Again, for the record, I have hereby overruled any

objection with regard to any of these pending matters today.

I realize we have the procedural issue of the Receiver's

motion to strike and motion for -- second motion for a show

cause as to why Gary Schepps should not be held in contempt and

sanctioned. I'm going to carry the Receiver's motion and

consolidate a hearing on the merits on this new motion with the

hearing we have on the first motion to show cause. We are

coming back on that first motion to show cause involving Mr.

Payne as well as Mr. Schepps on what date, Laura? Do you have

that handy, or does someone have that handy? Okay. She just

closed it out.

MR. LOH: I believe it's the 15th.

MR. URBANIK: November 15th? And so the Court will

again consolidate and hear any evidence and argument on that,

on the newest show cause relief sought.

Let me just say, I mean, we've -- Mr. Schepps, we're to the

point where we're having way too much time spent in procedural

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lawyer argument. I want to hear evidence when we have these

hearings. When we have a pleading that is filed, such as the

one you filed objecting to the Petfinders.com sale, a lawyer

should know you've got to come in with evidence. And I have

said that many times before. I have told Mr. Payne and you:

Come in with Mrs. Katz. Come in with Mr. whoever-it-is at

SouthPac. Come in with Mr. Baron. Come in with someone. But

you can't file a pleading and throw out all this stuff and then

take up the Court's time that way, take up the parties' time,

and then not have evidence.

I strongly suggest you have evidence when you come in on

the 15th, or anytime in the future you file a pleading. Courts

decide issues based on evidence. Okay? When you question

someone's authority, when you question someone's integrity,

when you object in any way to a motion, you'd better have

evidence.

Why would you come in here without evidence? Would you

address that right now? Why would you come in here without

evidence? Why would you file a pleading and then not have

evidence?

MR. SCHEPPS: I'm not prepared to discuss that today,

Your Honor, because it's the subject of a pending second motion

to show cause. And I'm allowed 24 days to respond to it.

THE COURT: All right. Well, again, I presume you're

going to have evidence on the 15th and at any subsequent

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INDEX

PROCEEDINGS 3

WITNESSES

Trustee's Witnesses Direct Cross Redirect Recross Court

Daniel J. Sherman Proffer-6 10 26

Damon Nelson 29 40/70

Daniel J. Sherman Proffer-93 97

Receiver's Witnesses Direct Cross Redirect Recross Court

Martin Thomas 77

Gary Schepps 83

Gary Schepps, Recalled 100

EXHIBITS

Trustee's Exhibits Identified Received

1 through 13 39 39

Receiver's Exhibits Identified Received

R-1 Petfinders, LLC's Objection to Trustee's 10 11

Motion for Authority to Sell Property of

the Estate

R-2 Pronske E-Mail Correspondence 17 18

R-3 Schepps E-Mail Correspondence 19

R-4 Thomas Correspondence 54 Denied-55*

*Reoffered Pg. 79

RULINGS

- Motion to Sell Property under Section 363(b) Filed 91

by Trustee Daniel J. Sherman [656] - Granted

- Application to Employ Sedo.com, LLC as Broker Filed 103

by Trustee Daniel J. Sherman [657] - Granted

- Motion to Sell Property under Section 363(b) Filed 103

by Trustee Daniel J. Sherman [658] - Granted

- Receiver's Motion to Strike Pleading and Second 104

Motion to Show Cause [679] - Carried to 11/15/2011

END OF PROCEEDINGS 106

INDEX 107

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ORDER GRANTING TRUSTEE'S MOTION FOR AUTHORITY TO SELL PROPERTY OF THE ESTATE – Page 1

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In re: §

§ Case No. 09-34784-SGJ

ONDOVA LIMITED COMPANY, § (Chapter 11)

§

Debtor. §

ORDER GRANTING TRUSTEE'S MOTION FOR AUTHORITY TO SELL

PROPERTY OF THE ESTATE

At Dallas, Texas, in said District on the 9

th

day of November, 2011, this Court conducted a

hearing (the "Hearing") on the Trustee's Motion for Authority to Sell Property of the Estate (the

"Motion")

1

[Docket No. 658] filed on October 7, 2011 by Daniel J. Sherman (the "Trustee"), the duly-

appointed Chapter 11 trustee of Ondova Limited Company (the "Debtor" or "Ondova"). As set forth

in this Court's Findings of Fact, Conclusions of Law and Order entered on October 18, 2011

("Findings") [Adversary Proceeding Docket No. 130] this Court previously conducted a trial in

Adversary Proceeding No. 11-03181, finding that the Trustee is directed to sell the domain name,

servers.com (the "Domain Name"), utilizing internet domain name broker, Sedo.

Upon consideration of the Motion and the arguments and representations made by counsel

therein and at the Hearing, this Court hereby finds as follows:

1

All of the capitalized terms used in this Order, unless otherwise indicated, shall have the meanings ascribed to them in

the Motion.

Signed November 14, 2011

U.S. BANKRUPTCY COURT

NORTHERN DISTRICT OF TEXAS

ENTERED

TAWANA C. MARSHALL, CLERK

THE DATE OF ENTRY IS

ON THE COURT'S DOCKET

The following constitutes the ruling of the court and has the force and effect therein described.

United States Bankruptcy Judge

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ORDER GRANTING TRUSTEE'S MOTION FOR AUTHORITY TO SELL PROPERTY OF THE ESTATE – Page 2

A. This Court has jurisdiction to hear and to determine the Motion and to grant the relief

requested therein pursuant to 28 U.S.C. §§ 157(a) and 1334. This matter is a core proceeding

within the meaning of 28 U.S.C. § 157(b). Venue of this case and of the Motion is proper in this

District pursuant to 28 U.S.C. §§ 1408 and 1409.

B. Notice of the Motion and the Hearing was appropriate and sufficient under the

circumstances, and no further notice is necessary.

C. The relief requested by the Trustee in the Motion is appropriate and in the best

interests of the Estate and all parties-in-interest.

D. All objections to the Motion are overruled.

E. Pursuant to the Findings, the sale of the Domain Name is an exercise of the

Trustee's sound business judgment and is in the Estate's best interest under the circumstances.

F. The Trustee is authorized to sell the Domain Name to a purchaser free and clear of

all liens, claims, encumbrances, and interests because one or more of the standards set forth in

Section 363(f) of the Bankruptcy Code have been satisfied. Furthermore, this Court has already

previously found that the Trustee's sale of the Domain Name meets all of the requirements of

Section 363(h) of the Bankruptcy Code.

NOW, THEREFORE, IT IS HEREBY:

ORDERED that the Motion is APPROVED. It is further

ORDERED that, pursuant to Sections 363(b), (h), and (f) of the Bankruptcy Code, the

Trustee is immediately authorized to sell the Domain Name. It is further

ORDERED that, if the purchaser of the Domain Name desires a subsequent order from this

Court approving the sale of the Domain Name or if the Trustee deems it appropriate or necessary to

obtain a subsequent order from this Court approving the sale of the Domain Name, the Trustee may

petition this Court for, and this Court shall grant, such an order. It is further

ORDERED that in the event no subsequent order is required by the purchaser or the

Trustee, within five (5) days of the sale of the Domain Name closing, the Trustee shall file a notice

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with the Court identifying the details of the sale of the Domain Name, including the purchase price.

It is further

ORDERED that the sale of the Domain Name shall be free and clear of all liens, claims,

encumbrances, and interests pursuant to Section 363(f) of the Bankruptcy Code. It is further

ORDERED that the Trustee is authorized to execute any and all documents he deems

necessary or appropriate to effectuate the sale of the Domain Name. It is further

ORDERED that this Order shall be effective immediately and the stay provided for in

Bankruptcy Rule 6004(h) is waived. It is further

ORDERED that this Court shall retain jurisdiction to hear and resolve any and all disputes

that may arise from the implementation of this Order.

# # # END OF ORDER # # #

Submitted by:

Raymond J. Urbanik

Texas Bar No. 20414050

Lee Pannier

Texas Bar No. 24066705

MUNSCH HARDT KOPF & HARR, P.C.

3800 Lincoln Plaza

500 N. Akard Street

Dallas, Texas 75201-6659

Telephone: (214) 855-7500

Facsimile: (214) 855-7584

rurbanik@munsch.com

lpannier@munsch.com

ATTORNEYS FOR DANIEL J. SHERMAN,

CHAPTER 11 TRUSTEE

MHDocs 3481283_1 11236.1

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 1

Raymond J. Urbanik, Esq.

Texas Bar No. 20414050

Thomas D. Berghman, Esq.

Texas Bar No. 24082683

MUNSCH HARDT KOPF & HARR, P.C.

3800 Lincoln Plaza

500 N. Akard Street

Dallas, Texas 75201-6659

Telephone: (214) 855-7500

Facsimile: (214) 855-7584

E-mail: rurbanik@munsch.com

E-mail: tberghman@munsch.com

ATTORNEYS FOR DANIEL J. SHERMAN,

CHAPTER 11 TRUSTEE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

In Re

§

Case No. 09-34784-SGJ

ONDOVA LIMITED COMPANY,

§

(Chapter 11)

§

Debtor.

§

Hearing Date: September 10, 2013

Hearing Time: 10:30 a.m.

TRUSTEE'S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE

PURSUANT TO 11 U.S.C. § 363(B)AND (B) FOR APPROVAL OF SALE PROCEDURES

NO HEARING WILL BE CONDUCTED HEREON UNLESS A WRITTEN

RESPONSE IS FILED WITH THE CLERK OF THE UNITED STATES

BANKRUPTCY COURT AT 1100 COMMERCE STREET, ROOM 1254,

DALLAS, TEXAS 75242-1496, BEFORE CLOSE OF BUSINESS ON

SEPTEMBER 9, 2013, WHICH IS AT LEAST TWENTY-FOUR (24) DAYS

FROM THE DATE OF SERVICE HEREOF.

ANY RESPONSE MUST BE IN WRITING AND FILED WITH THE CLERK, AND

A COPY SHALL BE SERVED UPON COUNSEL FOR THE MOVING PARTY

PRIOR TO THE DATE AND TIME SET FORTH HEREIN. IF A RESPONSE IS

FILED, A HEARING MAY BE HELD WITH NOTICE ONLY TO THE

OBJECTING PARTY.

IF NO HEARING ON SUCH NOTICE OR MOTION IS TIMELY REQUESTED,

THE RELIEF REQUESTED SHALL BE DEEMED TO BE UNOPPOSED, AND

THE COURT MAY ENTER AN ORDER GRANTING THE RELIEF SOUGHT OR

THE NOTICED ACTION MAY BE TAKEN.

TO THE HONORABLE STACEY G. C. JERNIGAN, U.S. BANKRUPTCY JUDGE:

COMES NOW Daniel J. Sherman (the "Trustee"), the duly-appointed Chapter 11 trustee

of Ondova Limited Company, and files his Motion for Authority to (A) Sell Property of the Estate

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 2

Pursuant to 11 U.S.C. § 363(b) and (B) for Approval of Sale Procedures (the "Motion"),

respectfully stating as follows:

I. BACKGROUND

A. Procedural Background And Jurisdiction

1. On July 27, 2009 (the "Petition Date"), Ondova Limited Company ("Ondova" or

"Debtor") filed its voluntary petition for relief under Chapter 11 of Title 11 of the United States

Code (the "Bankruptcy Code"), thereby initiating the above-referenced bankruptcy case (the

"Bankruptcy Case") and creating the Debtor's bankruptcy estate (the "Estate"). On September

17, 2009, the Court entered its order approving the appointment of the Trustee.

2. This Court has jurisdiction over this Bankruptcy Case and this Motion pursuant to

28 U.S.C. §§ 157 and 1334. Such jurisdiction is core under 28 U.S.C. § 157(b)(2). Venue of

this Bankruptcy Case before this Court is appropriate pursuant to 28 U.S.C. §§ 1408 and 1409.

3. The statutory bases for the relief requested herein are sections 105 and 363 of

the Bankruptcy Code, Rules 2002 and 6004 of the Federal Rules of Bankruptcy Procedure (the

"Bankruptcy Rules"), and Local Rule 9007-1 of the United States Bankruptcy Court for the

Northern District of Texas.

B. The Domain Name Servers.com

4. Pursuant to an order of this court entered on October 17, 2011, The Trustee has

authority to sell the Internet domain name Servers.com (the "Domain Name"). Although the

Trustee had previously employed Sedo.com to assist in the sale of the domain name, Sedo.com

was unable to locate a purchaser and the Trustee therefore terminated Sedo.com by letter

dated August 30, 2012, effective as of September 13, 2012. The Trustee then began his own

sale efforts and located a business in the webhosting industry which expressed an interest in

purchasing the Domain Name. XBT Holdings Ltd, or an affiliate thereof (“Purchaser”), has

made an offer to purchase the Domain Name and operates a large webhosting business that

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has no relationship to Ondova, the Trustee, Jeffrey Baron (“Baron”) or any of Baron’s related

entities.

5. The Purchaser has proposed an offer of $300,000 to purchase the Domain Name

which the Trustee has accepted subject to higher and better offers and pursuant to the sale

procedures delineated herein. The Purchaser is aware that the sale must be approved by the

Bankruptcy Court and that the Trustee must determine if there are higher or better offers. The

Purchaser has also agreed to be the stalking horse bidder in the event other parties are

interested in bidding on the Domain Name and an auction is scheduled by the Trustee. Due to

concerns that many matters related to Baron litigation have become protracted, the Purchaser

has advised the Trustee that its offer to purchase the Domain Name will terminate if either the

sale of the Domain Name has not closed or the auction, if applicable, has not been conducted

by December 15, 2013.

6. The sale procedures agreed to by the parties will allow the Trustee to determine

if there are any purchasers who would bid a better or higher offer for the Domain Name. In

order to evidence its good faith interest in purchasing the Domain Name, Purchaser has placed

a $40,000 deposit with the Trustee and has agreed to allow the Trustee to market the Domain

Name for a period of approximately four (4) weeks.

7. Furthermore, the Trustee and Purchaser have agreed to the following additional

procedures (the “Sale Procedures”):

a. Following approval of this Motion, the Trustee may begin to market the Domain

Name, noting that it is part of a Bankruptcy Court auction, on Internet websites

which are related to the server and webhosting industries and on Internet

websites which relate to the Internet domain name industry (i.e. Domain Name

Journal).

b. The Trustee shall have a period of thirty (30) days to market the Domain Name

following approval of this Motion. The specific dates and schedule for the

marketing and auction sale will be provided to the Court at the hearing on this

Motion.

c. The schedule will call for the Trustee to establish a deadline for interested parties

to submit a bid, in the amount of at least $330,000, and submit financial

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information to demonstrate sufficient financial resources to purchase the Domain

Name. Any party that seeks to bid on the Domain Name shall be required to

place with the Trustee a $40,000.00 deposit. A party which evidences financial

resources and places a deposit shall be designated a Qualified Bidder.

d. If there is one or more Qualified Bidders, an auction will be scheduled and

conducted at the offices of counsel for the Trustee and the initial opening bid will

be the highest bid received from a Qualified Bidder and all subsequent bidding

will be in minimum increments of $10,000.00. Qualified Bidders participating in

the auction may participate in person or by telephone. The Trustee shall have

the absolute right and discretion to determine the highest and best bid (the

“Winning Bidder”) at the auction.

e. The second highest bidder shall agree to be the purchaser if the winning bidder

fails to close.

f. Any party participating in the auction which is determined to be the winning

bidder but which fails to close on the purchase of the Domain Name shall forfeit

their deposit.

g. In the event that Purchaser is not the winning bidder, it shall receive a

$20,000.00 break-up fee and, like any other Qualified Party which submitted a

deposit but was not the winning bidder, shall receive the return of its deposit.

1

8. The Trustee believes that the offer made by Purchaser is fair and reasonable. In

the event no other party becomes a Qualified Bidder, the Trustee will file a notice with the Court

indicating that there were no other parties that became Qualified Bidders and that no auction will

be conducted. In said event, the Trustee may request a subsequent order of the Court

approving the sale of the Domain Name to Purchaser.

II. RELIEF REQUESTED

9. By and through the Motion, the Trustee requests that this Court grant him the

authority to sell the Domain Name to the Purchaser free and clear of all liens, claims and

encumbrances and that this Court designate the Purchaser a good faith purchaser for value

1

The Purchaser is aware that Baron, and certain attorneys representing Baron, are extremely litigious

and due to concerns that Baron or another party may employ vexatious litigation tactics to object, delay or

disrupt the auction or the sale of the Domain Name, the Trustee has agreed to address with Purchaser a

possible higher break-up fee in the event the Purchaser is not the winning bidder but has expended

additional legal fees due to the conduct of Baron, his attorneys of any other party. Any increase in the

break-up fee however can be considered in the event the auction sale generates sufficient funds to cover

the additional amount. Finally, in the event of any dispute concerning a request for an additional break-up

fee, such dispute shall be resolved by the Bankruptcy Court.

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§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 5

pursuant to 11 U.S.C. § 363(m). The Trustee further requests that this Court waive the fourteen

(14) day stay period provided for under Bankruptcy Rule 6004(h). Finally, the Trustee requests

that this Court approve the requested Sale Procedures set forth herein.

III. ARGUMENT AND AUTHORITY

A. The Proposed Sale Of The Domain Name Should Be Approved

1. The Section 363 Standards

10. A trustee may sell property of the estate "other than in the ordinary course of

business" with court approval and after notice and a hearing. 11 U.S.C. §363(b)(1). As

recognized by the Fifth Circuit, a trustee is entitled to use his or her business judgment in

determining whether to sell assets outside of the ordinary course of business. See Institutional

Creditors of Cont'l Air Lines Inc. v. Cont'l Air Lines Inc. (In re Cont'l Air Lines Inc.), 780 F.2d

1223, 1226 (5th Cir. 1986). Also, a trustee should be allowed to sell property of the estate

outside the ordinary course if that sale benefits the estate and its creditors. See Four B. Corp.

v. Food Barn Stores, Inc., 107 F.3d 558, 564-65 (8th Cir. 1997) (reminding courts, when faced

with bankruptcy sales, to be mindful of "the ubiquitous desire of the unsecured creditors" and of

one of the "primary objective[s] of the Code, to enhance the value of the estate at hand");

Official Comm. of Subordinated Bondholders v. Integrated Res., Inc., 147 B.R. 650, 659

(S.D.N.Y. 1992) (explaining that "[i]t is a well-established principle of bankruptcy law that the

objective of bankruptcy sales and the Debtor's duty with respect to such sales is to obtain the

highest price or overall greatest benefit possible for the estate" (quoting In re Atlanta Packaging

Prod., Inc., 99 B.R. 124, 131 (Bankr. N.D. Ga. 1988)). Therefore, if a trustee exercises his

sound business judgment when attempting to sell property of the estate outside the ordinary

course of business and, if that sale will benefit the estate and its creditors, then a court should

approve the sale.

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 6

11. Additionally, a trustee may sell property of the estate outside of the ordinary

course of business and "free and clear of any interest in such property of an entity other than

the estate", if –

(1) applicable non-bankruptcy law permits sale of such property free and

clear of such interest;

(2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is

greater than the aggregate value of all liens on such property;

(4) such interest is in bona fide dispute; or

(5) such entity could be compelled, in a legal or equitable proceeding, to

accept a money satisfaction of such interest."

11 U.S.C. § 363(f).

12. Satisfaction of any one of the five requirements listed above will suffice to permit

a sale "free and clear" of liens, claims and encumbrances. In re CPower Products, Inc., 230

B.R. 800 (Bankr. N.D. Tex. 1998) (stating that, for a sale of assets free and clear of liens, claims

and encumbrances, "…one of the conditions of 363(f)(1) through (5) must be met"). Finally,

Bankruptcy Rule 6004 provides that a sale outside the ordinary course of business "may be by

private sale or by public auction". Fed. R. Bankr. P. 6004(f)(1).

13. In light of the foregoing standards, the Trustee has concluded, as an exercise of

his sound business judgment, that the sale of the Domain Name to the Purchaser is in the best

interests of the Estate and all parties-in-interest.

14. As noted above, the Purchaser has no connection to Ondova or the Trustee and

therefore the Trustee states that the sale of the Domain Name to the Purchaser was negotiated

and entered into by unaffiliated parties in good faith, without collusion and from arms-length

bargaining positions. Therefore, the Trustee believes the Purchaser is absolutely a good faith

purchaser under Bankruptcy Code § 363(m) and should be entitled to all of the protections

afforded thereby. The Purchaser has been acting in good faith within the meaning of

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§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 7

Bankruptcy Code § 363(m). Finally, neither the Trustee nor the Purchaser has engaged in any

conduct that would cause or permit the purchase of the Domain Name to be avoided under

Bankruptcy Code § 363(n).

15. Bankruptcy Rule 6004(h) provides that an "order authorizing the use, sale, or

lease of property . . . is stayed until the expiration of 14 days after entry of the order, unless the

court orders otherwise." Fed. R. Bankr. P. 6004(h). The Trustee submits that waiving the

fourteen (14) day stay under Bankruptcy Rule 6004(h) is appropriate under the circumstances

because the parties desire to consummate the proposed sale of the Domain Name as soon as

possible.

2. Sale Procedures

16. In the interest of maximizing the potential recovery for the Estate, the Trustee

requests approval of the Sale Procedures contained herein. The Trustee believes that the Sale

Procedures serve the foregoing purposes in a fair, equitable, transparent and competitive

manner, with no unreasonable or unfair advantage to the Purchaser. The Trustee submits the

Sale Procedures as proposed, will enable all parties and the Court to have the best evidence of

the value of the Domain Name thereby ensuring that this estate obtains the highest and best

purchase price.

17. The Sale Procedures here are in the best interests of the Estate and all

claimants. Several courts have concluded that bid procedures should be approved when the

proposed transaction (i) is in the best interest of the estate, creditors, equity holders, and other

parties involved and (ii) maximizes revenues for the estate. See In re Tiara Motorcoach Corp.,

212 B.R. 133, 137 (Banks. N.D. Ill. 1997); In re S.N.A. Nut Co., 186 B.R. 98, 104 (Banks. N.D.

Ill. 1995); In re America West Airlines, Inc., 166 B.R. 908, 912 (Bankr. D. Ariz. 1994).

18. As part of the sale of property of the estate “other than in the ordinary course of

business” under section 363(b) of the Bankruptcy Code, a debtor may induce an interested

party to expend the resources necessary to serve as the “stalking horse bidder” by offering that

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 8

party certain bid protections. Those bid protections take many forms including, without limitation,

a break-up or topping fee, expense reimbursement, minimum overbid increments, limitations on

the marketing of the assets (for example, a “no shop” or “window shop” clause), bidder

qualifications requirements, and short deadlines for competing bidders’ due diligence and

submission of competing bids. See Collier on Bankruptcy § 363.2[6] (15th ed. 2009).

19. The Trustee submits that the proposed breakup fee of $20,000.00 is reasonable.

Courts have employed various tests to determine whether the protections offered by a debtor or

trustee should be granted. The primary concern of these courts is “whether the offer made by

the party seeking the break-up fee will enhance or hinder the bidding process. If the break-up

fee encourages bidding, it will be approved, if it stifles bidding, it will not be approved.” See In re

Integrated Resources, Inc., 135 B.R. at 750.

20. Courts hold that implementing and, if necessary, awarding bid protections to a

“stalking horse bidder” is an appropriate exercise of a trustee's business judgment. See

Integrated Resources, 147 B.R. at 659 (stating that such procedures “encourage bidding to

maximize the value of the debtor’s assets); Cantaxx Gas Storage Ltd. v. Silverhawk Capital

Ptns., LLC, 2008 U.S. Dist. LEXIS 37803, 17-18 (S.D. Tex. 2008) (stating that “[b]reak-up and

similar fees are common in corporate transaction . . . [s]uch fee provision may . . . enhance the

bidding process by creating momentum toward closing the sale”); In re Food Barn Stores Inc.,

107 F.3d 558, 564-65 (8th Cir. 1997) (stating that, in bankruptcy sales, “a primary objection of

the Code [is] to enhance the value of the estate at hand”).

21. Break-up fees and expense reimbursements are a normal and, in many cases,

necessary component of significant sales conducted under section 363 of the Bankruptcy Code:

“[b]reak-up fees are important tools to encourage bidding and to maximize the value of the

debtor’s assets . . . In fact, because the . . . corporation ha[s] a duty to encourage bidding,

break-up fees can be necessary to discharge [such] duties to maximize values.” Integrated

Resources, 147 B.R. at 659-60. Specifically, “break-up fees and other strategies may be

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 9

legitimately necessary to convince a ‘white knight’ bidder to enter the bidding by providing some

form of compensation for the risks it is undertaking.” In re 995 Fifth Ave. Assoc., L.P., 96 B.R.

24, 28 (Bankr. S.D.N.Y. 1989) (quotations omitted); accord Integrated Resources, 147 B.R. at

660-61 (break-up fees can prompt bidders to commence negotiations and “ensure that a bidder

does not retract its bid”); In re Hupp Indus., Inc., 140 B.R. 191, 194 (Bankr. N.D. Ohio 1992)

(“without such fees, bidders would be reluctant to make an initial bid for fear that their first bid

will be shopped around for a higher bid from another bidder who would capitalize on the initial

bidder’s . . . due diligence”). Courts in this District have likewise found that breakup fees are

proper and necessary tools to ensure lively bidding, protect the auction process, and avoid

potential litigation. See, e.g., In re Texas Rangers Baseball Partners, 431 B.R. 706, 715 (Bankr.

N.D. Tex. 2010) (Lynn, J.).

22. In consideration of the foregoing, bankruptcy courts frequently approve break-up

fees in connection in proposed bankruptcy sales. In the process, such courts generally consider

“(1) whether the relationship of the parties who negotiated the fee is marked by self-dealing or

manipulation; (2) whether the fee hampers, rather than encourages, bidding; and (3) whether

the amount of the fee is reasonable in relation to the proposed purchase price.” In re Twenver,

Inc., 149 B.R. 954, 956 (Bankr. D. Colo. 1992); In re Bidermann Industries U.S.A., Inc., 203 B.R.

547, 552 (Bankr. S.D.N.Y. 1997).

23. The Sale Procedures requested in this Motion should be approved because they:

(i) are the product of the Trustee’s sound business judgment; (ii) are in the best interest of the

Estate and all other interested parties; (iii) will maximize the value of the Domain Name; and (iv)

will enhance the bidding process.

24. The amount of the proposed “stalking horse” or Break-Up Fee which is

$20,000.00 is not unreasonable relative to the proposed purchase price. Similarly, the initial

overbid increment of $30,000.00 is clearly reasonable in relation to the purchase price offered

by the Purchaser.

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 10

25. Under the business judgment rule, the Sale Procedures proposed by the Trustee

are a sound business decision, made in good faith and with full information. The Sale

Procedures were negotiated at arm’s-length between the Trustee and Purchaser. The Trustee

believes that the Auction Procedures are in the’ best interests of this estate..

26. Furthermore, the arms’ length negotiations giving rise to the Sale Procedures,

the Stalking Horse Bid, and this Motion ensure a fair process for the sale. Accordingly, the

Trustee shall request that approval of the sale to the ultimate purchaser incorporate any and all

protections under Section 363(m) of the Bankruptcy Code or other law, to the purchaser as a

good faith purchaser.

3. Pending Appeals

27. This Court has previously determined ownership of the Domain Name.

2

Two

appeals of this Court’s orders related to the Domain Name are pending, one in the District Court

and one in the Fifth Circuit

3

, however no stay has been issued by any court which prohibits the

Trustee from entering into a transaction for the sale of the Domain Name.

IV. PRAYER

WHEREFORE, PREMISES CONSIDERED, the Trustee respectfully requests that the

Court enter an order: (i) granting this Motion; (ii) approving the Sale Procedures requested

herein; (iii) authorizing the Trustee to sell the Domain Name to Purchaser pursuant to the terms

set forth herein, including a specific ruling that the Purchaser is a good faith purchaser for value

under Section 363(m) and finding that the Purchaser is entitled to all protections of such a

purchaser; (iv) waiving the fourteen (14) day stay under Bankruptcy Rule 6004(h) so the sale

may be consummated as soon as possible; and (v) granting the Trustee such other and further

relief to which he has shown himself to be justly entitled.

2

See Adversary Proceeding Case No. 11-03181, Docket No. 130.

3

See District Court Docket No. 3:12-cv-00244-L and Fifth Circuit Docket No. 13-10121 (Consolidated with

Docket Nos. 13-10120 and 13-10122).

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TRUSTEE’S MOTION FOR (A) AUTHORITY TO SELL PROPERTY OF THE ESTATE PURSUANT TO 11 U.S.C.

§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 11

Respectfully submitted this 14

th

day of August, 2013.

MUNSCH HARDT KOPF & HARR, P.C.

By: /s/ Raymond J. Urbanik

Raymond J. Urbanik, Esq.

Texas Bar No. 20414050

Thomas D. Berghman, Esq.

Texas Bar No. 24082683

3800 Lincoln Plaza

500 N. Akard Street

Dallas, Texas 75201-6659

Telephone: (214) 855-7500

Facsimile: (214) 855-7584

E-mail: rurbanik@munsch.com

E-mail: tberghman@munsch.com

ATTORNEYS FOR DANIEL J. SHERMAN,

CHAPTER 11 TRUSTEE

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§363(b) AND (B) FOR APPROVAL OF SALE PROCEDURES – Page 12

CERTIFICATE OF SERVICE

I hereby certify that, on August 14, 2013, a true and correct copy of the foregoing

document was sent to all parties requesting electronic service through the Court's ECF system

and also to the parties listed below by first class U.S. mail, postage prepaid:

Kevin McCullough, Esq.

Rochelle & McCullough

325 N. St. Paul Street, Suite 4500

Dallas, TX 75201

Val Gurvits, Esq.

Boston Law Group, PC

825 Beacon Street, Suite 20

Newton Centre, MA 02459

Stephen R. Cochell, Esq.

Cochell Law Firm

7026 Old Katy Road, Suite 259

Houston, TX 77096

Conrad Herring, Esq.

3525 Delmar Heights Road, Suite 305

San Diego, CA 92130

Carey Ebert, Esq.

Ebert Law Offices

1726 Chadwick Court, Suite 100

Hurst, TX 76054

Nathan Johnson, Esq.

12770 Coit Road, Suite 1100

Dallas, TX 75251

/s/ Raymond J. Urbanik

Raymond J. Urbanik

MHDocs 4582363_2 11236.1

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1

IN THE UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF TEXAS (DALLAS)

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) Case No. 09-34784-sgj11

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In re ) Dallas, Texas

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ONDOVA LIMITED COMPANY, )

) September 10, 2013

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Debtor. ) 11:00 AM

)

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_______________________________)

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TRANSCRIPT OF HEARING

ON MOTION TO SELL PROPERTY (doc. 1110)

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BEFORE THE HONORABLE STACEY G. JERNIGAN,

UNITED STATES BANKRUPTCY JUDGE

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Transcription Services: eScribers

P.O. Box 7533

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New York, NY 10116

(973) 406-2250

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PROCEEDINGS RECORDED BY ELECTRONIC SOUND RECORDING.

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TRANSCRIPT PRODUCED BY TRANSCRIPTION SERVICE.

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APPEARANCES:

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Debtor and the Ch. 11 RAYMOND J. URBANIK, ESQ.

Trustee Daniel J. MUNSCH, HARDT, KOPF & HARR PC

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Sherman: 500 N. Akard Street

Suite 3800

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Dallas, TX 75201

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United States Trustee: LISA LAURA LAMBERT, AUST

OFFICE OF THE UNITED STATES TRUSTEE

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1100 Commerce Street

Room 976

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Dallas, TX 75242

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Jeffrey Baron: STEPHEN R. COCHELL, ESQ.

THE COCHELL LAW FIRM

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7026 Old Katy Road

Suite 259

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Houston, TX 77024

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Ch. 7 Trustee John H. KEVIN MCCULLOUGH, ESQ.

Litzler: ROCHELLE MCCULLOUGH, LLP

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325 N. Saint Paul Street

Suite 4500

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Dallas, TX 75201

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Potential Purchaser, MATTHEW SHAYEFAR, ESQ.

XBT Holding Ltd.: (TELEPHONICALLY)

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BOSTON LAW GROUP, LLP

825 Beacon Street

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Suite 20

Newton Centre, MA 02459

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Colloquy

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(Audio begins mid-sentence)

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THE CLERK: -- Company. First, appearances in the

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courtroom, please.

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MR. URBANIK: Good morning, Your Honor. Ray Urbanik

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from Munsch Hardt, on behalf of Daniel J. Sherman, Chapter 11

6

trustee.

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THE COURT: Okay.

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MR. URBANIK: Judge, I have with me a new lawyer in

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my firm, Isaac Brown, but he's not yet licensed in Texas; he's

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just here helping me today.

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THE COURT: Okay, welcome, Mr. Brown.

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MR. BROWN: Thank you.

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MR. SHAYEFAR: Your Honor, I am --

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MR. COCHELL: Stephen --

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MR. SHAYEFAR: -- Matthew Shayefar from the Boston

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Law Group --

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THE COURT: Okay, just a minute.

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MR. SHAYEFAR: -- representing the --

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THE COURT: Sir, just a minute. We're taking

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appearances in the courtroom first.

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MR. COCHELL: Yeah.

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Go ahead.

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MR. COCHELL: Good morning, Your Honor. Stephen

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Cochell, appearing on behalf of Mr. Baron.

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THE COURT: All right, thank you.

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Colloquy

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MR. MCCULLOUGH: Good morning, Your Honor. Kevin

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McCullough, counsel for John H. Litzler, Chapter 7 trustee in

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the Baron estate.

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THE COURT: Thank you.

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MS. LAMBERT: Lisa Lambert representing William

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Neary, the United States Trustee.

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THE COURT: Thank you.

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All right, let me get my notes here for the right

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hearing.

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We have a phone appearance. Please go ahead at this

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time.

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MR. SHAYEFAR: Excuse me, Your Honor. This is

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Matthew Shayefar from the Boston Law Group. I represent the

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potential purchaser, XBT Holding Ltd.

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THE COURT: All right. Let me make sure I heard

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that.

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Got the wrong document.

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All right. I'm sorry; was it Matthew Shayefar?

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MR. SHAYEFAR: Yes, Your Honor.

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THE COURT: All right, thank you.

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All right, we have a motion today filed by the Ondova

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Chapter 11 trustee, for approval of sale procedures to sell

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the domain name servers.com.

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Mr. Urbanik, ordinarily we would be hearing simply

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evidence regarding whether there's a sound business

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Colloquy

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justification for this proposed sale, and evidence, details

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about the proposed procedure, the proposed stalking horse,

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what kind of notice you're going to give, the auction process,

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the details of how an auction might occur, et cetera, with the

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main purpose of maximizing value for the Ondova estate.

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I've seen that Mr. Baron has objected through counsel

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Steve Cochell. It appears to me his primary argument is that

8

the domain name is his personally, Jeff Baron's, not the

9

Ondova estate. I know this Court in the past had a trial in

10

an adversary proceeding that was between Mr. Emke -- Mike

11

Emke -- and the Ondova estate, versus their respective rights

12

in the name; and I realize that after a day of evidence, or

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so, I made findings of fact, conclusions of law, concluding

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that the Ondova estate -- well, it was complicated, but

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basically it was all about Emke versus Ondova and a conclusion

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that Emke had not fulfilled his duties under a certain

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settlement agreement and, therefore, there were grounds under

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the settlement agreement to force a sale of the name, and I

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appointed Mr. Sherman as the receiver to go forward and sell

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the name.

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Be that as it may, I know that litigation did not

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involve Mr. Baron as a party, per se, in that litigation. So

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all this to say it looks like we've got issues today with

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regard to not merely the proposed sale auction of the name but

25

maybe ownership of the domain name. I don't think any other

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Opening Statement - Mr. Urbanik

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party-in-interest has objected today.

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MR. URBANIK: That's correct, Judge.

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THE COURT: All right, so I guess here's how I'd like

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to proceed: very short five-minute, maximum, opening

5

statements, just to confirm do I understand the issues as teed

6

up today, and then I really want to go straight to evidence,

7

whatever evidence you have, whatever evidence Mr. Baron has,

8

to either go to the merits of the sale motion or to go to this

9

ownership issue.

10

MR. URBANIK: Okay.

11

THE COURT: Okay? All right, you may proceed.

12

MR. URBANIK: Thank you, Your Honor. We filed the

13

motion to sell the domain name August 14, 2013, and no

14

response was filed until Saturday, September 7th. So

15

yesterday I got to review the response filed by Baron, and we

16

filed just this morning a motion of Daniel J. Sherman to

17

strike the Baron objection, and I'd like to hand the Court a

18

copy or two.

19

THE COURT: I've got it, actually.

20

MR. URBANIK: Okay. Some extra copies here in case

21

anyone --

22

THE COURT: I haven't had time to read it, but --

23

MR. URBANIK: Well --

24

THE COURT: -- I have a copy of it.

25

MR. URBANIK: So, Your Honor, we are good to go

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Opening Statement - Mr. Urbanik

7

1

forward with your proposal. My outline of how I was going to

2

present was going to be the sale motion itself with a proffer

3

from Mr. Sherman, then go into the Baron response, and then at

4

that point our motion to strike the Baron response; was going

5

to advise the Court that we reached an agreement with the

6

trustee John Litzler, regarding proceeding. And then I

7

actually, Judge, was going to visit a little bit with the

8

Court about where we are in the Ondova case and what's going

9

on with Mr. Baron and four attorneys that seem to be

10

representing him but, yet, won't come to court. Mr. Baron is

11

saying he can't testify at the 341 meeting and, yet,

12

Mr. Cochell, Mr. Schepps, Mr. Payne and Mr. Hari (ph.) are all

13

out there filing pleadings in other courts but, yet,

14

Mr. Baron can't testify at a 341 meeting because he doesn't

15

have a lawyer. But that's --

16

THE COURT: All right, we --

17

MR. URBANIK: -- that's at the end.

18

THE COURT: -- we may have to have a status

19

conference another time --

20

MR. URBANIK: Sure.

21

THE COURT: -- on that. I really want to figure out

22

are there grounds to go forward --

23

MR. URBANIK: Sure.

24

THE COURT: -- with selling this name or not. So --

25

MR. URBANIK: So in terms of my introduction, Judge,

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Opening Statement - Mr. Urbanik

8

1

I would suggest that today the Court take up our proffer of

2

Mr. Sherman regarding the history of the domain name, our

3

prior efforts to sell, the current offer to sell, our

4

marketing effort itself. Mr. Shayefar is on the phone, can

5

tell the Court a little bit about the purchaser. And then

6

we'll provide the Court the dates for a sale process and a

7

follow-up hearing in the event there's an auction, or a

8

follow-up date to present a final order.

9

So there's quite a bit to go through regarding just

10

the sale motion itself. And then I don't have a witness

11

regarding the -- our motion to strike the Baron response; it

12

would simply be legal argument. And in terms of the agreement

13

we've reached with Mr. Litzler, that'll just take a minute or

14

two to update the Court on that.

15

THE COURT: Okay. On the motion to strike, again, I

16

didn't have time to read it. I was --

17

MR. URBANIK: Okay.

18

THE COURT: -- in a meeting this morning until --

19

MR. URBANIK: Sure.

20

THE COURT: -- the hearing started. But what all are

21

your arguments? I mean, he --

22

MR. URBANIK: Sure.

23

THE COURT: -- he was not a party to the adversary

24

proceeding.

25

MR. URBANIK: It'd go to standing, Your Honor.

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Opening Statement - Mr. Urbanik

9

1

Mr. Baron is in a Chapter 7 case pursuant to order of July 26,

2

2013.

3

THE COURT: Are you saying only the trustee has

4

standing?

5

MR. URBANIK: That is correct. And what we did on

6

our motion to strike, Judge, is we -- we have all the

7

authorities on why Baron personally has no standing under a

8

whole long line of established cases, including a very recent

9

2013 case from Judge Lindsay regarding standing of Chapter 7

10

debtors. Then following that, Judge, we have an argument on

11

why there was no violation of the automatic stay in the Baron

12

personal case because his interest is so speculative, so

13

outlandish and so contingent, there was no need for us to go

14

get us -- lifting the automatic stay in the Baron personal

15

case; and I cite the Fifth Circuit's decision in Chestnut.

16

The claim that Mr. Baron has some interest in this

17

domain name is wishful thinking; it's pretty --

18

THE COURT: Okay, let's --

19

MR. URBANIK: -- it's pretty outrageous.

20

THE COURT: -- let's take this in steps.

21

MR. URBANIK: Um-hum.

22

THE COURT: If you would acknowledge that -- I mean,

23

it may be a slim possibility, but there is a possibility that

24

if either or both estates are solvent, he would have standing.

25

MR. URBANIK: That's correct --

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Opening Statement - Mr. Urbanik

10

1

THE COURT: Okay.

2

MR. URBANIK: -- he would have standing, but it's his

3

burden of proof, under very well established law, to show that

4

he has standing even to argue the position today.

5

And just let me say one more time, in case it wasn't

6

clear, we have reached an agreement for Mr. Litzler --

7

THE COURT: Okay --

8

MR. URBANIK: -- to look at this --

9

THE COURT: Okay, but --

10

MR. URBANIK: -- this contingent interest as --

11

THE COURT: -- but there's --

12

MR. URBANIK: Okay.

13

THE COURT: -- a very remote chance of standing. And

14

what are your other standing arguments besides that one?

15

MR. URBANIK: That's it, Your Honor: He would have

16

the burden of proof to show that there's going to be equity in

17

his personal estate, to make the argument today that he has

18

standing. So nothing in his paper filed Saturday in any way

19

goes to the issue of whether there'll be equity in the Baron

20

personal case. He doesn't address that without doing that, he

21

has no standing. So we filed a motion to strike to show that

22

he's got the burden of proof to show he can argue the

23

position; he hasn't done it.

24

THE COURT: All right, I'm going to overrule your

25

motion, okay? He can put in whatever evidence he wants to

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Opening Statement - Mr. Urbanik

11

1

suggest he has standing --

2

MR. URBANIK: Okay.

3

THE COURT: -- to suggest he has some ownership

4

interest in the name. I don't know what the evidence is going

5

to be other than perhaps that section 4 of the settlement

6

agreement that -- I'm going to hear whatever the evidence

7

is --

8

MR. URBANIK: Sure.

9

THE COURT: -- whatever the evidence is. I don't

10

know what the evidence is. So I overrule the motion to

11

strike.

12

MR. URBANIK: Okay.

13

THE COURT: All right. Anything else? I think we've

14

gone more than five minutes in your opening statement.

15

MR. URBANIK: I'm ready to go forward with the

16

motion --

17

THE COURT: All right.

18

MR. URBANIK: -- to sell, whenever you're ready to --

19

THE COURT: All right, thank you.

20

MR. URBANIK: -- to go into that.

21

THE COURT: Other opening statements? Mr. Cochell?

22

MR. COCHELL: Yes, ma'am.

23

MS. LAMBERT: No, no --

24

MR. COCHELL: Oh.

25

THE COURT: From the U.S. Trustee?

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Opening Statement - Ms. Lambert

12

1

MS. LAMBERT: I think it makes sense for the United

2

States Trustee to go next, because we're not opposing the

3

motion.

4

THE COURT: All right.

5

MS. LAMBERT: The issue of the automatic stay: If

6

the Court were to determine that there is a residual interest

7

in Jeff Baron's Chapter 7 case, the Chapter 7 trustee's

8

agreement does not resolve that there's either a 9019 motion

9

or a stay motion that all creditors will be entitled to notice

10

of. And while Mr. Baron may not have standing, the United

11

States Trustee and the Court are charged with independently

12

assessing that issue.

13

So that doesn't mean that -- today's only a bid

14

procedures motion. It doesn't mean that anything would have

15

to happen if the Court -- if, and only if, the Court

16

determined that Mr. Baron had an interest in the property. I

17

think that the stay, in Mr. Baron's case, could be modified,

18

and then the Court could require some kind of notice of the

19

settlement or notice of the procedures in his individual case,

20

before the sale is completed, and these issues could be

21

resolved that way.

22

But in terms of the Chapter 7 trustee, in Mr. Baron's

23

individual case, agreeing to lift the stay, that cannot occur

24

without notice, because the stay protects both the individual,

25

who is subject to the stay -- Mr. Baron -- and the estate as a

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Opening Statement - Mr. McCullough

13

1

whole and the creditors that are creditors of the estate.

2

THE COURT: Okay, understood.

3

Mr. McCullough?

4

MR. MCCULLOUGH: Yes, Your Honor. The gist of our

5

agreement with the Ondova estate is that the stay be lifted

6

just for the limited purpose of proceeding with the sale and

7

that any interest that the Baron estate may have in

8

servers.com be attached to the proceeds and then we fight

9

about it at that point. We'll work with Ms. Lambert on what

10

proper notice needs to be given in our estate; I think she's

11

raised a good point; we can work with her on trying to achieve

12

that.

13

But I think that our estate is in agreement that the

14

sale should go forward, we could liquidate this asset and then

15

fight over the proceeds later.

16

THE COURT: All right, so that is -- that's the

17

agreement: Whatever interest Jeff Baron may have, let's

18

decide that another day.

19

MR. MCCULLOUGH: Yes.

20

THE COURT: You agree to a vigorous marketing effort,

21

let's all get the highest price possible. Money is put

22

somewhere, in an escrow, in a trust, court registry, wherever.

23

MR. MCCULLOUGH: Right.

24

THE COURT: And then later there can be litigation

25

work --

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Opening Statement - Mr. Cochell

14

1

MR. MCCULLOUGH: And hopefully, by our estate being

2

on board with the sale, it helps to put some of the potential

3

buyers at ease and maybe brings a higher price.

4

THE COURT: Okay. Well, that -- thank you.

5

MR. MCCULLOUGH: Thank you.

6

THE COURT: That would be the normal way of handling

7

this when we have competing bankruptcy estates.

8

Mr. Cochell, now what say you?

9

MR. COCHELL: Thank you, Your Honor. I'm having

10

trouble hearing Ms. Lambert when she talked; I got about half

11

of what she said.

12

But let me just kind of review what our concerns are.

13

Our concerns are that there hasn't been notice of the

14

agreement between the trustee and Mr. Sherman, the other

15

trustee in the case. And we do think that this is a

16

procedurally unusual case in the sense that Mr. Baron -- while

17

he's in an involuntary, the involuntary order for relief is on

18

appeal. And the -- I think the law is very clear that when a

19

case is on appeal, and particularly with respect -- and also

20

the order -- this Court's order on Servers is also on

21

appeal -- the final order's on appeal, not the order that was

22

attached, referred to by Mr. Urbanik.

23

And so when these cases are on appeal and the subject

24

matter of the appeal is now before this Court on what appears

25

to be a second motion to sell, sell the property, we think

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Opening Statement - Mr. Cochell

15

1

that this Court is deprived of jurisdiction. And just as in

2

the receivership case --

3

THE COURT: Okay, what does that mean if there's no

4

stay pending appeal?

5

MR. COCHELL: That you cannot undermine --

6

THE COURT: First --

7

MR. COCHELL: Yes, Your Honor.

8

THE COURT: -- back up. Is there a stay pending

9

appeal --

10

MR. COCHELL: No.

11

THE COURT: -- of any of these orders?

12

MR. COCHELL: Not at this point. There is a --

13

THE COURT: Okay.

14

MR. COCHELL: -- motion for stay pending before Judge

15

O'Connor (ph.). And --

16

THE COURT: A stay of which order?

17

MR. COCHELL: Of the bankruptcy order.

18

THE COURT: The order for relief?

19

MR. COCHELL: The order for relief. I'm sorry.

20

THE COURT: Okay. But there is no stay.

21

MR. COCHELL: Correct.

22

THE COURT: So therefore, what legal authority are

23

you referring to that might prevent --

24

MR. COCHELL: I'm referring to --

25

THE COURT: -- a sale in --

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Opening Statement - Mr. Cochell

16

1

MR. COCHELL: -- the Griggs case, which I've referred

2

to in my objections; I can give you the full cite if you wish;

3

it's Griggs v. Provident Consumer Discount Company, U.S.

4

Supreme Court, 459 U.S. 56; and Coastal Corp. v. Texas Eastern

5

Corp., which is a Fifth Circuit case, 869 F.2d 817. And both

6

of these courts squarely refer to the proposition that a lower

7

court does not have jurisdiction to alter the status quo of

8

the matter on appeal, and retains jurisdiction only to

9

maintain the status quo; that's the Fifth Circuit case. And

10

in Griggs -- I quoted from there -- the filing of a notice of

11

appeal is in the event of jurisdictional significance that

12

confers jurisdiction on the court of appeals and divests the

13

district court of its control over those aspects of the case

14

involved in the appeal.

15

So whether Mr. Urbanik thinks that --

16

THE COURT: Are any of these cases on point? Are

17

they involving an order for relief that has been appealed? Do

18

you have any case involving an involuntary bankruptcy where a

19

debtor, an alleged debtor, has appealed the order for relief

20

and a higher court has said, 'Bankruptcy Court' --

21

MR. COCHELL: Yes, Your Honor.

22

THE COURT: -- 'even though there's no stay pending

23

appeal, you cannot go forward with one thing in that

24

involuntary, as long as there's an appeal pending'? Do you

25

have any opinion anywhere --

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Opening Statement - Mr. Cochell

17

1

MR. COCHELL: One moment.

2

THE COURT: -- that has held that?

3

MR. COCHELL: Did some research. I didn't cite this

4

for the Court, but let me -- I'm trying to find it here.

5

THE COURT: I mean, we may be going down a rabbit

6

trail, because this is an Ondova hearing in a motion to sell

7

property allegedly owned by Ondova. But assuming you're going

8

to tie this all together somehow, I would like to know once

9

and for all, is there an opinion that says that? I mean, I've

10

been wanting to know that for every hearing we've had in this

11

case.

12

MR. COCHELL: Yes, Your Honor. There's a case -- I

13

haven't analyzed this for a while; however, there's a case

14

called Creations Unlimited, Inc. v. McCain, 112 F.3d 814, and

15

at pages 816 to 817 the court held, as a general rule, a

16

district court is divested of jurisdiction upon the filing of

17

a notice of appeal with respect to any matters involved in the

18

appeal.

19

THE COURT: Does that involve --

20

MR. COCHELL: Okay.

21

THE COURT: -- an involuntary bankruptcy case order

22

for relief? Because what you're citing for me is black-letter

23

law.

24

MR. COCHELL: Well, okay, but --

25

THE COURT: But it's not the same thing as can a

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Opening Statement - Mr. Cochell

18

1

bankruptcy case go forward --

2

MR. COCHELL: Yeah. Okay --

3

THE COURT: -- when the actual order for --

4

MR. COCHELL: Well --

5

THE COURT: -- relief is on appeal.

6

MR. COCHELL: But let me just cite the Netsphere

7

case; that talks about mooting on appeal before the Fifth

8

Circuit. The Fifth Circuit stayed this Court's order for sale

9

in that case because it would have mooted the substance of

10

what was on appeal before the Court. And the Court then, in

11

its opinion, at footnote 2 of that decision, specifically said

12

that the stay was permanent on sale of those domains. I

13

recognize that that court's order doesn't squarely directly

14

compel this Court that the domain name of Servers is within

15

the specific direct ambit of the Netsphere case, but I think

16

that the Court would be erring if the Court did not take

17

notice of the fact that the Fifth Circuit talked about mooting

18

the appeal and that the jurisdiction of the Court needed to be

19

protected --

20

THE COURT: Well, then --

21

MR. COCHELL: -- in so many words.

22

THE COURT: -- maybe you'll get your stay pending

23

appeal. But that's a very different thing if there's no stay

24

pending appeal.

25

MR. COCHELL: But, Your Honor, a motion for stay is

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Opening Statement - Mr. Cochell

19

1

not necessary when you have Fifth Circuit courts -- the Fifth

2

Circuit decisions basically saying this Court has

3

responsibility for interpreting the law. That's a given. And

4

so when there's clear decisional precedent not just from

5

somewhere else or somewhere else in the Fifth Circuit but from

6

the Fifth Circuit in Netsphere involving this Court's

7

decision, I would respectfully --

8

THE COURT: It's not clear.

9

MR. COCHELL: -- submit --

10

THE COURT: It's not clear.

11

MR. COCHELL: Very well. There are --

12

THE COURT: It is --

13

MR. COCHELL: -- other cases.

14

THE COURT: And it's an appeal of a receivership --

15

MR. COCHELL: All right.

16

THE COURT: -- and meanwhile the receiver is

17

proposing to sell receivership assets. The Fifth Circuit

18

issued a stay pending appeal in that context. We now have a

19

different situation of an involuntary case, analogous in some

20

ways yes. You have an appeal of an order for relief, but no

21

stay pending appeal.

22

MR. COCHELL: We have a case, In re Madill, 65 B.R.

23

729, basically saying that the bankruptcy court may not enter

24

orders or take other action that would have the effect of

25

mooting the appeal. I don't know --

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Opening Statement - Mr. Cochell

20

1

THE COURT: What --

2

MR. COCHELL: My materials --

3

THE COURT: -- is the factual --

4

MR. COCHELL: -- don't --

5

THE COURT: -- context?

6

MR. COCHELL: I'm sorry?

7

THE COURT: What is the factual context?

8

MR. COCHELL: I don't have it here --

9

THE COURT: Okay.

10

MR. COCHELL: -- immediately with me.

11

THE COURT: Okay. Let's move on. Let me back up.

12

MR. COCHELL: That was not --

13

THE COURT: Let me

14

MR. COCHELL: -- an involuntary, Your Honor.

15

THE COURT: Okay.

16

MR. COCHELL: I'm sorry.

17

THE COURT: Let me back up.

18

MR. COCHELL: Okay.

19

THE COURT: Let me back up. The trustee in Jeff

20

Baron's bankruptcy case has announced through Mr. McCullough

21

that he consents to a sale process going forward with regard

22

to the Servers, Inc. domain name, servers.com domain name. He

23

consents and is perfectly content to have a decision made

24

another day with regard to how the proceeds get divvied up.

25

All right? In other words, let's go out there, let's have the

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Opening Statement - Mr. Cochell

21

1

stalking-horse bid as the price to beat, and -- what is it,

2

300,000? Is that the stalking-horse bid?

3

MR. URBANIK: Yes, Your Honor.

4

THE COURT: Okay, so the Jeff Baron bankruptcy

5

trustee is happy to let this process play out with the

6

starting bid of 300,000 -- hopefully potentially get a higher

7

price; maybe not -- but go forward, let the domain name be

8

sold, and then the money is held by someone, in escrow: court

9

registry, wherever, a third-party escrow agent. And then

10

later if there is litigation regarding who owned it, that can

11

happen another day. This is sort of the usual way in

12

bankruptcy, okay? That's as close to custom as I can think

13

of: Go out there; strike while the iron is hot; there's a

14

potential bidder right now; take the bird in the hand, or

15

whoever might top him; fight about this another day. Why is

16

this not a good idea?

17

MR. COCHELL: It's a bad idea because Mr. Baron was

18

unable to intervene in the Emke case because --

19

THE COURT: But wait.

20

MR. COCHELL: Hold on.

21

THE COURT: But wait. I understand that, but why is

22

it not a good idea to go out there and market this asset once

23

and for all, see if 300,000 can be beat? And then you got the

24

pot of money and then later we maybe have litigation about

25

this.

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Opening Statement - Mr. Cochell

22

1

MR. COCHELL: Be --

2

THE COURT: I understand your point, but --

3

MR. COCHELL: Yes, Your Honor.

4

THE COURT: -- he wasn't a party in that lawsuit --

5

MR. COCHELL: Right.

6

THE COURT: -- between Emke and Ondova.

7

MR. COCHELL: Right. Thank you. I appreciate that.

8

THE COURT: I understand that.

9

MR. COCHELL: Yeah.

10

THE COURT: So what I'm getting at is why shouldn't

11

we strike while the iron is hot and at least have the sale

12

process go forward? And we can have protective language in

13

there that not only makes Mr. Litzler happy but your client

14

happy. All rights are reserved to later make a claim for

15

these sale proceeds.

16

MR. COCHELL: I think that is fair if you view it

17

from the standpoint of the trustee wanting to generate income

18

that maybe can be distributed, and all of that. The problem

19

is that from our perspective it is taking Jeff Baron's

20

property and selling it at -- under bankruptcy standards where

21

it's unclear that it'll achieve the kind of value that

22

Mr. Baron would want to achieve for his property.

23

Okay, if you start off with the premise that it's not

24

his property, that's not a bad recommendation --

25

THE COURT: Okay --

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Opening Statement - Mr. Cochell

23

1

MR. COCHELL: -- but it's his property.

2

THE COURT: -- so let's back up. Are there tweaks

3

that can be made to the sale process that would make him

4

happy, that he thinks might maximize value better than what

5

Mr. Sherman has proposed? Or is he just against a sale,

6

period?

7

MR. COCHELL: No. I don't -- I think whether -- I

8

think that he's against the idea that he should be forced to

9

sell his property, because he believes he's an --

10

THE COURT: So --

11

MR. COCHELL: -- involuntary play --

12

THE COURT: So you think -- do you need to go whisper

13

to him?

14

MR. COCHELL: I can --

15

THE COURT: Is he against the sale --

16

MR. COCHELL: -- go whisper in his ear.

17

THE COURT: Okay. Is he against the sale under

18

any --

19

MR. COCHELL: All right.

20

THE COURT: -- procedure?

21

MR. COCHELL: And just for the record, we believe

22

that it would be a taking under the Fifth Amendment to do it

23

this way before there's been a determination of ownership

24

rights --

25

THE COURT: Okay --

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Opening Statement - Mr. Cochell

24

1

MR. COCHELL: -- and so on.

2

THE COURT: -- well, I want yes or no --

3

MR. COCHELL: Yes, Your Honor.

4

THE COURT: -- is he against a sale, period?

5

MR. COCHELL: Do you want me to do that now?

6

THE COURT: Yes, please.

7

MR. COCHELL: Yes, ma'am. Can we step outside for a

8

minute, Your Honor? Just for a minute.

9

THE COURT: Just for one minute.

10

MR. COCHELL: Just for a minute. Thank you.

11

(Pause)

12

MR. COCHELL: Thank you, Your Honor.

13

THE COURT: Okay.

14

MR. COCHELL: Standing right now and talking to

15

Mr. -- to my client, we don't know, sitting here right now,

16

whether there's a way that we could tweak this, without

17

further discussions with Mr. Urbanik. Having said that, if

18

the Court is wanting an answer now, as I take it you do,

19

Mr. Baron is, I think, generally taking the position that he

20

should not be forced into a sale of his property that he wants

21

to keep, going forward, for when he gets out of bankruptcy and

22

until after the courts have spoken on whether the order for

23

relief that was improvidently granted -- because, I mean, the

24

fact is that, I mean, we have fairly significant grounds for

25

appeal. So --

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Opening Statement - Mr. Cochell

25

1

THE COURT: All right, so there's no middle ground we

2

can reach here. That having been said, what is your evidence

3

going to be today?

4

MR. COCHELL: Well, Your Honor, on evidence, we

5

have -- the documents that we attached to our objections,

6

which we think is a matter of law, plus the arguments I've

7

made, should be sufficient for the Court to rule on the issue.

8

THE COURT: Okay, so walk me through that. I know we

9

had the settlement agreement on July 10th, 2009.

10

MR. COCHELL: Yes, Your Honor. And --

11

THE COURT: And what other documents?

12

MR. COCHELL: Yeah, we have -- one moment. We have

13

the Emke settlement, and --

14

THE COURT: Right.

15

MR. COCHELL: -- I don't think there's any dispute

16

that the trustee effectuated the transfer of servers.com to

17

Servers, Inc. The -- and I don't think there's any dispute

18

that the stock of servers.inc (sic) was owned fifty-fifty

19

between Servers, Inc. -- I mean or that servers.com was owned

20

fifty-fifty by Servers, Inc. and Mike Emke.

21

So Ondova did not own that asset. servers.com was

22

the only stock in the company.

23

MR. URBANIK: Your Honor, may I interrupt, please,

24

just for one second? Is the Court asking Mr. Cochell for

25

evidence on standing -- the surplus of estate assets where

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Opening Statement - Mr. Cochell

26

1

Mr. Baron can have a standing to object today, or about the

2

underlying transactions? If it's about their standing, they

3

would have to put on financial information regarding the

4

bankruptcy case.

5

THE COURT: All right, all right.

6

MR. COCHELL: Well, we've had no --

7

THE COURT: I -- let --

8

MR. COCHELL: We've had no --

9

THE COURT: Let me --

10

MR. COCHELL: -- notice --

11

THE COURT: Let me back up.

12

MR. COCHELL: -- of a standing argument --

13

THE COURT: Let --

14

MR. COCHELL: -- Your Honor.

15

THE COURT: Let me back up. We are going forward

16

today. I -- despite my limitation on five minutes, I've

17

broken my own rule. "What evidence are you going to have

18

today" was the question, and I don't want to hear oral

19

argument at this time; we'll have closing arguments

20

ultimately. But your evidence is this settlement agreement

21

from July 10th, 2009 and what else?

22

MR. COCHELL: Okay. And our -- as set out in our

23

objections, that the Court entered an order appointing a

24

receivership over Servers, Inc. and that the settlement

25

agreement provided that ownership would revert to Baron/Emke

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Opening Statement - Mr. Cochell

27

1

to be owned jointly and severally if a receivership was

2

imposed.

3

Now, Servers, Inc. never went into bankruptcy, so the

4

argument about the ipso facto clause is off.

5

THE COURT: Okay, are you saying that the moment this

6

Court appointed Daniel Sherman as the receiver over Servers,

7

Inc., that fifty percent of the domain name reverted to

8

Mr. Baron?

9

MR. COCHELL: No, it happened -- yes, I am.

10

THE COURT: All right. Well, there are legal

11

questions and factual questions. That would have been a post-

12

petition transfer -- correct -- of an interest in the Ondova

13

estate? So I'm kind of curious how 549 of the Bankruptcy Code

14

would be applied here. Assuming that is not an issue or a

15

problem, this agreement itself was entered into just days

16

before Ondova filed bankruptcy. So if Ondova had a property

17

interest in the name, if it on the eve of bankruptcy entered

18

into an agreement that resulted in Baron having a reversionary

19

interest, you've got maybe fraudulent-transfer issues.

20

I guess I'd be curious to have evidence why this

21

section 4 was agreed to if historically -- the name had been

22

owned where?

23

MR. COCHELL: Yes, Your Honor.

24

THE COURT: Or -- I say "owned". We of course know

25

what I really mean. The registrant had been whom?

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Opening Statement - Mr. Cochell

28

1

MR. COCHELL: I think those are appropriate

2

questions, but I believe it has to be the subject of an

3

adversary action, because we're talking about --

4

THE COURT: Well --

5

MR. COCHELL: -- ownership.

6

THE COURT: -- we've already had an adversary;

7

unfortunately, your client wasn't a party. And --

8

MR. COCHELL: Well --

9

THE COURT: -- I don't --

10

MR. COCHELL: -- not because --

11

THE COURT: -- know why he didn't intervene.

12

But, all right, well, we're going to have to hear

13

evidence --

14

MR. COCHELL: I'm sorry?

15

THE COURT: -- for me to -- we're going to have to

16

hear evidence today for me to be convinced that there is a

17

problem with going forward in the manner that has been

18

suggested, at least trying to sell the darn thing, get the

19

most possible; and then we can have ownership issues decided

20

another day.

21

MR. COCHELL: Your Honor, the ownership issues can't

22

be decided another day, under Rule 7001 of the Bankruptcy

23

Code. If there's an interest in property that has to be

24

determined, an adversary action has to be filed in due

25

process, giving Mr. Baron --

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Opening Statement - Mr. Cochell

29

1

THE COURT: All right --

2

MR. COCHELL: -- some opportunity --

3

THE COURT: -- I don't know if you were listening. I

4

had a hearing already today where, relying on 363(h) of the

5

Bankruptcy Code, I allowed both a debtor's interest in

6

property as well as a nondebtor co-interest in property, to be

7

sold. There is a mechanism in the Bankruptcy Code --

8

363(h) -- that allows both debtor property and a co-interest

9

owner's property to be sold. Okay? So again, I go back to

10

Mr. McCullough's idea.

11

MR. COCHELL: But --

12

THE COURT: I mean, it makes eminent sense. And even

13

if your client is a hundred percent right on the money --

14

MR. COCHELL: But --

15

THE COURT: -- it appears there's 363(h) authority --

16

MR. COCHELL: But there's also --

17

THE COURT: -- to go forward today.

18

MR. COCHELL: -- a real basic corporate doctrine

19

that, just because a company owns stock in another company --

20

let's say you own stock in GM and you want to sell some of

21

GM's assets; you can't as a stockholder go into GM and start

22

selling off their assets regardless, without a hearing and due

23

process on whether you're entitled to that asset. And they're

24

talking about being a shareholder, fifty percent, in Servers,

25

Inc. and therefore they can sell all the assets of Servers,

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Opening Statement - Mr. Cochell

30

1

Inc. They're not in bankruptcy.

2

THE COURT: All right. We're going to go forward.

3

Again, I'm going to consider the evidence as to the merits of

4

the sale procedures proposed, and I'm going to consider the

5

evidence as to ownership. All right? I'm acknowledging that

6

your client was not a party in the Emke adversary proceeding.

7

So now is your time to put on whatever evidence you

8

think I need to see that might convince me both (a) that your

9

client either owns or co-owns the domain name and (b) why I

10

ought not to allow a sale process to go forward in light of

11

that. Okay?

12

MR. COCHELL: Your Honor, just one more point. Now,

13

the reality here is that we're -- we -- I'll respectfully

14

submit to Your Honor that we're taking the cart before the

15

horse and that Mr. Baron has been precluded from protecting

16

his interests, such as being placed in receivership --

17

THE COURT: I'm --

18

MR. COCHELL: -- a receivership --

19

THE COURT: -- letting him put on --

20

MR. COCHELL: -- that was reversed.

21

THE COURT: -- whatever darn evidence he wants

22

today --

23

MR. COCHELL: Well --

24

THE COURT: -- regarding --

25

MR. COCHELL: -- we --

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Opening Statement - Mr. Cochell

31

1

THE COURT: -- this sale.

2

MR. COCHELL: -- we cannot agree to a process where

3

the Court is going to hear evidence on selling his property --

4

THE COURT: Again --

5

MR. COCHELL: -- in a sale procedure --

6

THE COURT: -- I want the evidence that it's his --

7

MR. COCHELL: -- when his ownership interests have

8

not first been determined.

9

THE COURT: Today --

10

MR. COCHELL: We have not had --

11

THE COURT: -- have at it: Put on your evidence

12

about ownership.

13

MR. COCHELL: That denies us due process under the --

14

THE COURT: Why does it deny --

15

MR. COCHELL: -- Bankruptcy Code. We have not --

16

THE COURT: -- due process?

17

MR. COCHELL: -- had discovery, Your Honor, of a

18

number of things, such as -- they're saying we don't have

19

standing, we have to produce evidence that we have standing to

20

be here. We haven't had -- we just heard that argument this

21

morning.

22

THE COURT: Okay, I don't think it's going to come to

23

that. I am willing to go down the trail of there may be

24

scenarios where Ondova's estate is solvent and Baron's estate

25

is solvent, though he personally has a judiciable interest

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Opening Statement - Mr. Cochell

32

1

here, okay, standing, constitutional standing. But what I

2

most want to hear today is evidence that you think supports

3

that your client owns this, that despite what we have thought

4

for years that the Ondova estate had the interest in the name,

5

primarily because there was a July 10th, 2009 agreement that

6

was between Ondova and Emke --

7

MR. COCHELL: And that's exactly --

8

THE COURT: -- and there was --

9

MR. COCHELL: But that's exact --

10

THE COURT: -- years of litigation that involved

11

Ondova and Emke, despite that, your client says he owns it. I

12

want to hear the story.

13

MR. COCHELL: But --

14

THE COURT: That's what --

15

MR. COCHELL: But despite that --

16

THE COURT: -- today is going to be.

17

MR. COCHELL: But you're also saying we have to prove

18

ownership when that's exactly the issue on appeal before the

19

district court in the Fifth Circuit. I mean, we've got a

20

Fifth Circuit appeal on this issue, Your Honor.

21

THE COURT: There's no stay pending appeal, all

22

right?

23

Mr. Urbanik, your first witness, please?

24

By the way, was this on the schedules, the individual

25

domain name of Ondova?

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Colloquy

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1

MR. URBANIK: You know, Judge, I believe it was. I

2

mean, those were Mr. Keiffer's schedules that we inherited; I

3

don't have them with me. I believe so, but we could --

4

THE COURT: Well, why don't you --

5

MR. COCHELL: I can't hear Mr. Urbanik. I'm sorry.

6

THE COURT: I asked was the domain name servers.com

7

specifically listed on Ondova's schedule, and he doesn't

8

remember.

9

But, Laura, I guess you can look it up. I don't know

10

if we had original schedules, amended schedules, or what.

11

But she'll be looking while we hear the evidence.

12

All right.

13

MR. URBANIK: Okay, thank you, Judge. Your Honor,

14

the first evidence that Mr. Trust -- that Daniel Sherman would

15

call is Mr. Sherman. I'd like to offer the proffer of

16

Mr. Sherman, and he's in the courtroom in case there's a need

17

for any cross-examination.

18

THE COURT: All right, well, let me ask --

19

Mr. Cochell, do you have any objection to the Court

20

taking the direct testimony of Mr. Sherman by proffer as long

21

as you were able to cross-examine him, or would you like him

22

to testify live instead?

23

(Mr. Cochell confers with client)

24

THE COURT: It was a simple question.

25

MR. COCHELL: Your Honor, one moment.

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Colloquy

34

1

(Mr. Cochell confers with client)

2

MR. COCHELL: Your Honor, we're not sure that we

3

really can participate in this, Your Honor. We don't have any

4

discovery. I mean, we're willing to sit here and listen to

5

Mr. Sherman's proffer, but we don't have any discovery of the

6

corporate documents on ownership. We didn't anticipate that

7

we were going to be litigating ownership in the context of a

8

sale procedure.

9

THE COURT: You raised the issue.

10

MR. COCHELL: I'm sorry?

11

THE COURT: You raised the issue.

12

MR. COCHELL: I raised an objection to sale without

13

first determining ownership and without --

14

THE COURT: All right --

15

MR. COCHELL: -- getting the appeals resolved.

16

THE COURT: You raised the issue. You said you

17

didn't have any notice that ownership was going to be the

18

subject of the hearing. You raised the issue.

19

MR. COCHELL: Let me modify that statement. I raised

20

the issue that ownership was not properly being assumed by the

21

trustee, because the ownership issues haven't been resolved as

22

to Mr. Baron. And ownership is not something that you address

23

in the context of a sale procedure, without first going

24

through an adversary procedure. That's the context of my

25

remark. I'm sorry, Your Honor, if I was imprecise.

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Colloquy

35

1

THE COURT: All right, so your answer to my question

2

is what? That's not an answer to my question.

3

MR. COCHELL: We don't have documents from Emke, from

4

the company, to --

5

THE COURT: Mr. --

6

MR. COCHELL: -- to look hard at --

7

THE COURT: Okay --

8

MR. COCHELL: -- ownership.

9

THE COURT: -- this is not a response to my question.

10

Mr. Sherman, would you come up here to be sworn in

11

and take the witness stand? We'll just do your examination

12

the old-fashioned way. Ms. Medders (ph.) will swear you in.

13

(Witness sworn)

14

MR. URBANIK: Your Honor, for the record, just, I

15

want to correct a few things, I think, before we go into

16

Mr. Sherman's testimony. Judge Sam Lindsay denied a motion to

17

stay the involuntary, on December 6. He misspoke. That was

18

deceptive.

19

THE COURT: December 6th?

20

MR. URBANIK: August 6th. I'm sorry. The first

21

exhibit of the motion to strike is Judge Lindsay's denial of

22

their motion to stay your bankruptcy case; Mr. Baron. So what

23

Mr. Cochell said up here about something in front of Judge

24

O'Connor was completely false.

25

Number two, this motion was filed on August 14, 2013.

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Colloquy

36

1

No one contacted me. I never heard from Mr. Cochell about

2

this motion. He sets August 14th to call me, conduct

3

discovery, look into this.

4

Number three, they didn't file an objection to the

5

motion to sell this domain name in 2011; they didn't file an

6

objection to the employ of the broker Sedo in 2011. They've

7

had two years to assert a claim against Ondova or look into

8

these issues. For them to come in here and say "Surprise" is

9

outrageous. This is just like the beginning of the

10

receivership when Baron says, 'Oh, I don't have a lawyer. I

11

can't protect my rights,' and then they come in and disrupt

12

things, seeking to be vexatious and to cause increased

13

expense.

14

So the statement about no stay is a lie. The

15

statement about no information is wrong, because they've had

16

since August 14th. They didn't object in 2011 to the sale of

17

the name then or the employment of the broker. They never

18

asserted a claim. These people are in here as terrorists just

19

trying to disrupt everything.

20

THE COURT: Okay, let me --

21

MR. URBANIK: I just had to get that --

22

THE COURT: -- let me --

23

MR. URBANIK: -- off my chest --

24

THE COURT: -- let me --

25

MR. URBANIK: -- at the beginning.

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Colloquy

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1

THE COURT: Okay, understood.

2

So a motion for stay pending appeal with regard to

3

the order for relief has already been denied by the --

4

MR. URBANIK: That's right. It's the --

5

THE COURT: -- district court.

6

MR. URBANIK: I could walk it up to the Court.

7

THE COURT: That's --

8

MR. COCHELL: It's not in the motion to strike, Your

9

Honor.

10

MR. URBANIK: It's my first exhibit to the motion to

11

strike.

12

MR. COCHELL: No, it's not.

13

THE COURT: Well, I'll check my own copy that --

14

MR. COCHELL: Understood, Your Honor.

15

THE COURT: -- printed out from the bankruptcy court

16

docket.

17

Exhibit A?

18

MR. COCHELL: This is on an interlocutory appeal.

19

That's -- this --

20

MR. URBANIK: That was --

21

MR. COCHELL: We have now --

22

THE COURT: Okay --

23

MR. COCHELL: We have a motion for stay --

24

THE COURT: Okay --

25

MR. COCHELL: -- pending the final order.

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1

THE COURT: All right, well --

2

MR. COCHELL: So if you start talking about

3

misrepresentation, start looking at --

4

THE COURT: All right.

5

MR. COCHELL: -- at things.

6

THE COURT: Okay. I'm tired of he-said-she-said.

7

The point is there's no stay pending appeal. What I wanted to

8

ask you about is this: You said that Mr. Baron never objected

9

to the motion to sell servers.com through Sedo back in 2011.

10

MR. URBANIK: That's correct. I brought the docket

11

sheets and I can show the Court. They objected --

12

THE COURT: Did --

13

MR. URBANIK: -- to petfinders --

14

THE COURT: Did --

15

MR. URBANIK: -- but not to servers.

16

THE COURT: Okay. What about Novo Point and Quantec?

17

MR. URBANIK: No, Jeffrey Baron did not object to the

18

sale of Servers or the employment of Sedo, but he -- and he

19

did intervene in the Emke adversary, but he did file an appeal

20

of the order approving the sale of the domain name. When we

21

go into Mr. Sherman's proffer, we'll go into all the dates and

22

docket numbers.

23

But they didn't come in and object to the sale in

24

2011 or the employment of Sedo. It's two separate motions and

25

two orders. They did not object.

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Daniel J. Sherman - Direct

39

1

THE COURT: Okay, I heard that, but did they appeal?

2

MR. URBANIK: Yes, they did. Mr. Baron did, using

3

Mr. Gary Schepps. Without filing an objection in court and

4

without presenting an argument, they still filed an appeal of

5

your orders -- one of your orders, on the sale of servers.com.

6

That's the one that's sitting at the Fifth Circuit that's

7

awaiting briefing.

8

Judge --

9

THE COURT: Well, sitting there at the Fifth Circuit

10

but moot, because you're not --

11

MR. URBANIK: I'm not pursuing that order.

12

THE COURT: -- you're not pursuing that anymore.

13

MR. URBANIK: It's an abandoned motion.

14

THE COURT: All right, let's hear the testimony of

15

Mr. Sherman.

16

MR. URBANIK: Okay. Thank you, Judge.

17

DIRECT EXAMINATION

18

BY MR. URBANIK:

19

Q. Can you please state your name, for the record?

20

A. Daniel J. Sherman.

21

Q. And, Mr. Sherman, what's your connection to this case?

22

A. I'm the Chapter 11 trustee of Ondova.

23

Q. What was Ondova's connection to the Internet domain name

24

servers.com on the date you were appointed?

25

A. Ondova owned -- basically had an undivided one-half

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1

interest in the name.

2

Q. And who owned the other half interest in the domain name?

3

A. Mike Emke.

4

Q. And where does Mr. Emke reside?

5

A. California.

6

Q. After Ondova started, obviously there's a lot of things

7

going on, but were there some preliminary discussions with

8

Emke about some -- doing something with the domain name?

9

A. Yes. We were basically told that it was a valuable name

10

and that he was -- the agree -- we'd seen the agreement that

11

had been executed prior to the bankruptcy, in which Emke was

12

then charged with, you know, developing a Web site that --

13

basically developing the name.

14

And we had discussions with him about going forward or

15

selling it. It was -- it all -- it essentially went nowhere.

16

After a year or so, we realized that he had no money. He

17

wanted the estate to give him money to develop a Web site, and

18

we explained that we didn't have that ability.

19

Q. Let me back up. So when you became trustee, you became

20

aware of a pre-bankruptcy -- a pre-Ondova bankruptcy

21

settlement between Ondova and Emke?

22

A. Yes.

23

Q. And did that settlement result from litigation or

24

something?

25

A. Yes. It was -- my recollection is Emke actually, I

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1

think, owned the name, but then failed to renew it timely.

2

And after the thirty days, I guess -- I think it's thirty

3

days -- whatever the time period is after a name hasn't been

4

renewed, it sort of falls into the -- into a pile; and Jeff

5

Baron snapped it up and -- I think, and then they -- then I

6

think Emke sued, and they went back and forth.

7

And then they eventually entered into the agreement that

8

said that the name would be placed in a corporation, a Nevada

9

corporation called Servers, Inc., and that Ondova -- by the

10

way, which I think was the -- it was the entity that snapped

11

the name up -- would own fifty percent of the shares, and Mike

12

Emke owned the other fifty percent of the shares.

13

MR. COCHELL: Objection. Hearsay, Your Honor. Move

14

to strike.

15

THE COURT: Overruled.

16

Q. Mr. Sherman, I'm going to hand you the agreement that was

17

entered into between Servers and Mike Emke.

18

A. Yes, this document that you handed me does appear to be

19

the agreement that was presented to me when I was trustee and

20

from --

21

MR. COCHELL: Objection. Hearsay.

22

THE COURT: Overruled.

23

A. -- from which we ultimately ended up filing the

24

adversary, and this was an exhibit in the adversary.

25

MR. URBANIK: Your Honor, may I approach?

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1

THE COURT: You may.

2

MR. URBANIK: Probably does -- I'm just handing one

3

copy now, but --

4

THE COURT: Okay.

5

MR. URBANIK: Your Honor, I'd like to ask for that

6

exhibit to be introduced as Trustee's number 1.

7

MR. COCHELL: I haven't seen the document, Your

8

Honor. I don't have a copy of it with me.

9

THE COURT: It's attached to your objection to the

10

sale.

11

MR. URBANIK: Exhibit D to your --

12

MR. COCHELL: Okay, is it D?

13

MR. URBANIK: -- motion to strike. Yeah.

14

MR. COCHELL: Okay. Thank you.

15

THE COURT: Okay. Exhibit will be admitted. What

16

did we call it?

17

MR. URBANIK: Trustee's 1.

18

THE COURT: T-1 will be admitted.

19

(July 6, 2009 settlement agreement was hereby received into

20

evidence as Trustee's Exhibit T-1, as of this date.)

21

BY MR. URBANIK:

22

Q. And the date on that, Mr. Sherman?

23

A. The date on the cover sheet is July 6, 2009, and the

24

signature of Mike Emke and Jeff Baron as president of Ondova

25

is -- appears to be July 6, 2009.

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1

Q. And Ondova's bankruptcy was just a few weeks later, on

2

July 27, 2009, is --

3

A. That's correct.

4

Q. -- that correct? Okay.

5

So after those preliminary settlement talks, did more

6

settlement efforts go into trying to resolve things with

7

Mr. Emke?

8

A. Yes, but they went nowhere.

9

Q. And after that -- is part of that settlement effort --

10

wasn't there even a proposal just selling it and splitting it

11

fifty-fifty --

12

A. Yes.

13

Q. -- addressed?

14

A. Yes.

15

Q. Okay. Did you file -- because you weren't able to

16

resolve things, was an adversary proceeding filed in March

17

2011?

18

A. Yes. In this court.

19

Q. And was that adversary number 11-03181?

20

A. I think so. I don't really know what the adversary

21

number was.

22

Q. All right. What was the outcome of that adversary

23

proceeding? I know it's been a few years but, as best as you

24

can recall, what was the outcome of the adversary --

25

A. Well, basically, the judge --

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1

MR. COCHELL: Objection. Hearsay.

2

THE COURT: Overruled.

3

A. I -- the -- I believe this Court found that Ondova did

4

have an undivided one-half interest in the name and that the

5

name needed to be sold. And I think that, because Emke --

6

Emke's conduct was so unreasonable, that the Court also

7

assessed the attorney's fees that the estate incurred in

8

attempting to enforce the agreement. The Court ordered the

9

sale of the name, appointed me as the receiver to wind up the

10

affairs, which we did, in the Nevada corporation, and then had

11

the authority to try to sell the name, which we did for -- but

12

again, Sedo didn't come up with an offer that we thought was

13

worth pursuing.

14

Q. And, Mr. Sherman, you were present for the trial of the

15

adversary -- the whole adversary proceeding --

16

A. Yes.

17

Q. -- were you not?

18

A. Yes, I was.

19

Q. And, Mr. Sherman, that document we've introduced as

20

Trustee's 1, that was part of Ondova's records and therefore a

21

document you had --

22

A. Yes.

23

Q. -- seen and reviewed and worked with when she became the

24

trustee?

25

A. Right.

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Daniel J. Sherman - Direct

45

1

Q. You're not seeing it for the first time today?

2

A. No. No.

3

MR. URBANIK: Your Honor, I would like to refer to --

4

the Court to docket 130 in the adversary, which were the

5

findings of fact, conclusions of law, and order, and would

6

like the Court to take judicial notice of the Court's ruling;

7

that's in adversary number 11-03181. I'd like the Court to

8

take judicial notice of the order approving motion to approve

9

award of trustee's professional fees, which is docket number

10

153 in that adversary proceeding.

11

THE COURT: Okay, Court will do so.

12

MR. COCHELL: Just for the record, what was 153?

13

MR. URBANIK: 153 is the Court's order approving the

14

attorney's fees, and the prior number was -- the findings of

15

fact and conclusions, docket number 130.

16

Q. And, Mr. Sherman, Judge Jernigan presided over that

17

adversary proceeding --

18

A. Yes.

19

Q. -- is that correct? Okay. And did Mr. Baron intervene?

20

A. No.

21

Q. And wasn't Martin Thomas Mr. Baron's lawyer at that time?

22

A. Yes.

23

Q. Did Mr. Thomas ever call you to discuss the adversary?

24

A. I have no recollection of him ever calling me about that

25

adversary action.

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Daniel J. Sherman - Direct

46

1

Q. Mr. Martin Thomas, he had ECF notice of the -- everything

2

going on in Ondova, did he not?

3

A. He seemed to, yes.

4

Q. And he called you frequently to talk about things in

5

Ondova?

6

A. He did call me occasionally; I wouldn't call it frequent.

7

Q. How often did Mr. Baron's lawyer call you, though, about

8

things in Ondova when he was counsel?

9

A. Martin didn't. I would see him generally in the

10

courtroom. We always spoke. He, basically, came to every

11

Ondova hearing, as I recall. I don't have a specific

12

recollection of him being in the courtroom during the

13

service.com adversary; he may have been; I just -- I don't

14

recall whether he was or he wasn't.

15

Q. Okay.

16

A. But he was certainly present at almost all other Ondova

17

hearings; always sat in the back row.

18

Q. Okay, Mr. Sherman, you've heard some of the presentation

19

today. You're aware there are still two appeals relating from

20

this adversary that are outstanding, is that --

21

A. Yes.

22

Q. One is for Mr. Emke?

23

A. Right.

24

Q. Do you know the status of that appeal?

25

A. I think it's at the Fifth Circuit.

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47

1

Q. Well, let me --

2

A. Is it not?

3

Q. -- correct you. That's --

4

A. Oh, right.

5

Q. -- still at the district court.

6

A. I'm sorry. Yes. No. That's right. I don't think that

7

Judge Furgeson ever did deal with that.

8

Q. Okay. So that appeal was with Judge Lindsay?

9

A. Right. And --

10

Q. And --

11

A. -- it's fully briefed.

12

Q. No stay's ever been issued regarding anything to do with

13

Ondova related to Mike Emke's appeal?

14

A. Correct.

15

Q. What is the second appeal that --

16

MR. URBANIK: Well, let me strike that question; I'll

17

ask it a little bit later.

18

Q. Mr. Sherman, later in 2011, did you take steps -- in

19

2011, did you take steps to sell servers.com?

20

A. Yes.

21

Q. And what were those steps?

22

A. Well, we asked the Court to authorize us to employ Sedo,

23

because we thought that they would -- they seemed to be pretty

24

good at it. The Court authorized it. We placed it with them

25

and -- I don't remember; they had it four, five or six months,

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48

1

and it -- they just never came back with an offer. I don't

2

think they ever got us an offer of 200 grand or something like

3

that. It was fairly disappointing.

4

Q. Okay. Did you also file -- serve a separate motion to

5

sell the name in order to --

6

A. Yes.

7

Q. -- to get the process to sell it?

8

A. Yes, we did do that.

9

Q. Okay. And is that the motion that Mr. Baron then filed

10

an appeal of the Court's order?

11

A. Yes.

12

Q. Okay. And what's the status of that appeal?

13

A. I can't remember, Mr. Urbanik. I mean, it's --

14

Q. Okay.

15

A. -- up there somewhere --

16

Q. Okay --

17

A. -- having nothing done --

18

Q. Was there ever a stay order entered by any --

19

A. No.

20

Q. -- appellate court?

21

A. No.

22

Q. Thank you.

23

A. It was never stayed.

24

MR. URBANIK: All right. And, Your Honor, just for

25

the Court's reference, the Mike Emke appeal is still sitting

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49

1

with Judge Lindsay; it's docket number 3:12cv00244. The Baron

2

appeal is with the Fifth Circuit, and I'll provide the Court

3

the number in just a minute. And, Judge, the docket numbers

4

for the sale of Servers and the motion to employ Sedo in this

5

case were 657 -- that was a Sedo motion -- and 658 was the

6

motion to sell. The Court approved the Sedo motion on October

7

17th, and the motion to sell.

8

Q. Mr. Sherman, because Sedo was not successful, did we

9

later terminate Sedo as our broker?

10

A. Yes, we did.

11

Q. Okay. After that, what steps did we take to just try to

12

sell this domain name?

13

A. Well, we continued to toss it out to different brokers in

14

different -- every now and then, people would call, and I --

15

we talked to Damon Nelson and -- about XBT; they -- and I

16

can't remember exactly where XBT came from, but I think they

17

may have been -- they may have been made aware of the name

18

because they were one of the interested parties looking at the

19

portfolio, the entire portfolio, and they had an interest in

20

that name. And they're the ones who came forward and said 300

21

grand.

22

Q. So XBT has made an offer for 300,000?

23

A. Yes.

24

Q. Have they provided you a deposit?

25

A. Yes. They wired 40,000 dollars to me.

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1

Q. And have we negotiated with XBT regarding sort of a sale

2

process?

3

A. Yes.

4

Q. And they're aware, and we've discussed with them, an

5

additional marketing period and the conducting of an auction

6

if another bidder --

7

A. We told them --

8

Q. -- shows up from --

9

A. -- it would be subject to a higher and better offer, and

10

basically they said fine. They understood all that; they

11

just -- they didn't want to -- they wanted -- if we didn't get

12

a sale order within, I think, four months, they wanted their

13

money back.

14

Q. That's correct. Okay. Thank you.

15

The motion that we filed August 14th, does that motion

16

contain, you know, the sale procedures that had been proposed

17

by you and agreed to by XBT?

18

A. Yes.

19

Q. As part of the -- and by the way, does XBT have any

20

connection to you, Ondova, Mr. Baron, the receivership or

21

anyone here in Dallas?

22

A. No.

23

Q. Okay. And XBT does operate in the United States, is that

24

your understanding?

25

A. Apparently.

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1

Q. Is one of their companies Webzilla, a server company?

2

A. Yes.

3

Q. Okay.

4

A. They have lawyers in New York. I remember that I asked

5

you to check them out because I didn't know who they were.

6

Q. I'm going to correct you: Boston.

7

A. Boston.

8

Q. Yes.

9

A. I thought it was New York.

10

Q. And their attorney is on the phone today.

11

A. Oh, good.

12

Q. Okay. Mr. Sherman, the procedures we're essentially

13

asking the Court to approve today, I'm going to go through

14

them because they're really not -- no one's complained about

15

the procedures as of yet: essentially a thirty-day period to

16

market the domain name, and during that period the trustee --

17

you will place ads in publications such as, you know, Domain

18

Name Journal and other domain name publications; you're going

19

to place ads in technology and server and cloud-based business

20

Web sites and blogs; and at the end of the thirty days, if

21

someone contacts us and shows financial condition, the process

22

calls for them to become a qualified bidder. Is that your

23

understanding?

24

A. Yes.

25

Q. And if someone does appear and is a qualified bidder,

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1

you'll conduct an auction?

2

A. I will --

3

Q. Okay.

4

A. -- if the Court authorizes it.

5

Q. If the Court approves this, the XBT folks, if they are

6

outbid at the auction, in that event they would receive a

7

20,000-dollar breakup fee?

8

A. Correct.

9

Q. If the auction occurs because there are qualified

10

bidders, the starting bid price for anyone else would be 330-,

11

is that your understanding?

12

A. Yes.

13

Q. Okay. Mr. Baron -- or Mr. Sherman, I have a footnote in

14

the motion, that addresses an issue that the XBT lawyers have

15

raised, and it relates to their breakup fee. And the footnote

16

essentially advises the Court that in the event that the XBT

17

parties have any extra costs or attorney's fees that are out

18

of the ordinary, caused by some conduct of Mr. Baron or any of

19

his surrogates or related entities, they may come to you about

20

an increase in their breakup fee. Are you familiar with that?

21

A. Yes.

22

Q. And if that occurs, we're going to discuss that with them

23

and, if we can't work out something, we'll come to the Court?

24

A. Absolutely.

25

Q. And do you know why they requested this possible increase

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1

in breakup fee?

2

A. I --

3

MR. COCHELL: Objection. Hearsay.

4

THE COURT: Overruled.

5

A. -- think that Mr. Baron's reputation precedes him.

6

MR. COCHELL: Objection. Hearsay. Move to strike.

7

THE COURT: Overruled.

8

Q. Do you bel -- Mr. Sherman, this was the highest offer --

9

their offer of 300,000 is the highest offer you received for

10

the domain name, is that correct?

11

A. Yes, that's correct.

12

Q. And we've been trying to sell it for two years?

13

A. Yes.

14

Q. Okay. Do you believe it's a reasonable offer?

15

A. Under the circumstances, yes.

16

Q. Do you think there's any merit in waiting any longer to

17

try to sell this domain name?

18

A. I don't see it.

19

Q. Isn't there in fact sort of a little bit of a special

20

interest in the domain name now because of the increase on

21

technologies in the cloud and having companies use servers to

22

provide cloud-based services?

23

MR. COCHELL: Objection. Hearsay. Lack of

24

foundation.

25

THE COURT: Overruled.

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1

MR. COCHELL: He's not an expert, Your Honor.

2

THE COURT: Overruled.

3

A. There does seem to be an increased interest; now, whether

4

it's because everybody's going to a cloud or not, I don't

5

know. I know the cloud requires lots of servers, and data

6

centers are popping up, but I really -- Mr. Cochell is right;

7

I am not an expert.

8

Q. But in role of trustee, you've spoken to Mr. Nelson, who

9

serves as our --

10

A. Oh, yes. Yes.

11

Q. -- technology advisor?

12

A. Yes.

13

MR. COCHELL: For the record, we move to strike

14

testimony about talking to Mr. Nelson, as hearsay.

15

THE COURT: Overruled.

16

Q. And, Mr. Sherman, I mean, through the sale process,

17

you're going to use genuine efforts to try to get a higher and

18

better bid, is that correct?

19

A. Absolutely.

20

Q. Okay. As part of the sale, we're going to ask -- will we

21

make -- if there's an auction process, obviously we'll come

22

back to the Court with a revised final order approving the

23

sale. And if the -- is that correct?

24

A. Yes.

25

Q. And if XBT ends up being the bidder at 300,000 or a

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1

higher offer, we're going to come back and ask for protections

2

under 363(m), holding that they're a good-faith purchaser?

3

A. Right.

4

Q. Okay. Because they have no connections whatsoever to any

5

party here?

6

A. None to me.

7

Q. Okay. And we'll also ask the Court to waive the

8

fourteen-day stay period under Bankruptcy Rule 6004(h), is

9

that correct?

10

A. Yes, that's correct.

11

MR. URBANIK: Your Honor, that's my proffer -- my

12

cross-examination of Mr. Sherman --

13

THE COURT: Your direct.

14

MR. URBANIK: -- I'm sorry.

15

THE WITNESS: Ma'am --

16

THE COURT: All right --

17

THE WITNESS: -- correct.

18

THE COURT: -- thank you.

19

MR. URBANIK: My direct.

20

THE COURT: Who wishes to cross-examine Mr. Sherman?

21

MR. COCHELL: I will, Your Honor; just give me a

22

minute, please.

23

(Pause)

24

CROSS-EXAMINATION

25

BY MR. COCHELL:

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1

Q. Good morning, Mr. Sherman.

2

A. Good morning, Mr. Cochell.

3

Q. You mentioned Mr. Thomas as Mr. Baron's attorney. Do you

4

remember Judge Furgeson chastising Mr. Thomas about not

5

representing Mr. Baron, in open court?

6

A. Do I remember him chastising him to his face?

7

Q. Yes. In open court. When you appeared, and I appeared

8

for the first time, before Judge Furgeson on September 27th of

9

2012, there was a hearing about me substituting in for

10

Mr. Thomas. At that time, do you recall Judge Furgeson

11

telling Mr. Thomas, "I didn't pay you 10,000 dollars a month

12

to be a potted plant," quote-unquote?

13

A. I think it was five.

14

Q. You were supposed to represent Mr. Baron vigorously

15

before Judge Jernigan?

16

THE COURT: All right, let's get to the --

17

Q. Do you remember that, sir?

18

THE COURT: -- question? Do you remember?

19

A. I think it was 5,000 dollars a month.

20

Q. Five thousand dollars a month. Whatever.

21

A. I remember him being mildly disappointed, yes.

22

Q. "Mildly disappointed". Do you recall reading the order

23

where he said that he would consider a motion to disgorge

24

Mr. Thomas's fees? It was along with the order on the

25

attorney's fees.

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1

A. I --

2

Q. Do you remember that part?

3

A. I don't remember that. I'm not saying that's not true,

4

but I don't remember that.

5

Q. And so Mr. Thomas didn't -- as you understand it,

6

Mr. Thomas didn't have the right to file an objection on

7

behalf of Mr. Baron? Do you remember that?

8

A. No.

9

Q. Okay. Do you remember that Mr. Thomas wasn't supposed to

10

file oppositions to attorney's fees applications?

11

A. I don't remember that either.

12

Q. Do you recall him doing any of those things?

13

A. I remember that he did not. I don't --

14

Q. Okay.

15

A. -- recall that he was prohibited --

16

Q. I see.

17

A. -- from doing so.

18

Q. I see. Do you remember Mr. Thomas saying that he was

19

instructed either by the receiver or by Judge Jernigan that he

20

could not file any pleadings or take active positions on

21

behalf of Mr. Baron? Do you remember him saying that in open

22

court before Mr. -- Judge Furgeson?

23

A. No.

24

Q. Okay. All right.

25

A. What I remember was that he didn't seem to have a very

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1

good relationship with Mr. Baron. That's what I remember.

2

MR. COCHELL: I'm going to move to strike as

3

unresponsive, Your Honor.

4

THE COURT: Sustained.

5

MR. COCHELL: Okay.

6

Q. Now, when's the last time you had the domain name

7

servers.com appraised by an expert?

8

A. I don't know. I mean, the best way to figure out the

9

value is to offer it for sale.

10

Q. When is the last time --

11

A. I don't remember.

12

MR. COCHELL: I move to strike.

13

A. I -- okay, no, you can --

14

Q. I'd like an answer to my question, sir. When was --

15

A. I don't --

16

Q. -- the last time --

17

A. I don't recall.

18

Q. -- you had it appraised?

19

A. I don't recall. I think that when we first employed --

20

or discussed the sale of the name with Sedo, because they

21

were -- they were the -- sort of, one of the premier domain-

22

name brokers, that they thought that it was a 250,000-dollar

23

value, at least.

24

Q. And when was that?

25

A. I don't -- I don't know. Two years ago? Whenever it was

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1

that we filed our application to employ them.

2

Q. And you believe there's been a change in the market, to

3

increase the interest in servers.com, is that correct?

4

A. I -- the fact that XBT offered us 300- is enough of a

5

change in the market --

6

Q. That's a --

7

A. -- for me.

8

Q. From the last offer from Sedo, that's a 200,000-dollar

9

change in the market in the last two years, right?

10

A. Sounds like it.

11

Q. Okay. So from -- as a nonexpert or as a nonappraiser,

12

that would seem to be an encouraging trend, right?

13

A. It seemed encouraging.

14

Q. Okay. And that's because of the rise of the cloud and

15

the increased use of the cloud, as far as you know?

16

A. I -- yes, I -- yes --

17

Q. Okay.

18

A. -- as far as I know.

19

Q. So did -- so -- but you haven't had the domain name

20

appraised by any expert in the sales and value of domain

21

names, to verify that or to see if others may think there's a

22

better offer out there?

23

A. No.

24

Q. Are you aware of a sale by -- sale of a domain name

25

called server.com as opposed to servers.com?

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A. I do seem to recall having heard that server.com sold at

2

some point.

3

Q. And sold for 900,000 dollars?

4

A. I don't remember when it was or what the price was. Do

5

you know?

6

Q. Okay. So 900,000's certainly better than 300,000, you'd

7

agree with that, right?

8

A. Right. Yes, yes. I --

9

Q. Absolutely.

10

A. -- I hope we get that.

11

Q. That would settle a lot of problems, I think.

12

With respect to ownership, there's this settlement

13

agreement -- do you recall that -- with Mr. Emke?

14

A. The one that was dated July 6, 2009?

15

THE COURT: Trustee Exhibit 1.

16

MR. COCHELL: I'm sorry?

17

THE COURT: Are you talking about Trustee Exhibit 1?

18

MR. COCHELL: Yes, Your Honor.

19

A. Yes, I am familiar with that.

20

Q. Okay, I'd like to -- do you have it in front of you, sir?

21

A. I do.

22

Q. Okay. Now, Servers, Inc. was never in bankruptcy,

23

correct?

24

A. Far as I know, it was not.

25

Q. Okay, and you were the receiver -- or you are the

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receiver of Servers, Inc.?

2

A. Yes.

3

Q. Is Servers, Inc. still in receivership?

4

A. I don't know that I would call it that. I mean, the --

5

well, all's we did was go through the process of shutting the

6

corporation down according to the -- whatever the state of

7

Nevada required.

8

Q. Okay. It says here, and my copy's not so good, but

9

what -- this is Roman iv; maybe your copy's better. Do you

10

know what this says? It says, "Security lien or" --

11

A. No, no, it says, "Security interest in name".

12

Q. Okay. All right. Okay, and it says, "In the event of

13

insolvency, receivership and/or other default of the jointly

14

owned company, the domain name servers.com shall revert to

15

Jeff Baron and Emke to be owned jointly and severally," is

16

that correct?

17

A. That is what it says.

18

Q. Okay, and that they maintain a first lien and security

19

interest in the domain name, security to any other investor,

20

equityholder such as Ondova. Is that correct, sir?

21

A. That is what it says.

22

Q. Okay. And this was done shortly before July -- it was

23

done on July 6 but shortly before the bankruptcy in the Ondova

24

case, which I understand was July 27th?

25

A. That sounds right.

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1

MR. COCHELL: Your Honor, we only have one copy, but

2

it was attached to the objections, Exhibit --

3

THE COURT: Of what?

4

MR. COCHELL: It's the order appointing receiver. If

5

I may mark it, show it to the witness, and offer it?

6

THE COURT: You may.

7

MR. COCHELL: Thank you.

8

THE COURT: What, you're wanting me to mark it?

9

MR. COCHELL: No, no, I just wanted you to see it. I

10

don't have an extra copy. I was going to show it to the

11

witness, mark it and then offer it.

12

THE COURT: Go ahead.

13

MR. COCHELL: My apologies, Your Honor.

14

Q. Do you recognize this document? This'll be --

15

MR. COCHELL: How do you want it marked, Your Honor?

16

Should I mark it as --

17

THE COURT: I'm sorry, what?

18

MR. COCHELL: -- as Debtor 1 or 2?

19

THE COURT: Go ahead.

20

MR. COCHELL: Okay.

21

THE COURT: Debtor's 1.

22

(Order appointing receiver was hereby marked for

23

identification as Debtor's Exhibit D-1, as of this date.)

24

THE COURT: We normally -- okay, please review our

25

Local Rules in the future. You were supposed to pre-mark your

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1

exhibits before you come in here, so we don't waste everyone's

2

time --

3

MR. COCHELL: Yes, Your Honor.

4

THE COURT: -- and have sufficient copies for

5

everyone in the courtroom.

6

MR. COCHELL: Yes, Your Honor.

7

A. You're asking me if I recognize it?

8

Q. Yeah.

9

A. Yes, I do.

10

Q. Do you recognize that?

11

A. I do.

12

Q. That's the order appointing you receiver?

13

A. Yes.

14

MR. COCHELL: We move the admission of Debtor 1, Your

15

Honor.

16

THE COURT: All right, no objection --

17

MR. URBANIK: No objection.

18

THE COURT: -- correct?

19

All right, D-1 is admitted.

20

(Order appointing receiver was hereby received into evidence

21

as Debtor's Exhibit D-1, as of this date.)

22

Q. With respect to the circumstances surrounding the

23

agreement for servers.com, you have no personal knowledge as

24

to what the discussions were between Mr. Baron and Mr. Emke,

25

is that correct?

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1

A. That would be correct.

2

Q. Okay. And anything that you have to offer about that

3

would be speculation, is that correct, sir?

4

A. About what Mike Emke and Jeff Baron were talking about?

5

Q. Yeah.

6

A. Yeah, no, that would be pure speculation.

7

Q. Okay. And with respect to --

8

MR. COCHELL: One moment.

9

Q. And your sales procedures were the result of your

10

discussions with XBT? Is that correct, sir?

11

A. Yes. I mean, they -- XBT -- that's XBT Holdings, right?

12

Q. Okay. Okay. And you did not discuss sales procedures

13

with any expert in the field, on what would be the most

14

appropriate procedures or the procedures that are best

15

calculated to reap the highest interest in servers.com?

16

A. Well, I mean, we talked with -- obviously, with Damon

17

Nelson, and we intend to publish the opportunity to buy the

18

name, in the trade journals where, you know, entities that

19

would be interested would see it, including The Wall Street

20

Journal. So we have a -- we have a pretty good offer and

21

we're going to dangle it out there; if somebody else wants it,

22

they'll have a chance to bid on it. I think that's usually

23

the best way to figure out the value.

24

Appraisers just give you an opinion. You dangle them --

25

you dangle a piece of property out there in the market, give

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1

it plenty of publication, and that's what the price is.

2

That's been my experience.

3

Q. Now, Mr. Nelson -- he didn't appraise -- or he didn't run

4

any values on servers.com, is that correct?

5

A. I don't remember whether he did or he didn't.

6

Q. Okay. And so you basically just got this offer of

7

300,000 from XBT and said, 'Boy, that's great. Let's do a

8

deal with them'? Is that a fair statement or is it unfair?

9

A. That's -- I think that's a little unfair. We thought --

10

Q. Okay.

11

A. -- that that's a better offer than we got from the

12

vaunted domain broker entity Sedo. And having a legitimate

13

offer like that, it seemed like a good opportunity to put it

14

out there again in front of everybody and see if we can get

15

somebody to bump it a little bit higher.

16

Q. Well, you know, when you guys came back into court a

17

couple of years ago -- or in 2012, saying that you had to have

18

an order to sell because you wouldn't otherwise be able to

19

sell all those domain names, you remember representing that to

20

the Court that the sale had to be done quickly or -- because

21

the market was declining? Do you remember that basic argument

22

to the Court on selling all the domain names?

23

A. During the plan confirmation hearing?

24

Q. Right.

25

A. I remember that the -- that the revenues on those

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1

portfolios were going down.

2

Q. Okay. And then you got -- you know, five months later,

3

six months later, you still had people wanting to purchase

4

that property, purchase the domain names, and the value hadn't

5

declined; isn't that correct?

6

A. I don't know that I can say that's true.

7

Q. Okay. So -- but you haven't talked to anybody yet about

8

whether the value of servers.com will decline, when the

9

evidence that you have is that there's increased interest and

10

that the value of servers.com has increased over the last two

11

years, isn't that right?

12

A. I'm not -- I'm trying desperately to follow what you're

13

saying.

14

Q. Okay.

15

A. Would you --

16

Q. I think it was --

17

A. -- say that again?

18

Q. -- too long a question.

19

A. Yeah.

20

Q. Okay. Let me break it down. Over the last two years,

21

the value has increased from 100,000, the last offer you got,

22

and then you get this 300,000-dollar offer, right?

23

A. Okay.

24

Q. Okay. And so what -- and there's been, in your words, an

25

increased interest in server.com because of the cloud,

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correct?

2

A. That's what I'm told. I don't --

3

Q. Okay.

4

A. -- really know.

5

Q. All right. And --

6

A. I just know that I have a higher offer than I did.

7

Q. All right. And so what's -- sitting here today, there's

8

nothing to say that you wouldn't have another 2- or 300,000

9

dollars' increase in a year or two, in the value of that

10

asset? You don't know one way or the other, right?

11

A. Nor do you. No. No one does.

12

Q. No. But we do know -- in the last few years, and

13

particularly when everybody was talking about declining

14

revenues of domain names at the last sale hearing, we now know

15

that at least as far as servers.com, the value has been

16

increasing. And so the asset might be sold in a year or six

17

months for a lot more money, if you make a more concerted

18

effort to market it, right?

19

A. A more concerted effort to market it?

20

Q. Well, has there been any -- do you know if there's been

21

any effort to develop that domain name?

22

A. What do you mean by "develop" it?

23

Q. By working the domain name, building out the

24

infrastructure of the domain name.

25

A. I don't know what that means. You're going to have to

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1

describe that to me.

2

Q. Okay, do you know if -- what advertising has been placed

3

on that server.com -- servers.com to increase the hits?

4

A. I haven't done that, no. I'm -- as a Chapter 11 trustee,

5

I don't develop Web sites.

6

Q. But do you know if there's been any development? That's

7

my question, sir.

8

A. I know that there's never been any development of it in a

9

number of years that Mike Emke had it and Jeff Baron had it.

10

MR. COCHELL: We move to strike, Your Honor.

11

THE COURT: Overruled.

12

MR. COCHELL: Okay.

13

THE COURT: We're stopping at 12:34, a lunch break.

14

MR. COCHELL: Yeah.

15

THE COURT: Can you be finished by then?

16

MR. COCHELL: I don't know, Your Honor.

17

THE COURT: Well, I tell you what: I'm giving you

18

fifteen more minutes to finish.

19

MR. COCHELL: Yes, Your Honor. I appreciate that.

20

Q. And what specifically did you look at to determine

21

whether Jeff Baron was develop -- not developing or developing

22

servers.com? What specifically did you look at that supports

23

your opinion, sir?

24

A. The fact that he hasn't done anything. I've never seen

25

any evidence of it. If you had any evidence that he had, I'm

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1

sure you'd present it to me.

2

Q. Well, let me ask you something: Do you know if Jeff

3

Baron had any control of servers.com?

4

A. Apparently he did not. He was litigating with Mike Emke

5

for years, and then he signed this agreement and he went --

6

and Ondova went into bankruptcy.

7

Q. I see. So the basis for your opinion is that the --

8

servers.com was tied up in litigation and couldn't be

9

developed; is that fair? Is that -- that's a yes or no.

10

A. Maybe it couldn't -- yeah, maybe it couldn't, but I've

11

also never -- I don't know that Jeff Baron's ever developed

12

out a Web site.

13

Q. Okay. You don't know one way or the other, right?

14

A. I have never seen any evidence that Jeff Baron developed

15

a Web site.

16

Q. Did you ever look for evidence specifically --

17

THE COURT: Okay --

18

Q. -- on servers.com?

19

THE COURT: -- I'm going to lodge my own --

20

MR. COCHELL: I'm sorry.

21

THE COURT: -- relevance objection. What relevance

22

does this have to either the bona fides of the sale procedures

23

or ownership?

24

MR. COCHELL: It goes to -- if we're talking about

25

selling this asset now, as opposed to determining ownership

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first, I think it has a lot to do with the value of this asset

2

to Mr. Baron when he comes out of bankruptcy. And it also

3

goes to why the Court should not proceed with this sale,

4

because nobody's done anything, really, to take a look at what

5

the value of this asset is. And there are legal questions

6

about ownership here, Your Honor. So that's why I followed

7

this.

8

THE COURT: Okay. Move on. I don't --

9

MR. COCHELL: Yes, Your Honor.

10

THE COURT: -- see the relevance tie.

11

MR. COCHELL: Okay.

12

BY MR. COCHELL:

13

Q. So Ondova merely is a stockholder in Servers, Inc., is

14

that correct?

15

A. Was a stockholder --

16

Q. Okay.

17

A. -- in Servers, Inc.

18

Q. Okay. And so the receiver owns fifty percent of the

19

stock, is that correct?

20

A. Ondova owns --

21

Q. I'm sorry. -- fifty percent in servers.com?

22

A. Ondova owned fifty percent of the shares of stock in

23

Servers, Inc.; that was the settlement that Ondova reached

24

with Mike Emke after a couple years of litigation. Ondova had

25

the name; the name was --

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1

Q. Right.

2

A. The name Servers, Inc. was in the name of Ondova; it was

3

not in the name of Jeff Baron.

4

Q. Okay.

5

A. The agreement that Emke and Ondova reached was to place

6

it in the name of -- was to put the name in Servers, Inc., a

7

Nevada corporation, one-half of the shares of which Ondova

8

owned.

9

Q. What facts do you have to support your conclusion that

10

Mr. Baron didn't have fifty-percent ownership of

11

servers.com --

12

A. I -- my --

13

Q. -- or never had?

14

A. My recollection is that that -- those were the

15

discussions that we had with Emke's counsel in -- when we

16

first filed the adversary.

17

MR. COCHELL: We move to strike for hearsay, Your

18

Honor.

19

THE COURT: Overruled.

20

MR. COCHELL: It's all the questions we have of this

21

witness, Your Honor.

22

THE COURT: All right. Do others have cross-

23

examination of Mr. Sherman?

24

MR. COCHELL: I'm sorry?

25

THE COURT: I'm asking does any other counsel have

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cross-examination of Mr. Sherman.

2

I have a few questions, Mr. Sherman.

3

Who has paid the registration fees and any other

4

costs to keep the servers.com name registered --

5

THE WITNESS: Ondova.

6

THE COURT: -- during --

7

THE WITNESS: Ondova.

8

THE COURT: Ondova, okay. Has that always been the

9

case, or --

10

THE WITNESS: As far as I know, it has, yes.

11

THE COURT: Okay, so it wasn't simply after the

12

adversary proceeding? I'm looking at my findings of fact,

13

conclusions of law, dated October 18th, 2011, docket entry

14

number 130; that's where I resolved rights between Emke --

15

THE WITNESS: Right.

16

THE COURT: -- and you.

17

THE WITNESS: My recollection, Judge, is that was

18

always an asset of Ondova; it was one of the -- we thought it

19

was a million-dollar asset; it was a big deal. It was never

20

that this is a Jeff Baron name; it was an asset owned by

21

Ondova.

22

THE COURT: So then Ondova was listed as the

23

registrant --

24

THE WITNESS: That's the way --

25

THE COURT: -- of this name?

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THE WITNESS: -- I remember it, yes.

2

THE COURT: And Ondova was also the registrar

3

until --

4

THE WITNESS: Until the -- I guess, the -- yeah, it

5

was, until it all got shifted to another registrar.

6

THE COURT: And now who's the registrar?

7

UNIDENTIFIED SPEAKER: It's GoDaddy. --

8

THE WITNESS: Yeah, GoDaddy, yeah.

9

THE COURT: Okay. When did you first become aware of

10

this name? You testified early that you had had conversations

11

for Emke a year, about what to do with the name; but when did

12

you first become aware of it?

13

THE WITNESS: I -- you know, within a couple of

14

months. Within a couple of months of my being a -- there was

15

a lot of stuff going on; there was a lot of water coming out

16

of that fire hydrant. But it -- but I became aware of it

17

early on, because we thought that it was some -- a billion-

18

dollar name; we thought it was. And that's why were so

19

disappointed when Sedo didn't come up with anything more than

20

they did.

21

THE COURT: Okay. Now, there've been some questions

22

about Mr. Thomas, but did any Baron lawyer -- Mr. Pronske

23

or --

24

THE WITNESS: Nobody.

25

THE COURT: -- Ryan Lurich -- did any Baron lawyer

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ever ever --

2

THE WITNESS: Not in --

3

THE COURT: -- say, 'We have a dispute. Jeff Baron

4

owns that name, not Ondova'?

5

THE WITNESS: The objection that Mr. Cochell filed on

6

Saturday -- well, actually it wasn't the objection; I think he

7

filed a witness and exhibit list on Thursday or Friday or

8

something, before an objection had been filed; but it told me

9

that an objection was coming. That is the first time I have

10

any recollection of Jeff Baron asserting ownership interest in

11

the name.

12

THE COURT: All right. Well, the comment earlier

13

about the motion to employ Sedo to broker the name, back in

14

2011 --

15

THE WITNESS: Right.

16

THE COURT: -- and then the motion to sell --

17

THE WITNESS: Right.

18

THE COURT: -- servers.com --

19

THE WITNESS: Right.

20

THE COURT: -- there was a report by Mr. Urbanik that

21

Baron never objected to those motions but then he appealed

22

those two orders. In the appeal was there an argument made

23

that, 'Wait, those are not property of the Ondova estate', or

24

was it more just an objection to the merits of a sale?

25

THE WITNESS: Honestly, I don't remember what the

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basis of the appeal was.

2

THE COURT: Okay.

3

THE WITNESS: I just don't remember.

4

THE COURT: Okay. I'll look those up. Okay. There

5

was a reference to lawsuits involving Servers.com between Emke

6

and Ondova?

7

THE WITNESS: Right.

8

THE COURT: Do you know how many lawsuits -- is it

9

correct to say there were multiple lawsuits?

10

THE WITNESS: It -- it could be, Judge; I just know

11

that they had litigated for a while, is my recollection.

12

THE COURT: All right. Am I correct that Servers,

13

Inc. was not even formed until after Ondova filed bankruptcy?

14

THE WITNESS: That sounds right.

15

THE COURT: Well, if it was, I guess it was just

16

shortly before the bankruptcy. The Trustee Exhibit 1 is dated

17

July 6th --

18

THE WITNESS: Right.

19

THE COURT: -- 2009. The bankruptcy was filed July

20

27, 2009.

21

THE WITNESS: Right.

22

THE COURT: I mean, the basis for my question is this

23

Trustee Exhibit 1 states, at paragraph 1, "Domain name

24

ownership: The domain name Servers.com shall be owned jointly

25

between Compana" -- the other name for Ondova -- "and Emke, as

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described under the following terms. The parties shall be

2

equal owners of either an LLC, a C corp., or other acceptable

3

structure formed by Emke." I mean, it sounds like it's to be

4

formed.

5

THE WITNESS: Right.

6

THE COURT: Okay. All right. That's all of my

7

questions. If we can wrap up with Mr. Sherman in five

8

minutes, I'll do that. Otherwise, we're going to take a lunch

9

break and come back and finish this.

10

How much redirect do you have?

11

MR. URBANIK: Your Honor, I don't have any redirect.

12

I am going to call Mr. Baron.

13

THE COURT: Okay.

14

MR. URBANIK: However, I didn't plan for being here

15

this afternoon, and I've got some scheduling conflicts. I'm

16

wide open tomorrow. But I'm going to have Mr. Baron on the

17

stand a while as a cross witness in my case.

18

THE COURT: Okay, first things first. No redirect,

19

so that means no recross.

20

Mr. Sherman, you're excused from the stand.

21

MR. COCHELL: Your Honor, I'd like to recross just

22

for a few minutes.

23

THE COURT: He didn't choose to redirect, so you

24

don't get to recross.

25

MR. COCHELL: Based on your questions, Your Honor.

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Daniel J. Sherman - Cross (Resumed)

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You opened up a line of inquiry that I didn't pursue.

2

THE COURT: Okay. I'll give you three minutes to

3

pursue these questions.

4

MR. COCHELL: Yes, Your Honor. Thank you.

5

THE COURT: My redir -- whatever it was, wasn't even

6

three minutes.

7

RESUMED CROSS-EXAMINATION

8

BY MR. COCHELL:

9

Q. Mr. Sherman, you weren't aware that Mr. Baron has been

10

claiming ownership of Server since 2011? You're not aware of

11

that?

12

A. I don't remember that, no.

13

Q. Okay. And on your testimony about Ondova paying for

14

registration fees, I mean, have you -- when's the last time

15

you looked to see whether Ondova was paying registration fees?

16

A. I have Mr. Nelson monitoring that.

17

Q. Okay. And what speci -- do you recall specifically

18

asking him, do we pay registration fees for --

19

A. Do --

20

Q. -- for Servers.com -- Mr. Nelson?

21

A. I don't remember if I had actually put that question to

22

him. He may have told me it was coming up and it needed to be

23

paid.

24

Q. Okay. Did you know that ICANN prohibits registrars, such

25

as Ondova, from owning domain names?

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A. Okay.

2

Q. And so therefore, registration fees would not be paid by

3

Ondova for Servers.com.

4

A. So who's been paying it?

5

Q. And that's true, right?

6

A. I don't know.

7

MR. COCHELL: Okay. That's all we have, Your Honor.

8

THE COURT: All right. Thank you, Mr. Sherman;

9

you're excused.

10

All right. What are we going to do? You can't come

11

back this afternoon?

12

MR. URBANIK: I cannot this afternoon, Your Honor.

13

I'm sorry. Tomorrow morning -- tomorrow is wide open. I'm

14

going to call Mr. Baron. I'm going to call Mr. Nelson.

15

MR. COCHELL: Your Honor --

16

MR. URBANIK: And it's going to take several hours,

17

Your Honor. I'm sorry, I just didn't -- we did not believe

18

they had standing, it would be -- we'd be here for so long

19

this morning.

20

THE COURT: You have another court hearing this

21

afternoon, or what is your conflict?

22

MR. URBANIK: I have three client meetings, Judge,

23

and one I rescheduled with --

24

THE COURT: Okay.

25

MR. URBANIK: -- clients.

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THE COURT: You know what, you need to figure out if

2

you can reschedule client meetings; that's not the same as

3

court hearings. Do you have -- if I were to do this tomorrow

4

instead of today, do you have an issue?

5

MR. URBANIK: Well, I could do it the next day, Your

6

Honor. I have an escrow --

7

THE COURT: Well, you know what? I have court

8

hearings all Thursday.

9

MR. URBANIK: Yes, Your Honor.

10

THE COURT: Your choices are coming back this

11

afternoon or coming back tomorrow. Which works?

12

MR. URBANIK: Afternoon's fine.

13

THE COURT: All right. If you don't have court

14

hearings, Mr. Urbanik, court is more important than client

15

meetings.

16

MR. URBANIK: I understand.

17

THE COURT: So we'll come back -- it's 12:35. We'll

18

come back at 2 o'clock --

19

MR. URBANIK: 2 o'clock.

20

THE COURT: -- to finish the day.

21

MR. URBANIK: All right. Thank you, Your Honor.

22

THE CLERK: All rise.

23

(Recess from 12:35 p.m. until 2:02 p.m.)

24

THE COURT: Good afternoon. Please be seated. All

25

right. We're going back on the record in the Ondova matter.

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We seem to be missing Mr. Baron and his counsel, anyone have

2

any clues about that?

3

MR. URBANIK: I did not see them downstairs or in

4

this lobby. Has anybody else seen them?

5

THE COURT: It's five after 2. All right. Well, it

6

seems like I had a discussion with Mr. Cochell at a prior

7

hearing, not too long ago, about being late. All right.

8

Well, we're going to take a five-minute break, and Laura,

9

maybe you can go and other people can go look in the

10

hallway --

11

MR. URBANIK: Sure.

12

THE COURT: -- to see if they can find him. Thank

13

you.

14

THE CLERK: All rise.

15

(Recess from 2:02 p.m. until 2:09 p.m.)

16

THE COURT: For the record, it is ten after 2 and we

17

are still waiting on Mr. Baron and his counsel in the Ondova

18

case. Do we have someone on the phone still?

19

MR. SHAYEFAR: Yes, Your Honor. This is Matthew

20

Shayefar.

21

THE COURT: Okay. We are waiting on Mr. Baron and

22

his lawyer to come into the courtroom. We understand they are

23

in the building.

24

MR. SHAYEFAR: I will continue to hold. Thank you.

25

THE COURT: Mr. Baron, do you know, is Mr. Cochell on

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his way?

2

MR. BARON: He is in the restroom. He should be here

3

any moment.

4

THE COURT: All right, Mr. Cochell. We have been

5

waiting on you and Mr. Baron. What is your explanation for

6

being eleven minutes late?

7

MR. COCHELL: Your Honor, we had to walk back from

8

the lunch. We were -- we walked about five or six blocks, and

9

I just started feeling very badly. I had to just go back out

10

and go to the bathroom. So I wasn't feeling well. That's for

11

the last two or three minutes. I think we were about six

12

minutes late, so I apologize. We just -- it took a while to

13

walk back.

14

THE COURT: All right. Well, you did this to me in a

15

previous hearing not too long ago as well; you kept us all

16

waiting. And I think I admonished you then.

17

MR. COCHELL: I don't recall that, Your Honor, but --

18

THE COURT: Okay. Well, I do.

19

MR. COCHELL: Okay.

20

THE COURT: And if it happens again, you're going to

21

get a monetary sanction.

22

MR. COCHELL: Yes, Your Honor.

23

THE COURT: Okay? All right. We're now ready to

24

resume. Let me talk about some time limitations for this

25

afternoon. We've finished with Mr. Sherman's testimony. I

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understand that maybe the trustee is going to call Mr. Baron

2

and Damon Nelson. Let me just be clear for everyone, I have

3

entertained evidence today, and I told you the issues today

4

would both be the merits of the sale procedure motion.

5

MR. COCHELL: I'm sorry; I couldn't hear you.

6

THE COURT: Mr. Cochell, we have a hearing headset.

7

Do you need -- are you hearing impaired; do you need the

8

headset to --

9

MR. COCHELL: I guess I've been losing my hearing,

10

but I'm really having trouble today. I'll be happy to wear

11

one, if you have one.

12

THE COURT: Well, you don't have to, but I'm offering

13

it to you. We have a headset that we give to hearing impaired

14

lawyers, parties, that sometimes help amplify the sound.

15

MR. COCHELL: Yeah.

16

THE COURT: I just --

17

MR. COCHELL: Actually, that would be good --

18

THE COURT: Okay.

19

MR. COCHELL: -- because I am having trouble --

20

THE COURT: Okay.

21

MR. COCHELL: -- to be honest. I just haven't been

22

able to hear.

23

THE COURT: Okay.

24

MR. COCHELL: You just put it on and it works?

25

THE CLERK: Put it on your ears.

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MR. COCHELL: Okay. Okay.

2

THE COURT: All right. Is it working?

3

MR. COCHELL: Okay. That's great. Thank you.

4

THE COURT: Okay, very good.

5

MR. COCHELL: Thank you.

6

THE COURT: All right. Let's talk about time

7

limitations. First of all, we are going to finish this

8

afternoon. Second of all, I am thinking about putting time

9

limitations on our remaining witnesses, which I understand are

10

going to be Mr. Baron and Damon Nelson, although I don't see

11

him in here at the moment.

12

I want to remind you of what is relevant today.

13

First and foremost, the merit of the sale motion. Is it

14

reasonable for the trustee to be proposing these sale

15

procedures, to be proposing the 300,000 dollar stalking-horse

16

bid, the notice procedures, the auction procedures, the

17

overbid protections? Is that a reasonable sale process at

18

this time? Okay. So any evidence people want to put on to

19

challenge the trustee on this.

20

But second, I have allowed evidence relevant to

21

ownership of this domain name and the trustee's right to

22

pursue a sale of the domain name. Now, to be clear, I have

23

already had litigation in an adversary proceeding between Mike

24

Emke and Ondova where I ended up giving Mr. Sherman the right

25

to sell the domain name. I have opened this up to some

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relitigation, if you will, because Mr. Baron was not a party

2

to that adversary proceeding, although I think he certainly

3

had notice of it and an opportunity to intervene. But I'm

4

erring on the most conservative side that perhaps he has a

5

right to challenge this right to sale, even though I've

6

already given Mr. Sherman the right to sell after that Emke

7

adversary proceeding.

8

So that being the case, I'm entertaining evidence as

9

to -- competing evidence, if you will, as to ownership or

10

rights into that name. But having said that, I want to remind

11

everyone -- Mr. Cochell, I wish you would pay attention when

12

I'm talking --

13

MR. COCHELL: I am. I'm --

14

THE COURT: -- because this is mostly for your

15

benefit.

16

MR. COCHELL: Yes, Your Honor.

17

THE COURT: 363, I mentioned 363(h) earlier; really

18

363(f) is probably more germane than 363(h). It allows a

19

trustee to sell an asset that the bankruptcy estate has

20

ownership or rights in, even if those rights are subject to a

21

bona fide dispute.

22

So I want to be clear, even if Mr. Baron puts forth

23

much credible evidence that he has some sort of potential

24

interest in the name, the way I see it, 363(f) still permits

25

this Court to allow the sale of it. What I'm trying to get at

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here is, is it beyond the pale -- is there just no chance that

2

Ondova has an interest? Is there some sort of evidence, that

3

none of us know about, that shows more than a bona fide

4

dispute here in favor of Mr. Baron -- it's just clear-cut that

5

he has the property interest? I'm giving you the benefit of

6

the doubt that maybe that evidence exists and it's never seen

7

the light of the courtroom. Okay?

8

So that's all we're going to hear evidence on. What

9

I'm hearing so far, it sounds like, Mr. Cochell, is the sole

10

argument with regard to ownership is Section 4 of the July

11

10th, 2009 settlement agreement. I'd like you to be candid;

12

is that solely what you're relying on, or is there going to be

13

more evidence than that? Because if that's solely what you're

14

relying on, I think what we've got here is, at best, a bona

15

fide dispute, where I can still authorize the sale of this

16

name under 363(f). Okay? You get what I'm saying?

17

MR. COCHELL: Yes, Your Honor. And I would agree

18

with you that there's probably a bona fide dispute. And with

19

respect to new evidence, we're hampered, in part, by the fact

20

that Mr. Baron has not had all of his documents, you know,

21

that relates back to those years. And so that would go to

22

your issue of whether there's overwhelming or such clear

23

evidence that would knock you off the judicial bench in shock

24

today. So I'm taking a bit of license here, but so it seems

25

to me that if it's understood that if we have evidence to come

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back and challenge it, that we can do that at a later time

2

before the sale is consummated.

3

THE COURT: Well, you can't just say he hadn't had

4

access to documents and there might be documents; I need more

5

than that.

6

MR. COCHELL: Well --

7

THE COURT: This argument -- I've gone during the

8

lunch break --

9

MR. COCHELL: Yes, Your Honor.

10

THE COURT: -- and I've seen that Mr. Baron has had

11

lawyers making this argument, that he has a right to the name,

12

since at least November 4th, 2011. I'm looking at Fifth

13

Circuit briefing. Okay? And all they said back then was --

14

they talked about Section 4 of this agreement. So --

15

MR. COCHELL: Well, I would proffer to --

16

THE COURT: -- I need to know more than he hadn't had

17

access to documents and there might be documents there.

18

MR. COCHELL: I would proffer --

19

THE COURT: He knows his case better than anyone

20

else, so --

21

MR. COCHELL: I would proffer to the Court that he

22

was the original owner of Servers.com.

23

THE COURT: You know, I need evidence; I don't need a

24

lawyer standing up telling me that. I made it clear from the

25

beginning --

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MR. COCHELL: Fair enough.

2

THE COURT: -- I need evidence. All right. So the

3

remaining witnesses the trustee intends to call are Mr. Baron

4

and Mr. Nelson?

5

MR. URBANIK: That's correct, Judge.

6

THE COURT: Is that it?

7

MR. URBANIK: Yes.

8

THE COURT: All right. What about on this side, so

9

we can decide time limitations?

10

MR. COCHELL: It's maybe Mr. Baron.

11

THE COURT: All right. Well, we're going to limit

12

Mr. Baron; I'm thinking one hour each. Anybody think that's

13

unfair?

14

MR. COCHELL: No.

15

THE COURT: Okay. So two hours in the aggregate, one

16

hour each. And then Mr. Nelson, I'm thinking a total of one

17

hour, thirty minutes, thirty minutes. Anyone think that's --

18

MR. URBANIK: At the most. At the most, Judge.

19

THE COURT: Does that sound reasonable or

20

unreasonable? Okay.

21

MR. COCHELL: It sounds fine, Your Honor.

22

THE COURT: So an hour in the aggregate. So we'll

23

go, at most, three more hours.

24

All right. Mr. Urbanik, are you ready to call Mr.

25

Baron?

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Jeff Baron - Direct

88

1

MR. URBANIK: Yes, Your Honor.

2

THE COURT: All right. Mr. Baron, you have been

3

called to the witness stand, please.

4

(Witness sworn)

5

DIRECT EXAMINATION

6

BY MR. URBANIK:

7

Q. Mr. Baron, could you please state your full name for the

8

record?

9

A. It's Jeff Baron.

10

Q. Mr. Baron, prior to the appointment of Daniel Sherman as

11

Chapter 11 Trustee of Ondova, what was your position at

12

Ondova?

13

A. President, I believe; I believe that was the title.

14

Q. How long were you president?

15

A. I'd say, nine years, ten years, I guess, something

16

like -- I can't recall precisely.

17

Q. Okay. Nine or ten years?

18

A. That would be my best guess.

19

Q. Thank you. Mr. Baron, I'm going to zoom right in on the

20

issue raised in Mr. Cochell's pleading filed September 7th.

21

It says that you make a claim to the domain name -- and I'm

22

going to paraphrase -- because there's a security interest in

23

Servers.com reverting ownership to Baron and Emke in the event

24

that Servers, Inc. is placed under receivership. And then in

25

your response, you quote Section 4 of that agreement. Can you

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1

explain what was the reason for dropping this provision in the

2

settlement agreement with Mike Emke?

3

A. You're talking about number 4, right?

4

Q. Yes, sir.

5

A. This has been many years ago, so I'm just going to give

6

you my best recollection. It's -- I -- I was a party to --

7

from my best recollection, again, I was a party to the

8

lawsuits, at least one of the lawsuits with Mike Emke, and I

9

had, you know, interests in -- in the domain name. So this

10

was just a way to, I guess, preserve my -- what I had

11

personally, my claims, or whatever, in the name. I would -- I

12

would best put it that way. I'm not articulating this very

13

well, but that's my best way to describe it.

14

Q. What consideration did Ondova get to give you this

15

reversionary interest?

16

A. I'm not sure exactly what you're asking, but if -- could

17

you ask it a little bit different way --

18

Q. Sure.

19

A. -- of what consideration that?

20

Q. By having Ondova agree to this, did Ondova receive any

21

consideration? In giving you, as president, this right, what

22

was given to Ondova?

23

A. I don't know -- again, that's kind of a multi question,

24

but I don't think it was as president. I had -- I had claims,

25

certainly, against Mr. Emke. There was claims going back and

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Jeff Baron - Direct

90

1

forth regarding the domain name. I think I had a -- I guess

2

this was just part of -- part of the settlement that allowed

3

the -- allowed the -- allowed the case to settle. I had my

4

own -- my own interests, kind of apart from what Ondova had.

5

Q. Your own interests, okay. Let's go back. Who owns the

6

stock in Ondova?

7

A. I -- I know it's a trust. I can't recall. It's been so

8

many years, but I think, if you can refresh my memory, you

9

probably know better than I do at this point.

10

Q. Are you connected, in any way, to this trust that you're

11

saying owns Ondova?

12

A. Yes, of course.

13

Q. Are you a beneficiary of that trust?

14

A. Without seeing the documents, I don't recall. It's been

15

so long since I've looked at that, but probably; I just don't

16

recall.

17

Q. How long has Ondova been in existence?

18

A. Best I can recall, it was -- it's been thirt -- twelve,

19

thirteen years, something like that. It's been long, yeah.

20

Q. Who organized Ondova and brought it to -- created the

21

entity? Who created the entity?

22

A. I don't recall.

23

Q. It wasn't you?

24

A. I think -- again, this is just based on guessing of all

25

those years ago, I think it was -- I think there was a

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91

1

different -- I think there was another person who organized it

2

and created it. But I'm -- I'm not recalling, off the top of

3

my head.

4

Q. How long have you been president of Ondova?

5

A. I think I just told you; it was something like ten or

6

more years that --

7

Q. Your testimony is you did not create the Ondova Limited

8

Company; that wasn't you?

9

A. No, my testimony was -- I just said it is the same as it

10

was a minute ago when you asked me. It's that I don't recall

11

how it was created exactly; that's a long time ago. But best

12

I can recall, it was organized and created by someone else,

13

but I don't recall.

14

Q. How long have you been employed by Ondova?

15

A. As long as I was president, so the same -- it would be

16

the same period of time.

17

Q. So you did not begin employment with Ondova when it was

18

first created?

19

A. I believe it was right after it was created, best I can

20

remember. It's been many --

21

Q. Is it going --

22

A. -- many years.

23

Q. Is it twelve or thirteen years and then you've been

24

working for Ondova for twelve or thirteen years?

25

A. As best I can remember, but I can't tell you for

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1

certain -- with certainty.

2

Q. Okay. So there's a trust that owns the stock, and you're

3

somehow connected to that trust?

4

A. Yes.

5

Q. Is it the Belton Trust?

6

A. Sounds familiar. I don't -- it's been a long time since

7

I've looked at this stuff, but I don't -- don't remember.

8

Q. Who created the Belton Trust?

9

A. I don't recall that.

10

Q. Did you have anything to do with the creation of the

11

Belton Trust?

12

A. I think I was, again, the beneficiary of it, so probably,

13

but I don't -- don't recall.

14

Q. So you're the beneficiary; what all does the Belton Trust

15

own?

16

A. I can't recall.

17

Q. But you do believe it owns the stock of Ondova?

18

A. Now that you're asking me about it, I don't think it is

19

the Belton Trust, so I would have to rephrase my testimony; I

20

do not think the Belton Trust owns Ondova, but I -- I really

21

can't recall precisely, but I don't think so.

22

Q. Who else would have owned it if it wasn't the Belton

23

Trust? What are some of the other entity names that might own

24

Ondova stock?

25

A. Best I can recall, it was a trust, but I don't think it

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Jeff Baron - Direct

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1

was called Belton Trust, and I don't remember the name that it

2

was called.

3

Q. Are you involved in a lot of trusts?

4

A. There are a lot of trusts -- I don't know if you'd say a

5

lot, but there were trusts.

6

Q. Did you have anything with the creation of these trusts?

7

A. Can you tell me which trusts, if you're --

8

Q. The Belton Trust.

9

A. That doesn't have anything to do with Ondova, I don't

10

think, from what I recall, but I don't -- I don't recall what

11

happened with that trust or how it was set up.

12

Q. Mr. Baron, I don't have the bankruptcy schedules with me

13

here today, or the statement of financial affairs, but

14

would -- if I obtained them, and I showed you the Belton Trust

15

is who you've listed as owner of the Ondova stock, would that

16

make a difference in your testimony?

17

A. I'd like to ref -- if that would help me refresh my

18

memory, but best I can remember of that, Belton Trust didn't

19

have anything to do with owning Ondova, so --

20

Q. All right. Besides you as president of Ondova, who were

21

the other officers?

22

A. I think Mr. Nelson was an officer, and I can't recall if

23

there were others that got put in place at different times.

24

Q. How long was Mr. Nelson an officer?

25

A. It wasn't very long. I just -- I can't recall, though.

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Jeff Baron - Direct

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1

Q. All right. Who, initially, owned the domain name

2

Servers.com?

3

A. I believe I originally was the -- the first registrant,

4

best I can recall.

5

Q. How did Mike Emke claim an interest in the domain name?

6

A. My recollection is that he -- he had registered it before

7

-- before I did -- and again, it's a long time; I'm just

8

trying to remember -- he had registered it beforehand, and

9

Network Solutions and Verisign, I think, if I recall,

10

terminated his registration. And he didn't -- you know, he

11

didn't like the fact that his registration was terminated; he

12

wanted it back.

13

Q. Although you said you were the first owner, are you now

14

saying Mike Emke was the first owner of the domain name?

15

A. Well, when I said the first owner, I -- I mean between me

16

and Ondova. I wasn't the original owner forever and ever. I

17

don't know who that would have been, when the name was first

18

registered on the Internet. That would be --

19

Q. Mike Emke owned it before you or Ondova?

20

A. Best I can -- that was his claim. I don't know if it's

21

true or not, but that's what he claimed.

22

Q. How did Ondova get the name?

23

A. Best I can recall, I -- I let Ondova -- I let Ondova

24

register it, but I -- it's been a long time; I can't recall

25

exactly.

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1

Q. Did you take steps to have the Servers.com name become an

2

asset of Ondova? And if so, what were those steps?

3

A. I -- I don't recall that. I --

4

Q. But somehow Ondova ended up owning this domain name, is

5

that right?

6

A. Ondova certainly had claim to the domain name. I think

7

at that point we weren't saying that a company could own a

8

domain name, so I want just to be careful there. I think we

9

were just -- I think the position was that Ondova was a

10

registrant and not an owner of the domain name. But --

11

Q. And you testified earlier that you were involved in

12

having the name come to Ondova; is that correct?

13

A. I would have been involved in that in some way.

14

Q. Okay. Now, was litigation then -- did litigation then

15

occur between Ondova and Mr. Emke?

16

A. Yes, it did.

17

Q. What courts was that litigation in?

18

A. The best I can recall, it was in a court in Nevada,

19

several courts in Texas. I -- that's all I can remember.

20

Q. And what years did the litigation take place? During

21

what years did the litigation take place?

22

A. I don't -- don't recall. It was over many years; I just

23

don't recall what years.

24

Q. What years did Ondova become registrant of the domain

25

name?

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1

A. I don't recall that.

2

Q. Okay. In connection with the litigation with Mike Emke,

3

were law firms employed?

4

A. Yes.

5

Q. Okay. Who did Ondova hire to represent it?

6

A. I -- I can't recall. If you gave me some names, I could

7

probably refresh my memory and confirm it. I just don't

8

recall the names of the people.

9

Q. Did Ondova employ counsel to represent it in litigation?

10

A. Yes. Yes.

11

Q. Who paid the legal fees for those lawyers?

12

A. Well, for -- best I can recall, it was Ondova paid some

13

and I paid some, but I don't -- I can't recall, with

14

specificity, which was which.

15

Q. So you're saying Ondova paid some and you paid some.

16

What --

17

A. Best I can recall.

18

Q. How much in legal fees did you pay?

19

A. I don't recall at all.

20

Q. If you were to pay legal fees, would you pay them out of

21

your own personal bank account?

22

A. It's possible, sure. It's possible.

23

Q. Well, where else would they come, if it wasn't from your

24

personal bank account?

25

A. I would say it could come from various ways. We had -- I

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1

know a lot of litigation was funded through finance companies

2

that paid directly -- litigation costs directly from finance

3

companies, so it could have been them. I don't recall, but

4

litigation fees were paid from various sources, and that's why

5

I can't tell you that it was for sure out of -- which bank

6

account it would have been out of.

7

Q. What -- okay, if you were to -- if you've paid any legal

8

fees for Ondova to litigate against Mike Emke, what records

9

and documents do you have that show that you paid those legal

10

fees?

11

A. I -- as I sit here today, I can't recall.

12

Q. Do you have your own personal banking records, your

13

personal records, not Ondova's, but do you have your personal

14

banking records for a number of years?

15

A. Best I can recall, most of that was turned over to the

16

receiver in 2010. But best I can recall, most of my documents

17

are in the possession of Mr. Vogel, but --

18

Q. So you did not retain any personal banking documents when

19

Mr. Vogel was appointed?

20

A. That's not what I said. I said most of them -- best of

21

my recollection, most of the documents are with Mr. Vogel. I

22

probably have some. I know we gave some for the involuntary

23

proceeding.

24

Q. Okay. Did you keep copies?

25

A. Of the things that I gave to Mr. Vogel, I don't believe I

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1

kept copies of that, but he may have given a copy to one of

2

the counsel that I had.

3

Q. Do you, in your possession now, have any bank records

4

that show that you funded Ondova's legal fees for its

5

litigation against Mike Emke?

6

A. I can't tell you if it's in my possession or not; I just

7

don't know, at this point.

8

Q. So you're not able to provide any detail on why some

9

reversionary interest went to you? You don't have any bank

10

records. You don't have the amounts. You don't have any

11

books and records that show that you have some personal stake

12

in this domain name, do you?

13

A. Well, I -- I wasn't prepared to be answering those kind

14

of questions or being that kind of documents to this -- this

15

proceeding. So I'm sure if I had the opportunity to do

16

discovery and have some due process, I would have that,

17

because I'm fairly certain it exists, but I don't have it here

18

today. I didn't bring it here. I didn't know that I needed

19

to bring that here.

20

Q. What about the fact that the motion was filed several

21

weeks ago? Didn't you begin preparing for today's hearing

22

then?

23

A. Well, I didn't think that we were -- this was an

24

ownership hearing, so I didn't think that's what -- that's

25

what was being heard here.

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1

Q. Okay. Mr. Baron, I'm going to come back to gathering

2

those records. This security interest that was given to you

3

and Mike Emke, did you take any steps to get collateral or get

4

some security interest or, I'll use the word lien, on -- you

5

know, to enforce your right that's in paragraph 4? What steps

6

did you take to perfect or get a security interest in this

7

reversionary right?

8

A. I can't tell you at this point. My lawyers -- I don't

9

know what the lawyers did to do that. I can't -- I don't

10

recall.

11

Q. Has anyone ever told you that you do have some type of

12

security interest or lien --

13

A. Yes.

14

Q. -- in the domain name?

15

A. Yes.

16

Q. Who has told you that?

17

A. Well, that's attorney-client privilege information, so I

18

don't -- I

19

Q. A lawyer told you you have a security interest in the

20

name?

21

A. Yes.

22

Q. Which lawyer?

23

A. I think that's attorney- --

24

MR. COCHELL: Objection

25

A. -- client privilege information, and I mean, I'm --

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1

THE COURT: Sustained.

2

Q. What -- I'm not asking about anything that you had in any

3

discussions with your lawyer, but what is your understanding

4

of when or where or how this interest became perfected?

5

A. I think "perfected" is a legal term, and if you can

6

explain that; I don't know what that means, precisely, but

7

I've heard that term before. So can you explain what you mean

8

by "perfected"?

9

Q. Like filing a mortgage or a UCC statement.

10

A. I don't know if lawyers have done that for me. I

11

don't -- I just don't. I can't tell you at this time.

12

Q. Do you have evidence with you today that such a security

13

interest was every formally recorded anywhere?

14

A. I personally didn't bring anything with me, so I -- I

15

didn't know that's what it was going to be talked about today

16

and what I had to be -- I didn't know I was going to have to

17

be showing anything about ownership or security interests or

18

anything like that, so I didn't personally bring anything.

19

Q. Going back to this grant of the security interest to you,

20

Mr. Emke (sic), did you present this settlement agreement to

21

Ondova's board of directors before it was assigned?

22

A. Best I can recall, Ondova is a limited liability company,

23

so I don't -- I don't think it has a board of directors.

24

Q. So in 2009, there was no board overseeing Ondova?

25

A. I -- I can't recall with specificity, but I think the LLC

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101

1

had a -- I just don't recall. I'm sorry, I can't recall what

2

the -- what the operating agreement had in it.

3

Q. Other --

4

A. But I know that the rules were followed very closely for

5

whatever the operating agreement had, because I -- I recall

6

that we were very careful about following those rules.

7

Q. Besides yourself, did anyone else in Ondova approve this

8

provision in the Emke settlement agreement?

9

A. I don't recall.

10

Q. Was there anyone else at Ondova that would even need to

11

approve this provision placed on the settlement agreement?

12

A. At that time, I can't recall who, if there was another

13

officer or anybody at Ondova, so I can't recall that.

14

Q. What were the total legal fees you spent fighting Mike

15

Emke in the litigation?

16

A. I can't recall that.

17

Q. Were those lawyers paid?

18

A. I'm fairly certain, I know, that they were paid. I just

19

can't recall how much.

20

Q. And you don't recall if you paid any of those lawyer

21

fees?

22

A. I'm fairly certain that I paid some; I don't recall how

23

much.

24

Q. Okay. Mr. Baron, were you aware that Mr. Sherman and Mr.

25

Emke were involved in a litigation, in 2011, over this domain

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102

1

name?

2

A. I was aware that they had some -- something going on. I

3

don't remember the dates, but I know that they had something

4

going on between -- I guess some kind of issue. I don't

5

remember the dates though.

6

Q. Would you say you became aware that the suit was filed

7

against Emke sometime during 2011?

8

A. I don't know that there was a suit. I know that there

9

was some kind of -- some kind of dispute, but I don't know

10

what the -- I'm sorry; I don't remember the dates and what --

11

what kind of -- I don't remember that it was a suit; I know it

12

was a dispute.

13

Q. I used a sort of imprecise term. Do you know what an

14

adversary proceeding is?

15

A. I've heard the term a bit.

16

Q. Okay. So let me use that term. Did you know that Mr.

17

Sherman had brought an adversary proceeding against Mr. Emke?

18

A. I can't recall if that's what -- what happened, or if it

19

was a -- my understanding was there was some kind of sanction

20

against Emke and the receivership that was -- that was put

21

over him. Now, I don't know that there was ever a -- like, a

22

trial and all that stuff, or an adversary trial or whatever

23

that is.

24

Q. Mr. Baron, were you aware of the motion that Mr. Sherman

25

filed in 2011 to sell the domain name?

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103

1

A. Is that the one that's on appeal? I -- if you could

2

refresh my memory, I can try to help with that. I can't

3

recall the dates or any of that kind of stuff.

4

Q. I'm just asking generally, were you aware Mr. Sherman

5

filed a motion to sell the name?

6

A. In general, I know that he filed something regarding the

7

name that -- that we appealed. And I don't know if it was to

8

sell or if it was to distribute between -- I think it was.

9

Q. So you're aware of an appeal?

10

A. Yes, I'm aware of the appeal.

11

Q. Of an order to sell the name?

12

A. I think that's what it was, but I'm -- if you could

13

refresh my memory with the document that would be helpful,

14

but --

15

Q. Did you instruct Gary Schepps to file an appeal on the

16

Court's order?

17

A. I think that's attorney-client --

18

MR. COCHELL: Objection.

19

A. -- privileged.

20

MR. COCHELL: Objection. It's privileged, Your

21

Honor.

22

THE COURT: Overruled.

23

A. I don't believe I instructed him to do that, but I don't

24

recall, but I don't think so.

25

Q. You did not instruct Gary Schepps to appeal --

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104

1

A. I don't --

2

Q. -- Judge Jernigan's order?

3

A. -- I don't recall, is the real -- the real answer.

4

Q. Do you know that there is an appeal pending?

5

A. Yes.

6

Q. And you don't know who brought the appeal for you?

7

A. I'm fairly certain that Gary Schepps brought the appeal.

8

Q. Did he do it at your instruction?

9

A. I don't recall.

10

Q. Did he do it on his own?

11

A. I don't recall if we discussed it before it was appealed.

12

Q. Did you file an objection to Mr. Sherman's sale motion?

13

A. The one that just got filed a couple days ago?

14

Q. No, back in 2011, did you file an objection to the sale

15

motion?

16

A. The best I can recall, and this is, again, just based on

17

my recollection, is that my lawyer at the time was prohibited

18

from filing an objection because he was told that he could not

19

file objections in the bankruptcy court and he was prohibited

20

from making any objections on my behalf. And I think, if I

21

recall correctly, that Peter Loh had filed some kind of

22

nominal objection for it. The best -- that's the best I can

23

recall.

24

Q. Who told you could not file objections in the bankruptcy

25

court?

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105

1

A. That's attorney-client privileged. Okay, it's Mr. Thomas

2

told me that he could not file objections nor speak nor do

3

really anything on my behalf in the bankruptcy court. He was

4

told that -- he told me that he was instructed that he could

5

not essentially represent me in the bankruptcy court.

6

Q. And --

7

A. In any proceeding in the bankruptcy court.

8

Q. -- did you -- I mean, who advised Mr. Thomas of that,

9

Mr. Baron?

10

A. My understanding is that it was a combination of Judge

11

Jernigan, Receiver Vogel, and either you or your client,

12

Mr. Sherman. But I can't recall precisely what he -- that's

13

the best I can recall.

14

Q. Did --

15

A. I think it was a concerted agreement -- some kind of --

16

best I can tell by reading, it was some kind of concerted

17

protocol of some sort. But --

18

Q. Well, let me find out more about that. Where was this

19

protocol entered at? Was it in an order? Was it in a letter?

20

Because I've never seen it and I don't know what you're

21

talking about, so please explain what it is?

22

A. I'm not certain, but I know he talked about that, and I

23

believe I remember reading a transcript where you and

24

Mr. Thomas and the judge were discussing something about the

25

protocol. But as I sit here today, I can't recall when that

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106

1

was. But it may have been at the hearing that you're talking

2

about on the -- for the servers.com sale. But I think you

3

were part of that discussion, if I recall right.

4

Q. Were you in the courtroom?

5

A. No, I was not in the courtroom.

6

Q. So your position is Martin Thomas could not object to the

7

sale because of some agreement between the judge and the

8

lawyers?

9

A. My understanding --

10

Q. To the motion -- the motion because of some agreement

11

between the judge and the lawyers?

12

A. My understanding is that Mr. Thomas was directed that he

13

couldn't make any kind of objections on my behalf and he

14

couldn't represent me, and that I was forbidden from making

15

objections on my own behalf, because Mr. Vogel was the

16

receiver, apparently, that held all of my rights. And the

17

position that Judge Jernigan, that your client, you and

18

Mr. Vogel took were that I had no rights whatsoever to object

19

or do anything to represent my rights in the bankruptcy court,

20

that only Mr. Vogel held my rights, and he was the only person

21

that could -- that could do anything on my behalf. So I was

22

forbidden one hundred percent from exercising my rights.

23

Q. And tell me again, where is this all documented? Do you

24

know?

25

A. Like I said, I believe there's some transcripts that have

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107

1

some of that in it. And certainly, Mr. Thomas told me that

2

fact. And I know Mr. Vogel, on many instances, has expressed

3

his view that he held all of my rights to any kind of legal

4

proceedings. In fact, I think motions for contempt and so

5

forth were filed against Gary Schepps for purportedly trying

6

to exercise my rights when people -- I think it was either

7

your client or Mr. Vogel had said that no -- that I was not

8

allowed to present -- protect and represent my rights, and

9

only Mr. Vogel could do that.

10

Q. Do you have any evidence of any of this today with you?

11

Do you have Mr. Vogel, Mr. Thomas with you today to put any

12

evidence on that this is true at all, or just a figment of

13

your imagination?

14

A. It's certainly not a figment of my imagination. I can

15

assure you that.

16

Q. Then what evidence do you have Mr. -- what evidence do

17

you have Mr. Baron, with you today --

18

A. Oh, I don't have anything with me.

19

Q. You have no evidence with you today --

20

A. Unless my lawyer has it. But it's in the court

21

transcripts and it's in --

22

Q. In which date was that --

23

A. -- the records.

24

Q. -- in which date did that occur?

25

A. I can't tell you off the top of my head.

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108

1

Q. You have no evidence today that you were prohibited from

2

objecting to those sale motions, do you?

3

A. It was in court transcripts that were in this court.

4

Q. Do you have the transcripts with you?

5

A. I don't have them in my pocket. My lawyer may have them.

6

Q. Do you have any evidence, yes or no?

7

A. I think what I'm telling you is evidence. But I'm -- I

8

think it is.

9

Q. No it's not. Do you have any evi --

10

THE COURT: Okay. Let's move on.

11

Q. Okay, Mr. Baron. So even though you didn't object, you

12

instructed Gary Schepps to file appeals of the judge's sale

13

order. Is that correct?

14

A. I answered that question before. I don't recall

15

specifically instructing Mr. Schepps to do that, but I believe

16

it was appealed.

17

Q. So you don't recall telling Gary Schepps to file an

18

appeal on your behalf?

19

A. That's correct.

20

Q. Does Mr. Schepps still represent you?

21

A. No, I don't believe he does.

22

Q. Okay. The agreement that we've been talked about was

23

right before the Ondova bankruptcy case, wasn't it?

24

A. It was July 9th, 2009, so it was before the bankruptcy --

25

Ondova bankruptcy.

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109

1

Q. Was Ondova, you know, solvent on that date? Was it

2

operating and paying its debts as they came due?

3

A. I believe so. That was right around the date that Judge

4

Furgeson diverted a hundred percent of the revenue from Ondova

5

to the lawyers in the case, so I don't recall if that was

6

before this date or after that date. So I'm sorry, I can't

7

answer that without seeing other documents.

8

Q. Well, on the date that Ondova filed, there were clearly

9

some unpaid claims, including claims of lawyers and some

10

lawsuits against Ondova by some businesses like University of

11

Texas and Grupo Andrea. Did Ondova have the necessary funds

12

to pay all of its claims and resolve those lawsuits?

13

A. I think Ondova certainly did have plenty of funds to deal

14

with those issues. The only thing that prevented it from --

15

or would have prevented it from doing that was Judge

16

Furgeson's -- Judge Furgeson's order. And then I'm not sure

17

what date that was. So that would be the only thing that

18

would have stood in the way of that.

19

Q. How much cash did Ondova have on the date of the

20

agreement with Mike Emke?

21

A. I can't recall that.

22

Q. All right. So why was -- why were there proceedings

23

before Judge Furgeson?

24

A. Well, I think you're familiar with that. That's -- that

25

was the --

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110

1

Q. Just for the record, just so we can instruct the --

2

A. Oh. That was the --

3

Q. -- testify about what was going on?

4

A. -- that was the dispute with Netsphere and Munish Krishan

5

and Manila Industries and that whole -- that whole thing.

6

Q. Why did Netsphere commence a litigation in Judge

7

Furgeson's court against you and Ondova?

8

A. That was over the ongoing dispute that was over money

9

that we claimed that Munish Krishan embezzled and claims about

10

domain name ownership and the whole mess that that whole --

11

whole -- do you want me to explain everything about it? I

12

mean, it's -- as you know, it's very convoluted.

13

Q. Did their suit initiate as a result of your failure to

14

comply with an April 2009 settlement agreement?

15

A. No. I think that was certainly their allegation, but

16

that was an allegation that they had.

17

Q. And how long had you been litigating with Netsphere at

18

that time in 2009?

19

A. I think the litigation started in 2006, so --

20

Q. Okay. So in the summer of 2009, is it your testimony

21

that Ondova had plenty of funds to pay all of its creditors in

22

full and settle its litigation with Netsphere, University of

23

Texas, Grupo Andrea, Southern Companies, and all the other

24

parties that asserted claims against Ondova?

25

A. I don't think most of those people that you just

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111

1

mentioned had claims before you and your -- Mr. Sherman took

2

over Ondova. But I think before Judge Furgeson made his, you

3

know, his order diverting funds, it had plenty of -- plenty of

4

funds.

5

Q. So you were not in litigation with the University of

6

Texas on the petition date?

7

A. I think that -- I think that was there in the petition

8

date. I said not all of those ones that you had mentioned.

9

That's all.

10

Q. How about Grupo Andrea?

11

A. I don't believe there was litigation with Ondova on the

12

petition date, I don't think. But I can't recall as I sit

13

here today. I don't think so.

14

Q. Didn't they file your -- file suit against your privacy

15

service prior to the Ondova petition date?

16

A. I don't believe so.

17

Q. They didn't have a suit pending against TIPA or the other

18

companies that Joey Dauben ran for you?

19

A. I believe you're making statements that I don't agree

20

with. So do you want me to --

21

Q. So there was no -- you had never heard of Grupo Andrea

22

before this issue was --

23

A. I've heard -- I've heard of that, yes.

24

Q. Okay. When did you first hear of Grupo Andrea, then?

25

A. They had a -- they had a -- they did have a claim against

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112

1

a domain name. And I don't believe that was an Ondova domain

2

name, but I can't remember, going back this far. I don't

3

think it was owned by Ondova. But I don't recall.

4

Q. Didn't they take your Rule 2004 examination right after

5

the case was filed, because they had claims against Ondova or

6

its privacy business, and they wanted your 2004 examination?

7

A. Now that you just mentioned that, I remember them taking

8

a 2004, but I don't remember what the -- if they had claims at

9

that point, or -- I don't recall. But now I remember what you

10

just told me about that 2004 that they -- they did --

11

Q. All right--

12

A. -- question me.

13

Q. -- so we now know that on the petition date you had --

14

right when this settlement was -- the same time, you had

15

litigation with Netsphere, litigation with University of

16

Texas, some litigation with Grupo Andrea. How about Liberty

17

Media Company? Had they already sued you or one of your

18

privacy companies before the Ondova petition date?

19

A. I don't remember --

20

Q. You don't --

21

A. -- that at all.

22

Q. How about Southern Companies or Harbinger Company; did

23

they have claims against Ondova around the petition date?

24

A. I don't believe so.

25

Q. You don't believe so? How about your privacy companies?

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113

1

A. Can you be specific, because I don't -- if you're

2

referring to TIPA, I don't call that my privacy company, so I

3

don't --

4

Q. Okay. Did Ondova use privacy companies?

5

A. I don't recall if it was Ondova that had the privacy

6

company or if it was the registrant's at the time. This has

7

been many years ago. But there was a privacy-type -- I guess

8

you'd call it that.

9

Q. Okay. When you say registrant's, do you mean the trust

10

that held the domain names?

11

A. It was, I think, back then, a company called Simple

12

Solutions.

13

Q. Um-hum.

14

A. And Blue Horizons.

15

Q. So do you know who Joey Dauben is?

16

A. Yes.

17

Q. Okay. Did you have any connection with him?

18

A. I knew who he was, or who he is.

19

Q. Did he run -- did he run privacy companies?

20

A. I don't know if you would -- if you would call his

21

company a privacy company or what you would call it. But he

22

had a company that was dealing with domain names. I don't

23

know if you would call it a privacy company or not.

24

Q. Would --

25

A. I don't think he would.

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114

1

Q. So I'm trying to understand the financial picture of

2

Ondova in the summer of 2009 and whether it could pay debts as

3

they come due.

4

A. Um-hum.

5

Q. So it's your testimony that there were some large claims,

6

University of Texas, Grupo Andrea, Netsphere, obviously Mike

7

Emke. But you're a little hazy on those other companies I

8

mentioned: Liberty Media, Harbinger, and Southern Companies?

9

A. I don't think Grupo Andrea had a claim against Ondova. I

10

don't recall that at all.

11

Q. When they took your 2004 examination, why did they do

12

that?

13

A. The best I can recall is John and Pete had been trying to

14

convince Grupo Andrea to make a claim against me and against

15

Ondova and convinced them to start, you know, trying to ask

16

questions and trying to find a way to make a claim. But I

17

don't think that -- the best I can recall, they didn't have a

18

claim at that point. But I don't -- again, I don't remember

19

back that far.

20

Q. Which -- was that related to the domain name "Grupo.com"?

21

A. No, I don't think so.

22

Q. What name was it related to?

23

A. I think that was Andrea -- Andrea.com.

24

Q. Who was the registrant of that domain name?

25

A. I don't -- don't recall which one it was. I don't -

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115

1

can't recall that.

2

Q. Did it have any connection to you, the Village Trust,

3

Quantec, Novo Point, or Ondova?

4

A. I think it was one of the companies that I can recall

5

that was owned by Simple Solutions or Blue Horizons. And then

6

there was also a claim that I believe one of Joey Dauben's

7

companies, or him, something like that claim -- they -- I

8

think they claimed that they also had an ownership interest in

9

it.

10

Q. Well, then why did they want your examination --

11

MR. URBANIK: I'll strike that question, Judge.

12

Sorry.

13

Q. Mr. Baron, your lawyer mentioned earlier that a name,

14

server.com, sold for 900,000 dollars. When did that sale

15

occur?

16

A. I'm trying to recall. I think it was -- Mr. Sherman gave

17

me a copy of the -- I'm sure he did -- Mr. Sherman gave me a

18

copy of a printout of a server -- of a sale site where it

19

showed server.com sold for 900,000. I think that was in 2009

20

when he gave me a copy of that sheet. But I don't remember

21

the date of the sale.

22

Q. Okay. And you're sure it's that amount that you're

23

saying is 900,000 dollars. Is that what your testimony is?

24

A. I'm fairly certain it was, but I can't tell you a hundred

25

percent. I would say that there's a ninety-nine percent

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1

certainty that it was between 900,000 and a million. But I

2

can't tell you with a hundred percent.

3

Q. Do you still have that document?

4

A. It's very easy to find on the Internet. I could find it

5

in a few seconds.

6

Q. Okay. So you're ninety-nine percent sure about that.

7

Okay.

8

Mr. Baron, are you aware that on Ondova -- the Ondova

9

estate has a right to seek the recovery of any fraudulent

10

transfers of its property during the two-year period prior to

11

the filing of a bankruptcy case. Were you aware of that?

12

A. Not what you're saying in particular.

13

Q. So --

14

A. I believe you if you tell me.

15

Q. So if the Bankruptcy Code had a provision that said that

16

your transfer -- the Emke -- transfer of the domain name to

17

you and Mr. Emke personally could be avoided under bankruptcy

18

law, would you have any defenses to that? How would you

19

respond to that or fight that kind of case?

20

A. It sounds like something that a lawyer would do, not that

21

I can do right now talking to you.

22

Q. Were you aware that bankruptcy law does allow a trustee

23

to recover fraudulent transfers that occurred during the two-

24

year period prior to a filing?

25

A. I don't believe I can say yes to that. I --

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Q. Okay. You testified earlier that Martin Thomas would not

2

represent you in here. What steps did you take to correct

3

that situation?

4

A. This is attorney-client --

5

MR. COCHELL: Well, Your Honor, at some point when I

6

substituted in for Mr. Baron, I did make a record, read

7

several e-mails to Judge Furgeson between Mr. Thomas and my

8

client. That showed --

9

THE COURT: Okay. I -- this is your opportunity to

10

make an objection. Do you have an objection to the question?

11

MR. COCHELL: We'll object to any discussions between

12

my client and lawyers about what steps to take. I think the

13

relevant question is what steps, if any, did he take.

14

Q. Did you take any steps to --

15

THE COURT: Okay, just a moment.

16

MR. URBANIK: I'm sorry.

17

THE COURT: I overrule that objection. You didn't

18

ask for an out of -- or a communication between him and his

19

lawyer as I understood the question. All right, proceed.

20

Q. What steps did you take to correct the situation

21

describing Martin Thomas, where he could not come into court

22

and represent you?

23

A. Well, first of all, my understanding is that it was a

24

ruling from the court and that I was not permitted to take any

25

steps. But I did -- I certainly asked Mr. Thomas to do

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things. Asked and asked and asked, many times.

2

Q. And he would not take any steps to represent you in the

3

bankruptcy court?

4

A. My understanding is that he did not and would not. He

5

believed that he was ordered or instructed or whatever not to,

6

and that no matter what I said, he couldn't do it, because

7

that was his -- his marching orders.

8

Q. So even though you did not object to the sale motion, you

9

did not intervene in the Emke case, you felt it was

10

appropriate to appeal Judge Jernigan without getting the stay

11

lifted to assert some reversionary new claim in the domain

12

name. Is that what you're saying you did, without getting the

13

stay lifted in Ondova, you --

14

A. You just said about five or eight things, and I can't --

15

if you can break them up into pieces, I'd be happy to --

16

Q. Why didn't you seek relief from the stay to protect your

17

interest in the domain name in the Ondova case? Ondova was a

18

Chapter 11 debtor.

19

A. Can you ask me that again? I just can't --

20

Q. What steps did you take -- you or your lawyer -- to

21

protect your interest in this domain name that you say arose

22

when the receivership was created?

23

A. What steps did I take? Oh, I certainly -- you know,

24

again this is attorney-client privilege, but --

25

Q. What steps -- I'm not asking what you discussed with your

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lawyer.

2

A. Oh.

3

Q. What steps did you take?

4

A. Well, these would be things that I would have discussed

5

with my lawyer to do.

6

Q. You didn't do anything in the Ondova case, did you?

7

A. Did I do anything? I don't know what you mean.

8

Q. You did nothing in this case to make a claim for this

9

reversionary interest in servers.com, did you?

10

A. My understanding is that -- that Mr. Schepps, number one,

11

filed some kind of motion asking for legal fees or something

12

like that, to object to the servers.com sale. I recall

13

reading something like that that Mr. Schepps did. I know that

14

we filed an appeal. And I believe that -- I know I did speak

15

with Mr. Thomas -- again, I don't know if I can go into the

16

details about my discussions with Mr. Thomas or other lawyers

17

about what I'd asked them to do about it. But my

18

understanding was that I personally was prohibited from doing

19

it.

20

Q. Can you show me this motion Mr. Schepps filed to take

21

steps in the -- regarding servers.com? That's July 1st

22

through December 31, 2011. And there's no such pleading from

23

Mr. Schepps in there.

24

A. Okay. Well, you just handed me 739 or so -- maybe it's

25

less than that -- but a lot of docket entries. I can --

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Q. Well, if you have the pleading. Do you have the pleading

2

you say Mr. Schepps filed for you to protect your interest in

3

this domain?

4

A. I don't have it with me, but I recall that it's -- number

5

one, I believe there was something that he filed in the Fifth

6

Circuit Court of Appeals, requesting some kind of money or

7

stay --

8

Q. That's not my question.

9

A. -- based on servers.com.

10

Q. My question is -- Mr. Baron, what did he do in this case,

11

to preserve this so-called interest in the domain name?

12

A. I think I'm describing what he's tried to do to do that.

13

Q. What'd he do in this case?

14

A. Well --

15

Q. If he filed something in this case, can you find it for

16

me in the docket?

17

A. I can look through the docket. But I can tell you that

18

when I was in the receivership, I don't believe that -- I

19

believe that my lawyer was told that he could not file

20

anything, so I doubt I will find anything, because he was

21

instructed and I was under the understanding that I was

22

prohibited, my lawyer was prohibited from filing anything in

23

the case. So I can look through this. But I wouldn't be

24

surprised if there wasn't anything.

25

Q. So you don't have any evidence to show that he filed

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something in this case to preserve your claim against the

2

domain name, do you?

3

A. I think there is evidence that he's filed things.

4

Q. But you don't know which day, what it's called?

5

A. As I sit here today, there is -- you know, I think, about

6

2- or 3,000 docket entries in all the cases. And I can't

7

remember all that stuff in my head. But I believe it -- I do

8

recall reading a pleading that was filed regarding it.

9

Q. So you directed Gary Schepps to file a pleading in this

10

bankruptcy case to protect your interest in servers.com. Is

11

that your testimony? A hundred percent? You're sure --

12

A. No, I'm not sure that I dir -- no, I can't say that. But

13

I know that Mr. Thomas -- I'm fairly certain that I discussed

14

that with Mr. Thomas about doing that. And my -- his

15

explanations to me always about -- any time I asked him to do

16

anything in the court was that he was instructed that he

17

couldn't do so --

18

Q. And you took --

19

A. -- so I should not even bother him about that kind of

20

thing.

21

Q. -- and you took no steps to terminate Mr. Thomas, did

22

you?

23

A. I believe he was replaced by Mr. Cochell.

24

Q. At whose request?

25

A. Best I can recall is that Judge Furgeson entered an

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1

order, where he -- he ordered me to find counsel to deal with

2

issues in the bankruptcy case, and I found Mr. Cochell

3

pursuant to that order that Judge Furgeson issued, as best I

4

can remember about that.

5

Q. But it took a while for that to happen, you didn't do it

6

during 2011, did you? You didn't take any steps to replace

7

Mr. Thomas, did you?

8

A. Well, the order that was given to me by Judge Furgeson

9

and Mr. Vogel was that I was prohibited from hiring counsel,

10

so --

11

Q. Then why did you hire Mr. Cochell?

12

A. Judge Furgeson, I believe, ordered me to hire Steve

13

Cochell.

14

Q. After Mr. Cochell filed a motion to be employed, right,

15

at your request?

16

A. No, I believe it was before that, yes.

17

Q. You're saying Cochell showed up out of thin air and filed

18

a motion to represent you, you didn't visit with him first?

19

A. That's not what I'm saying at all.

20

Q. How did Mr. Cochell become employed?

21

A. I think I answered that. But Judge Furgeson issued an

22

order I believe and he ordered that I had to find counsel to

23

represent me in issues in this bankruptcy court, this is

24

years -- I think it was about two years after the receivership

25

was put over me. And then I found Steve Cochell after Judge

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Furgeson ordered me to find counsel.

2

Q. Gary Schepps represented you in the receivership, why

3

didn't Gary Schepps go to Judge Furgeson sooner?

4

A. I -- I'm not Gary Schepps I can't --

5

Q. Wasn't he your attorney?

6

A. He was my attorney in the appeal at that time.

7

Q. You didn't ask to replace Mr. Thomas, did you?

8

A. This is attorney-client, I'll ask my counsel if I should

9

answer this.

10

Q. I'm asking a fact, I'm not asking about any attorney-

11

client privilege discussions, you did not have Mr. Thomas

12

replaced sooner because you didn't take any steps to do that,

13

did you?

14

A. Mr. Schepps may have done that, I'm not aware of if he

15

did or if he didn't, but it wouldn't surprise me if he did

16

take steps to try to have that done. That would not surprise

17

me if Mr. Schepps did.

18

Q. Nothing occurred to have Martin Thomas replaced, did it?

19

A. I think I've answered that, and that Steve Cochell -- my

20

understanding is that Steve Cochell took his place.

21

THE COURT: All right, stop, stop. You've got

22

fifteen minutes left.

23

MR. URBANIK: Okay.

24

THE COURT: Let's move on to a different topic.

25

MR. URBANIK: I understand, Judge, I'm sorry.

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Q. Mr. Baron, what is your view of the value of this domain

2

name?

3

A. I haven't take the time to look at that, I didn't think

4

that's what we were going to be talking about today, so I

5

haven't taken the time to analyze that at all.

6

Q. What are your specific concerns over allowing the trustee

7

to market it in national publications and -- and, you know,

8

for the Internet and for the technology industry?

9

A. As I sit here today I haven't thought about that. I

10

didn't -- wasn't prepared to be answering that kind of

11

questions. But just something I can mention, just off the top

12

of my head, is that, you know, based on the kind of -- what I

13

would call a sham that was done in the auction procedures that

14

Mr. Sherman and Mr. Vogel held last year at the end of

15

November, which was an absolute sham in my opinion, that if

16

the same type of things are done in this proceeding that it

17

will end up in a -- it will be another sham sale with a very

18

low value.

19

Q. What's your --

20

A. So, specifically, it's the way that you and your client

21

and Mr. Vogel advertised the name, did not bring in --

22

MR. URBANIK: Objection. Objection. Nonresponsive.

23

THE COURT: Overruled.

24

A. The way that you advertised the domain name did not bring

25

in qualified buyers, and it was, in my opinion, designed to

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1

have a very low sale amount. And it resulted in a very low

2

sale amount. So that's a big problem the way that this -- you

3

and your client advertised the domain name, it does not bring

4

in the value.

5

Q. Are you aware that we've been trying to sell the domain

6

name for two years?

7

A. What you told the Court today, I believe, is that you

8

tried to sell it through Sedo?

9

Q. Yes.

10

A. Okay.

11

Q. And we did not get any offers over 200,000 dollars, were

12

you aware of that?

13

A. I recall you saying that, I don't know if it's true or

14

not, but I remember you saying that.

15

Q. I see. Do you have a buyer that will pay over 300 -- do

16

you know a buyer that will pay over 330,000 dollars for the

17

domain name?

18

A. As I sit here today I can't -- I don't -- I haven't been

19

out trying to find buyers for servers.com, so I wouldn't have

20

one.

21

MR. URBANIK: Your Honor, I'll pass the witness.

22

THE COURT: All right. You've left yourself four

23

minutes.

24

MR. URBANIK: Thank you, Judge.

25

THE COURT: All right, Mr. Cochell, reexamination?

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MR. COCHELL: Yes, Your Honor.

2

CROSS-EXAMINATION

3

BY MR. COCHELL:

4

Q. Mr. Baron, do you remember the hearing where I was

5

appointed as your attorney to substitute in for Mr. Thomas?

6

A. I remember it occurring, I don't think I was there at

7

that hearing, I don't -- maybe you can refresh my memory. Was

8

I there? Okay.

9

Q. Okay. All right. Do you remember --

10

MR. COCHELL: Your Honor, I'll just ask -- I don't

11

have a copy of it, but it's a matter of record, and I believe

12

it's publicly available on PACER, but the transcript of the

13

September 27th, 2012 hearing with Judge Furgeson will have an

14

excerpt setting out the times and dates of e-mail exchanges

15

between Mr. Baron and Mr. Thomas.

16

THE COURT: Okay, you don't have a copy?

17

MR. COCHELL: I don't have a copy with me.

18

THE COURT: I don't have it up on my screen.

19

MR. COCHELL: I'm sorry.

20

THE COURT: I don't have -- you can --

21

MR. COCHELL: We can access it and send it to you

22

later today.

23

THE COURT: You can access and send it to me before

24

the end of the day.

25

MR. COCHELL: Yes, Your Honor, thank you. All right,

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and we'll just skip that testimony.

2

Q. Did -- what specifically did you do to try and recover

3

records in the receivership after you -- you provided a bunch

4

of records to Mr. Vogel, right?

5

A. Yes.

6

Q. Did you ever make requests for Mr. Vogel to have access

7

to his records?

8

A. I believe counsel did make those requests.

9

Q. Okay. And who would have those records if any were

10

provided?

11

A. It would be probably Mr. Stromberg.

12

Q. How about Mr. Schepps?

13

A. Mr. Schepps, he may have some.

14

Q. Okay. And -- you mentioned earlier, I believe, that Mr.

15

Schepps had received probably a copy of some of the records

16

that you got in receiverships, do you recall that?

17

A. I think he probably did.

18

Q. Okay. And did you make a -- or did you or me, on your

19

behalf, make a request for Mr. Schepps to obtain a copy of

20

those records?

21

A. I believe so.

22

Q. And what was his response?

23

A. I believe he denied or declined to provide those, I

24

believe.

25

Q. In fact, he took the position that you owed him money

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and, therefore, he wouldn't give you records.

2

A. It sounds -- that sounds right.

3

Q. Okay. With respect to Mr. Schepps, did -- let me just

4

redirect on something else. With respect to auction

5

procedures what is it that was deficient about the auction

6

procedures and the sale of the domain names as to the time and

7

place of the auction and access to information?

8

A. Actually, there was just so much, and I haven't really

9

thought about this. Again, as I explained to Mr. Urbanik I

10

haven't prepared for all this, but off the top of my head

11

there was just so many things wrong with it.

12

The auction was held in a lawyer's office, number one,

13

and that very much chills bids from people that want to come

14

and -- number one, come to the auction, but, number two, I

15

believe the requirement was that the potential bidders had to

16

fly to Dallas to come look at information that they would have

17

to do their due diligence on, so they would have to actually

18

fly -- a lot of these potential buyers are outside the United

19

States, so they'd have to fly to Dallas in a very short period

20

of time, review documents, and the documents in this -- in the

21

domain name industry the only real way to analyze documents is

22

electronically, you just can't analyze paper documents because

23

they're just too voluminous, you can't really put those

24

through a computer model, and you just cant. And my

25

understanding that the only form that these documents were

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being provided in was paper format, so potential buyer would

2

have to come fly to Dallas, bring, I guess, a team of people

3

in to go pour through, you know, thousands and thousands of

4

paper documents, which is just not practical. It's, in

5

effect, no buyer would do that unless they knew that they

6

could buy it for a very few cents on the dollar, and take a

7

very big gamble they'd be getting something that they were

8

taking a big huge risk on.

9

And the other thing was that the receiver in that

10

proceeding, I believe, required a very substantial down

11

payment or deposit before they were even allowed to come and

12

fly to Dallas to look at the documents to see if it was

13

something they were interested in. So that was a big problem.

14

You know, like I said having -- holding -- having an auction

15

in a lawyer's office, I think just in general, chills bids,

16

buyers don't want to come and buy something in someone else's

17

lawyer's office.

18

In addition, the way that the auction was marketed, it

19

was put out on Internet sites, but when someone were to go to

20

e-mail -- if someone were to go and try to contact the seller

21

in this Internet site the e-mail address wasn't even a valid

22

e-mail address, so their e-mail would have been rejected. And

23

that, certainly, when you can't even contact the seller that

24

chills the bids a lot. And my understanding is that several

25

buyers tried to contact the seller and the seller didn't even

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respond when they were contacted through the telephone. So

2

all of those things together, and the fact that there was a

3

very short period of time the buyers were able to analyze the

4

information, they didn't have enough time to go get the

5

financing or do what they needed to do their due diligence on

6

and to arrange for financing to buy the domain names, all of

7

those things just lead to a very, low, low price for a sales

8

price.

9

Q. Okay.

10

A. And there was other things too, I just can't remember

11

them sitting here.

12

Q. Okay. So how long would a potential qualified bidder

13

need to, number one, conduct some due diligence, assuming they

14

were provided the proper materials, and how long to obtain

15

financing, if you know?

16

MR. URBANIK: Objection, Your Honor. This line of

17

questioning is sort of premised on an answer to one of my

18

questions about what was wrong with selling one domain name,

19

not 153,000 domain names that, you know, the receiver

20

attempted part of the plan. So we've heard several minutes of

21

Mr. Baron's answer, I'm not sure if it's relevant of that

22

earlier sale.

23

THE COURT: Okay. Relevance objection. Are you

24

asking about the previous sale procedures, or the proposed --

25

MR. COCHELL: No, I was asking about this one. How

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1

long in this case for servers would it take to do a proper job

2

of marketing it and to allow people sufficient time to

3

purchase it.

4

THE COURT: Okay. I overruled the objection, to the

5

extent you just rephrase the question.

6

MR. COCHELL: Yeah.

7

MR. URBANIK: Thank you.

8

Q. Go ahead.

9

A. Well, and the thing that I just didn't remember to answer

10

in my last answer to you is that, you know, when you sell a

11

domain name without having it -- developed at all, having

12

it -- if it's been very mismanaged up until the point that

13

you're selling it, the value -- the price that a buyer would

14

pay would be much less than it would be if the name had been

15

properly managed up until the time that it was offered for

16

sale. Because the name that's mismanaged, not developed in

17

all of those kinds of things lead to a buyer not being able to

18

tell what the real value is. It's like, you know, trying to

19

buy a piece of real estate that's been -- you know, a building

20

that's been abandoned for twenty years and it's, you know, a

21

buyer doesn't know what kind of repairs are needed with the

22

plumbing, with the foundation, and all that kind of stuff.

23

Whereas, if the name -- if the building had been occupied, and

24

if it had been managed correctly then a buyer would be -- have

25

a much better ability to determine what the value would be.

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1

So that's one problem.

2

The other -- but as far as the timing goes I would just,

3

you know, estimate and say that -- having -- you know, the

4

longer that you give for the sale the higher value you can

5

get, because it takes a long time to market a domain and

6

domain names are very unique and they're very, you know, each

7

one has its own potential buyers, and to find that right buyer

8

sometimes takes a long time.

9

So -- I'm sorry, can you ask me one more time?

10

Q. For a significant -- for an asset that has a minimal

11

value at 300,000 that's still a significant domain name?

12

A. Yes.

13

Q. Is that right?

14

A. Yes, it is. And I would say that, in general, I'm aware

15

of many domain names that have been sold for large amounts,

16

and the honest answer is that sellers keep domain names on the

17

market for years before they can get a real market value,

18

because the names are unique, it's kind of like artwork.

19

Q. Well, now, they've set, I believe, a maximum time period

20

of forty-five days, and then they'd consummate the sale

21

automatically --

22

A. Okay.

23

Q. -- if I'm reading that correctly, is that sufficient

24

time?

25

A. I would say it's absolutely insufficient time, it would

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1

result in a very, very low undervalued price, in general.

2

Q. And what would you say is a reasonable time, would it be

3

three months? Four months?

4

A. Well, if you're looking to do like a fire sale, or if

5

you're looking to get, you know, a decent value for it. If

6

you're looking to do a fire sale then maybe six months or more

7

would be a fire sale, if you're looking to get, you know, a --

8

a reasonable price that's reflective of the value then it

9

would be much, much longer than that.

10

Q. You heard Mr. Sherman testify earlier today about the

11

increased interest in servers.com because of the cloud, do you

12

agree with that testimony?

13

A. I can't really comment on that, I don't -- I certainly

14

don't think that the value is going down, but I don't

15

really -- I can't really comment about the cloud and that kind

16

of thing. But I don't think that the value of servers.com is

17

decreasing. Does that answer your question?

18

Q. Yeah. So the increase for Mr. Sherman's value of 100,000

19

when he got an offer to 300,000 two years later, do you think

20

that's an accurate barometer of the market value, or even the

21

liquidation value of this asset?

22

A. No, I don't think that the 300,000 dollars is an accurate

23

barometer. I think just the fact that someone happens to, you

24

know, somehow find Mr. Sherman's name from doing all kinds of

25

research and trying to track down who the owner of servers.com

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1

is, and happens to call Mr. Sherman to make an offer, that's

2

not reflective of the value. Because that's reflective of a

3

buyer that's gone through a whole lot of effort to try to find

4

the owner of the domain name and to make a bid, and it's not

5

reflective of any kind of market valuation.

6

Q. And who -- prior to selling a significant asset what

7

steps do you believe need to be taken as a prudent businessman

8

who owns and sells domain names?

9

A. Well, I would think someone that were to do that, and I

10

could just base this on what I know other people that have

11

sold domain names for, you know, decent value is that they do

12

manage the domain name themselves for a period of time to make

13

sure that it's being -- that the domain name is being managed

14

correctly. And some of them will build out a Web site around

15

the domain names so that it gets more revenue and has more

16

attractiveness to it. And if that person was really actively

17

trying to sell the domain name, and I think they would -- it

18

would take a lot of time, but they would go out and find --

19

they would certainly go out and market it like has been

20

described, they would go out and market it through various

21

sources, but they would also, I think on their own, contact

22

potential buyers of that particular domain name. Because

23

there's -- you know the buyer for servers.com name, you know,

24

IBM may be interested in servers.com, but they wouldn't be

25

interested in -- may not be interested in something like

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1

rewards.com, or dinnerware.com, so you have different buyers

2

for different domain names.

3

That's how our previous seller would spend quite a bit of

4

time trying to identify the potential buyers for that name,

5

but it would also go about marketing it in other ways too.

6

Q. Do you recall reviewing the findings of fact and

7

conclusions of law filed in the Emke case, filed as document

8

130, in the Ondova proceedings here?

9

A. I remember looking at it, but I'd have to have a document

10

to remember.

11

Q. Okay. Let me give you a copy of that, specifically page

12

3 of 11, of document 130 in the proceedings involving Mike

13

Emke and Servers, Inc.

14

(Pause)

15

Q. And this refers to paragraph 8 about -- does that

16

paragraph relate to what you were referring to as development?

17

A. Yes, he was responsible for developing -- it sounds like

18

developing the domain name, yes.

19

Q. And what does development include?

20

A. It can mean a lot of things, I think in this context --

21

let me just read it a little bit more.

22

(Pause)

23

A. It looks like here it was talking about operating a sort

24

of a Web-hosting business. And that would be something that

25

would be logical to have at servers.com.

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1

Q. Did he create a new Internet Web site?

2

A. He created, I believe, a company called Servers, Inc.

3

Q. But did he create a new Internet Web site URL?

4

A. I'm not aware of that he did, I don't know.

5

Q. Okay. Did he create a business plan and model?

6

A. I don't believe he did. I don't believe he did any of

7

these things.

8

Q. Okay. That's any of the things described in paragraph 8

9

of document 130?

10

A. Right, I don't believe he did anything to develop the

11

name.

12

Q. Okay. And, in fact, the judge at paragraph 9 goes

13

through and talks about all the things that Mr. Emke did not

14

do, and we'll just ask the Court --

15

MR. COCHELL: I have a copy for the Court if the

16

Court wishes to --

17

THE COURT: I have it.

18

MR. COCHELL: Okay, all right.

19

Q. So are the steps that Mr. Emke were supposed to do to

20

develop the Web site the kinds of things that you're referring

21

to in terms of creating value for a company, and --

22

A. Yes. Yes. Absolutely. And if he had done what is

23

described in here I think it would have tremendously increased

24

the value of the -- it would have allowed a sale of

25

servers.com much, much more -- much higher than what it would

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137

1

be without doing this.

2

Q. Okay. With respect to Mr. Emke you mentioned you had

3

some interests apart from Ondova and some other lawsuits that

4

related to the servers.com name, in the context of settling

5

the dispute with Ondova and Mr. Emke, were there any claims

6

made by you -- I mean, made by you against Mr. Emke, do you

7

recall?

8

A. I believe so, I can't recall with certainty, but I

9

believe there were claims made.

10

Q. Do you recall whether you personally had any claims

11

against Mr. Emke?

12

A. I believe I did, but I can't recall with a hundred

13

percent certainty, but I believe so.

14

Q. Did you -- what would you need to do to determine if you

15

had any claims against Mr. Emke?

16

A. Claims that I have or that I made in the lawsuit?

17

Q. Had and made?

18

A. Well, I know that I had claims against them, you know,

19

for things such as lawyer fees and so forth, I just don't

20

recall with certainty if we got a chance to make those in the

21

lawsuit. I think we got to that point, but I don't recall if

22

it that got to that point or not.

23

Q. And in resolving this case, which was submitted as, I

24

believe, Trustee's Number 1, the agreement, was their

25

consideration by Mr. Emke -- there was a compromise among the

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138

1

parties, right?

2

A. Right, I think every party was sort of agreeing to give

3

up whatever claims that they had in order to resolve the

4

dispute and so that nobody had to keep fighting and paying

5

lawyers, and doing all that kind of stuff that costs a lot of

6

time, money and effort, energy.

7

Q. And your recollection is that the compromise involved

8

claims that you had against Mr. Emke, whether they were filed

9

formally or not?

10

A. Yes, I believe so.

11

Q. And with respect to --

12

MR. COCHELL: Your Honor, may I have the order for

13

receiver, I believe I provided it to the Court, receivership,

14

Debtor Number 1? Thanks.

15

Q. Just for the record the order appointing a receiver was

16

signed on October 17th, 2011, see that date there?

17

A. Yes.

18

Q. And what is your contention about the ownership interest,

19

what is it that you believe happened on that date, by virtue

20

of the order for receivership in paragraph 4?

21

A. On that date servers -- the domain name at that point --

22

let me just kind of back -- can I backup a little bit --

23

Q. Yes.

24

A. -- or do you want me to answer it exactly? My

25

understanding is that upon signing the settlement agreement

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139

1

Ondova no longer had any ownership interest whatsoever in

2

servers.com, it was all transferred to a company, Servers,

3

Inc. And when a domain name -- so the domain name was

4

transferred to Servers, Inc. and that company was owned fifty

5

percent by Ondova and then fifty percent by Mike Emke. But

6

neither Mike Emke nor Ondova had any interest individually in

7

the -- in the servers.com domain name at that point.

8

Then when the receivership was put in place the -- I'm

9

sorry, when the receivership over Servers, Inc. was put in

10

place servers.com was then owned fifty percent by me and fifty

11

percent by Mike Emke. And the ownership of Servers, Inc. was

12

still owned fifty percent by Ondova and fifty percent by Mike

13

Emke. But the domain name that it previously had been owned

14

by Servers, Inc. then belonged to Mike Emke, fifty percent,

15

and me fifty percent, that's upon the receivership order that

16

you just showed me.

17

Q. Okay. So when Servers, Inc. was created you -- your

18

understanding of the agreement is that Ondova was no longer an

19

owner of servers.com?

20

A. I believe that Ondova ceased being an owner of

21

servers.com upon signing the settlement agreement of July 6th,

22

2009. At that point Ondova did not own any -- anything else

23

in servers.com. If you read paragraph 1, and I can read that

24

if you like, I think describes that.

25

Q. That's unnecessary.

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140

1

A. Okay. Paragraph 1 in the settlement agreement.

2

Q. Right.

3

MR. COCHELL: One moment, Your Honor.

4

(Pause)

5

MR. COCHELL: Can Mr. Baron take a break? I think it

6

will expedite matters.

7

THE COURT: All right. Well, let me tell you where

8

you are time wise.

9

MR. COCHELL: Yes, Your Honor.

10

THE COURT: I lost my notes. 3:12, okay, so you're

11

twenty-four minutes into this. And I'll let you have a five-

12

minute break, more than five minutes it cuts into your hour.

13

Okay.

14

MR. COCHELL: Yes, Your Honor, thanks.

15

THE CLERK: All rise.

16

(Recess from 3:36 p.m. until 3:40 p.m.)

17

THE COURT: All right, please be seated.

18

All right, Mr. Baron, you may take your place on the

19

bench.

20

All right. 3:44, you may resume. And, Mr. Baron,

21

I'm required to remind you you're still under oath.

22

MR. COCHELL: Thank you, Your Honor

23

RESUMED CROSS-EXAMINATION

24

BY MR. COCHELL:

25

Q. Mr. Baron, I'd like to go a little bit further on the

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141

1

kinds of records -- what records would you need to -- that you

2

don't currently have that would help you establish a better

3

understanding of the facts and circumstances underlying the

4

agreement for servers.com exhibit; Trustee's Exhibit 1?

5

A. Well, to I think to establish my ownership interest after

6

the agreement we want to have things like corporate documents,

7

bylaws, operating agreements of the corporation Servers, Inc.

8

We want to have agreements between Ondova and Emke, agreements

9

between Servers, Inc. and Emke and/or Ondova, you know, any

10

kind of operating type documents that govern or organization

11

documents too I think that governs Servers, Inc. as well. And

12

that would be to establish the ownership interest after -- to

13

establish ownership interest prior to the other documents.

14

Q. With respect to --

15

A. Things like that.

16

Q. Sorry?

17

A. Sorry. I was just saying things like that. There's

18

other things too, but that's just what I can think of.

19

Q. With respect to Trustee's Exhibit 1, would -- could you

20

take a look at paragraph 1, I'd like to go through that with

21

you. Basically, it starts off "The domain name servers.com

22

shall be owned jointly between Compana and Emke as described

23

under the following terms." Just to clarify, what was the

24

status of Compana at the time of this agreement?

25

A. Compana was the performer name of Ondova.

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1

Q. Okay. And with respect to the following terms "The

2

parties shall be equal owners of either an LLC, a C Corp. or

3

another acceptable company structured formed by Emke," is that

4

right?

5

A. Right.

6

Q. And then "The domain name servers.com shall be registered

7

to the company," that would be Compana or --

8

A. No, the company refers to Servers, Inc., it's the newly

9

formed company. So what's happening here is the domain name

10

is being transferred from anybody that had a claim to interest

11

in it, whether it me, Ondova, Emke, everybody is transferring

12

their claim to servers.com to the new company which became

13

Servers, Inc. So they're giving up any rights to servers.com,

14

and Servers, Inc., the new company, is acquiring all of the

15

ownership in it.

16

Q. Okay. And "The parties shall each acquire equal

17

ownership and voting shares in the company," that would be

18

voting shares in servers.inc (sic), is that correct?

19

A. Servers, Inc., yes.

20

Q. Servers, Inc. And then there was another thing that's

21

not particularly relevant to this case. All right.

22

With respect to ownership, so at the time of entering

23

into this agreement Servers, Inc. became the owner of

24

servers.com, is that correct?

25

A. Yes. Servers, Inc. became the owner of servers.com, I

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1

believe that's in the findings of facts, too.

2

Q. Okay. So in order for you to provide a full recitation

3

of the facts surrounding your interest in servers.com you

4

would need the records that we were previously discussing

5

about bylaws and operating agreements, and correspondence?

6

A. Yes, that would be some of the documents, I believe.

7

More would be helpful as well.

8

Q. And that would be something through the discovery

9

process, is that right?

10

A. Right.

11

Q. And earlier counsel was asking you if you had documents

12

in your possession and you responded that they're in the

13

receiver's possession, is that right?

14

A. I think what you're asking me is if I had it here today,

15

I don't have it here today. I think these documents are in --

16

my expectation is in a lot of people's possessions, whether

17

it's Mr. Emke, Mr. Sherman, Mr. Vogel, I may have some but

18

it's in a lot of people's possession, I would assume.

19

Q. All right, thank you.

20

MR. COCHELL: Your witness.

21

THE COURT: All right. I have some questions before

22

redirect. All right.

23

Mr. Baron, when server -- no. When was Servers, Inc.

24

actually formed?

25

THE WITNESS: I think it was right after the

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144

1

settlement agreement, but I can't recall just sitting here

2

today, the date.

3

THE COURT: All right. So the wording of Section 1

4

of the settlement agreement reads as if the entity has not

5

been formed yet, that's one reason I'm asking. So you're

6

confirming you don't think it was formed yet, but you think it

7

was formed shortly after the July 6th, 2009 settlement

8

agreement?

9

THE WITNESS: Well, as I'm reading this more closely

10

it says that it was already formed by Emke, so it may have

11

already been formed at the time of the settlement agreement.

12

I'm not sure if it was formed --

13

THE COURT: Where do you see that it was already

14

formed by Emke?

15

THE WITNESS: Number 1, it says the parties shall be

16

equal owners of either an LLC, a C Corp. or other acceptable

17

company structure formed by Emke. So I don't know if that

18

means he had already formed it or he was about to form it, I'm

19

not certain.

20

THE COURT: Okay. But your testimony was you think

21

it was formed shortly after this agreement?

22

THE WITNESS: Well, I said that before I read this a

23

little more closely. After reading it, I'm not sure if it was

24

formed at the time that we signed it or right after. I don't

25

know.

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1

THE COURT: All right. So did you ever see the

2

formation documents?

3

THE WITNESS: I don't recall -- I don't recall seeing

4

them, but -- I just don't recall.

5

THE COURT: And so you don't recall if you ever

6

received stock certificates, or a stock certificate?

7

THE WITNESS: I don't recall, but I remember reading

8

in your findings of fact about some things --

9

THE COURT: Okay. I'm just asking --

10

THE WITNESS: Okay.

11

THE COURT: Don't refer to that.

12

THE WITNESS: I just don't recall that.

13

THE COURT: Okay. How many years were you the

14

registrant of servers.com?

15

THE WITNESS: I don't know.

16

THE COURT: Were you the registrant of servers.com,

17

or was Ondova, or was some other entity you're connected with?

18

THE WITNESS: I believe I was a first, but that's my

19

recollection of it.

20

THE COURT: Okay. Do you know how long you --

21

THE WITNESS: I don't.

22

THE COURT: -- were the registrant?

23

THE WITNESS: I don't.

24

THE COURT: When you were the registrant, or when

25

Ondova was the registrant, or when some company in your --

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146

1

that you're connected with was the registrant of servers.com

2

what did you do with it; what did you do with the name?

3

THE WITNESS: Well, the name went under litigation

4

almost immediately after it was registered, after I registered

5

it. Well, I don't know about that. It was not too long after

6

I registered it, it went to litigation. So I don't think very

7

much was done with it because it was in dispute and everybody

8

was disputing who had what rights to it, so I don't think much

9

was done with it.

10

THE COURT: All right. So you don't remember, first

11

of all, what year you became the registrant of it, correct?

12

THE WITNESS: Best I can recall it was maybe

13

2000/2001, that would be my best recollection.

14

THE COURT: And so then the litigation began when?

15

THE WITNESS: I just don't recall, but it was not too

16

long after that, but I just don't recall a year, that's a long

17

time ago.

18

THE COURT: So you or Ondova or some company you were

19

connected with was the registrant of servers.com between

20

either 2000 or 2001 and July 6th, 2009 when you entered into

21

the settlement agreement, and nothing was really done to make

22

money off the name during that time period?

23

THE WITNESS: The best I can recall not much was

24

done. There may have been some advertising put on that site,

25

but because it was in litigation, because there were so many

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claims in dispute and allegations about a sundry of things

2

there wasn't anything -- there wasn't much done with it, but

3

there may have been some advertising.

4

THE COURT: Okay. So there was a Web site

5

servers.com?

6

THE WITNESS: Best I can recall there was some

7

advertising at some point in time, but I don't think it was

8

the entire period of time between 2000 --

9

THE COURT: Okay. So you have no memory of how much

10

money it made or --

11

THE WITNESS: No.

12

THE COURT: -- what advertising -- what was on the

13

Web site?

14

THE WITNESS: Well, if it was advertising through

15

some of these what these Web people call Monotizers, it would

16

have been whatever they put on there, which --

17

THE COURT: Okay. But you don't remember, you can't

18

testify --

19

THE WITNESS: I can't recall.

20

THE COURT: -- at all.

21

THE WITNESS: I can't recall specifically what was on

22

there.

23

THE COURT: so you cannot tell me how much revenue

24

may have been made off the name?

25

THE WITNESS: I can't tell you that without, you

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know, getting documents and -- like, Mr. Cochell said, without

2

getting discovery and taking things out.

3

THE COURT: You have any guesses, you have any

4

recollection at all of the range of revenue that you may have

5

made off of servers.com?

6

THE WITNESS: I really don't. I don't.

7

THE COURT: All right. Is there any price at which

8

you would support a sale of servers.com?

9

THE WITNESS: There might be, I just don't think that

10

this is the way to do it. I don't believe this is a proper

11

mechanism to be selling this domain name, and I just don't --

12

I wouldn't want to sell the domain name. I don't want to sell

13

the domain name. If I was forced to do it, then I could

14

probably come up with a price, but if it were up to me I

15

wouldn't --

16

THE COURT: Okay. Come up with a price -- what would

17

be an acceptable price where you wouldn't be in here

18

complaining?

19

THE WITNESS: I can't sit here today and say that

20

because I haven't sat down and evaluated what the market and

21

domain name is worth right now, but I could probably do that.

22

I just -- I can't do that today.

23

THE COURT: All right. On November 4th, 2011 you

24

filed a brief before the Fifth Circuit and I'm looking at --

25

it's so hard to understand their docket entries, or I don't

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even know if they call them docket entries. This is in case

2

number 10-11202, and it's -- it's got document number

3

00511655466 at the top, date filed 11/4/2011. On page 9 of

4

that pleading you represent that the domain name servers.com

5

has been appraised at 1.4 million to 4.2 million dollars in

6

value, accordingly Baron's legal interest in fifty percent of

7

the domain name, domain name has substantial value between

8

700,000 and 2.1 million. Where did you get that?

9

THE WITNESS: I don't recall participating in that

10

kind of -- that valuation, so I don't recall doing that.

11

THE COURT: All right. Well, you filed a pleading

12

before the Fifth Circuit, and I gave you exact quote, "The

13

domain name has been appraised at 1.4 million to 4.2 million

14

in value."

15

THE WITNESS: Is that Mr. Schepps' filing, is that --

16

THE COURT: Well, he signed the pleading for you.

17

THE WITNESS: Okay. I don't believe I came up with

18

that value.

19

THE COURT: Well, you did.

20

THE WITNESS: As I sit here today, I don't know, and

21

I don't think it was me because I don't recall doing that.

22

THE COURT: Who -- what are the possibilities of

23

where this value came from?

24

THE WITNESS: Well, Mr. Schepps may have obtained it

25

from someone else, I don't recall who he got it from, or if he

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did, I don't know. But Mr. Schepps may have gotten the value

2

from someone, I would assume that he got it from somebody.

3

THE COURT: Okay. I'm just asking you, this is your

4

pleading, your pleading. What are the possibilities -- where

5

could Mr. Schepps have gotten it from?

6

THE WITNESS: Possibilities I can think of, and I'm

7

not saying that he did this because I don't know, I can't

8

think of it now, but he could have gotten it from an appraisal

9

service, and he could have gotten it from an expert, someone

10

like Mr. Lindenthal that we had as an expert a few months ago.

11

He could have got it from those type of people.

12

THE COURT: Okay. I know the type of people who do

13

appraisals, I'm not asking hypothetically, I'm asking

14

specifically who, what appraiser --

15

THE WITNESS: I don't know.

16

THE COURT: -- what service?

17

THE WITNESS: I don't know. I can't recall anything

18

today.

19

THE COURT: Who had you engaged to help you with

20

this?

21

THE WITNESS: I don't believe I engaged anybody to do

22

this, and I'm just trying to recall back from 2011, there was

23

a lot going on then. But I don't believe I engaged anybody to

24

do that. If Mr. Schepps did I don't recall who he did, or if

25

he did.

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THE COURT: You're saying Mr. Schepps would have put

2

something like this in a pleading without you reading it?

3

THE WITNESS: Would he have put it in a pleading

4

without me reading it, yes, I don't know if he did or not, but

5

he would have, he could have.

6

THE COURT: You remember this in the pleading?

7

THE WITNESS: Vaguely, but not -- vaguely.

8

THE COURT: Well, what do you think about this value?

9

THE WITNESS: As I sit here today I think it would --

10

it could be a value that an appraiser would come up with the

11

domain name for, you know, it being a dormant domain name, the

12

way it is today.

13

THE COURT: And how would an appraiser come up with

14

that value?

15

THE WITNESS: There's all different sorts of ways. I

16

mean, an appraiser can look at comparable sales, they can look

17

at the business that's behind the domain name, they can look

18

at --

19

THE COURT: Okay. There's no business behind the

20

domain name.

21

THE WITNESS: Okay, I've seen appraisers.

22

THE COURT: So you told -- you told -- oh, you've

23

seen the appraisals?

24

THE WITNESS: No, no, I didn't say that. I said if

25

an appraiser was going to do an appraisal on a name like this

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they could look at comparable -- comparable sales.

2

THE COURT: Okay. You said -- I haven't heard any or

3

seen any evidence, you said, though, earlier you knew of

4

server.com having been sold between 900,000 and one million --

5

THE WITNESS: I did see that, yes.

6

THE COURT: -- before 2009?

7

THE WITNESS: I remember it being around that time,

8

yeah.

9

THE COURT: So that would be the closest comparable

10

one could conceive here --

11

THE WITNESS: Well --

12

THE COURT: -- therefore, where would you get 1.4

13

million to 4.2 million?

14

THE WITNESS: Well, server.com I think is a much

15

different name -- well, it is different than servers because

16

it's the singular which has a much different connotation than

17

servers. Server, it just has a different connotation than

18

servers does because of the type of go to service, or product

19

that could be sold at that -- that would be associated with

20

that kind of site. A server or --

21

THE COURT: Why would the S be so significant?

22

THE WITNESS: Because servers has I think a

23

connotation of Web hosting and Web servers, and that type of

24

thing. Server has more of a connotation of someone serving

25

breakfast or something like that.

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THE COURT: What do you base this on?

2

THE WITNESS: It's my own, you know, thought.

3

THE COURT: Okay. Do you have any empirical evidence

4

of that?

5

THE WITNESS: Well, I've been dealing with domain

6

names since -- a long time, over twelve years, and I've spent

7

a lot of time trying to figure out what the semantics of words

8

are, and that's what I base it on, it's not -- I haven't done

9

any scientific study.

10

THE COURT: You don't know of empirical evidence,

11

okay.

12

THE WITNESS: Yeah, I'm not here as a -- yes, that's

13

right.

14

THE COURT: And just one last question. What do you

15

think should be done with the name servers.com?

16

THE WITNESS: I think that the agreement that was put

17

in place by me and Mike Emke, or Ondova and Mike Emke should

18

be honored, and I believed that Mike Emke --

19

THE COURT: Let me back up.

20

THE WITNESS: -- and I should have the right to use

21

the domain name.

22

THE COURT: Let me back up. He didn't honor the

23

agreement?

24

THE WITNESS: If he breached the agreement then I

25

guess the parties to the agreement have claims against

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Mr. Emke, but I can't really tell you what would happen to

2

that.

3

THE COURT: Well, my job today is to determine if

4

this trustee is exercising reasonable business judgment, okay,

5

so I need to compare what he's proposing to something else.

6

What is your something else that would be more reasonable?

7

THE WITNESS: Well, I mean, if your goal is to -- if

8

you're forcing a liquidation on a domain name --

9

THE COURT: I'm saying -- I'm asking you what would

10

be more reasonable?

11

THE WITNESS: Well, in a normal context, the

12

reasonable thing to do would be to develop the domain name and

13

use it and develop it. That would be --

14

THE COURT: Who would develop it?

15

THE WITNESS: There's lots of -- there are lots of

16

possibilities through servers.com. I think you could

17

certainly employ a company to develop a name like that that

18

would spend, you know, sorts of resources doing it. You

19

could --

20

THE COURT: Let me back up.

21

THE WITNESS: Um-hum.

22

THE COURT: You didn't do it for nine years.

23

THE WITNESS: Well, there was --

24

THE COURT: -- and then you entered into an agreement

25

with Mr. Emke to do it and he didn't do it. So again, what is

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a better option at this point in time after thirteen years of

2

no revenue from this name, what is the better option than

3

trying to sell it?

4

THE WITNESS: I think that the one option would be to

5

find a very reputable company or individual, and probably

6

company to start --

7

THE COURT: Who and what would it cost and how long

8

would it take?

9

THE WITNESS: If I had a little bit of time to

10

research that I could provide that to you. I just don't have

11

that at my fingertips.

12

THE COURT: Okay. Haven't you had thirteen years to

13

explore that?

14

THE WITNESS: Well, I can explain. For the majority

15

of the time there was litigation pending and there wasn't much

16

sense spending a whole lot of time.

17

THE COURT: Was -- what prevented you during the

18

pendency of the litigation from doing something with the name?

19

THE WITNESS: There was a lot of uncertainty as to

20

what -- who the claims of ownership was of the name and there

21

wasn't --

22

THE COURT: Besides the uncertainty, what prevented

23

you --

24

THE WITNESS: Well, the uncertainty --

25

THE COURT: -- from utilizing the name?

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THE WITNESS: -- the uncertainty caused --

2

THE COURT: Was there an injunction?

3

THE WITNESS: Just a lot of claims --

4

THE COURT: Okay.

5

THE WITNESS: -- but I don't believe there was an

6

injunction. But if -- certainly, I think if something was

7

done with the domain name there would have been complaints and

8

there could have been injunctions filed by -- or an injunction

9

request filed by Mr. Emke about doing things with them to

10

resolve all sorts of problems that got tangled up when that

11

then was in litigation. There was all kinds of claims. If we

12

were to try to find a potential person that were a company

13

that would develop this name that could be -- that they might

14

have some concerns about doing it themselves because of this

15

litigation. Nobody's going to want to invest a whole bunch of

16

time, money and energy in an asset that is being disputed.

17

THE COURT: All right. Redirect, Mr. Urbanik?

18

You've got twelve minutes maximum.

19

MR. URBANIK: I don't have very much, Your Honor.

20

REDIRECT EXAMINATION

21

BY MR. URBANIK:

22

Q. Mr. Baron, earlier when Mr. Cochell was asking you

23

questions, you lumped mismanaged domain names and not

24

developed -- not developed domain names, those are two

25

different things. I mean what would you call a mismanaged

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domain name?

2

A. It's a broad category but no, I think I'd use that term

3

to describe what Mr. Vogel did to the domain user the last

4

several years and it's just neglecting them and not, you know,

5

not making sure that the correct ads were on there, not

6

dealing with disputes and just sort of letting things go -- go

7

amuck.

8

Q. Okay.

9

A. That type of thing. There's other things too but I'm

10

just --

11

Q. What do you call -- what would a nondeveloped domain name

12

be?

13

A. Like an example at servers.com?

14

Q. Yes.

15

A. Okay. Well, that's an example. Servers.com it's not --

16

I don't know what's there today but there may not be anything

17

on the site at all. It might just be --

18

Q. If I told you it was a blue page with servers.com and if

19

interested contact --

20

A. Yeah, that would be --

21

Q. Undeveloped.

22

A. -- that'd be undeveloped.

23

Q. Okay. Judge was asking you what does it cost to develop

24

a domain name like servers.com? What is your estimate of the

25

cost?

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A. That's a wide range of answers I could give you if

2

you'd -- it varies a lot. I think you could find someone

3

quite -- I don't know who easily but quite easily, that would

4

not charge anything to develop a site. What they would do is

5

take a percentage of profits or something like that. They

6

would have some type of agreement where they would develop a

7

name in exchange for future profits or revenue or whatever

8

because I don't think it would cost anything.

9

Q. What percentage of the domain name would have to give to

10

them?

11

A. I don't know if you'd have to give a percentage of a

12

domain name. You might. It depends on the deal that you

13

would work but it could just be a percentage of profits. It

14

could be a percentage of revenue. It could be any range of

15

possibilities. So I think you could do all kinds of different

16

arrangements.

17

Q. What's your estimate of the range of what you'd recover

18

if you found such a person to do that?

19

A. The range of --

20

Q. What you can --

21

A. -- can you tell me what recover means? I'm not sure what

22

you mean.

23

Q. Yes. If you sold the name after you entered into such

24

a --

25

A. Um-hum. And again I think that was in a -- that varies a

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lot too. I think that the potential is very, very high for a

2

name like servers.com because it could be -- turn into a Web

3

site that could be a top Web-hosting company and that would

4

generate a great, great deal of value. Much, much more than

5

it could as an undeveloped name but it could be less than

6

that.

7

Q. In the past couple years, have you entered into any such

8

agreements?

9

A. I've been in a receivership and forbidden from doing any

10

such thing.

11

Q. So you haven't. Okay. So you don't know what these

12

hypothetical Web -- I'm sorry -- Web site developers charge.

13

Do you?

14

A. I just know in general what they have in the past and

15

it's -- it varies. I mean they're all -- it depends on the

16

domain name. Every domain name has a different value to a Web

17

developer. A name like servers.com, I think, would have a lot

18

of attractiveness to a developer like that much more than a

19

name that didn't make any sense like a name with jumbled up

20

characters or one that didn't have any English word

21

connotation to it. So I think servers.com would be an

22

attractive name for a developer and you could probably get a

23

pretty good deal.

24

Q. Would it be fair to say that if you found someone who

25

would do it with no payment, they would want a larger

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percentage of the recovery when it sold?

2

A. Not necessarily. In don't think necessarily. I think --

3

Q. Do you know somebody that will take no payment at all and

4

still just want a very small recovery if we sell it later?

5

And if so, who is that person or company?

6

A. Can you ask me that again? I'm sorry; a small recovery?

7

Q. Do you have any person that would, for no payment

8

whatsoever develop this domain name and not want some sizeable

9

chunk of the proceeds when it sold?

10

A. I've not gone out and tried to find those people myself

11

but I think they do exist.

12

Q. You think they exist. Have you ever met any of them?

13

A. I have met many developers that do that type of thing but

14

I've not discussed this particular domain name with any of

15

them that I can remember.

16

Q. Are these individuals or businesses?

17

A. Businesses. They would be development people that would

18

help.

19

Q. Can you name a few?

20

A. I can't think of them off the top of my head but they --

21

you can do a Google search and I'm sure find many of them that

22

do that.

23

MR. URBANIK: I pass the witness, Your Honor.

24

THE COURT: All right. Any recross?

25

MR. COCHELL: One moment.

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Colloquy

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1

THE WITNESS: Can I ask my counsel if I may sit down?

2

THE COURT: Okay. Would you go to the witness stand

3

if your client has a question?

4

MR. COCHELL: Yes.

5

(Off the record)

6

MR. COCHELL: No recross for me.

7

THE COURT: All right. Thank you, Mr. Baron. You're

8

excused from the witness stand.

9

All right. Mr. Urbanik, you may call your next

10

witness.

11

MR. URBANIK: I'd like to call Damon Nelson.

12

THE COURT: All right. Mr. Nelson, please come to

13

the witness stand and raise your right hand.

14

(Witness sworn)

15

THE WITNESS: Yes.

16

MR. COCHELL: Your Honor, Mr. Nelson was not listed

17

on the witness list. I'm not sure there's a legitimate reason

18

to be calling him at this point.

19

MR. URBANIK: He is a rebuttal witness, Your Honor.

20

THE COURT: Well, he's a rebuttal and --

21

MR. COCHELL: Well --

22

THE COURT: Let me ask this. Your objection to the

23

sale was filed when?

24

MR. COCHELL: I'm sorry?

25

THE COURT: Your objection to the sale motion was

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filed when?

2

MR. COCHELL: My objection to the sale was filed --

3

THE COURT: When?

4

MR. COCHELL: -- I believe it was Saturday.

5

THE COURT: Okay. So he didn't even know about your

6

objection at the time his witness and exhibit list was due.

7

MR. COCHELL: Well, I don't --

8

THE COURT: True?

9

MR. COCHELL: -- I don't think that the objections

10

were due until yesterday. That's what I recall.

11

THE COURT: All right. Well, I'm going to overrule

12

it. He called him as a rebuttal witness. He's going to do

13

rebuttal on the, what, the topic of ownership that was just

14

raised Saturday. Correct?

15

MR. URBANIK: That is correct, Your Honor.

16

THE COURT: Okay. I overrule the objection.

17

DIRECT EXAMINATION

18

BY MR. URBANIK:

19

Q. Mr. Nelson, state your full name.

20

A. Damon Nelson.

21

Q. And, Mr. Nelson, are you currently assisting Daniel

22

Sherman Chapter 11 Trustee of Ondova in matters related to the

23

Ondova case?

24

A. Yes.

25

Q. And previously when Ondova was the registrar of the

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domain names you assisted Mr. Sherman more regarding Ondova

2

acting as a registrar?

3

A. That's correct.

4

Q. Okay. Have you been involved in matters related to

5

servers.com?

6

A. Yes, to a certain extent.

7

Q. When Mr. Sherman became aware of the servers.com domain

8

name, did he ask you to do an investigation of who owned the

9

domain name?

10

A. As far as history, yes.

11

Q. Okay. And what did you find out when you did that

12

investigation?

13

MR. COCHELL: Objection. Hearsay.

14

THE COURT: Overruled.

15

A. I was looking for a history around the petition date and

16

the registrant's name was Compana, LLC.

17

Q. And Compana is Ondova. Is that correct?

18

A. That's correct.

19

Q. So on the petition date, the domain name was owned by

20

Ondova?

21

A. Compana. Yeah.

22

Q. Okay. Mr. Nelson, were you familiar that a similar

23

domain name was sold in 2009 named server.com?

24

A. Yes.

25

Q. Did Mr. Sherman ask you to investigate the sales price of

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that domain name?

2

A. Yes.

3

Q. And what did you find out?

4

A. It sold, I believe, sometime in August of 2009 for

5

770,000 dollars by -- in the book it was Sedo.

6

Q. Okay. In connection with this case, Mr. Nelson, do you

7

recall roughly when we employed Sedo to begin the sale efforts

8

of the servers.com?

9

A. Right. I can't recall the exact dates but it was late

10

2011 I believe to sometime in 2012.

11

Q. And is it your understanding that we allowed Sedo

12

approximately one year to try to sell the domain name?

13

A. That's correct.

14

Q. Do you remember what their highest offer was?

15

A. I want to say it was --

16

MR. COCHELL: Objection. Hearsay.

17

THE COURT: Overruled.

18

A. -- I want to say that the conversations were around

19

100,000.

20

Q. Okay. And eventually, we did terminate Sedo.com. Is

21

that correct?

22

A. That's correct.

23

Q. And then we began essentially the trustee's own sale

24

efforts with a blue Web page, if you will, instructing

25

potential parties to contact you?

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A. Yeah. We had a blue page. Now, it's a -- I think

2

there's actually a sign that says "Domain for Sale" and it has

3

OndovaLimited@gmail which I answer every day.

4

Q. And were you the person first contacted by a purchaser,

5

XBT?

6

A. I can't say a hundred percent. I know I get inquiries

7

and I would forward them to you so the -- who the purchaser is

8

versus how they came in could be a completely different name.

9

Q. Alex -- Alexi --

10

A. That name --

11

Q. -- our purchaser?

12

A. -- yeah, that name sounds familiar.

13

Q. And he contacted you because of the Web page that says

14

contact --

15

A. Yes.

16

Q. -- you? Okay. And Mr. Alex's bid of 300,000, his

17

through his company, XBT, that's the highest bid we've

18

received since the trustee has taken over the sale efforts?

19

A. That's correct.

20

Q. And it's higher than anything Sedo presented to us?

21

A. That's correct.

22

Q. And in this case, we have no broker's commission?

23

A. That's correct.

24

Q. Okay. And you are advising the trustee on the ways to

25

market the domain name to even get a possible higher bid. Is

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that correct?

2

A. Yes. I believe there are numerous entities that would be

3

interested in buying this domain name but you would have to go

4

out and seek them out through advertising or marketing or some

5

type of traffic generation that --

6

Q. So you are working with the trustee on essentially

7

marketing it through domain name journal and technology Web

8

sites and blogs that deal with servers and clouds. Is that

9

correct?

10

A. Right. In addition to the main investment sites, we

11

would target a cloud-based enterprise; Web sites that are more

12

directed to the chief strategy officer or chief technology

13

officer or Fortune 500 companies. We want to try to get where

14

those people would actually be reading.

15

Q. And in your day-to-day work both for Mr. Sherman and even

16

for Mr. Vogel still, there's other parties in this business

17

that contact you like Jason Boshoff of Domain Holdings and

18

other parties that see the servers.com Web site?

19

A. Yes.

20

Q. And so you're constantly getting calls about it and --

21

about it and whether it's up for sale?

22

A. It's primarily e-mails and --

23

Q. E-mails I meant.

24

A. Yeah. And all the e-mails I redirect to you.

25

Q. Thank you.

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Just to clarify the record, Mr. Nelson, at some point

2

during Mike Emke's control of the domain name, he did have

3

some ad or parking sites up. Is that your recollection?

4

A. Yes. He actually had a GoDaddy reseller hosting account

5

that he pointed servers.com to hoping to generate, I guess,

6

hosting sales.

7

Q. And it was a fairly basic package, though --

8

A. Yes.

9

Q. -- that you can purchase sort of pre-arrange with

10

GoDaddy?

11

A. Right. I think it's, like, ninety-nine dollars a month

12

to have this reseller package.

13

Q. Okay. And prior to Sedo being employed, I mean did

14

anyone ever make an offer to Ondova to purchase servers.com?

15

A. No.

16

Q. Okay. Or Mr. Emke?

17

A. Not that I'm aware of or Mr. Emke.

18

Q. You heard Mr. Baron talk about possibly developing this,

19

do you have any idea what it would cost to develop this domain

20

name to make it value to go maturely greater than 300,000

21

dollars?

22

A. I would say it's going to be in the half-million dollar

23

range. And a lot of the times the way domain names are priced

24

that are fully-developed out are -- it's based on multiple of

25

earnings. And so it's two years, three years multiple

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earnings is how you would turn around and flip that domain

2

name when it's ready to sell. So if you wanted to generate

3

two million dollars a year, you had to put some effort to get

4

there.

5

MR. COCHELL: Objection. Move to strike. Lack of

6

foundation.

7

THE COURT: Overruled.

8

MR. COCHELL: Also, he's not an expert under Rule

9

702.

10

THE COURT: Overruled.

11

Q. Does the Ondova estate have the funds to develop this Web

12

site?

13

A. No.

14

Q. Do you know of anyone that would do it for free based on

15

the promise of a future share of the sales price?

16

A. I don't know of anybody's name. I think a statement

17

Baron made could be interpreted that you could find somebody

18

and there might be some joint venture opportunities out there

19

to develop the name without any upfront costs but I'm not

20

aware of it and I haven't ever done any deals like that.

21

Q. Understand. Have you been following the pricing on

22

domain names, Mr. Nelson?

23

A. Yes.

24

Q. And you follow that pretty closely, don't you?

25

A. Yes.

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Q. There was a sort of a dip in pricing probably in 2011 or

2

2012 after server.com sold. Is that a fair statement?

3

MR. COCHELL: Objection. Lack of foundation.

4

THE COURT: Overruled.

5

A. Yes, sir. I did notice.

6

Q. How are domain name prices this year for 2013?

7

MR. COCHELL: Objection. Lack of foundation.

8

THE COURT: Overruled.

9

A. It seems like compared to the last couple years, the

10

prices for six and seven -- or six-digit and seven-digit names

11

have gone up.

12

MR. URBANIK: I'll pass the witness, Your Honor.

13

THE COURT: All right. Cross?

14

MR. COCHELL: Yes, Your Honor.

15

CROSS-EXAMINATION

16

BY MR. COCHELL:

17

Q. Mr. Nelson, if I understand it correctly, is it fair to

18

say that registrant information -- how did you access the

19

registrant information that you were referring to earlier in

20

your testimony?

21

A. Through a -- there's software called a -- a site called

22

DomainTools and they have a Whois history and it pretty much

23

identifies changes in the record itself over time whether it's

24

a payment update or a change in registrar or change in

25

registrant or a change in just technical informational record

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1

put -- puts little points in there but I did go back to look

2

at dates around the petition date to discover that there was

3

a -- the Whois record actual states Compana, LLC.

4

Q. Okay. And did you print that out?

5

A. Yes.

6

Q. Did you bring that with you today?

7

A. No, sir.

8

Q. All right.

9

A. It's -- I did e-mail it to Mr. Urbanik.

10

Q. Okay. And when did you look this up?

11

A. I would say it was prior to the Emke case.

12

Q. Okay. And so -- and this Whois information, is it who

13

has it registered or isn't there a distinction between who is

14

the registrant and who is the owner of the information?

15

A. If you're asking does the records reflect the difference

16

between a registrant and an owner?

17

Q. Yes.

18

A. The records do not reflect that. It is the registrar and

19

registrant and admin and technical support information.

20

Q. But isn't there a difference between someone who

21

registers it and someone who actually owns the domain?

22

A. Could be. Sometimes.

23

Q. Okay. Is it fair to say that DomainTools is not the

24

authoritative site for determining registration or ownership?

25

A. DomainTools, I suspect, pulls from the same information

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1

everybody else does as a Whois-registered.

2

Q. But you don't know that one way or the other. Is that

3

correct?

4

A. If I --

5

Q. You suspect it but you don't really know. Is that

6

correct?

7

A. -- if I'm pulling Whois information, I typically go to

8

GoDaddy or I go to Hostskater and I can look up information.

9

DomainTools gives me the ability to look back in time over

10

Whois information that GoDaddy doesn't provide that service.

11

Hostskater doesn't provide that service. This is --

12

DomainTools is the only one I've looked at. I've done this a

13

lot of times is look at history and domain names.

14

Q. Okay. But I'm -- so I'm asking you what you did based on

15

your -- when you testified earlier that you looked at who

16

owned -- who is the registrant on the date of the petition --

17

MR. URBANIK: Judge. Asked and answered.

18

MR. COCHELL: Okay.

19

THE COURT: Sustained.

20

Q. And -- but what I'm asking, sir, is what did you

21

actually -- so if you looked at DomainTools, I mean if

22

DomainTools -- I guess your testimony is a little unclear.

23

What is it that DomainTools actually provides and how do

24

you -- why is that reliable?

25

A. It --

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MR. URBANIK: Past objection. Asked and answered.

2

His answer is --

3

THE COURT: Overruled. Go ahead.

4

A. Okay. It pulls from a database that has -- it says

5

registrar: and then a bunch of names. Registrant: Compana,

6

LLC. It has the same format that GoDaddy or Hostskater has in

7

delivering the information.

8

Q. Okay. And does ICANN, isn't ICANN the company that is

9

the company that maintains registrations and is the authority

10

on registrations?

11

A. They keep a Whois record and I don't have access to

12

ICANN's Whois record.

13

Q. Okay. So you're going to someone who has a different

14

database but -- right? Domain names -- DomainTools is not --

15

does not kick in -- they don't share off of ICANN, right?

16

A. I don't know that.

17

Q. Okay. And you don't know if their information is

18

reliable because they are not the authority on registrations.

19

ICANN is the authority on registration. Right?

20

A. Well, I didn't know I was going to ask -- be asked about

21

DomainTools where they provide the information but I suspect

22

they're actually pulling it from ICANN's database.

23

Q. Okay. So --

24

A. Me, as a registrar right now, I cannot access it. I'm an

25

end user.

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1

MR. COCHELL: We move to strike that testimony as --

2

THE COURT: Overruled.

3

MR. COCHELL: -- mere suspicion.

4

THE COURT: Overruled.

5

Q. Okay. And what dates was Compana listed as registrant to

6

servers.com?

7

A. I pulled -- I can't recall exactly the number of records

8

I pulled that I know of but I pulled more than a few and less

9

than a dozen during certain time periods around the

10

2009-2010 --

11

Q. And you don't have any of those records with you today.

12

Right?

13

A. I did not bring them with me. I can access them and

14

deliver them to the Court if need be.

15

Q. Okay.

16

MR. URBANIK: Objection, Your Honor. I'd like to

17

just point to the Court something that may shortcut this.

18

The Court's findings and conclusions entered on

19

October 18th, 2011 in the adversary identifies who the

20

registrar was of the domain name. It was Ondova registered

21

the name in 2002, paragraph 4, that's what the Court's

22

findings were after a very lengthy trial with Mr. Emke.

23

That's the same -- this order also provides the Servers, Inc.

24

entity was created by Conrad Herring on August 10th, 2009 and

25

these are the findings in the case -- while the case at this

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1

point.

2

None of the appeals contested these findings. In

3

fact -- and Mr. Baron did not appear in this adversary, didn't

4

intervene. And furthermore, and in his appeal to the district

5

court, there was no -- Mr. Schepps did include the record when

6

he appealed the ruling in the district court. Judge Furgeson

7

denied the appeal of Mr. Schepps in January 2013 as moot. So

8

there's no factual -- there's no party, including Mr. Baron,

9

contesting the facts that Ondova was a registrar. The hearing

10

was before the Court at docket 130 and that is hearing number

11

11-03181.

12

THE COURT: All right. I overrule the objection.

13

You can continue to question him on this but it seems like

14

we're repeating the same question in different ways so --

15

MR. COCHELL: Yes, Your Honor.

16

THE COURT: -- hurry along.

17

MR. COCHELL: Yes, Your Honor.

18

BY MR. COCHELL:

19

Q. All right. Now, you never did deals, I think -- well,

20

you prepped but you never did deals similar to the kind that

21

Mr. Baron was suggesting that there be -- that you could do

22

some sort of arrangement with an investment company that would

23

take a percentage of revenues or profits in exchange for

24

developing a Web site. You never did anything like that?

25

A. I have not done that. No, sir.

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1

Q. And you never looked to do anything like that before.

2

Correct? You never tried to find people who would do that

3

sort of a deal?

4

A. I --

5

Q. Yes or no.

6

A. -- in my --

7

Q. Can you answer that yes or no?

8

A. Yes, I have looked.

9

Q. Okay.

10

A. But I --

11

Q. And when was that?

12

A. Probably in the last couple years I do have domain names

13

that I own that I had sought out joint venture arrangements

14

and I didn't like the terms of the deal so I didn't pursue

15

those anymore.

16

Q. Okay. And were they domain names that had a 300,000 to 1

17

million dollar value to them?

18

A. Not as a parked site. No.

19

Q. No. Okay. So the answer to my question, then, is you

20

never tried to do a deal of this kind of magnitude on the

21

terms of development in exchange for a percentage of revenues

22

or profits. Is that correct? You've never done that?

23

A. No.

24

Q. Okay. Now, there has been an increase in the value of --

25

based on your testimony of an offer of 100,000 dollars two

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1

years ago through Sedo to now an offer of 300,000. Correct?

2

A. That's correct.

3

Q. That's an increase in value of on the average of 100,000

4

a year. Right? Obviously.

5

A. Yeah. I guess --

6

Q. It's not a trick question.

7

A. Yeah.

8

Q. And so my question, sir, is -- and that's with a Web site

9

that's relatively undeveloped. Right?

10

A. Yeah, it's true.

11

Q. Okay. So the real value of this Web site likely with

12

development is quite substantial particularly if there was a

13

sale of server.com for 770,000 just a couple years ago?

14

A. Well, the sale four years ago for 770,000, the domain

15

name is still blank. There's nothing -- nobody's developed

16

anything. So I don't know the reason why it's still blank but

17

I would anticipate that if it was worth developing they would

18

have probably spent some money in a four year period.

19

As it stands right now, I don't believe we have any money

20

in the bankruptcy trustee account to develop out this domain

21

name to make it more valuable than what it is as a parked

22

domain.

23

Q. Okay. And, of course, nobody's looked into it, into that

24

avenue to increase the value of the assets so that it could be

25

sold at a much higher price, generate a lot more income in a

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1

Chapter 11 estate. Right?

2

A. For a joint venture agreement, no.

3

Q. Okay.

4

A. I have not done that.

5

Q. All right. One moment.

6

MR. COCHELL: That's all the questions we have.

7

Thank you, Your Honor.

8

THE COURT: All right. Any redirect?

9

REDIRECT EXAMINATION

10

BY MR. URBANIK:

11

Q. Mr. Nelson, as part of your examination of the name for

12

the trustee, did you look into who was paying the yearly

13

renewal fees for servers.com?

14

MR. COCHELL: Objection. Hearsay.

15

THE COURT: Overruled.

16

A. Ondova Limited was paying the renewals and we're paying

17

them right now through GoDaddy.

18

Q. Did you look back to see how long Ondova had been paying

19

the renewals for servers?

20

MR. COCHELL: Objection. Hearsay.

21

THE COURT: Overruled.

22

A. As long as I was manager of Ondova Limited it was paying

23

the renewals.

24

Q. Okay. Thank you.

25

MR. URBANIK: That's all the questions I have, Judge.

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1

THE COURT: All right. Any recross on that redirect?

2

MR. COCHELL: No, Your Honor. Thank you.

3

THE COURT: All right. Thank you, Mr. Nelson.

4

You're excused.

5

All right. Any other evidence from the trustee?

6

MR. URBANIK: No, Your Honor.

7

THE COURT: All right. Trustee rests.

8

Does Mr. Baron have any additional evidence?

9

MR. COCHELL: No, Your Honor.

10

THE COURT: All right. I'll hear closing arguments

11

very briefly, please.

12

MR. URBANIK: Your Honor, we employed Sedo pursuant

13

to an order on October 7th, 2011 to sell the domain name and

14

their highest offer is 100,000 dollars. We terminated Sedo on

15

September 13th, 2012 and since then we have marketed the name

16

on our own and we now have the offer for 300,000 dollars. No

17

one here has shown us, at least, a legitimate argument

18

regarding any flaw or problem with our sale process or sale

19

procedures. We have a willing -- a ready and able buyer to go

20

forward on a purchase who has 40,000 dollars of earnest money

21

and we feel that the sale procedures are reasonable and

22

appropriate and designed to maximize the value of the domain

23

name. They are very consistent, if not even -- maybe more

24

generous than the sale procedures approved in many other

25

bankruptcy cases.

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Closing Argument - Mr. Urbanik

179

1

So I know the judge, you wanted us to focus on the

2

merits of the sale motion and then Mr. Baron's ownership of

3

the domain name. Nothing Mr. Baron himself raised regarding

4

problems I thought was a basis to not approve the sale

5

procedures we have heard. Nothing from Mr. Baron has shown

6

that he's made any efforts to sell domain names or has any

7

legitimate reason to oppose it although he keeps referencing

8

the receiver's efforts to sell domain names in 2012. We're

9

only selling one name, not 154 -- 153,000 names.

10

Regarding Mr. Baron's -- so with respect to the sale

11

procedures, we would ask the Court to approve the sale

12

procedures as reasonable and in the trustee's business

13

judgment and also approve the finding of XBT as a good faith

14

purchaser of value and that the Court shorten the fourteen-day

15

stay period under Rule 6004.

16

With respect to Mr. Baron's ownership of the domain

17

name, Ondova was clearly insolvent. It was in the zone of

18

insolvency because of that agreement with Mike Emke was nearly

19

three weeks before Ondova filed. There's already a

20

presumption of insolvency. The Court can take judicial notice

21

of the claims register in the Ondova case. The Court can take

22

judicial notice of the -- of the fact that Mr. Baron did not

23

object to the sale in 2011. The Court can take notice that

24

Mr. Baron took no steps to intervene in the adversary of Mike

25

Emke. There's not been any stay of the order approving the

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Closing Argument - Mr. Urbanik

180

1

sale in 2011. Not been any order staying Mr. Baron's personal

2

bankruptcy case. So regarding Baron's claim on ownership,

3

those are some the things the Court can look at.

4

There's not been any evidence that Mr. Baron provided

5

any consideration through Ondova to get the benefit of that

6

reversionary interest. There's no evidence that Mr. Baron

7

took any efforts to get a perfected security interest or lien

8

in the domain name.

9

Mr. Baron is an officer of Ondova; he was a sole

10

officer so he was an insider. He says he paid attorneys' fees

11

to Ondova to fight Mr. Emke but there's no evidence of any

12

attorneys' fees. As an insider, there's a sort of an

13

additional hurdle that Mr. Baron would have to show that

14

somehow this transaction where he got a reversionary interest

15

was fair and reasonable and for consideration.

16

Mr. Baron could not recall any other officer of

17

Ondova let alone another founder. He did not know who owned

18

the stock of Ondova. And in the event that somehow Mr.

19

Baron's claim against Servers, Inc. vested, I think Ondova

20

would then have another claim against Mr. Baron for breach of

21

fiduciary duty because we saw absolutely no legitimate reason

22

today why Baron should get a reversionary interest in the

23

domain name servers.com. And those are just the facts or

24

reasons, Judge. Obviously, Section 549 is applicable here.

25

This was a post-Ondova petition transaction.

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Closing Argument - Mr. Urbanik

181

1

We have fully briefed ipso facto clauses in the

2

appeal before Judge Furgeson not yet in the Fifth Circuit but

3

this is clearly an unenforceable ipso facto clause in

4

connection with Ondova. And, in fact, I don't have the site

5

right here at the podium but in the Lehman Brothers case where

6

there were businesses that all over the map courts found that

7

these provisions that were triggered on the insolvency are

8

simply unenforceable. And ipso facto clauses have a very

9

broad longstanding history.

10

So not even having briefed ipso facto, we believe

11

that under 549, under all the factual bases here and also the

12

Court's power to sell the name under 363, there's really no

13

reason to hold up this sale.

14

This offer is a very, very good offer. Our sale

15

procedures are designed to bring in buyers. Mr. Nelson didn't

16

say this but there's sort of a different -- there's a

17

different element when you put an ad in that says we have a

18

buyer and we're going to sell it and the hearing is this date.

19

That brings people to the table more than having a Sedo broker

20

call somebody and say, oh, they're going to sell the name.

21

When you have a bankruptcy auction I do believe that

22

businesses pay more attention to them, they see that that name

23

is finally going to go after all these years of being in play

24

and in controversy and we may obtain a buyer, a big industry

25

player, to purchase this name where it's simply a broker

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Closing Argument - Mr. Urbanik

182

1

calling or seeing the blue page would not achieve that same

2

result.

3

So we may get the prices that Mr. Baron was talking

4

about or at least implied in a filing with the Fifth Circuit,

5

so for all of the reasons -- I know I'm talking fast, Your

6

Honor -- we don't think there was any evidence presented by

7

Mr. Baron today that would in any way be inconsistent with

8

this Court's approving our sale motion, our sale procedures.

9

If the Court approves the motions, we will coordinate with

10

Traci Davis on the follow-up hearing date. But as I stated on

11

the record earlier, it's a thirty-day marketing period with a

12

fixed date for the qualified bidder, a fixed date for the

13

auction. We will put all that in the notice.

14

You didn't ask any questions for buyers' counsel;

15

he's on the phone and he can answer any questions the Court

16

has regarding the qual -- they're ready, willing and able to

17

close on the purchase. It's probably maybe appropriate to do

18

that today while we're all here.

19

And then finally, I would ask the Court to maybe re-

20

look at the findings and conclusions from the Emke adversary

21

which was hotly contested. The Court did make a lot of

22

findings based on evidence about ownership and who did what

23

and I think I cited Docket 130, no one appealed the facts of

24

what happened in Ondova and Mr. Baron didn't intervene. Mr.

25

Baron didn't file a motion, he didn't object to the sale of

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Closing Argument - Mr. McCullough; Mr. Cochell

183

1

the name in 2011.

2

And, Your Honor, I'm probably beating -- take up the

3

Court's time but I'm still very certain that this -- Mr.

4

Baron's standing is suspect in light of Mr. Litzler being his

5

trustee and a lack of showing of any pecuniary interest in his

6

personal case that he would have any standing today.

7

So I'm just going to close on that note, Your Honor,

8

but we would ask the Court to approve the motion for all of

9

the reasons that I just went through and I'm happy to answer

10

any questions or go into anything in more detail.

11

THE COURT: All right. Not at this time.

12

MR. URBANIK: Okay. Thank you.

13

THE COURT: Thank you. Mr. McCullough, briefly.

14

MR. MCCULLOUGH: Yes, Your Honor.

15

I guess recognizing the agreement that we have with

16

the Ondova estate that with the -- ownership doesn't need to

17

be decided today. I think you can sell it subject to a bona

18

fide dispute. I think that's well within the Court's power to

19

do and I think the Court should do and then we can just

20

resolve these issues once the proceeds come in.

21

THE COURT: Thank you. All right. Mr. Cochell?

22

MR. COCHELL: Yes, Your Honor.

23

Your Honor, we think that the Emke settlement

24

agreement did create a fundamental change in the ownership of

25

the company. It went to Servers, Inc. and then Ondova's

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Closing Argument - Mr. McCullough; Mr. Cochell

184

1

ownership became that of a stockholder not entitled to the

2

underlying assets on demand. And so that is very fundamental.

3

And then when there's the order of receivership, we believe,

4

also that the ownership reverted to Mr. Baron and Mr. Emke.

5

We think there was consideration for that as shown by

6

Mr. Baron's testimony that yes he did pay attorneys' fees

7

personally for the litigation, that he had claims that he

8

compromised --

9

THE COURT: Okay. What's the real -- I didn't get

10

any evidence other than he thinks he paid some attorneys'

11

fees.

12

MR. COCHELL: Right.

13

THE COURT: I didn't get any evidence of what claims

14

and what lawsuits.

15

MR. COCHELL: Right.

16

THE COURT: He personally asserted against Emke.

17

MR. COCHELL: Right. And, Your Honor --

18

THE COURT: I said at the beginning of today I wanted

19

evidence.

20

MR. COCHELL: Right.

21

THE COURT: Where's my evidence?

22

MR. COCHELL: Well, you said at the beginning of

23

today, that's correct, and the evidence is in the possession

24

of the receiver and of Mr. Schepps who has refused to give it

25

to us. So that's where the evidence is.

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Closing Argument - Mr. McCullough; Mr. Cochell

185

1

Mr. Baron has been in receivership. He hasn't had

2

these documents. He --

3

THE COURT: First of all, the lawsuits are a matter

4

of public record.

5

MR. COCHELL: Right.

6

THE COURT: You're an attorney and you know how to

7

get answers, counterclaims, et cetera, et cetera.

8

MR. COCHELL: Right.

9

THE COURT: Okay. Nobody's holding that information

10

hostage.

11

MR. COCHELL: Right.

12

THE COURT: Okay. So you had the ability, you had

13

the time, I have no information about what claims have been

14

asserted, and you quote several lawsuits Emke filed against

15

Compana. And you're telling me Mr. Baron had no ability to

16

retrieve records of what legal fees he may have personally

17

paid in connection with Ondova -- Servers litigation against

18

Mr. Emke.

19

MR. COCHELL: Well, how could he?

20

THE COURT: How --

21

MR. COCHELL: He doesn't have copies of them.

22

THE COURT: Okay.

23

MR. COCHELL: I mean the receivers never --

24

THE COURT: Okay. How many bank accounts has Mr.

25

Baron had in that time period? That's a very simple question.

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Closing Argument - Mr. McCullough; Mr. Cochell

186

1

MR. COCHELL: All right.

2

THE COURT: The answer is what?

3

MR. COCHELL: I don't know the answer.

4

THE COURT: You have the ability to get the answer to

5

get that question. You could go to the bank --

6

MR. COCHELL: Yes.

7

THE COURT: -- and get copies of these records. What

8

am I missing? What are you missing?

9

MR. COCHELL: What you're missing is that Mr. Baron

10

does not have unlimited resources. His resources are in the

11

hands of other people and have been for many years. The

12

ability to go out and spend a couple thousand dollars is not

13

his to enjoy at this point in time and that's just a fact of

14

life. And lawyers who step in and try and help him don't have

15

unlimited time and resources.

16

So my basic thesis -- my basic argument earlier today

17

I think still stands that this determining ownership is really

18

properly the subject of an adversary action. He's asserted

19

it. He has a right to discover. We came in without any

20

documents, so did Mr. Baron and that's the point of that

21

cross-examination. He didn't bring it with him.

22

THE COURT: Whose burden is it under --

23

MR. MCCULLOUGH: There was no right to discovery,

24

Your Honor.

25

THE COURT: Tell me this, whose burden is it under

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Closing Argument - Mr. McCullough; Mr. Cochell

187

1

363?

2

MR. COCHELL: Well, I think the burden initially is

3

on the trustee to come forward and show that it's a proper

4

sale.

5

THE COURT: Keep going.

6

MR. COCHELL: And I think the burden also is on the

7

trustee when he files an adversary action.

8

THE COURT: Okay. I'm going to answer my own

9

question.

10

MR. COCHELL: Yes, Your Honor.

11

THE COURT: 363(p), "In any hearing under this

12

section," okay, in any hearing under Section 363 of the

13

Bankruptcy Code regarding potential sale of assets, "the

14

trustee has the burden of proof on the issue of adequate

15

protection; and (2) the entity asserting an interest in

16

property has the burden of proof on the issue of the validity,

17

priority, or extent of such interest." There's the answer to

18

my question.

19

MR. COCHELL: All right.

20

THE COURT: Your client who is asserting an interest

21

in the domain name servers.com has the burden of proof on the

22

validity, priority or extent of his interest.

23

MR. COCHELL: And what we're saying is that --

24

THE COURT: There is my evidence.

25

MR. COCHELL: Your evidence is subject to discovery.

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Closing Argument - Mr. McCullough; Mr. Cochell

188

1

We haven't had discovery. And you cannot -- you --

2

THE COURT: What evidence is subject only to

3

discovery?

4

MR. COCHELL: Evidence of the by-laws, the corporate

5

minutes, the stock certificates, the ownership of the company,

6

the course of conduct of the company, correspondence as to

7

what the intention of the party --

8

THE COURT: What is that going to tell me?

9

MR. COCHELL: It would --

10

THE COURT: What is that going to tell me about the

11

ownership of servers.com?

12

MR. COCHELL: I think it would have a lot to do with

13

the agreement regarding to servers.com. I think -- you were

14

asking, people were asking what --

15

THE COURT: Your whole argument, is it not, is that

16

paragraph 4, section 4 of the July 6, 2009 settlement

17

agreement operated here such that when this Court appointed

18

Mr. Sherman receiver to sell the name somehow that created a

19

situation where Jeff Baron owned fifty percent of the name,

20

servers.com. Isn't that you whole argument? And what

21

discovery is going to shed light on that interpretation?

22

MR. COCHELL: Well, Your Honor, I'm not going to

23

quibble with you. I think that --

24

THE COURT: I'm just asking the question.

25

MR. COCHELL: -- part of it is --

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Closing Argument - Mr. McCullough; Mr. Cochell

189

1

THE COURT: What evidence could you get in discovery

2

that would shed light on the meaning of this section 4?

3

MR. COCHELL: Well, part of it would be to have

4

people who actually provide documents to me before the hearing

5

and people who will give me information prior to the hearing,

6

that's called discovery. You know that. And --

7

THE COURT: Did you serve discovery --

8

MR. COCHELL: Your Honor, no, I didn't. And the

9

reality is that we have limited resources and time to do this

10

stuff. And the Court -- I mean all we can do is what we can

11

do. You may find fault with the lawyering, with the facts,

12

that's fine, but all I'm saying to Your Honor is that we're

13

not coming here to pull the wool over your eyes or anything

14

like this but we don't have the information in our possession,

15

we don't have the resources to go after it on our own and

16

that's where it stands.

17

And again, I sincerely believe that in this sort of a

18

case on a sale determining the ownership requires an adversary

19

hearing. And I -- I'm not a bankruptcy specialist. I'm not

20

going to argue the point with you because --

21

THE COURT: Is there a reason why you haven't filed

22

such an adversary proceeding?

23

MR. COCHELL: Well, I just -- I just got into this on

24

this aspect of it, Your Honor. I was asked to file the

25

objections a bit before they were due. So no, I haven't. We

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Closing Argument - Mr. McCullough; Mr. Cochell

190

1

can file an adversary action but it seems to me that if they

2

had that issue they should have filed it but that's just --

3

THE COURT: They don't think there's an issue.

4

MR. COCHELL: Okay.

5

THE COURT: They think I've litigated this.

6

MR. COCHELL: All right. And then there's also this

7

little detail of everything being on appeal and there is this

8

appeal before the Fifth Circuit on this very same issue and

9

there is this case law whether --

10

THE COURT: Isn't that in a moot that's still --

11

MR. COCHELL: I don't think so, Your Honor.

12

THE COURT: How could it not be moot?

13

MR. COCHELL: Because it's still live and it's still

14

being litigated.

15

THE COURT: Whoa, whoa, whoa.

16

MR. COCHELL: That's why.

17

THE COURT: Whoa, whoa. The motion was a motion to

18

employ Sedo as a broker and then a motion to sell servers.com

19

to the retention of Sedo. That's expired. That relief is no

20

longer being sought. How could that appeal possibly not be

21

moot?

22

MR. COCHELL: I don't know, Your Honor.

23

THE COURT: Who's pursing that appeal?

24

MR. COCHELL: It's been dormant and I substituted in

25

for Gary Schepps recently.

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Closing Argument - Mr. McCullough; Mr. Cochell

191

1

THE COURT: Do you think you have an obligation as an

2

officer of the court to let the Fifth Circuit know that that's

3

a moot appeal?

4

MR. COCHELL: And --

5

THE COURT: That's a question, yes or no?

6

MR. COCHELL: Yes, I do.

7

THE COURT: Okay. Are you going to let them know

8

tomorrow, this afternoon?

9

MR. COCHELL: I'm going to let them know after I

10

review the briefs and verify the representations made in

11

court. It may be that you're absolutely right and if you are

12

I will do exactly what I believe should be done and if it's

13

moot then I will advise the Court and file a suggestion of

14

mootness.

15

THE COURT: How could it now be moot?

16

MR. COCHELL: I don't know but Mr. Urbanik and I

17

haven't discussed it. The first time this was raised was just

18

during the course of this hearing and the mootness issue

19

wasn't raised to me before.

20

Also, Your Honor, I don't know if you're aware of

21

this but Judge O'Connor has established a briefing schedule

22

only involuntary.

23

THE COURT: My law clerk let me know this morning --

24

MR. COCHELL: All right.

25

THE COURT: -- when you all were unaware.

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Colloquy

192

1

MR. COCHELL: All right. Okay.

2

THE COURT: So you set a deadline of what, September

3

17th for a response --

4

MR. COCHELL: Right.

5

THE COURT: -- to your motion for stay pending appeal

6

and the reply deadline, I think it's September 25th and he --

7

I don't think he set oral arguments.

8

MR. COCHELL: That's correct.

9

THE COURT: District judges often don't do that.

10

MR. COCHELL: That's correct, Your Honor.

11

THE COURT: No stay pending appeal.

12

MR. COCHELL: Right.

13

THE COURT: Anything else?

14

MR. COCHELL: That's it.

15

THE COURT: Okay. I'm just looking at -- I'm sorry;

16

were you getting up? I've really heard enough.

17

MR. URBANIK: I'm going mention something, Your

18

Honor. I believe Mr. Cochell mentioned earlier that maybe

19

this Court was stayed from proceeding under the Griggs case.

20

If the Court wants to invite a letter brief on whether this

21

court was in any way stayed because of what's happening in the

22

district court, maybe Mr. Cochell could do a letter brief by

23

Thursday or something. We totally disagree. I mean the

24

filing of an appeal doesn't state much or anything. So any

25

ar -- I mean I guarantee you they will appeal what you do

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Ruling

193

1

today. There will be an appeal. However you rule, Mr. Baron

2

will order -- will have a lawyer that is paying to hire

3

Cochell, Schepps as to those appeals for Mr. Baron's entities.

4

They'll appeal your order and I just think maybe letter briefs

5

showing some of these arguments that Mr. Cochell is making

6

might be appropriate. I don't believe the Griggs case

7

controls this Court's proceeding today and I don't believe he

8

can overcome the standing issue vis-a-vis Mr. Litzler under

9

many cases including Judge Lindsay's case that I mentioned

10

earlier. So that's a suggestion. I'll sit back down.

11

THE COURT: Okay. I get fixated on a lot of things

12

during hearings and sometimes my law clerk and I are

13

exchanging notes and looking at random things on the docket.

14

Just FYI, I'll share one little tidbit. I had asked her to

15

look at was the ownership interest of Servers, Inc. -- was the

16

fifty-percent equity ownership that Ondova had in Servers,

17

Inc., was it listed in the Ondova bankruptcy schedules. You

18

know, we had talked about the settlement agreement dated July

19

6, 2009, we talked about this ad nauseum today, Trustee's

20

Exhibit 1; we've talked about how that was two weeks --

21

actually, twenty-one days before Ondova filed bankruptcy, and

22

it looked like it contemplated Servers, Inc. would be formed.

23

It wasn't quite formed yet, was it formed yet, Mr. Baron

24

didn't quite know; he -- but he thinks maybe it was formed a

25

few days after this agreement but then he really didn't know.

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1

But I think the point is the position of -- I think

2

the position of Mr. Baron has consistently been that Ondova

3

came into the bankruptcy case with a fifty-percent ownership

4

in Servers, Inc. and then he thinks, when I appointed

5

Mr. Sherman, the receiver, with authority to sell severs.com,

6

that meant all of a sudden he had an interest in fifty percent

7

of the domain name.

8

Be that as it may, the fifty-percent ownership

9

interest in Servers, Inc. did not specifically appear in

10

Ondova's Schedule B, signed under penalty of perjury. In the

11

question on Schedule B that does ask about stock interest,

12

equity interest, other kinds of interest, there was a zero

13

dollar amount put on the schedule, not specifically Servers,

14

Inc. zero value; it was just zero for any stock or equity

15

interest the estate might have.

16

I don't know what I should infer from that, but the

17

facts are what they are, and I don't think there's any dispute

18

that the settlement agreement was signed on July 6, 2009. And

19

on July 27th, 2009 the Ondova bankruptcy estate owned fifty

20

percent of some entity that had been formed, or was to be

21

formed, to hold the name servers.com. And I don't think

22

there's any dispute that Ondova has paid the registration fees

23

and any other expenses associated with ownership of this name

24

for many years.

25

I'm just going to also throw out there that when the

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1

Court ruled in the Emke litigation in October 2011, Court

2

really didn't see any relevance in section 4 of the July 6,

3

2009 settlement agreement. The provisions that this Court

4

thought were most relevant were section 2 of the settlement

5

agreement and section 6 of the settlement agreement. Section

6

2 put certain obligations on Mr. Emke to develop a business

7

plan for servers.com to consult with Ondova regarding that

8

business plan, to design, develop an Internet Web site, to use

9

servers.com, which would be a sales and marketing platform for

10

the business, and he would use his best efforts to develop

11

that Web site in a reasonable amount of time, and et cetera,

12

et cetera, other obligations regarding development and

13

capitalizing on that name.

14

And then -- and then -- that was paragraph 2.

15

Paragraph 6 was, if the parties couldn't agree on whether

16

Emke's management is maximizing the value of servers.com, the

17

parties may seek any one of the following remedies: 1, 2, 3,

18

that -- item 2, any one of these remedies could be sought.

19

Item number 2, one party may buy out the other party for a

20

specified price and/or, based on the best effort to attempt to

21

find a buyer -- okay, I'm sorry; it was paragraph 1 remedy

22

that was relevant here: The parties may seek to sell the

23

business and/or domain name and divide the revenues equally.

24

So the litigation that this Court had was asking this

25

Court for declaratory judgment that Mr. Emke had not fulfilled

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1

his obligations under Section 2 to develop the name. Court

2

found he hadn't fulfilled his obligations to develop the name.

3

And then the Court was asked to enter a declaratory judgment

4

that paragraph 6 kicked in, since the parties hadn't agreed on

5

how he was going to manage and use the name, and, pursuant to

6

paragraph 6, a party could seek to sell the domain name.

7

Court declared that provision did apply, so therefore Ondova,

8

one of the parties to the settlement agreement, could seek to

9

sell the business. And as a mechanic for accomplishing that,

10

I appointed Mr. Sherman to essentially be a receiver of that

11

name to sell and market.

12

Now, I'm telling you right now I do not think

13

paragraph 4 really was triggered by that series of events.

14

There wasn't a technical insolvency or receivership or other

15

default of the company Servers, Inc. to trigger reversion of

16

the name to Jeff Baron and Mike Emke jointly and equally. The

17

Court was again declaring section 2 of the agreement violated

18

by Emke, and section 6 of the agreement triggered so that

19

Ondova could force a sale of the domain name. And because we

20

had the unique situation of one party being in bankruptcy and

21

having a bankruptcy trustee who was uniquely experienced with

22

selling assets, it made sense to essentially make him a

23

receiver of the name so that he could sell and market it. It

24

wasn't really the equivalent of a receivership over Servers,

25

Inc.

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1

But even if paragraph 4 was triggered, again we have

2

this issue of a post-petition transfer of property of the

3

Ondova estate to the shareholder. We have Section 549 of the

4

Bankruptcy Code that I'm not sure such a transfer would be

5

consistent with. But even more problematic, we have an

6

agreement that was entered into on the eve of Ondova's

7

bankruptcy, three weeks before Ondova's bankruptcy, that

8

created this reversionary interest in Jeff Baron, and there's

9

no evidence of what consideration he might have given as

10

reasonably equivalent value; just his testimony that maybe he

11

paid legal fees -- he's not sure how much -- maybe he paid

12

some legal fees of Ondova associated with the Emke litigation,

13

and maybe he asserted claims personally against Mr. Emke, but

14

we don't have any evidence of that.

15

All this to say the best thing we have here, the most

16

we have here in favor of Mr. Baron, is some argument of a bona

17

fide dispute with regard to the ownership of the name. He had

18

the burden under 363(p) to show that, and really that's just

19

relevant to then determine if there is a sale of the asset, if

20

we have to provide adequate protection of his interest that's

21

in boda fide dispute.

22

On balance, what this all means is there is authority

23

under 363(b), (f) and (p) for the trustee to attempt to sell

24

the domain name servers.com. Again, at best, there is an

25

interest in Baron that is subject to a bona fide dispute, and

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Ruling

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1

363(f) provides that the trustee can sell an asset as to which

2

there's some bona fide dispute; it's just a matter of any

3

interest, any claims against the assets attach to the

4

proceeds, to the same extent they have validity against the

5

actual asset. And later we can sort out who gets the

6

proceeds.

7

So there is authority under 363(b) and (f) to approve

8

a potential sale. The Court looks at is there an exercise of

9

reasonable business judgment here by the trustee in wanting to

10

enter into the sale procedures, is there a sound business

11

justification, and the Court finds yes on both counts. I

12

think there is no other option with regard to this asset that

13

might maximize value for all parties-in-interest; there is not

14

the money to potentially develop the name; there has not been

15

a viable competing option presented to the Court for a

16

potential joint venture; et cetera. Moreover, the trustee has

17

made attempts to sell this asset in the past, and this is the

18

best offer, the one from XBT, that has been presented to him

19

thus far.

20

So I am approving XBT as a stalking-horse bidder at

21

the proposed offer price of 300,000 dollars. The Court will

22

approve these proposed bid procedures for there to be a

23

thirty-day marketing period. There shall be a bid deadline

24

that will be at least thirty days after notice of the sale has

25

been provided by the trustee. After the bid deadline, if

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1

there are competing qualified bidders, the trustee shall

2

conduct an auction; I'm thinking an auction somewhere in the

3

neighborhood of five days after the bid deadline would be

4

appropriate. The required topping bid would be 300,000 --

5

330,000 dollars, with a 40,000-dollar deposit and evidence of

6

financial wherewithal to be provided to the trustee.

7

Subsequent bidding will be in minimum increments of 10,000

8

dollars.

9

The Court does approve a breakup fee to XBT if it is

10

not the ultimate winning bidder, of 20,000 dollars, and the

11

Court is only approving that at this time. Any request to

12

increase that would have to be made by a subsequent motion.

13

We will have a sale hearing at which the Court will

14

hear reports of the auction process and will consider approval

15

of either the XBT 300,000-dollar bid or a higher and better

16

offer if any is received.

17

And we'll do that sale hearing, Mr. Urbanik, I would

18

say, at least three days after the auction. So why don't you,

19

I guess, follow up with Ms. Davis separately and work

20

backwards.

21

MR. URBANIK: Yes.

22

THE COURT: Again, at least a thirty-day marketing

23

period after your notice goes out, and then a bid deadline at

24

least thirty days after, and then an auction at least five

25

days after, and then a hearing at least three days after.

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Ruling

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1

All right. Anything else?

2

All right, well, I hope you will have an answer from

3

Judge O'Connor sometime in late September/early October on

4

whether there is going to be a stay pending appeal.

5

Otherwise, you're certainly all welcome to submit any briefing

6

you want on this issue, but I thought I learned in law school

7

that if a party didn't have a stay pending appeal on an order,

8

that everyone could go forward and rely upon and act on the

9

order. So that's why I continue to go forward in the Baron

10

involuntary case as well as in the Ondova case where there're

11

specific orders that have been appealed.

12

All right, we'll look for your order, Mr. --

13

MR. URBANIK: Thank you, Judge.

14

THE COURT: -- Urbanik.

15

(Whereupon these proceedings were concluded at 5:11 PM)

16

17

18

19

20

21

22

23

24

25

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201

1

2

I N D E X

3

OPENING STATEMENTS PAGES

4

Mr. Urbanik 6-11

5

Ms. Lambert 12-13

6

Mr. McCullough 13-14

7

Mr. Cochell 14-32

8

9

WITNESS EXAMINATION BY PAGE

10

Daniel J. Sherman Mr. Urbanik 39

11

Daniel J. Sherman Mr. Cochell 56, 77

12

Jeff Baron Mr. Urbanik 88

13

Jeff Baron Mr. Cochell 126

14

Jeff Baron Mr. Urbanik 156

15

Damon Nelson Mr. Urbanik 162

16

Damon Nelson Mr. Cochell 169

17

Damon Nelson Mr. Urbanik 177

18

19

E X H I B I T S

20

DEBTOR'S DESCRIPTION ID. ADM.

21

1 Order appointing receiver 62 63

22

23

TRUSTEE'S DESCRIPTION ID. ADM.

24

1 July 6, 2009 settlement 42

25

agreement

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202

1

2

RULINGS

3

Page Line

4

Motion of Daniel J. Sherman to strike the 11 27

5

Baron objection, overruled.

6

XBT is approved as a stalking-horse bidder at 198 20

7

the proposed offer price of 300,000 dollars.

8

The proposed bid procedures are approved. 198 22

9

There will be a thirty-day marketing period. 198 23

10

There shall be a bid deadline that will be at 198 23

11

least thirty days after notice of the sale

12

has been provided by the trustee.

13

After the bid deadline, if there are 198 25

14

competing qualified bidders, the trustee

15

shall conduct an auction, at which the

16

required topping bid would be $330,000,

17

with a $40,000-dollar deposit and evidence

18

of financial wherewithal to be provided

19

to the trustee. Subsequent bidding will

20

be in minimum increments of $10,000.

21

Breakup fee of $20,000 to XBT if it is not 199 9

22

the ultimate winning bidder, is approved.

23

24

25

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203

1

2

C E R T I F I C A T I O N

3

4

I, Clara Rubin, certify that the foregoing transcript is a

5

true and accurate record of the proceedings.

6

7

8

9

10

______________________________________

11

CLARA RUBIN

12

13

Veritext

14

200 Old Country Road

15

Suite 580

16

Mineola, NY 11501

17

18

Date: September 17, 2013

19

20

21

22

23

24

25

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ONDOVA LIMITED COMPANY

Case No. 09-34784-sgj11 September 10, 2013

A

abandoned (2)

39:13;131:20

ability (7)

40:18;131:25;

171:9;185:12,15;

186:4,12

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65:18;82:22;98:8;

130:3;131:17;

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124:15

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132:25;136:22;

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against (39)

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24;111:14,17,25;

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14;121:1;137:6,11,

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180:19,20;184:16;

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agent (1)

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91:10,11;98:21;

104:13;113:7;

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26:20,25;27:15,18;

32:5;40:10;41:7,16,

19;42:19;44:8;

60:13;63:23;69:5;

71:5;85:11;86:14;

88:25;89:2;100:20;

101:2,5,8,11;105:15;

106:7,10;108:22;

109:20;110:14;

137:24;138:25;

139:18,21;140:1;

141:4,6,24;142:23;

144:1,4,8,11,21;

146:21;153:16,23,

24,25;154:24;158:6;

177:2;179:18;

183:15,24;188:13,

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194:18;195:3,5,5;

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141:7,8,8;143:5;

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3:22;4:10;62:12,

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Alex (1)

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Alexi (1)

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Alex's (1)

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