No. 10-11202

In the

United States Court of Appeals

for the Fifth Circuit

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NETSPHERE, INC. Et Al,

Plaintiffs

JEFFREY BARON,

Defendant-Appellant

ONDOVA LIMITED COMPANY,

Defendant-Appellee

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Appeal of Order Appointing Receiver in Settled Lawsuit

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Cons. w/ No. 11-10113

NETSPHERE INC., Et Al, Plaintiffs

JEFFREY BARON, Et Al, Defendants

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

Appellants

PETER S. VOGEL,

Appellee

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Appeal of Order Adding Non-Parties Novo Point, LLC

and Quantec, LLC as Receivership Parties

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From the United States District Court

Northern District of Texas, Dallas Division

Civil Action No. 3-09CV0988-F

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RESPONSE AND MOTION FOR RELIEF WITH RESPECT TO

VOGEL MOTION TO LIQUIDATE JEFF BARON’S STOCKS

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Case: 10-11202 Document: 00511598161 Page: 1 Date Filed: 09/09/2011

TO THE HONORABLE FIFTH CIRCUIT COURT OF APPEALS:

COMES NOW JEFFREY BARON, Appellant, and subject to the

preliminary Fifth Amendment objection and motion previously filed in this cause,

make this response, objection and motion for relief with respect to Vogel’s motions

to liquidate Jeff Baron’s stocks.

Vogel’s motion to liquidate Baron’s IRAs was

denied by the District Court and has been withdrawn by Vogel, and this response

addresses Vogel’s motion to liquidate Baron’s stocks.

I. ARGUMENT AND AUTHORITY

There Are No In Rem Claims Against Jeff Baron’s Property

Contrary to the underlying basis of Vogel’s motion, there are no in rem

claims against Jeff Baron’s property being held in receivership. As a preliminary

matter, an unsecured creditor has, in the absence of statute, no substantive right,

legal or equitable, in or to the property of his alleged debtor. This is true, whatever

the nature of the property. The only substantive right of a simple contract creditor

is to have his debt paid in due course. His adjective right is, ordinarily, at law. He

has no right whatsoever in equity until he has exhausted his legal remedy.

Accordingly, a court does not have equitable jurisdiction to use receivership to

enforce unsecured creditors’ in personam claims (against the owner of the

The three motions involved are (1) 07/05/2011 MOTION filed by Appellee Mr. Peter S. Vogel

of The Receiver's Omnibus Motion to Permit Cashing Out of Stocks and IRAs (Pending Before

the District Court and Filed with the Fifth Circuit Pursuant to District Court Order) [6850979-2];

(2) 07/05/2011 MOTION filed by Appellee Mr. Peter S. Vogel Withdrawing the preceding

Motion [6850979-2]; and (3) 7-07-11 Motion to permit liquidation of non-exempt stocks-but not

the liquidation of the IRA's.

Case: 10-11202 Document: 00511598161 Page: 2 Date Filed: 09/09/2011

receivership property) before those claims have been reduced to judgment. Pusey

& Jones Co. v. Hanssen, 261 U.S. 491, 497 (1923); e.g., Williams Holding Co. v.

Pennell, 86 F.2d 230 (5th Cir. 1936).

Vogel is ignoring a fundamental principle of law— the distinction between

equitable in rem claims against receivership property and in personam claims at

law against the owner of the receivership property individually. Receivership

actions are in rem actions over specific property. E.g. Sumrall v. Moody, 620 F.2d

548, 550 (5th Cir. 1980). In personam actions to establish liability on claims

against individuals do not involve the receivership res. Hawthorne Savings v.

Reliance Ins. Co., 421 F.3d 835, 855 (9th Cir. 2005) (noting the fundamental

distinction between “the liquidation of a claim and the enforcement of the claim

after it has been reduced to judgment”). After an in personam action has been

liquidated and reduced to judgment, an attempt to execute the judgment against

property is then normally in rem (and, thus, an attempt to execute on a judgment

would seek an interest in the receivership res). Id. Accordingly, only an attempt to

levy against the res made after a judgment has been obtained in personam is an in

rem action that relates to a court's dominion over the receivership res. Id. Vogel is

attempting to create an interest in property that does not exist. The ‘claimants’

against Baron have not asserted any legally cognizable in rem claims against the

res property– rather, the claimants allege that Mr. Baron personally is obligated in

personam to pay them money for breach of contract. The crucial step of

adjudication of in personam liability against Baron has not occurred. The District

Case: 10-11202 Document: 00511598161 Page: 3 Date Filed: 09/09/2011

Court’s order to pay ‘claimants’ against Baron has been appealed and the District

Court has been stayed from further proceedings. Notably, a fundamental step of

adjudicating in personam liability is a constitutionally protected step and, with

claims at law, invokes a citizen's right to trial by jury. E.g., Ross v. Bernhard, 396

U.S. 531, 531 (1970). Accordingly, it is premature to seek to liquidate Baron’s

stocks. The matter is currently on appeal and there are no in rem claims to the

receivership res, only unliquidated in personam ‘claims’ against Baron. Notably,

the District Court lacks subject matter jurisdiction over those non-diverse in

personam state law claims against Baron personally.

Irreparable Injury and Costs

Vogel’s motion fails to apprise the Court of the irreparable injury and costs

involved with the liquidation of the stocks. As a primary matter there is a

substantial tax liability which will be incurred with the stock’s sale. Additionally,

because the stock market is extremely depressed in value at this time, there is a

very real likelihood that should the Court at a later time determine that Baron’s

assets should not have been liquidated to pay the alleged ‘claims’ solicited against

Baron by Vogel, it will not be possible to restore ownership of the stocks currently

held because their market value will have vastly appreciated.

Equitable Considerations

As a matter of equity, the Court should examine, at least on a prima facie

Case: 10-11202 Document: 00511598161 Page: 4 Date Filed: 09/09/2011

basis the underlying ‘claims’ for which the stock sale is sought.

These claims

have not been tried before any court, the claims were solicited by Vogel and were

presented to the District Court below in a one-sided ‘report’ that intentionally

excluded all of the exculpatory evidence. SR. v8 p1242-43; SR. v7 p202.

A Better Alternative

Jeff Baron had a million dollars in his savings accounts. He voluntarily

turned over his banking information and material to the receiver immediately upon

imposition of the receivership. Still, the receiver emptied Baron’s savings accounts

in 'fees'. It is not comprehensible how reasonable costs of protecting a handful of

bank accounts and IRAs (that were voluntarily turned over to the receiver) could

reach a million dollars, emptying the bank accounts where were ordered conserved

by the receivership order. In any case, the only remaining assets of Jeff Baron in

receivership are his exempt IRAs

and the stocks receiver now seeks to liquidate.

If the receivership as to Jeff Baron’s property is now dissolved or stayed

pending appeal, Baron can borrow and pay into the receivership cash in the amount

of the liquidation value of the stocks. There is no reason to keep Baron in

A compelling prima facie case is established in the record that the ‘claims’ solicited by Vogel

against Baron are absolutely groundless. SR. v8 p 1197-1201, 1212- 1243. For example, Doc

522 should be examined. SR. v6 p64. The issues presented in that filing are issues of law based

upon the “claimant’s” own evidence and statements and establish that the ‘claim’ is clearly

groundless, even frivolous. The District Court’s response to being presented with the clear

argument establishing the groundless of the claim was to seal the revelation as if it were some

state secret. SR. v6 p64 (sealing Doc 522).

Pursuant to Texas Law, the Roth IRA accounts are exempt from execution. Tex.Prop.Code

§42.0021; E.g., In re Youngblood, 29 F.3d 225 (5th Cir. 1994). The IRAs were not property

subject to seizure by the receiver as it is a longstanding principle of law that a receiver may take

into his possession only “property which may be taken in execution”. Booth v. Clark, 58 U.S.

322, 331 (1855).

Case: 10-11202 Document: 00511598161 Page: 5 Date Filed: 09/09/2011

receivership— his savings accounts have been fully emptied by the receiver.

Allowing Baron to provide a bond in order to be released from the receivership

works no hardship to any party, eliminates the necessity to liquidate the stocks

(should such a necessity exist), and prevents further irreparable injury. Such a

remedy also eliminates the continuing costs of receivership as to Jeff Baron's

property. Further, there is no reason Baron should not be allowed to work and

engage in business transactions as he is currently prohibited from doing by the

receivership order.

II. CONCLUSION & PRAYER

There are no in rem claims asserted against Jeff Baron’s property held in

receivership, and there is accordingly no basis in law to liquidate his stocks.

Liquidation of the stocks involves costs including taxes and substantial risk of

irreparable injury. The stocks should not be sold until the appeal of the District

underlying issue of the denial of Jeff Baron’s right to paid counsel and jury trial (or

any trial) to defend the in personam ‘claims’ asserted against him is resolved.

Jointly, and in the alternative, Jeff Baron prays that the receivership as to

him personally be dissolved or stayed pending appeal and that he be allowed to

post bond in the amount of the stocks sought to be liquidated in return for release

of the stocks and his exempt property from the receivership, and the restoration of

his right to enter business transactions, work, and earn wages.

Case: 10-11202 Document: 00511598161 Page: 6 Date Filed: 09/09/2011

Respectfully submitted,

/s/ Gary N. Schepps

Gary N. Schepps

Texas State Bar No. 00791608

5400 LBJ Freeway, Suite 1200

Dallas, Texas 75240

(214) 210-5940 - Telephone

(214) 347-4031 - Facsimile

Email: legal@schepps.net

COUNSEL FOR APPELLANT

CERTIFICATE OF SERVICE

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

notification through the Court’s electronic filing system.

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANT

CERTIFICATE OF CONFERENCE

Counsel for the Vogel and Sherman oppose.

CERTIFIED BY: /s/ Gary N. Schepps

Gary N. Schepps

COUNSEL FOR APPELLANT

Case: 10-11202 Document: 00511598161 Page: 7 Date Filed: 09/09/2011