MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING WITHDRAWAL OF REFERENCE [DOC

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

NETSPHERE, INC., § Civil Action No. 3-09CV0988-F

MANILA INDUSTRIES, INC., and §

MUNISH KRISHAN, §

Plaintiffs. §

§

v. §

§

JEFFREY BARON, and §

ONDOVA LIMITED COMPANY, §

Defendants. §

MOTION TO STRIKE NOTICE OF TRANSMITTAL REGARDING

WITHDRAWAL OF REFERENCE [DOC 118] TO CLARIFY RECORD

FOR HEARING ON STAY PENDING APPEAL & BRIEF IN SUPPORT

TO THE HONORABLE ROYAL FURGESON, U.S. DISTRICT COURT JUDGE:

COMES NOW, Jeffrey Baron, Appellant, and respectfully requests this

Court to clarify the record of proceedings and strike the Notice of Transmittal

Regarding Withdrawal of Reference [DOC 118].

1. The report and recommendation attached by the bankruptcy court to the

transmittal is not a report regarding withdrawal of reference.

2. The bankruptcy court’s report was transmitted in violation of the Federal

Rules of Bankruptcy Procedure. Bankruptcy Rule 9033, which governs the

procedure for transmittal of reports and recommendations and mandatorily requires

that the report shall be filed with relationship to proceedings which were heard by

the bankruptcy Court. The bankruptcy Court conducted no hearing on the subject

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of the report, and the filing of such report is accordingly not in conformity with the

Bankruptcy Rules.

3. The required opportunity to object to the report was also circumvented.

The Rules of Bankruptcy Procedure require that “The clerk shall serve forthwith

copies on all parties by mail and note the date of mailing on the docket” and

“Within 14 days after being served with a copy of the proposed findings of fact and

conclusions of law a party may serve and file with the clerk written objections which

identify the specific proposed findings or conclusions objected to and state the

grounds for such objection.” F.R.Bankr.P. 9033. This procedure was not followed.

Less than 14 days after the drafting of the report, the district court adopted the

report, circumventing the statutory objection period.

4. The bankruptcy court lacked subject matter jurisdiction to make the

report. The bankruptcy court erroneously concluded that it had jurisdiction to

make the recommendation because “there could conceivably be an impact on the

Ondova bankruptcy estate, if attorneys who represented Jeffrey Baron and his

related entities go unpaid and make ‘substantial contribution’ claims against the

bankruptcy estate.” Since the right to reimbursement is owned primarily by the

creditor and based on contribution to the estate, whether the attorney is paid or not

is irrelevant to any conceivable impact on the bankruptcy estate.

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If a creditor pays an attorney who provided the services creating a substantial

contribution to the bankruptcy case, that creditor is entitled to file a claim and recover

his expenses. E.g., In re Energy Partners, Ltd., 422 BR 68 (Bankr.S.D.Tex. 2009).

An example of this rule applied in by the Fifth Circuit Court of Appeals is Matter of

DP Partners Ltd. Partnership, 106 F. 3d 667 (5th Cir. 1997).

In DP Partners HFG incurred $150,700 in attorney's fees. The Court held

that “reasonable compensation for professional services rendered by an attorney or

an accountant of an entity whose expense is allowable under paragraph (3) of this

subsection” and that “under the plain language of the statute, if HFG meets the

requirements of section 503, it shall recover administrative expenses. This statutory

mandate permits of no discretionary calls by the courts.” Accordingly the Court

held HFG was “entitled to actual and necessary expenses incurred in making a

substantial contribution to DP's Chapter 11 reorganization, including reasonable

professional fees.”

So, if a creditor pays attorney’s fees for work which made a substantial

contribution to the bankruptcy case, the creditor is entitled to file a claim and

receive reimbursement as was HFG in the DP Partners case.

If the same creditor does not pay the attorney, then the attorney is entitled to

file a claim to receive the same reimbursement directly. E.g., In re Texaco, Inc., 90

B.R. 622 (S.D.N.Y. 1988).

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Accordingly, there is no conceivable impact to the bankruptcy estate arising

out of a creditor’s payment or non-payment of attorney’s fees and the bankruptcy

court is without subject matter jurisdiction to issue recommendations regarding the

subject—especially where there is no formal dispute or state litigation regarding

the alleged claims.

FOR THE FOREGOING REASONS, Mr. Baron respectfully requests this

Court to strike the Notice of Transmittal Regarding Withdrawal of Reference

[DOC 118].

Respectfully submitted,

/s/ Gary N. Schepps

Gary N. Schepps

State Bar No. 00791608

Drawer 670804

Dallas, Texas 75367

(214) 210-5940

(214) 347-4031 Facsimile

APPELLATE COUNSEL FOR

JEFFREY BARON

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CERTIFICATE OF SERVICE

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

through the Court’s electronic filing system.

/s/ Gary N. Schepps

Gary N. Schepps

CERTIFICATE OF CONFERENCE

This is to certify that the undersigned called conferred with Mr. Raymond J.

Urbanik, attorney for DANIEL J. SHERMAN, Trustee for ONDOVA LIMITED

COMPANY, and they oppose.

/s/ Gary N. Schepps

Gary N. Schepps

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