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. §

REPLY IN SUPPORT OF STEPHEN R. COCHELL’S MOTION FOR APPOINTMENT

AS COUNSEL FOR JEFF BROWN IN UNDERLYING MATTER

In response to Stephen R. Cochell’s (“Cochell”) Motion for Appointment as Counsel for

Jeff Baron, the Receiver launches a fusillade of arguments based on personal ad hominem attacks

on Mr. Cochell that are grossly inaccurate and untrue. The Receiver’s vitriol underscores the

need for Mr. Baron to be represented by an attorney and advocate who will protect his interests.

I. Summary of Argument

As a threshold matter, the Court ordered Jeffrey Baron to retain counsel of choice. [Dkt.

904]. Because Mr. Baron has no access to his funds, counsel filed the instant motion to ensure

that the Court approved payment of fees for Mr. Baron’s representation. [Dkt. 960].

The Receiver initially asserts the Court should not appoint Mr. Cochell because it there is

no need to appoint counsel because Mr. Schepps has been acting as trial counsel. This argument

is flatly contradicted by the Court’s order, which finds that Mr. Schepps is not Mr. Baron’s trial

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counsel. [Dkt. 904 at 1 fn. 1]. The Receiver then asserts appointment is premature and

unnecessary because the action has been stayed. However, this argument ignores the fact that

the Court ordered that Mr. Baron retain counsel to represent him in the underlying suit. It

appears that the Court may have stayed the time for responding to the Amended Complaint until

the issue of Mr. Baron’s representation is resolved. Even assuming that the case is stayed for a

lengthy period of time, Mr. Baron needs the assistance of counsel to conduct informal, as well as

formal discovery to preserve evidence while the case is still relatively fresh.

The Receiver then argues that the Court should reconsider its prior order and refuse to

appoint counsel or to reject Mr. Baron’s counsel of choice, thereby leaving Mr. Baron without

the benefit of trial counsel. Instead of addressing the issues raised by Mr. Cochell regarding the

lack of diversity jurisdiction supporting the Netsphere lawsuit, the Receiver attacks Mr. Cochell,

alleging that he violated a gag order entered by Judge Hittner in the Stanford criminal

proceeding. [Dkt. 979 at 5-6]. Counsel for the Receiver is flat wrong about Mr. Cochell

violating a gag order. The Receiver failed to advise the Court of a fact material to this argument.

A Motion to Vacate and Set Aside Judge Hittner’s Preclusion Order was filed, at which time, it

became apparent that a pleading filed by Mr. Cochell had been misquoted by two separate

internet news organizations, which misled Judge Hittner into believing that the gag order was

violated. [Exhibit A, Dkt. 610, USA v. Stanford].Judge Hittner withdrew the Order removing the

sanctions. [Exhibit B, Dkt. 646, USA v. Stanford]. In matters involving the reputation of

counsel, the Court should not allow any party to smear opposing counsel with inaccurate, false or

misleading facts. Either the Receiver set out to mislead this Court, or is guilty of gross

negligence in failing to determine whether the order was set aside.

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The Receiver further asserts that one of Mr. Cochell’s clients, R. Allen Stanford, had no

right to file a lawsuit challenging unlawful conduct by the authorities and that, because he filed a

lawsuit for a client, he should be disqualified from acting as counsel. Id. The Receiver’s

argument is myopic and short-sighted. It is axiomatic that individuals are entitled to file lawsuits

against the Government for redress of wrongs. Counsel for the Receiver should recognize this

principle because one of his partners at Gardere Wynn represents, or represented Mr. Stanford in

the criminal case before Judge Hittner. The attacks on Mr. Stanford breach a fundamental

fiduciary duty, the duty of loyalty. As set out in the first page of the lawsuit, the case was filed

to preserve Mr. Stanford’s rights and avoid a statute of limitations problem. Barely three weeks

later, and after discussion by Mr. Stanford’s counsel with the government attorneys, a Notice of

Dismissal was filed reserving the right to re-file the case after the criminal trial. The issues

raised in the complaint were addressed to Judge Hittner in the criminal case. Regardless of one’s

opinion about the issues raised in the lawsuit, counsel had a duty to preserve his client’s rights.

For whatever reason, the record reflects that Mr. Baron has been unrepresented by trial

counsel since the beginning of the receivership. The record also reflects that, on May 15, 2012,

the Receiver argued that Mr. Baron would probably engage in vexatious litigation if he was not

represented by counsel; yet, a month later, the Receiver flip-flops and now claims that if counsel

is appointed, Mr. Baron will engage in vexatious litigation.

[Dkt. 928] (“retaining new counsel

would be a step towards ending the receivership in an orderly fashion (contravening Mr. Baron’s

apparent goal of driving the Receivership into administrative insolvency.”). As set out below,

Counsel does not plan to review the entire file of this case unless there is a need to do so in

litigating the underlying lawsuit. From a review of some of the Receiver’s pleadings, however, it

does not appear that Mr. Baron has engaged in vexatious litigation, but has reportedly hired

counsel and allegedly failed to pay them, or objected to their fees. Counsel is not currently in a

position to address the merits of these claims.

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the Receiver’s arguments possess some of the hallmarks of vexatious litigation and are a waste

of Mr. Baron’s resources.

III. The Receiver’s Counsel Omitted Material Facts in his Unsupported

Assertions of Sanctionable Conduct by Mr. Cochell.

As this Court knows, vexatious litigators frequently launch personal attacks on opposing

counsel to deflect the Court from the real issues in a case, citing facts out of context or even

misleading the court by omitting mention of material facts in their pleadings. In some cases,

counsel are simply “churning” the file and attempting to create non-existent conflict and

discovery disputes. In his Response, the Receiver alleges that Mr. Cochell violated a gag order

and was sanctioned by Judge Hittner. However, the Receiver failed to disclose a material fact to

this Court----- Judge Hittner’s order was vacated.

The undersigned attorney has never been sanctioned by a court for violating a court

order. The Receiver asks: “So, who is Mr. Cochell?” Mr. Cochell has been a practicing attorney

since 1979 and served as an Assistant United States Attorney, as a Judge Advocate in the Naval

Reserve and also served as Chief Disciplinary Counsel of the Utah State Bar, where he

prosecuted lawyers who engaged in excessive billing practices, vexatious litigation tactics,

defrauded clients and failed to exercise candor and professional responsibility before the courts

of that state. Mr. Cochell takes his duty as an officer of the Court seriously, and intends to

become thoroughly grounded in the facts and law of this case, and not devolve to bickering and

unsupported attacks on counsel for the Receiver.

The Receiver also makes much of the fact that Mr. Cochell referred to the Receiver as“firing”

prior counsel for Mr. Baron. [Dkt. 960 at ¶ 4]. Regardless of word choice, the Receiver did

terminate compensation to prior counsel at the inception of the litigation and the attorneys ceased

to represent Mr. Baron. [Dkt. 169, Declaration of Sidney Chesnin]

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As this Court knows, civility has become a scarce commodity in the legal profession.

Counsel for the Receiver did not contact Mr. Cochell or ask about Judge Hittner’s order, nor did

he review the record to see if the order was challenged and set aside. The concept of civility

encompasses the basic idea that one must provide this Court, or any court, of accurate, truthful

facts about an attorney before attacking his reputation in a public record. Mr. Golden would, no

doubt, expect that counsel exercise diligence before smearing his reputation.

The facts surrounding the gag order are as follows: Judge Hittner found a violation of a

gag order and sanctioned the undersigned attorney based on inaccurate information, and without

a third party investigating the allegations prior to issuance of an order. [Dkt. 510, USA v.

Stanford] Mr. Cochell was never asked about news articles published by Bloomberg News and

Courthouse News Service that erroneously attributed public statements to Cochell, which led

Judge Hittner to believe there was a violation of the gag order. [Dkt. 612, USA v. Stanford]. Mr.

Cochell filed an appropriate motion to vacate and set aside the order. Id. Judge Hittner

essentially granted the Motion and withdrew the Order. [Dkt. 646, USA v. Stanford]. Counsel

for the Receiver, however, failed to investigate this issue before making an allegation that is and

was obviously untrue.

Attorneys are expected to represent clients zealously and within the bounds of the law,

but they are also expected to act with civility when appearing before the Courts. Civility, in

Section III, ¶10 of the Texas Lawyer’s Creed was adopted by the Supreme Court of Texas in

1989, and provides: “I will not, without good cause, attribute bad motives or unethical conduct

to opposing counsel nor bring the profession into disrepute by unfounded accusations of

impropriety. I will avoid disparaging personal remarks or acrimony towards opposing counsel,

parties and witnesses. I will not be influenced by any ill feeling between clients. I will abstain

from any allusion to personal peculiarities or idiosyncrasies of opposing counsel.” (emphasis

supplied).

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part, dictates some sensitivity to checking the facts before make false, untrue as part of an effort

to deny counsel appointment in this case. The mark of a vexatious litigator is one who

needlessly proliferates pleadings and wastes the Court’s time and resources on motions that are

unsupported by the law or the facts, and who unfairly smears the reputation of opposing counsel.

It is ironic that, in a case purportedly about “vexatious litigation”, counsel for the Receiver failed

to advise the court that the sanctions against the undersigned counsel were vacated by Judge

Hittner. See Rule 3.03, Tex. Disc. Rules of Professional Conduct (Candor to the Tribunal).

IV. Attacking Counsel for Filing a Lawsuit Against Government Agents is

Misguided. Moreover, the Receiver Breached His Duty of Loyalty to His

Own Client in Making This Argument.

It is axiomatic that citizens have a right to petition their government for redress. The

Receiver suggests that counsel filed frivolous litigation in an action filed on behalf of Robert

Allen Stanford alleging constitutional violations by various SEC and Department of Justice

personnel. There is no evidence to support the Receivers’ suggestion that the lawsuit was

improperly filed. Indeed, the issue was never even raised by the Government in that lawsuit.

There is no question that Mr. Stanford is an unpopular public figure. However, counsel

for the Receiver should not impute evil motive to the undersigned counsel for filing a lawsuit for

Mr. Stanford where, as here, Mr. Golden’s own law firm, Gardere Wynn, represented Mr.

Stanford in his criminal case. United States of America v. Robert Allen Stanford, 4:09-cr-00342.

The undersigned counsel concludes that the representation was either calculated, or was the

result of gross negligence by counsel for the Receiver.

The Receiver’s reliance on a “commentator’s” unsupported opinion in a Bloomberg News

article is not helpful, nor is it reliable. As set out in Exhibit A, Bloomberg was partially

responsible for misquoting Mr. Cochell, resulting in the issuance of the vacated gag order.

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Mark W. Bayer, a partner in Gardere Wynn’s Dallas office, is listed as counsel of record for Mr.

Stanford in the criminal case. Mr. Golden also practices out of that firm’s Dallas office.

Gardere Wynn, through Mr. Golden, breaches its duty of loyalty to Mr. Stanford when it accuses

Mr. Stanford of vexatious litigation and further refers to their own client as an alleged Ponzi-schemer.

Regardless of what one thinks of Mr. Stanford, his own lawyers should not be casting their client in an

unfavorable light. Every client, including Mr. Stanford, is entitled to loyalty from his attorneys.

The issues of government misconduct in Stanford v. Korotosh, et.al., were subsequently

raised by trial counsel in USA v. Stanford. In Korotosh, there was no finding, or even an

allegation of sanctionable conduct for a pleading that was detailed, fact specific and challenged

the right of the government to engage in certain types of investigative conduct.

After

discussions with Government prosecutors by Stanford’s counsel, a Notice of Dismissal was filed

stating that Counsel determined that the claims in the case could be preserved through the

proceedings in the criminal case. Counsel made it clear that the action was being filed to

preserve Mr. Stanford’s rights due to running of the statute of limitations. [Dkt. 979, Ex. B at 1

fn.1]. Once it was clear that Mr. Stanford’s rights were preserved through the criminal case,

counsel filed the Notice of Dismissal without prejudice to Mr. Stanford re-filing the action after

his criminal trial was resolved. Thus, the Receiver again fails to mention facts that are material

to any allegations about the undersigned counsel.

The Receiver generally asserts that the defendants in Korotosh possessed immunity, which is

only partially true. The SEC personnel possessed qualified immunity. The issue of immunity

for government prosecutors during the investigative phase of a case is questionable where there

is no grand jury investigation, or where prosecutors are acting jointly with civil government

lawyers to obtain evidence for purposes of criminal prosecution. Regardless of one’s

philosophical or judicial view of immunity, the Korotosh lawsuit raised legitimate legal and

factual issues for a court to decide.

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In casting aspersions against Mr. Cochell, Mr. Golden has violated a fiduciary duty of

loyalty to Mr. Stanford, as Mr. Bayer’s fiduciary loyalty to Mr. Stanford is equally binding on

other partners of Gardere Wynn, including Mr. Golden.

V. Mr. Baron is Unrepresented by Trial Counsel

The Receiver’s argument that Mr. Schepps is Mr. Baron’s trial counsel is confusing at

best. The Court recently found that Mr. Schepps is not Mr. Baron’s trial counsel and ordered

Mr. Baron to retain trial counsel. [Dkt. 904 at 1 fn.1]. Even assuming that Mr. Schepps was an

advocate for a client he represents on appeal, he is apparently unpaid and clearly not representing

Mr. Baron as trial counsel. In light of the Court’s ruling that Mr. Schepps was not Mr. Baron’s

trial counsel and ordering Mr. Baron to retain trial counsel for the underlying suit, the Receiver’s

insistence that Mr. Schepps formally withdraw as trial counsel is without merit.

VI. Mr. Baron Requested Mr. Cochell Act As Counsel of Choice.

Barely a month ago, the Receiver argued that Mr. Baron needed an attorney to eliminate

the possibility of vexatious litigation. The Receiver now argues that Mr. Baron does not need a

trial attorney and the Court should not appoint Mr. Cochell and pay him for his services. The

Receiver’s position on appointing trial counsel for Mr. Baron is hopelessly contradictory and

appears to support a conclusion that the Receiver would prefer Mr. Baron to be unrepresented

and unable to defend his interests.

Mr. Cochell is an attorney and officer of the Court filing a Motion for Appointment as

Counsel for a client. The pleading was filed subject to F.R.Civ.P. 11 and was made after full

consultation, and at the request of Jeffrey Baron. The Receiver’s argument that the Court should

require Mr. Baron to file an affidavit is extraordinary and is nothing more than hyperbole.

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VII. Conclusion

The Court should not allow any party, including the Receiver, to engage in satellite

litigation needlessly smearing the reputation of counsel while: (1) failing to contact counsel

prior to filing this motion and discussing their assertions; (2) omitting material facts to the Court

that were highly relevant and negate their arguments; and (3) violating their fiduciary duty to

another client in their zeal to disqualify Mr. Cochell, and deprive Mr. Baron of his counsel of

choice.

Accordingly, Mr. Cochell requests the Court award him reasonable attorney’s fees for

having to expend four hours of time responding to these spurious allegations. The Court has the

inherent power to award such fees and should do so where, as here, counsel has far exceeded the

bounds of civility, the facts or the law. Moreover, the Court should not allow Gardere Wynn to

bill Mr. Baron’s estate for its fees in filing this response.

Very respectfully,

_/s/Stephen R. Cochell

Stephen R. Cochell

The Cochell Law Firm, P.C.

Texas Bar No. 24044255

7026 Old Katy Rd., Ste 259

Houston, Texas 77096

(713)980-8796 (phone)

(713)980-1179 (facsimile)

srcochell@cochellfirm.com

CERTIFICATE OF SERVICE

I hereby certify that this document filed through the ECF system will be sent electronically to the

registered participants as identified on the Notice of Electronic on June 21, 2011.

/s/ Stephen R. Cochell

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