Mark Stromberg
State Bar No. 19408830
STROMBERG STOCK, PLLC
Two Lincoln Centre
5420 LBJ Freeway, Suite 300
Dallas, Texas 75240
Telephone 972/458-5335
Facsimile 972/770-2156
E-mail: mark@strombergstock.com
Attorneys for Jeffrey Baron, Alleged Debtor
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
IN RE: §
§
JEFFREY BARON, § Bankr. No. 12-37921-SGJ
§
Alleged Debtor. §
______________________________________________________________________________
JEFFREY BARON’S REQUEST FOR LEAVE TO SEEK LIMITED RELIEF FROM
ORDER CLARIFYING APPLICATION OF STAY TO CERTAIN APPEALS
Jeffrey Baron (the “Alleged Debtor”), by and through counsel, and pursuant to the Court’s
Order Clarifying Application of Automatic Stay to Certain Appeals [Doc. 81, the “Order”], and
Bankruptcy Rule 8003, requests leave of this Court to seek limited relief to file an appeal of this
Court’s Order: Continuing to April 4, 2013 at 2:30 PM the Joint Status Conference an Hearings
Set for 3/19/13 at 10:30 AM on various motions filed by the Receiver; Requiring Mandatory,
Good Faith, in-Person Global Settlement Conferences Among Parties and Lawyers During Next
Two Weeks; (c) Authorizing Payment of Court Reporter Fees; and (d) Addressing Miscellaneous
Issues. A copy of the Order is attached as Exhibit A.
In support of his request for relief from the Order Clarifying Application of Automatic
Stay to Certain Appeals, Alleged Debtor provides a summary of the following issues:
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I. The Order and Issues on Appeal
Specifically, the Alleged Debtor wishes to appeal from that portion of the Order
[Dkt. 96] that orders as follows:
there shall be no wind-down plan considered by the district Court for the
Receivership at this time for two reasons: the automatic stay of the Jeff Baron
involuntary bankruptcy case; and (b) no mandate has been issued by the Fifth
Circuit with regard to its ruling invalidating the Receivership (which is not final at
this time). There will be no hearing on a wind-down of the Receivership unless
and until both of the following occur: (a) the automatic stay of the Jeff Baron
involuntary bankruptcy order is terminated; and (b) a mandate has been issued by
the Fifth Circuit with regard to its ruling invalidating the Receivership. [Dkt. 96 at
4].
The Alleged Debtor does not seek leave to appeal from any other provisions of the subject Order.
This portion of the Order interferes with the jurisdiction of the Fifth Circuit Court of
Appeals over the receivership property and the District Court’s ability to coordinate the activities
of both the involuntary bankruptcy and the receivership. The order assumes subject matter
jurisdiction over a petition for involuntary bankruptcy that has been brought on disputed claims.
Mr. Baron understands that the Bankruptcy court has ruled that the claims are bona fide
undisputed claims that can be the subject of an involuntary bankruptcy.
1
The Bankruptcy
Court’s conclusion was based on the argument that the Compromise Order entered by the
District Court (Dist. Dkt. 575) was a final, binding order. As set out below, the order was not
final or binding.
Finally, the Bankruptcy Court has entered an order abating the bankruptcy proceeding
until the Fifth Circuit’s mandate, the timing of which is unknown and potentially lengthy. The
District Court has, on at least two occasions, requested that the parties devise a plan to wind
down the receivership. Further delay of winding down, or at least discussing a wind down plan
1
A proposed order has been uploaded for the Court’s consideration as well as an Order Denying
Alleged Creditor Jeffrey Baron’s Motion to Dismiss.
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will materially delay potential settlement of the case, increase the costs of administration for two
estates and delay termination of the receivership. For these reasons, the Alleged Debtor
respectfully requests the Court grant leave to appeal the order. Subject to further order of this
court, the Notice of Appeal is filed contemporaneously with this Motion.
II. Res Judicata Should be Applied Against Jeff Baron.
As set out in pleadings and oral argument on the Creditors’ Motion for Partial Summary
Judgment, the Alleged Debtor maintains that Judge Furgeson’s order in Docket No. 575 was not
final as the District Court specifically held: (a) that Mr. Baron had a right to litigate
counterclaims against all claimants; (b) entered an order stating that funds to be paid under the
Compromise Order could not be paid until the Fifth Circuit ruled on the appeals; and (c) the
Order did not state that it was final. This Court has concluded that the Compromise Order was
final and binding on the parties based on the doctrine of res judicata, and precludes any bona fide
dispute as to the Petitioning Creditors’ claims.
The doctrine of res judicata (claim preclusion) requires the following elements: (1) The
parties are identical or in privity; (2) the judgment in the prior action was rendered by a court of
competent jurisdiction; (3) the prior action was concluded to a final judgment on the merits; and
(4) the same claim or cause of action was involved in both actions. Swate v. Hartwell, 99 F.3d
1282, 1286 (5th Cir.1996). The Fifth Circuit expressly held that the claims were not decided on
the merits, and ruled that the appointment of the Receiver - - pursuant to which authority the
Compromises embodied in that order were reached - - was improper. Thus, the Alleged Debtor
maintains that res judicata should not be applied to preclude bona fide disputes.
III. The Bankruptcy Ruling Conflicts with the Fifth Circuit Decision.
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As a practical matter, the Bankruptcy Court’s ruling is in direct conflict with the Fifth
Circuit’s decision holding that the claims of the attorney claimants in the receivership were not
determined by the district court on the merits. This places the Bankruptcy Court in the
anomalous position of actually or effectively overruling a decision by the Fifth Circuit by
holding that a Compromise Order entered by the District Order somehow supersedes an order of
the Fifth Circuit. While appeals for the parties are not completed, the reasoning and conclusions
of the Fifth Circuit should not be disregarded. The Fifth Circuit ordered that the District Court
proceed with the wind-down of the receivership. The Alleged Debtor respectfully submits that
this portion of the Order must, as a matter of law, be reversed.
IV. The Fifth Circuit Ordered the District Court to Wind Down the Receivership.
The District Court Should Withdraw the Reference and Comply with that
Order.
As a matter of judicial economy, the Receiver and the Alleged Debtor’s motion to
withdraw the reference should be decided prior to any further proceedings in the Bankruptcy
Court. Local Bankruptcy Rules 5011-1.
The Order interferes with the jurisdiction of the Fifth Circuit Court of Appeals in
ordering a wind-down of the receivership and also with the District Court's ability to comply
with the Fifth Circuit's order to wind down the receivership. The District Court referred the
matter to the Bankruptcy Court but previously entered an order that any interference with the
District Court’s enforcement of its order would violate its order. Both the Receiver and the
Alleged Debtor believe the involuntary constitute a violation of the receivership order and should
be the subject of a show cause order.
The Receiver filed a motion to withdraw the reference to the bankruptcy, and the Alleged
Debtor joined in that motion [DC Docket No. 1187, Dkt. 1199 at 5]. The wind down plans filed
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by the Receiver and the Alleged Debtor seek withdrawal of the reference to the bankruptcy court
to eliminate the duplication of effort leading to the reason for the joint status conference.
WHEREFORE, the Alleged Debtor requests an Order Granting Relief from Order
Clarifying Application of Stay to Certain Appeals and granting leave to appeal the Order [Dkt.
96].
Very respectfully,
STROMBERG STOCK, PLLC
/s/ Mark Stromberg
Mark Stromberg
Texas Bar No. 19408830
CERTIFICATE OF SERVICE
This is to certify that, on April 1, 2013, a copy of this document was served on all
counsel through the Court’s ECF system.
/s/ Mark Stromberg
Mark Stromberg
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