Netsphere, Inc. v. Baron
703 F.3d 296
5th Cir.2012Background
- Baron and Ondova formed ventures with Netsphere disputes leading to settlement discussions; MOU settled all disputes in 2009.
Baron allegedly breached the MOU; Netsphere sought enforcement in the northern Texas district court, triggering injunctive relief.
- The district court entered a June 2009 preliminary injunction with a $50,000-per-day penalty for noncompliance and showed concern about Baron's many lawyers.
- Baron caused Ondova to file for bankruptcy; bankruptcy stay paused district court litigation, and a Chapter 11 trustee (Daniel Sherman) was appointed in 2009.
- A global settlement, approved in July 2010, divided domain names between Quantec (Baron) and Manila Industries (Krishan); settlement relied on transfer of names and retained district court jurisdiction.
- In November 2010, the bankruptcy trustee moved for appointment of a receiver due to Baron’s persistent hiring/firing of lawyers; the district court appointed a receiver ex parte on November 24, 2010; Baron appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a receivership over non-subject assets was proper | Baron | District court | Receivership over Baron's personal assets and non-subject properties improper |
| Whether the receiver could be used to pay unsecured attorney claims | Baron | Trustee/receiver | Not permissible to marshal funds to pay unsecured claims outside the underlying dispute |
| Whether district court could extend receivership to Novo Point, Quantec | Baron | District court | Receivership could not include Novo Point and Quantec |
| Whether equity supports fees for an improper receivership | Baron | Trustee/receiver | Fees must be reassessed and awarded from appropriate fund; release of assets to Baron |
| Whether other motions remain live after reversal | Baron | Various | Moot or unresolved motions treated as moot; judgment vacates receivership |
Key Cases Cited
- Santibanez v. Weir McMahon & Co., 105 F.3d 234 (5th Cir. 1997) (abuse of discretion in receivership standards and limits)
- Gordon v. Washington, 295 U.S. 30 (1935) (receivership for protection of property pending disposition)
- Woodson v. Surgitek, Inc., 57 F.3d 1406 (5th Cir. 1995) (court's power to manage its affairs; limitations on remedies)
- FDIC v. Maxxam, Inc., 523 F.3d 566 (5th Cir. 2008) (receivership as equitable remedy with limits)
- De Beers Consolidated Mines, Ltd. v. United States, 325 U.S. 212 (1945) (equity powers limited; injunctions cannot freeze assets without basis)
- Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) (equitable relief in money-damages actions bounded by traditional equity limits)
- Cochrane v. W.F. Potts Son & Co., 47 F.2d 1026 (5th Cir. 1931) (jurisdiction over assets must be tied to underlying litigation)
- Palmer v. Texas, 212 U.S. 118 (1909) (costs of improper receivership to be allocated equitably)
- Commercial Nat’l Bank v. Connolly, 176 F.2d 1004 (5th Cir. 1949) (equitable control of receivership costs to fund administered property)