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Fifth Circuit Ruling Doesn’t End Multiple Law Firm Fee Dispute

August 19, 2015 | Posted in : Fee Dispute, Fee Dispute Litigation / ADR, Fee Issues on Appeal, Unpaid Fees

A recent Texas Lawyer story, “Fifth Circuit Decision Fails to End Huge Fee Case,” reports that in 2011, Peter Vogel took on an unusual and difficult federal court assignment: to act as a receiver over a “vexatious litigant” who hired and fired 45 Texas lawyers while allegedly stiffing them for hundreds of thousands of dollars in attorney fees.

Four years and numerous appeals later, Vogel’s receivership is finally over.  The partner in Dallas’ Gardere sorted through the tangled case full of unpaid invoices that ultimately distributed nearly $1 million to 22 different law firms to keep the complicated litigation moving.  But the litigation itself is far from over, as the U.S. Court of Appeals for the Fifth Circuit’s recent decision in Baron v. Vogel indicates.

Jeffrey Baron, an internet entrepreneur who founded Ondova Limited—a licensed bulk domain name registrar—was sued in Dallas U.S. district court over a contract dispute in 2009.  Ondova later filed for bankruptcy, which automatically stayed the district court case.  At that stage of the litigation, Baron repeatedly hired and fired 45 lawyers, according to the bankruptcy trustee.

The district court deemed Baron a “vexatious litigant” and appointed Vogel as receiver over Baron’s business to assess the attorney fee claims and disburse Baron’s assets to resolve them.  The district court ultimately ordered that Baron pay $870,237 to 22 different law firms and solo attorneys in 2010.

Baron appealed the appointment of the receiver to the Fifth Circuit in 2011 and ultimately won.  In that decision, the appellate court found that the trial judge had no authority to establish a receivership “to control Baron’s hiring, firing and nonpayment of numerous attorney.”

But because the circumstances that led to the appointment “were primarily of Baron’s own making,” the Fifth Circuit concluded that charging Baron’s receivership fund for reasonable receivership expenses—without allowing any more of his assets to be sold—was an equitable solution.  The case was remanded back to the district court to reconsider the fees it had previously awarded to Vogel and whether they should be discounted.

The district court authorized several interim fee payments to Vogel and the lawyers who assisted him—which Baron appealed.  And in its most recent ruling, the Fifth Circuit has concluded that it has no jurisdiction at this time to decide the seemingly never-ending attorney fee dispute.