Clark v. Mortenson, CIV.A.H-02-3505.

• Decision Date: 23 December 2002
• Docket Number: No. CIV.A.H-02-3505.,CIV.A.H-02-3505.
• Citation: 256 F.Supp.2d 661
• Parties: Timothy J. CLARK, et al., Plaintiffs, v. Janet MORTENSON, et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

256 F.Supp.2d 661

Timothy J. CLARK, et al., Plaintiffs, v. Janet MORTENSON, et al., Defendants.

No. CIV.A.H-02-3505.

United States District Court, S.D. Texas.

December 23, 2002.

Brian Baum, Katy, TX, for Plaintiff.

Janiece M. Longoria, Houston, TX, for Defendant.

Order for Sanctions and Permanent Injunction

HUGHES, District Judge.

1. Introduction.

From its inception, this case frustrated the purposes of civil litigation. The plaintiffs' original and amended complaints state legal propositions that are wholly disconnected from the facts of the defendants' behavior. Worse than being mere failures, the pleadings are gratuitous, malicious attacks on the receiver for Austin Forex, her lawyer, other investors, and their lawyer.

The Texas securities board sued in Travis County to impose a receivership on Russell Erxleben's cluster of companies. The court appointed Janet Mortenson receiver. While Erxleben went to federal prison, she proceeded to recover about 60% of the investors' losses. Among the people she sued were the Dunns, who are Erxleben's in-laws, and Harry Nichols, who is a friend.

After messing in cases to recover transfers from Erxleben to the Dunns and Nichols, the Baum family recruited four investors to sue the receiver.

2. Baum Family.

Most of the blame for this misguided aggression falls on the Baum family. There are five Baums. Abe Baum, who is now dead, was a lawyer in New Jersey, admitted October 1, 1933. Abe Baum had no part in this, except that his son occasionally appropriates his name and law license.

Sheldon Baum is one of Abe Baum's sons. Sometimes he calls himself Abe or Abbe. Sheldon Baum graduated from Tulane, and he went to its law school one semester in 1953. Sheldon Baum was among the owners of Creditor Funds Recovery, a proprietorship that located missing creditors for unclaimed funds in bankruptcy court. Although Sheldon Baum formally withdrew from the business on the registration with the county clerk, he continues to run it through his sons.

Brian Baum is the elder son of Sheldon Baum. He graduated from law school and passed the bar in Pennsylvania. Brian Baum operates his law practice from the family house in Katy, a west Houston suburb. His assumed name certificates are for Baum & Baum, and one of them includes his non-lawyer brother as a principal.

Douglas Baum is the non-lawyer son of Sheldon Baum and brother of Brian Baum. He says that he now operates Creditor Funds Recovery. He generally assists his father and brother.

Lucretia Baum is Sheldon Baum's wife. Although her name appears on the Creditor Funds Recovery certificate, she has not apparently been active in the Austin Forex cases.

3. Plaintiffs.

The Baums recruited four people to join this suit by telling them that (a) there were funds in the receivership that Mortenson had not disclosed and (b) they could get money by seeking an accounting and assets that Mortenson had not recovered. They may have been told about waste and conflicts of interest. All of them had accounts with Erxleben's all-star investment company. They are businessmen in Austin, Denver, and Waco, plus a lawyer in Boise.

4. Plaintiff Misconduct.

The plaintiffs signed contingent-fee contracts with Baum & Baum, wrote a letter of authorization, or said "include me." The fee contract says it has authority to seek an accounting and to recover other assets of the receivership. Fairly read, it would include suing for those things.

Each of the plaintiffs had gotten the continual notices from the receiver of settlements, disbursements, hearings, and other events in the course of the receivership. Each of the plaintiffs knew nothing about errors or omissions by the receiver. Each of the plaintiffs knew nothing of the Baums—nothing other than the solicitation letter.

No plaintiff asked for the specifics of the firm that sought to represent him. No plaintiff asked for details of the need for an accounting, not even the lawyer. No plaintiff asked for a copy of the papers sent in his name. No plaintiff called to check the status of his claim. Hearing the promise of big recoveries in class actions, these men loosed people they did not know to start fights with others over claims that they did not understand. Without the casual participation of the plaintiffs, the Baums would not have had a vehicle.

The response of the plaintiffs to their discovery of what had been done in their names had the potential to mitigate their responsibility. One plaintiff went immediately to a new lawyer and had him write Mortenson immediately disclaiming knowledge of the accusations in the complaint. When he discovered that he had authorized the Baums to act for his family business, he immediately corrected his initial assertion that he had done nothing to start the suit. He has promptly been candid and apologetic, admitting his error.

Two plaintiffs compounded their error by calling the Baums and asking them to help them. They relied on the Baums to answer for them in the slander suit that the receiver brought in response to the Baums' sending the federal complaint to the Austin newspaper. They relied on the Baums' advice not to appear in federal court when they had been ordered to be present in person. When they later did appear they admitted their errors, confessing total ignorance about the allegations and little understanding of what they had been told by Sheldon Baum.

One plaintiff was as flippant in his response to this court's orders as he was to his retaining the Baums. In the case of this plaintiff, he cannot plead the ingenuity of the layman when dealing with these processes for he is a lawyer of some maturity and claimed sophistication. He swore to varying recollections of his authority to the Baums. His affidavit says he did not authorize them in writing; his oral testimony was that he may have signed the contract and that he may have said something that could have been construed as approval.

He did not disclaim the facts promptly. He sent the court a letter saying he could not be here for the hearing instead of moving for a continuance. After having filed the letter directly and after having a copy of the complaint, he used the Baums to file a notice of dismissal. Later, he swore that he fired the Baums, but he never moved for substitution of counsel or even made a pro-se appearance.

Even though he had the means through the Internet to see all orders and all docket entries, he did not look. Worse, he dissembled about the ability to use the judiciary's nationwide system. Had access not been available, he did not order copies from the court or otherwise see what he had been ordered to do and what had been done in his name. While the layman from Waco was clear and contrite, the lawyer from Boise was evasive and contradictory.

Their sanctions will be proportionate.

5. Sheldon Baum.

Sheldon Baum proclaimed himself the instigator of this suit. He determined who to name as plaintiffs, what claims to file, whom to sue, and where to file. He polled attorneys and receivers for advice on the complaint and conferred with the plaintiffs. They all believed that he was an attorney, with good reason. He also proclaimed his personal hostility to the defendants.

Sheldon Baum's relationship to the truth is pathological. In response to direct questions about simple objective data, he says what he prefers the facts to be rather than what they demonstrably are.

• Sheldon Baum swore that he graduated from Tulane law school. The office of the general counsel at Tulane said Sheldon did not graduate, and Baum himself offered in evidence a registrar's letter attesting that he had completed twelve hours.

• Sheldon Baum swore that he did not have a Texas driver's license because he did not drive anymore. In the same afternoon he said that it had expired, he had turned it back, and he only meant that he did not have it with him. He renewed it in the fall of 2001 according to the state's web site.

• He said that he did not drive anymore and then minutes later that he was in the court house only because he had driven his sons to the hearing.

• After telling this court that he was retired and only answered telephones for his sons' business, he admitted that he was the driving force behind this litigation. Others testified that their contacts were with him and not with his sons.

These examples are taken because of their clarity. Similar conflicts exist between the statements of father and sons as between different versions of the father's own words.

Sheldon Baum has had extensive experience with courts. He bears a felony conviction for procuring the theft of his brother's car in the 1980s. He has filed involuntary petitions in bankruptcy against others and has been barred by the court from ever doing it again. His father and son were lawyers. His participation in this lawsuit reveals another installment in his history of acting on greed, malice, and illness. His obstruction in this case earns him the obligation (a) to pay his victim's attorneys' fees that are rounded down and fixed at $100,000 (b) to spend ten days in the custody of the marshal, and (c) to file nothing with courts or agencies without written approval of this court.

6. Brian Baum..

Brian Baum is a lawyer licensed by Pennsylvania. He signed the pleadings. He would not—could not perhaps—tell the truth. Brian Baum told the court that his father was licensed as a lawyer by New Jersey. When it became clear that the lawyer was his grandfather, not his father, he just kept talking. Brian Baum sat mute while his father told the court his lies, including stories about Sheldon Baum's appearances as a lawyer in the district court in Travis County.

After a paragraph-by-paragraph examination of the claims in both complaints, Baum admitted that each claim was fabricated. He persisted in his argument that some actions of the receiver had been "unneeded."

Brian Baum said he did not prepare purported pro-se responses...