Netsphere, Inc. v. Baron

• Decision Date: 14 August 2015
• Docket Number: Nos. 13–10119,13–10696.,s. 13–10119
• Citation: 799 F.3d 327
• Parties: NETSPHERE, INCORPORATED, et al., Plaintiffs v. Jeffrey BARON, Defendant–Appellant. Quantec L.L.C. ; Novo Point, L.L.C., Movants–Appellants v. Peter S. Vogel, Appellee. Netsphere, Incorporated, et al., Plaintiffs v. Jeffrey Baron, Defendant–Appellant. Quantec L.L.C. ; Novo Point, L.L.C., Movants–Appellants v. Gardere Wynne Sewell, L.L.P.; Peter S. Vogel, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

799 F.3d 327

NETSPHERE, INCORPORATED, et al., Plaintiffs

v.Jeffrey BARON, Defendant–Appellant.

Quantec L.L.C. ;

Novo Point, L.L.C., Movants–Appellants

v.Peter S. Vogel, Appellee.

Netsphere, Incorporated, et al., Plaintiffs

v.Jeffrey Baron, Defendant–Appellant.

Quantec L.L.C. ;

Novo Point, L.L.C., Movants–Appellantsv.Gardere Wynne Sewell, L.L.P.;

Peter S. Vogel, Appellees.

Nos. 13–10119

13–10696.

United States Court of Appeals, Fifth Circuit.

Aug. 14, 2015.

Craig Alan Capua, West & Associates, L.L.P., Dallas, TX, for Movants–Appellants.

Christopher D. Kratovil, Esq., Alison R. Ashmore, Attorney (argued), Jeffrey R. Fine, David John Schenck, Attorney, Dykema Cox Smith, Richard M. Roberson, Gardere Wynne Sewell, L.L.P., Dallas, TX, for Appellees.

Appeals from the United States District Court for the Northern District of Texas.

Before JOLLY, HIGGINBOTHAM, and DAVIS, Circuit Judges.

Opinion

PATRICK E. HIGGINBOTHAM, Circuit Judge.

As a general rule, the courts of appeals have jurisdiction only over the final decisions of the district courts. There are certain exceptions and qualifications to that principle, however. In this case we must decide whether any of them allow us to review several district court orders which, pursuant to the mandate of an earlier decision of our court, awarded fees to a receiver before final judgment had been entered. Concluding that none apply, we dismiss for want of appellate jurisdiction.

I.

We set out the tangled factual and procedural history of this long-running case in our earlier opinion.¹ We summarize briefly now.

This case began back in the spring of 2009, as a contractual dispute between Netsphere, Inc., and Jeffrey Baron.² As the litigation ensued, one of Baron's companies, Ondova Limited Company, declared bankruptcy, automatically staying the district court action. During this stage of the case, as in earlier proceedings, Baron repeatedly hired and fired his lawyers.³ “The bankruptcy creditors and Ondova eventually agreed to a settlement, but Baron continued to hire new lawyers. Many of the lawyers claimed they had not been paid and began to file claims for legal fees in the bankruptcy proceeding.”⁴ As proceedings continued, both the bankruptcy court and the bankruptcy trustee became increasingly concerned over Baron's failure to pay his current or former lawyers.⁵ Eventually, on the recommendation of the bankruptcy court, the district court appointed Peter S. Vogel as receiver over Baron.⁶

Baron appealed the district court's order appointing the receiver. In Netsphere v. Baron, Inc. (“Netsphere I ”) we reversed, holding that the district court had “no authority to ... establish[ ] a receivership” in order “to control Baron's hiring, firing, and non-payment of numerous attorneys.”⁷ We next turned to the question of who should bear the costs expended by the improper receivership. We held that our “precedents establish that equity controls when addressing the costs created by an improper receivership.”⁸ Because “the record support[ed] that the circumstances that led to the appointment of a receiver were primarily of Baron's own making,” we ruled that “charging the current receivership fund for reasonable receivership expenses, without allowing any additional assets to be sold, is an equitable solution.”⁹ On remand, in addition to awarding new fees, we also ordered the district court to reconsider all receivership fees and expenses it had previously ordered to be paid. We reasoned that these “[f]ees already paid were calculated on the basis that the receivership was proper” but “[i]n light of our ruling that the receivership was improper, equity may well require the fees to be discounted meaningfully from what would have been reasonable under a proper receivership.”¹⁰

Before the Netsphere I mandate issued, the district court entered several orders approving interim fee applications submitted by the receiver and its counsel. After the mandate issued, and the case was remanded, the district court then entered an order reconsidering the fees it had previously awarded to the receiver, its counsel, and the Ondova bankruptcy trustee. It also authorized new payments to the receiver and to one of its counsel, Dykema Gossett PLLC.

These appeals of the various fee orders follow.¹¹

II.

Both sides implore us to decide this appeal. While we sympathize with their desire for resolution, we lack the power to do so.

Our appellate jurisdiction is normally limited to “final decisions of the district courts of the United States.”¹² These decisions “end[ ] the litigation on the merits and leave[ ] nothing for the court to do but execute the judgment.”¹³ That is not what we have here. No final judgment has been entered and the underlying breach of contract dispute that formed the original basis for this litigation remains undecided. Moreover, even within the context of the receivership, the district court's orders merely authorizes certain cash payments to the receivership and its counsel; they do not purport to enter a final judgment winding-up or terminating the receivership. Indeed, it was not until two years after the orders in this case were issued that the district court finally entered an order directing the termination of the receivership upon the payment of certain court-approved fees and expenses.¹⁴ That order has since been appealed and will be addressed in the normal course by another panel of our court.¹⁵

There are two potential avenues for appellate jurisdiction absent a final decision of the district court: one based in statute, one in federal common law. Neither has purchase in this case.

A.

In 28 U.S.C. § 1292(a)(2), Congress granted a limited right to appellate review of certain interlocutory orders related to receivers, providing:

[T]he courts of appeals shall have jurisdiction of appeals from: [i]nterlocutory orders appointing receivers, or refusing orders to wind up receiverships or to take steps to accomplish the purposes thereof, such as directing sales or other disposals of property.¹⁶

It is undisputed that the challenged fee orders are not “orders appointing receivers.” Nor did the district court “refus[e] orders to wind up receiverships.” Just the opposite, in fact: the fee orders were issued as a necessary step to comply with our court's mandate that receivership fees be awarded and the receivership wound

up.¹⁷

The closer question, however, is whether the phrase “take steps to accomplish the purposes thereof” vests us with jurisdiction to review a fee order issued in compliance with an earlier appellate directive to wind-up the receivership. We conclude that it does not.

Turning first to the text of section 1292(a)(2), the statute grants us jurisdiction only over “orders ... refusing orders to wind up receiverships or to take steps to accomplish the purposes thereof, such as directing sales or other disposals of property. ”¹⁸ While not a model of clarity, seen in context, there are two ways to read these words. One “interpret[s] this provision as permitting appeals from orders ‘to take steps to accomplish the purposes [of winding up receiverships],’ ” and the other constructs the language to “permit[ ] appeals only from orders ‘refusing ... to take steps to accomplish the purposes of [winding up receiverships].’ ”¹⁹ We agree with the Ninth Circuit that the latter construction “requires less grammatical torture of the statute” than the former.²⁰ To reach the latter result, we interpret the verb phrase “refusing orders” to modify both the infinitive phrase “to wind up receiverships” and the infinitive phrase “to take steps to accomplish.” The parallel structure of both infinitive phrases suggest that is a reasonable outcome.²¹ To reach the opposite result, however, we must replace “to take steps” with “taking steps,” a tense change that requires us to change the structure of the statute. Indeed, every circuit to squarely consider this question has reached the same result.²²

Second, both our court and our sister circuits have long concluded that orders directing the payment of monies or the transfer of property to receivers and their professionals are unreviewable under section 1292(a)(2).²³ We have also refused to find jurisdiction over other orders issued in the course of a receivership, such as authorizing the execution of a lease by a receiver.²⁴ So have our sister circuits.²⁵

Third, as a matter of policy, this interpretation makes good sense. As we recognized in Warren v. Bergeron,²⁶ the imposition of a receivership visits significant consequences: “To put a corporation or other entity into receivership is to wrest management and control from those entrusted by the owners, replacing them with a court-appointed trustee under court supervision. Because this action may cause great harm, Congress decided to make interlocutory orders appointing receivers appealable.”²⁷ Orders entered in the normal course of a receivership do not visit such consequences. Moreover, to conclude otherwise would mean that “virtually any order of the receiver within the scope of its jurisdiction would be potentially appealable.”²⁸ Such a piecemeal approach to the appellate process would be disruptive and costly, both to the parties and the courts.²⁹

While we believe this textual reading is best, there is one wrinkle, in the form of precedent from our court that could be read to come out the other way. In United States v. “A” Manufacturing Co., Inc., we addressed the question of whether an order by a receiver confirming a sale after the fact is appealable under section 1292(a)(2).³⁰ We said it was, relying mainly on cases interpreting the final-judgment doctrine.³¹ But in doing so, we used expansive language to describe section 1292(a)(2), saying it “provides for appeals from interlocutory orders which take steps to accomplish the purpose of receiverships such as directing the sale or disposal of property.”³² This language arguably conflicts with the reading of section 1292(a)(2) we have just put forward. Even still, we...