Business Law 11th Edition by Kenneth Clarkson,Roger LeRoy Miller,Gaylord Jentz,Frank Cross

تمرين 17

Baum v. Blue Moon Ventures, LLC
United States Court of Appeals, Fifth Circuit, 2008. __ F.3d __.
DeMOSS, Circuit Judge:
* * * *
Douglas Baum purports to run an asset recovery business. He researches various unclaimed funds, tries to locate the rightful owner, and then gets paid either with a finder's fee or by taking an assignment [a right to payment of some or all of the funds]. * * * Douglas Baum acts in concert with his brother, Brian Baum, and his father, Sheldon Baum ("the Baums").
In September 2002, the Baums [became involved in] a federal district court case * * * by recruiting investors-through misrepresentation-to sue a receiver [a court-appointed person who oversees a business firm's affairs], the receiver's attorney, other investors, and those investors' attorneys. The district court * * * determined that the Baums' pleadings were "gratuitous, malicious attacks with legal propositions that were wholly disconnected from the facts of the defendants' behavior." The district court admonished the Baums for wrongfully interfering in the case, wrongfully holding themselves out to be attorneys licensed to practice in Texas, lying to the parties and the court, and for generally abusing the judicial system. The district court stated:
This case is an example of guerilla warfare through litigation. The Baums brought this suit to satisfy their illusion of hidden funds or to extort deals for their other clients. These claims were fraudulent. Once instituted, the Baums maintained them with singular ineptitude. When asked to explain their case-or anything else-Brian and Sheldon Baum did not tell the truth.
The Baums have wasted the time and money of the defendants and the scarce resources that the taxpayers entrust to the judiciary. They have flouted the authority of this court-an authority they invoked. They have no concept of the purpose and function of the courts. * * *
The district court sanctioned both Brian and Sheldon Baum to ten days in jail and ordered them to pay $100,000 in attorney's fees to the defendants. The court also issued a permanent * * * injunction against all three Baums [to prohibit them from filing claims related to the same case in Texas state courts without the permission of Judge Lynn Hughes, the district court judge].
* * * *
* * * [I]n June 2005, the Baums entered an appearance in another bankruptcy case [a proceeding to ensure equitable treatment to creditors competing for a debtor's assets]. * * *
Danny Hilal owned and operated several limited liability companies, including Appellee, Blue Moon Ventures, L.L.C. Blue Moon's primary business was purchasing real property at foreclosure sales and leasing those properties to residential tenants.* * *
Sheldon Baum claimed to be a * * * creditor in the Hilal case, but he would not identify his claim. Brian Baum was again misleading the parties and the court as to being a licensed attorney in Texas, and Douglas Baum participated in the scheme by posting a fake notice [that the Internal Revenue Service might foreclose on Hilal's property to collect unpaid taxes].
* * * *
* * * [The bankruptcy court concluded that this was] a continuation of a pattern of conduct identified by [the district court that was] materially misleading to creditors and parties in interest in this case.* * * [The bankruptcy court forwarded a memo on the case to the district court that had imposed the sanctions on the Baums.]
* * * *
The [district] court conducted two three-hour hearings in which the Baums all testified, as well as counsel for the Appellees (collectively referred to as "Blue Moon"). The court concluded that the Baums had continued in their abusive * * * practices, and thus a modification of the
* * * [i]njunction was necessary. [The court expanded the injunction to include the filing of any claim in any federal or state court or agency in Texas.]
Douglas refused to agree to any modification of the * * * [i]njunction on the grounds that it would impede his business. * * * Douglas Baum filed a timely notice of appeal [to the U.S. Court of Appeals for the Fifth Circuit].
* * * *
* * * Douglas Baum argues that the district court lacked jurisdiction to * * * modify the pre-filing injunction. We disagree.
A district court has jurisdiction to impose a pre-filing injunction to deter vexatious [intended to annoy], abusive, and harassing litigation.* * *
* * * *
* * * Federal courts have both the inherent power and the constitutional obligation to protect their jurisdiction from conduct [that] impairs their ability to carry out [their] functions. If such power did not exist, or if its exercise were somehow dependent upon the actions of another branch of government or upon the entitlement of a private party to injunctive relief, the independence and constitutional role of [the] courts would be endangered. Because the district court has jurisdiction to * * * impose a pre-filing injunction to deter vexatious filings, it also has jurisdiction to * * * modify an existing permanent injunction to accomplish the same goal. [Emphasis added.]
* * * *
* * * Modification of an injunction is appropriate when the legal or factual circumstances justifying the injunction have changed.
Federal courts have the power to enjoin [prevent] plaintiffs from future filings when those plaintiffs consistently abuse the court system and harass their opponents. * * * [Emphasis added.]
* * * *
The district court could consider Baum's conduct in the state court proceedings in determining whether his conduct before the bankruptcy court was undertaken in bad faith or for an improper motive. Limiting the injunction to any particular defendants did not stop Baum from repeating his pattern of abusive litigation practices; therefore, the district court did not abuse its discretion in determining that a broader injunction is necessary to protect both the court and future parties.* * *
* * * *
* * * Baum argues that the district court abused its discretion in extending the injunction to prohibit Baum from filing any claims in state courts or agencies.* * *
* * * *
* * * [A] district court's pre-filing injunction may extend to filings in lower federal courts within the circuit that the issuing court is located, * * * a district court's pre-filing injunction may not extend to filings in any federal appellate court, and * * * a district court's pre-filing injunction may not extend to filings in any state court. Based on the facts of this case, we find that the district court abused its discretion in extending the pre-filing injunction to filings in state courts, state agencies, and this Court. * * * [T]hose courts or agencies are capable of taking appropriate action on their own. We uphold those provisions of the pre-filing injunction that prevent Douglas Baum from filing claims in federal bankruptcy courts, federal district courts, and federal agencies in the state of Texas without the express written permission of Judge Hughes.
1. Would there by any way in which the Baums could have operated their business ethically Explain.
2. Are there situations in which a business owner's conduct would be more reprehensible than the Baums' behavior in this case Explain.