The Strange Case of Jeff Baron, Domain-Squatting Web Pioneer Turned Legal Crusader
On November 9 at a downtown Dallas law office, some 153,000 Internet domain names hit the auction block. The winning bidder was an entity known as Trans, Ltd., which put down $5.2 million and scooped up the names over the objections of their previous owner, Ondova, LLC.
That auction never should have happened. The 5th Circuit Court of Appeals in New Orleans ruled on December 18 that a U.S. District cCourt had overstepped its authority by placing the assets of Ondova and its owner Jeff Baron -- indeed, even Baron himself -- into receivership. That decision enabled a federal bankruptcy judge to order the November auction. The ruling marks a rare victory for Baron in a legal battle that is as strange as it is convoluted.
The whole thing can be traced to 1999 when Baron, a graduate of J.J. Pearce in Richardson, was working for Mary Kay by day while taking computer programming courses at night. He used his newfound programming chops to develop software that quickly registers cheap Internet domain names. He soon quit his job at the cosmetics manufacturer and founded Ondova.
These were the heady days just before the dotcom bubble burst, and Baron was able to amass hundreds of thousands of domain names and a tidy fortune, pulling in a reported $1.5 million in profit per month.
Trouble came when he teamed up with a fellow entrepreneur named Munish Krishan, who runs Netsphere, a "domain development, marketing, and domain monetization company" based in California. Krishan, according to this decidedly pro-Baron account, promised to use his considerable resources and expertise to transform Ondova into a search engine to rival Google.
That never happened, and the partners soon had a falling out. Over the next several years, they would file a combined seven lawsuits, each blaming the other for the venture's failure. It wasn't until April 2009 that they jointly signed a memorandum of understanding that finally settled the dispute.
The settlement lasted all of a month. In May 2009, Krishan alleged that Baron and Ondova were violating the terms of the agreement and sued them in federal district court to make them stop. The next month, U.S. District Judge Royal Furgeson (aka the dean-to-be of UNT-Dallas' downtown law school) issued a preliminary injunction ordering all parties to comply with the agreement, later tacking on a $50,000-per-day fine if they didn't.
It was at this point that Furgeson went rogue, at least according to the set of fringe-y outlets that portray Baron as a victim railroaded first by an unscrupulous business partner, then by an out-of-control judiciary.
Invariably, Baron is described as an "Internet pioneer." He's also a "mild-mannered techie," "one of the nicest people you would ever want to speak with," and someone whose "business decisions were guided by the mistaken belief that the people he was dealing with would be honest and treat him fairly." Furgeson, on the other hand, is a tyrant who presides over a "Soviet-style" court. Here's Baron himself discussing his situation.
Baron may be a perfectly nice guy, and there are elements of truth to the latter charge. During one exchange frequently cited by the pro-Baron website is a bit of a tirade from June 2009 in which Furgeson exhorts Baron to comply with the injunction.
"You want to challenge the court order, I have the marshals behind me," Furgeson says, per this transcript. "I can come to your house, pick you up, put you in jail. I can seize your property, do anything I need to do to enforce my orders. I'm telling you don't screw with me. You are a fool, a fool, a fool, a fool to screw with a federal judge, and if you don't understand it, I can make you understand it. I have the force of the Navy, Army, Marines, and Navy behind me."
And then there's the order to put all of Baron's assets into receivership, which even the 5th Circuit concluded was beyond the pale. For one, their ruling noted, much of the property in question -- personal bank accounts, cell phones, homes, the money Baron, a diabetic, needed to pay medical bills -- had no connection to Baron's legal case. More fundamentally, there's the fact that, while receivership is a common enough remedy in criminal cases, its use to punish a party in civil litigation is without precedent.
But Baron's story is far more complicated, starting with the idea that he's an "Internet pioneer." He's certainly an entrepreneur, one who had the wherewithal to notice a weakness in the domain name market and exploit it, but look at Ondova's business. It essentially squats on domain names and profits from the ads people click when they accidentally visit one of the sites. Some of the domains are generic, like phonecards.com. Others are simple combinations of as few as two letters. More are common misspellings of popular websites. A sizable percentage are, according to court documents, simply, sometimes disturbingly, pornographic. I've lost track of the specific citation in the mountains of documents, but think along the lines of hotchildsex.com.
Then there's Furgeson, who, in the 5th Circuit's opinion, was acting not out of a thirst to exercise dictatorial power but from a completely understandable desire to stop Baron from being an unbearable little shit. (That's our phrasology. The 5th Circuit prefers "vexatious litigant.")
For starters, Baron had Ondova declare bankruptcy in July 2009, thus putting the legal battle with Krishan on hold. This just so happened to occur on the day before a scheduled hearing to determine if Baron should be held in contempt of court for violating the previous month's injunction.
Then, there was Baron's nasty little habit of hiring attorneys and firing them a few days or weeks later without paying them. This parade of new lawyers not only ground the Krishan case to a virtual halt, but it simultaneously threw a wrench in Ondova's bankruptcy proceedings, since at least 45 of them went on to file claims on the company's assets. The attorneys Baron was screwing over weren't fresh-faced law school grads, either, but established, high-powered litigators like Jeff Rasansky and Charla Aldous.
It was only after Baron ignored the court's order to stop that Furgeson brought down the hammer and gave Baron such a legal reaming that he had to borrow a friend's clothes to travel to D.C. And that's what the 5th Circuit takes issue with.
"Here, the record supports that the circumstances that led to the appointment of a receiver were primarily of Baron's own making," its opinion concludes. "The district court had an array of fairly onerous remedies to apply but chose another remedy that it did not have. The manner in which the district court responded to those circumstances was errant, but the court's perception was reasonable that a vigorous response was required."
In other words, Baron deserved to be legally smacked around, just not in the precise way Furgeson decided to do it. So now the ball -- and the case -- are now back in Furgeson's court.
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