Global Naps, Inc. v. Verizon New England, Inc.

Decision Date18 January 2013
Docket Number12–1327.,Nos. 12–1102,s. 12–1102
Citation706 F.3d 8
CourtU.S. Court of Appeals — First Circuit
PartiesGLOBAL NAPS, INC.; PPUC Pennsylvania Public Utility Commission; American Registry for Internet Numbers, Ltd., Plaintiffs, Quality Speaks, LLC, Plaintiff, Appellee, v. VERIZON NEW ENGLAND, INC., d/b/a Verizon Massachusetts, Defendant, Appellee, MA Dept. of Telecommunications & Energy; Paul B. Vasington, in his capacity as Commissioner; James Connelly, in his capacity as Commissioner; W. Robert Keating, in his capacity as Commissioner; Deirdre K. Manning, in her capacity as Commissioner; Eugene J. Sullivan, Jr., in his capacity as Commissioner, Defendants, Carl F. Jenkins, Receiver, Appellee, v. Frank T. Gangi, Counterclaim Defendant, Appellant.

OPINION TEXT STARTS HERE

Andrew Good, Good & Cormier, Eric C. Osterberg and Osterberg LLC on brief for counterclaim defendant, appellant.

John F. Drew, Andrea L. Martin and Burns & Levinson LLP on brief for plaintiff, appellee.

Donald H.C. Libbey, Donald H.C. Libbey P.C., Steven J. Marullo and Law Offices of Steven J. Marullo on brief for receiver, appellee.

Before LYNCH, Chief Judge, STAHL and HOWARD, Circuit Judges.

PER CURIAM.

Since 2002, Global NAPs, Inc. (GNAPs) has been engaged in litigation with Verizon New England, Inc. that originally arose over access fees the two companies owed each other for interconnecting their telephone networks. Verizon is the former local telephone monopoly in Massachusetts, known as the “incumbent local exchange carrier” (ILEC); GNAPs is a startup competitor, known as a “competitive local exchange carrier” (CLEC). Although Verizon prevailed in the underlying dispute roughly four years ago, the district court is still overseeing a receivership sale to satisfy the judgment against GNAPs. The company's former principal, Frank Gangi, appeals to challenge an injunction the court issued in connection with that sale. Finding no error, we affirm.

Because these consolidated cases represent the seventh and eighth appeals filed by Gangi or his former company GNAPs in the course of this decade-long litigation,1 we recount only those facts necessary to resolve the instant dispute.

In brief, GNAPs sued Verizon over the fee issue and Verizon filed various counterclaims. In early 2009, following serious discovery violations by GNAPs, including instances in which the district court found that Gangi lied and withheld or destroyed evidence, the court entered a $57.7 million default judgment in favor of Verizon. The district court also ruled that Gangi and various Gangi-controlled entities were alter egos of GNAPs and thus liable for the judgment. A panel of this court affirmed in April 2010, Global NAPs, Inc. v. Verizon New Eng. Inc. ( GNAPS V ), 603 F.3d 71, 95 (1st Cir.2010), cert. denied,––– U.S. ––––, 131 S.Ct. 1044, 178 L.Ed.2d 864 (2011), and the following month the district court appointed a receiver to marshal and sell the assets of GNAPs and its alter egos.

The receiver soon began the process, although his efforts were hampered by Gangi, who, among other stratagems seemingly designed to conceal or protect his assets, apparently had transferred ownership of his $400,000 Porsche to a ten-year-old child. In any event, the receiver eventually focused his efforts on two Gangi-controlled companies other than GNAPs itself: BroadVoice and Convergent. BroadVoice offers VoIP service, which allows customers to place ordinary telephone calls over the internet, typically at a substantial savings compared to traditional phone service; Convergent designs network infrastructure hardware and software that enables connections among and between traditional telephone networks and VoIP telephone systems.

In August 2011, as a precursor to holding an auction that he hoped would lead to a final sale order from the district court, the receiver secured a stalking horse bid for BroadVoice and Convergent. The stalking horse bidder's asset purchase agreement (APA) included the following provision:

Restraining Order Regarding Frank Gangi and Employees of GNAPs. The Sale Order [ultimately entered by the district court] shall provide that Frank Gangi and any other employees or agents of the Receivership Estates shall be immediately and permanently enjoined from directly or indirectly interfering with, taking action to reduce the value of, or otherwise damaging the value of the Purchased Assets. The form and substance of such order shall be satisfactory to the Purchaser.

The receiver then filed a sale motion, which requested the court's permission to hold an auction that used the stalking horse bid as the minimum price for bidders and the stalking horse APA as the acceptable terms for bidders.

In September 2011, the district court issued an order granting the request, and the following month the receiver accepted a bid from Quality Speaks, LLC (QS) over competing bids from several companies, including one affiliated with Gangi. In December, over the objections of Gangi and the Gangi-affiliated bidder, the district court entered a sale order authorizing the receiver and QS to complete the transaction. In February 2012, the district court entered a supplemental order outlining the closing terms and imposing an injunction against Gangi, as contemplated by both the original stalking horse APA and the final QS APA. In relevant part, the injunction provides:

All Persons, including the Judgment Debtors and the Judgment Debtors' Agents, and Frank Gangi and any person operating under Frank Gangi's direction or control, and any employee or agent of the Receivership Estates, are prohibited and enjoined from taking any action to adversely affect or interfere with the ability of the Receiver to transfer the Purchased Assets to the Purchaser or with the operation of the Purchaser's business or its enjoyment of the Purchased Assets or from directly or indirectly interfering with, taking action to reduce the value of, or otherwise damage the value of the Purchased Assets, including any contact or solicitation of any sort with existing Broad[V]oice subscribers.

Gangi filed a timely notice of appeal from the sale order and, soon after, from the supplemental order, although in his briefs he expressly limits his challenge to the imposition of the injunction in the supplemental order. We review the district court's grant of the injunction for abuse of discretion, its underlying legal conclusions de novo, and its underlying factual findings for clear error. Contour Design, Inc. v. Chance Mold Steel Co., 693 F.3d 102, 107 (1st Cir.2012).

We begin by addressing the receiver and QS' two-fold argument that we should not even reach the merits of Gangi's appeal. Their primary contention is that the completion of the sale to QS, which occurred in May 2012 while this appeal was pending, rendered the appeal equitably moot. QS first raised this argument in a motion to dismiss filed before the parties submitted their briefs. At the time, a panel of this court denied the motion “subject to reconsideration by the panel that decides the merits of the appeals.”

Having now reviewed the parties' briefs, we decline to decide the mootness issue and instead proceed directly to the merits. Were the receiver and QS' argument one of Article III mootness, we would of course be obligated to resolve it. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94, 101–02, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). When confronted with non-constitutionalchallenges to jurisdiction, however, we are not so constrained.” Aponte–Rosario v. Acevedo–Vilá, 617 F.3d 1, 6 (1st Cir.2010). As explained below, this case readily can be resolved in favor of the receiver and QS, and when a party “easily wins an affirmance on the substantive issue,” we may “decline to decide the jurisdictional issues raised by it.” Restoration Pres. Masonry, Inc. v. Grove Eur. Ltd., 325 F.3d 54, 59 (1st Cir.2003) (quoting Menorah Ins. Co. v. INX Reinsurance Corp., 72 F.3d 218, 223 n. 9 (1st Cir.1995)) (internal quotation mark omitted).

Given the ease with which we may dispose of the merits, we also decline to take up the receiver and QS' secondary argument that Gangi has waived the sole argument he makes on appeal. Instead, we assume arguendo that he has not. See United States v. Brown, 295 F.3d 152, 155 n. 4 (1st Cir.2002) (bypassing complex waiver analysis in favor of a merits decision).

Proceeding then to the merits, we review the “well-established principles of equity” that govern issuance of a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). A court may, in its discretion, issue such an injunction if it concludes (1) that [a party] has suffered”—or, as here, will suffer—“an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the [parties], a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.” Id.; see also Esso Standard Oil Co. v. López–Freytes, 522 F.3d 136, 148 (1st Cir.2008).

The current situation amply warranted issuance of the injunction. The first two factors together require “a substantial injury that is not accurately measurable or adequately compensable by money damages.” Ross–Simons of Warwick, Inc. v. Baccarat, Inc., 217 F.3d 8, 13 (1st Cir.2000) (quoting Ross–Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 19 (1st Cir.1996)) (internal quotation marks omitted). The district court of course had no way of knowing precisely how Gangi might interfere with the receiver's ability to transfer BroadVoice and Convergent to QS or how Gangi might damage the value of BroadVoice, Convergent, or their assets. The court nonetheless had every reason to fear that he might inflict injuries that were difficult to detect, let alone measure.

Over the past decade, Gangi repeatedly has employed nefarious tactics to...

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