Global Naps, Inc. v. Federal Ins. Co., Civ.A. 00-12430-PBS.
| Decision Date | 18 July 2002 |
| Docket Number | No. Civ.A. 00-12430-PBS.,Civ.A. 00-12430-PBS. |
| Citation | 214 F.Supp.2d 61 |
| Parties | GLOBAL NAPS, INC., Frank T. Gangi, William J. Rooney, Jr., and Janet Lima, Plaintiffs, v. FEDERAL INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Salvador M. Llach, Martin C. Pentz, Nutter, McClennen & Fish, LLP, Boston, MA, for plaintiffs.
Robert P. Powers, Melick, Porter & Shea, LLP, Boston, MA, for defendants.
Plaintiff Global NAPs, Inc. ("Global NAPs")1 brings this diversity action against Federal Insurance Company ("Federal Insurance") to recover the litigation expenses incurred in its defense of a complaint filed by New York Telephone and New England Telephone and Telegraph Company (the "Verizon" action).
Federal Insurance moves for summary judgment on the ground that Global NAPs' insurance policy does not cover the Verizon action because the action did not include a claim for malicious prosecution. Global NAPs has filed a cross-motion for partial summary judgment concerning Federal Insurance's duty to defend, while leaving for later its duty to indemnify.
After hearing, the Court ALLOWS Federal Insurance's motion for summary judgment and DENIES Global NAPs' cross-motion for partial summary judgment.
The following facts are undisputed except where otherwise stated.
Global NAPs and Verizon are telecommunications carriers that sell telecommunications services to customers in Massachusetts and New York, respectively. The Telecommunications Act of 1996 ("TCA") requires "incumbent local exchange carriers" to permit "competing local exchange carriers" to interconnect with the incumbent telephone network, allowing the customers of each carrier to connect to the customers of the other. See 47 U.S.C. §§ 201 et seq. Typically, although costs are incurred by exchange carriers operating where a call terminates, only the carrier in whose area a call originates bills a customer for the phone call. As a result, exchange carriers commonly enter into "reciprocal compensation" arrangements pursuant to the TCA. Under these arrangements an incumbent local exchange carrier is required to compensate a competitive local exchange carrier for telephone calls originating with the competitor's customers and terminating with local customers, i.e. exchange carriers are compensated for costs incurred from phone calls they do not bill to their customers. Global NAPs and Verizon entered into such reciprocal compensation arrangements.
On September 7, 1999, Global NAPs filed a complaint against Bell Atlantic-New York (now "Verizon"), before the New York Public Service Commission ("New York PSC"), seeking a declaration that Global NAPs was entitled to payments being withheld by Bell Atlantic-New York. The dispute involved compensation for Internet-bound traffic. Global NAPs asserted that calls to Internet Service Providers ("ISPs") were subject to the same compensation as non-Internet bound calls under the terms of the Verizon-Global NAPs reciprocal compensation arrangements. Verizon responded that due to the nature of Internet bound traffic, calls to ISPs were not subject to compensation, or, in the alternative, any compensation should be smaller than that for non-Internet bound traffic, which is more expensive.
Global NAPs asserted two claims before the New York PSC: (1) the parties' disagreement over the appropriate per-minute rate to apply to Internet-bound traffic originating from Verizon to Global NAPs (either fixed at the same rate as non-Internet bound traffic or subject to tariff fluctuations); and (2) the parties' disagreement regarding the actual number of minutes exchanged between them.
On February 11, 2000, Global NAPs formally withdrew from consideration one of its claims for relief — the disputed number of minutes of Internet-bound traffic. The other claim, concerning the appropriate rate to apply, was later decided in favor of Global NAPs: the New York PSC held that the same rate should apply to both Internet and non-Internet bound traffic.
On May 8, 2000, Global NAPs was named as a defendant in a proceeding filed by Verizon under the name New York Tel. Co. and New England Tel. & Tel. Co. v. Global NAPs, Inc., Frank T. Gangi, William J. Rooney, Jr., and Janet Lima, Civil Action No. 00-CIV-2650, in the United States District Court for the Eastern District of New York. Verizon also sued plaintiffs Frank T. Gangi and William J. Rooney, officers of Global NAPs, and plaintiff Janet Lima, an employee.
Verizon sought damages not merely for alleged billing improprieties, e.g. excessive or "phantom" minutes of use ("MOUs"), but also for alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and the Massachusetts Deceptive Trade Practices Act, Mass.Gen.Laws ch. 93A.
The RICO counts and the chapter 93A count of the Verizon action are grounded upon allegations of a series of "predicate acts" by Global NAPs relating to the compensation dispute. One of the predicate acts was Global NAPs' filing of the administrative complaint against Verizon before the New York PSC. The Verizon complaint alleged:
Defendants' prosecution and maintenance of the New York PSC proceedings relating to the number of MOUs involved was itself a fraud, designed to confuse Bell Atlantic and conceal the nature of Defendants' racketeering activity. Gangi and Rooney in particular submitted papers, and directed [Global NAPs] counsel to submit papers and take positions, that Defendants knew were false and misleading. (¶ 84).
* * * * * *
On or about September 3, 1999, Rooney prepared a complaint for filing with the New York PSC in which [Global NAPs] demanded payment for reciprocal compensation pursuant to the invoices it had sent to Bell Atlantic. (See Exhibit 11).... In that complaint, Rooney claims that [Global NAPs] is entitled to the full amount of the unpaid invoices, even though he knew that approximately one half of the amount sought arose from the Defendants' criminal fraud involving phantom MOUs, and not from any actual use by or non-fraudulent charge to Bell Atlantic. Rooney wrote and sent the complaint — and thereby commenced the proceeding — with the intention of concealing the fraud from Bell Atlantic, so that GNAPs could continue to collect reciprocal compensation while the MOU dispute dragged on, and with the intention of persuading the PSC to become an unwitting accomplice to Defendants' Phantom MOUs Scheme. (¶ 131).
* * * * * *
An additional aspect of the scheme was to conceal the nature of the fraud and thereby prolong its life through the baseless MOU claim before the New York PSC. The papers submitted by Rooney and the other Defendants in that matter were further incidents of mail and wire fraud to this end. (¶ 143).
The complaint did not have a count asserting the tort of malicious prosecution, and never used the term "malicious prosecution."
Federal Insurance issued to Global NAPs a commercial general liability insurance policy which provides that it will "pay damages the insured becomes legally obligated to pay by reason of liability imposed by law ... for ... personal injury caused by an offense committed during the policy period." The policy gives Federal Insurance "the right and duty to defend any insured against a suit seeking damages for ... [such] personal injury." "Personal injury" is defined as "injury, other than bodily injury" arising out of certain enumerated "offenses committed in the course of [Global NAPs'] business," including "malicious prosecution."
By letter dated May 16, 2000, the plaintiffs gave notice to Federal Insurance of the Verizon action. In that same letter, plaintiffs requested a defense and indemnification under the Federal Insurance Policy. On June 8, 2000, Federal Insurance declined coverage under the Federal Insurance Policy for the Verizon action. In the disclaimer letter, Federal Insurance took the position that "the allegations in the [Verizon Complaint] ... do not fall within the insuring agreement as they do not meet the definitions of ... Personal Injury ... as those terms are defined in the policy."
"Summary judgment is appropriate when `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Barbour v. Dynamics Research Corp., 63 F.3d 32, 36 (1st Cir.1995) (quoting Fed. R.Civ.P. 56(c)), cert. denied, 516 U.S. 1113, 116 S.Ct. 914, 133 L.Ed.2d 845 (1996). "To succeed [in a motion for summary judgment], the moving party must show that there is an absence of evidence to support the nonmoving party's position." Rogers v. Fair, 902 F.2d 140, 143 (1st Cir.1990); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
"Once the moving party has properly supported its motion for summary judgment, the burden shifts to the non-moving party, who `may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing there is a genuine issue for trial.'" Barbour, 63 F.3d at 37 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct 2505, 91 L.Ed.2d 202 (1986)). " Rogers, 902 F.2d at 143 (quoting Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505) (citations and footnote in Anderson omitted). The Court must "view the facts in the light most favorable to the nonmoving party, drawing all reasonable inferences in that party's favor." Barbour, 63 F.3d at 36...
To continue reading
Request your trial