United States Court of Appeals For the First Circuit
Nos. 12-1102, 12-1327
GLOBAL 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,
FRANK T. GANGI,
Counterclaim Defendant, Appellant. ___________________
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Rya W. Zobel, U.S. District Judge]
Before Lynch, Chief Judge, Stahl and Howard, Circuit Judges.
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.
January 18, 2013 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
1 See Global NAPs, Inc. v. Verizon New Eng. Inc. (GNAPS VI), No. 10-1962 (1st Cir. Nov. 8, 2010); Global NAPs, Inc. v. Verizon New Eng. Inc. (GNAPS V), 603 F.3d 71, 76 (1st Cir. 2010) (collecting prior cases), cert. denied, 131 S. Ct. 1044 (2011). A detailed discussion of the relevant facts may be found in our most recent substantive opinion. GNAPS V, 603 F.3d at 78-81.
-3- 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, 131 S. Ct. 1044 (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,
-4- 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:
-5- 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
-6- "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 (1998).
When confronted with non-constitutional challenges 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).
-7- 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 (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.
-8- Over the past decade, Gangi repeatedly has employed
nefarious tactics to avoid meeting his responsibilities to others.
See, e.g., GNAPS V, 603 F.3d at 93 (summarizing evidence that GNAPs
lied to the district court and destroyed evidence); see also S. New
Eng. Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 147-48 (2d Cir.
2010) (same). He has shown an apparent propensity for using
technology to cover his tracks. See, e.g., GNAPS V, 603 F.3d at 94
(describing evidence that employee under Gangi's control digitally
"shred[ded]" electronic accounting files). The district court
quite rightly feared more of the same. We previously have affirmed
a finding of substantial and inadequately compensable injury when
a telecommunications company faced technological attacks on its
ability to collect subscriber revenue. CoxCom, Inc. v. Chaffee,
536 F.3d 101, 112 (1st Cir. 2008). The injury contemplated here
was similar and thus easily satisfied the first two factors.
Indeed, although we do not affirm the district court's
injunction based on events that occurred after its issuance,
subsequent events show that the court's fears about the sort of
harm Gangi might inflict may well have been justified.
Specifically, after the court imposed the injunction, the receiver
had to seek an emergency temporary restraining order when a
BroadVoice employee's computer was involved in an electronic attack
on the BroadVoice system that allowed outsiders to make thousands
of fraudulent calls to Africa and Europe, allegedly costing the
-9- receivership estate $10,000 per day. Whether the employee
intentionally helped outsiders attack BroadVoice to hinder the sale
to QS or unwittingly served as a conduit for the attack was
unclear. Given Gangi's history, the incident is at least
suspicious.
Proceeding to the third factor, the balance of hardships
between Gangi and the receivership estate quite obviously tilts in
favor of the estate; Gangi can claim no legitimate interest in
interfering with the transfer of BroadVoice and Convergent to QS or
in damaging their value. Cf. R.I. Hosp. Trust Nat'l Bank v. Howard
Commc'ns Corp., 980 F.2d 823, 829 (1st Cir. 1992) (interference
with transfer of assets to receiver constituted "contumacious
conduct" and warranted sanctions).
Gangi attempts to spin the third factor in his favor by
arguing that the injunction actually constitutes a prohibition on
competition that bars him from re-entering the VoIP business. He
maintains that under Massachusetts law, a court may not impose such
a restriction in conjunction with a forced judicial sale, and
further contends that such a restriction is impermissible as matter
of the Commonwealth's employment law. We need not address either
argument, however, because we are not persuaded that the injunction
prohibits competition at all. While the injunction does bar
"contact or solicitation of any sort," there is no cause for
reading those words as broadly as Gangi does.
-10- Here, the injunction prohibits contact and solicitation
that "interfer[es] with, . . . reduce[s] the value of, or otherwise
damage[s]" BroadVoice and Convergent. Stretching "interfering
with" or "damaging" to mean luring away customers with better
services or rates is unwarranted. Accordingly, under the best
reading, the injunction does not prohibit Gangi from starting a new
VoIP provider that simply competes with BroadVoice on the open
market. Rather, it prohibits him from misappropriating the
BroadVoice customer list or other property, recruiting BroadVoice
customers through deceit, or engaging in other wrongful conduct.
See, e.g., Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 405-06
(2d Cir. 2004) (affirming a permanent injunction that barred a
company from acquiring customers by deceiving them into thinking it
was related to another company with which they already did
business). If Gangi has concerns about the sorts of contact and
solicitation permissible under the injunction, he of course is free
to seek clarification from the district court based on specific
facts. Regal Knitwear Co. v. NLRB, 324 U.S. 9, 15 (1945).
Turning at last to the fourth and final factor, the
injunction plainly serves the public interest, which undoubtedly
includes seeing that losing parties respect the judgments entered
against them and that debtors pay their creditors. See, e.g., NML
Capital, Ltd. v. Republic of Argentina, 699 F.3d 246, 263 (2d Cir.
2012) (finding that in light of debtor's "disregard of its legal
-11- obligations" to creditors, public interest favored permanent
injunction requiring specific performance of those obligations).
Here, GNAPs, Gangi, and various Gangi alter egos together owe
Verizon more than $57 million. The district court determined that
accepting QS' bid and its associated terms and conditions, which
include imposing the injunction, constitutes a "sound business
judgment" and thus is the best way of ensuring that Gangi at last
begins to pay what he owes.
Gangi again attempts to turn in his favor a factor that
cuts against him by misconstruing the breadth of the injunction.
He maintains that the district court has enjoined everyone outside
of QS from contacting or soliciting BroadVoice customers.
Obviously such a restriction would violate the public interest, see
CVD, Inc. v. Raytheon Co., 769 F.2d 842, 849 (1st Cir. 1985)
(noting "public interest in free competition"), not to mention the
provision of the Federal Rules of Civil Procedure governing
injunctions, Fed. R. Civ. P. 65(d)(2) (an injunction may only bind
the parties, their representatives, and "other persons who are in
active concert or participation with" them).
Gangi argues that his reading follows inescapably from
the plain language of the injunction, which by its terms applies to
"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" (emphasis added).
-12- Gangi's interpretation holds up, however, only if one
does not read the rest of the order imposing the injunction. Just
a few paragraphs before the passage Gangi quotes, the district
court defined "Persons" as, inter alia, those "holding Claims
arising under or out of, in connection with, or in any way relating
to, the Judgment Debtors." Thus the court properly enjoined only
Gangi's creditors, Gangi, and those working in concert with him, as
contemplated by the Federal Rules. See Fed. R. Civ. P. 65.
In short, the injunction plainly was justified under
longstanding equity principles, and Gangi's various other arguments
against its imposition do not merit serious discussion. His
protest that the district court did not support the injunction with
adequate findings is without merit. The findings here, though
brief, satisfied "the common sense rule that a court should let the
parties and an appellate court know why it acts, and on what
factual basis." Ben David v. Travisono, 495 F.2d 562, 563 (1st
Cir. 1974). The district judge who issued the injunction has been
managing this case for ten years, and although the supplemental
order imposing the injunction did not go into great detail, other
closely related orders were more thorough. These orders included
the original order authorizing the auction and the sale order
approving QS' bid, both of which specifically contemplated imposing
the injunction. In such a situation, the brevity of the actual
injunction order itself is perfectly acceptable. See CoxCom, Inc.,
-13- 536 F.3d at 112 ("The district court's earlier findings in support
of the . . . preliminary injunction, combined with [the
plaintiff's] success on the merits, supports the permanent
injunction.").
Gangi's argument that the injunction is vague fails as
well. Again, as noted above, if he is uncertain as to what is
permissible under the injunction, he is free to seek clarification
from the district court. Regal Knitwear Co., 324 U.S. at 15. "The
mere fact that . . . interpretation is necessary does not render
the injunction so vague and ambiguous that a party cannot know what
is expected of him." United States v. Greyhound Corp., 508 F.2d
529, 537 (7th Cir. 1974); accord United States v. Brown, 561 F.3d
420, 438 (5th Cir. 2009).
Finally, we decline to consider Gangi's assertion that
the injunction "infringes on non-commercial and commercial speech
protected by the First Amendment." Although he invokes Sorrell v.
IMS Health Inc., 131 S. Ct. 2653 (2011), for the proposition that
restrictions on commercial speech are constitutionally suspect, he
does not advance any substantive argument. The "settled appellate
rule" is "that issues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation, are deemed
waived." United States v. Zannino, 895 F.2d 1, 17 (1st Cir.),
cert. denied, 494 U.S. 1082 (1990); accord Igartúa v. United
-14- States, 626 F.3d 592, 603 (1st Cir. 2010), cert. denied, 132 S. Ct.
2376 (2012); 132 S. Ct. 2375 (2012).
Affirmed.
-15-