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PPUC Pennsylvania Public Utility Commission v. Gangi

United States Court of Appeals, First Circuit

October 17, 2017

PPUC PENNSYLVANIA PUBLIC UTILITY COMMISSION; QUALITY SPEAKS, LLC; AMERICAN REGISTRY FOR INTERNET NUMBERS, LTD.; GLOBAL NAPS, INC., Plaintiffs,
v.
FRANK T. GANGI, Defendant, Appellant, CARL F. JENKINS, Receiver, Appellee, VERIZON NEW ENGLAND, INC., d/b/a Verizon Massachusetts; MASSACHUSETTS DEPARTMENT 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; FERROUS MINER HOLDINGS, LTD.; GLOBAL NAPS NETWORKS, INC.; GLOBAL NAPS NEW HAMPSHIRE, INC.; GLOBAL NAPS REALTY, INC.; 1120 HANCOCK STREET, INC.; CHESAPEAKE INVESTMENT SERVICES, INC.; REYNWOOD COMMUNICATIONS, INC. Defendants.

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS Hon. Rya W. Zobel, U.S. District Judge

          Donald H.C. Libbey, with whom Donald H.C. Libbey PC, Steven J. Marullo, and Law Office of Steven J. Marullo were on brief for appellee.

          Eric Charles Osterberg, with whom Osterberg LLC, Andrew Good, and Good Schneider Cormier & Fried were on brief for appellant.

          Before Torruella, Lynch, Kayatta, Circuit Judges.

          LYNCH, Circuit Judge.

         Frank Gangi ("Gangi") appeals from the district court's December 30, 2015 order approving a sale of his assets and the assets of entities owned by him, recommended by the receiver, Carl Jenkins ("Jenkins"), whom the court appointed to sell those assets for the benefit of Gangi's creditors. Gangi, on appeal, primarily argues that the assets were sold to a fiduciary of the receivership estate, and the sale was prohibited as a result. In the alternative, Gangi argues that the sale was improper and unfair.

         Jenkins counters that this appeal should not be heard on the merits because it is equitably moot, and that, in any event, the assets were not sold to a fiduciary and the sale was appropriate. The district court rejected Gangi's contentions as without merit; agreed with the receiver's contentions; and concluded that the sale was fair, reasonable, and in the best interest of the receivership. The court also described the different categories of assets and found that the allocations as to purchase price were fair and reasonable. We hold this appeal is not equitably moot, and affirm the sale order because there was no abuse of discretion.

         I. Background

         The litigation that has resulted in the receivership and this apparently final order of sale is in its fifteenth year. It began in 2002, when Global Naps, Inc. ("GNAPs") sued Verizon New England, Inc. ("Verizon"). See Global Naps, Inc. v. Verizon New Eng., Inc., 603 F.3d 71, 79 (1st Cir. 2010). Verizon counterclaimed, and won a $58 million judgment. Id. at 79-80. We bypass here a description of the business relationships, which are amply described in that opinion and other opinions. On remand, the district court found that Gangi, the owner of GNAPs, was jointly and severally liable for the $58 million judgment because GNAPs was merely an alter ego for Gangi. Id. at 81.

         In 2010, the district court placed the assets of many entities owned by Gangi into receivership and appointed Jenkins receiver. The district court empowered Jenkins to "take any actions to identify, safeguard and preserve the assets of the Judgment Debtors, to make all business decisions over the assets and operations of Judgment Debtors, and to implement, satisfy and enforce" the receivership order. Over the years, the receiver did just that. The district court judge here had approved prior sales of assets by the receiver and had extensive experience with this case at the time this sale occurred.

         Pursuant to these duties, on March 28, 2013, Jenkins entered into an exclusive agreement with Hilco IP Services LLC ("Hilco") to market internet protocol addresses ("IP addresses") owned by the estate.[1] Hilco's marketing agreement did not extend to any other receivership assets. Between the engagement of Hilco and the sale at issue, Jenkins accepted only two offers to purchase blocks of IP addresses. Both sales were through Hilco. In one of these sales, Jenkins sold 65, 536 IP addresses to Mid-Continent Communications for $376, 832.

         On March 10, 2015, the district court made it clear that the receivership should be brought to an end through prompt disposition of the remaining assets. In an order, it stated: "In the spirit of bringing this case to an end, the receiver shall file a status report within 30 days of this order giving a preliminary accounting . . . . In that report, the receiver shall also propose a timeline for filing his final accounting."

         On December 3, 2015, Jenkins filed a motion requesting an order approving a sale of the remaining receivership assets to Northeast Technology Solutions, LLC ("Northeast") for $525, 000. The property included, "five (5) lots of vacant land located in Las Vegas, NV"; "several domain names registered to GNAPs entities"; "telephone number blocks"; and four blocks of IP addresses, for a total of 114, 688 addresses. For reasons having to do with the resolution of other litigation, the price had to be allocated to its different components. The receiver, by agreement of the parties to the sale, allocated $50, 000 of the purchase price to the real property in Las Vegas, $275, 000 to a block of 65, 536 IP addresses, and $200, 000 collectively to the remaining IP addresses, domain names, and telephone numbers.

         A footnote to Jenkins's motion for an order approving the sale stated: "Northeast has a relationship with HilcoGlobal, and any fee otherwise due to HilcoGlobal under any agreement with the Receiver has been waived." The receiver also ...


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