# SmartSky Networks, LLC v. Gross

> United States Bankruptcy Court, E.D. North Carolina · June 13, 2024

URL: https://www.frixlaw.com/law-library/cases/10459263

## Case

- **Court:** United States Bankruptcy Court, E.D. North Carolina
- **Decided:** June 13, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10459263

## How later opinions describe it (automated extraction)

- stating that “unsworn documents purporting to be affidavits may be rejected” and that affidavits must be sworn to before a notary
- declining to consider several unsworn documents at summary judgment

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

NO. 5:23-CV-731-FL

DAVID DOV GROSS, )
)
Appellant, )
)
v. ) ORDER (SEALED)1
)
SMARTSKY NETWORKS, LLC, )
)
Appellee. )

This matter is before the court upon appeal of a final order of the United States Bankruptcy
Court for the Eastern District of North Carolina denying appellant’s motion for a new trial, in
adversary proceeding captioned SmartSky Networks, LLC v. David Dov Gross, Case No. 22-
00109-5-JNC (Bankr. E.D.N.C.) (the “adversary proceeding”), and upon appellant’s motion to seal
the case (DE 24). The issues have been briefed fully, and in this posture are ripe for ruling. For
the reasons that follow, the bankruptcy court’s order is affirmed, and the motion to seal is granted
in part and denied in part.

1 Where this order references certain sealed filings, the parties are DIRECTED to file jointly under seal, within
14 days, a copy of this order marked to reflect any perceived necessary redactions with the words “Proposed Redacted”
affixed to the captioned title. Upon the court’s inspection and presuming its approval, a redacted copy of this order,
as proposed by the parties in accordance with controlling authority, will be made a part of the public record. If upon
its review the court determines a different approach other than what is proposed may be necessary, notice will be
given. If the parties jointly determine no redaction is warranted, they are DIRECTED to file jointly, within that same
14-day period, a notice to that effect. In that event, the clerk will solicit the court’s approval to unseal this order before
taking additional action.
STATEMENT OF THE CASE
On March 10, 2022, appellant David Dov Gross (“debtor”) filed a voluntary petition under
Chapter 7 of the bankruptcy code. (See BR Op. (DE 7–4) 2). Among his liabilities, debtor listed
an adverse arbitration award of approximately $2.5 million.2
Appellee SmartSky (“creditor”) began an adversarial proceeding June 13, 2022. Creditor

sought to have the arbitration award declared a nondischargeable debt under 11 U.S.C. § 523(a)(6).
At summary judgment, the bankruptcy court narrowed the issue for trial in the adversarial
proceeding to just one: whether creditor had established that such debt arose from “a willful and
malicious injury” as defined in the bankruptcy code. (See BR Op. 14). Trial took place in July,
2023. Following trial, the bankruptcy court issued findings of fact and conclusions of law, and
entered judgment in creditor’s favor. Debtor filed pro se a motion for a new trial under Rule 59
on September 8, 2023.3 The bankruptcy court held a hearing on that motion December 13, 2023,
and denied it in a written order the following day.
At trial, a variety of witnesses testified in creditor’s case, at whose testimony debtor’s

appeal mainly is directed, particularly creditor’s president and founder, Ryan Stone (“Stone”).
(See generally Debtor’s Br. (DE 18)).
Debtor filed pro se the instant appeal of the bankruptcy court’s denial of his Rule 59 motion
December 20, 2023.4 Debtor filed a brief in support of appeal, relying upon the bankruptcy court

2 Confirmation proceedings are ongoing in the United States District Court for the Middle District of North
Carolina. See SmartSky Networks, LLC v. Wireless Systems Solutions, LLC et al., No. 1:20-cv-834-TDS-LPA
(M.D.N.C.). That court confirmed the award, which order was reversed on appeal on non-merits grounds. See
generally SmartSky Networks, LLC v. DAG Wireless, LTD, 93 F.4th 175 (4th Cir. 2024). Creditor is currently
seeking re-confirmation in light of the Fourth Circuit’s decision. These proceedings have no impact on the instant
appeal.

3 Though debtor’s counsel had not yet withdrawn by the filing of this motion, their motions to withdraw were
pending, and debtor filed the motion pro se. (See BR Ct. Mot. (DE 7–8) 1–14).

4 Debtor had counsel in the bankruptcy court until his attorneys withdrew September 12, 2023.
record, several documents discussing the connection between the telecommunications sector and
national security, additional corporate documents from parties involved in this action, and an
affidavit from debtor. Thereafter, debtor filed the instant motion to seal the case, which creditor
opposes. Creditor then filed a response brief in opposition to the appeal, and debtor replied.5
STATEMENT OF FACTS

The court draws upon the bankruptcy court’s recitation of the background facts, which
neither party challenges as clearly erroneous.
Creditor produces wireless communications systems for use in travelling aircraft. Creditor
contracted with Wireless Systems Solutions, for which debtor worked, to develop such technology
along with two other entities which debtor owned, which are referenced together with Wireless
Systems Solutions in the record as “DAG.”6 (BR Op. 3–4). The relationship between DAG and
creditor soured, and on September 10, 2020, creditor commenced an action against debtor, his
parents, and DAG in the United States District Court for the Middle District of North Carolina for
a variety of commercial torts, including misappropriation of trade secrets, breach of contract,

unfair and deceptive trade practices, and conversion. Creditor pursued these claims in parallel
arbitration proceedings against these defendants, to which the parties agreed all claims should be
submitted.
The arbitration panel produced an 81-page opinion with 427 findings of fact and
conclusions of law, which ultimately found these defendants, including debtor, liable for a variety
of misconduct. (See BR Op. 4–8; Arbitration Award (DE 9–3) 85–90). For example, the
arbitration panel found these defendants had passed off creditor’s technology as their own to

5 Debtor’s parents filed a separate action in this court, pro se, asserting claims based on the underlying events,
March 22, 2024. See Gross v. Dodson, No. 5:24-cv-184 (E.D.N.C. Mar. 22, 2024).

6 The record does not illuminate what “DAG” stands for. (See BR Op. 4).
creditor’s competitors and the industry media, (Arbitration Award ¶¶ 250, 320), rendering them
liable for breach of contract, misappropriation of trade secrets, unfair and deceptive trade practices,
and false advertising. (See Arbitration Award ¶¶ 321, 324, 331, 342, 427). The parties agreed that
the panel’s findings of fact would be binding in subsequent litigation. (See BR Op. 5 n.3).
In the bankruptcy court’s findings of fact and conclusions of law, entered following trial,

the bankruptcy court determined that debtor inflicted willful and malicious injury because debtor
“purloined [creditor’s] [trade secrets] and used them to compete directly with [creditor] in a closed
business market environment over a lengthy period of time,” such as by “issu[ing] admittedly false
press releases . . . using [creditor’s] confidential information . . . [including] after being warned in
a cease and desist letter, after being sued, and while defending the arbitration proceeding,” during
which debtor committed “substantial discovery abuses” involving creditor’s confidential material.
(BR Op. 15).
COURT’S DISCUSSION
A. Standard of Review

This court has appellate jurisdiction pursuant to 28 U.S.C. § 158(a) to review the
bankruptcy court’s orders. “An appeal under subsections (a) and (b) of this section shall be taken
in the same manner as appeals in civil proceedings generally are taken to the courts of appeals
from the district courts.” 28 U.S.C. § 158(c)(2). “On an appeal the district court . . . may affirm,
modify, or reverse a bankruptcy court’s judgment, order, or decree or remand with instructions for
further proceedings.” Harman v. Levin, 772 F.2d 1150, 1153 n.3 (4th Cir. 1985).7 “Legal
conclusions are reviewed de novo, but findings of fact will only be set aside if clearly erroneous.”
Schlossberg v. Barney, 380 F.3d 174, 178 (4th Cir. 2004). A finding of fact is clearly erroneous,

7 Internal citations and quotation marks are omitted from all citations unless otherwise specified.
although there is evidence to support it, when the reviewing court, after carefully examining all
the evidence, is “left with the definite and firm conviction that a mistake has been committed.”
Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985).
If the [lower court’s] account of the evidence is plausible in light of the record
viewed in its entirety, the [appellate court] may not reverse it even though
convinced that had it been sitting as the trier of fact, it would have weighed the
evidence differently. Where there are two permissible views of the evidence, the
factfinder’s choice between them cannot be clearly erroneous.

Id. at 573-74.
B. Analysis
Debtor argues that the bankruptcy court erred in denying his Rule 59 motion for a new trial
on the basis of new evidence.8 Creditor argues that debtor’s motion did not satisfy the demanding
standard required for a Rule 59 motion. The court agrees with creditor, and concludes that the
bankruptcy court was correct to deny the motion for several independent reasons.
1. Rule 59 Standard
A Rule 59(e) motion may by granted “only” in three situations: 1) to accommodate an
intervening change in controlling law; 2) to account for new evidence not available at trial; or 3)
to correct a clear error of law or to prevent manifest injustice. Mayfield v. Nat’l Ass’n for Stock
Car Auto Racing, Inc., 674 F.3d 369, 378 (4th Cir. 2012).
The United States Court of Appeals for the Fourth Circuit has established a five-element
test for new evidence-based motions under Rules 59 and 60: 1) the evidence must be newly
discovered; 2) the movant must have exercised due diligence to discover the new evidence; 3) the
evidence is not cumulative or merely impeaching; 4) the evidence is material; and 5) the evidence
is likely to produce a new outcome if the case were retried, or would require the judgment to be

8 Debtor mentions the manifest injustice prong in passing in his brief, but his arguments are all addressed to a
Rule 59 motion made on the basis of new evidence. (See Debtor’s Br. 20).
amended. See Boryan v. United States, 884 F.2d 767, 771 (4th Cir. 1989). A party may not receive
a new trial on grounds of new evidence that is “merely cumulative or impeaching[.]” Id.
2. Raising New Issues on Appeal
The court addresses at the outset the fact that debtor’s argument has changed between its
presentation to the bankruptcy court and upon debtor’s appeal.

Debtor’s motion, as presented to the bankruptcy court, consisted of a series of summarily
asserted disagreements with the testimony of witnesses at trial, unsupported by any evidence or
legal authority. (See BR Ct. Mot. 1–14). Debtor asked that the bankruptcy court allow him time
to obtain unspecified new evidence to correct what debtor saw as inaccurate testimony. (See id.
8, 15). The Rule 59 standard necessarily contemplates the actual production of new evidence.
See, e.g., Pacific Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396, 403 (4th Cir. 1998) (collecting
cases); Boryan, 884 F.2d at 771 (“newly discovered” (emphasis added)). Rule 59 is not a vehicle
through which to mount fishing expeditions to discover evidence a party speculates might exist
somewhere. Because debtor did not actually point to any new evidence in his motion before the

bankruptcy court, that court’s denial of debtor’s motion could be affirmed on that ground alone.
Debtor did file exhibits after he submitted his motion, in advance of the bankruptcy court’s hearing
on his motion, but these exhibits do not provide a basis for disturbing the bankruptcy court’s
analysis and conclusion, as discussed below.
In contrast, debtor’s appeal before this court presents, in effect, an entirely different motion
from the one submitted to the bankruptcy court. Debtor now presents different exhibits which he
contends undermine the testimony of creditor’s witnesses at trial.9

9 Debtor produced “two short, one-minute videos” at the bankruptcy court’s hearing on his motion, (see BR
R. 59 Order (DE 1-1) 4 n.4), and debtor filed several exhibits in advance of the hearing, but debtor does not discuss
these exhibits in his appeal before this court.
Normally, a party cannot present new arguments on appeal that were not first presented
below absent “exceptional circumstances.” Richardson v. Clarke, 52 F.4th 614, 625 (4th Cir.
2022). Such circumstances are evaluated under a “fundamental error” standard even more
searching than the highly demanding plain error standard used in criminal cases. See In re Under
Seal, 749 F.3d 276, 285–86 (4th Cir. 2014). Debtor does not attempt to establish any fundamental

error within the meaning of this standard. In this posture, this court would therefore normally
disregard new arguments, which form the substantial bulk of debtor’s appeal. However, because
the court concludes that debtor’s new arguments do not succeed, and in deference to his pro se
status, the court will evaluate both the motion presented to the bankruptcy court, and the new
arguments as presented to this court.
3. Motion Before Bankruptcy Court
The court has already noted the fatal deficiency with debtor’s original motion: it points to
no new evidence, and so fails all five elements of the Boryan standard. Further, the exhibits debtor
filed after he submitted his motion to the bankruptcy court, before the hearing thereon, were only

impeaching, and in addition and in the alternative, would not have led to a different result at trial,
for the reasons discussed below with reference to debtor’s exhibits before this court. Such exhibits
sought solely to impeach creditor’s witnesses on grounds that their testimony lacked corroboration
and by drawing unreasonable inferences and innuendos from press release-like documents. (See
Debtor’s Exs. Part 1 (DE 8–3); Debtor’s Exs. Part 2 (DE 8–4); Debtor’s Exs. Part 3 (DE 8–5)).
This is sufficient grounds to affirm the bankruptcy court’s rejection of the Rule 59 motion
presented to it.
4. Motion Before This Court
The court therefore proceeds to debtor’s arguments now presented for the first time on
appeal.
Debtor points to two new pieces of evidence: 1) a press release issued in September, 2023
by a third party, “Flexjet,” around which much of the tort claims in the underlying action revolved;

and 2) an affidavit from debtor. (See Debtor Br. 6–13).10 For the following reasons, these two
new pieces of evidence do not warrant a new trial because they are merely impeaching, and
because such evidence would not have resulted in a different outcome.
a. Impeachment
Debtor’s new evidence, as explained at length in his brief, is introduced to discredit the
testimony of creditor’s witnesses at trial. For example, debtor claims, with reference to specific
portions of the trial transcript, that the press release discredits Stone’s testimony that debtor
interfered with negotiations between Flexjet and creditor. (See Debtor’s Br. 7–10). Debtor thus
attempts merely to discredit Stone’s testimony. Debtor also introduces an affidavit to undermine

Stone’s statement that debtor approached Flexjet and influenced it to cease negotiating with
creditor. (See Debtor’s Br. 10–13). In his own words, debtor introduces this evidence to highlight
what he views as the lack of “corroborating evidence of the veracity of [Stone’s] testimony[,]” and
to question “the veracity of Plaintiff witness’ [sic] testimony.” (Debtor’s Br. 11, 14). Thus,
because the new evidence serves no purpose but to impeach creditor’s witnesses, it does not
provide a proper basis for a new trial. Boryan, 884 F.3d at 771.
Later in his brief, debtor claims that he does not introduce this evidence for impeachment
purposes, but on the very same page states that he does so “to point out the misleading nature of

10 Debtor’s brief refers to a few other exhibits in a quick passing reference, but then never mentions them again.
The court accordingly confines its analysis to the two exhibits which debtor actually discusses. (See Debtor’s Br. 5).
plaintiff witness testimony that was not corroborated by any supporting evidence[,]” and that the
new evidence “contradicts and impeaches plaintiff’s witness testimony.” (Debtor’s Br. 18
(emphasis added)). Seeking to undermine a witness’s credibility, or to point out gaps or a lack of
corroboration in a witness’s story, is classic impeachment. See, e.g., Impeachment, Black’s Law
Dictionary (11th ed. 2019) (“[t]he act of discrediting a witness . . . [t]he act of challenging the

accuracy or authenticity of evidence”). Accordingly, these two pieces of evidence are merely
impeaching and thus not a proper basis for relief under Rule 59.
b. Different Outcome
In addition, and in the alternative, neither piece of new evidence would have led to a new
outcome at trial.
First, debtor’s arguments around the press release rely essentially on speculation around
the timing of various decisions in which debtor had no part, and by suggesting tenuous inferences
from corporate boilerplate typical of a press release. For example, debtor claims that the release’s
statement that Flexjet’s choice of another third party as a business partner followed an 18-month

review process demonstrates that Flexjet never would have worked with creditor anyway, because
it was intent on working with the other entity all along. (See Debtor’s Br. 11–12). The court
cannot conclude that such innuendos and unsupported inferences would have resulted in a different
outcome at trial.
Debtor’s arguments about the press release largely depend on the contentions contained in
his affidavit, in which debtor claims that a third-party individual associated with Flexjet told debtor
that he had nothing to do with creditor’s alleged harms. (See Debtor’s Br. 10–11). Debtor’s
attempted use of this affidavit is unavailing, for two reasons. First, the bankruptcy court made an
explicit finding of fact that it found debtor and his testimony “self-serving and incredulous” at
trial. (See BR Op. 13). The court cannot conclude that the bankruptcy court would alter this or
any other finding based on the submission of a post-hoc affidavit, written by debtor, which
provides only hearsay, and which debtor admits has no corroboration. (See generally Debtor’s Ex.
27 (DE 22-6)); see also Harvey v. Enoch Pratt Free Library, No. RDB-20-0874, 2022 WL 345038,
at *2 (D. Md. Feb. 4, 2022) (rejecting use of self-serving affidavit on motion for reconsideration).

Second, this document is not actually an affidavit, because it is unsigned and unsworn.
While the United States Court of Appeals for the Fourth Circuit has not squarely addressed the
issue in a published opinion, an affidavit must be sworn to under penalty of perjury, verified, and
certified by a notary. See, e.g., Whittaker v. Morgan State Univ., 524 F. App’x 58, 60 (4th Cir.
2013) (distinguishing an unsworn letter from a notarized affidavit and ruling that the former could
not be considered at summary judgment); Pfeil v. Rogers, 757 F.2d 850, 858–59 (7th Cir. 1985)
(stating that “unsworn documents purporting to be affidavits may be rejected” and that affidavits
must be sworn to before a notary); Lumoa v. Potter, 351 F. Supp. 2d 426, 431 (M.D.N.C. 2004)
(declining to consider several unsworn documents at summary judgment); Slep-Tone Ent. Corp.

v. Powers, No. 5:12-CV-53-BO, 2014 WL 2040104, at *7 (E.D.N.C. Apr. 3, 2014) (“[Party’s]
purported affidavit fails as an affidavit per se because there is no notarial certification with it.”);
see also Pratt v. Allbritton, No. 4:16-CV-198-BR, 2018 WL 4610151, at *6–7 (E.D.N.C. Aug. 8,
2018) (examining North Carolina’s notarization laws); Affidavit, Black’s Law Dictionary (11th
ed. 2019) (“A voluntary declaration of facts written down and sworn to by a declarant, usually
before an officer authorized to administer oaths.” (emphases added)).
The document here contains no oath under penalty of perjury, no notarial verification
whatsoever, and indeed not even a signature; it therefore cannot qualify as an affidavit, which
bolsters the court’s conclusion that the bankruptcy court virtually certainly would not have credited
it.
Debtor cites Schultz v. Butcher, 24 F.3d 626, 631 (4th Cir. 1994) in his reply brief. (See
Debtor Reply (DE 28)). This case is inapposite. It dealt with a Rule 60(b)(3) motion seeking a
new trial on grounds that a party had deliberately concealed evidence requested in discovery and

thereby obtained a favorable judgment through fraud, and conducted an analysis similar to the
Brady v. Maryland, 373 U.S. 83 (1963) standard in a civil setting. See Butcher, 24 F.3d at 630–
31 (discussing possession by other side, materiality, and favorability). But as debtor repeatedly
emphasizes throughout his brief, the press release to which he points was not issued until after
trial, and so could not have been produced by anybody before then. As for debtor’s affidavit,
debtor claims his ability to gather evidence was impaired by an injunction entered by the arbitration
panel and by subsequent contempt proceedings sought to enforce it. (See Debtor Reply 4–5). But
as the bankruptcy court noted, debtor could have requested discovery relief at any time before trial
but elected not to, and debtor makes no showing that he could not have moved for modification of

the injunction to permit greater discovery. (See BR R. 59 Order 5). Finally, and in any case,
debtor’s motion is presented under Rule 59, not Rule 60(b)(3).
In sum, debtor has not produced new evidence sufficient to meet the demanding Rule 59
standard, for three reasons: 1) debtor’s motion as presented to the bankruptcy court identified no
new evidence, which debtor afterwards supplemented with only impeaching and/or immaterial
evidence; 2) debtor’s motion before this court presents merely impeaching evidence; and 3) in the
alternative such evidence would not have led to a different outcome at trial. See Boryan, 884 F.2d
at 771; Pac. Ins. Co., 148 F.3d at 403 (“an extraordinary remedy which should be used sparingly”).
Accordingly, the court affirms the bankruptcy court’s order denying debtor’s motion for new trial.
5. Motion to Seal
Debtor moves to seal this entire case and all documents within it. This drastic measure is
not appropriate without a showing of good cause, and debtor makes no argument in support of
sealing. However, the bankruptcy court sealed numerous documents on a more selective basis,
and creditor consents to the sealing here of documents already sealed on the bankruptcy court’s
docket. The court therefore concludes that, because good cause to seal was shown before that
court, good cause to extend sealing to the same documents before this court has been shown.
Accordingly, docket entries 7-3, 7-6, 7-7, 7-8, 7-9, 8-1, 8-3, 8-4, 8-5, 9-1, 10-5, and 10-9 will
be sealed.
CONCLUSION
For the forgoing reasons, the bankruptcy court’s order denying debtor’s Rule 59 motion is
AFFIRMED. Debtor’s motion to seal (DE 24) is GRANTED IN PART and DENIED IN PART.
The clerk is DIRECTED to seal the documents identified in the preceding paragraph.
SO ORDERED, this the 13th day of June, 2024.

LOUISE W. FLANAGAN
United States District Judge

12

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10459263. Public record. Not legal advice.