Opposition Brief — Gangi v. Verizon New England, Inc.

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Supreno Court, U.S

FILED

OFC 23 25.9

SE OF THE CLERK

No. 10-544 OFFICE OF THE Cl

IN THE

Supreme Court of the duited States

FRANK GANGI.

Petitioner.

VERIZON NEW ENGLAND INC.

D/B/A VERIZON MASSACHUSETTS, ET AL..

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the First Circuit

BRIEF IN OPPOSITION FOR RESPONDENT

VERIZON NEW ENGLAND INC.

MICHAEL FE. GLOVER SCOTT H. ANGSTREICH

STEVEN H. HARTMANN Counsel of Record

VERIZON GREGORY G. RAPAWY

1320 North Courthouse Road KELLOGG, HUBER, HANSEN,

9th Floor TODD, EVANS & FIGEL, P.L.L.C

Arlington, VA 22.201 1615 M Street, N.W., Suite 400

(703) 351-3059 Washington, D.C. 20036

(202) 326-7900

(sangstreich@khhte.com)

December 23, 2010

QUESTIONS PRESENTED

In 2006, the First Circuit held that a 2001 Federal

Communications Commission (“FCC”) order did not

prevent the Massachusetts Department of Telecom-

munications and Energy from compelling one of peti

tioner’s companies to pay respondent’s tariffed rates

for certain calls delivered over respondent's network.

In a separate lawsuit, respondent obtained a $57

milhon judgment against petitioner personally and

against his company for failure to pay the amounts

due. In 2010, the First Circuit affirmed that judg

ment. The questions presented are:

1. Whether the relevant state and federal regu-

latory agencies, the reviewing federal district court,

and the First Circuit correctly concluded that a pric-

ing mechanism the FCC established in 2001 and re-

tained in 2008 that set rates for certain specific types

of dial-up Internet Service Provider traffic does not

apply to the different calling arrangement at issue in

this case.

2. Whether res judicata bars petitioner from re

litigating the claims and issues resolved by the First

Circuit in 2006 because its decision affirmed a final

judgment entered by the district court in 2005 that is

no longer subject to appeal.

3. Whether the First Circuit correctly held that,

by attempting to “sandbag” (Pet. App. 25a) respon-

dent with a late-asserted defense of alleged failure to

exhaust administrative remedies, petitioner's company

could and did waive any such defense that might

exist.

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Rules of this Court,

respondent Verizon New England Inc. d/b/a Verizon

Massachusetts states the following:

Verizon New England Inc., f/k/a New England

Telephone and ‘Telegraph Company d/b/a Bell

Atlantic Massachusetts, is wholly owned by NYNEX

Corporation, which in turn is a wholly owned sub

sidiary of Verizon Communications Ine., a publicly

owned company. Verizon Communications Inc. has

no parent company, and no publicly held company

has a 10% or greater ownership interest in Verizon

Communications Inc

Lt]

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED.

CORPORATE DISCLOSURE STATEMENT 1]

TABLE OF AUTHORITIES. \

ee AE PRUE Ek oscacancocssess Rhea RD aa HALEY vale 2

REASONS FOR DENYING THE PETITION ......... 14

l REVIEW OF THE FIRST CIRCUIT'S

2006 DECISION CONCERNING THE

ISP REMAND ORDER IS UN

WARRANTED AND PROCEDURALLY

8 + RRR RRR Se eA RON SARA TRE ara me 15

A. Gangi Fails ‘To Show Any Signifi

cant Conflict Concerning the JSP

Remand Order ..... Sc eer ua) 15

B. Limited Conflicts Among State Com

missions Do Not Warrant Review.......... 20

C. The Regulatory Scheme for Dial-Up

t I

Internet Access Lacks Prospective

RII ss ccccs cezbeis va sontavaniocnisouenncenas ere i

D. Review of the Scope of the FCC’s

ISP Pricing Regime Is Barred by

Res Judicata ............ ene eae aaa ies

EK. The First Cireuit’s Decisions Were

be SRE nee pelea Tne iC eRe ee ae vee 24

Il. REVIEW OF THE QUESTION

WHETHER GNAPS WAIVED ANY

EXHAUSTION DEFENSE IS ALSO

CFG ON RITES 0 FEED basis sscciadcvivsscssuncsacsvessenvenss 25

\. Gang Fails To Establish Any Con

tlict Relevant to the First Circuit

Waiver Holding 5

B. The First Circuit Decision Wa

Correct 9Q

CONCLUSION J

TABLE OF AUTHORITIES

Page

CASES

Arbaugh v. Y&H Corp., 546 U.S. 500 (2006) 30

AT&T Corp. v. lowa Utils. Bd., 525 U.S. 366

CERIO cccccccccvecseunee 16, 2]

Auer v. Robbins, 519 U.S. 452 (1997) Ly

BellSouth Telecomms., Inc. v. MCImetro Access

Transmission Servs., Inc., 317 F.3d 1270

(lith Cir. OGG)... ea | as 26

Central Virginia Community College v. Katz,

546 U.S. 356 (2006) ........... J 8

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264

(1821) .cccccecccneanseiea me \

Core Communicattons, Inc. v. FCC, 592 F.3d

139 (D.C. Cir. 2010), cert. dented, Nos. 10

185 & 10-189 (Nov. 15, 2010)...... ; 18. 25

Core Communications, Inc. v. Verizon Pennsyl

vanta Inc.:

423 F. Supp. 2d 493 (E.D. Pa. 2006), affd

in part, vacated in part, and remanded, 493

K’.3d 333 (38d Cir. 2007)........ oe Zi

493 F.3d 333 (3d Cir. 2007)........... aoe, 26, 30

Global NAPs, Inc. v. FCC, 247 F.3d 252 (D.C

Cir. 2001) ....cicceeceuee

Global NAPs, Inc. v. Massachusetts Dep't of

Telecomms. & Energy, 427 F.3d 34 (1st Cir

ZU) «.«00ssecedenesnnen aie

Global NAPs, Inc. v. Verizon New England

Inc.:

396 F.3d 16 (1st Cir. 2005) 2, 6, 23

144 F.3d 59 (1st Cir. 2006) 2, 7, 8, 12, 15, 16,

15, 19, ZU, 22, 23, 24, 25

154 F.3d 91 (2d Cir. 2006) 20

189 F.3d 13 (1st Cir. 2007) e

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co..,

240 U.S. 25! (1916) oe

Hillsborough County v. Automated Med. Labs.,

Inc., 471 U.S. 707 (1988) ..... 6

Illinois Bell Tel. Co. v. Global NAPs Illinois,

Inc., 551 F.3d 587 (7th Cir. 2008) 28, 29

Kontrick v. Ryan, 540 U.S. 443 (2004) 30

Local 28 of Sheet Metal Workers’ Int'l Ass'n '

EEOC, 478 U.S. 421 (1986) aa 22, 23

Metropolitan Life Ins. Co. v. Price, 501 F.3d

271 (3d Cir. 2007). 28

New York SMSA L.P. v. Town of Clarkstown,

612 F.3d 97 (2d Cir. 2010) wishes Aa ae

Pasadena City Bd. of Educ. v. Spangler,

427 U.S. 424 (1976) .... 3

(west Corp. v. Arizona Corp. Commn, 567

F.3d 1109 (9th Cir. 2009) ..... Lo

Southern New England Tel. Co. v. Global

NAPs Inc., 624 F.3d 123 (2d Cir. 2010)......... 29

Southwestern Bell Tel. Co. v. Brooks Fiber

Communications of Oklahoma, Inc., 235

eg Te Bk a) Re 16, 27

Southwestern Bell Tel. Co. v. Public Util

Comm'n of Texas, 208 F.3d 475 (5th Cir

Z0C0).... - RAED ARE steuneaceas 26, 27

ling v. AT&T, 319 F.3d 1126 (9th Cir. 2003) 15, 16

Verizon Caltfornia Inc. v. Peevey, 452 F.3d

1142 (9th Cir. 2006) 19, 21

Verizon Maryland Inc. v. Global NAPs, In

377 F.3d 355 (4th Cir. 2004)

Verizon New England Inc. v. Maine Pub. Uti

Comm'n, 509 F.3d 1 (ist Cir. 2007)

Vonage Holdings Corp. v. Nebraska Pub. Seri

Comm'n, 564 F.3d 900 (8th Cir. 2009)

Zipes v. Trans World Altrlines, In: 155 |

330 (1982)

ADMINISTRATIVE DECISIONS

Memorandum Opinion and Order, Starpower

Communications, LLC, 15 FCC Red 11277

(2000) 2° {)

Order, Petition of Core Communications, In

for Forbearance Under 47 U.S.C. $ 160(c)

from Application of the ISP Remand Orde

19 FCC Red 20179 (2004), petitions for

review denied. In re Core Communications

fru 155 F.3d 267 (D.C. Cir. 2006) G

Order on Remand and Report and Order

Implementation of the Local Competition

Provisions in the Telecommunications Act

of 1996, 16 FCC Red 9151 (2001), remanded

WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C

Cir. 2002) o, 6, 7, 3, 10, 14,

Vill

Order on Remand and Report and Order and

Further Notice of Proposed Rulemaking

Implementation of the Local Competition

Provisions in the Telecommunications Act

of 1996, 24 FCC Red 6475 (2008), petitions

for review dented. Core Communications

Inc. v. FCC, 592 F.3d 139 (D.C. Cir. 2010)

ert. denied, No 10-185 & 10-189 (Nov. 15

-O10) a Bas Bao chs wae C4

rATUTI

Communication Act of 1954 i |

el eq

17 | OL

17 U.S. OP(a)

17 | >. y P51(b ) '

17 U.S. a

I7 U.S.C. § 252%(e)

I7 U.S.C 7 I 16

i7 US ( : i2(C) )

lelecommunication Act of 1996 ub. |

104-104, 110 Stat. 56

U... @ Lod! A)

OTHER MATERIALS

Brief for FCC, Core Communications, Inc. v.

FCC, Nos. 08-1365, et al. (D.C. Cir. filed

May 1, ZO08) «055.052... i eidsnxcieeetabnsadiatansareneioNs 18, 25

Brief for the Federal Respondents in Oppo-

sition, Core Communications, Inc. v. FCC,

Nos. 10-185 & 10-189 (U.S. filed Oct. 12,

EM este gecsungeaciansenehtadevaes Senawbastwlcesaweweucel Eis< be

Brief of Appellant GNAPs, Global NAPs, Inc.

v. Verizon New England Inc., No. 05-2657

(1st Cir. filed Nov. 28, 2005) 22

Brief of Appellee Verizon, Global NAPs, Inc. v.

Verizon New England Inc., No. 05-2657

(ist Cir. filed Dec. 14, 2005) ...................cccccec0e: 20

Brief of Appellee Verizon, Global NAPs, Inc. v.

Verizon New England Inc., Nos. 09-1308 &

09-1309 (1st Cir. filed June 11, 2009)..........0...... 24

Complaint, Global Naps, Inc. v. Verizon New

England Inc., et al., No. 02-12489 (D. Mass.

FEMI BPG. FN, UID cnccccacnccocccacevesnss 6, 7, 3, 9, 22, 20

Complaint, Global Naps, Inc. v. Verizon New

England Inc., et al., No. 03-10437 (D. Mass.

feed Pear. G6, 2003) .................. RAR G BER A AR 6, 23

Complaint, Global NAPs, Inc. v. Verizon New

England Inc., No. 05-10079 (D. Mass. filed

RS I eo es end Cea isue to Oe es ee

Opposition of FCC to Petition for a Writ of

Mandamus, Jn re Core Communications,

Inc., No. 07-1446 (D.C. Cir. filed Dec. 27,

RE ete arnt eee ne 17

Reply Brief of Appellants GNAPs et al., Global

NAPs, Inc. v. Verizon New England Inc.,

Nos. 09-1308 & 09-1309 (1st Cir. filed June

RRR aia AAS Ran dn ena Mee Aare ae Se APN een 24

This case presents no question worthy of certiorart.

Petitioner Frank Gangi (“Gang”) has failed to show

that any relevant circuit split exists or that this

case involves any question of nationwide import. His

claims of conflict and confusion among the lower

courts do not withstand scrutiny. And he omits and

misstates important procedural points that render

this case an unsuitable vehicle for resolving any

question that affects anyone but the parties.

What this case really involves is a_ last-ditch

attempt by Gangi to escape the consequences of

his own actions. For years, Gangi's company Global

NAPs, Inc. (““GNAPs”) engaged in an abusive regula-

tory arbitraye scheme by gaming the regulations gov-

erning intercarrier charges applicable to local “dial-

up” telephone calls to Internet Service Providers

(“ISPs”). The Federal Communications Commission

(““EFCC” or “Commission”) ultimately adopted rules to

shut down this arbitrage scheme that, logically, ad-

dressed the calls that were the focus of the scheme.

As relevant here, GNAPs employed a different call

ing arrangement that allowed long-distance calls to

be made to its ISP customers free of the toll charges

that would normally apply. GNAPs argued that,

under the pricing rules adopted by the FCC to stop

arbitrage payments to GNAPs (and similar compa-

nies), Verizon had to make additional payments to

GNAPs for such calls. But regulators and courts

ruled (after years of litigation and multiple inter-

vening appeals) that the FCC’s pricing rules did not

apply to those long-distance calls and that GNAPs

had to pay Verizon rather than vice versa.

GNAPs refused to pay, leading to more years of

litigation — in which it continued to advance new

theories relentlessly and to lose at every turn. Ulti

mately, Verizon obtained a judgment against GNAPs

for $57 million, and the courts held Gangi personally

liable for that amount after piercing GNAPs’ corpo-

rate veil as a sanction for Gangi’s destruction of

evidence and “le|s] to the court,” Pet. App. 44a.

GNAPs, which (along with other Gangi-owned

companies) is now controlled by a Receiver, does not

seek certiorari. Gangi does, but his petition lacks

any basis to support a grant. As the D.C. Circuit

observed as long ago as 2001 in addressing another

part of this same controversy, “GNAPs” — and now

Gangi — “sought to game the ... rules, and lost.”

Global NAPs, Inc. v. FCC, 247 F.3d 252, 260 (D.C.

Cir. 2001). Nothing about that well-deserved loss

warrants review.

STATEMENT

As the district court observed in its final grant of

summary judgment to Verizon, “[t]he history of this

case 1s a protracted and complicated one.” Pet. App

54a. As the court of appeals observed years earlier,

that complexity stems from a series of “efforts by

GNAPs,” and now Ganga, “to delay or avoid payment

of... sums past due to Verizon” through repetitious

litigation. GNAPs IV, 489 F.3d at 18.!

This brief uses the same short-form citations for prior

appeals that the First Circuit did in its most recent decision

See Pet. App. 3a-4a (identifying the cases as: Global NAPs, Inc.

v. Verizon New England Inc., 396 F.3d 16 (1st Cir. 2005)

(““GNAPs I”); Global NAPs, Inc. v. Massachusetts Dep't of Tele

comms. & Energy, 427 F.3d 34 (1st Cir. 2005) (““GNAPs ITI”);

Global NAPs, Inc. v. Verizon New England Inc., 444 F.3d 59

(Ist Cir. 2006) (““GNAPs IIT”), reprinted in Pet. App. 75a-11 1a;

Global NAPs, Inc. v. Verizon New England Inc., 489 F.3d 13

(ist Cir. 2007) (““GNAPs IV”)). It refers to that most recent

decision, Global NAPs, Inc. v. Verizon New England Inc., 603

1. From at least 2000 to 2006, GNAPs provided

ISPs with an arrangement known as “Virtual NXX”

(or “VNXX”). “NPA-NXX” represents the first six

digits of a ten-digit telephone number under the North

American Numbering Plan. For example, in this

Court's general number (202) 479-3000, the NPA-

NXX is “(202)-479.” Historically, each NPA-NXX has

corresponded to a particular telephone exchange in a

particular local calling area. A “Virtual NXX” num

ber is one assigned to a customer that is physically

located outside of the exchange associated with the

NPA-NXX in its assigned telephone number. The

eall to a Virtual NXX number appears local to the

person dialing the number, though the recipient of

the call is far away. The call also appears local to the

telephone company (here, Verizon) that serves the

caller.

GNAPs assigned Virtual NXX numbers associated

with exchanges throughout Massachusetts to its

ISP customers, which sold “dial-up” Internet access

“Dial-up” is a form of Internet access in which a cus

tomers modem, using the same kind of telephone

line used for voice calls, makes a standard telephone

‘call to a modem belonging to the ISP. This case thus

does not involve any broadband service, such as that

provided over Verizon's FiOS and DSL offerings or a

cable company’s cable modem service; any wireless

service; or any service using Voice over Internet Pro

tocol (“VoIP”).

The Virtual NXX numbers that GNAPs assigned

allowed its ISP customers to offer to their own

Massachusetts customers, who purchase local tele

phone service from Verizon among others, the ability

F.3d 71 (lst Cir. 2010), reprinted in Pet. App. 1la-50a, as

“GNAPs V.”

to access the Internet by dialing an apparently local

telephone number. Callers dialing these Virtual

NXX numbers would pay only for a local call, even

though their calls were actually travelling to places

that would ordinarily trigger a toll charge.”

GNAPs argued that Verizon had to pay it charges

for completing these Virtual NXX calls to ISPs,

claiming that the calls were just like ordinary local

calls. See 47 U.S.C. § 251(b)(5). Verizon argued that

the calls were in fact toll-free, long-distance calls,

no different from toll-free, long-distance calls made

using a traditional “800” service, and that GNAPs

should pay Verizon the charges that would be due

under its tariffs for such calls.

2. In 2002, Verizon and GNAPs presented that

dispute to the Massachusetts Department of Tele-

communications and Knergy (“Department’).? Exer-

cising its authority under 47 U.S.C. § 252 to resolve

disputes regarding the terms of the contracts between

local telephone companies, known as interconnection

agreements, the Department ruled for Verizon. The

Department agreed with Verizon that Virtual NXX is

essentially a “substitute toll-free calling service” and

held that Virtual NXX calls should “be rated as local

or toll based on the geographic end points of the call.”

Pet. App. 159a, 162a. Accordingly, GNAPs would

“ Increasingly, the distinction between “local” and “toll” (and

between inter- and intrastate toll) is disappearing, as customers

purchase flat-rated, any-distance wireline and wireless plans

At the time of the dispute between Verizon and GNAPs, these

distinctions mattered more to both consumers and carriers, as

they governed the amount that consumers would pay to their

carners and that carriers would pay to each other

’The Department is now known as the Department of Tele

communications and Cable

have to pay Verizon’s tariffed charges on Virtual

NXX traffic. The Department ordered the parties to

develop contract language to reflect its decision. See

id. at 168a. The Department later approved a con-

tract between GNAPs and Verizon containing such

language. See id. at 90a.

In reaching its decision, the Department rejected

GNAPs’ argument that its ruling was inconsistent

with the FCC’s JSP Remand Order.4 See id. at 152a-

153a. In that order, the FCC adopted a_ pricing

methodology for certain dial-up ISP traffic to address

the significant “regulatory arbitrage” problem that

had arisen because dial-up traffic 1s one way “lor

modems do not generally call” back —- so payments

by carriers originating these calls led to “large one-

way flows of cash” to companies, like GNAPs, with

ISP customers. JSP Remand Order 44] 8, 21, 70.

Indeed, before the FCC’s ruling, GNAPs was among

the companies that, together, had generated a total

of nearly $2 billion annually in abusive “windfall”

profits by signing up ISP customers exclusively or

almost exclusively. 7d. § 70. When GNAPs sought to

shield itself behind the FCC order meant to curtail

its Own uneconomic arbitrage, however, the Depart

ment rejected GNAPs’ contention that the FCC's pric

ing rules “control[] ... [the] issues in thle] arbitra

tion.” Pet. App. 147a.

4 Order on Remand and Report and Order, Implementation

of the Local Competition Provisions in the Telecommunications

Act of 1996, 16 FCC Red 9151 (2001) (VSP Remand Order’)

remanded, WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir

2002)

GNAPs filed a complaint (the “2002 Complaint”)

in the District of Massachusetts challenging the

Department's ruling with respect to Virtual NXX

traffic. GNAPs claimed that the Department’s rul-

ing on Virtual NXX ISP traffic was inconsistent with

the JSP Remand Order.

3. Throughout 2003 and 2004, Verizon continued

to deliver calls to GNAPs and to bill GNAPs charges

for those calls pursuant to the terms of the contract

the Department had approved. GNAPs did not pay

the bills. On March 17, 2005, Verizon warned

GNAPs that it already owed Verizon $42 million and

that, if GNAPs did not pay, Verizon would terminate

service. In response, GNAPs obtained an order from

the district court requiring Verizon to continue pro-

viding service, claiming that it could not pay the

amounts due under the interconnection agreement

and that its business would be destroyed if service

were terminated. See Pet. App. 35a-36a.

The district court then turned to the merits of the

2002 Complaint. On September 21, 2005, it granted

partial summary judgment to the Department and

’ See Complaint, Global Naps, Inc. v. Verizon New England

Inc., et al., No. 02-12489 (D. Mass. filed Dec. 30, 2002) (“2002

Complaint’)

"In 2003, GNAPs filed a second complaint, which challenged

the Department's decision that GNAPs could not refuse to

sign an interconnection agreement reflecting the Department's

ruling on Virtual NXX traffic. See Complaint, Global Naps, Inc

v. Verizon New England Inc., et al., No. 03-10437 (D. Mass

filed Mar. 6, 2003) (*2003 Complaint’). The parties litigated the

2003 Complaint first The district court granted summary

judgment for the Department and Verizon and entered a final

judgment against GNAPs on May 13, 2004. On January 19,

2005, the First Circuit affirmed in GNAPs 1. On May 31, 2005,

this Court denied GNAPs’ petition for certiorari

Verizon, rejecting GNAPs’ claim that the pricing

regime in the ISP Remand Order governed the call-

ing arrangement at issue here.?’ GNAPs then stipu-

lated to an order dismissing all other claims in the

2002 Complaint with prejudice in order to obtain

an appealable final judgment. The district court

entered the stipulated judgment on October 31, 2005.

On appeal, GNAPs did “not challenge the [Depart-

ment’s] determination that whether a call is local or

‘interexchange’ should be based on the geographic

endpoints of the call, or the decision to impose access

charges on non-ISP-bound VNXX calls.” GNAPs ITI,

Pet. App. 103a. Instead, GNAPs claimed only that

the FCC intended for its ISP pricing regime to

control “charges for ... non-local ISP-bound traffic,”

such as the Virtual NXX traffic at issue in this case

Id. at 103a-104a. Verizon and the Department re-

sponded that the FCC’s pricing regime applied only

where the ISP and the caller were located in the

same local calling area. The First Circuit invited and

received an amicus brief from the FCC concerning

the correct interpretation of the JSP Remand Order

The FCC's brief acknowledged that, “[i]Jn some respects,

the JSP Remand Order appears to address all calls

placed to ISPs,” but clarified that “the Commission

{had been] focused on calls between dial-up users and

(SPs ina single local cailing area.” /d. at 108a (inter

nal quotation marks omitted; alteration in original)

The petition incorrectly identifies the district court

September 21, 2005 ruling as the resolution of “cross-motions

for summary judgment on [Verizon's] counterclaim.” Pet. 12

That counterclaim was raised in response to GNAPs’ 2005

Complaint, not the 2002 Complaint. See Complaint, Global

NAPs, Inc. v. Verizon New England Inc., No. 05-10079 (D. Mas

filed Jan. 12, 2005) (“2005 Complaint”); infra p. 9

The First Circuit affirmed. See GNAPs IIT,

reprinted in Pet. App. 75a-11la. The First Circuit

held that neither the text nor the context of the

ISP Remand Order supported a conclusion that the

order's pricing regime “clearly preemptfed] state

authority to impose access charges for interexchange

VNXX ISP-bound traffic.” /d. at 103a. It reasoned

that, in light of the “important distinction” in telecom-

munications law between different types of charges,

the FCC would have spoken more clearly if it had

intended its new pricing mechanism to apply to the

tanffed charges at issue here. /d. at 105a.

In addition, the court relied on the venerable

“‘maxim ... that general expressions, 1n every

opinion, are to be taken in connection with the case

in which those expressions are used.” /d. at 106a

(quoting Central Virginia Community College v.

Katz, 546 U.S. 356, 363 (2006), quoting in turn

Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 399-400

(1821) (Marshall, J.)). Because the JSP Remand

Order as a whole was focused on a problem of arbi-

trage in the reciprocal-compensation system for calls

within the same calling area, the court declined to

construe the FCC’s pricing regime meant to remedy

that arbitrage as displacing otherwise applicable tar-

iffed charges for different call arrangeinents simply

because some language in it might read that way in

isolation

* After affirming, the First Circuit “remanded to the district

court for any further proceedings.” Vet. App. llla. The only

further proceedings stemming from the 2002 Complaint involved

a postjudgment dispute over $16 million in securnty that GNAPs

had provided for the orders that had compelled Verizon to con

tinue providing service. See GNAPs 1V, 489 F.3d 13 (affirming

the district court's release of the security to Verizon)

4. On January 12, 2005, while the 2002 Com-

plaint was pending, GNAPs filed the 2005 Complaint

in the district court. The 2005 Complaint alleged

that the FCC’s Core Forbearance Order,? which mod-

ified certain aspects of the FCC’s pricing regime for

ISP traffic, entitled GNAPs to bill Verizon for traffic

delivered to GNAPs’ ISP customers.!®° On March 14,

2005, Verizon answered the 2005 Complaint and

counterclaimed for the originating charges that

GNAPs owed under the parties’ interconnection

agreement. GNAPs’ reply to Verizon’s counterclaim

did not raise any argument that the counterclaim

had to be presented to the Department before the

district court could rule upon it.!!

During 2005 and 2006, Verizon uncovered evidence

that assets and revenues belonging to GNAPs had

been moved to other entities also owned by Gangi

Verizon therefore moved for prejudgment remedies to

secure its counterclaim. It also sought judgment on

the pleadings on the 2005 Complaint. The district

court granted both of Verizon’s motions. Verizon

then diligently attempted to attach GNAPs’ assets,

but was able to locate less than $1 million in GNAPs’

’ Order, Petition of Core Communications, Inc. for Forbear

ance Under 47 U.S.C. $ 160(c) from Application of the ISP

Remand Order, 19 FCC Red 20179 (2004) (“Core Forbearanc:

Order’), petitions for review denied, In re Core Communications

Inc., 455 F.3d 267 (D.C. Cir. 2006)

'0 In resisting Verizon's later motion for judgment on the

pleadings, GNAPs argued to the district court that the “basis of

fits} claim” in the 2005 Complaint was “the [i]nterconnection

laljgreement” between the parties. C.A. App. 399

'! The relevant portions of the record can be found at C.A

App. 65-75 (2005 Complaint), C.A. App. 90-107 (Verizon's

Answer and Counterclaim), and C.A. App. 125-28 (GNAPs’

Reply to Verizon’s Counterclaim)

name. Verizon accordingly added Gangi (among nu

merous other entities) as a counterclaim defendant

seeking to hold him personally liable by piercing the

veils of the corporations he owned

GNAPs and Gangi moved twice to dismiss Veri

zon’s amended counterclaim. The first motion raised

a challenge to the district court's subject-matter

jurisdiction under 28 U.S.C. § 1367 that is not pre

sented in the petition. In the second motion, filed

in June 2007, GNAPs raised for the first time thi

argument that Verizon's counterclaim against GNAP

itself (originally asserted in March 2005) had to bi

presented to the Department before the district court

could rule upon it. See Pet. App. lla. On January %

2008, the district court denied that motion. See id

{Qa-/4a

>. discovery continued into the summer of 200

During that time, Verizon learned that Gangi and

his companies had destroyed or withheld busine

and accounting records that were necessary for Veri

zon to make its case against GNAPs, Gangi, and

the other counterclaim defendant As a result

October 16, 2008, Verizon sought a default judgme

on all of its claims

While the motion for default judgment was pend

ing, the FCC issued the Second ISP Remand Orde)

[In that order, the FCC responded to the D.C. Cu

cult’s 2002 remand of its JSP Remand Order by sp:

Order on Remand and Report and (Dr iT ! ma | irtnel

Notice of Proposed Rulemaking Impl mentation of the La

Competition Provisions in the Telecommunications Act of 199¢

24 FCC Red 6475 (2008) (“Second ISP Remand Order’), pet

tions for review dented, Core Communications, Ini RC q

F.3d 139 (D.C. Cir. 2010) (“Core v. FCC”). cert. dented

185 & 10-189 (Nov. 15, 2010)

fying the source of its legal authority to establish its

[SP pricing regime; however, the FCC “maintainf[ed],”

and did not change, the substance of that regime

Second ISP Remand Order 44 1, 29. On November

14, 2008, GNAPs moved for summary judgment,

claiming that the new order had “clarified” that

the FCC had intended to preclude imposing charg

on GNAPs for any ISP-bound calls, regardless of

whether the caller and ISP were in the same loca!

calling area On November 18, 2008, the district

court denied that motion, stating that the Second

ISP Remand Order could “not undo everything that

happened in the case over the last eight years” and

that “it’s hard to see how the FCC can effectively

overrule the First Circuit

On December 3, 2008, after an evidentiary hearing

the district court granted default judgment against

Gangi and held him personally hable to pay any

judgment against GNAPs, finding that Gangm had

committed willful discovery misconduct and that

Gangi and another GNAPs employee had “led |

the court” on the witness stand in an attempt t

conceal their action Pet. App. 44a; see td. at 44a

17a (summarizing the district court's findings). ‘The

district court also ruled on December 4 that GNAP

The relevant portion of the district court November

bench ruling 1s reproduced at ©.A. App. 2062-63 Citing

same pages of that transcript, the petition claims (at 14) that

the district court “statiled| that its pnor determination on the

issue was ‘law of the case "he district judge did not say the

words Gangi has placed in quotation marks. Gangi's misquota

tion of the district court is material. As discussed infra note

and 18, the question whether the district court and the First

Circuit's prior rulings are mere law ol the case or carry the full

force of res judicata 1s relevant to Gangi's ability to raise certai

questions purports dly presente iby this petition

was judicially estopped from contesting certain state

ments it had made in 2005 about the charges it

would have to pay to Verizon if it lost in GNAPs II]

See id. at 64a-69a (denying reconsideration of that

ruling)

On January 22, 2009, the district court granted

summary judgment to Verizon on its counterclaim

against GNAPs. The court found GNAPs (and there

fore Gangi) liable for $57,716,714. See id. at 53a-64a

6. On appeal, the First Circuit affirmed Se

GNAPs V, reprinted in Pet. App. la-50a. The court

rejected GNAPs’ and Gangi’s argument that the

Second ISP Remand Order provided a reason for re

visiting GNAPs Ill. It concluded that “|t|he Second

[SP] Remand Order's express purpose was to justify

not change 1 particular rate system that the

ourt had previously construed. Jd. at 18a. It found

upport for this conclusion not only in the order 1t

elf, but also in the D.C. Circuit's opimon upholding

the order and in the FCC’s brief to the D.C. Circuit

in that case. See td. at 17a. Accordingly, the court

declined to revisit its “hlo|ld|ing], in GNAPs /I/, that

the FCC's rate] system applied only to local ISP trat

at Id. at 18a

The First Circuit also rejected GNAPs' and Gangi

argument that Verizon wa required to submit to the

Department its counterclaim for amounts due under

the interconnection agreement before bringing that

laim to the district court The court first held

that the district court had subject-matter jurisdiction

over the counterclaim and that nothing in the Tele

communications Act of 1996 ("1996 Act’) took that

jurisdiction away See id. at 20a-24a It then

reasoned that. because jurisdiction existed, GNAP

laim amounted at most to “a type of administrativ:

exhaustion argument it 24a ind that exhau

tion requirements that Congress has not express!

made a prerequisite tf coul ubject-matter jur)

diction can be waived, see id. Noting that “GNAP

did t raise this lexhaustion-type] argument until

nearly two years alter Verizon filed its countercla

ind only atte, (; NAP tne! irgument had beer

rejected, the court concluded that GNAPs had at

empted indbag it pponent’ al held that tl

iil Va Va ved / i )

lL} buy Lircull al ittirn Lrie ! l

Line rulin iwainst GNAP ind (aal loin

rirst ¢ iit held that judicial « ppel agall

(y \P ’ ippropmat " tihers i!

hat GNAP lelil i pia I t

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REASONS FOR DENYING THE PETITION

Gangi fails to show the existence of any relevant

split among the circuits or other question of impor-

tance. The First, Second, and Ninth Circuits are the

only ones to have considered whether the FCC’s JSP

Remand Order pricing regime extends to Virtual

NXX calls to ISPs. All three agree that it does not.

The question also has diminishing practical impor-

tance because it is limited to the scope of a regula-

tory remedy for arbitrage and fraud in the context of

dial-up ISP access an outmoded technology that is

rapidly giving way to newer ones. In addition, even

if the question warranted review, this case would

be an unsuitable vehicle for that review: GNAPs

litigated and lost this issue in 2006, that loss is

embodied in a final judgment that is no longer sub-

ject to review, and Gangi is bound by that judgment’s

res judicata effects.

Gangi similarly falis far short of showing any

important or controversial question about the appro-

priate timing of remedies in cases about interconnec-

tion agreements. The First and Second Circuits are

the only circuits to have considered whether there is

a nonwaivable requirement that a htigant seek the

interpretation or enforcement of an interconnection

agreement from a state commission before going to

federal court. Both agree that there is not. The

Third Circuit has held that such a requirement

exists, but has not determined whether it is waivable.

With no split to resolve, Gangi’s plea for review seeks

nothing more than error correction from this Court.

Moreover, the First Circuit did not err when it con-

cluded that GNAPs’ attempt to “sandbag” Verizon,

Pet. App. 25a, ought to fail.

I. REVIEW OF THE FIRST CIRCUIT’S 2006

DECISION CONCERNING THE JSP REMAND

ORDER IS UNWARRANTED AND PROCE-

DURALLY BARRED

A. Gangi Fails To Show Any Significant Con-

flict Concerning the JSP Remand Order

1. The cases that Gangi claims conflict with the

First Circuit’s 2006 decision in GNAPs III are easily

distinguishable. His lead case is Ting v. AT&T, 319

F.3d 1126 (9th Cir. 2003); see Pet. 17-18. That case

does not even mention payments due for dial-up ISP

traffic or the JSP Remand Order. In Ting, the Ninth

Circuit held that §§ 201(b) and 202(a) of the Commu-

nications Act of 1934 did not preempt certain state

contract and consumer protection laws as applied to

the predominantly interstate service provided by a

long-distance carrier to its end users. See 319 F.3d

at 1145-46.

Gangi also relies upon New York SMSA L.P. v.

Town of Clarkstown, 612 F.3d 97 (2d Cir. 2010) (per

curiam); see Pet. 18-19. Like Jing, that case does

not mention payments due for dial-up ISP traffic or

either ISP Remand Order. In New York SMSA, the

Second Circuit held that a local ordinance that estab-

lished a local “prefer[ence]” for certain types of wire-

less telecommunications facilities over others, and

that attempted to supplement the FCC’s regulation

of radio frequency interference, was preempted by

§ 332(c)(7) of the Communications Act. See 612 F.3d

at 105-06.

The holdings of Ting and New York SMSA have

nothing to do with the question presented by the

petition.!4 Gangi claims that those cases (along with

this Court’s decision in AT&T Corp. v. Iowa Utilities

Board, 525 U.S. 366 (1999)) establish the general

proposition that there is no presumption against

preemption in “areas of traditional federal jurisdic-

tion.” Pet. 19. That broad claim of generalized ten-

sion in the reasoning of circuit-court decisions falls

well short of the sharp conflict that calls for review

by this Court.

Gangi’s claim of tension also mischaracterizes the

First Circuit’s reasoning. He criticizes that court for

relying on a passage from Hillsborough County v.

Automated Medical Laboratories, Inc., 471 U.S. 707

(1985). See Pet. 17. The First Circuit’s citation to

Hillsborough, however, was specifically about con-

struing the scope of a regulatory action. See GNAPs

I11, Pet. App. 101la (“‘[Blecause agencies normally

address problems in a detailed manner and can

speak through a variety of means, ... we can expect

that they will make their intentions clear if they

intend for their regulations to be exclusive.’”) (quot-

ing Hillsborough County, 471 U.S. at 718). The First

Circuit’s reliance on that insight did not create a

conflict with Jowa Utilities Board, Ting, or New York

\4 Qwest Corp. v. Arizona Corp. Commission, 567 F.3d 1109

(9th Cir. 2009), which Gangi cites only in passing (at 18), held

that a state commission exercising delegated federal authority

under 47 U.S.C. § 271 could not rely on its state-law authority

to impose certain pricing requirements that the FCC had

expressly rejected. Qwest, like Ting and New York SMSA, does

not mention payments due for dial-up ISP traffic or either JSP

Remand Order. Indeed, Qwest undercuts Gangi’s claim of a

conflict: the Ninth Circuit noted in Qwest that it “agree[d]

with” the First Circuit’s decision in Verizon New England Inc. v.

Maine Public Utilities Commission, 509 F.3d 1 (1st Cir. 2007).

567 F.3d at 1119.

SMSA, all of which dealt primarily or exclusively

with questions of statutory construction.

2. Gangi then argues that the First Circuit

“turn[ed] a blind eye to the FCC’s manifest intent

to establish an exclusive method of intercarrier

compensation for internet-bound calls.” Pet. 20. He

relies upon the Eighth Circuit’s decision in Vonage

Holdings Corp. v. Nebraska Public Service Commis-

sion, 564 F.3d 900 (8th Cir. 2009), in support of

his argument. Again, however, the Eighth Circuit's

opinion does not mention payments due for dial-up

ISP traffic or either JSP Remand Order. Instead,

that court addressed the effect of a 2004 FCC order

that addressed VoIP traffic, not dial-up ISP traffic.

See id. at 905. This case does not involve any VoIP

traffic. Gangi’s unsupported assertion that two

orders addressing different issues are materially

identical is hardly enough to show the need for this

Court’s review.

Gangi further ignores the FCC’s later indication

that the First Circuit correctly construed the agen-

cy’s intent as to dial-up ISP traffic, explaining to the

D.C. Circuit that “the First Circuit had no difficulty

recognizing {in GNAPs III] that the JSP Remand

Order did not address the regulatory treatment. of

VNXX calls.” Opposition of FCC to Petition for a

Writ of Mandamus at 27 n.22, In re Core Communi-

cations, Inc., No. 07-1446 (D.C. Cir. filed Dec. 27,

2007). The FCC’s interpretation of its own regula-

tory regime is subject to a highly “deferential stan-

dard.” Auer v. Robbins, 519 U.S. 452, 461 (1997).

3. Gangi next turns to a case that did involve

the ISP Remand Order but had nothing to do with

construing the scope of the FCC’s pricing rules or

whether they extend to long-distance dial-up ISP

traffic. See Pet. 24 (citing Core v. FCC, 592 F.3d

139). In Core v. FCC, the D.C. Circuit held that,

in the Second ISP Remand Order, the FCC had

adequately explained its statutory authority to pro-

mulgate the pricing rules that had been in effect

since the ISP Remand Order. See 592 F.3d at 141.

In doing so, the court approved the FCC’s conclusion

that ISP-bound traffic is within the FCC’s statutory

authority to regulate under § 201(b), because the

dial-up call to the ISP (which may take place entirely

in one state) is part of a longer interstate communi-

cation that begins with the dial-up user and ends

somewhere on the Internet. See id. at 143-45.

As the First Circuit concluded, Core v. FCC said

nothing to suggest that the long-distance calls at is-

sue here were governed by the pricing rules imposed

in the JSP Remand Order. See Pet. App. 17a. Gangi,

moreover, fails to mention that the D.C. Circuit

actually cited GNAPs III while clarifying that there

was no dispute in Core v. FCC about the regulatory

treatment of “a [local exchange carrier]’s provision of

access for completion of a long-distance call.” 592

3d at 144.

Further, the FCC’s brief to the D.C. Circuit in Core

v. FCC described the “traffic covered by the Commis-

sion’s interim pricing rules” as that traffic “which

occurs when two [local exchange carriers} collaborate

to deliver calls to an ISP within a local calling area.”

Brief for FCC at 21, Core v. FCC, Nos. 08-1365, et al.

(D.C. Cir. filed May 1, 2009) (““FCC’s D.C. Cir. Core v.

FCC Br.”) (emphasis added). That, of course, is the

very holding of GNAPs I/II. And the First Circuit

in turn quoted and relied upon that passage from

the FCC’s brief in GNAPs V. See Pet. App. 17a.

Thus, the First Circuit, the D.C. Circuit, and the

FCC have all reviewed one another’s reasoning,

and none has noted any tension. Gangi’s attempt to

manufacture a reviewable conflict from this situation

deserves no credence.

4. Finally, Gangi claims (at 25) that GNAPs III

conflicts with Verizon Maryland Inc. v. Global NAPs,

Inc., 377 F.3d 355 (4th Cir. 2004). That case involved

a challenge to a state commission arbitration deci-

sion to which the JSP Remand Order did not apply

because the arbitration predated the order’s effective

date. See id. at 367 (“The [JSP Remand Order] ...

expressly preserves the arbitration decisions here

because they were issued before June 14, 2001.”).

The Fourth Circuit did not need to, and did not,

adopt any holding concerning the preemptive effect of

the JSP Remand Order on decisions issued after its

effective date.

Gangi, however, relies on the Fourth Circuit’s

statement in dictum that the FCC “adopted a new

compensation regime ... to govern ISP-bound calls

and announced that it was stripping state commis-

sions of any authority to formulate the compensation

regime for such calls.” Jd. That dictum, however,

said nothing about the scope of the FCC’s rules and

did not opine (much less rule) on whether the JSP

Remand Order pricing rules reached Virtual NXX

ISP-bound traffic.

5. The only circuit case that Gangi cites that

actually addresses the same question as the First

Circuit did in GNAPs II] is Verizon California Inc. v.

Peevey, 462 F.3d 1142 (9th Cir. 2006). In that case,

the Ninth Circuit, following the First Circuit, held

that the JSP Remand Order “has no effect on the de-

termination of whether collection of call origination

charges for ISP-bound VNXX traffic is appropriate.”

Id. at 1158. Gangi does not cite the Second Circuit's

decision in Global NAPs, Inc. v. Verizon New Eng-

land Inc., 454 F.3d 91 (2d Cir. 2006) — despite the

fact that his company was a party to that case but

that court, also following the First Circuit, likewise

rejected GNAPs’ claims that the FCC’s ISP pricing

rules apply to Virtual NXX ISP traffic, see id. at 99-

101 (citing GNAPs ITI). The fact that the only other

on-point circuit decisions agree with the First Circuit

is further evidence that review is unnecessary.

B. Limited Conflicts Among State Commis-

sions Do Not Warrant Review

Gangi claims (at 26) that “the question presented

here has generated widespread conflict and confusion

among state commissions over the scope of their

authority over internet calls.”. This claim would

not justify granting a petition for certiorari even

if correct. A conflict between state agencies over

the interpretation of federal law does: not warrant

review, because such a conflict can be resolved by the

district and circuit courts, or by the FCC.

In any event, the state commission decisions on

which Gangi relies show no indication that the First

Circuit’s decision has created confusion. Instead,

they show that GNAPs IIT helped to clarify the law.

Every final decision that GNAPs cites as adopting

GNAPs’ position on the scope of the FCC’s ISP pric-

ing rules was issued in January 2005 or earlier. See

Pet. 26-27 nn.48-50.'5 Accordingly, none of them

had the benefit of GNAPs /1T1. Gangi does not appear

to dispute that, in the wake of GNAPs IIT, final

!> Other commissions during that time frame had joined the

Department in concluding that the FCC’s ISP pricing rules did

not apply to long-distance calls to ISPs. See Brief of Appellee

Verizon at 32-33 & nn.30-32, GNAPs ITT, No. 05-2657 (1st Cir.

filed Dec. 14, 2005) (collecting decisions).

decisions at the state commission level have been

consistent with the rule adopted by the Furst, Second,

and Ninth Circuits some without the need for

judicial review, and others after review by district

courts. See Pet. 27-28 nn.52-56.

Gangi also contends that this Court’s review is

warranted because of “untenable conflict between

state commissions and the relevant court of appeals.”

Pet. 27 & n.56 (citing district court decisions in

Arizona and Washington applying Peevey). On the

contrary, as this Court has recognized, “if the federal

courts believe a state commission is not regulating

in accordance with federal policy they may bring it

to heel.” Jowa Utils. Bd., 525 U.S. at 379 n.6. The

ordinary operation of judicial review does not signal

a need for intervention by this Court.

C. The Regulatory Scheme for Dial-Up Inter-

net Access Lacks Prospective Importance

The pricing rules that the FCC established in the

ISP Remand Order and maintained in the Second

ISP Remand Order apply to dial-up ISP access, in

which a user accesses the Internet over the tradi-

tional telephone network. Dial-up Internet access

was extremely important more than a decade ago,

when it was almost the exclusive means by which

individuals and households obtained access to the

Internet. Since that time, the explosive growth of

broadband Internet access has substantially decreased

the need for dial-up access, and that trend continues.

As the FCC recently advised this Court, “fewer than

6 percent of Americans use dial-up Internet connec-

tivity as their main form of home access,” and the

agency's current efforts “to promote broadband de-

ployment... will likely further the already substan-

tial decline in use of dial-up services.” Brief for the

Federal Respondents in Opposition at 23-24, Core v.

FCC, Nos. 10-185 & 10-189 (U.S. filed Oct. 12, 2010).

Accordingly, even the validity of the Second ISP

Remand Order “present{[ed] a narrow question of

diminishing practical significance.” Jd. at 23. That

is also true of the even narrower question presented

here about the scope of the FCC’s pricing rules.

Gangi argues (at 30) that the question presented

retains practical importance because two state agen-

cies have drawn guidance from GNAPs III when con-

sidering VoIP traffic, which is not at issue here. The

possibility that the decision of a court of appeals

might indirectly influence other controversies in the

future, however, is not a ground for review. Gangi,

moreover, is ill-positioned to make such an argu-

ment: GNAPs previously told the First Circuit that

“[thhe narrow question presented here is whether the

FCC’s Order applies to all ISP-bound traffic, includ-

ing traffic that uses VNXX arrangements.” Brief of

Appellant GNAPs at 33, GNAPs ITI, No. 05-2657 (1st

Cir. filed Nov. 28, 2005).

D. Review of the Scope of the FCC’s ISP Pric-

ing Regime Is Barred by Res Judicata

In any event, this case is a fatally flawed vehicle

for considering the first question Gangi’s petition

raises. Were it to grant certiorari, this Court would

“not have before [it] any issue as to the correctness

of” the First Circuit’s decision in GNAPs IIT, Local 28

of Sheet Metal Workers’ Intl Ass'n v. EEOC, 478 U.S.

421, 441 (1986), because that decision is embodied in

a final judgment no longer subject to appeal.

The district court’s final judgment against GNAPs

on the 2002 Complaint was entered on October 31,

2005, affirmed by the First Circuit on April 11, 2006,

and is long past the point where it could be reviewed

by this Court. See supra pp. 6-8. Verizon filed the

counterclaim that the First Circuit addressed in

GNAPs V in response to GNAPs’ 2005 Complaint,

which resulted in a separate final judgment from the

district court. See supra p. 12.16

Because the district court’s October 31, 2005 judg-

ment is long since final and unappealable, GNAPs’

attempt to relitigate the questions presented in

GNAPs II] is barred by res judicata.'? Accordingly, if

this Court were now to grant review of Gangi’s peti-

tion, it could not reach the underlying question of the

applicability of the FCC’s pricing rules. At most, the

only question before this Court would be whether the

First Circuit erred in determining that the “Second

[ISP] Remand Order is not materially different from

the JSP Remand Order on the issues of concern.”

Pet. App. 16a. That highly limited question does not

warrant review. !8

16 The proceedings arising from the 2002, 2003, and 2005

Complaints were consolidated before the same district judge.

However, as the First Circuit explained with regard to the 2002

and 2003 Complaints, this consolidation was only “for purposes

of convenience and efficiency” and did not prevent the district

court from entering “|s]Jeparate judgments ...in each of the...

cases.” GNAPs I, 396 F.3d at 22 (internal quotation marks

omitted).

17 Although this Court’s review of a prior, interlocutory

appellate panel ruling in the same case is not barred by the

doctrine of law of the case, see, e.g., Hamilton-Brown Shoe Co. v.

Wolf Bros. & Co., 240 U.S. 251, 258 (1916), this rule does not

apply to the preclusive effect of a final judgment. See Sheet

Metal Workers, 478 U.S. at 441 (declining to reconsider on cer-

tiorari in a related case the correctness of a lower court’s earlier

unappealed final judgment); Pasadena City Bd. of Educ. v.

Spangler, 427 U.S. 424, 432 (1976) (same).

18 The First Circuit’s opinion in GNAPs V does not state

expressly whether it considered GNAPs III to bind GNAPs as a

EK. The First Circuit’s Decisions Were Correct

Finally, review is unjustified for the additional

reason that the First Circuit’s decisions were correct

In GNAPs ITI, the First Circuit correctly determined

that the pricing regime established in the /SP

Remand Order was meant to deal with “a particular

issue of intercarrier compensation,” Pet. App. 110a

the problem of “‘reciprocal compensation obligations

las] applfied] to the delivery of calls from one [local

exchange carrier]’s end-user customer to an ISP

in the same local calling area that is served by a

competing [local exchange carrier].’” Jd. at 106a

107a (quoting JSP Remand Order {| 13). Because the

order extensively discussed problems of regulatory

arbitrage in that context, see id. at 107a-108a, but

did not discuss other calling arrangements such as

the toll-free, long-distance calls at issue here, the

First Circuit correctly concluded that the FCC’s pric

ing rules did not extend to the latter.

That conclusion was reinforced by the FCC’s ami

cus brief, which confirmed that the order’s “focus |”

was on the arbitrage problems created by paying

reciprocal compensation on dial-up ISP traffic where

matter of res judicata. See Pet. App. 15a-20a. Verizon clearly

preserved in its briefing, however, the argument that GNAPs

and Gangi were unable “to evade the bar of res judicata.” Brief

of Appellee Verizon at 51, GNAPs V, Nos. 09-1308 & 09-1309

(1st Cir. filed June 11, 2009). GNAPs and Gangi responded

that res judicata did not apply because the Second ISP Remand

Order “clarified the controlling law during the parties’ continu

ous and on-going litigation concerning access charge liability.”

Reply Brief of Appellants GNAPs et al. at 8, GNAPs V, Nos. 09

1308 & 09-1309 (1st Cir. filed June 25, 2009). That argument is

wrong, but, even if it had a colorable chance of succeeding, the

substantial likelihood that this case would ultimately turn on

a fact-bound procedural issue would nevertheless make it an

unsuitable vehicle for answering the question presented

the caller and the ISP are located within the same

local calling area. Jd. at 108a (internal quotation

marks omitted). Furthermore, as noted above, the

FCC subsequently endorsed GNAPs I/I/] in briefing

before the D.C. Circuit, explaining to that court

that its “pricing rules” encompass the traffic “which

occurs when two [local exchange carriers] collaborate

to deliver calls to an ISP within a local calling area.”

FCC’s D.C. Cir. Core v. FCC Br. at 21 (emphasis

added).

Finally, the First Circuit also rightly concluded in

GNAPs V that the Second ISP Remand Order is “not

materially different from the JSP Remand Order on

the issues of concern.” Pet. App. 16a. That order

was intended to clarify the source of the FCC’s

authority to adopt its pricing rules, not to alter the

substance of those rules. See id. at 17a (quoting the

D.C. Circuit's explanation in Core v. FCC, 592 F.3d

at 142, that the Second ISP Remand Order “‘insti

tuted substantially the same rate cap system’” as the

original order). This Court should leave undisturbed

the First Circuit’s correct resolution of that narrow

question.

Il. REVIEW OF THE QUESTION WHETHER

GNAPS WAIVED ANY EXHAUSTION DE-

FENSE IS ALSO UNWARRANTED

A. Gangi Fails To Establish Any Conflict

Relevant to the First Circuit’s Waiver

Holding

Gangi also fails to show the existence of any split

among the circuits concerning the question whether

federal law imposes a nonwaivable administrative.

exhaustion requirement before a party to an inter

connection agreement under the 1996 Act may seek

to enforce that agreement in federal court. The First

Circuit held only that GZNAP had waived any

exhaustion defense it might have had, and therefore

did not need to decide whether such an exhaustion

defense in fact exists. See Pet. App. 24a-25a. Gangi

identifies no circuit case holding the contrary

l. Gangi first relies (at 31-32) on BellSouth Tele

communications, Inc. v. MCImetro Access Transmis

Inc., 317 F.3d 1270 (11th Cir. 2003)

(en banc). BellSouth, however, did not even decide

ston Seri Lces,

whether an exhaustion defense exists in cases involv

ing interconnection agreements, much less whether

such a defense (if one exists) is waivable. BellSouth

instead dealt with the question whether Congress

“grant of authority” to state public utility comm:

sions 1n 47 U.S.C. § 252(e) over the creation of inter

connection agreements “encompass[ed] the interpre

tation of [those] agreements, not just their approval!

or rejection,’ and held that it did. 317 F.3d at 1277

In BellSouth, the dispute over the enforcement of

the interconnection agreement had been presented

initially to the Georgia Public Service Commission,

see id,, and the question for the court was whether

the agency exceeded its jurisdiction by hearing the

dispute. The Eleventh Circuit was not faced with

any contention that a dispute filed initially to the

district court had to be presented to the agency. Still

less was it faced with a case where (as here) such a

defense was raised belatedly after years of litigation

in district court. '

‘9 Gangi also cites (at 34) Southwestern Bell Telephone Ci

Public Utility Commission of Texas, 208 F.3d 475 (5th Ci

2000) (“SW Bell 1 PUC”), and Southwestern Bell Telephone

Co. v. Brooks Fiber Communications of Oklahoma, Inc., 235

F.3d 493 (10th Cir. 2000). Both of those cases, like BellSouth

involved the question whether state commission had authority

2. Gang also relies (at 32-33) on Core Communi

cations, Inc. v. Verizon Pennsylvania Inc., 493 F.3d

333 (3d Cir. 2007) (“Core v. Verizon”). The Third Cir

cuit (unlike any other) did adopt a rule that “inter

pretation and enforcement actions that arise after a

state commission has approved an interconnection

agreement must be litigated in the first instance

before the relevant state commission.” Id. at 344

The Third Circuit, however, had no cause to address

whether that rule gave rise to a defense that was

waivable or nonwaivable. The defense before it had

been timely asserted. See id. at 336-37 (describing

the case’s procedural history).?°

Indeed, the Third Circuit would likely agree that

the defense it adopted was waivable. ‘That court

observed candidly that the 1996 Act gives “no real

indication of what role the state commissions are to

play, and ... is simply silent as to the procedure for

post-formation disputes” about interconnection agree

ments. Core v. Verizon, 493 F.3d at 340 (discussing

to hear complaints seeking to enforce interconnection agree

ments, not the question whether that authority gave rise to a

nonwaivable exhaustion defense in a federal court action. Se

Brooks Fiber, 235 F.3d at 497: SW Bell v. PUC, 208 F.3d at 480

20 Before the district court in Core v. Verizon. the Verizon

affiliate that was a party to that case argued that the district

court lacked subject-matter junsdiction. That incorrect argu

ment was rejected: the district court found that it had subject

matter jurisdiction, but dismissed on nonjurisdictional grounds

See Core Communications, Inc. v. Verizon Pennsylvania Inc.,

423 F. Supp. 2d 493, 497-98 (E.D. Pa. 2006), affd in part,

vacated in part, and remanded, 493 F.3d 333 (3d Cir. 2007). On

appeal, Verizon Pennsylvania revised its position and argued

that the state commission had primary jurisdiction over Core’s

complaint because it involved technical issues. Verizon Penn

sylvania neither advanced nor endorsed the exhaustion-type

rule that the Third Circuit adopted

47 U.S.C. § 252). Accordingly, the court relied on its

own admittedly “broad[] reading” of the FCC’s inter-

pretation of the 1996 Act in its Starpower order.?!

Id. at 342. The Third Circuit, however, would agree

with the First Circuit that a judge-made exhaustion

requirement derived from a silent statute “is a non-

jurisdictional affirmative defense” that must be pre-

served by timely assertion. Metropolitan Life Ins. Co.

v. Price, 501 F.3d 271, 280 (3d Cir. 2007).

3. Gangi also relies (at 33-34) on Illinois Bell Tel-

ephone Co. v. Global NAPs Illinois, Inc., 551 F.3d 587

(7th Cir. 2008) (Posner, J.). The questions necessary

to the Seventh Circuit’s judgment in that case were

whether the district court had diversity jurisdiction

over a dispute between a GNAPs affiliate and a

subsidiary of AT&T, and personal jurisdiction over

another GNAPs affiliate. The court held that it did,

and therefore reversed the district court’s contrary

conclusion. See id. at 590, 597-98.

Illinois Bell also addressed in broad dicta the cir-

cumstances under which “issues that arise in the

course of a federal suit to enforce an interconnection

agreement may sometimes be within the ‘primary

jurisdiction’ of the state regulatory agency.” Jd. at

594. Those dicta are not relevant here because

GNAPs “expressly disavowed any desire... to invoke

the discretionary doctrine of primary jurisdiction” in

this case. Pet. App. 24a n.16.%2

“1 Memorandum Opinion and Order, Starpower Communica

tions, LLC, 15 FCC Red 11277 (2000) (“Starpower’).

22 Gangi contends (at 33) that the Seventh Circuit was refer-

ring to “the doctrine of exclusive primary jurisdiction.” As the

First Circuit noted, this contention “ignores [the Seventh Cir-

cuit’s] plain statement that the court was invoking discretion

ary and not exclusive primary jurisdiction.” Pet. App. 25a; see

yAS)

4. As Gangi concedes (at 35), the Second Circuit

has reached a result on similar facts consistent with

the First Circuit’s decision in GNAPs V. See South-

ern New England Tel. Co. v. Global NAPs Inc., 624

F.3d 123, 135 (2d Cir. 2010) (rejecting GNAPs’ argu

ment that a federal court is “divest[ed] ... of its

jurisdiction over [a] claim” to enforce a federal tanff

“when the provisions of an [interconnection agree-

ment] are asserted in defense”). The only two cir-

cults to have weighed in on the question actually

presented are thus in accord. Gangi cites (at 37-39)

various nonprecedential district court decisions that

he claims support him. Disagreement that is limited

to the district court level does not warrant review by

this Court.

B. The First Circuit’s Decision Was Correct

Review is also unwarranted because the First Cir-

cuit correctly rejected any exhaustion defense that

GNAPs might have had. The court of appeals first

concluded that the district court had subject-matter

jurisdiction over this case under 28 U.S.C. §§ 1331

and 1367 because Verizon’s counterclaim against

GNAPs and Gangi was sufficiently related to the

undisputedly federal claims that GNAPs raised in its

2005 Complaint and because Gangi could point to

nothing that took that jurisdiction away. See Pet

App. 23a. Although he vigorously contested jurisdic-

tion in the court of appeals, Gangi does not appear to

do so now. See Pet. 37.

Illinois Bell, 551 F.3d at 595-96 (distinguishing a case referring

to “‘exclusive original jurisdiction’”); id. at 596 (“|Wje do not

think the court need refer all disputes over an interconnection

agreement to the state commission, only those where the dis-

pute raises a genuine policy issue... .”).

The First Circuit then held that, because any ex

haustion requirement here did not limit the district

court’s subject-matter jurisdiction, it could be (and

was) waived by GNAPs’ failure to raise it in a timely

fashion. See Pet. App. 24a-25a. That conclusion is

strongly supported by Arbaugh v. Y&H Corp., 546

U.S. 500 (2006), on which the First Circuit relied,

and by other decisions of this Court.23 And the facts

of this case — in which GNAPs itself asserted a claim

for charges to recover under an _ interconnection

agreement, litigated for years in district court, and

then belatedly tried to switch forums after unfavora-

ble rulings made it seem likely that Verizon would

prevail confirm the wisdom of the rule. See supra

pp. 9-10 & note 10.

The First Circuit’s judgment could also be affirmed

on the alternative basis that the Third Circuit erred

In recognizing an exhaustion requirement to begin

with. The Third Circuit, which is the only court of

appeals to hold that such a requirement exists, based

the requirement entirely on its reading of the FCC’s

order in Starpower. See Core v. Verizon, 493 F.3d at

341-44. But the FCC in Starpower did not rule that

interconnection-agreement disputes must always go

23 See Arbaugh, 546 U.S. at 516 (“[W]hen Congress does not

rank a statutory limitation on coverage as jurisdictional, courts

should treat the restriction as nonjurisdictional in character.”);

Kontrick v. Ryan, 540 U.S. 443, 456 (2004) (explaining that a

“claim-processing rule” that does not limit subject-matter juris-

diction, “even if unalterable on a party's application, can none-

theless be forfeited if the party asserting the rule waits too long

to raise the point”); Zipes v. Trans World Airlines, Inc., 455 U.S.

385, 393 (1982) (“[F]iling a timely charge of discrimination with

the [Equal Employment Opportunity Commission] is not a juris

dictional prerequisite to suit in federal court, but a requirement

that ...is subject to waiver, estoppel, and equitable tolling.”).

to state agencies first. Instead, it explained that

state commissions have the responsibility to resolve

such disputes in “some circumstances,” but not in

others, depending on the facts of the case and the

terms of the dispute-resolution provision in the

applicable interconnection agreement. Starpower 4 6

& n.14.

This case is not a suitable vehicle to consider

the Third Circuit’s conversion of Starpower’s fact

sensitive approach into an exhaustion rule, because

the Court’s holding would very likely instead rest on

the waiver ground that the First Circuit adopted

as to which Gangi has shown no conflict. Neverthe

less, this additional ground for affirmance further

confirms that the First Circuit’s judgment is correct

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted,

MICHAEL E. GLOVER SCOTT H. ANGSTREICH