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

United States Court of Appeals
For the First Circuit

Nos. 06-2095, 06-2120

GLOBAL NAPS, INC.,

Plaintiff, Appellant,

v.

VERIZON NEW ENGLAND, INC. d/b/a VERIZON MASSACHUSETTS;
MASSACHUSETTS DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY; PAUL
B. VASINGTON, in his capacity as Commissioner; JAMES CONNELLY, in
his capacity as Commissioner; W. ROBERT KEATING, in his capacity
as Commissioner; DEIRDRE K. MANNING, in her capacity as
Commissioner; EUGENE J. SULLIVAN, JR., in his capacity as
Commissioner,

Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Rya W. Zobel, U.S. District Judge]

Before
Lynch, Lipez, and Howard,
Circuit Judges.

John W. McGuinness, with whom Glenn B. Manishin, Kelley Drye
& Warren LLP, William J. Rooney, and Jeffrey Melick were on brief,
for appellant.
Scott H. Angstreich, with whom David F. Engstrom, Kellogg,
Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Bruce P. Beausejour,
Richard P. Owens, Keefe B. Clemons, Robert Weigel, and Gibson, Dunn
& Crutcher LLP were on brief, for appellee Verizon New England,
Inc.

May 30, 2007
 LYNCH, Circuit Judge. This appeal raises issues

concerning the release of security when an appellant has previously

been ordered to post that security as a condition for obtaining an

injunction pending appeal. See Fed. R. Civ. P. 65(c). In this

case, the district court released the security after this court had

rejected the appeal and dissolved the injunction.

We affirm the district court's release of $16 million in

security to appellee Verizon New England, Inc. ("Verizon"), over

the protests of appellant Global NAPs, Inc. ("GNAPs"). In order to

maintain the status quo pending appeal, Verizon had been enjoined

from terminating its services to GNAPs for failure to pay access

fees; GNAPs, in turn, had been ordered to provide security for the

costs and damages Verizon would incur during the period of the

injunction. Our analysis construes Federal Rule of Civil Procedure

65(c) and adopts standards for the release of security under this

rule.

I. BACKGROUND

This marks the third time that aspects of this dispute

have appeared in our court. See Global NAPs, Inc. v. Verizon New

Eng., Inc. (GNAPs I), 396 F.3d 16 (1st Cir.), cert. denied, 544

U.S. 1061 (2005); Global NAPs, Inc. v. Verizon New Eng., Inc.

(GNAPs II), 444 F.3d 59 (1st Cir. 2006). The parties' underlying

litigation pertains to GNAPs' failure to make payments to Verizon,

notwithstanding a December 2002 order from the Massachusetts

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Department of Telecommunications and Energy (DTE) which required

these payments. As reflected in a subsequent interconnection

agreement between Verizon and GNAPs, the DTE order had required

GNAPs to pay Verizon for Virtual NXX ("VNXX") calls originated by

Verizon's Massachusetts customers and delivered to GNAPs.1 See

GNAPs II, 444 F.3d at 66.

In GNAPs I, we rejected a particular argument from GNAPs

that it did not need to comply with the DTE's December 2002 order.

See GNAPs I, 396 F.3d at 23. This resolved only part of the

dispute. In GNAPs II, we rejected GNAPs' remaining arguments that

the DTE's rulings conflicted with and were preempted by federal

law, and so we affirmed the DTE order. See GNAPs II, 444 F.3d at

71-75. The current dispute pertains to a security posted after our

decision in GNAPs I, and which was released to Verizon after our

decision in GNAPs II.

A. The Remand After GNAPs I

After our ruling in GNAPs I, Verizon notified GNAPs on

March 17, 2005 that GNAPs had accrued more than $42 million in

access charges (excluding late payment charges). Verizon further

informed GNAPs that it would terminate services to GNAPs on April

19, 2005 if payments were not made. The companies later agreed to

postpone the termination date to May 12, 2005, in order to explore

1
For an explanation of VNXX calling, see GNAPs II, 444 F.3d
at 63-64.

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settlement possibilities. When the settlement discussions failed,

GNAPs moved for a TRO and/or preliminary injunction to prevent

disconnection while it litigated the GNAPs II case. See id. at 67

n.6.

On May 12, 2005, the district court indicated that it

would maintain the status quo pending a resolution on the merits of

GNAPs' preemption argument; the court stated at a hearing that it

would grant GNAPs' motion, subject to GNAPs posting appropriate

security. On June 2, 2005, the court entered the preliminary

injunction which GNAPs had requested, conditioned on GNAPs

providing security in the amount of $1 million (a condition that

GNAPs fulfilled). The court also expedited the briefing schedule

for the parties' cross-motions for summary judgment. On September

21, 2005, the district court denied GNAPs' motion for partial

summary judgment, and it granted Verizon's and the DTE's

cross-motions for partial summary judgment.

In light of its success in the district court, Verizon

again notified GNAPs (this time by letter dated September 23, 2005)

that it would soon terminate service for non-payment. GNAPs sought

clarification from the district court on whether the preliminary

injunction had been dissolved by the court's opinion, and the court

confirmed that its decision had that effect. GNAPs then stipulated

to the dismissal with prejudice of its remaining challenges to the

DTE's decision, thereby freeing GNAPs to pursue an appeal.

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B. GNAPs II and the Injunction Pending Appeal

GNAPs next sought an injunction pending appeal, first

from the district court, and then from this court, in order to

prevent Verizon from terminating service. See id. at 68 n.8.

GNAPs represented to both courts that without such an injunction it

would "suffer a fatal revenue loss," and in its motion to this

court it characterized the litigation as an "all-or-nothing

dispute." GNAPs also represented that it had offered to pay

Verizon, over time, the more than $56 million Verizon claimed was

now due, which GNAPs asserted "would fully pay the access charges,

if Verizon prevails here." That offer, according to GNAPs,

required only that Verizon agree to refrain from cutting off

service, and agree to return the sums paid if GNAPs prevailed on

appeal.

The district court denied GNAPs' request for additional

injunctive relief. But this court granted GNAPs' motion on

November 2, 2005, and we enjoined Verizon from terminating service

pending GNAPs' appeal. This injunction was contingent on GNAPs

providing "additional security" in an amount to be set by the

district court, and we remanded the issue of the amount and form of

the security. In the district court, GNAPs proposed that the court

set security -- beyond the $1 million GNAPs had already posted as

security for the first injunction -- in the amount of $16,676,313.

GNAPs further stated that it would post that amount by assigning

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funds that Verizon's affiliates, most of which operated in other

states and were not parties to the underlying suit, had withheld

from GNAPs or its affiliates to secure debts in what Verizon claims

are unrelated disputes. Not coincidentally, those withheld funds

totaled $16,676,313.

The district court ordered GNAPs to post an additional

$15 million in security. This was roughly $1.7 million less than

the $16,676,313 in additional security that GNAPs had itself

proposed as appropriate. Over Verizon's objection, the district

court also permitted GNAPs to satisfy that requirement by assigning

funds withheld by Verizon's affiliates.

On April 11, 2006, this court issued its ruling on the

merits in GNAPs II, and we affirmed the district court's grant of

summary judgment. See id. at 61. This court rejected GNAPs' claim

that the Federal Communications Commission, in a decision known as

the "ISP Remand Order," had altered the preexisting intercarrier

payment rules for all calls delivered to ISPs. We instead agreed

with Verizon that the ISP Remand Order preempted state-imposed

payment rules only for calls where the caller and the ISP are

located in the same local calling area. See id. at 71-75.

C. Dissolution of the Injunction and Release of the Security

On April 13, 2006, Verizon moved this court to issue its

mandate in GNAPs II early; in the alternative, it asked for an

order lifting the injunction pending appeal, as either relief would

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permit Verizon to terminate services to GNAPs for non-payment of

access charges.

GNAPs opposed Verizon's motion on April 18, 2006. It

contended for the first time that if access charges were due at

all, GNAPs actually owed Verizon only about $7.5 million in total

damages in the case. This amount was far less than the $56 million

GNAPs had earlier offered to pay Verizon, and was also lower than

the $16 million in security that GNAPs had previously posted.

GNAPs' new argument was that the FCC's ISP Remand Order capped

Verizon's access charges for VNXX calls to ISPs at $0.0007 per

minute.

We granted Verizon's motion in part, vacating the

injunction pending appeal later that same day, April 18, 2006.2

After this court vacated the injunction, and still on

April 18, Verizon moved in the district court for the release of

the $16 million in security. Its motion was supported by

affidavits evidencing that the harm to Verizon from issuance of the

injunction exceeded $16 million.

On May 2, 2006, the day GNAPs' opposition to Verizon's

motion was due in the district court, GNAPs moved for leave to

oppose that motion only after this court issued its mandate in

2
On April 24, 2006, we also denied GNAPs' motion for
reconsideration of our decision to vacate the injunction. The next
day, GNAPs filed a petition for rehearing and rehearing en banc of
this court's GNAPs II decision; this court denied the petition on
May 4, 2006.

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GNAPs II. Until that happened, GNAPs contended, the district court

lacked jurisdiction. GNAPs requested that the district court give

it "leave to submit the grounds for its opposition three days after

[the district court] regains jurisdiction upon issuance of . . .

the mandate." Verizon opposed GNAPs' motion on May 4, 2006,

contending that the mandate's issuance was not necessary for the

district court to release the security.

GNAPs did file an opposition in the district court on May

5, 2006, contesting Verizon's motion for release of security.

GNAPs continued to press its argument that the district court did

not have jurisdiction to consider Verizon's motion until after this

court's mandate had issued. GNAPs also made three substantive

arguments: (1) that release of the security was improper because

this court's injunction pending appeal had not expressly stated

that "the amount [GNAPs] posted is 'for payment for such costs and

damages as may be incurred or suffered' by the enjoined party, if

found to have been wrongfully enjoined;" (2) that this court's

dissolution of the injunction pending appeal did not compel the

conclusion that Verizon had been wrongfully enjoined; and (3) that

due process entitled GNAPs to a "full and fair opportunity" to

litigate the invoice amounts that Verizon had used as evidence of

its harm from the injunction. GNAPs provided little elaboration

-8-
of, and no affidavit support for, its arguments disputing Verizon's

proof.3

On May 15, 2006, this court issued its mandate in GNAPs

II. That same day, GNAPs filed a motion in the district court

seeking leave until May 22, 2006 to file a motion for an

evidentiary hearing and discovery. The next day, May 16, the

district court granted Verizon's previously filed motion and

ordered the release to Verizon of the full $16 million in security.

Simultaneously, the court issued an order denying GNAPs' May 2

motion for leave to wait until issuance of the mandate in order to

oppose Verizon's request for the security, but granting GNAPs' May

15 motion.

GNAPs responded with two more motions in the district

court. On May 16, 2006, GNAPs moved for a stay of the district

court's order releasing the security. But on May 17, 2006, the

district court clerk's office released the security to Verizon,

mooting the motion. Then, on May 22, 2006, GNAPs moved for

reconsideration of the district court's May 16 order, styling its

motion as one seeking the "return [of] property previously

deposited in [c]ourt," and also requesting discovery and an

evidentiary hearing. GNAPs also, for the first time in the

3
The sole elaboration in GNAPs' motion was that it briefly
flagged the issues it claimed it wanted to litigate. GNAPs did not
provide any reasons why those issues should be resolved in GNAPs'
favor.

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district court, attached two affidavits to its motion. The

affidavit of Michael Couture purported to demonstrate that GNAPs

owed Verizon only $563,077.60 for access charges accrued during the

pendency of the two injunctions. The affidavit of Robert Fox was

to similar effect. The district court denied GNAPs' motion on June

16.

GNAPs separately appealed two of the district court's

orders: its May 16 order granting the release of security, and its

June 16 order denying GNAPs' request for reconsideration. This

court consolidated those appeals.

These consolidated appeals embody the latest efforts by

GNAPs to delay or avoid payment of the sums past due to Verizon.

The district court rejected those efforts and so do we.

II. GNAPS' MANDATE ARGUMENT

GNAPs' first argument is procedural: it contends that the

district court could not act on Verizon's motion to release the

security until the mandate issued in GNAPs II. See United States

v. Ferris, 751 F.2d 436, 440 (1st Cir. 1984) (explaining that

during the pendency of an appeal, a district court lacks

jurisdiction "to proceed with respect to any matters involved in

the appeal"). The district court implicitly found that it had

jurisdiction to act as it did, and we review that conclusion de

novo. See Baella-Silva v. Hulsey, 454 F.3d 5, 10 (1st Cir. 2006).

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 The short answer to GNAPs' argument is that the district

court in fact did not act to release any funds until after the

mandate was issued. If there is anything to GNAPs' argument, it

cannot be that the district court lacked jurisdiction to release

the funds. Rather, GNAPs' only plausible grievance can be with the

fact that the district court accepted Verizon's arguably premature

motion, an acceptance which then triggered an impending deadline

for GNAPs to respond.

We see no jurisdictional problem with the district

court's acceptance of Verizon's motion. There are some exceptions

to the rule that only one court at a time has jurisdiction, such as

for transparently frivolous appeals, see, e.g., United States v.

Brooks, 145 F.3d 446, 456 (1st Cir. 1998), certain modifications of

forfeiture orders, see United States v. Hurley, 63 F.3d 1, 23-24

(1st Cir. 1995), and the posting of a supersedeas bond, see Trs. of

the Chi. Truck Drivers, Helpers & Warehouse Workers Union (Indep.)

Pension Fund v. Cent. Transp., Inc., 935 F.2d 114, 119 (7th Cir.

1991), among other ancillary matters. As these examples

illustrate, and as the Seventh Circuit has recognized, the

"proposition that only one court at a time has jurisdiction" is a

qualified rule "designed to prevent conflict among tribunals, as

well as to prevent the waste of time and money that occurs if" a

court changes a judgment while a case is pending in another court.

Wis. Mutual Ins. Co. v. United States, 441 F.3d 502, 504 (7th Cir.

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2006); see also Hurley, 63 F.3d at 24 (explaining that the purpose

of the rule is to avoid "interference and inconsistency," and

suggesting that it is unwise "to extend this [rule] further than

its own rationale").

The key point of Verizon's April 18 motion was that it

sought to demonstrate its damages from the injunction. That

damages calculation involved no conflict with the appeal that was

still technically pending in this court.

GNAPs nonetheless contends that Verizon's motion did

present a conflict, because irrespective of the amount of damages,

GNAPs could not be deemed liable on the security until it was

determined that GNAPs in fact owed access charges to Verizon -- an

issue that GNAPs says was pending in this court until we issued the

mandate in GNAPs II. But we had vacated the injunction before the

mandate issued; there was no realistic potential conflict. GNAPs

could have been expected to treat GNAPs II as good law,

notwithstanding the ministerial fact that the mandate had not yet

issued. Cf. Wedbush, Noble, Cooke, Inc. v. SEC, 714 F.2d 923, 924

(9th Cir. 1983) (explaining that a court of appeals decision has

stare decisis effect even before the mandate issues in a case). It

is well established in this circuit that a district court can

proceed, notwithstanding the technical pendency of an appeal, when

it is clear that the appeal "constitutes a transparently frivolous

attempt to impede the progress of the case." Brooks, 145 F.3d at

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456. By like token, the district court could easily have concluded

that GNAPs' procedural objection (i.e. its refusal to contest

Verizon's calculations until the mandate issued) was an effort to

delay.

If we thought that GNAPs had been disadvantaged somehow

by the district court's acceptance of Verizon's filing on April 18,

after we had vacated the injunction, that might be another issue

(although not a jurisdictional one). But GNAPs was well aware from

the date of our decision in GNAPs II, April 11, that it most likely

would have to pay up on the security it had posted. GNAPs had

adequate time to prepare its evidence and argument, and in fact it

had over three weeks to prepare the opposition it did file on May

5.

III. COMPLIANCE WITH RULE 65(c)

GNAPs next argues that the district court failed to

comply with the federal rules when it released the full $16 million

in security to Verizon.

A. The Legal Backdrop

We start our analysis with the basic law. The security

was given, under Federal Rule of Civil Procedure 65(c), upon the

issuance of a preliminary injunction which restrained Verizon from

terminating service to GNAPs pending the appeal in GNAPs II. Rule

65(c) states:

No restraining order or preliminary injunction
shall issue except upon the giving of security

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 by the applicant, in such sum as the court
deems proper, for the payment of such costs
and damages as may be incurred or suffered by
any party who is found to have been wrongfully
enjoined or restrained. No such security
shall be required of the United States or of
an officer or agency thereof.

The provisions of Rule 65.1 apply to a surety
upon a bond or undertaking under this rule.

The terms of Rule 65(c) do not, in so many words, explicitly

discuss how dissolution of the injunction affects payment of the

security. But the Rule does implicitly address this when it states

that the security is held for payment of costs and damages suffered

by a party "who is found to have been wrongfully enjoined." See

Coyne-Delany Co. v. Capital Dev. Bd., 717 F.2d 385, 390-91 (7th

Cir. 1983). The implication is that when a party has been

wrongfully enjoined, it may collect some or all of the security.

Our understanding of Rule 65(c) is also informed by the

fact that if a bond had been posted as the security, recovery would

be governed by Rule 65.1. Rule 65.1 in turn provides a summary

procedure for the enforcement of liability against a surety. See

Fed. R. Civ. P. 65.1. Such enforcement may be done on motion,

without the need for filing an independent action. Id. Although

the terms of Rule 65.1 apply only to sureties, courts have applied

that rule's procedures when imposing liability on a principal as

well. See Coyne-Delany, 717 F.2d at 391. The key inference is

that when an injunction does cause damages, the principal or the

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surety is "normally . . . required to pay the damages, at least up

to the limit of the bond." Id.

The operation of Rule 62 is also informative.4 Rule 62

grants the district court "power . . . [to] 'protect an enforceable

judgment,'" which includes the power to "protect the winner from

any subsequent harm suffered through appellate delay." J. Perez &

Cia., Inc. v. United States, 747 F.2d 813, 815 (1st Cir. 1984)

(quoting Redding & Co. v. Russwine Constr. Corp., 417 F.2d 721, 727

(D.C. Cir. 1969)). Our situation is analogous to security issued

under Rule 62, insofar as the preliminary injunction was issued to

4
Rule 62(c), "Injunction Pending Appeal," reads in pertinent
part:

When an appeal is taken from an interlocutory
or final judgment granting, dissolving, or
denying an injunction, the court in its
discretion may suspend, modify, restore, or
grant an injunction during the pendency of the
appeal upon such terms as to bond or otherwise
as it considers proper for the security of the
rights of the adverse party.

Also significant is Rule 62(g), "Power of Appellate Court Not
Limited," which provides:

The provisions in this rule do not limit any
power of any appellate court or of a judge or
justice thereof to stay proceedings during the
pendency of an appeal or to suspend, modify,
restore, or grant an injunction during the
pendency of an appeal or to make any order
appropriate to preserve the status quo or the
effectiveness of the judgment subsequently to
be entered.

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preserve the status quo, and GNAPs was required to post security

pending appeal.

The Fifth Circuit, in Continuum Co. v. Incepts, Inc., 873

F.2d 801 (5th Cir. 1989), has provided a generally accepted

explanation of the purposes served by requiring security pending

appeal pursuant to Rule 65(c):

(1) [I]t assures the enjoined party that it
may readily collect damages from the funds
posted or the surety provided in the event
that it was wrongfully enjoined, without
further litigation and without regard to the
possible insolvency of the assured, and (2) it
provides the plaintiff with notice of the
maximum extent of its potential liability,
since the amount of the bond "is the limit of
the damages the defendant can obtain for a
wrongful injunction, . . . provided the
plaintiff was acting in good faith."

Id. at 803 (footnote omitted) (omissions in original) (quoting

Coyne-Delany, 717 F.2d at 391); see also Sprint Commc'ns Co. v. CAT

Comc'ns. Int'l, Inc., 335 F.3d 235, 240 n.5 (3d Cir. 2003); Note,

Security for Interlocutory Injunctions Under Rule 65(c): Exceptions

to the Rule Gone Awry, 46 Hastings L.J. 1863, 1866, 1870-71 (1995).

The important points are that the security is generally destined

for a wrongfully enjoined party, and also that the party seeking

the injunction has had fair notice of the costs that are likely to

be paid for the injunction's issuance.5

5
Some courts, like the Continuum court, make use of the
fiction that a security bond can be viewed as a contract under
which the plaintiff "'agree[d]' to the bond amount as the 'price'
of a wrongful injunction." 873 F.2d at 803. The key point, in our

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 These principles have important implications for the

dispute before us. This court previously determined that an

injunction was appropriate to preserve the status quo pending

appeal, in light of GNAPs' argument that it would be forced out of

business unless an injunction was entered. GNAPs made a business

judgment that it was willing to incur the "cost" of a possibly

wrongful injunction in order to take its appeal. Yet GNAPs now

seeks to avoid payment of most of the security which had been

entered to secure Verizon against the injunction.

Before explaining why GNAPs cannot avoid this payment, we

clarify one more important point about the applicable law. What is

at issue in this case is not security for the payment of damages on

an ultimate judgment on the merits. Rather, we are concerned with

security issued for interim harms suffered by an appellee, when the

appellee has been enjoined in order to preserve the status quo

pending appeal. As Justice Stevens explained in Edgar v. MITE

Corp., 457 U.S. 624 (1982):

Since a preliminary injunction may be granted
on a mere probability of success on the
merits, generally the moving party must
demonstrate confidence in his legal position
by posting bond in an amount sufficient to
protect his adversary from loss in the event
that future proceedings prove that the
injunction issued wrongfully. The bond, in
effect, is the moving party's warranty that

view, is not the analogy to contract, but rather the recognition
that the party seeking the injunction has notice of the
injunction's price.

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 the law will uphold the issuance of the
injunction.

Id. at 649 (Stevens, J., concurring in part and concurring in the

judgment) (footnote omitted); see also N.E. Airlines, Inc. v.

Nationwide Charters & Conventions, Inc., 413 F.2d 335, 338 (1st

Cir. 1969) (explaining that a security issued under Rule 65(c)

protects against damages "suffered by reason of the [wrongfulness]

of [a] preliminary injunction"). Both GNAPs and Verizon agree that

the security in this case was designed to protect Verizon from the

interim harms caused by the injunction.6

B. The District Court's Compliance

With these background principles of law clarified, we

consider the parties' areas of contention. GNAPs presents three

categories of arguments. First, GNAPs argues that the district

court made no finding, as required by Rule 65(c), that Verizon was

"wrongfully enjoined." Second, GNAPs argues that Verizon has not

6
GNAPs does contend, however, that the district court took a
different view of the security and that it released the security
based on pre-injunction damages that Verizon claimed it had
suffered. We do not understand the district court to have acted in
this manner; our affirmance of the district court's actions is
based on Verizon's demonstration of the actual harm it suffered
during the injunction.
To the extent that GNAPs is making a different argument -- a
claim that security pending appeal cannot be released until there
is a final judgment on the merits of the case awarding damages --
we reject that argument as illogical, and inconsistent with the
premise of Rule 65(c) security. Dissolution of an injunction is
itself a final determination which permits a party to seek security
posted with respect to the injunction. See 11A C. Wright et al.,
Federal Practice & Procedure § 2972, at 458-59 (2d ed. 1995).

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shown its entitlement to the full security. Third, GNAPs asserts

it was entitled to an evidentiary hearing to contest Verizon's

claimed damages.

1. Wrongfully Enjoined

On the first point, GNAPs' basic proposition is that

under Rule 65(c), an injunction cannot be wrongful unless it is

shown that issuance of the injunction was an abuse of discretion at

the time it was issued. Almost every other circuit to have

considered this issue has rejected GNAPs' interpretation. See

Sprint, 335 F.3d at 242 n.9;7 Nintendo of Am., Inc. v. Lewis Galoob

Toys, Inc., 16 F.3d 1032, 1036 & n.4 (9th Cir. 1994); Blumenthal v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1054

(2d Cir. 1990); Atomic Oil Co. of Okla. v. Bardahl Oil Co., 419

F.2d 1097, 1099 (10th Cir. 1969); cf. Coyne-Delany, 717 F.2d at

389-93 (implicitly rejecting GNAPs' argument, although indicating

that certain considerations may nonetheless justify withholding

some or all of a security from a wrongfully enjoined party). But

see H & R Block, Inc. v. McCaslin, 541 F.2d 1098, 1099-1100 (5th

7
In Sprint, a case on which GNAPs mistakenly relies, the
court, in our view, rejected GNAPs' position. It is true that the
Sprint court acknowledged that dissolution of an injunction does
not mean "that the injunction was improvidently granted by the
original judge." 335 F.3d at 242 n.9. But that was simply an
acknowledgment that a preliminary injunction can be proper at the
time it was issued, yet become improper after the passage of time.
See id. In any event, in the very next paragraph the court went on
to clarify that an injunction can be "wrongful" for Rule 65(c)
purposes even when the initial issuance of the injunction was
proper. See id. (citing Blumenthal, 910 F.2d at 1054).

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Cir. 1976) (per curiam). This court has not construed the term

before.

We now adopt the majority position, and we hold that

under Rule 65(c), a party is wrongfully enjoined when it had a

right all along to do what it was enjoined from doing. See

Nintendo, 16 F.3d at 1036; see also Slidell, Inc. v. Millennium

Inorganic Chems., Inc., 460 F.3d 1047, 1059 (8th Cir. 2006);

Blumenthal, 910 F.2d at 1054.

Applying that rule to this case is quite simple. The

issue of whether Verizon was wrongfully enjoined was determined

when we issued our opinion in GNAPs II and rejected GNAPs'

arguments on the merits of its position. We then vacated the

injunction because Verizon was entitled, and had been entitled all

along, to cut off services to GNAPs.

2. Determining the Entitlement to Security

GNAPs' second point is that Verizon presented

insufficient evidence of its entitlement to the full security. We

disagree and think it helpful to split this point into two smaller

issues: whether Verizon had established it was entitled to provable

damages, and whether Verizon had in fact proved the amount of

damages it suffered.

On the first issue, while there is a split of authority,

we adopt the majority rule that there is a rebuttable presumption

that a wrongfully enjoined party is entitled to have the security

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executed so as to recover provable damages up to the amount of the

security. See Milan Express, Inc. v. Averitt Express, Inc., 254

F.3d 966, 981 (11th Cir. 2001); Nintendo, 16 F.3d at 1036-37; Nat'l

Kidney Patients Ass'n v. Sullivan, 958 F.2d 1127, 1134-35 (D.C.

Cir. 1992); Coyne-Delany, 717 F.2d at 391-92. But see H & R Block,

541 F.2d at 1099-1100. Under this presumption, a district court

must have a good reason to depart from the preference for recovery

of security granted under Rule 65(c). Coyne-Delany, 717 F.2d at

391-92.

As Judge Posner put it in Coyne-Delany, not only is

this rule "implied by the text of Rule 65(c)[,] but it makes the

law more predictable and discourages the seeking of preliminary

injunctions on flimsy (though not necessarily frivolous) grounds."

Id. at 392. And as several circuits have pointed out, there are

ancillary benefits to adoption of the presumption. See Nintendo,

16 F.3d at 1037; Nat'l Kidney, 958 F.2d at 1134-35; see also Note,

Recovery for Wrongful Interlocutory Injunctions Under Rule 65(c),

99 Harv. L. Rev. 828, 838 n.36 (1986); Note, Interlocutory

Injunctions and the Injunction Bond, 73 Harv. L. Rev. 333, 342

(1959).

Applying this presumption requires slightly more

explanation. Earlier, this court avoided stating a standard of

appellate review of the district court's release of the security.

It is often said, sometimes loosely, that appellate review of this

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release is for abuse of discretion. See, e.g., Milan Express, 254

F.3d at 981; Nat'l Kidney, 958 F.2d at 1135. But since we have

adopted a presumption, that presumption in turn affects how we

apply the abuse of discretion standard. This amounts to stricter

review along the sliding scale of the abuse standard. See Coyne-

Delany, 717 F.2d at 392 ("When rules prescribe a course of action

as the norm but allow the district court to deviate from it, the

court's discretion is more limited . . . . The judge must have a

good reason for departing from [the presumption of recovery] in a

particular case.").

Here, the district court correctly concluded that it had

no good reason to refrain from releasing the security to Verizon so

long as Verizon could prove the damages it suffered. Perhaps if

there had been a demonstration that Verizon had failed to mitigate

its damages, GNAPs would have had a stronger case that Verizon was

not entitled to all of the damages it had suffered. See id. at

392. But no such showing was made here. There was no abuse of

discretion.8

That brings us to the second question, whether Verizon in

fact adequately proved its damages. We note that the issue of the

amount of appropriate security was litigated when the district

8
It is not sufficient for GNAPs to point out that it pursued
its appeal in good faith. The award of release of security is
compensatory, not punitive. Coyne-Delany, 717 F.2d at 392.

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court set the amount.9 That previously determined amount was the

amount which the court released -- not more, not less. Of course,

Verizon was still required to establish that the predicted harm was

the actual harm. But that proof did not need not to be to a

mathematical certainty. See Nintendo, 16 F.3d at 1039. From our

point of view, not requiring mathematical exactitude has the

benefit of keeping both parties honest and focused in the initial

setting of the security. This will minimize later gamesmanship.

Indeed, the district court was entitled to take into

account GNAPs' earlier representation that it was willing to post

additional security in the sum of $16,676,313 (for a total of

almost $18 million) to satisfy any harm to Verizon from issuance of

the injunction. True, GNAPs did not flatly concede that Verizon's

damages from an injunction would reach that level. But the fact

that GNAPs so readily accepted this security level, and the

implicit billing rate that it reflected, stands in stark contrast

to GNAPs' current claim that Verizon used an incorrect rate and

that GNAPs actually accrued less than $600,000 in charges during

the injunction period.

Further, Verizon did file an affidavit with the district

court and it provided evidence that the actual harm from issuance

of the injunction was greater than the secured sum. That affidavit

9
Verizon in fact had requested that the district court impose
a larger sum in security than what was ultimately imposed.

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asserted that between February 23, 2005 (the billing date which

Verizon cited in its March 17, 2005 letter threatening to terminate

service), and April 18, 2006 (the date that this court dissolved

the preliminary injunction), GNAPs had accrued over $24.7 million

in access charges.10 Of course, this time period exceeded by

several months the period when the injunction was actually in force

(a period that began, as a practical matter, on May 12, 2005). Yet

a simple calculation shows that even after excluding the non-

injunction days from this amount, it is likely that Verizon's

damages still exceeded the security amount of $16 million.11 GNAPs

chose not to provide evidence to counter Verizon's affidavit when

10
The affidavit also stated that of that $24.7 million,
approximately $11.9 million was attributable to charges accrued
after September 23, 2005 (the date on which the district court
clarified that it had dissolved the first preliminary injunction).
One could argue that GNAPs' security for the second preliminary
injunction is conceptually separate from its security for the first
preliminary injunction, with the result that $1 million secured the
first injunction and $15 million secured the second injunction.
Such an argument would suggest that Verizon was entitled to less
than $11.9 million of the $15 million securing the second
injunction. However, GNAPs did not raise this issue in the
district court, even in its motion for reconsideration, and so we
assume that the full $16 million secured the time period for both
injunctions combined.
11
The time period covered by Verizon's affidavit spanned 419
days. 78 of those days preceded May 12, 2005. Additionally, as
many as 42 of the remaining days were attributable to the time
period between the dissolution of the first preliminary injunction,
and the imposition of the second injunction -- days which should
arguably be excluded as well. Even so, 299 of the 419 affidavit
days, or approximately 71.36%, plainly covered the injunction
period. Multiplying that percentage by the affidavit's claimed
damages still yields more than $17 million, which exceeds the
security amount by over $1 million.

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it filed its opposition in the district court. It instead decided

to wait until its motion for reconsideration to contest Verizon's

evidence. We will not relieve GNAPs of its tactical choice.

3. Evidentiary Hearing

GNAPs' next argument is that the district court was

required, as a matter of due process, to have held an evidentiary

hearing on the amount of Verizon's damages. But against the

background that we have discussed, GNAPs' claim rings hollow. The

district court had a sufficient basis in the evidence to determine

that issuance of the injunction had caused at least $16 million in

harm. GNAPs had an opportunity to respond to Verizon's affidavits,

and it even attempted a partial response on May 5 -- albeit one

that failed to put forth any evidence to counter Verizon's

submissions.12

C. Denial of Motion for Reconsideration/Return of Property

Finally, GNAPs contends that the district court erred in

denying GNAPs' "Motion for Return of Property." Although styled as

12
GNAPs points out that on May 15, 2006, it asked the district
court for leave until May 22 to file its motion to request an
evidentiary hearing. And it further points out that the requested
leave was granted by the district court. But when the court
granted GNAPs' requested leave, it did so simultaneously with the
court's May 16 order releasing the posted security. In this
circumstance, we understand the district court simply to have been
allowing GNAPs to file what would in effect be a motion for
reconsideration that could include a request for an evidentiary
hearing. We do not understand the district court to have been
excusing GNAPs' delay in opposing Verizon's motion. Indeed, our
understanding is confirmed by the denial of GNAPs' motion to wait
until issuance of the mandate to oppose the release of security.

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such, we think GNAPs' motion should properly be understood as a

motion for reconsideration. Irrespective of how a party titles his

motion, "'a post-judgment motion made within ten days of the entry

of judgment that questions the correctness of a judgment is

properly construed as a motion to alter or amend judgment under

Fed. R. Civ. P. 59(e).'" Aybar v. Crispin-Reyes, 118 F.3d 10, 14

n.3 (1st Cir. 1997) (quoting Skagerberg v. Oklahoma, 797 F.2d 881,

883 (10th Cir. 1986)). GNAPs' statements in the motion suggest

that it too may have understood its motion as effectively seeking

reconsideration.

As a general matter, a motion for reconsideration may

only be granted if the original judgment evidenced a manifest error

of law, if there is newly discovered evidence, or in certain other

narrow situations. See Palmer v. Champion Mortgage, 465 F.3d 24,

30 (1st Cir. 2006); Marie v. Allied Home Mortgage Corp., 402 F.3d

1, 7 n.2 (1st Cir. 2005). Our review of the denial of such a

motion is for abuse of discretion. Palmer, 465 F.3d at 30.

GNAPs' motion to reconsider developed two lines of

argument that it had cursorily flagged in its opposition to

Verizon's motion. First, GNAPs contended that Verizon had used an

incorrect billing rate. Second, GNAPs argued that Verizon had

overstated the number of minutes for which GNAPs owed access

charges: Verizon's affidavits were not limited to the period the

injunction was actually in force, Verizon had allegedly billed for

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certain calls that should have been exempt from the access charges

Verizon imposed, and Verizon's private communications with GNAPs

had allegedly conceded that Verizon's stated number of minutes was

too high. GNAPs provided affidavits in support of its arguments.

The district court did not abuse its discretion in

denying GNAPs' motion. Generally, a party is not entitled to

present new arguments on a motion for reconsideration. Aybar, 118

F.3d at 16. Here there may well have been a strategic choice by

GNAPs to cause delay in the release of the security, including by

withholding material arguments until reconsideration. Even if the

delayed presentation resulted from nothing more than GNAPs having

second thoughts about its best arguments, parties are bound by the

choices they make.13

IV. CONCLUSION

We affirm the district court's orders. Costs are awarded

to Verizon.

13
Nor does it matter that the district court had granted GNAPs
leave to file this post-judgment motion. GNAPs had only requested
this leave on May 15, and leading up to that date GNAPs certainly
had ample time to develop its arguments and gather the needed
evidence. The district court did not abuse its discretion when it
permitted GNAPs to file its post-judgment motion, but then
ultimately concluded that it would not alter its judgment based on
these new arguments.

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