DEBRA ANN LIVINGSTON, Circuit Judge:
This case presents a number of questions arising from a dispute between Plaintiff-Appellee The Southern New England Telephone Company ("SNET") and Defendant-Appellant Global NAPs Inc. ("Global"), its affiliated companies Global NAPs Networks, Inc., Global NAPs New Hampshire, Inc., and Global NAPS Realty, Inc., and its parent company Ferrous Miner Holdings, Inc. ("Ferrous Miner") (collectively "defendants" or "appellants") over Global's alleged failure to pay SNET for twenty-six special access servers Global ordered from SNET between 2002 and 2004. On March 26, 2007, the United States District Court for the District of Connecticut (Janet C. Hall, District Judge) granted in part SNET's motion for summary judgment on Count I of SNET's
In order to "promote competition and reduce regulation" in the provision of local telephone service, which up until that point had been supplied through a system of monopoly local carriers, Congress passed the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.) ("Telecommunications Act" or "Act"). See id. pmbl., 110 Stat. 56; see also Global NAPs, Inc. v. Verizon New England, Inc., 454 F.3d 91, 94 (2d Cir. 2006); Peter W. Huber et al., Federal Telecommunications Law: 2004 Cumulative Supplement (2d ed. 1999) § 1.2. To effectuate these purposes, the Act requires telecommunications carriers to "interconnect" with each other's networks. See 47 U.S.C. § 251(a)(1). Because new entrants into a local telecommunications market, lacking the established network of the preexisting carrier, face high barriers to entry, so-called "incumbent local exchange carriers" ("ILECs")—the preexisting local carriers that had provided telephone services to a given area prior to the effective date of the Act, see id. § 251(h)(1)—have a duty to negotiate agreements with so-called competing local exchange carriers ("CLECs"), newcomer carriers who request to interconnect with the ILEC's network. See id. §§ 251(c)(1); 252(a)-(b); see also BellSouth Telecomms., Inc. v. MCImetro Access Transmission Servs., Inc., 317 F.3d 1270, 1273 (11th Cir.2003) (en banc). These agreements, called interconnection agreements ("ICAs"), must provide a requesting CLEC with interconnection into the ILEC's network "for the transmission and routing of telephone exchange service and exchange access" according to standards set forth in the Act. 47 U.S.C. § 251(c)(2)(A)-(D).
The Act lays out a detailed procedure for carriers to follow in entering into ICAs. Carriers may adopt an ICA either through voluntary negotiation or through a process referred to as "arbitration" in the relevant state public utilities commission ("PUC"). Under the first option, upon receiving a request to interconnect from a CLEC an ILEC may enter into a binding agreement
The Telecommunications Act provides varying routes to judicial review at this "approval stage" of an ICA, depending on whether the state PUC has acted on the agreement within a statutory time limit. The PUC has a limited amount of time in which to grant or deny its final approval of an ICA. Id. § 252(e)(4). If the PUC makes a "determination" under § 252, "any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the agreement ... meets the requirements of [§§ 251 and 252]." Id. § 252(e)(6). If, however, a state PUC fails to take an action either granting or denying its final approval to an ICA within the § 252(e)(4) time limits, the Federal Communications Commission ("FCC") may "preempt[]" the state PUC's jurisdiction over the ICA and undertake to itself the role of approving or rejecting the agreement. Id. § 252(e)(5). In such a case, the FCC proceeding and any judicial review that follows is the "exclusive remed[y]" for a state PUC's failure to act on an ICA. Id. § 252(e)(6).
As a separate matter, beginning with the Communications Act of 1934, ch. 652, 48 Stat. 1064 (1934) (codified as amended at 47 U.S.C. § 151 et seq.), federal law has required common carriers of communications to file a list of tariffs with the FCC specifying the charges the carriers will impose for the transmission of communications over their systems and between their systems and others. See 47 U.S.C. § 203(a); ICOM Holding, Inc. v. MCI Worldcom, Inc., 238 F.3d 219, 221 (2d Cir.2001). Pursuant to the "filed rate doctrine," once its tariff is filed and approved by the FCC, a carrier may not charge a rate for a particular service different from that specified in the tariff, and it may not "extend to any person any privileges or facilities in [any] communication" except as specified in the tariff. 47 U.S.C. § 203(c); see also Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 222, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998); ICOM, 238 F.3d at 221. Until replaced by a new tariff, filed with and approved by the FCC pursuant to the same procedure, a common carrier's tariff has the force of law; parties may not alter the rights and liabilities defined in the tariff by contract or through any other means. ICOM, 238 F.3d at 221.
In 2000, Global, a CLEC, asked SNET, an ILEC, to enter into an ICA pursuant to the Telecommunications Act. Among the issues to be resolved in this agreement were "the terms and conditions under which the parties would physically interconnect
Between 2002 and 2005, Global ordered a number of circuits and signaling links from SNET to carry Global traffic. According to SNET's complaint, SNET billed Global for providing these services in accordance with the rates set out in SNET's federal tariff, but Global refused to pay SNET for its purchases. SNET filed this action in December 2004; Count I of SNET's complaint sought payment from Global for its failure to pay the tariffed rates for the services SNET had rendered.
In December 2005 SNET moved for a prejudgment remedy against Global as well as disclosure from Global of its assets, including any and all cash, stocks, bonds, bank and investment accounts, real or personal property, and debts owing to Global. The district court, finding that SNET had shown a likelihood of success on the merits, granted SNET's motions on May 5, 2006, awarding SNET a prejudgment remedy of $5.25 million and ordering Global to disclose its property and assets. There began a lengthy battle over discovery of those assets, detailed exhaustively in the district court's opinion below. See S. New England Tel. Co. v. Global NAPs, Inc., 251 F.R.D. 82 (D.Conn.2008) (default judgment ruling) ("SNET II"). The dispute culminated in July 2007, when the district court granted SNET's motion to hold Global in civil contempt for Global's "blatant violation[s]" of the court's attachment and disclosure orders. See id. at 95. The court later awarded SNET the amount of $645,760.41, the costs and fees SNET incurred in litigating its motion for contempt. More generally, the district court concluded that Global repeatedly failed to comply over the course of two years with its orders that Global produce its financial information and that Global often gave misleading or outright false answers to the court and SNET regarding whether documents existed or in whose custody they were. See id. at 85-87, 93-95.
In June 2006, at the time of the disclosure and attachment dispute, SNET moved to amend its complaint to add the remaining appellants—Global NAPs New Hampshire, Inc., Global NAPs Networks,
After permitting SNET to amend its complaint to include the allegations relevant to the veil-piercing defendants, the district court granted partial summary judgment in favor of SNET and against Global on the merits of SNET's tariff claim. See SNET I, 482 F.Supp.2d 216. The veil-piercing defendants then unsuccessfully moved to dismiss the claims against them for lack of personal jurisdiction. In August 2007, defendants further contended, for the first time, that the court lacked subject matter jurisdiction over the tariff claim because the Telecommunications Act requires such claims to be presented first to the relevant state public utilities commission. The district court rejected this argument. See S. New England Tel. Co. v. Global NAPs, Inc., 520 F.Supp.2d 351 (D.Conn.2007) (subject matter jurisdiction ruling).
After it was allowed to amend its complaint, SNET sought discovery regarding the allegations in its complaint on the corporate structure of Global and its affiliated companies, contended by SNET to be Global's alter egos. In May 2007 the defendants were ordered to produce the companies' financial documents. SNET II, 251 F.R.D. at 87. Alleging noncompliance with the courts' discovery orders, SNET moved for a default judgment in August 2007 against all defendants, and the district court granted the motion with respect to SNET's tariff claim. Id. at 96. The final default judgment imposed liability in the amount of $5,893,542.86 on all defendants jointly and severally; this figure incorporated the amount Global owed to SNET in damages on SNET's tariff claim, $5,247,781.45, as well as $645,761.41 in fees and costs that the court had awarded SNET earlier for its efforts in prosecuting its motion for contempt. This appeal followed.
Global's first contention on appeal is that the district court lacked subject matter jurisdiction over this case and was thus without power to enter summary judgment in favor of SNET or to impose sanctions on the defendants. Global's principal argument is that SNET's claim required the district court to interpret the parties' ICA, and that the Telecommunications Act provides that federal district courts lack jurisdiction to hear claims requiring the interpretation of ICAs in the first instance. Instead, parties seeking the interpretation or enforcement of an ICA must litigate their claim first in the relevant state PUC, the decision of which may then be appealed to a federal court. Global further contends that this requirement is jurisdictional, rather than simply an administrative exhaustion requirement, and is thus not waived or forfeited when a defendant fails to raise it as an affirmative defense. We review a district court's determination of whether it had subject matter jurisdiction de novo. See Mathirampuzha v. Potter, 548 F.3d 70, 74 (2d Cir.2008). We are unpersuaded by Global's argument.
Federal courts are courts of limited jurisdiction, and "[t]he validity of an order of a federal court depends upon that court's having jurisdiction over both the subject matter and the parties." Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). For the purpose of determining whether a district court has federal question jurisdiction pursuant to Article III and 28 U.S.C. § 1331, the jurisdictional inquiry "depends entirely upon the allegations in the complaint" and asks whether the claim as stated in the complaint "arises under the Constitution or laws of the United States." Carlson v. Principal Fin. Group, 320 F.3d 301, 306 (2d Cir.2003); see also Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Provided that it does, the district court has subject matter jurisdiction unless the purported federal claim is clearly "immaterial and made solely for the purpose of obtaining jurisdiction" or is "wholly insubstantial and frivolous." Carlson, 320 F.3d at 306 (quoting Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 90 L.Ed. 939 (1946)); see also In re Stock Exchs. Options Trading Antitrust Litig., 317 F.3d 134, 150 (2d Cir.2003) ("Options Trading"). It follows from our exclusive focus on the complaint in determining federal question jurisdiction, moreover, that whether a plaintiff has pled a jurisdiction-conferring claim is a wholly separate issue from whether the complaint adequately states a legally cognizable claim for relief on the merits. See, e.g., Carlson, 320 F.3d at 306 ("[I]f the plaintiff really makes a substantial claim under an act of Congress, there is jurisdiction whether the claim ultimately be held good or bad." (quoting The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 57 L.Ed. 716 (1913)) (internal quotation marks omitted)). Thus a defense, however valid, does not oust the district court of subject matter jurisdiction. This is because once the court's jurisdiction has been properly invoked in the plaintiff's complaint, the assertion of such a defense is relevant only to whether the plaintiff can make out a successful claim for relief, and not to whether the court has original jurisdiction over the claim itself.
In this case, SNET's claim, pled on the face of its complaint, see Am. Compl. ¶¶ 29-31, 48-51, is that Global ordered circuits pursuant to the terms and conditions for services included in SNET's federally filed tariff and that SNET is owed the applicable rate for such services
"The inadequacy of a federal claim is ground for dismissal for lack of subject-matter jurisdiction only when the claim is so insubstantial, implausible, foreclosed by prior decisions of [the Supreme] Court, or otherwise completely devoid of merit as not to involve a federal controversy." Options Trading, 317 F.3d at 150 (emphasis added) (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)) (internal quotation marks and alterations omitted). A federal claim is not "insubstantial" merely because it might ultimately be unsuccessful on its merits. Cf. Schwartz v. Gordon, 761 F.2d 864, 867 n. 4 (2d Cir. 1985) ("When a claim allegedly based on a federal statute must be dismissed because of the statute's inapplicability to the facts alleged, ... the dismissal is more accurately described as based on failure to state a claim upon which relief may be granted" rather than as jurisdictional.). It is true that SNET's right to relief on its claim in this case depended ultimately upon a favorable construction of the parties' ICA—specifically to the effect that Global rather than SNET was responsible for providing the circuits in question, and therefore that Global's ordering the circuits from SNET was a purchase of a service as provided in SNET's tariff rather than an invocation of SNET's responsibility under the ICA. But this is simply irrelevant to whether the tariff claim itself properly invoked federal question jurisdiction:
Options Trading, 317 F.3d at 150-51 (internal quotation marks and citation omitted).
Global's argument to the contrary would have the effect of transmuting any claim against which a party raised a contract as a defense into a claim on that contract. We found such an argument "frivolous" in Kamakazi Music Corp. v. Robbins Music Corp., 684 F.2d 228 (2d Cir. 1982), and it is equally so here. Kamakazi, 684 F.2d at 230. Kamakazi owned copyrights in certain sheet music, which it licensed to Robbins to sell. After the contract expired,
Global next argues that even assuming SNET properly pled a tariff claim based on federal law, the Telecommunications Act divested the district court of jurisdiction over this claim because the claim raises a question regarding the interpretation of an ICA. Again, we disagree.
Global relies on § 252 of the Act, which provides in relevant part that "[i]n any case in which a State commission makes a determination under this section, any party aggrieved by such determination may bring an action in an appropriate Federal district court to determine whether the [ICA] meets the requirements of section 251 of this title and this section." 47 U.S.C. § 252(e)(6). This provision says nothing, however, about the jurisdiction of the district courts to hear federal tariff claims, nor does it contain any language divesting the district courts of their general federal question jurisdiction over such claims. See 28 U.S.C. § 1331. The only "determination[s]" referred to in § 252 that are potentially relevant in this context are decisions of a state PUC approving or rejecting a final ICA (see id. § 252(e)) (and, potentially, decisions of the PUC in an arbitration proceeding, see id. § 252(b)(c)). Far from divesting the district court of jurisdiction over a properly pleaded tariff claim, the Act is thus silent even as to a state PUC's authority to act in the situation presented in this case: namely, where a claim raises a question of the interpretation of an ICA that has already been framed and approved by the relevant PUC. See, e.g., Core Commc'ns, Inc. v. Verizon Pa., Inc., 493 F.3d 333, 340 (3d Cir.2007) ("[T]he Act is simply silent as to the procedure for post-formation disputes" concerning the interpretation or enforcement of ICAs.).
The Supreme Court has held that the judicial review provisions set forth in § 252(e)(6)—which again, by their terms, only apply to judicial review of "determinations" of a state PUC made at the approval
We see no reason why Verizon Maryland's reasoning that § 252(e)(6) "does not divest the district courts of their authority under 28 U.S.C. § 1331 to review [state PUCs' orders] for compliance with federal law" should not apply equally to the district courts' authority under § 1331 to consider a federal tariff claim when the provisions of an ICA are asserted in defense. Id. at 642, 122 S.Ct. 1753. Thus SNET's claim arises under federal law pursuant to § 1331, and § 252(e)(6) does not divest the court of its jurisdiction over that claim by implication. Because we presume that "Congress legislates against the backdrop of existing jurisdictional rules that apply unless Congress specifies otherwise," Gottlieb v. Carnival Corp., 436 F.3d 335, 339 (2d Cir.2006) (citing Shoshone Mining Co. v. Rutter, 177 U.S. 505, 506-07, 20 S.Ct. 726, 44 L.Ed. 864 (1900)), a clear statement from Congress is required before we conclude that a statute withdraws the original jurisdiction of the district courts over "all civil actions arising under the Constitution, laws, or treaties of the United States," 28 U.S.C. § 1331. See, e.g., Verizon Md., 535 U.S. at 643-44, 122 S.Ct. 1753; cf. Arbaugh v. Y & H Corp., 546 U.S. 500, 515-16, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006); Gottlieb, 436 F.3d at 340 (recognizing the "rule that § 1332 applies to all causes of action ... unless Congress expresses a clear intent to the contrary"). There is no language in § 252 addressing the subject matter jurisdiction of federal district courts to hear claims involving the interpretation of previously approved ICAs, let alone language amounting to a clear withdrawal of § 1331 jurisdiction over federal tariff claims. Cf. Global NAPs, Inc. v. Verizon New England Inc., 603 F.3d 71, 84-85 (1st Cir.2010) (rejecting Global's argument that § 252(e)(6) divests a federal court of subject matter jurisdiction over a counterclaim that was properly before the court pursuant to 28 U.S.C. § 1367).
Global suggests that the doctrine of primary jurisdiction is applicable here, and that pursuant to this doctrine the district court should have dismissed this action until the DPUC had a chance to rule on the interpretation of the parties' ICA. The doctrine of primary jurisdiction applies "to claims properly cognizable in court that contain some issue within the special competence of an administrative agency." Reiter v. Cooper, 507 U.S. 258,
Global relies on these cases for the proposition that questions relating to the interpretation of ICAs must be presented in the first instance to state PUCs. However, none of these cases holds that a PUC's authority to interpret interconnection agreements erects a jurisdictional bar to claims over which the district court has federal question jurisdiction pursuant to § 1331, such as SNET's tariff claim here. Indeed, in two of the cases relied on by Global, BellSouth and Southwestern Bell Telephone Co. v. Public Utility Commission of Texas, the claims at issue were presented to a state PUC in the first instance, so the cases did not even address the situation this case presents, in which an issue related to an ICA is first raised in a district court. See BellSouth, 317 F.3d at 1272-73; Sw. Bell, 208 F.3d at 478. Core Communications, Inc. v. Verizon Pennsylvania, Inc., 493 F.3d 333 (3d Cir. 2007), Global's principal authority on appeal, is similarly distinguishable because there the Third Circuit affirmed the dismissal without prejudice of a claim for breach of an ICA, holding that such claims seeking "interpretation and enforcement" of ICAs "must be litigated in the first
To summarize, we conclude 1) the district court had federal question jurisdiction over SNET's tariff claim pursuant to 28 U.S.C. §§ 1331, and 2) nothing in the Telecommunications Act divested the district court of that jurisdiction.
We next confront appellants' argument that the district court lacked personal jurisdiction over the veil-piercing defendants—Global NAPs Networks, Global NAPs New Hampshire, Global NAPs Realty, and their parent company Ferrous Miner—and that, accordingly, the court should have granted their motion to dismiss rather than enter a default judgment against them. Where, as here, a district court in adjudicating a motion pursuant to Federal Rule of Civil Procedure 12(b)(2) "relies on the pleadings and affidavits, and chooses not to conduct a full-blown evidentiary hearing, plaintiffs need only make a prima facie showing of personal jurisdiction." Porina v. Marward Shipping Co., 521 F.3d 122, 126 (2d Cir. 2008) (internal quotation marks omitted). This showing may be made through the plaintiff's "own affidavits and supporting materials, containing an averment of facts that, if credited, would suffice to establish jurisdiction over the defendant." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir.2001) (internal quotation marks, citation, and alterations omitted). We review the district court's resulting legal conclusion de novo. Spiegel v. Schulmann, 604 F.3d 72, 76 (2d Cir.2010) (per curiam). In doing so, "we construe the pleadings and affidavits in the light most favorable to plaintiffs, resolving all doubts in their favor." Porina, 521 F.3d at 126.
Appellants' principal argument is that SNET's prima facie showing was deficient because the allegations in SNET's amended complaint are "conclusory." SNET alleges that each of the appellants was an "alter ego" of Global, a fact that, if established, would clearly support a finding of personal jurisdiction. See Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 142-43 (2d Cir.1991). It is also well established that the exercise of personal jurisdiction over an alter ego corporation does not offend due process. See Transfield ER Cape Ltd. v. Indus. Carriers, Inc., 571 F.3d 221, 224 (2d Cir.2009). We need only determine, then, whether SNET made sufficiently supported allegations that, if proven true, would establish that the Global entities and their parent, Ferrous Miner, are alter egos. We conclude that it did, and that the district court did not err in denying these defendants' motion to dismiss.
The factual allegations in SNET's complaint, supported by declarations and deposition testimony, constituted a specific averment of facts that, if credited, would suffice to show that all of the Ferrous Miner—owned entities operate as a single economic unit and that Ferrous Miner dominates and controls the Global entities.
Appellants further contend that SNET was required to present a prima facie case not only that the corporate entities here operated as a single economic unit dominated by Ferrous Miner, but that "the allegedly `sham' [corporate] structure" laid out in the complaint was "used to further some evil purpose." Global Br. 24. Under federal common law, however, SNET need only demonstrate that it would be unfair under the circumstances not to disregard the corporate form. See Bhd. of Locomotive Eng'rs v. Springfield Terminal Ry. Co., 210 F.3d 18, 26 (1st Cir.2000) ("[T]he rule in federal cases is founded only on the broad principle that a corporate entity may be disregarded in the interests of public convenience, fairness and equity." (internal quotation marks omitted)). And while Connecticut does require the plaintiff to show "improper use of the corporate form," Naples, 990 A.2d at 340, that requirement is easily satisfied by the allegation that Ferrous Miner structures the Global entities such that those companies that incur liabilities are also those without assets to satisfy them. Cf. Ill. Bell, 551 F.3d at 597. We conclude that the district court did not err in denying the veil-piercing defendants' motion to dismiss.
Global next contends that the district court abused its discretion in sanctioning Global for civil contempt and in imposing a default judgment against both Global and the veil-piercing defendants for discovery-related misconduct. Again, we disagree.
The battle for discovery in this case began on May 5, 2006, when the district court granted SNET's motion for a prejudgment remedy in the amount of $5.25 million and at the same time ordered the disclosure of Global's assets. Specifically, SNET moved for disclosure of Global's "cash, stocks, bonds[,] ... bank accounts and investment accounts, ... real or personal property[,] ..." and any debts owed to the company. Motion to Disclose, Doc. 64 (12/23/05). The court ordered Global to comply with SNET's motion for disclosure within two weeks by providing SNET with sufficiently detailed information so that SNET could attach Global's assets to satisfy the prejudgment remedy. As amply recounted in the district court's opinion below, see SNET II, 251 F.R.D. at 85-87,
Separately, the district court authorized SNET to attach any property Global disclosed as an asset pursuant to the court's May 5, 2006, order granting SNET a prejudgment remedy. As part of its obligation to disclose its assets, Global emailed a list of "all [its] known assets" in Connecticut to SNET's counsel on May 22, 2006. The list did not indicate the specific locations of the disclosed assets or their value, and SNET moved to compel additional disclosure. Concluding that the disclosure was insufficient, the district court followed up with a new order on May 26, 2006, which required Global to disclose all of its assets within the State as well as their specific locations and value. Global responded on June 6, 2006, by sending a new list of assets that included the location and serial number of particular units of equipment. The district court concluded that this disclosure was vague regarding the location of several assets and, on October 3, 2006, ordered Global physically to show SNET representatives the locations of the disclosed assets in order to allow SNET to attach them. The court's October 2006 order also restated clearly that SNET was entitled to attach "any ... real or personal property disclosed by [Global]" pursuant to the court's earlier orders. Order Granting Prejudgment Remedy, Doc. 239, at 2 (10/3/06). Global then claimed that it had "replaced" the disclosed equipment with equipment it had leased, moving the disclosed equipment to a storage unit in Mystic, Connecticut. SNET attached the equipment in the storage unit, but soon discovered that the equipment there was not in fact the same equipment that Global had disclosed. Global finally allowed SNET to visit two of its five Connecticut locations in December 2006, and during these visits SNET determined that the equipment disclosed on Global's list of June 6, 2006, was still in use at the subject locations. After these initial visits, however, Global cut off SNET's access to any further Global locations; the district court concluded that in the days after SNET's visits, Global hurriedly replaced the equipment on its June 6 list with other equipment. At some point Global removed the equipment disclosed on its June 6 list to Massachusetts, where SNET was able to attach some of it in March 2007. As of the time of the district court's ruling on SNET's motion for contempt, SNET still had not been able to attach certain items
SNET's contempt motion was based on Global's alleged violation of the district court's May and October 2006 orders authorizing SNET to attach Global equipment for the purpose of securing SNET's prejudgment remedy. On July 9, 2007, the district court concluded that Global had "acted willfully in violating [the] court's prejudgment Orders" allowing SNET to attach Global's Connecticut property, and ordered civil contempt sanctions: the "reasonable costs of prosecuting [SNET's] motion for contempt and sanctions, including attorney's fees, expert fees, and other costs." S. New England Tel. Co. v. Global NAPs Inc., No. 3:04-cv-2075, at 12-13 (D.Conn. July 9, 2007) (order on SNET's motion for contempt and sanctions) (hereinafter "July 9, 2007 Contempt Order").
After SNET amended its complaint to add the veil-piercing defendants, it sought discovery on its allegations that the various Global entities were mere shell companies and controlled by Ferrous Miner. This move set off yet another round of discovery-related battles. As the district court described:
SNET II, 251 F.R.D. at 87 (citations omitted).
Much of the wrangling in the district court had to do with a computer belonging to Janet Lima, the President of Select & Pay, Inc., a company used by the Global entities as a bookkeeping agent. Prior to the formation of Select & Pay, of which Lima testified she is the sole owner, Lima was a direct employee of Global NAPs. As the district court explained, the defendants claimed that the documents covered by the district court's discovery orders had been lost due to a mishap with Lima's computer:
Id. (alterations in original). Although there was some conflict in the defendants' evidence regarding how the computer was allegedly destroyed, see id. at 87-88 & n. 4, the district court determined in any event that
Id. at 87. The court further noted that the defendants had not explained why the data on the computer was irretrievable. See id. at 88.
In January 2007, SNET acquired excerpts of defendants' financial documents through a third-party subpoena to defendants' tax accountants; many of these documents had not previously been produced, although they clearly fell within the scope of the district court's prior orders. Id. These documents included some financial statements for Ferrous Miner. Id. According to the testimony of a representative of the accountants, several of the records produced came from the Global entities themselves and had not been created by the accountants. The representative also testified that he had in the past seen a general ledger for Ferrous Miner or one of the Global companies, even though no such ledger had yet been produced in discovery.
Upon receiving the documents from the accountants, SNET investigated the replacement computer being used by Janet Lima, which Scheltema had previously claimed to have searched. Id. The investigations of two groups of forensic experts revealed that numerous files from the replacement computer had been destroyed using a program called "Window Washer." According to the report of a group of forensic consultants, LECG, LLC ("LECG"), this application can be used in conjunction with a separate Shred utility, allowing the user of a file not simply to delete the file from the computer (which normally allows the file potentially to be recovered or at least its existence to be discovered) but to "shred" the file: the result is that the Shred utility "overwrites the contents of the file, scrambles the name, and deletes it." LECG, LLC, Summary of Forensic Analysis, Mar. 16, 2008, at 6. The "shred" function is not the default setting of Window Washer; a user must affirmatively choose to use it. LECG discovered significant evidence of the use of the Shred utility and Window Washer on the replacement computer:
SNET II, 251 F.R.D. at 88. Further analysis indicated that when Lima used the program on June 12, 2007, she used the program's "wash with bleach" function, which allows the user to overwrite deleted files. Id. at 88-89. This was again not the program's default setting. Moreover, contrary to Lima's testimony, the program had in fact been used again: "LECG's analysis shows that Window Washer's data wiping utility [the "Shred" utility] was first used on June 16, 2007, on which day it was run three times, and was used again on June 20, 2007." Id. at 89.
The forensic analysis concluded that, out of 93,560 items stored in a database on the computer that held the "metadata" (records) of all files that had once existed there, nearly 20,000 had been "erased using anti-forensic software such as Window Washer's Shred utility." Id. "At least 103 of these files were `user created files,' that is, `substantive files created by a user as opposed to a computer generated record.'" Id. LECG was able to discern the names of three files that had been deleted: "2000 Sales Journal," "checkregisterNH7-12-2006," and "NH check Jan thru May 06."
Concluding that "all defendants [had] willfully violated the court's discovery orders by," among other things, failing to turn over records ordered disclosed, "lying to the court about the inability to obtain documents from third parties, and destroying and withholding documents that were within the scope of" the court's discovery orders, the district court granted SNET's motion for a default judgment against all defendants on SNET's tariff claim on July 1, 2008. SNET II, 251 F.R.D. at 96.
We review "all aspects of a District Court's decision to impose sanctions for abuse of discretion," United States v. Seltzer, 227 F.3d 36, 39 (2d Cir.2000) (internal quotation marks omitted); see also Luft v. Crown Publishers, Inc., 906 F.2d 862, 865 (2d Cir.1990), mindful of the Supreme Court's repeated admonition that this standard of review means what it says: that "[t]he question, of course, is not whether [we] would as an original matter have [applied the sanction]; it is whether the District Court abused its discretion in so doing." Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (per curiam). We review the factual findings of the district court made in support of its decision for clear error. See Friends of Animals Inc. v. U.S. Surgical Corp., 131 F.3d 332, 334 (2d Cir.1997) (per curiam).
Rule 37 provides in relevant part that:
Fed.R.Civ.P. 37(b)(2)(A). We have indicated that "[s]everal factors may be useful in evaluating a district court's exercise of discretion" to impose sanctions pursuant to this rule, including "(1) the willfulness of the non-compliant party or the reason for noncompliance; (2) the efficacy of lesser sanctions; (3) the duration of the period of noncompliance, and (4) whether the non-compliant party had been warned of the consequences of noncompliance." Agiwal v. Mid Island Mortg. Corp., 555 F.3d 298, 302 (2d Cir.2009) (quoting Nieves v. City of New York, 208 F.R.D. 531, 535 (S.D.N.Y. 2002)) (internal quotation marks and alteration omitted). Because the text of the rule requires only that the district court's orders be "just," however, and because the district court has "wide discretion in imposing sanctions under Rule 37," Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 135 (2d Cir.2007) (internal quotation marks omitted), these factors are not exclusive, and they need not each be resolved against the party challenging the district court's sanctions for us to conclude that those sanctions were within the court's discretion. See, e.g., Daval Steel Prods., a Div. of Francosteel Corp. v. M/V Fakredine, 951 F.2d 1357, 1366 (2d Cir. 1991).
With respect to the district court's July 2008 imposition of a default judgment against appellants, dismissal or default imposed pursuant to Rule 37 is a "drastic remedy" generally to be used only when the district judge has considered lesser alternatives. John B. Hull, Inc. v. Waterbury Petroleum Prods., Inc., 845 F.2d 1172, 1176 (2d Cir.1988). Despite the harshness of these measures, however, "discovery orders are meant to be followed," Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 853 (2d Cir.1995), and dismissal or default is justified if the district court finds that the failure to comply with discovery orders was due to "willfulness, bad faith, or any fault" of the party sanctioned, Salahuddin v. Harris, 782 F.2d 1127, 1132 (2d Cir.1986) (quoting Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 212, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958)); see also Cine Forty-Second St. Theatre v. Allied Artists, 602 F.2d 1062, 1067 (2d Cir.1979). The district court is free to consider "the full record in the case in order to select the appropriate sanction." Nieves, 208 F.R.D. at 535 (citing Diapulse Corp. of Am. v. Curtis Publ'g Co., 374 F.2d 442 (2d Cir. 1967)).
With respect to the district court's July 2007 order holding Global in civil contempt, the district courts have the inherent power to find a party in contempt for bad faith conduct violating the court's orders "even if procedural rules exist which sanction the same conduct." Chambers v. NASCO, Inc., 501 U.S. 32, 49, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991); see also Roadway Express, Inc. v. Piper, 447 U.S. 752, 767-68, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980); Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 106-07 (2d Cir.2002); cf. Armstrong v. Guccione, 470 F.3d 89, 100-05 (2d Cir.2006).
The contempt finding here was not an abuse of discretion. First, contrary to Global's primary contention on appeal, the district court's May and October orders, which ordered Global to disclose "any and all cash, stocks, bonds[,] ... bank accounts and investment accounts, ... real or personal property[, and] debts owing" to Global and allowed SNET to attach "any ... real or personal property disclosed by [Global]," were perfectly clear. "A clear and unambiguous order is one that leaves no uncertainty in the minds of those to whom it is addressed, who must be able to ascertain from the four corners of the order precisely what acts are forbidden." King, 65 F.3d at 1058 (internal quotation marks omitted). Global disclosed its Connecticut inventory pursuant to the court's May 2006 order, and once that inventory was disclosed, it was clearly subject to attachment. Global's attempt to read an ambiguity into this order, as well as the one that followed in October, regarding whether it allowed SNET to attach replacement equipment that Global had "swapped in" for the disclosed equipment, is unavailing, as it could hardly be clearer that the "real or personal property" that SNET was allowed to attach was the specific property Global disclosed, not, as Global contends, any property it disclosed or "fungible substitutes." Global Br. 46. Second, the district court did not clearly err in concluding that the evidence of Global's noncompliance with its orders was "clear and convincing" and that Global did not act "reasonably diligent[ly]" to attempt compliance. Local 638, 81 F.3d at 1171. We find nothing in the record that disturbs the district court's conclusion that Global's behavior over the course of 2006 was "a naked attempt to thwart SNET's ability to secure its [prejudgment remedy]." July 9, 2007 Contempt Order at 11.
Finally, Global contends that SNET was not prejudiced by its inability
Global's argument on appeal with regard to the default judgment is that it was an "overbroad" sanction with respect to the veil-piercing defendants, Global Br. 29, because, according to Global, the district court defaulted the veil-piercing defendants on matters other than the specific issue to which the discovery orders related—whether the defendants were alter egos of Global. Global argues that the Supreme Court's decision in Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982), mandates that a Rule 37 sanction must be "specifically related to the particular `claim' which was at issue in the order to provide discovery," Ins. Corp. of Ir., 456 U.S. at 707, 102 S.Ct. 2099, and that the district court was thus not permitted to default the veil-piercing defendants on any issue other than their alter ego status. The district court therefore erred, Global contends, in defaulting these parties on the merits of SNET's claim and in holding these parties liable for the costs of the earlier contempt ruling against Global. Additionally, Global argues that the district court erred in imposing sanctions on the veil-piercing defendants based on the actions of Global itself and of Janet Lima, a non-party. Finally, Global raises a number of mitigating arguments to suggest that the sanctions lack sufficient support in the record—it contends that there was no basis for the district court to find bad faith on its part, that any documents not produced were of minimal relevance in any event, and that SNET was "never really prejudiced" by any failure on Global's part to comply with discovery orders.
Insurance Corp. of Ireland held that it does not violate due process for a district court to impose under Rule 37(b) an order subjecting a party to personal jurisdiction in that court as a sanction for the party's failure to comply with a discovery order seeking to establish facts relating to the court's personal jurisdiction over it.
The district court did not commit any legal errors and its decision to impose default on all defendants was not an abuse of discretion. First, the record fully supported the district court's determination that the defendants acted willfully and in bad faith. See Agiwal, 555 F.3d at 302. The forensic reports allowed the district court to conclude that the deletion of documents from Lima's computer was intentional rather than merely negligent, the evidence supported the district court's
Global responds by contending that its conduct did not merit the harsh sanctions the district court imposed because Global's noncompliance did not prejudice SNET, and the district court never concluded that any destroyed evidence would have been relevant to the litigation. But of course, as the district court pointed out, the evidence that was the subject of the discovery orders related to the defendants' corporate financial records, and was thus obviously germane to the alter ego determination that SNET was urging the district court to make. See SNET II, 251 F.R.D. at 93 n. 6. Additionally, while the district court concluded that the Global entities engaged in the willful destruction of evidence, even the simple failure to produce evidence in a timely manner in and of itself can support an inference that the evidence withheld would be unfavorable to the noncompliant party. See Residential Funding Corp., 306 F.3d at 109. SNET suffered prejudice, therefore, as it was deprived of what we can assume would have been evidence relevant to its alter ego allegations.
Even if SNET had suffered no prejudice from Global's conduct, however, we, along with the Supreme Court, have consistently rejected the "no harm, no foul" standard for evaluating discovery sanctions that Global would have us apply. Although one purpose of Rule 37 sanctions
Update Art, Inc. v. Modiin Publ'g, Ltd., 843 F.2d 67, 71 (2d Cir.1988); see also Nat'l Hockey League, 427 U.S. at 643, 96 S.Ct. 2778 (noting that Rule 37 sanctions may serve both to "penalize those whose conduct may be deemed to warrant" them and to "deter those who might be tempted to such conduct in the absence of such a deterrent"). Even when a party finally (albeit belatedly) complies with discovery orders after sanctions are imposed, these purposes may still justify the sanctions:
Cine Forty-Second St. Theatre, 602 F.2d at 1068 (internal quotation marks omitted). In light of the record before us, it is clear that the district court did not abuse its discretion in concluding that a default sanction here was appropriate to serve these purposes.
To summarize, we hold:
1) The district court had subject matter jurisdiction over this action because SNET's claim for enforcement of its federal tariff arose under federal law, 28 U.S.C. § 1331, and nothing in the Telecommunications Act of 1996 "divested" the district court of its jurisdiction.
2) SNET's allegations and supporting affidavits regarding the corporate structure of the various Global entities sufficed, under either Connecticut or federal common law, to support a prima facie case that the district court had personal jurisdiction over the veil-piercing defendants as Global's alter egos.
3) The district court did not abuse its discretion in finding Global in contempt for willfully evading and violating the prejudgment remedy discovery orders and sanctioning Global in the amount of SNET's fees and costs.
We have considered all appellants' remaining arguments and conclude that they are without merit. For the foregoing reasons, the judgment of the district court is AFFIRMED.