Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-57015/USCOURTS-ca9-14-57015-0/pdf.json

Parties Involved:
NewGen, LLC
Appellee
Safe Cig, LLC
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NEWGEN, LLC, a Wisconsin limited

liability company,

Plaintiff-Appellee,

v.

SAFE CIG, LLC, a California limited

liability company,

Defendant-Appellant.

Nos. 13-56157

14-57015

D.C. No.

2:12-cv-09112-

RGK-JCG

NEWGEN, LLC, a Wisconsin limited

liability company,

Plaintiff-Appellant,

v.

SAFE CIG, LLC, a California limited

liability company,

Defendant-Appellee.

No. 13-56225

D.C. No.

2:12-cv-09112-

RGK-JCG

OPINION

Appeal from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge, Presiding

Argued and Submitted February 11, 2016

Pasadena, California

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2 NEWGEN V. SAFE CIG

Filed September 7, 2016

Before: M. Margaret McKeown and Sandra S. Ikuta,

Circuit Judges, and Robert W. Pratt,* District Judge.

Opinion by Judge McKeown

SUMMARY**

Diversity Jurisdiction

The panel affirmed the district court’s grant of an almost

$1.5 million default judgment against Safe Cig, LLC and in

favor of NewGen, LLC after accepting NewGen’s amended

allegations of diversity citizenship as true, and rejected

NewGen’s cross-appeal for additional damages.

The panel held that the district court properly permitted

NewGen to amend its complaint under 28 U.S.C. § 1653 to

cure the defective allegations of diversity jurisdiction. The

panel further held that nothing in the text of § 1653 suggested

that it applied only to judgments on the merits, and not to

default judgments. The panel concluded that the district court

acted within its statutory authority to give NewGen the

opportunity to correct its allegations, and the amended

* The Honorable Robert W. Pratt, United States District Judge for the

Southern District of Iowa, sitting by designation.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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NEWGEN V. SAFE CIG 3

complaint remedied the deficiencies of the original

complaint, by alleging the parties were of diverse citizenship.

The panel held that the district court had subject matter

jurisdiction. The panel reasoned that both Safe Cig’s initial

appeal and its Fed. R. Civ. P. 60(b) motion were facial and

not factual attacks on the district court’s subject matter

jurisdiction, and that Safe Cig never called into question the

factual predicates to establish diversity jurisdiction.

Addressing the district court’s denial of relief from

default judgment, the panel held that the district court did not

err in weighing the factors of Eitel v. McCool, 782 F.2d 1470,

1472 (9th Cir. 1986), and did not abuse its discretion in

entering default judgment.

Finally, the panel upheld the district court’s award of

$1,483.075.84, and rejected NewGen’s cross-appeal for

additional damages.

COUNSEL

Ricardo P. Cestero (argued) and Daniel G. Stone, Greenberg

Glusker Fields Claman & Machtinger LLP, Los Angeles,

California, for Appellant/Cross-Appellee.

Harry E. Van Camp (argued) and Deborah C. Meiners,

DeWitt Ross & Stevens S.C., Madison, Wisconsin, for

Appellee/Cross-Appellant.

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4 NEWGEN V. SAFE CIG

OPINION

McKEOWN, Circuit Judge:

This case is a procedural tangle complicated by the parties

and their counsel and serves as a reminder that subject matter

jurisdiction must exist at the outset of a suit, although it may

be achieved through amended pleadings. Safe Cig, LLC

challenges an almost $1.5 million default judgment awarded

in NewGen, LLC’s favor as void for lack of subject matter

jurisdiction.

Although we are sympathetic to a party that finds itself

facing a large default judgment, here the district court

invoked the appropriate rules and statutes. The case presents

no procedural irregularities, onlyprocedural complexities. At

the time the district court entered default judgment, neither

the parties nor the court noticed that NewGen’s original

complaint failed to adequately allege complete diversity. 

Safe Cig only raised the diversity challenge in a related

appeal to this court and a concurrently filed Federal Rule of

Civil Procedure 60(b) motion for relief from the judgment. 

The district court permitted NewGen to file an amended

complaint remedying the defective jurisdictional allegations,

but refused to reopen the judgment when Safe Cig protested

that it lacked sufficient knowledge to confirm or deny the

new allegations regarding the citizenship of the parties. 

Because Safe Cig never factually attacked NewGen’s

amended jurisdictional allegations, we accept NewGen’s

amended allegations of diversity of citizenship as true and

conclude the district court had subject matter jurisdiction. 

We therefore affirm the grant of default judgment and the

damages award.

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NEWGEN V. SAFE CIG 5

BACKGROUND

Safe Cig was in the business of making and selling

electronic cigarettes when it contracted with NewGen to help

with online marketing. As NewGen alleges, the parties set

out the terms of the deal in two contracts—an Affiliate

Agreement and a Consulting Agreement—under which

NewGen agreed to attract online customers to Safe Cig’s

sales site. According to NewGen, Safe Cig did not live up to

its end of the bargain, failing to pay NewGen its lifetime 20%

commission on all sales resulting from NewGen’s referrals,

to grant NewGen access to its sales records to verify those

commissions, to pay NewGen in exchange for not launching

a competitor, and to pay NewGen for general marketing and

business consultant services. This suit followed.

Three days after NewGen filed its complaint, NewGen

properlyserved Safe Cig’s registered agent, despite resistance

on the agent’s part. The deadline to respond to the complaint

came and went without a response; Safe Cig claims that, at

the time, it did not think service was effective. On

application from NewGen, the district court entered default. 

The same day, Safe Cig contacted NewGen and offered a

deal: it would not contest service in exchange for a 60-day

extension to respond to the complaint. NewGen rejected the

proposal, and filed for default judgment. Safe Cig objected

to default judgment on a number of grounds, but did not

challenge the district court’s subject matter jurisdiction over

the dispute.

The district court entered default judgment, finding that

service was effective and holding that it had diversity

jurisdiction under 28 U.S.C. § 1332. The court concluded

that NewGen was entitled to a default judgment as to its

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6 NEWGEN V. SAFE CIG

claims of breach of contract and breach of the covenant of

good faith and fair dealing, but rejected NewGen’s claims of

fraud as insufficiently pleaded. The district court awarded

NewGen $1,483,075.84 in damages.

Safe Cig launched a two-pronged attack on the default

judgment. It appealed to this court, claiming relief from

judgment because the entry of default was an abuse of

discretion under Eitel v. McCool, 782 F.2d 1470 (9th Cir.

1986). In the appeal, for the first time in the litigation, Safe

Cig argued that NewGen failed to plead diversity jurisdiction

in its original complaint and failed to prove jurisdiction prior

to entry of the default judgment. On the same day, Safe Cig

filed in the district court a Rule 60(b) motion for relief from

the judgment, asking the court to declare the default judgment

void for lack of subject matter jurisdiction.

At that stage, NewGen, Safe Cig, and the district court all

agreed that NewGen failed to properly plead diversity

jurisdiction in the original complaint—with respect to a

limited liability company, the citizenship of all of the

members must be pled. See Johnson v. Columbia Props.

Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). The

question was how to proceed next. In response to the Rule

60(b) motion, the district court ordered additional briefing on

diversity jurisdiction. NewGen submitted a declaration with

respect to the citizenship of the parties and reasserted that the

parties were diverse, while Safe Cig protested that the

citizenship of the parties was “uncertain.” Armed with the

additional briefing, the district court concluded that while

NewGen had not adequately pled subject matter jurisdiction

in its original complaint, NewGen could amend the complaint

to cure the defective allegations. The court found the record

supported the allegations: it established that “none of the

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NEWGEN V. SAFE CIG 7

members of Safe Cig were domiciliaries of Wisconsin when

the case was filed,” and thus, “[b]ecause NewGen and Safe

Cig were not citizens of the same state when the case was

filed, the Court had jurisdiction over this matter.” The

district court also held that because Safe Cig had not denied

NewGen’s factual allegations of diversity, NewGen had no

affirmative obligation to prove diversity with affidavits,

although it did submit a declaration; and that NewGen “could

have met [Safe Cig’s] facial challenge simply by amending

the jurisdictional allegations in the Complaint.” The district

court thus denied the Rule 60(b) motion on condition that

NewGen amend its complaint to cure the original, “defective”

allegations of jurisdiction pursuant to 28 U.S.C. § 1653.

When NewGen filed its amended complaint alleging that

the parties were of diverse citizenship, Safe Cig filed an

answer challenging the allegations based on Safe Cig’s

purported lack of knowledge and information about the

citizenship of its members. The district court struck much of

Safe Cig’s answer as “immaterial [or] impertinent” pursuant

to Rule 12(f), noting that it had “made it clear” in the Rule

60(b) order that it “was not reopening the final judgment” and

that “the merits of Plaintiff’s claims are not open to dispute.” 

Because the district court determined Safe Cig had not

actually challenged the veracity of NewGen’s factual

allegations of citizenship, it likewise determined that the

answer did not upset “the Court’s previous finding that the

judgment in this case was not void for want of subject matter

jurisdiction.”

There was another jurisdictional wrinkle, however: in

May 2014, when the district court denied the motion for relief

from judgment, the case was still pending on appeal in this

court. It was not until September 2014, after the district court

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8 NEWGEN V. SAFE CIG

had conducted hearings and issued its orders,1that we

remanded to the district court “to consider Safe Cig’s Federal

Rule of Civil Procedure 60(b) motion.” Following remand,

the district court reissued its May 2014 order denying the

Rule 60(b) motion with leave to amend the jurisdictional

allegations. The parties then refiled the amended complaint

and answer, and Safe Cig filed its notice of appeal in the

current appeal.

ANALYSIS

I. Amending the Complaint Under 28 U.S.C. § 1653

When the default judgment was entered, neither the

parties nor the court recognized that NewGen’s jurisdictional

allegations were defective. Only later did Safe Cig challenge

the district court’s subject matter jurisdiction in the original

appeal and in a Rule 60(b) motion for relief from judgment. 

Rather than tear up the default judgment, however, the district

court denied the motion on the condition that NewGen amend

its complaint to cure the defective allegations of diversity

jurisdiction—a condition that NewGen met. Safe Cig urges

that the proper course of action was to reopen the judgment

and permit Safe Cig to respond to the complaint and litigate

1 We reject Safe Cig’s argument that the district court erred in taking

new evidence and considering the Rule 60(b) motion before the case was

remanded from this court. Rule 62.1 provides that “[i]f a timely motion

is made for relief that the court lacks authority to grant because of an

appeal that has been docketed and is pending, the court may . . . (1) defer

considering the motion; (2) deny the motion; or (3) state either that it

would grant the motion if the court of appeals remands for that purpose or

that the motion raises a substantial issue.” Fed. R. Civ. P. 62.1(a). In

considering these options, the district court is free to consider new

evidence at its discretion.

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NEWGEN V. SAFE CIG 9

the case on the merits. We disagree: the district court

properly permitted NewGen to amend its complaint under

28 U.S.C. § 1653 without reopening the judgment.2

NewGen concedes that its original complaint failed to

adequately allege diversity jurisdiction. A limited liability

company “is a citizen of every state of which its

owners/members are citizens,” not the state in which it was

formed or does business. Johnson, 437 F.3d at 899. The

original complaint asserts diversity jurisdiction under

28 U.S.C. § 1332, but does not allege the citizenship of

NewGen or Safe Cig’s members. It only states that NewGen

was a Wisconsin limited liability company with its principal

place of business in Wisconsin, and that Safe Cig was a

California limited liability company with its principal place

of business in California.

Defective jurisdictional allegations are not fatal, however. 

A judgment is only void where there is a “total want of

jurisdiction” as opposed to an “error in the exercise of

jurisdiction.” Watts v. Pinckney, 752 F.2d 406, 409 (9th Cir.

1985) (internal quotation marks omitted). Courts may permit

parties to amend defective allegations of jurisdiction at any

stage in the proceedings. The operative statute, 28 U.S.C.

§ 1653, provides that “[d]efective allegations of jurisdiction

may be amended, upon terms, in the trial or appellate courts.” 

We agree that “[s]ection 1653’s liberal amendment rule

permits a party who has not proved, or even alleged, that

diversity exists to amend his pleadings even as late as on

appeal.” D.C. ex rel. Am. Combustion, Inc. v. Transamerica

2 We review de novo questions of law and the district court’s

interpretations of the Federal Rules of Civil Procedure. United States v.

$133,420.00 in U.S. Currency, 672 F.3d 629, 637 (9th Cir. 2012).

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10 NEWGEN V. SAFE CIG

Ins. Co., 797 F.2d 1041, 1044 (D.C. Cir. 1986). The intent of

the provision is to avoid the needless expenditure of judicial

resources where a court can instead “permit the action to be

maintained if it is at all possible to determine from the record

that jurisdiction does in fact exist.” Aurecchione v.

Schoolman Transp. Sys., Inc., 426 F.3d 635, 639 (2d Cir.

2005) (internal quotation marks omitted).

Nothing in the text of § 1653 suggests that it applies only

to judgments on the merits, not default judgments, as Safe

Cig contends.3 While judgments issued after trial admittedly

require a steeper investment of judicial and party resources,

the same “statutory purpose of avoiding needless sacrifice to

defective pleading,” Mathews v. Diaz, 426 U.S. 67, 75 n.9

(1976), applies to default judgments. Our general policy that

“doubt, if any, should be resolved in favor of the motion to

set aside the [default] judgment,” Schwab v. Bullock’s Inc.,

508 F.2d 353, 355 (9th Cir. 1974) (internal quotation marks

omitted), does not justify exempting default judgments from

§ 1653 without any textual basis.

The Second Circuit adopted a similar view in Jacobs v.

Patent Enforcement Fund, Inc., 230 F.3d 565, 567 (2d Cir.

2000), where defects in jurisdictional allegations were

similarly discovered only after entry of default judgment. 

The Second Circuit ordered supplemental briefing on

 

3

 Safe Cig appears to have conceded in the district court that § 1653 is

applicable here. We nonetheless address Safe Cig’s argument on appeal

that § 1653 does not apply to default judgments. See Pickup v. Brown,

740 F.3d 1208, 1232 n.10 (9th Cir. 2014) (“We have discretion to address

an argument that otherwise would be waived when the issue presented is

purely one of law and either does not depend on the factual record

developed below, or the pertinent record has been fully developed.” 

(internal quotation marks omitted)).

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NEWGEN V. SAFE CIG 11

diversity, and, relying on the affidavits submitted, satisfied

itself that there was diversity jurisdiction. Id. The court held

that “while a complaint must present certain quite particular

allegations of diversity jurisdiction in order to be adequate,

the actual existence of diversity jurisdiction, ab initio, does

not depend on the complaint’s compliance with these

procedural requirements.” Id. at 567–68. This principle is

consistent with a court’s authority—upon a motion to dismiss

for lack of jurisdiction—to direct the plaintiff to amend. Id.

at 568.

The district court thus acted within its statutory authority

to give NewGen the opportunity to correct its allegations. 

The amended complaint remedied the deficiencies of the

original complaint, alleging the parties were of diverse

citizenship. It alleged that NewGen was an LLC organized in

Wisconsin and that its sole member was a citizen of

Wisconsin when the complaint was filed. It alleged that Safe

Cig was an LLC organized in California with five members,

each of which was a citizen of California at the time the

complaint was filed.

II. Pleading Subject Matter Jurisdiction

We next examine de novo whether subject matter

jurisdiction existed. A-Z Int’l v. Phillips, 323 F.3d 1141,

1145 (9th Cir. 2003). The party seeking to invoke the district

court’s diversity jurisdiction always bears the burden of both

pleading and proving diversity jurisdiction. See FW/PBS,

Inc. v. City of Dallas, 493 U.S. 215, 231 (1990). However, at

the pleading stage, allegations of jurisdictional fact need not

be proven unless challenged. See, e.g., DaimlerChrysler

Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006) (“[B]ecause we

presume that federal courts lack jurisdiction unless the

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12 NEWGEN V. SAFE CIG

contrary appears affirmatively from the record, the party

asserting federal jurisdiction when it is challenged has the

burden of establishing it.” (emphasis added) (internal citation

and quotation marks omitted)); Kanter v. Warner-Lambert

Co., 265 F.3d 853, 857 (9th Cir. 2001) (“[A]t [the pleading]

stage of the case, the defendants were merely required to

allege (not to prove) diversity . . . .”). The determinative

question here is whether, and in what sense, Safe Cig

challenged the factual basis for diversity jurisdiction, and

whether it triggered an obligation on the part of NewGen to

offer supplemental evidence proving jurisdiction.

Ordinarily, a challenge to the district court’s subject

matter jurisdiction would be raised in a Rule 12(b)(1) motion. 

In that context—and we see no reason to depart in the context

of a Rule 60(b)(4) motion for relief from a default

judgment—the sufficiency of the pleadings to establish

subject matter jurisdiction is determined by whether the

movant brings a facial or factual challenge. Cf. Gould v. Mut.

Life Ins. Co. of N.Y., 790 F.2d 769, 771–72 (9th Cir. 1986)

(noting that a “Rule 60(b) motion may encompass a claim

that the district court acted in excess of its jurisdiction”

(internal quotation marks omitted)). “A facial attack accepts

the truth of the plaintiff’s allegations but asserts that they are

insufficient on their face to invoke federal jurisdiction.” Leite

v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014) (internal

quotation marks omitted). By contrast, a factual attack

“contests the truth of the plaintiff’s factual allegations,

usually by introducing evidence outside the pleadings.” Id.

(emphasis added); accord Safe Air for Everyone v. Meyer,

373 F.3d 1035, 1039 (9th Cir. 2004). Only upon a factual

attack does a plaintiff have an affirmative obligation to

support jurisdictional allegations with proof. Leite, 749 F.3d

at 1121. In contrast, a facial attack is easily remedied by

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NEWGEN V. SAFE CIG 13

leave to amend jurisdictional allegations pursuant to

28 U.S.C. § 1653.

Both Safe Cig’s initial appeal and its Rule 60(b) motion

can only be characterized as facial attacks. Safe Cig

repeatedly asserts it is “without knowledge or information

sufficient to form a belief” as to the domiciles of its members. 

But at no point does Safe Cig assert that any of its members

are citizens of Wisconsin. Nor does Safe Cig argue that

NewGen’s sole member is not a citizen of Wisconsin, as set

out in NewGen’s declaration and the amended complaint,

claiming only that the evidence in support of his citizenship

is “weak.” Safe Cig simply reasserted at multiple junctures

that it had doubts about the citizenship of its own officers

(although it did not even hint they were from Wisconsin),

and, as the district court put it, it “carefully avoided taking

any position on [its] own citizenship.” Safe Cig never called

into question any of the factual predicates to diversity

jurisdiction, and, notably, never asked for discovery to clarify

the issue. See, e.g., Crawford v. United States, 796 F.2d 924,

928 (7th Cir. 1986) (“If the defendant thinks the court lacks

jurisdiction, his proper course is to request an evidentiary

hearing on the issue.”). It would stretch the concept of a

“factual attack” too far to include such perfunctory denials.

Safe Cig insists that upholding the default judgment

where Safe Cig has denied “knowledge or information

sufficient to form a belief” as to the citizenship of its

members improperly relieves NewGen of the duty to prove

subject matter jurisdiction. Safe Cig characterizes its lack of

knowledge as raising a jurisdictional challenge that shifts the

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14 NEWGEN V. SAFE CIG

burden to Safe Cig to prove jurisdiction was wanting.

4

In the

context of a Rule 12(b)(1) motion—which is analogous to the

Rule 60(b) motion here—the effect of a denial depends on the

nature of the denial:

Once the moving party has converted the

[Rule 12(b)(1)] motion to dismiss into a

factual motion by presenting affidavits or

other evidence properly brought before the

court, the party opposing the motion must

furnish affidavits or other evidence necessary

to satisfy its burden of establishing subject

matter jurisdiction.

Savage v. Glendale Union High Sch., Dist. No. 205, 343 F.3d

1036, 1039 n.2 (9th Cir. 2003) (emphasis added). The district

court correctly held that a facial attack in this posture merits

only leave to amend the allegations, not wholesale revival of

a defaulted defense and an obligation to supplement the

record.5 Hence, Safe Cig’s agnosticism is insufficient to

4 The district court never placed the burden on Safe Cig to disprove

diversity; rather, because Safe Cig never contested the truth of NewGen’s

assertions, Safe Cig never triggered any obligation on NewGen’s part to

support its allegations of diversity with affidavits or other evidence,

although NewGen did provide a declaration as part of supplemental

briefing.

5 We are at a loss to understand Safe Cig’s claim that it was denied a due

process right because it could not respond to the amended allegations. 

The essence of due process is the requirement of notice and an opportunity

to respond. Mathews v. Eldridge, 424 U.S. 319, 348 (1976). Notice was

apparent from the face of the complaint and Safe Cig certainly did not

suffer for opportunities to contest diversity jurisdiction. Although Safe

Cig took a pass on its first opportunity to raise the issue in the district

court, it did so in the first appeal and then raised the issue in its Rule 60(b)

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NEWGEN V. SAFE CIG 15

avoid jurisdiction.

We observe that this approach is in line with our sister

circuits. In American Combustion, for instance, the plaintiff

filed a motion on appeal to correct defects in the

jurisdictional allegations. 797 F.2d at 1044. The D.C. Circuit

ordered the parties to brief any dispute concerning the

existence of diversity. Id. at 1044–45. When the defendant

did not respond and conceded diversity at oral argument, the

court concluded that because the defendant did not deny

plaintiff’s “allegations of diversity, triggering the requirement

that [plaintiff] affirmatively prove the facts necessary to

support a finding of diversity, the amended allegations here

support a finding of diversity jurisdiction.” Id. at 1045. The

same principle applies here: Safe Cig never asserted that the

parties are not in fact diverse.

Simply put, because the only real challenge to jurisdiction

concerned the sufficiency of the pleadings, the amended

allegations—which were undoubtedly legally sufficient—

resolved the only question ever raised regarding the district

court’s subject matter jurisdiction.

III. Denial of Relief from Default Judgment

Satisfied that the district court had subject matter

jurisdiction and that the amended complaint corrected any

defect in the pleadings, we turn to review of the district

court’s decision to deny relief from the default judgment. We

review the district court’s factual findings for clear error, and

review the grant of a default judgment for abuse of discretion.

motion, and was ordered by the district court to provide additional briefing

on the issue.

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16 NEWGEN V. SAFE CIG

Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1391

(9th Cir. 1988).

“Our starting point is the general rule that default

judgments are ordinarily disfavored. Cases should be decided

upon their merits whenever reasonably possible.” Eitel,

782 F.2d at 1472. We then look to the following factors:

(1) the possibility of prejudice to the plaintiff,

(2) the merits of plaintiff’s substantive claim,

(3) the sufficiency of the complaint, (4) the

sum of money at stake in the action; (5) the

possibility of a dispute concerning material

facts; (6) whether the default was due to

excusable neglect, and (7) the strong policy

underlying the Federal Rules of Civil

Procedure favoring decisions on the merits.

Id. at 1471–72. In this case, numerous factors weigh in favor

of entry of default judgment. The district court’s ruling was

not “illogical,” “implausible,” or without “support in

inferences that may be drawn from facts in the record,” and

the district court therefore did not abuse its discretion. United

States v. Hinkson, 585 F.3d 1247, 1261 (9th Cir. 2009) (en

banc) (citing Anderson v.City of Bessemer City, 470 U.S. 564

(1985)).

The district court considered in detail the procedural

background of the default and weighed the Eitel factors. First

and foremost, the default was certainly not due to excusable

neglect. Notwithstanding its agent’s blatant attempts to resist

service, Safe Cig was properly served, yet ignored the

deadline to respond to the complaint. Its counsel instead

waited until default was entered to contact NewGen’s

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NEWGEN V. SAFE CIG 17

attorneys.6 Safe Cig gives no “credible, good faith

explanation” for its apparent bad faith “intention to take

advantage of the opposing party, interfere with judicial

decisionmaking, or otherwise manipulate the legal process.” 

TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 697 (9th

Cir. 2001), overruled on other grounds by Egelhoff v.

Egelhoff ex rel. Breiner, 532 U.S. 141 (2001).

Safe Cig also does little to undercut the merits of

NewGen’s claim. To establish its breach of contract claims,

NewGen’s complaint sets out the contents of the Affiliate and

Consulting agreements in sufficient detail, and Safe Cig’s

failure to make payments. Safe Cig does not “present

specific facts that would constitute a defense” or that would

substantially alter the liability at stake. United States v.

Signed Pers. Check No. 730 of Yubran S. Mesle, 615 F.3d

1085, 1094 (9th Cir. 2010).7 Stating only general objections

to the existence of a contract, the extent of the relationship

between the parties, and the alleged services performed by

NewGen is insufficient to satisfy the “meritorious defense”

requirement. Id.

The district court found that NewGen “sufficiently

demonstrated the possibility of prejudice if default is denied.” 

In addition, the court carefully examined the damages issues,

stating that “[NewGen] only seeks contractual damages

6 Safe Cig asserts that it was not represented by counsel at the time, but

Safe Cig’s counsel leaves ambiguous when he started acting for Safe Cig.

7 The declaration of Safe Cig’s Chief Information Officer, albeit

conclusory, does provide some additional detail. However, as the district

court noted, the declaration and related arguments were untimely because

they were not filed in opposition to the first motion for default judgment,

and Safe Cig provides no evidence to support its claims.

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18 NEWGEN V. SAFE CIG

directly proportional to [Safe Cig]’s breach of the contracts”

and thus “the amount of money at stake does not bar an entry

of default judgment.” Ultimately the court reduced the

requested damages. None of the factual findings were in

clear error. While there is room to disagree whether default

was warranted, our role is not to second guess the district

court’s weighing of the Eitel factors. We thus conclude that

the district court’s decision to enter default judgment was not

an abuse of discretion.

IV. Calculation of the Damages Award

We also uphold the district court’s damage award of

$1,483,075.84, and deny NewGen’s cross-appeal for

additional damages. We review the district court’s

computation of damages for clear error. Felder v. United

States, 543 F.2d 657, 663 (9th Cir. 1976).

In reaching its damages calculation, the district court

relied on a declaration from Dustin Erickson, NewGen’s

owner. See Geddes v. United Fin. Grp., 559 F.2d 557, 560

(9th Cir. 1977) (“[U]pon default the factual allegations of the

complaint, except those relating to the amount of damages,

will be taken as true.”). The district court awarded

$783,558.43 in damages for breach of the consulting

agreement, a figure reasonably consistent with the

$25,000/month in damages claimed in the Complaint and

supported by Erickson’s estimate of Safe Cig’s net total

profits each month. The district court also awarded

$699,517.41 for unpaid commissions owed under the

Affiliate Agreement for February 2010 to December 2012,

based on historical data provided by Safe Cig and future

projections where Safe Cig refused to grant NewGen access

to its sales records.

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NEWGEN V. SAFE CIG 19

Erickson’s detailed account of how he calculated each

figure supports the district court’s consideration of the

declaration. Nor are we troubled by Safe Cig’s claim that the

evidence is unreliable. As the district court noted, Safe Cig’s

“conduct is highly questionable, because it is in the best

position to have the accurate records required to refute

[NewGen]’s estimates. Further, any necessity for [NewGen]

to rely on estimates is due to [Safe Cig]’s failure to comply

with the Affiliate Agreement, which requires [Safe Cig] to

provide [NewGen] with its sales records.”

We reject NewGen’s cross-appeal of the damages award. 

While NewGen was entitled to lifetime commissions on sales

made pursuant to referrals from NewGen, as alleged in its

Amended Complaint, the district court did not clearly err in

finding that NewGen was only entitled to Safe Cig’s sales,

not sales by any third-party, and in finding that once Safe

Cig’s website ceased operating in December 2012, there were

no Safe Cig sales. We agree that damages claimed from 2013

to 2018 were “unsubstantiated.”

CONCLUSION

We are satisfied that diversity jurisdiction exists and that

the district court did not abuse its discretion in denying the

Rule 60(b) motion to vacate the judgment. The amended

complaint resolved the defective pleadings, and the district

court did not abuse its discretion in upholding the default

judgment. We also affirm the award of damages and reject

NewGen’s cross-appeal.

AFFIRMED.

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