In the

United States Court of Appeals

For the Seventh Circuit

No. 11-3369

WILLIAM R. WEHRS, JR.,

Plaintiff-Appellee,

v.

KEVIN WELLS,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 07 C 3312—Joan Humphrey Lefkow, Judge.

ARGUED APRIL 13, 2012—DECIDED AUGUST 8, 2012

Before BAUER, KANNE, and TINDER, Circuit Judges.

KANNE, Circuit Judge. In 2007, William Wehrs filed a

complaint against his stock broker, Kevin Wells, alleging

he violated various federal securities and state laws

by executing unauthorized trades on Wehrs’s account,

resulting in significant losses. Wells never answered the

complaint or appeared in court, and a default judgment

was entered against him. Subsequently, Wells filed a

motion to vacate the default judgment, which was
2 No. 11-3369

granted with respect to damages but denied with

respect to liability. The parties then agreed to submit

the issue of damages to the district court by motion

for summary judgment, which the court granted in favor

of Wehrs. On appeal, Wells argues that the district court

abused its discretion by denying his motion with respect

to liability and not permitting him to file an answer to

the complaint, as well as by considering damages that

he did not proximately cause. We find no merit to

Wells’s challenges, and accordingly affirm the district

court’s judgment.

I. BACKGROUND

Because the district court entered a default judgment

against Wells, we take as true the facts of the complaint.

e360 Insight v. Spamhaus Project, 500 F.3d 594, 605 (7th Cir.

2007). Wehrs was a client of the stock brokerage firm

Benson York Group, Inc., where Wells worked as a

stock broker. In 2005, Wells recommended shares of

Cyberonics, Inc. (CYBX), a medical technology company. Wehrs was persuaded by the recommendation,

and on June 23 he authorized Wells to purchase 4,000

shares on margin at a price of $43.75 per share, with a

$7,500 stop-loss order.

Wells deviated from this order, however, and on June 24

instead purchased 4,100 shares on margin at a market

price of $46.00 per share, for a total purchase price

of $192,659 after commission. On June 27, Wells sold the

stock for $43.33 per share (crediting Wehrs’s account

$181,650)—it is not clear whether or not this sale was
No. 11-3369 3

made pursuant to a stop-loss order—before inexplicably

repurchasing another 4,100 shares that same day (charging

Wehrs’s account $190,735 after commission). Wehrs

maintains that neither the initial purchase of CYBX, which

had a higher price per share and quantity than he specified, nor the subsequent repurchase of the shares were

authorized.

Wehrs discovered the unauthorized transactions,

along with the hefty commission fees charged to his

account, and tried in vain to contact Wells and his supervisor, Kevin Brennan. After leaving several messages, Wehrs finally managed to reach Wells by phone

on July 15. Wells told him not to worry about any temporary losses to his account because the Food and Drug

Administration had just approved one of Cyberonics’s

products. The price of the stock would jump to $65

in just a few days, Wells maintained, and Wehrs

would profit handsomely. Although these assurances

may have temporarily abated Wehrs’s concerns, the

stock price did not increase, and instead began a slow

and steady decline. As the price dropped, shares were

sold at a loss in order to satisfy the maintenance margin. Wehrs continued to call Wells and Brennan about the

losses, but he was repeatedly assured that all of the

commissions charged to his account would be reversed,

any stock sold on margin would be repurchased, and

CYBX would eventually increase in value. Although the

commissions were eventually refunded, the stock’s

price never recovered. All but eighty-five shares were

eventually sold pursuant to margin calls, crediting

Wehrs’s account $133,855. The remaining eighty-five

shares were sold for $1,398 on July 2, 2009.
4 No. 11-3369

In his reply brief in support of the motion, Wells modified

1

this request to “a reasonable period” to answer Wehrs’s anticipated amended complaint.

On June 14, 2007, Wehrs filed suit against Wells,

Brennan, and Benson York alleging federal securities

law violations, and state law claims for fraud, negligence,

and breach of fiduciary duty. The case was stayed

from May 30, 2008, to June 3, 2009, while the defendants

appealed the district court’s denial of their motion to

compel arbitration. That appeal was eventually voluntarily dismissed by the defendants. Following the dismissed appeal, the defendants’ attorney filed a motion

to withdraw as counsel, which was granted by the

district court on August 13, 2009. Subsequently, the

defendants did not hire another attorney and did not

answer the complaint or appear in court. The district

court accordingly declared the defendants in default on

September 10, 2009. After a prove-up hearing to establish the amount of damages, the court entered default

judgment on September 17, 2009, in favor of Wehrs

for $236,837.75.

Represented by new legal counsel, Benson York and

Brennan filed a motion to vacate the default judgment,

which the district court granted on November 17, 2009.

Wells, representing himself, filed a separate motion to

vacate the default judgment under Rule 60(b) of the

Federal Rules of Civil Procedure on December 9, 2009. In

that motion, Wells also requested that the court grant

him seven days to file an answer to the complaint. With1

out specifically addressing his request to file an answer,
No. 11-3369 5

the district court denied Wells’s motion to vacate the

default judgment as to liability, finding that he did not

state a meritorious defense to the complaint, but permitted him to rebut the amount of damages. Brennan and

Benson York eventually settled with Wehrs, leaving

Wells as the lone defendant remaining in the case.

Wells retained counsel, and the parties agreed to

submit the issue of damages to the court by motion for

summary judgment. At summary judgment, the district

court held that the allegations contained in the original

complaint failed to state a claim under federal securities

law. Nevertheless, the court determined that it was

proper to retain jurisdiction over the supplemental

state law claims, and found that the allegations in the

complaint supported claims for breach of fiduciary duty

and negligence. The district court then calculated the

damages caused by the unauthorized purchase and

repurchase of CYBX stock and granted summary judgment in Wehrs’s favor, finding Wells liable for $49,861.

Wells filed this timely appeal.

II. ANALYSIS

Wells presents three arguments on appeal, although

we have grouped together the first two for ease of analysis. First, he contends that the district court abused

its discretion in denying his motion to vacate the

default judgment with respect to liability. Raising a

related point, he argues that the court should have

first granted him leave to file an answer to the complaint before ruling on his motion. Finally, Wells claims

the district court abused its discretion at summary judg-
6 No. 11-3369

ment by considering damages that he did not proximately cause. We address each of these arguments in turn.

A. Motion to Vacate the Default Judgment

Wells first challenges the district court’s denial of his

motion to vacate the default judgment as to liability. We

review the district court’s decision only for an abuse of

discretion. Bakery Mach. & Fabrication, Inc. v. Traditional

Baking, Inc., 570 F.3d 845, 848 (7th Cir. 2009). Relief from a

final judgment may be granted pursuant to Rule 60(b)

under exceptional circumstances, and we have characterized the district court’s considerable latitude in making

its decision as “discretion piled on discretion.” Swaim v.

Moltan Co., 73 F.3d 711, 722 (7th Cir. 1996). We apply a

deferential standard of review because the district court

is “the forum best equipped for determining the appropriate use of default to ensure that litigants who are

vigorously pursuing their cases are not hindered by

those who are not in an environment of limited judicial

resources.” Id. at 716 (quotation marks and citation omitted). In order to have a default judgment vacated, the

moving party must demonstrate: “(1) good cause for

the default; (2) quick action to correct it; and (3) a meritorious defense to the complaint.” Sun v. Bd. of Trs. of Univ.

of Ill., 473 F.3d 799, 810 (7th Cir. 2007).

The district court found that Wells was able to meet the

first two requirements because he took quick action to

correct the default, and had good cause due to

excusable neglect—Wells asserted that his withdrawn

counsel did not provide him notice of the date by which
No. 11-3369 7

he had to file a responsive pleading. Nevertheless, the

district court denied Wells’s motion because he did not

set forth a meritorious defense. In his motion to vacate

the default judgment, Wells stated that he “emphatically

den[ies]” the claims made in Wehrs’s complaint

because “all transactions were authorized.” Wells also

maintained that after Wehrs accused him of making

unauthorized trades, he notified Brennan, who then

took over the account. Finally, Wells’s motion disputed

the amount of damages set forth in the complaint, attaching as an exhibit a transaction history of Wehrs’s

account showing that commissions charged for the allegedly unauthorized transactions were reversed. The

district court found Wells’s broad denial insufficient

to state a meritorious defense because he did not specifically deny the complaint’s allegations that he purchased, sold, and repurchased the shares of CYBX

without permission. Indeed, the court found that Wells

implicitly admitted the complaint’s allegations when

contesting the amount of damages.

Wells primarily argues that the district court abused

its discretion because the motion set forth a meritorious

defense: the transactions were authorized. We disagree.

A meritorious defense need not, beyond a doubt, succeed

in defeating a default judgment, but it must at least “raise[]

a serious question regarding the propriety of a

default judgment and . . . [be] supported by a developed

legal and factual basis.” Jones v. Phipps, 39 F.3d 158, 165

(7th Cir. 1994). In his motion to vacate the default judgment, Wells makes only a single conclusory statement

that the transactions were authorized. We have consistently held that such a general denial of the complaint’s
8 No. 11-3369

After ruling on Wells’s motion to vacate the default judgment, 2

the district court later permitted Wehrs to file two amended

complaints. In the “summary of argument” and “conclusion”

sections of his opening brief, Wells states that the district judge

(continued...)

allegations, without any factual support, is insufficient

to state a meritorious defense. E.g., Pretzel & Stouffer v.

Imperial Adjusters, Inc., 28 F.3d 42, 46 (7th Cir. 1994) (“[A]

meritorious defense requires more than a ‘general denial’

and ‘bare legal conclusions.’ ”); accord Stephenson v. ElBatrawi, 524 F.3d 907, 914 (8th Cir. 2008) (“simple assertions unsupported by specific facts or evidence” failed to

establish meritorious defense); New York v. Green, 420

F.3d 99, 110 (2d Cir. 2005) (“conclusory denials” insufficient to raise meritorious defense). Moreover, as the

district court correctly observed, the fact that the commissions charged to Wehrs’s account were reversed

undercuts Wells’s contention that the transactions

were authorized.

Neither did the district court abuse its discretion in

denying Wells leave to answer the complaint. Wells

maintains that he would have provided the necessary

factual support to establish a meritorious defense in an

answer to the complaint, if only the district court had

granted him leave to do so. But this argument is illogical. It makes little sense to claim that a district court

cannot rule on a motion to vacate a default judgment

without first granting a defendant leave to file an

answer, when the failure to file an answer is the reason

default judgment was entered.2
No. 11-3369 9

(...continued) 2

“further abused her discretion in denying Wells’ Motion for

Leave to File An Answer to Wehrs’ subsequently filed Second

Amended complaint.” (Appellant’s Br. at 28.) To the extent

Wells is also challenging the district court’s denial of any

subsequent request to file an answer, this argument is

waived. The lone sentences in his summary of argument and

conclusion sections, lacking any citation to governing law, are

insufficient to raise adequately an issue on appeal. See United

States v. Tockes, 530 F.3d 628, 633 (7th Cir. 2008) (“Unsupported

and undeveloped arguments . . . are considered waived.”); see

also Bob Willow Motors, Inc. v. Gen. Motors Corp., 872 F.2d 788,

795 (7th Cir. 1989) (argument unsupported by any authority

and raised in “mere single line in the ‘summary of argument’

section” of opening brief is waived).

Moreover, Wells was free to raise specific facts to

support his purported meritorious defense in his motion

to vacate the default judgment. He did just that

regarding his claim that the complaint exaggerated

Wehrs’s financial losses, attaching a transaction

history that revealed some charges to Wehrs’s account

had already been refunded. But Wells provided nothing

of the sort regarding his contention that the transactions

were authorized. Wells also could have attached a proposed answer as an exhibit to the motion, to provide

some support for his threadbare assertions. See Anilina

Fabrique de Colorants v. Aakash Chems. & Dyestuffs, Inc., 856

F.2d 873, 879 (7th Cir. 1988) (district court’s denial of

Rule 60(b) motion was abuse of discretion because it

did not consider meritorious defense established in defendant’s proposed answer, exhibits, and counterclaim).
10 No. 11-3369

He did not do so, and this left the district court with

only the conclusory statements contained in Wells’s

motion when considering whether he raised a meritorious defense. And although Wells was appearing

pro se, this does not excuse the fact that he provided no

specific facts or evidence to support his general denial

of the complaint’s allegations. Cf. Jones, 39 F.3d at 163

(noting that although pro se litigants benefit from

various procedural protections, they are “not entitled to a

general dispensation from the rules of procedure or

court imposed deadlines”).

B. Damages

The district court carefully calculated Wehrs’s

damages, considering the total amount charged to

Wehrs’s account as a result of the purchase and

repurchase of the CYBX shares. The court then deducted

from this total: (1) refunded transaction fees and sales

commissions; (2) credits for the shares of CYBX sold,

including those shares sold pursuant to margin calls;

(3) the $7,500 stop-loss amount; and (4) $27,499, the

settlement amount agreed to by the other defendants.

The district court accordingly found Wells liable for

$49,861 in damages.

Wells does not take issue with the district court’s calculations. Instead, he argues that the court abused its

discretion by not considering evidence that he did not

proximately cause a large portion of the damages. Specifically, Wells contends he should not be held liable for any
No. 11-3369 11

losses that occurred after June 27, 2005, the date that

Wehrs discovered the unauthorized transactions.

Because Wehrs could have sold his stock on this date,

Wells posits, Wehrs should have mitigated his damages,

rather than holding the stock as the price continued to

fall. But because the default judgment entered against

Wells precluded him from raising this argument at summary judgment, we disagree.

Generally, we will not reverse a damages award in

a default judgment unless it is clearly excessive. e360,

500 F.3d at 602. “A default judgment establishes, as a

matter of law, that defendants are liable to plaintiff

on each cause of action alleged in the complaint.” Id.

Upon default, the well-pled allegations of the complaint

relating to liability are taken as true, but those relating

to the amount of damages suffered ordinarily are not.

United States v. Di Mucci, 879 F.2d 1488, 1497 (7th Cir.

1989); accord 10A Charles Alan Wright et al., Federal

Practice and Procedure § 2688, at 58-59 (3d ed. 1998 & Supp.

2012) (“If the court determines that defendant is in

default, the factual allegations of the complaint, except

those relating to the amount of damages, will be taken

as true.”). Thus, “[d]amages must be proved unless they

are liquidated or capable of calculation.” Merrill Lynch

Mortg. Corp. v. Narayan, 908 F.2d 246, 253 (7th Cir. 1990).

Because a plaintiff must ordinarily prove damages, the

defaulting party may raise the issue of causation as it

relates to the calculation of damages. 10 Moore’s Federal

Practice, § 55.32[1][c] (3d. ed. 2012) (“The rule that the

claimant must prove the amount of damages may also
12 No. 11-3369

extend to the element of causation. While liability is

admitted, the defaulting party is liable only for those

damages that arise from the acts and injuries that were

pleaded.”); see Trans World Airlines, Inc. v. Hughes, 449

F.2d 51, 70 (2d Cir. 1971), rev’d on other grounds, 409 U.S.

363 (1973) (“The outer bounds of the recovery allowable

are of course measured by the principle of proximate

cause. The default judgment did not give TWA a blank

check to recover from Toolco any losses it had ever suffered from whatever source.”).

Wells relies heavily on the Second Circuit’s broad

language in Hughes to argue that because Wehrs could

have mitigated his damages, Wells did not proximately

cause a significant amount of the financial losses suffered. But Wells misconstrues the Second Circuit’s decision, ignoring the critical difference between proximate cause as it relates to liability and proximate cause

as it relates to damages after a default judgment has

been entered. See Greyhound Exhibitgroup, Inc. v. E.L.U.L.

Realty Corp., 973 F.2d 155, 159 (2d Cir. 1992) (finding a

categorical distinction between proximate cause “as it

pertains to the assignment of liability in the first instance,” and proximate cause “as it relates to the ministerial calculation of damages” after a default judgment).

Within the context of a default judgment, proximate

cause “presumes that liability has been established, and

requires only that the compensation sought relate to

the damages that naturally flow from the injuries

pleaded.” Id. Thus, a defaulting landlord whose faulty

sprinkler system caused a warehouse fire could not
No. 11-3369 13

argue he did not proximately cause all of the fire’s damages by pointing to the plaintiff’s comparative negligence

in causing the fire—that argument would contest settled

issues of liability. Id. In contrast, a plaintiff that lost $3,000

in a defaulting defendant’s fraudulent investment

scheme could not recover for, among other things, money

spent on an abortion she claimed was needed because

“she did not have the money to raise a child due to her

monetary loss”—the money spent on an abortion bore

little relation to the complaint’s allegations, and did not

naturally flow from the injuries pled. Wu v. Ip, No. C 93-

4467, 1996 WL 428342, at *1 (N.D. Cal. July 25, 1996)

(unpublished).

To permit Wells to argue that Wehrs should have sold

his shares of CYBX at an earlier date to mitigate his

damages would allow Wells to contest his liability,

rather than the extent of the damages suffered from the

injuries pled. This he may not do; a defaulting party “has

no right to dispute the issue of liability.” 10 Moore’s

Federal Practice, supra, § 55.32[1][a]. As the district

court duly noted, the duty to mitigate damages is an

affirmative defense, and Wells waived his right to this

defense by not filing a responsive pleading to the complaint. After a default judgment was entered against

him, Wells could not raise the waived defense while

contesting damages under the guise of proximate cause.

Accordingly, the district court did not abuse its discretion in determining damages at summary judgment.
14 No. 11-3369

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of

the district court.

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