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# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it

N o. 11

- 3369 W I L L I A M R. W EHRS, J R ., P la intif f-A pp ellee, v. K EV I N W ELL S, D ef endant-Appellant.

A pp eal from the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, Eas tern Div isi on. No . 07 C3312

—Jo an H umphreyL efk ow, Judge
.
A RGUED A PRI L 13, 2012

— D ECI DE D A UGUS T 8, 2012

Befo re B AUER, K ANN E , a nd T INDER, C ircu it Judges . K ANN E , Cir cu i tJudg e . In 2 0 0 7, Wi l l i a m We h r s fi l e d a co m pl ainta g ains t hi s st o ckb r o k er, Kev i n W el l s, a l l eg i ng h e v i o l a t e d v a r i o u s fe d e r a ls e c u r i t i e s a nd s t a t e l a ws by executi ng unauth or ized tr ades o n W ehrs ’ s a ccount, r es ul tingi n s i g ni fi can t l o ss es . W el l s ne ve ra ns wer ed th e co m pl ainto ra ppea r ed i n c o ur t, a nd a de f aul t j udg m en t wa s e nt e r e d a g a i ns th i m. S ub s e qu e nt l y, Wel l s fi l e d a m oti on t o vacat e the def aul t j ud gm ent, wh i c h w as2 N o. 11

- 3369 gr anted with r espectto dam age s but denie d w i th re sp ec t to liab ility

. T h e pa rt ies th en ag re ed to s u b m it the i ssue ofdam age s t o the di str i ct c ourtbym oti on f orsum m ar y j ud gm ent, wh i ch the court g ra nted in f avo r of W eh rs. O n ap p eal, W ell s argu es th at th e d ist r ict court abused i ts disc re ti on bydenyi ng hi s m oti on with re spect to l i abi l i ty and not per m itt in g him to fi l e a n answer t o the c om pla i nt, as wellas b y consi deri ng dam age s that he di d not pro xi m ate l y c ause. W e fi nd n o m er i t t o W el l s’ s chal l enges , and acco rdi ngl y affi rm the dist ri ct cour t’ s j ud gm ent.

I. B ACK GR OUN D Bec au se the di st r i ctc o ur t en te r ed a def au l t j ud gm en t aga i nst W el l s, we tak e a s t rue the f ac ts o f t he co m pla i nt. e360 Ins ight v. Spam haus P roje ct, 500 F.3d 594 , 605 (7th C ir. 2007 )
. W eh rs w a s a c li en t of th e stock broke rage fi rm Benson Yor k Gro up , Inc. , wh er e W el l s w or ke d as a sto ck b ro ker

. In 200 5, W el l s r eco m m ended share s o f C yb e r o n i c s , In c . ( C Y B X ) , a me d i c a lt e c h n o l o g y c o mpan y . W eh r s was pe r su ade d b y the r ec o m m end at i o n, and on J une 23 he autho ri ze d W el l s t o pu rchas e 4, 000 sh ar es o n ma r g i n a t a p r i c e o f $ 4 3
. 7 5 p e r s h a r e , wi th a $7,500 stop -l oss ord er. W el l s devi ate d fr om thi s or der, however, and on J une 24 i nstea d pu rchas ed 4,100 share s o n m ar gi n at a m ar ket pri ce o f$4 6. 00 per shar e, f or a to talpurchase pri ce o f$ 19 2, 65 9 afte rc o m m i ss ion. O n J une 2 7, W el l s so l d the st o ckf o r$ 43
. 33 pe rs ha r e ( cr edi tingW eh r s’ s ac co unt $181 , 650)

— i t i s no t cl earwh et h ero r not thi s s al e wasN o. 11

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m ade pu rs uant to a sto p-loss o rder

—b efo re ine x p lica b ly r epu r ch as i ngano th er4, 10 0 sh ar es tha t sa m e day( ch ar g i ng W eh rs’s accou nt $190,735 after com m issi on). W eh rs m ai ntai ns thatnei therthe i ni ti alpurchase of CY BX , wh i ch h ad a h igh er p ric e p er sh ar e a n d qu an tit y t h an h e s p ec ifi ed , nor the sub seq ue n t r e p urc ha se of the sh ares w ere a utho r i z e d. W ehrs di sco ver ed the unauthor i zed tr ansact i ons, alo n g w ith th e h eft y c om m iss ion fee s c h a r g ed to h is acc ou nt, and tri ed i n va in to cont act W ell s an d h is sup ervi sor, Kevi n Brennan. A fterl eaving se ve ra l m essa g es , W eh r s fi na l l y mana g ed to r ea ch W ell s bypho ne on J uly15 . W ells to l d him notto worr y about any t em por ary l o ss es t o hi s ac co untb ec au se th e F o o d a nd Dr ug A d m inist r ation h ad j us t ap p roved one of Cyb eronics’s products. The p ric e o fthe sto ck w oul d j um p to $65 in j us t a few da ys, W ell s m aintain ed , and W eh rs w oul d profi t handsom el y. A l though these ass urances m ayhave t empor ar i l y aba te d W eh r s’ s co nc erns , the sto ck pri ce di d not incre ase , and i nstea d b eg an a sl ow an d s t e a d y d ecline. A s the price d rop p ed , share s w ere sold at a loss i n ord er to satisfy th e m a inten an ce m arg i n. W eh r s co nt i nue d to cal lW el l s an d Br enna n abo utthe l o ss es , b uthe was rep ea te dl y a ss ur ed th ata l lo fthe c o mm i s s i o ns c ha r g e d t o h i s a c c o un two ul d b e r e v e r s e d, an y sto cks o l d o n mar g i n wo ul d b e r epu r ch as ed, a nd CYBX woul d e ve ntua l l y i nc r ea se i n value. Altho ug h the com m issi ons w ere even tu all y refun d ed , the stoc k’s p rice never recov ered

. A llbu t eighty-fi ve sh ares w ere ev en tu al l y so l d pur su an t to m ar g i n ca l l s, cr edi ting W ehrs ’ s a ccount $133 , 855. The r em ai ni ng ei ghty- fi ve shar es w er e s ol d fo r $1, 398 on J uly2, 20 09.4 N o. 11

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In hi s reply brie fi n supp ort ofthe m oti on, W el ls m od ifie d 1 thi s r eques tt o “ a r ea s onabl e per i od” t o a ns wer W eh rs ’ s an t i cip ated am en d ed com p lain t. On June 1 4, 20 07, W ehrs fi l ed sui t a gainst W el l s, Brennan, and Benson Yor k a l l eging federa lse curit i es l aw vi ol ati ons, and sta te l aw cla i m s fo r fra ud , negl i gence , and bre ach o ffi du ci ar y duty. T h e case w as sta yed fro m M ay 30, 20 08, to J une 3, 20 09, wh i l e the d efe nd ants appeal ed the d istr i ct c ourt ’ s deni alo fthei r m oti on t o com p el a rbi tr at i o n. Tha t appe alwas e ve ntua l l y v o l untar i l y di sm i sse d by the defendants. Fo l l owing the di sm i sse d app eal, the defe nd ants’ a tt or ney fi l ed a m oti on to w ithd ra w as c o uns el, whi chwas g r an te d b y the di st r i ctc o urt on A ug us t 13 , 2 00 9. S ubs eque nt l y, the defe nd ants did nothi re ano therat torn ey a nd di d not answ erthe com pla i nt o r appear in c ou rt . The di str i ct c ourtacc or dingl y decl ar ed the defe nd ants i n defa ulto n Se ptem ber10 , 20 09. A ftera prove - up hear i ng to es ta blish th e a m ou n t o f d am ag es , th e c ou rten te re d d efa u lt j ud gm en t on Septe m ber 17, 2009 , in favor ofW eh rs f or$2 36, 837. 75. Re pr esented b y ne w l eg alc o uns el, Be ns o n Yo r ka nd Brennan fi l ed a m oti on to vacat e the defa u lt jud gm ent, w hi ch the d i str i ct c ourtgr anted o n N ove m ber17, 20 09. W el l s, r epres enti ng hi m sel f, fi l ed a sep ar ate m oti on t o va ca te the de f au l t j udg m en t unde rRul e 60 ( b) o fthe Fe d er al R u les of C ivil P ro c e d u r e o n D ec em b er 9, 20 09 . In th atmot i o n, W el l s al so r eque st ed th atth e cou r t g r an t hi m s ev enda y s to fi l e ana ns wert o the c o m pl aint
. W i th

1 ou t sp ecifi cally ad d ressing h is r eq ue st to fi le an ans w er,N o. 11

- 3369 5 th e di st r i ctc o ur t den i ed W ell s’ s m o ti o n t o v ac at e th e d ef aul t j ud gm ent a s t o l i abi l i ty, fi nd i ng tha t he did not sta te a m er i tor ious defe nse t o the c om pla i nt, but perm i tte d h i m t o r eb utthe a m o unto fda m ag es . Br enna n a nd Ben so n Yo r ke ve ntua l l y s et tl ed wi thW eh r s, l eavi ng W el l s a s the l one defe nd ant r em ai ni ng i n the case . W el l s r eta i ned counsel, and t h e parti es agr eed to subm i t th e iss ue o fdam age s t o the c ourtbym oti on for sum m ar y j ud gm ent. A t s um m ary j ud gm en t, the dist ri ct cour t hel d that the al l ega ti ons conta i ned i n the or i gi nal c om pla i nt f ai l ed to st ate a cl ai m under federa lse curi ti es l aw . N eve rthel es s, the c ourtdeter m i ned that i t was properto r eta i n j uri sdic ti on o verthe sup p lem ental st at e l aw cl ai m s, an d f o und th at th e al l eg at i o ns i n the com pla i nt support ed cl ai m s forbr each o ffi du ci ar y duty an d ne g l i g ence . The di st r i ctc o ur t th enc al cul at ed th e damages ca us ed bythe una utho r i ze d pur ch as e an d re pu rchas e o fCYB X sto ck and gra nted sum m ar y j ud gm ent in W ehrs ’ s f avo r, fi nd i ng W el l s l i abl e for$4 9, 861. W ells filed th is t im ely ap p ea l.

II. A NA LYSIS W el l s pre sents three ar gum ents on a pp eal, al though w e hav e g ro up ed toge th er t he fi rs t tw o f orea se ofanal ysi s. Fi rs t, he c onte nd s tha t the di str i ct c ourtabuse d i ts di sc r et i o n in de ny i nghi s m o ti o n t o v ac at e th e defa ultj ud gm ent with re sp ect to l i abi l i ty. Rai si ng a re l ate d poi nt, he a rgues that the court shoul d have fi r s tg r a n t e d h i m l e a v e to fi l e a n a n s we rt o th e c o mp l a i n t b e f o r e r u l i n g o n h i s mo t i o n . F i n a l l y, We l l s c l a i ms the di str i ct c ourtabuse d i ts disc re ti on a t s um m ar y j ud g-6 N o. 11

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m en t b y c on sid er in g d am ag es t h a t h e d id n otp ro x im at ely ca us e. W e addr es s ea ch o fthe se a r g um en ts i n tur n.

A. M ot i on t o Vac at etheD e f aul tJudg m e nt W ells firstch alle n ge s t h e d i s tr ict co u rt ’s d en ial of h is mo t i o n t o v a c a t e th e d e f a u l tj u d g me n ta s t o l i ab i l i t y . We re vie w the dis tr i ct c ourt ’ s deci si on o nl y foran abuse o f d iscret i o n. Bake ry M ac h. & Fa b r i ca t i on, Inc . v. Tr adi t i onal B aking, Inc. , 5 7 0 F
. 3 d 8 4 5 , 8 4 8 ( 7 th C i r . 2 0 0 9 )

. R e l i e ffr o m a fi nalj ud gm ent m ay be g ra nted pursuant to R u le 6 0( b) un d er ex cep tional circum stan ces, an d w e ha ve c h a racteri ze d the di st r i ctc o urt’s c o ns i der ab l e l at i tu de i n mak i ng i ts deci si on a s “ dis c re tion pil ed on di scr eti on. ” Swai m v. M ol t an Co. , 73 F. 3d 711, 7 22 (7 th Ci r. 19 96)

. W e a pp l y a d eferential sta n d a r d of review becau se th e d istri ct cou rt i s “ the for um b es t equi pp ed f ordeter m i ni ng the approp riate use of defau lt to en su re tha t l it igan ts w ho are vi gor ousl y purs uingthei r case s a re nothi nd er ed by thos e who ar e no t in an e nvi ro nm ent of lim i ted j ud i ci al re so u rce s. ” Id. a t7 1 6 ( qu o t a t i o n mar k s a nd c i t a t i o n o mitte d)

. In o r der to ha ve a de f au l t j udg m en t va ca te d, the m oving par ty m ust dem onst ra te: “( 1) go od cause f or th e d efa u lt; (2) q u ick ac tio n to c or re c t it; an d (3) a m er ito rious defense to the c om pla i nt. ” Sun v. Bd. of Trs
. of U ni v. of Ill

. , 473 F.3d 799 , 810 (7th C ir. 2007). The di st r i ctc o ur t f o und tha t W el l s was ab l e to m ee t th e fi rs t tw o re quir em ents because h e to ok quickact i on t o cor re ct the def aul t, and had goo d cause due t o excusabl e neg l ect

— We l l s a s s er t e d th a th i s wi th d r a wn counseldi d not pro vi de him n ot ice ofthe date bywh i chN o. 11

- 3369 7 he ha d t o fi l e a r es po ns i ve plea di ng . Nev er th el es s, the dist ri ct c ourtdeni ed W el l s’ s m oti on be cause he di d not setf or th a m er i tor i ous defense. In hi s m oti on t o vacat e th e d efa u lt jud gm en t, W ells st a t e d th at h e “ em p h at ica lly den [ i es ] ” th e cl ai m s m ade i n W eh r s’ s co m pl aint because “a l ltr ansact ion s were author i zed. ” W el l s a l so m aint aine d tha t afte rW eh r s ac cus ed hi m o fmaking unauthori zed tr ades, he no ti fi ed B re nnan, wh o then too k o verthe acc ount. Final l y, W el l s’ s m oti on di sputed the a m ount o fdam ag es set for th i n the com pla i nt, at
tach ing as an exh ibi t a trans action history of W eh rs’s ac c ou n t s h ow in g t h at co m m iss ion s c h ar g e d fo r th e a ll eg edly unauth o r i ze d t r an sa ct i o ns wer e r ev er se d. The di st r i ctc o ur t f o und Wel l s’ s b roa d de ni ali ns uffi ci en t to st at e a m er ito riou s d efe n se be c au se h e d id n otsp ec ifically d en y the com p lai nt ’s al legations th at he pu rc ha s e d, s o l d, a nd r e pu r c ha s e d the s ha r e s o fCY BX w ith o u t p er m iss ion . In d ee d , th e c ou rtfou n d th at W ells i m plicitly adm i tte d the co m pla i nt’ s a l l ega ti ons w hen conte sting the am ount o fdam age s. W el l s pri m ar i l y a rgues that the di str i ct c ourtabuse d i ts di sc reti o n b ec au se the mot i o n s etf o r tha mer i to r i o us de fense: the tr ansact i ons w er e a uthor i zed. W e di sag re e. A m er i tor i ous defe nse need not, bey ond a doubt, succe ed in d efeating a d efault j ud gm en t, bu t it m us t at least “raise[] a serious q ue stion regard ing the prop r ie t y of a defa ultj ud gm ent a nd

. . . [ be] supporte d by a devel oped legaland f actualbas i s. ” Jone s v. Phipps , 39 F. 3d 158, 16 5 ( 7th Ci r. 19 94)

. In hi s m oti on t o vacat e the def aul t j ud gm en t, W el l s m ak es o nly a s i ng l e co nc l us o r y s ta te m en t that the t ra nsacti ons w er e a uthor i zed. W e hav e co nsi sten tly held th at su ch a general d en ialof th e c o m p laint ’s8 N o. 11

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A fter rulin g on W ells’ s m otio n to v aca te the d efau lt j u d g m en t, 2 the dist ri ctcourt lat er p er m it ted W ehrs to fil e t w o am ended c om pl ai nts. In t he “s um m ar y ofar gum en t ” a nd “c onc l us i on” s ec t i ons ofhi s ope ni ng br i ef, W el l s s t at es thatthe di s t ri c tj udge (co n tin u ed ...) al l eg at i o ns , wi th o ut an y f ac tu al su ppo r t, is ins uffi ci en t to st at e a m er ito riou s d efe n se . E.g
. , Pr e tze l & St ouf f e rv. Im per ial A djust ers, Inc. , 2 8 F
. 3 d 4 2 , 4 6 ( 7 th C i r . 1 9 9 4 ) ( “ [ A] m er ito riou s d efe n se req u ire s m or e t h a n a ‘ge n er al d en ial’ an d ‘ba re lega l co n c lu sio n s.’ ”); accord Stephenson v. ElBat r awi, 5 2 4 F
. 3d 907, 914 (8th Cir. 2008) (“si m p le asserti ons unsup port ed by sp ec i fi c f acts o r evi dence” f ai l ed to es ta b lish m er ito riou s d e fen se ); New Yo rk v . Green , 42 0 F.3 d 99 , 110 (2d C ir. 20 05 ) (“c on c lu so ry d en ials ” in su ffici en t to r ai se mer i to r i o us de fe ns e)

. M o r eo ve r, a s th e d i s t r i c tc o u r tc o r r e c t l y o b s e r v e d, th e f a c tth a tth e c o mm i ssi ons charg ed to W ehrs ’ s a ccount w er e r ev ersed unde r cut s W el l s’ s co nt en ti o n th at th e tr an sa ct i o ns we r e a utho r i z e d. N e i t h e r d id th e d ist ric t c ou rtab u se its d isc re tio n in d en yin g W ells lea ve to a n sw er th e c om p lain t. W ells m aintai n s that he w ou ld h ave p rovide d the n eces sary f actualsupport to est abl i sh a m er i tor i ous defen se i n an answ erto the com pla i nt, i fo nl y the di str i ct c ou rthad gr an te d h im lea ve to d o s o . B u t th is a rg u m en t is illogical. I t m a k e s li ttle sens e to clai m that a district cou rt ca nno t r ul e o n a mot i o n t o v ac at e a d efa ul t j udg m en t w i thout fi rs t g ra nti ng a defe nd ant l eave to fi l e a n answ er, wh en the f ai l ure to fi l e a n answer i s t here as on de f a ul tj ud g men twa s e nt e r e d. 2N o. 11

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(

. . . c on t i nu e d) 2 “fur ther ab u s ed h erdi s c re t i on i n de nyi ng W el l s ’ M ot i on f or Lea ve to F ile An Ans wer t o W eh rs ’ s ubs equen t l y fi l ed S ec ond Am en ded c om pl ai nt
. ” ( Appel l ant’ s Br. at28. ) To the e xt en t W el l s i s al s o c hal l en gi ng the di strictc our t ’ s den i al ofan y su b se q u en t requ est to file an an sw er, this arg u m en t is wai ved. The l one s en t en c es i n h is s um m ar y ofar gum en tan d concl usi on sec ti ons, l acking any ci tat ion t o gov erni ng law , are in su ffici en t to ra ise ad eq u a te ly an issu e o n ap p ea l. S ee Un i te d S tat es v. Tockes , 530 F. 3d 628, 633 ( 7th Cir

. 2008) ( “U nsupp orte d a n d u n d ev el o p ed ar g u m en ts . . . a re co n sid e r e d w a iv ed .”); see al so Bob Wi l l ow M ot ors, Inc. v. G en. M ot ors C orp. , 872 F. 2d 788, 79 5 (7 t h C i r. 1989 ) (arg u m en t un sup p or ted b y an y au tho rity an d raised in “m ere s i n g le line in th e ‘ sum m ary of arg u m en t’ se ct io n ” o f op en in g b ri ef is w a iv ed ). M or eov er, W el l s was fre e t o ra i se speci fi c f acts to supp or t hi s pu rpor ted m er i tor i ous defe nse i n hi s m ot ion to vacat e the d efaul t j ud gm ent. H e di d j ust that re gar ding hi s cl aim that the com pla i nt exag ger ate d W ehrs ’ s fi na n c ial los se s, at ta c h i ng a tr ansact i on hi st o r y tha t r ev ea l ed so m e ch ar ges to W eh r s’ s ac co unt had a l r ea dy be enr efunde d. ButW el l s pr o vi ded no th i ng o fthe s o r t r eg ar di nghi s content i o n tha t th e tr an sa ct i o ns w er e a uthor i zed. W el l s a l so could have at tached a propo s e d a ns we ra s a n e xh ib i tt o the mo t i o n, to p r o v i de s o m e s u p p or t fo r h is th re ad b ar e a ss er tio n s. Se eAni l i na Fabri que de C olorants v . A aka sh C hem s. & D yes tuff s, Inc. , 85 6 F. 2d 8 7 3 , 8 7 9 ( 7 th Ci r . 1 9 8 8 ) ( di s t r i c tc o ur t ’ s de ni a lo f R u le 6 0(b ) m ot ion w as ab u se of d isc re tio n b e c au se it di d no t co ns i dermer i to r i o us defen se e st ab l i sh ed i n de fen d an t’s prop osed answ er, exh ibi ts, an d cou nt erclaim ).10 N o. 11

- 3369 H e di d not do so, and thi s l eft t he di str i ct c ourtwith o n ly the con clusory sta tem en ts con tained i n W ell s’s m ot ion when consi deri ng wh etherhe r ai sed a m er ito r i o us de fen se . And a l th o ug h W ell s was a ppea r i ng p ro se, th i s d o e s n o t e x c u s e th e f a c t th a t h e p r o vi ded no speci fi c fac ts orev i dence to support hi s g ener aldeni al of th e c om p lain t’s alle g a t i o n s. C f. Jon es , 39 F. 3d at 163 ( no tingtha t al th ou gh pro sel i ti gants bene fi t fro m var i ous proce du ra l prot ecti ons, theyar e “ not enti tl ed to a gener aldi spensati on fr om the rul es ofpro cedure or cou rt i m p osed de ad line s”).

B
. D a m ages T he dist r ict cou rt carefully calcu lated W eh rs’s dam age s, co nsi deri ng the to talam ount ch ar ged to W eh r s’ s ac co unta s a r es ul t o fth e p urc ha se a nd re pu rchas e o fthe CY BX shar es. Th e cour t then dedu cted fro m thi s t ota l : ( 1) r efund ed tr an sa c ti on fees and sal es c o mm i s s i o ns ; (2) cr e di t s f o rthe s ha r e s o fCY BX s o l d, i ncl ud i ng tho se shar es sol d pu rs uant to m ar gi n cal l s; ( 3) the $ 7, 50 0 st o p- l o ss a m o unt; a nd ( 4) $ 27, 49 9, the set tl em ent a m ount a gr eed to by t he o therdefendants. Th e di s t r i c tc o ur ta c c o r di ng l y f o un d We l l s l i ab l e f or $49, 861 i n dam age s. W ells d oe s n otta ke iss u e w ith th e d i s t r i c t c ou rt ’s c alcul ati ons. Instea d, he ar gues that the c ourtabuse d i ts disc re ti on bynotco nsid eri ng ev i dence thathe di d not p ro x im at ely ca u se a lar ge p or tio n of th e d am ag es . Sp ec ifica l l y, W el l s co nt en ds he s ho ul d no t be he l d l iable fo ra nyN o. 11

- 3369 11 l oss es that occur re d afterJ u n e 27, 20 05, the date that W ehrs d i sco ver ed the una ut ho r i z e d t r a ns a cti ons. Because W ehrs cou ld have s ol d his st ocko n thi s date , W el l s pos i ts, W ehrs sho uld have m itig ate d his dam age s, ra therthan hol ding the s toc k a s the pri ce c ontinu ed to f al l

. But beca use the d efa u l t j ud gm ent e nter ed aga i nst We l l s p r e c l u d e d h i m fr o m r a i s i n gth i s a r g u men t ats u mm ar y j ud gm ent, we disa gr ee. G en er ally , w e w ill no t re ve rs e a d am ag e s a w a r d in a d efa u lt jud gm e n t u n les s itis cle ar ly ex c es siv e. e360, 500 F. 3d at 602. “ A def aul t j ud gm ent e stabl i shes, as a m atter of l aw , that de fend an ts are li a ble to plaintiff on ea c h c a u s e of ac tio n alleg ed in t h e c om p lain t.” Id. Upon de f au l t, the wel l

- pl ed al l eg at i o ns o fthe c o m pl aint r el at i ngt o l i ab i l i tya r e ta k ena s tr ue , b uttho se r el at i ng t o the a mou nto fda mag e s s uffe r e d o r di na r i l y a r e n ot. U nite d States v. D i M ucci, 8 7 9 F.2d 1488, 1497 (7th C ir. 19 89 ); ac co r d 10 A C h ar les A lan W rig h t e t a l., Fe de r al P rac tice a nd P roc edu re § 2 6 8 8 , a t5 8

- 5 9 ( 3 d e d. 1 9 9 8 & S up p. 20 12 ) (“If th e c ou rtd et er m in es th at d e f e n d a n t is in de f aul t, the f a c t ua la l l e g a t i o ns o fthe c o mpl a i nt, e xc e pt thos e r el ating to the am ount o fdam age s, wil lbe tak en as tr ue. ”)

. T hus, “[ d]am age s m ust be pro ved unl ess they ar e l i quidate d orcapabl e o fcal cul ati on.” M er ri ll Lynch M or tg. Corp. v. Narayan , 908 F.2d 246 , 2 5 3 ( 7th Cir. 1990). Bec au se a pl aint i ffm us t o r di na r i l y pr o ve da m ag es , the d efa u ltin g p ar ty m ay rais e t h e is su e o f ca u sa tio n as it rel ate s t o the c al cul ati on o fdam age s. 10 M oore ’s Fe de r al P ract ice, § 5 5. 32 [ 1] [c] ( 3d. e d. 2 01 2) ( “T he r ul e th atthe cl ai m ant m ust pro ve the a m ount o fdam ag es m ay al so12 N o. 11

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ex te n d to th e e lem en t o f c au sa tio n . W h ile liab ility is adm i tte d, the defa ult i ng party i s l i abl e onl y f or tho se d am ages th at a r ise from the ac ts an d i njuries that w ere p lea d ed .”); see Tran s Wo rld A irli n e s , In c. v. H ug hes , 44 9 F.2d 51, 70 ( 2d Cir. 1971), re v’ d on othe rgroun ds , 409 U
. S. 36 3 (1 97 3) (“ T h e o u te r b ou n d s o f th e re c ov er y a llow ab le ar e o fco urse m eas ured bythe pri nci ple o fpro xi m ate ca us e. The def au l t j udg m en t di d no t g i ve TW A a b l an k ch eck t o r e c o v e r from Toolco an y l osses it had ever suffered from w ha tever sou rce.”). W el l s r el i es heavi l y o n the Se cond Cir cui t’ s br oad l an g ua g e i n H ug hes to arg u e t h at be c au se W e h r s co u ld h av e m itig at ed h is d am ag es , W ells d id n o t p ro x im at ely cau se a signifi can t am ou nt of th e fina nc iall osses su ffer ed

. B u t W ells m isc on st ru es th e Sec on d C irc u it’ s d ec is i o n , i gn or in g t h e c rit ica l d iffer en c e b et w ee n p ro x imat e c a us e a s i tr e l a t e s t o l i ab i l i t ya nd p r o xi mat e c ause a s i t r e l a t e s t o da mag e s a ft e r a de f a ul t j ud g m ent has b ee n en te re d

. See Greyhou nd Exhi b i tgroup, Inc . v. E. L. U .L. Real ty Corp. , 973 F. 2d 155, 15 9 ( 2d Cir

. 19 92) (finding a c at eg or ica l d ist in c t i o n be tw ee n p ro x im at e c au se “a s it per tains to the a ss i g nm en t o fl i ab i l i tyi n the fi r sti nsta nce, ” a nd p ro x i m ate cause “a s i t r el ate s t o the m i ni ste
rialcalculation of da m ages” after a d efault j ud gm en t). W i thi n the conte xt o f a def aul t j ud gm ent, pro xi m ate ca us e “pr es um es tha t l i ab i l i tyha s be ene st ab l i sh ed, a nd re quires onl y that the co m pensati on s ought re l ate to th e dam age s that natural l y fl ow fr om the i nj uri es ple aded.” Id. Thus, a defa u l ti ng l andlo rd wh ose f aul ty spri nkl ersy ste m cause d a warehou se fi re co uld notN o. 11

- 3369 13

a r gu e h e d i d n o tp r o x i ma t e l y c a u s e a l lo ft he f i r e ’ s d a mage s by poi nti ng to the pla i nti ff’ s co m parat i ve negl i gence in cau sing t h e fire

— that ar gum ent woul d contes t s ett l ed iss u es of liab ility

. Id. In contr ast, a pla i nti ff that l ost$3 , 000 i n a de f au l ting de fen dan t’ s fr au dul en t i nv es tment schem e co uld not re cove r f or, am ong othe r thi ngs, m oney spent o n an ab or ti on s he cl ai m ed w as needed because “she di d n o th a v e the mo ne y t o r a i s e a c hi l d d ue t o h er mon e t a r y l o s s”

— th e m one y sp en t on an abortion bore l i ttl e r el ati on t o the c om pla i nt’ s a l l ega ti ons, a nd di d not n at u ra lly flo w f ro m th e inj u rie s p led

. Wu v. I p , N o. C 93- 4467, 19 96 W L 4 28 34 2, at * 1 ( N
. D. Cal. J uly25 , 19 96) (un p ub li sh ed ). T o p er m it W ells to arg u e t h at W eh rs sh o u ld h av e s old h is s h ar es of C Y B X atan ea r l i e r d at e t o m itig at e h is dam age s would al l ow W el l s to co ntesthi s l i abi l i ty, r ath er than the e xt en t o fthe da m ag es s uffer ed fr o m the i nj uri es ple d. This he m ay not do; a d efa u ltin g par ty “has no r i ght t o dispute the i ssue ofl i abi l i ty.” 1 0 M oore’s Fe de r al P ra ct ice, sup ra , § 55. 32[ 1] [ a]
. A s the di str i ct cour t duly n ot ed, the du ty to m i ti gat e dam age s i s a n affir m at ive d efe n se , an d W ells w aiv ed h is rig h t to th is d e fe n s e b y no t f i l i n ga r e s p o n s i v e p l e a d i n gt o th e c o mpla i nt. A ftera defa ultj ud gm ent w as enter ed aga i nst h im , W ells co u ld n o t ra ise th e w aiv ed d efe n se w h ile conte sting dam age s under the guis e o fpro xi m ate cause . A ccor dingl y, the dist ri ct c ourtdi d n ot abuse i ts disc re ti on in deter m i ni ng dam age s a t s um m ar y j ud gm ent.14 N o. 11

- 3369 III. C ON CLU SI ON Forthe f or ego i ng r eas ons, we A FFIRM the j ud gm en t of the di str i ct c ourt
.

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