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IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

AUSTIN DIVISION

PAUL NG INVESTORS, LLC,

Plaintiff,

v.

NANO GLOBAL CORP., WCRST, LLC, 

AND STEVE PAPERMASTER,

Defendants.

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No. 1:20-CV-00488-RP

REPORT AND RECOMMENDATION 

OF THE UNITED STATES MAGISTRATE JUDGE

TO THE HONORABLE ROBERT PITMAN

UNITED STATES DISTRICT JUDGE:

Before the court are Plaintiff Paul NG Investors, LLC’s Motion for Default Judgment 

Against Defendant Nano Global Corporation (Dkt. #14), Paul NG Investors, LLC’s Motion for 

Default Judgment Against Defendant WCRST, LLC (Dkt. #15), and Paul NG Investors, LLC’s

Motion for Default Judgment Against Defendant Steve Papermaster (Dkt. #16).1 After reviewing 

the pleadings, the relevant case law, and the entire case file, the undersigned issues the following 

Report and Recommendation to the District Court.

I. BACKGROUND

On May 6, 2020, Plaintiff Paul NG Investors, LLC (“PNGI”) filed this suit against 

Defendants Nano Global Corp. (“Nano”), WCRST, LLC (“WCRST”), and Steve Papermaster. 

Dkt. #1.2 Nano is an “early stage privately held medical technology company” that sought to raise 

1 These motions were referred by United States District Judge Robert Pitman to the undersigned for a Report and 

Recommendation as to the merits pursuant to 28 U.S.C. § 636(b)(1)(B), Rule 72 of the Federal Rules of Civil 

Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District 

of Texas.

2 PNGI invokes this court’s diversity jurisdiction because it, through the citizenship of its members, is a citizen 

of California, Florida, Ohio, and Pennsylvania; Defendants are citizens of Delaware and Texas; and the amount in 

controversy is alleged to be over $75,000. 28 U.S.C. § 1332; See MidCap Media Finance, L.L.C. v. Pathway Data, 

Inc., 929 F.3d 310, 314 (5th Cir. 2019) (“[T]he citizenship of a[n] LLC is determined by the citizenship of all of its 

members.”) (alterations in original) (internal quotation marks omitted).

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capital in 2016. Dkt. #1 at 3. Steve Papermaster (“Papermaster”) is the founder and CEO of Nano, 

and WCRST is “an entity created and owned by [Papermaster] to hold interests, including stock, 

in Nano.” Id. 

Around March 6, 2017, PNGI invested in Nano by entering into a number of transactions 

with Nano, Papermaster, and WCRST. Id. The first of these transactions was a Stock Transfer 

Agreement between PNGI and WCRST, whereby WCRST transferred 1,900,000 shares of its 

Series 1 Preferred Stock in Nano to PNGI at a price of $0.02 per share. Id. In the second transaction, 

PNGI invested in a Convertible Promissory Note issued by Nano (the “Convertible Note”). Id. 

Under the Convertible Note, Nano agreed to repay the principal amount of $4,100,00.00 plus 

interest at a rate of 4.25% per annum on the maturity date of March 6, 2019, or earlier if Nano 

closed a Qualified Financing, “upon which PNGI could convert the principal of the Note into an 

equity security in Nano.” Id. at 3-4. The Convertible Note subsequently was amended to extend 

the maturity date to March 31, 2020. Id. at 4.

In the third transaction, PNGI entered into a Letter Agreement (the “Letter Agreement”) 

with WCRST and Papermaster. Id. Per the Letter Agreement, WCRST and Papermaster agreed 

they would “(1) re-purchase the shares in Nano that were the subject of the Stock Transfer 

Agreement at a price equal to PNGI’s purchase price and (2) purchase the Convertible Note for an 

amount equal to the principal amount thereof and all accrued and unpaid interest” if, by December 

1, 2017, the Convertible Note had not been converted into preferred stock in Nano. Id. Per an 

amendment, the relevant date under the Letter Agreement was extended to March 31, 2020. Id. 

Around June 28, 2019, PNGI and Nano entered into an additional Convertible Promissory 

Note for $1,000,000.00 (the “Additional Note”) with the purpose of providing Nano additional 

funding. Id. Per two amendments, the maturity date for the Additional Note was extended from 

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August 15, 2019, to March 31, 2020. Id. Additionally, the second amendment contained the 

following provision: 

[w]ithout limiting any of the [Nano’s] rights under this Note or otherwise, if a 

Qualified Financing shall not have occurred on or prior to the Maturity Date, then 

at any time after the Maturity Date[,] [Nano], upon written notice from [PNGI], 

shall remit to [PNGI] within five (5) days of receipt of such notice, the amount of 

$1,500,000 (being the Original Principal Amount multiplied by 1.5) plus unpaid 

accrued interest on the Original Principal Amount from June 28, 2019 through the 

date that such payment is made to [PNGI], without any requirement for [PNGI] to 

make any claim or institute any proceeding under or in respect of this Note.

Dkt. #18-4 (Second Amendment to Additional Note). 

As of the filing of this lawsuit – over a month after the March 31, 2020 maturity dates –

Nano has failed to repay any of the principal or accrued interest relating to either the Convertible 

Note or the Additional Note. Id. at 5. Additionally, Nano has not completed a Qualified Financing. 

Id. On April 1, 2020, PNGI “provided notice and demand to WCRST and [Papermaster] under the 

[Letter Agreement] to fulfill their obligations to repurchase the shares in Nano and to purchase the 

[Convertible Note].” Id. WCRST and Papermaster have not satisfied their obligations to PNGI 

under the Letter Agreement. 

A. Damages Sought in Complaint and Motions for Default Judgment

Per its Complaint, PNGI seeks only compensatory damages against Defendants arising out 

of their respective breaches of the Convertible Note, Additional Note, and Letter Agreement. In 

Count I, PNGI seeks $4,670,042.72 in damages against Nano for its breach of the Convertible 

Note – $4,100,00.00 in principal and $570,042.72 in accrued interest. Dkt. #1; Dkt. #14; Dkt. #14-

1. In Count II, PNGI seeks compensatory damages jointly and severally against WCRST and 

Papermaster for their breach of the Letter Agreement in the amounts of $4,708,042.42 – $38,000

for the obligations relating to the Stock Purchase Agreement and $4,670,042.72 relating to the 

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purchase price of the Convertible Note. Id. In Count III, PNGI seeks $1,032,720.46 in damages 

against Nano for its breach of the Additional Note. Id.

B. Damages Sought in PNGI’s Supplemental Brief in Support of Motions for 

Default Judgment against Defendants 

Upon beginning its analysis, the court discovered PNGI had not provided sufficient 

evidence supporting its damage calculations. Thus, the court ordered PNGI to file a supplemental 

brief explaining its calculation. See Dkt. #17. On December 4, 2020, PNGI filed its Supplemental 

Brief. Dkt. #18. Notably, the damage totals sought in the Supplemental Brief are different than 

those requested in PNGI’s Complaint and Motions for Default Judgment. Compare Dkt. #1, #14, 

with Dkt. #18. The difference in damages for Counts I and II can be chalked up to previously 

mistaken interest-payment calculations. However, in Count III, PNGI seeks damages based on an 

amended reading of the underlying contracts. See Dkt. #18 at 2-3. Specifically, PNGI seeks 

additional damages against Nano based on the second amendment of the Additional Note, which 

increases the principal amount Nano owes on the Additional Note from $1,000,000.00 to 

$1,500,000.00. See id; see also Dkt. #18-4 at 1-2. Based on these damage adjustments, PNGI 

clarifies in its Supplemental Brief that it is seeking the following damages:

• Per Count I, $4,634,684.92 against Nano for breach of the Convertible Agreement. This 

includes a principal amount of $4,100,000.00 and interest equaling $534,684.92. 

• Per Count II, $4,672,684.92 jointly and severally against Papermaster and WCRST. This 

includes the total amount owed under Count I plus $38,000.00 relating to obligations under 

the Stock Purchase Agreement. 

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• Per Count III, $1,532,253.42 against Nano for breach of the Additional Note. This includes 

a principal amount of $1,500,000 (the original principal amount multiplied by 1.5) and 

interest equaling $32,253.42.3

Dkt. #18. Because these totals are supported by the record, the underlying agreements, PNGI’s 

provided calculations, and appear little more than corrected damage calculations based on the same 

contracts discussed in the Complaint, the court finds the damages described in PNGI’s 

Supplemental Brief consistent with the relief sought in its Complaint. Thus, the court construes 

PNGI’s filings as seeking the amounts depicted in the Supplemental Brief. 

II. PROCEDURAL HISTORY

On May 7, 2020, counsel for Defendants filed a Waiver of the Service of Summons. Dkt. 

#3. Subsequently, Defendants failed to file a responsive pleading or motion, prompting PNGI to 

file its Motions for Entry of Default against all Defendants. See Dkt. #8, #9, #10. The Clerk’s 

Office entered default against all Defendants on July 23, 2020. See Dkt. #11, #12, #13. On July 

24, 2020, PNGI filed its Motions for Default Judgment against Defendants. See Dkt. #14, #15, 

#16. 

III. LEGAL STANDARD

Federal Rule of Civil Procedure 55(b)(2) governs the entry of a default judgment by a court. 

See FED. R. CIV. P. 55(b)(2). In the Fifth Circuit, three steps are required when obtaining a default 

judgment: (1) default by the defendant, FED. R. CIV. P. 55(a); (2) entry of default by the Clerk’s 

Office, FED. R. CIV. P. 55(a); and (3) entry of a default judgment by the district court, FED. R. CIV.

P. 55(b); New York Life Ins. Co. v. Brown, 84 F.3d 137, 141 (5th Cir. 1996). Additionally, in order 

3 The interest amount owed on the Additional Note is calculated based on the Additional Note’s original principal 

amount of $1,000,000.00. See Dkt. #18-3 at 1. This calculation is correct based on the Additional Note’s second 

amendment, stating that “unpaid accrued interest” is to be calculated “on the Original Principal Amount.” Dkt. #18-4 

at 2-3. 

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to obtain a default judgment, the movant must establish that the defendant is neither a minor nor 

an incompetent person, and that the defendant is not in military service. 50 U.S.C. § 3931; Bank 

of New York Mellon Tr. Co., N.A. v. Hancock, 5:19-CV-270-H-BQ, 2020 WL 2989023, at *2 (N.D. 

Tex. June 4, 2020). Where a defendant has defaulted, the factual allegations in the complaint are 

taken as true, except regarding damages. See Jackson v. FIE Corp., 302 F.3d 515, 525 n.29 (5th 

Cir. 2002).

“Default judgments are a drastic remedy” and thus are “resorted to by courts only in 

extreme situations.” Sun Bank of Ocala v. Pelican Homestead & Sav. Ass’n, 874 F.2d 274, 276 

(5th Cir. 1989). Accordingly, “[a] party is not entitled to a default judgment as a matter of right, 

even where the defendant is technically in default.” Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 

1996). Rather, “[t]here must be a sufficient basis in the pleadings for the judgment entered.” 

Nishimatsu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975) (default is not 

treated as an absolute confession by defendant of liability and of plaintiff’s right to recover). A 

court must accept pleaded facts as true, but must also determine whether those facts state a claim 

upon which relief may be granted. See Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (affirming 

district court’s denial of entry of default judgment because, even if true, plaintiff’s allegations 

would not support imposing liability against defendants).

Courts use a three-part test to determine when to enter a default judgment. The court first 

considers whether the entry of default judgment is procedurally warranted. United States v. Rod 

Riordan Inc., No. MO:17-CV-071-DC, 2018 WL 2392559, at *2 (W.D. Tex. May 25, 2018); 

Nasufi v. King Cable Inc., No. 3:15-CV-3273-B, 2017 WL 6497762, at *1 (N.D. Tex. Dec. 19, 

2017) (citing Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998)). 

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Next, courts assess the substantive merits of the plaintiff's claims and determine whether 

there is a sufficient basis in the pleadings for the judgment. J & J Sports Prods., Inc. v. Morelia 

Mexican Rest., Inc., 126 F. Supp. 3d 809, 814 (N.D. Tex. 2015) (citing Nishimatsu, 515 F.2d at 

1206). In doing so, courts assume that, due to its default, the defendant admits all well-pleaded 

facts in the plaintiff's complaint. See Rod Riordan Inc., 2018 WL 2392559, at *3. 

Finally, the court determines what form of relief, if any, the plaintiff should receive. Id.

While damages are normally not to be awarded without a hearing or a demonstration by detailed 

affidavits establishing the necessary facts, if the amount of damages can be determined with 

mathematical calculation by reference to the pleadings and supporting documents, a hearing is 

unnecessary. Id. (citing United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir. 1979); James 

v. Frame, 6 F.3d 307, 310 (5th Cir. 1993)). 

IV. ANALYSIS 

A. Default Judgment is Procedurally Warranted 

As an initial matter, PNGI has provided sufficient evidence proving that Defendants are not in 

military service and are neither minors nor incompetent persons. PNGI has submitted an affidavit 

showing that Papermaster is not in military service, incompetent, nor a minor. Dkt. #18 at 2; Dkt. 

#18-1 at 2. Furthermore, WCRST and Nano are corporations and thus cannot be minors, 

incompetent persons, nor in military service. Id. 

The Fifth Circuit has set forth six factors for a court to consider in determining whether a 

default judgment is procedurally proper. United States v. Padron, 7:17-CV-00009, 2017 WL 

2060308, at *2 (S.D. Tex. May 12, 2017). These factors are: “(1) whether material issues of fact 

are at issue; (2) whether there has been substantial prejudice; (3) whether grounds for default are 

clearly established; (4) whether default was caused by good faith mistake or excusable neglect; (5) 

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harshness of default judgment; and (6) whether the court would feel obligated to set aside a default 

on the defendant's motion.” G&G Closed Circuit Events, LLC v. Mickey's Sports Bar & Grill, LLC, 

No. 3:17-CV-01310-M, 2017 U.S. Dist. LEXIS 209912, at *3 (N.D. Tex. Dec. 21, 2017).

Here, all of these factors weigh in favor of granting default judgment. First, Defendants 

filed their Waiver of the Service of Summons, which expressly states that “[Defendants’ Counsel] 

understand[s] that I, or the entity I represent, must file and serve an answer or a motion under Rule 

12 . . . . If I fail to do so, a default judgment will be entered against me or the entity I represent.” 

Dkt. #3. While this Waiver does not constitute as an appearance, see Rogers v. Hartford Life &

Acc. Ins. Co., 167 F.3d 933, 938 (5th Cir. 1999), it makes plain that Defendants received “a copy 

of the complaint” and were put on full notice of the above-styled lawsuit. Dkt. #3. Second, 

Defendants failed to file an answer or any responsive pleadings; therefore, there are no material 

facts in dispute. Padron, 2017 WL 2060308 at *3. Third, Defendants’ failure to respond or 

otherwise appear threatens to cause substantial prejudice because it “threatens to bring the 

adversarial process to a halt, effectively prejudicing Plaintiff's interests.” Id. Fourth, the grounds 

for default are clearly established because Defendants have failed to answer or defend. Fifth, there 

is no indication that default was caused by a good faith mistake or excusable neglect. Sixth, default 

judgment would not be harsh in this situation because the judgment would be for nothing more 

than what Defendants owe under the law. Finally, the court is unaware of any reason why it should 

set aside any default judgment it may enter. Because of the foregoing, default judgment against 

Defendants is procedurally proper.

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B. Sufficient Basis in the Pleadings for the Judgment

The court next must determine whether there is a sufficient basis in the pleadings for the 

judgment requested. Nishimatsu, 515 F.2d at 1206. Based on its failure to respond, the court 

assumes that Defendants admit all well-pleaded facts in PNGI’s Complaint. See id. 

PNGI’s Complaint asserts three causes of action for breach of contract against Defendants. 

Dkt. #1 at 5-8. In Texas, the elements for a breach of contract claim are: (1) the existence of a valid 

contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by 

the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Smith Int'l, Inc. 

v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007). A breach occurs when a party fails to perform 

a duty required by the contract. Id.

Taking its well-pleaded allegations as true, PNGI has satisfied the elements of all three

breach of contract claims by showing that:

1. There were valid contracts between PNGI and Defendants in the form of the Stock 

Transfer Agreement, Convertible Note, Letter Agreement, and Additional Note,

Dkt. #1; Dkt. #1-2 (Restricted Stock Transfer Agreement); Dkt. #1-3 (Convertible 

Agreement); Dkt. #1-4 (Letter Agreement); Dkt. #1-5 (Additional Note);

2. PNGI fully performed under the various contracts, Dkt. #1; 

3. Nano did not complete a Qualified Financing, nor repay any of the owed principal 

or interest on the Convertible or Additional Notes, id. at 5;

4. Upon receiving notice and demands from PNGI, WCRST and Papermaster did not 

satisfy any of their obligations under the Letter Agreement, id;

5. PNGI sustained damages due to Defendants’ breaches, id. at 5-7. 

Based on the foregoing, PNGI has sufficiently pleaded its breach of contract claims. 

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C. Damages

Having found that PNGI’s Motions for Default Judgment should be granted and judgment 

entered in its favor, the undersigned must determine the appropriate amount of damages. When 

the amount of damages can be determined with mathematical calculation by reference to the 

pleadings and supporting documents, as is the case here, a hearing is unnecessary. James v. Frame, 

6 F.3d 307, 310 (5th Cir. 1993).

As noted above, PNGI requests that the undersigned “issue [d]efault [j]udgments on each 

Count in the Complaint as follows: (1) on Count I as against Defendant Nano Global, Inc. in the 

amount of $4,634,684.92; (2) on Count II as against Defendants Steve Papermaster and WCRST 

LLC in the amount of $4,672,684.92; and (3) on Count III as against Defendant Nano Global, Inc. 

in the amount of $1,532,253.42.” Dkt. #18 at 3. In support of these sums, PNGI provides an 

affidavit explaining its damage calculations. See Dkt. #18-1. PNGI also provides various charts 

depicting its interest calculations. See Dkt. #18-2; Dkt. #18-3.

Based on the foregoing and considering all the relevant evidence, PNGI has demonstrated 

that a hearing is not necessary because it has submitted adequate documentation for the requested 

damages. Thus, the well-pleaded facts establish PNGI’s claims for breach of contract and PNGI’s 

entitlement to its requested damages. 

V. RECOMMENDATIONS

The undersigned RECOMMENDS that the District Court GRANT Plaintiff Paul NG 

Investors, LLC’s three Motions for Default Judgment against Nano Global Corp., WCRST, LLC, 

and Steve Papermaster (Dkt. #14, #15, #16), and enter a final judgment stating that: 

• Pursuant to Count I, Defendant Nano Global, Inc. is liable to Plaintiff PNGI for its breach 

of the Convertible Note in the amount of $4,634,684.92;

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• Pursuant to Count II, Defendants Steve Papermaster and WCRST LLC are jointly and 

severally liable to PNGI for their breach of the Letter Agreement in the amount of 

$4,672,684.92; 

• Pursuant to Count III, Defendant Nano Global, Inc. is liable to Plaintiff PNGI for its breach 

of the Additional Note in the amount of $1,532,253.42;

• The award shall bear post-judgment interest to be calculated and compounded pursuant to 

28 U.S.C. § 1961, until paid in full; and

• Upon providing the appropriate documentation, PNGI may recover its reasonable 

attorneys’ fees and costs from Defendants as allowed by, and pursuant to, Federal Rule of 

Civil Procedure 54(d) and Local Rule CV-7(j).

The court notes an adoption of this Report and Recommendation by the District Judge will 

effectively end this case. 

VI. OBJECTIONS

The parties may file objections to this Report and Recommendation. A party filing 

objections must specifically identify those findings or recommendations to which objections are 

being made. The District Court need not consider frivolous, conclusive, or general objections. See 

Battles v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).

A party’s failure to file written objections to the proposed findings and recommendations 

contained in this Report within fourteen (14) days after the party is served with a copy of the 

Report shall bar that party from de novo review by the District Court of the proposed findings and 

recommendations in the Report and, except upon grounds of plain error, shall bar the party from 

appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the 

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District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); 

Douglass v. United Services Automobile Ass’n, 79 F.3d 1415 (5th Cir. 1996) (en banc).

SIGNED December 9, 2020.

_______________________________

MARK LANE

UNITED STATES MAGISTRATE JUDGE

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