# United Stat es Court of Appeals For the First C ircuit

Nos. 01-2513, 01-2521 KPS & ASSOCIATES, INC., Plaintiff, Appellee,

v. DESIGNS BY FMC, INC., Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Rya W. Zobel, U.S. District Judge ]

Before Lynch, Circuit Judge , Bownes, Senior Circuit Judge , and Lipez, Circuit Judge .

Nathan Lewin , with whom Alyza D. Lewin and Lewin & Lewin, LLP were on brief, for appellant. Karen D. Hurvitz , with whom T heresa A. O'Loughlin was on brief, for appellee.

January 28, 20031 In these consolidated appeals, Designs challenges the entry

of default in No. 01-2513 and the award of sanctions in No. 01- 2521. -2-

LIPEZ, Circuit Judge . This acrimonious dispute between defendant-appellant Designs by FMC, Inc. ("Designs") and plaintiffappellee KPS & Associates, Inc. ("KPS") is a diversity breach of contract action that comes to us following the entry of a default judgment agains t Desi gns and a damages award of $367,154 plus prejudgment interest. Designs challenges the entry of default and the subsequent determination of damages, assigning error to several rulings of the district court. These rulings include a denial of Designs' motion to dismiss (arguing that the federal action should be dismissed in favor of parallel state litigation) and a refusal to set aside t he entry of default. Designs also appeals the district court's assessment of $5,000 in sanctions. 1

For the reason s st ated below, we affirm the district court in all respects save one — the computation of the bas e quantumof d amag es after the entry of default. In fixing that amount, the district court erred in its application of Rule 55(b)(2) of the Federal Rules of Civil Procedure (dealing with the determination of damages after an entry of default). I. A. The Relationship Between the Parties

Since these appeals come to us following the entry of a default judgment, we derive the following factual background from-3-

the well-pleaded factual allegations contained in the complaint and the attachments thereto. Where appropriate, however, we note the factual contentions advanced by KPS and Designs on appeal, and we further elaborate on the facts as necessary in our discussion of the applicable law. See infra Section II .

KPS, an independent jewelry manufacturers' sales representative, is a Florida corporation registered to do business in Massachusetts, which is also its principal place of business. Its "principal in charge" is Kenneth Sayles. As KPS's counsel put it dur ing th e initial pretrial conference, KPS "is basically one person, Kenneth P. Sayles." Designs is an importer, seller, and distributor of silver jewelry to retail and department stores througho ut th e United States. It is a New York corporation with its principal place of business in Brooklyn. Its president and sole shareholder is William Nussen.

In 1987 KPS an d Designs entered into an oral agreement whereby KPS agreed to secure new accounts for Designs. The parties dispute whether this relationship was to be exclusive. The complai nt alleges that it was not, and that KPS was free t o represent other jewelry distributors. KPS goes on to allege in its complaint that i t s ecured new accounts for Designs with several different retailers, and that each time it secured a new account, Designs and KPS would agree on a commission schedule. Each month Designs would send KPS a statement detail ing it ems shipped to-4-

retail ers, and then KPS would send Designs a statement detailing the commissions due arising out of those orders. According to the complaint, KPS became so successfu l in developing business for Designs that Designs agreed to forward $17,500 to KPS each month on account. This agreement was confirmed in a letter from Nussen to Sayles dated June 2 3, 1995, a nd attached to the complaint as an exhibit. According to the complaint, Designs stopped sending statements to KPS in November 1995. By the end of 1995, Designs hadfallen far behind in its payme nts to KPS — to the tune of $146,016 — and Designs remained behind in its payments through 1996. The complaint goes on to al leg e that in December 1996 Designs issu ed a statement purporting to reflect the commissions due KPS for 1996 sales. That printout failed to include significant sales of KPS, and the printout used erroneo usl y low commission percentages.

At some point in 1997, K PS b egan representing Jasco, Inc., another jewelry distributor. According to the complaint, Jasco and Designs were not in direct competition since Jasco sold

a "more limited, and somewhat different, product." KPS made no effort to conceal its relationship with Jasco. Upon learning of KPS's represen tati on of Jasco in July 1998, Nussen contacted Sayles, demanding that KPS terminate its relationship with Jasco. Sayles refused because, according to the co mplaint, exclusive-5-

representation had never been part of KPS's agreement with Designs. Shortly thereafter, Nussen sent Sayles a letter terminating the business relationship between Designs and KP S. Th e letter cited "irreconcilable differences" as the basis for this termination and indicatedthat KPS would be provided with a final accounting. The letter unilaterally limited the payment of unp aid commissions on future sales to those sales occurring within ninety days of the date of the letter. According to the complaint, given the purchasing timeline under which retailers operate, KPS was entitled to commissions on sales that occurred after that ninety-dayperiod hadexpired. In any event, Designs never provided KPS with a final accounting, nor did Designs pay KPS th e comm issions it was claiming. On April 27, 1999, KPS's counsel, Karen Hurvitz, sent a demandletter to Nussen seeking $131,035.37 in unpaid commissions. The demand letter indicated that KPS intended to proceed to litigation if Designs failed to meet its obligations. Three days later Nussen telephoned Hurvitz, leaving a message on her answering machine that he had no intention of paying any commissions to KPS. Approximately two weeks later Hurv itz re ceived a call from David Schrader who identified himself as counsel for Designs. At this point there were some communications between Hurvitz and Schrader, the nature and extent of which are in dispute. In any event, Designs failed to pay the commissions as demanded.-6- On Septe mbe r 13, 1999, Designs filed a lawsuit in New York state court naming KPS and Sayles as defendants, and asserting eleven different causes of action, including bre ach of contract, fraud, breach of fiduciary duty, conversion, tortious interference, and"prima facie tort." The complaint sought over $5,000,000 in compensatory damages and $5,000,000 in punitive damages. The unverifiedcomplaint, howev er, lacked pertinent dates, did not detail KPS's alleged wrongdoings with any specificity, and did not indicate how Designs had calculated its enormous damages. The compla int al so sought to enjoin KPS and Sayles from representing "any other merchants" despite the fact that Nussen had terminated Designs' relationship with KPS over a year earlier.

On September 22, 1999, Schrader faxeda copy of Designs' yet-to-be-servedcomplaint to Hurvitz, together with a cover letter asking her to accept service on behalf of KPS and Sayle s. In a separate letter faxed at the same tim e, Sch rader indicated to Hurvitz that Designs would be willing to withdraw its suit if the parties could agree to "sign general releases in favor of each other releasing any claims they may have."

Two days later Hurvitz filed the instant lawsuit against De signs on behalf of KPS in the United States District Court fo r the District of Massachusett s. Th e complaint and its supporting affidavits detailed sales accounts with six different retailers and includedcopies of invoices from each of those retailers. The-7-

complaint and the affidavit listed specific commissions due based

on figures contained in those invoices. Although there are some inconsistencies and computational error s in the numbers, there appears to have been an attempt to draft the complaint and affidavit with some degree of specificity — in contrast to Designs' complaint filed in New York, which, as KPS describes it, was replete with generalized "boilerplate." KPS's complaint sounded in contract and quantum meruit, and also sought multiple damages pursuant to Chapter 93A of the Massachusetts General Laws (prohibiting "[u]nfa ir methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce"). KPS's complaint also listed four loca l cust omers of Designs as trustees and requested attachments against each of them in the amount of $65,000. See Mas s. Gen. Laws Ann. ch. 246, § 1 (West 2002). B. Procedural History

Following the filing of the complaint in this case, the litigation quickly bogged down in a messy motion practice. Both parties and their attorney s accu sed each other of misconduct and filednumerous motions for sanctions, to strike, to q uash, to compel , and to disqualify. We recount only that portion of this sorry procedural history which is pertinent on appeal.

On October 19, 1999, an initial conference was held via telephone among counsel andthe district court. Schrader, counsel-8-

for Designs, had indicated to the court the day before that he did not oppose the entry of an order authorizing the trustee process. At the hearing, however, Schrader claimed that the district judge's

co urt roomdeputy had erroneously led him to believe that the trustee process was "a question of getting authorization to serve papers, as op pos ed to an ex parte or on-notice attachment proceeding." He therefore asked for an extension of time in which to respond to the request for trustee process. The district court gave the parties until October 22 to file papers regarding the trustee process.

On October 25, after that deadline hadexpired without a filing by Schrader, he sought a further extension of time, citing difficulty in obtaining local counsel as the reason for the delay. The next day, Schrader faxed an affidavit from Nussen to the court, in which Nussen indicated that the reason for the delay in responding was the fact that "my daughter is being married tonight " (ori ginal emphasis). The next day, in lieu of a formal motion , Schrader faxed a "letter brief" to chambers in which he (a) indicatedonce again his difficulty in obtaining local counsel, (b) opposed the trustee process, and (c) argued that the court should dismiss or stay the proceedings in light of the New York litigation. On October 29, the district court, finding that KPS haddemonstrated a reasonable likelihood of success on the merits,-9-

issuedan order allowing the trustee process and attaching the trustees' accounts payable to Designs.

At some point in November, Designs obtained an ex parte temporary restraining order in its New York lawsuit froma New York state criminal court judge sitting in an emergency civil part. The TRO restrained two of KPS's main customers from making payments to KPS. When the TRO was subsequently vacated on December 17, the New York court denied a further attempt by Designs to obtain an att achmen t against KPS. According to KPS's New York counsel, Schr ader admitted to him and the New York court that the reaso n Schrader had sought the rest rainin g order was because "if Sayles obtainedan injunction in Boston, he wanted to obtain a similar one in New York." Also, according to KPS's New York counsel, Designs repeatedly failed to meet its discovery obligations in the New York litigation and failed to diligently prosecute its case.

Back in the Massachusetts litigation, KPS fileda motion

on January 14, 2000, to compel Designs to retain local counsel. KPS and Designs also filed additional papers with regard to Designs' motion to dismiss. On February 3 the court granted KPS's motion to compel Designs to retain local counsel, ordering Designs to do so within seven days. Designs' local counsel, Brian Banks, didnot file his appearance until five days after the seven-day deadline had passed. Banks, Schrader, and Hurvitz all appeared at

a status conference on February 17, 2000, at which time the2 This request was premature. Under Rule 6(a) of the Federal

Rules of Civil Procedure, Designs had until March 3, 2000, to file its answer since intervening Saturdays and Sundays would not have been included in the computation of time. Designs, however, did not attempt to file its answer until almost three weeks later, rendering the question of the due date academic. -10- district court announced that it would soon rule on Designs' motion to dismiss. When it did, Designs would then have ten days in which to file its answer to KPS's complaint. The next day, the district court, without opinion, endorsed as "denied" Designs' motion to dismiss. Ten calendar days later, on March 1, 2000, Hurvitz submittedto the court a r equest for an entry of default since Designs had yet to file its answer. 2 This request was served on Designs' New York and local counsel. On March 10, 2000, the clerk entereda notice of default against Designs pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. Copies of the notice were servedon all counsel. On March 17, 2000, KPS filed a request for the entry of default judgment, which was likewise served on all counsel. On March 21, 2000, Schrader finally took action, faxing

a letter to the court in which he ass erted that he had sent a timely answer on March 1, 2000, by Federal Express. Shortly thereafter, Designs filed a motion to set aside the default, and the district court conducted a hearing on May 17, 2000. At the close of the hearing, the district court ruled from the bench,-11-

denying Designs' mot ion to set aside the entry of default. The court char acterized Schrader's behavior over the course of the litigation as "stonewalling" and explicitly disbelieved Schrader's profferedexplanation with regard to the filing of the answer. She toldSchrade r: "We have had trouble with you from the very beginning." She co ncluded: "And because I do not credit these stories, because I do not find there to be good cause to remove the default, the motion to rem ove t he default is denied." One month later, on June 14, Designs filed a motion for reconsideration — styledas a motion pursuant to Rule 60(b). The court agreed to reconsider its prior ruling and then once again denied the request to set aside the entry of default.

Subsequently, on July 27, 2000, the court issued a brief written order on damages which stated, in part:

No further hearing is necessary to ascertain the compensatory damages claimed as the verifiedcomplaint and plaintiff's affidavit attachedthereto set forth a sum certain based on sales and commission figures there detailed, Pope v. United States , 323 US 1, 12 (1944); Brockton Sav. Bank v. Peat, Marwick, Mitchell & Co. , 771 F.2d 5 (1st Cir. 1985), and, a defaul t having been entered, each of plaintiff's allegations of fact are established as a matter of law. The district court then referred the matter to a magistrate judge for the sole purpose of determining whether Designs should be held liable for double or treble damages under Chapter 93A — i.e., to determi ne whether Designs' unlawful conduct was "willful or-12-

knowing." The magistrate judge permitted no evidence on the base quantumof damages, which the court had fixed as the "sum certain" contained in the complaint and a supporting affidavit.

Following the hearing on 93A lia bili ty, the magistrate judge issued a Report and Recommendation finding that Designs had willfully and knowingly engaged in conduct pro hibi ted by Chapter 93A and that KPS should be awarded double damages. Designs filed its objections to the Report and Recommendation with the district judge, who overruled those obje cti ons. Judgment was entered on September 28, 2001, for $367,154 — twice the $183,577 recited in the a d damnumclause of KPS's complaint — plus prejudgme n t interest. On October 23, 2001, Designs filed a ti mely notice of appeal. In the days lea ding up to the Chapter 93A hearing, Designs had served subpoenas duces tecum on KPS's "cust odi an of records," KPS's "resident agent," KPS's bank, and Jasco. Copies

were not served on KPS's counsel, andKPS's counsel only learned of them from the witnesses involved. KPS immediately moved to quash the subpoenas andalso moved for sanctions, arguing that voluminous documents had been improperly sought and that they were irrelevant to the determination of Designs' liability under Chapter 93A. The motions were granted and the magistrate judge recommended a sanction of $5,000. Designs lodged its objections with the district judge, who overruled them on September 28, 2002. On-13-

October 25, 2002, Designs filed a timely notice of appeal with regard to this imposition of sanctions. II. A. The Motion to Dismiss

Designs claims that the district court erred in denying its moti on to dismiss or stay the proceedings in light of th e ongoing New York litigation. The decision to dismiss or stay proceedings in light of parallel litigation is "necessarilyleft to the discretion of the district court in the first instance." Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp. , 460 U.S. 1, 19 (1983). The district court's decision may be reversed only for an abuse of that discretion. Elmendorf Grafica, Inc. v. D.S. Am. (E.), Inc. , 48 F.3d 46, 50 (1st Cir. 1995). The exercise of that discretion, how ever, is greatly constrained by what the Supreme Court has labeledan "exceptional-circumstances test." Cone , 460 U.S. at 19 (citing Colo. River Water Conservation Dist. v. United States , 424 U.S. 800 (1976)); Elmendorf , 48 F.3d at 50. Pursuant to this test, "[t]here must be some extraordinary circumstances for a federal court to shrink from 'the virtually unfl agging obligation of the federal courts to exercise the jurisdiction given them.'" Currie

v. Group Ins. Comm'n , 290 F.3d 1, 10 (1st Cir. 2002) (quoting Colo. River , 424 U.S. at 817).

Drawing on Colorado River andits progeny, courts look to

a variety of factors t o determine whether "exceptional-14-

circumstances" exist which counsel the abdication of jurisdiction in favor of parallel state court litigation. Always keeping in mindthe "heavy presumption favoring the exercise of jurisdiction," Villa Marina Yacht Sales, Inc. v. Hatteras Yachts , 915 F.2d 7, 13 (1st Cir. 1990), a court may consider: (1) whether either court has assumed jurisdiction over a res ; (2) the inconvenience of the fed eral forum; (3) the desirability of avoiding piecemea l litigation; (4) the orde r in which the forums obtained jurisdiction; (5) whether state or federal law c ontrol s; (6) the adequacy of the state forum to protect the parties' interests; (7) the vexatious or contrived nature of the federal claim; and (8) respect for the principles underlying removal jurisdiction. Burns

v. Watler , 931 F.2d 140, 146 (1st Cir. 1991). This list is by no

means exhaustive, nor is any one factor necessarily determinative. Villa Marina , 915 F.2d at 12. Rather, "'a carefully considered judgment taking into account both the obligation t o ex ercise jurisdiction and the combination of factors counseling against that exercise is required.'" Id. (quoting Colo. River , 424 U.S. at 818–19). Desi gns concedes that neither the first nor the second factor (jurisdic tio n over a res or inconvenience of the federal forum) weighs in favor of dismissal. We conclude that none of the others do either.-15- As for the concern about piecemeal litigation, "[d]ismissal is not wa rranted simply because related issues otherwise would be decided by different courts, or even because two

co urts otherwise would be deciding the same issues." Id. at 16. Rather, concerns about p iece meal litigation "should focus on the implications and pr a ctical effects of litigating suits deriving fromthe same transaction in two separate fora," Gonzales v. Cruz , 926 F.2d 1, 4 (1st Cir. 1991), and weigh in favor of dismissal only if there is some "exceptional basis" for dismissing one action in favor of the other. Burns , 931 F.2d at 146; see , e.g. , Colo. River , 424 U.S. at 819–20 (f inding that "clear federal policy [against piecemeal litigation] evinced in legislation" weighed in favor of dismissal); Liberty Mut. Ins. Co. v. Foremost-McKesson, Inc. , 751 F.2d475, 477 (1st Cir. 1985) (fin ding exceptional circumstances when there was "real possibility" that insurance pol icy mi ght be interp ret eddifferently in each forum, leaving insured with insufficient coverage after years of paying premiums). This case does not involve any such exceptional circumstances or imp licate broadpolicy considerations. Rather, this dispute between a vendor andits sales representative over sales commissions presents "a straightforward application of state . . . laws," Burns , 931 F.2d at 143, and is of primary importance only to the immediate parties.

I t is true that the New York lawsuit commenced s evera l days before the instant case. However, the fourth factor relating-16-

to the order of the lawsuits "should not be measured exclusively by which complaint was fi led f irst, but rather in terms of how much progress has been made in the two actions." Cone , 460 U.S. at 21; Currie , 290 F.3d at 10. At the time the court heard Designs' motion to dismiss, the New York litigation was proceeding anemically, whereas KPS was prosecuting the instant case at an appreciable pace. This factor therefore does not weigh in favor of dismissal. Designs notes correctly that no federal substantive law is implicated in this dispute. However, the presence of state law issues weighs in favor of dismissal in only rare circumstances — namely, "when a case presents 'complex questions of state law that wouldbest be resolved by a state court.'" Villa Marina , 915 F.2d at 15 (quoting Am. Bankers Ins. Co. v. First State Ins. Co. , 891 F.2d882, 886 (11th Cir. 1990)); see , e.g. , Currie , 290 F.3d at 11 (staying federal proceedin g wh en "state law question [was] not clear" and court unsure "how the state ultimately would balance the important policy interests"). Hence, this factor does not weigh in favor of dismissal.

Designs insists that the instant litigation is "vexatious andreactive," a nd "a contrived, defensive reaction" to the New York lawsuit. We are unpersuaded. KPS sent a demand letter to Designs for $131,035.37 in unpaid commissions four months prior to the filing of the New York lawsuit by Designs. In that letter, KPS-17-

declared its intention to file suit should the demand not be met. If anything, Designs' lawsui t against KPS for over $5,000,000 in compensatory damages and $5,000,000 in punit ive damages could be viewedas a "contrived, defensive reaction" to KPS's demandletter.

Citi ng Vi lla Marina , Designs finally claims that the district court's summary denial of the motion to dis miss without opinion means that we must at least remand to the district court so that the court can justify its denial on the record. We disagree. This case concerns the denial of a motion to dismiss. In Villa Marina , the district court ha d grantedthe motion to dismiss without "balanc[ing] the factors in favor of dismissal against [the court's] obligation to exercise jurisdiction even in the face of duplication and judicial inefficiency." Villa Marina , 915 F.2d at 13. Given the heavy presumption in favor of ex ercisi ng jurisd iction and the lack of merit in Designs' arguments, the district court was justified in summarily denying Designs' motion. B. The Entry of Default

Designs argues that the district court erred in denying its motion to set aside the entry of default. See Fed. R. Civ. P. 55(c). Designs also maintains that the default judgment should be vacatedunder Rule 60(b). We will address these two contentions in turn.-18- 1. The Rule 55(c) Motion a. Legal Standards Rule 55(c) provides that a court may set aside an entry of default "for good cause shown." We review the district court's denial o f a Rule 5 5(c) motion for abuse of discretion, while we review a ny f actual findings underlying that decision for clear

error. Conetta v. Nat'l Hair Care Ctrs., Inc. , 236 F.3d 67, 75 (1st Cir. 2001); Gen. Contracting & Trading Co. v. Interpole, Inc. , 899 F.2d 109, 112 (1st Cir. 1990). We will not disturb the district court's decision unless it is "clearly wrong. " Bond Leather Co. v. Q.T. Shoe Mfg. Co. , 764 F.2d 928, 938 (1st Cir. 1985). Citing Coon v. Grenier , 867 F.2d 73 (1st Cir. 1989), Designs argues that we must look to three factors in scrutinizing the district court's ruling: (1) whether the default was willful; (2) whether setting asid e the default would have prejudiced KPS; and(3) whether Designs has a meritorious defense. See id. at 76. Since the district court didnot comment in detail upon these three considerations, Designs argues that the district court abused its discretion.

The three factors cited by Designs are cited frequently in the cases as elements of the " good cause" analysis under Rule 55(c). However, as we said in Coon , we would not "set for th any precise formula [for the good cause analysis], because we recognize-19-

that each case must necessarily turn o n i ts own unique circumstances." Id. As another court has put it, the th ree factors cited by Designs are not "talismanic," and we will consider others. CJC Holdings, Inc. v. Wright & Lato, Inc. , 979 F.2d60, 64 (5th Cir. 1992). In McKinnon v. Kwong Wah Restaurant , 83 F.3d 498 (1st Cir. 1996), we identified no fewer than seven factors a district court may consider:

(1) whether the default was willful; (2) whether setting it aside would prejudice the adversary; (3) whether a meritorious defense is presented; (4) the nature of the defendant's explanation for the default; (5) the good faith of the parties; (6) the amount of money involved; ( 7) the timing of the motion [to set aside entry of default]. Id. at 503. Thus Rule 55(c), as an "express[ i on of] the traditional inherent equity power of the federal courts," 10A Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d § 2692 (1998), permits the consid eratio n of a panoply of "relevant equitable factors." Enron Oil Corp. v. Diakuhara , 10 F.3d 90, 96 (2dCir. 1993). The "Rule 55(c) determinations are case-specific" and "must, therefore, be made in a practical, commonsense manner, without rigid adherence to, or undue reliance upon, a m echani cal formula." Gen. Contracting & Trading , 899 F.2d at 112. While the three factors identified by Designs are certainly "important" and "familiar," Conetta , 236 F.3d at 75, and a district court "should" consider them, Coon , 86 7 F.2d at 76, the failure of a district court to expressly consider them does not necessarily constitute an-20-

abuse of discretion. Likewise, the decision of the district court to accord dispositive weight to one of the familiar factors or other relevant equitable factors does not necessarily mean an abuse of discretion.

This flexibility is necessitated by the competing policies and values that underlie the concept of default. On the

one hand, it "provide[s] a useful remedy when a litigant is confrontedby an obstructionist adversary," and "play[s] a constructive role in maintaining the orderly and efficient administration of justice." Enron , 10 F.3d at 96. It furnishes an invaluable incentive for par ties t o comply with court orders and rules of procedure. See Fed. R. Civ. P. 37 (b)(2)( C). It encourag es t he expeditious resolution of litigation and promotes finality. See Wright, Miller & Kane, supra , § 2693. On the other hand, countervailing considerations include the goals of "resol[ving] cases on the merits," Key Bank of Me. v. Tablecloth Textile Co. , 74 F.3d 349, 356 (1st Cir. 1996), and avoiding "harsh

or unfair result[s]." Enron , 10 F.3d at 96. Since "defau l t judgments im plicat e sharply conflicting policies . . . the trial judge, who is usu ally the person most familiar with the circumstances of the case and is in the best position to evaluate the good faith and credibility of the parties, is entrusted with the task of balancing these competing considerations." Eagle Assocs. v. Bank of Montreal , 926 F.2d 1305, 1307 (2d Cir. 1991)-21-

(internal quotation marks omitted); see Bond Leather Co. , 764 F.2d at 938 (noting that "the district court, familiar with the parties andcircumstances, is best situated to weigh the reasons for and against setting aside a default judgment" (internal quotation marks omitted)). b. The District Court's Findings

Eleven days after the clerk had entered the default against Designs, Schrader faxed a letter to the court in which he assertedthat he had submitted a timely answer via Federal Express. In that letter, Schrader stated that the answer had been sent by a "temporarysecretary" and that he had been told by Federal Express that "the packages were likely rejected because the federal express [sic] slip filled out was an International Air Waybill" (original emphasis). Schrader indicated that he had b een t rying to get an af fidavi t from the temporary secretary who had been working that day. He also toldthe court that he would submit to the clerk that

same day a motion to vacate the default, along with an explanatory affidavit. The motion andaffidavit were not filed until one week later. In resp ons e, KPS filed an affidavit from its New York counsel, Brian Schrader (no relation to David, Designs' counsel), in which he asserted that Federal Express would not have destroyed

or lost the two p ack ages sent to Boston. He stated that he had testedDavid Schrader's explanation by sending a package to Hurvitz-22-

in Boston with an international airbill instead of a domestic one, andthat the package had arrived one day late. He also statedthat the name of the "temporary secretary" who had allegedly made the

error had not been produced by Designs, even in response to a subpoena. Hurvitz also submitted an affidavit stating that she had contactedFederal Express herself, and that Federal Express had assuredher that they never destroy or dispose of a package. Rather, if a package has the wrong type of waybill, Federal Express will either change the waybill itself or return the package to the sender to make the change; at most, a delay of one day w oul d be in curred. Brian Schrader's affidavit also included sever a l representations concerning Designs' co nduct in the New York litigation. Designs had allegedly failed to comply with numerous discovery demands and engaged in bad-faith dilatory tactics.

The district court held a hearing on May 17, 2000, on Designs' motion to remove the default. The court heard from Hurvitz and David Schrader. Although Schr ade r had informed the court earlier that he would not be able to personally attend because of a conflict, he nevertheless managed to appear. At the hearing, Schrader argued that the defau lt sho uld be set aside because (a) the default was not willful, (b) Designs had a meritorious defense, and (c) KPS could not show any prejudice. Schrader focused on the willfulness factor. Schrader also stuck to his story concerning the temporary secretary. However, he provided-23-

no affidavit from any temporary secretary despite his prior representation that he was attempting to obtain one. He now claimedthat there was no way he could determine who the temporary secretary was because his firm had used "20 different secretaries

over the course of the last two months." Moreover, he represented that, contrary to the affidavit filed by Brian Schra der, Designs hadbeen complying with its responsibilities in the New York litigation and that the New York case was proceeding apace.

The district court was not impressed. First, commenting

on the proce dural history to that point, the court characterized Schrader's behavior as "ston ewal ling," and she admonished him in open court: "We have had trouble with you from the b eginning." She noted his previous failures to meet deadlines and remarked on his duplicitousness, referencing his earlier representation that he could not attend the hearing and then his sudden appearance. She notedinconsistencies and implausibilities in Schrader's representations during the hearing about the late answer, and she foundother representations he had made in affidavits to be incredible. The court explicitly disbelieved Sc hrade r's story concerning the temporary secretary while believing the affidavit of the other attorney Schrader concerning Designs' intransi genc e in the New York litigation. These findings led to the dispositive ruling from the bench: "And because I do not credit these stories,-24-

because I do not find there to be good cause to remove the default, the motion to remove the default is denied."

c. Application of the Legal Standards In mak ing its ruling, the district court did not expressly cite the three facto rs emphasized by Designs (willfulness, a meritorious defense, and prejudice). We have already concluded, however, that the lack of such an analysis does not necessarily mean that the district court abused its discretion. Indeed, we think that the district court's ruling was entirely defensible.

By the time the district court deniedDesigns' motion to set aside the default, it had become well acquainted with the parties and circumstances in this case. It had conducted two motion hearings and one pretrial con ferenc e. It had received

numerous written communications from counsel and had taken several motions (w ith supporting materials) under advisement. Given the distric t cour t's familiarity with the case, and on the record developedin connection with the hearing, we cannot say that the district court clearly erred in its assessment of Schrader's credibility, nor did it clearly err in rejecting his proffered explanation for the default.

The burden of demonstrating good cause for the removal of

a default rested with Designs. See Bond Leather , 764 F.2d at 938. Thus, Designs had the burden to demonstrate a lack of willfulness.-25-

When the district court rejected Schrader's explanation, Designs

was effectively left with no explanation for the default. Hence Design s' argument that the default was not willful lacked any fact ual predicate and was properly disregarded by the district court. Cf. id. (finding that "district court was within its rights" when it "expressly rejected [defendant's] proffered explanation of its failure to answer").

At the default hearing, Schrader also argued that Designs had a meritorious defense which weighed in favor of setting aside the default. The district court, however, had once before taken a dimview of Designs' asserted defenses when it granted KPS's request to issue trustee process. Thus we take the district court's comment on "stonewalling" to imply that it adhered to her prior skepticism about the defenses, and that it felt that Designs

was merely trying to postpone the inevitable. Cf. Marziliano v. Heckler , 728 F.2d151, 156 (2d Cir. 1984) ("[W]e infer from the court's emphasis on its duty to do justice to the litigants before it t hat the court was unpersuaded as to the merits of the . . . defense."). We cannot say that the court erred in its evaluation of Designs' defense. All of the m ateri als offered by Designs in support of its defense were internally generated balance she ets, reports, and the like. KPS, on the other hand, attached copies of actual customer invoices and purchas e or ders to its complaint. Moreover, over the course of this dispute , the amount Designs-26-

claims it is due from KPS has varied wildly: at one time nothing ("a wash"), at another $6,000, at an other $30,000, at another $60,000, and finally over $74,000 (not inclu ding t he $10 million claimed in the New York lawsuit).

Schrader also argued before the district court that KPS wouldsuffer no prejudice if the default were to be set asid e. Schrader was correct on this point. In response, KPS directs us to Chuang Investments v. Eagl e Inn s, Inc. , 81 F.3d 13, 14 (1st Cir. 1996)(per curiam), for the proposition that prejudice is "inherent in needless delays and postponements." Chuang , however, concerned the dismissal of a plaintiff 's case (and an entry of default on counter-claims) for failure to comply with discovery orders. See id. at 14 ("The grounds stated [in defendant's motion to dismiss]

were the repeated failures of the [plainti ffs ] to respond to discovery reques ts. "). We have stated elsewhere that in the context of a Rule 55(c) motion, delay in and of itself does not constitute prejudice. "The issue is not mere delay, but rather its accompanying dangers: loss of evidence, increased difficulties of discovery, or an enhanced opportunity for fraud or c ollusion." FDIC v. Francisco Inv. Corp. , 873 F.2d 474, 479 (1st Cir. 1989). There is no indication that any of these dangers were pr esent or considered by the district judge when she ruled on the Rule 55(c) motion.-27- The district court, however, correctly gave significant weight to two other factors — the nature of Designs' explanation for the default, and the good faith of the parties. See McKinnon , 83 F.3d at 503. The district court determined that Schrader had fabricatedhis explanation regarding the filing of an answer — a finding that goes to the nature of the explanation as well as to Designs' good faith. We have noted before that "courts have inherent power to dismiss an action when a party has willfully deceivedthe court and engagedin conduct utterly inconsistent with the orderly administration of justice." Aoude v. Mobil Oil Corp. , 892 F.2d 1115, 1119 (1st Cir. 1989) (quoting Wyle v. R.J. Reynolds Indus. , 709 F.2d 585, 589 (9th Cir. 1983)); see also id. (quoting Link v. Wabash R.R. Co. , 370 U.S. 626, 630–31 (1962)) ("It is apodictic that federal courts possess plenary authority 'to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.'"). In light of these determinations of fabrication and bad faith, and its consideration of other salient factors, the district court did not abuse its discretion in refusing to set aside the default.

2. Rule 60(b) Relief On June 1 5, 2000, Designs filed "a motion pursuant to FRCP 60(b) for reargum ent and reconsideration of [the district court's] May 17, 200 0 bench decision denying Designs' motion to vacate the default entered against it." In support of this motion,3 A motion filed under Rule 60 permits a party to seek "Relief

FromJu dgment o r Order." Fed. R. Civ. P. 60. Typically, a Rule 60(b) motion seeks relief from judgment. In this case, Designs' R ule 60(b) motion sought relief from the court's order "deny in g [Designs'] motion to vacate the default entered against it." The motion could not (and did not) seek relief from judgment because the court had yet to enter judgment. -28- Designs argued the same points it had argued previously — a lack of willfulness, a lack of prejudice, and a meritorious defense. On July 26, the court endorsed the cover of Designs' Rule 60(b) motion: "Motion for reconsideration allowed. Upon reconsideration, the court affirms its decision denying the motion to vacate default."

Designs' Rule 60 (b) motion sought relief from the district court's order denying its request to set aside the de fault. 3 Designs' appellate brief makes clear, however, that it

now seeks Rule 60(b) relief from judgment under a theory never presentedto the district court. Relying principally on Community Dental Services v. Tani , 282 F.3d 1164, 1170 (9th Cir. 2002), Designs argue s that it is entitled to relief under Rule 60(b) on the basis of "excusable neglect" or "extraordinary circumstances"

— namely, that its attorney Schrader was "grossly negligent in fabricating a false explanation" and that it would be "grossly inequitable to sanction the client" who wa s " victimized" by its attorney. Thus, according to Designs, the district court "was obligedto vacate the default judgment against FMC under Rule 60(b) of the Federal Rules of Civil Procedure." We disagree.-29- In Tani , a trademark infringement case, Tani's lawyer had repeatedlyfailed to file and serve a stipulation and answer, despite representing to the court at an initial conference that he had done so, and despite being ordered at a subsequent conference to do so. When the plaintiff later moved for a default judgment andinjunc tio n, Tani's lawyer failed to file a memorandum in opposition, and the district court granted the plaintiff's motion. All the while, Tani's lawyer had been assuring his client that he

was handling the litigation and that the case was going well. Tani only learned of the default judgment entered against him when he receiveda copy of it at his office. Tani then dismissed his derelict attorney, retained new counsel, an d f iled a Rule 60(b) motion for relief from judgment. The district court denied the request, holding that a client is bound by the actions (or inaction) of his attorney. On appeal, the Ninth Circuit vacated the judgment, concluding that "conduct on the part of a client's allegedr epresentative that results in the client's receiving practically no repre senta tion at all clearly constitutes gross negligence, and vitiating [sic] the ag ency relationship that underlies our general policy of attributing to the client the acts of his attorney." Id. at 1171. According to the Tani court, since the client was not at fault, the district court erred in imputing the attorney's conduct to the client. See id. at 1172 ("It is-30-

clear from the record that any culpable conduct was committed by [Tani's laywer], not Tani.").

There are two serious flaws in Designs' reliance on the Ninth Circuit's decision in Tani . First, in this circuit we have consistently "turned a deaf ear to the plea that the sins of the attorney should not be visited upon the client." Farm Constr. Serv s., Inc. v. Fudge , 831 F.2d 18, 21 (1st Cir. 1987). We need not decide, however, whether to make an exception to this widely acceptedrule because of the second defect in De signs' argument: "It is hornbook law that theories not raised squarely in the district court cannot be surfaced for the first time on appeal." Nat'l Amusements, Inc. v. Town of Dedham , 4 3 F.3d 731 , 749 (1st Cir. 1995).

The cases cited by Designs are not to the contrary. In Tani the defendant dismissed his "grossly negligent" counsel, and Tani's new counsel sought 60(b) relief in the first instance in the district court. See Tani , 282 F.3d at 1167. In Carter v. Albert Einstein Medical Center , 804 F.2d 805 (3d Cir. 1986), the plaintiff discharged his attorney and, proceeding pro se, first sought Rule 60(b) relief in the district court unde r a "g ross negligence" theory prior to making the same argument on appeal. Id. at 806–07;

see also Boughner v. Sec'y of HEW , 572 F.2d 976, 977 (3d Cir. 1978) (Rule 60(b) claim first raised in district court by new counsel). The final case cited by Designs, Shepard Claims Service, Inc. v.4 By "base quantum" we mean the amount of compensatory damages

to which KPS was entitled prior to any doubling under Chapter 93A. -31- WilliamDarrah & Associates , 796 F.2d 190 (6th Cir. 1986), is altogether inapposite in that it concerns a Rule 55(c) motion to set aside the entry of default (not a Rule 60(b) motion to set aside a default judgment). The app ellate courts subscribing to Designs' "gross negligence" theory of relief have thus required the claimto be raised first in the district court — properly so, in

our view, given "the superior opportunity for the trial judge to

assess the challenged conduct." Carter , 8 04 F.2d at 807. We therefore reject Designs' claim for Rule 60(b) relief. C. The Calculation of Damages

In its order of July 27, 2000, the district court indicatedthat no hearing was necessary to determ ine th e base quantumof damages 4 since "the verified complaint and plaintiff's affidavit attached thereto set forth a sum certain based on sales

an d comm ission figures there detailed." The order also referred the matter to the magistrate ju dge for a hearing on Chapter 93A liability. The order did not, however, identify the amount of this "sumcertain." The district court subsequently clarified the amount of damages on September 28, 2001, when it overruled Designs' objections to the magistrate judge's Report and Recommendation on the doubling of damages under Chapter 93A: "Judgment may be enteredfor plaintiff in double the amount of its damages of5 D esigns was not permitted to challenge the base quantum o f

damages at the hearing before the magistrate judge. In accordance with the July 27 order, the magistrate judge limited the scope of that hearing to the issue of multiple damages under Chapter 93A. See infra Part II(D). -32- $183,577." The district court apparently arrived at this sum by looking to the ad damnumclause of the complaint.

Designs argues two related points with respect to the district court's calculation of damages. First, Designs argues that KPS's claim was not for a "sum certain" and that the district court erred in thereby fixing the base quantumof d amages on the basis of the complaint, without a hearing. Second, Designs argues that the district court erred in limiting the scope of the hearing before the magistrate judge to the issue of liability for multiple damages under Chapter 93A. 5 Designs maintains that it was entitled to an evidentiary hearing to determine the base quantum of damages, notwithstanding any admissions made as result of its default or the amount claimed in the ad damnumclause.

The district court's order of July 27, 2000, as clarified by its memorandum and order of September 28, 2001, was entered pursuant to Rule 55(b), which provides in pertinent part:

If, in order to enable the court to enter judgment or to carry it into effect , it is necessary to take an a ccount or to determine the amou nt of damages or to establish the truth of any ave rment by evidence or to make an investigation of any other matter, the court mayconduct such hearings or order such references as it deems necessary and proper and sh all accord a right of trial by jury to6 The district court's den omin ation of KPS's claim as a "sum

certain" uses a phrase found in subsection (b)(1), the only place in Rule 55 where the term "sum certain" appears: When the plaintiff's claim against a defendant is for a sumcertain or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if the defendant has been defaulted for failure to appear and is not an infant or incompetent person. Fe d. R. Civ. P. 55(b)(1). However, by its own terms, this subsection only applies "if the defendant has bee n defa ulted for failure to appear." Id. By the time the default had been entered, Designs had undeniably "appeared" in the action. See N.Y. Life Ins. Co. v. Brown , 84 F.3d 137, 142 (5th Cir. 1996) (holding that participation in telephone conference before magistrate judge constitu tes "appearance" for Rule 55 purposes). Thus subsection (b)(1) is inapplicable in this case to the determination of damages after the entry of default. -33-

the part ies when and as required by any statute of the United States. Fed. R. Civ. P. 55(b)(2) (emphasis added). On the basis of its conclusion that "the verified complaint and plaintiff's affidavit attachedthereto set f orth a sum certain," the district court determined that no evidentiary inquiry was necessary to calculate the amount of damages to be set forth in the default judgment. 6 We review the district court's refusal to inquire further for abuse of discretion. See HMG Prop. Investors, Inc. v. Parque Indus. Rio Canas, Inc. , 847 F.2d 908, 919 (1st Cir . 1 988) ("We review a determination that a hearing was not compulsory u nder R ule 55(b) only for abuse of discretion.").-34- We conclude that the district court abused its discretion in failing to conduct further inquiry before fixing th e b ase quantumof damages. There are two reasons why further inquiry was required. First, there are obvious discrepancies between the damages claimed in the body of the complaint and the damages requestedin the ad damnumclause, as well as serious arithmetical

errors in the affidavit filed with the complaint. Second, even without these errors and discrepancies, there would still be a need for further inquiry given the nature of KPS's claim.

According to the face of the complaint, KPS claims that it is entitled to $67,238 in base commissions and $63,795 in "sales price differentials," i.e., price mark-ups beyond cost. Adding these two figures results in a total of $131,033. However, in the enumerated counts and ad damnumclause, the complaint states that KPS is entitled to judgment against Designs in the amount of $183,577 —

an un explained difference of over $50,000. Likewise, KPS's affidavit filed in support of its complaint contains several

com putational errors. Signed by Sayles, the affidavit lis t s accounts fromsix different retailers, with commissions calculated at several different rates depending on the retailer. To take one account as an example, KPS claims that the cost differential for Gottscha lk's department store was supposed to be calculated at 9.54% based on a sales volume of $196,684, for a total of $18,668. However, 9.54% of $196,684 is $18,764. More glaringly, the-35-

affidavit concludes that the "total of the above amounts due from Designs is $183,577," yet the individual subtotals addup to approximately $160,000 — an unacco unted -for difference of over $23,000. Moreover, many of the acc ountings and purchase orders attachedas exhibits to the complaint's supporting affidavit are illegible or incomp r ehensible. Given these inconsistencies and errors, the district court erred in simply fixing the base quantum of damages at the amount stated in the complaint's ad damnum clause. See Transatl. Marine Claims Agency v. Ace Shipping Corp. , 109 F.3d 105, 111 (2d Cir. 1997) ("While the District Court may not have been obligated to hold an evidentiary hearing, it could not just accept [plaintiff's] statement of the damages."); Flaks v. Koegel , 504 F.2d 702, 707 (2d Cir. 1974) ("While a default judgment constitutes an admission of liability, the quantum of damages remains to be established by proof unless the amount is . . . susceptible of mathematical computation.").

Even if KPS's complaint and affidavit were free from the discrepancies and errors detailed above, the district court could not have determined damages without a further evidentiary inquiry. Following the entry of default, a district court can enter a final judgment without requiring further proof of damages only in limited situations. F or exa mple, no evidentiary inquiry is necessary if7 A s on e court has noted, "the cases discussing the sum

certain requirement of Rule 55 are few and far between and rather exiguous in their reasoning." Collex, Inc. v. Walsh , 74 F.R.D. 443, 450 (E.D. Pa. 1977); see also Byrdv. Keene Corp. , 104 F.R.D. 10, 12 (E.D. Pa. 1984) ("Relatively few cases have raised the question of what qualifies as a 'sum certain' for the purposes of Rule 55(b)."). Given this paucity of federal case law, we will look to states whose rules of procedure mirror the Federal Rules of Civil Procedure in the analysis that follows.

8 As we noted in footnote 6, supra , the phrase "sum certain" only appears in Fed. R. Civ. 55(b)(1), applicable only "if the defendant has been defaultedfor failure to appear." Nevertheless, the concept of a "s um ce rtain" is relevant to the question under Rule 55(b)(2) of whether a further evidentiary inquiry is necessary before the determination of damages. -36- the claim is for a "sum certain." 7 See 10 Moore's Federal Practice ¶ 55.22[1] (2002) ("In cases where the court has entered default judgment and the claim is for a sum certain, the court can enter the default judgment for the amo unt stated in the complaint."); accord Farm Family Mut. Ins. Co. v. Thorn Lumber Co. , 501 S.E.2d 786, 790 (W. Va. 1998) (indicating that "if the damages sought by the party moving for a default judgment are for a sum certain, or

a n amount which can be rendered certain by calculati on, n o evidentiary hearing on damages is necessary"); cf. Fed. R. Civ. P. 55(b)( 1) ( authorizing court clerk to enter default judgment sine decreto when claim is for sum certain and defendant has failed to appear). Contrary to the district court's statement, this is not

a sum certain case. 8 In the Rule 55 context, a claim is not a sum certain unless there is no doubt as to the amount to which a plaintiff is entitledas a result of the defendant's default. See ,9 Neither the fact that the complaint identifies a purpo rted

aggregate total, nor the fact that the affidavit attests to such a sum, automatically converts KPS's claim into a "sum certain."

Courts considering the question are clear that a claim is not for a "sum certain" merely because the demand in th e co mplaint is for a specific dollar amount. A contrary holding wouldpermit almost any unliquidated amount to be transformed into a claim for a sum certain simply by placing a monetary figur e on the itemof claimed damage, even though that amount has not been fixed, settled, or agreed upon b y the parties and regardless of the nature of the claim. FarmF amil y Mut. Ins. Co. , 501 S.E.2d at 791; accord Zorach v. Lenox Oil Co. , 1996 Mass. App. Div. 11, 13 (1996) ("Merely requesting a specif ic amount in the complaint or statement of damages does not fulfill the sum certain requirement."). -37- e.g. , Reynolds Sec., Inc. v. Underwriters Bank & Trust, Co. , 378 N.E.2d106, 109 (N.Y. 1978) ("The term 'sum certain' in this context contemplates a situation in which, once liability has been established, there can be no dispute as to the amount due, as in actions on money judgments andnegotiable instruments."); see also Interstate FoodProcessing Corp. v. Pellerito Foods, Inc. , 622 A.2d 1189 , 1193 (Me. 1993) ("Such situations include actions on money judgme n ts, negotiable instruments, or similar actions where the damages sought can be determined without resort to e xtri nsic proof. "). The First Circuit case cited by the district court in its July 27 order, Brockton , was jus t such a case — an action to collect on an unpaid certificate of deposit. See Brockton , 771 F.2d at 13. The instant appeal is clearly not such a case. 910 Some courts and commentat ors appe ar to use the terms "sum

certain" and "liquidated claim" interchangeably. See , e.g. , Farm Family , 501 S.E.2d at 791 ("Other jurisdictions considering the term'sum certain' have suggested that its meaning is similar to 'liquidated amount.'"); 46 Am. Jur. 2d Judgments § 291 ("The 'sum certain' requirement is clearly met where the c laim i s for liquidatedor statutory damages and clearly not met where the claim is for unliquidated damages."). Other author ities put a more distinguishing gloss on the terms. For exam ple , Black's Law Dictionary (7th ed. 1999) defines "sum certain" as 1. Any amount that is fixed, settled, or exact. 2. Commercial law. In a negotiable instrument , a sum that is agreed on in the instrument or a sum that can be ascertained from the document. Id. at 1449. It defines a "liquidated claim" as "[a] claim for an amount previously agreed on by the parties or that can be precisely determinedby operation of law or by the terms of the parties' agreement." Id. at 240. The text of Rule 55 appears to distinguish between a "sum certain" and "a sum which can by computation be made certain" (i.e., liquidated damages). See Fed. R. Civ. P. 55 (b )(1). In deciding this appeal, we need not definitively d elin eate the respective ambits of the terms "sum certain" and "liquidated claim." It is enough for us to conclude that KPS's claim is neither one. -38- As with a "sum certain," a hea rin g is not normally requiredif the claim is "liquidated." See 46 Am. Jur. 2d Judgmen ts § 313 ( "As a general proposition, in the context of a default judgment, unliquidated d a mages normally are not awarded without an evidentiary hearing; that rule, however, is subject to

an exception where the amount claimed is a liq uidat ed sum or one capable of mathematical calculation."). "'Liquidated' means adjusted, certain, settled with respect to amount, fixed. A claim is liquidated when the amount thereof has been ascertained and agreedupon by the parties or fixed by operation of law." 10 Farm-39-

Family Mut. Ins. , 501 S.E.2dat 791 (quoting Hallett Constr. Co. v. Iowa State Highway Comm'n , 139 N.W.2d 421, 426 (Iowa 1966)). The classic example is an enforceable liquidateddamag es clause in a contract. See 22 Am. Jur. 2d Damages § 683. Another example would be a delinquent tax assessment. United States v. Raleigh Rest. , 398 F. Supp. 496, 498 (E.D.N.Y. 1975). KPS and Designs, however, vigorously dispute the issue of damages. Likewise, KPS's damages have not been fixed by operation of law. Finally , as the inconsistences and inaccuracies in the complaint and the supporting affidavit amply demonstrate, KPS's claims are not capable of simple mathematical computation. Thus, KPS's complaint and its supporting affidavit do not state a liquidated claim.

Relyi ng on the erroneous conclusion that KPS's claim stated a claim for a sum certain, the district court did not look beyondthe complaint's ad damnumclause and an internally inconsistent supporting affidavit in fixing the base quantum of damages. For the reasons explai ned ab ove, this limited approach was an abuse of discretion requiring that we remand the matter to the district court for further consideration of the damages issue. However, Desig ns i s not necessarily entitled to an evidentiary hearing on remand. In limited circumstances we have permitted district courts to dispense with a Rule 55(b)(2) hearing, even in the face of apparently unliquidated claims. See e.g. , HMG , 847 F.2dat 919 (holding that district court, "intimately familiar with11 Given the history of misrepresentations from Designs,

Nussen, and their trial counsel, we remind the parties that it is well within the power of the district court to impose sanctions for any misrepresentations made on remand as to damages. See Fed. R. Civ. P. 11(c). -40- the case from years of travail," did not abuse discretion when it forwen t he aring and calculated damages from "mortgage and loan agreeme n ts, certifications by the taxing authorities, and other documents of record"). Other circuits are in agreement. See , e.g. , Action S.A. v. Marc Rich & Co., Inc. , 951 F.2d 504, 508 (2d Cir. 1991) (holding that full evidentiary hearing not required when court had been "inundated with affidavits, evidence, and oral presentations by opposing coun sel"); Dundee Cement Co. v. Howard Pipe & Concrete Prods., Inc. , 722 F.2d 1319, 1323 (7th Cir. 1983) (holding that district court did not abuse discretion by failing to holdhearing when amount claimed was "capable of ascertainment from definite figures contained in the docu mentary evidence or in detailedaffid avits"). We decline to decide whether the instant

case would lend itself to resolution without an evidentiary hearing, leaving that determination to the sound discretion of the district court on remand. In making this determin ati on, the district court may, of course, consider any evidence submitted at the Chapter 93A hearing. 11 D. The Chapter 93A Claim

Section 2 of Chapter 93A of the Massachusetts General Laws prohibits "[u]nfair methods of competition and unfair or12 The magistrate judge rul ed on De cember 6, 2000, that KPS

wouldnot be p ermi tted to introduce evidence concerning events which post-dated the a cti vities described in the complaint — in particular, evidence concerning the New York litigation. -41- deceptive acts or practices in the conduct of any trade or commerce." Mass. Gen. Laws Ann. ch. 93A, § 2 (West 2002). Upon a finding that a defendant has violated section 2, the court can

aw ard a plaintiff compensatory damages. "[R]ecovery shall be in the amount of actual damages; or up to three, but not less than two, times such amount if the court finds that the [conduct] was a willful or knowing violation of said section two." Id. § 11.

The court's order of July 27, 2000, provided as follows: Upon consideration of both plaintiff's request for hearing on assessment of damages on Count III, and defendant's opposition thereto with supporting and supplemental memoranda and documents, plaintiff's request is granted. It is ordered that this matter be referred to the Magistrate Judge for a hearing on damages under Mass. Gen. Laws, ch. 93 A, C ount III of the complaint. On January 29, 2001, after an adverse evidentiary ruling from the magistrate judge, 12 counsel for KPS wrote the magistrate judge, stating: "I am writing to inform the Court that KPS hereby waives

an evidentiary hearing on assessment of damages under Chapter 93A. Instead, in pursuing its claim for multiple damages under Chapter 93A, KPS will rely solely on the allegations of the Complaint and the reasonable inferences to be drawn therefrom." Soon thereafter, Designs, which o nly a few months before objected to any sort of-42-

hearing, demanded an evidentiary hearing on the issu e of willfulness. Designs argued that, even if t he def ault had established a 93A violation, Designs' conduct was not "knowing or will ful" and that KPS was thus not entitled to any doubling or trebling of damages. Designs also maintained that the allegations of the complaint failed to state a claim for relief under Chapter 93A and that the claim should be rejected on that ground as well.

At hearings on May 9 and June 11, 2001, the magistrate judge made clear his position: the district court had already determinedthat the complaint stat ed a c laim for relief under Chapter 93A, and the sole purpose of the referral was to determine whether KPS was entitled to a doubling or trebling of damages, i.e., to determine whether Designs' conduct was "willful or kn owing. " The magistrate judge ruled that he would permit testimony only o n t hat one issue. He then asked counsel for Designs if Design s, in ligh t of that ruling, still wished to go forwar d wi th the evidentiary hearing. Counsel for Designs responded in the affirmative.

The magistrate judge then conducted an evidentiary hearin g a t which he heard testimony from Nussen and Designs' accounts receivable clerk. On August 3, 2001, the magistrate judge issue a Report and Recommendation. In it, he found that Designs, "by and through its principal, Nusse n, k nowingly and willfully refusedto pay KPS commissions due and owing in violation of known-43-

contractual obligations." The magistrate judge therefore recommendedan award of double damages under Chapter 93A. Designs timely filed objections to the Report and Recommendation, each of which the district court overruled.

1. Willfulness We review the magistrate judge's factual determination of willfulness for clear error. Pepsi-Cola Metro. Bottling C o. v. Checkers, Inc. , 754 F.2d10, 18–19 (1st Cir. 1985). Designs tries to paint Nussen as a reasonable businessman who only refused to pay because he believed "an accounting showed that KPS owed money to Designs." Designs argues that "uncontradicted" testimony by Nussen demo nstratedthat at the time Designs terminated KPS's contract, Nussen honestly believed that KPS owed Designs money. While we do not dispute Designs' contention that a "good faith dispute as to whether money is owed . . . is not the stuff of which a c. 93A claimis made," Duclersaint v. Fed. Nat'l Mortgage Ass'n , 696 N.E.2d536, 540 (Mass. 1998), the Massachusett s Su preme Judicial Court has made clear that "con duc t 'in disregard of known contractual arrangements' and intended to secure benefits for the breaching party constitutes an unfair act or practice for c. 93A purposes." Anthony's Pier Four, Inc. v. HBC Assocs. , 583 N.E.2d 806, 821 (Mass. 1991) (quoting Wang Labs., Inc. v. Bus. Incentives, Inc. , 501 N.E.2d 1163, 1165 (Mass. 1986)). The magistrate judge-44-

hadample evidence before him to find that Designs (through Nussen) had willfully evaded its known contractual obligations to KPS.

In his Report and Recommendation, the magistrate judge wrote: [D]efendant's proffered justification was and

is clearly unadorned pretext without any factual basis whatsoever. Nussen said that he didnot pay the commissions because he thought it was a "wash." Yet, he never said that in response to the formal demand. To the contrary, Nussen's so-called "wash," shortly after that demand for an accounting and payment, found new life in a state-filed c o mplaint in which he allegedthat KPS owed Designs no less than $5,000,000. It is clear to this court, from the fact that Nussen never meaningfully responded to plaintiff's formal demandfor payment, and from all th at N ussen said, that his true motivation was, as he so testified, that he was irked by reason of the fa ct that he thought Sayles and KPS se rve d others as well in the distribution of jewelry while representing Designs. But that is hardly justification for evading known contractual obligations. Even assuming that KPS should not have represented others while representing [Designs] (and that is not the case [by virtue of the well-pleaded allegation in paragraph 20 of the complaint, admitted by default]), Nussen's self-help conduct of simply refusing to pay moneys due andowing to KPS is simply the inappropriate and inexcusable response. The magistrate judge's conclusions are not clearly erroneous. At the damages hearing Nussen was an evasive witness, repeatedly refusing to give direct answers to questions posed by opposing counsel and questions posed by the court. He repeatedly

c ontradictedhimself on the witness stand and was impeache d wit h13 Although the authorities are not uniform, the prevailing view is that a n entry of default prevents the defendant from disputing the truth of the well-pleaded facts in the complaint pertaining to liability. But, the defendant may still contest a claim on the groundthat the complaint does not allege fa cts that add up to the elements of a caus e of action. -45- his own affidavit fi led that morning in connection with (yet another) motion to dismiss. Morever, any belief that Nussen had with regard to the amount KPS allegedly owed Designs could hardly be considered "honest" in light of Nussen's wildly morphing claims

— over the course of this dispute, Nussen has claimed that KPS owed Designs $60,000, at another point $30,000, els ewhe re $6,000, and finally, as the magistrate noted in the excerpt quoted above, that Nussen considered it all "a wash" (leaving aside the claim for over $5,000,000 in the New York lawsuit). The record clearly supports the magistrate judge's fac tual finding on the willfulness of Nussen's and Designs' conduct.

2. The Sufficiency of the 93A Allegations Designs argued before the district court, andnow argues here, that the factual allegations deemed admitted by virtue of its default do not constitute a 93A violation. In effect, Designs seek s t o dismiss the 93A count for failure to state a claim, notwithstanding the entry of default. See Fed. R. Civ. P. 12(b)(6). The district court assumed it could entertain such an argument and then summarily disposed of it. We do the same. 13Conetta , 236 F.3dat 75–76 (internal quotation marks and citations

omitted). We assume, without deciding, that this case lends itself to such an argument. -46-

a. The Business Relationship The protections of Chapter 93A are not available to parties in a strictly private transaction, "where the undertaking is not 'in the ordinary course of a trade or business.'" Linkage Corp. v. Trustees of Boston Univ. , 679 N.E.2d191, 207 n.33 (Mass. 1997) (quo tin g Lantner v. Carson , 373 N.E.2d 973, 975 (Mass. 1978 )). Thus "intra-enterprise" transactions do not fall within the statute's purview. Included in this classification are "disputes stemming from an employment relationship, disputes between indivi d ual members of a partnership arising from partnership business, and transactions anddisputes between parties to a joint venture andbetween fellow shareholders." Id. Designs tries to avail itself of this "intra-enterprise" exemption by claiming that KPS's claims con stit ute a "private grievance," the result of an "internal business dispute," and not an "arms-length commercial marketplace transaction." This argument contradicts the well-pleaded allegations deemed admitted by operation of Designs' default and defies common sense. The complaint alleged that KPS was a Florida corporation with its principal place of business in Massachusetts, and that Designs was a New York corporation with its principal place of business in Brooklyn. It also alleged that: (1) KPS was an ind ependent sales representative; (2) certain-47-

agreements confirmed that inde pendent status; and (3) the relationship was not exclusive. On these admitted facts, we can only conclude that this arrangement constitu ted "an arm's-length transaction between two corporations under which [plaintiff] providedservices to [defendant] and received compensation." Linkage , 679 N.E.2d at 207.

b. The Unfair or Unscrupulous Conduct Designs next argues that Des igns' mere "refusal to pay Sayles' demand was not an unfai r o r unscrupulous response," and thus does not fall within the ambit of Chapter 93A. The complaint, however, alleged that Designs (1) refused to pay KPS or provide any statements and accountings, despite repeateddemands to do so; (2) usederr oneous ly low commission rates; (3) demanded, without justification, that KPS stop dealing with Jasco, threatening to unilaterally ter minate Designs' contract with KPS unless KPS complied; (4) carried through on that threat; and (5) arbitrarily decidedto limit KPS's commissions to orde rs received less than ninety days after Designs had unilaterally terminatedits contract with KPS . All of these allegations were deemed admitted as a result of Desi gns' default. As a matter of law, the complaint alleges conduct sufficiently unscrupulous and unfair to state a 93A14 The magistrate judge noted that, even if the district court

hadnot ruled th at KPS was entitled to 93A relief as a matter of law by virtue of Designs' default, he would have still reached the same conclusion on the evidentiary record before him. -48- claim. See Anthony' s Pier Fou r, Inc. 583 N.E.2d at 821. (Mass. 1991). 14 c. Primarily and Substantially Within Massachusetts

The conduct proscribed by Chapter 93Awill only give rise to a valid claim if "the actions and transactions constituting the allegedunfair meth od of competition or the unfair or deceptive practice occurred primarily and substantially within the Commonwealth [of Massachusetts]." Mass. Gen. Laws Ann. ch. 93A, § 11 (West 2002). In determining whether the conduct occ urred "primarily and substantially" in Massachusetts, we will look to three factors: (1) where the defendant engaged in unfair or unscrupulous conduct; (2) where the plaintiff was on the receiving endo f the unfa ir or unscrupulous conduct; and (3) the situs of plaintiff's losses due to the un fair and unscrupulous conduct. Roche v. Royal Bank of Can. , 109 F.3d 820, 829 (1st Cir. 1997); Clinton Hosp. , 907 F.2d at 1265–66.

As for the first factor, Designs argues that it is a New York corporation, with no office or showroom in Massachusetts, and that Sayles would travel to New York to meet with Nussen. This may be true. The complaint, however, alleged that Designs contracted with KPS to secure new accounts for Designs with several different-49-

retailers in Massachusetts. The complaint also alleged that after KPS had become entitled to commissions on the Massachusetts accounts, Designs repudiated its contract with KPS and shortchanged KPS through communications delivered to KPS in Massachusetts.

As for the second and third factors, they both weigh heavily on the side of KPS. The complaint alleged that KPS had secured accounts for Designs with retailers whose "usual place[s] of business" were in Massachusetts. Thus KPS's unpaid commissions accruedin Massachusetts. The complaint also al leged that KPS's principal place of business was in Massachusetts when it became the target of the unfair and unscrupulous conduct. Therefore, for Chapter 93A purposes, on the basis of the facts deemed admitted, we conclude that the unfair and unscrupulous conduct at issue occurred primarily and substantially within the Commonwealth of Massachusetts.

3. The Remand Finally, we note that the sole issue before the magistrate judge was the nature of Designs' conduct and whether it

was "willful or knowing" under Chapter 93A. We affirm the magis t rate judge's "willfulness" determination and his award of double damages. The fact that we are remanding is unrelated to the awardof double damages, and the issue of "willfulness " unde r Chapter 93A should not be revisited on remand. Whatever the district court finds to be the proper base quantum of damages, that15 For the same reason, we will not consider Designs'

"suggestion" — made in a short footnote on the last page of its opening brief — that we reassign this case to a different judge on remand. Such an argument would be baseless in any event. -50- amount s hould be doubled as a result of our affirming the 93 A rulings, and judgment should be entered accordingly. E. Sanctions

1. In the District Court Designs has put forward no argument with respect to its appeal of the district court's order imposing $5,000 in sanctions. "An appellant waives any issue which it does not adequately raise in its initial brief." Playboy Enters., Inc. v. Pub. Serv. Comm'n of P.R. , 906 F.2d 25, 40 (1st Cir. 1990). We will therefore affirm the district court's order imposing sanctions. 15

2. On Appeal The acrimony which permeated the district court proceedings has spilled over on appeal. Prior to oral argument, Designs filed a motion for sanctions against KPS pursuant to our Local Rule 30(e), claiming tha t KP S unreasonably and vexatiously increase d th e costs of litigation through the inclusion of unnecessary materials in the joint appendix. KP S file d an opposition brief in which it cro ss-mov ed for attorneys' fees and expenses incurred in responding to Designs' "frivolous motion." Having duly considered both requests, we find them meritless. They are denied.-51- III. For the forgoing reasons, we affirm the district court's entry of a default judgment against Designs with respect to liability, andwe affirm the doubling of compensatory damages under Chapter 93A. However, we vacate the district court's calculation of the base quantum of compensatory damages, and remand for further proceedings not inconsistent with this opinion.

Designs' motion for sanctions is hereby DE NIED . KPS's cross-motion for attorneys' fees is hereby DENIED .

AFFIRMED in part, VACATED in part, and REMANDED . Each party to bear its own costs. SO ORDERED .