United States Court of Appeals

For the First Circuit

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 Theresa A. O'Loughlin was on

brief, for appellee.

January 28, 2003
1 In these consolidated appeals, Designs challenges the entry

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

2521.

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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 against Designs 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 the entry of default. Designs also appeals the

district court's assessment of $5,000 in sanctions.1 

For the reasons stated below, we affirm the district

court in all respects save one — the computation of the base

quantum of damages 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
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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 during the 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

throughout the 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 and 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

complaint alleges that it was not, and that KPS was free to

represent other jewelry distributors. KPS goes on to allege in its

complaint that it secured 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 detailing items shipped to
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retailers, and then KPS would send Designs a statement detailing

the commissions due arising out of those orders. According to the

complaint, KPS became so successful 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 23, 1995, and 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

had fallen far behind in its payments to KPS — to the tune of

$146,016 — and Designs remained behind in its payments through

1996. The complaint goes on to allege that in December 1996

Designs issued 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 erroneously low

commission percentages. 

At some point in 1997, KPS began 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 representation of Jasco in July 1998, Nussen contacted

Sayles, demanding that KPS terminate its relationship with Jasco.

Sayles refused because, according to the complaint, exclusive
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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 KPS. The letter cited

"irreconcilable differences" as the basis for this termination and

indicated that KPS would be provided with a final accounting. The

letter unilaterally limited the payment of unpaid 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-day period

had expired. In any event, Designs never provided KPS with a final

accounting, nor did Designs pay KPS the commissions it was

claiming.

On April 27, 1999, KPS's counsel, Karen Hurvitz, sent a

demand letter 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 Hurvitz received 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.
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On September 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 breach 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

unverified complaint, however, 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

complaint also 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 faxed a copy of Designs'

yet-to-be-served complaint to Hurvitz, together with a cover letter

asking her to accept service on behalf of KPS and Sayles. In a

separate letter faxed at the same time, Schrader 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

Designs on behalf of KPS in the United States District Court for

the District of Massachusetts. The complaint and its supporting

affidavits detailed sales accounts with six different retailers and

included copies of invoices from each of those retailers. The
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complaint and the affidavit listed specific commissions due based

on figures contained in those invoices. Although there are some

inconsistencies and computational errors 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]nfair methods of competition and unfair or

deceptive acts or practices in the conduct of any trade or

commerce"). KPS's complaint also listed four local customers of

Designs as trustees and requested attachments against each of them

in the amount of $65,000. See Mass. 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 attorneys accused each other of misconduct and

filed numerous motions for sanctions, to strike, to quash, 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 and the district court. Schrader, counsel
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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

courtroom deputy had erroneously led him to believe that the

trustee process was "a question of getting authorization to serve

papers, as opposed 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 had expired 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"

(original emphasis). The next day, in lieu of a formal motion,

Schrader faxed a "letter brief" to chambers in which he (a)

indicated once 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

had demonstrated a reasonable likelihood of success on the merits,
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issued an 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 from a 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

attachment against KPS. According to KPS's New York counsel,

Schrader admitted to him and the New York court that the reason

Schrader had sought the restraining order was because "if Sayles

obtained an 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 filed a 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,

did not 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 the
2 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.

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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

submitted to the court a request 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

entered a notice of default against Designs pursuant to Rule 55(a)

of the Federal Rules of Civil Procedure. Copies of the notice were

served on 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 asserted 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,
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denying Designs' motion to set aside the entry of default. The

court characterized Schrader's behavior over the course of the

litigation as "stonewalling" and explicitly disbelieved Schrader's

proffered explanation with regard to the filing of the answer. She

told Schrader: "We have had trouble with you from the very

beginning." She concluded: "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 remove the default is denied." One month

later, on June 14, Designs filed a motion for reconsideration —

styled as 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

verified complaint and plaintiff's affidavit

attached thereto 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 default 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

determine whether Designs' unlawful conduct was "willful or
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knowing." The magistrate judge permitted no evidence on the base

quantum of damages, which the court had fixed as the "sum certain"

contained in the complaint and a supporting affidavit. 

Following the hearing on 93A liability, the magistrate

judge issued a Report and Recommendation finding that Designs had

willfully and knowingly engaged in conduct prohibited 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 objections. Judgment was entered on

September 28, 2001, for $367,154 — twice the $183,577 recited in

the ad damnum clause of KPS's complaint — plus prejudgment

interest. On October 23, 2001, Designs filed a timely notice of

appeal.

In the days leading up to the Chapter 93A hearing,

Designs had served subpoenas duces tecum on KPS's "custodian of

records," KPS's "resident agent," KPS's bank, and Jasco. Copies

were not served on KPS's counsel, and KPS's counsel only learned of

them from the witnesses involved. KPS immediately moved to quash

the subpoenas and also 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
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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 motion to dismiss or stay the proceedings in light of the

ongoing New York litigation. The decision to dismiss or stay

proceedings in light of parallel litigation is "necessarily left 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,

however, is greatly constrained by what the Supreme Court has

labeled an "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 unflagging 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 and its progeny, courts look to

a variety of factors to determine whether "exceptional
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circumstances" exist which counsel the abdication of jurisdiction

in favor of parallel state court litigation. Always keeping in

mind the "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

federal forum; (3) the desirability of avoiding piecemeal

litigation; (4) the order in which the forums obtained

jurisdiction; (5) whether state or federal law controls; (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 to exercise

jurisdiction and the combination of factors counseling against that

exercise is required.'" Id. (quoting Colo. River, 424 U.S. at

818–19).

Designs concedes that neither the first nor the second

factor (jurisdiction over a res or inconvenience of the federal

forum) weighs in favor of dismissal. We conclude that none of the

others do either. 
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As for the concern about piecemeal litigation,

"[d]ismissal is not warranted simply because related issues

otherwise would be decided by different courts, or even because two

courts otherwise would be deciding the same issues." Id. at 16.

Rather, concerns about piecemeal litigation "should focus on the

implications and practical effects of litigating suits deriving

from the 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 (finding 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.2d 475, 477 (1st Cir. 1985) (finding exceptional circumstances

when there was "real possibility" that insurance policy might be

interpreted differently in each forum, leaving insured with

insufficient coverage after years of paying premiums). This case

does not involve any such exceptional circumstances or implicate

broad policy considerations. Rather, this dispute between a vendor

and its 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.

It is true that the New York lawsuit commenced several

days before the instant case. However, the fourth factor relating
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to the order of the lawsuits "should not be measured exclusively by

which complaint was filed first, 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

would best 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.2d 882, 886 (11th Cir. 1990)); see, e.g., Currie, 290 F.3d at 11

(staying federal proceeding when "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

and reactive," and "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
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declared its intention to file suit should the demand not be met.

If anything, Designs' lawsuit against KPS for over $5,000,000 in

compensatory damages and $5,000,000 in punitive damages could be

viewed as a "contrived, defensive reaction" to KPS's demand letter.

Citing Villa Marina, Designs finally claims that the

district court's summary denial of the motion to dismiss 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 had granted the 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 exercising

jurisdiction 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

vacated under Rule 60(b). We will address these two contentions in

turn.
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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 of a Rule 55(c) motion for abuse of discretion, while we

review any factual 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 aside the default would have prejudiced KPS;

and (3) whether Designs has a meritorious defense. See id. at 76.

Since the district court did not 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 forth any

precise formula [for the good cause analysis], because we recognize
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that each case must necessarily turn on its own unique

circumstances." Id. As another court has put it, the three

factors cited by Designs are not "talismanic," and we will consider

others. CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60, 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[ion of] the

traditional inherent equity power of the federal courts," 10A

Wright, Miller & Kane, Federal Practice and Procedure: Civil 3d §

2692 (1998), permits the consideration of a panoply of "relevant

equitable factors." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96

(2d Cir. 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 mechanical

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, 867 F.2d at 76, the failure of a district

court to expressly consider them does not necessarily constitute an
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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

confronted by 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 parties to comply with court orders and

rules of procedure. See Fed. R. Civ. P. 37(b)(2)(C). It

encourages the 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 "default

judgments implicate sharply conflicting policies . . . the trial

judge, who is usually 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)
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(internal quotation marks omitted); see Bond Leather Co., 764 F.2d

at 938 (noting that "the district court, familiar with the parties

and circumstances, 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

asserted that he had submitted a timely answer via Federal Express.

In that letter, Schrader stated that the answer had been sent by a

"temporary secretary" 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 been trying to get an

affidavit from the temporary secretary who had been working that

day. He also told the court that he would submit to the clerk that

same day a motion to vacate the default, along with an explanatory

affidavit. The motion and affidavit were not filed until one week

later.

In response, 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 packages sent to Boston. He stated that he had

tested David Schrader's explanation by sending a package to Hurvitz
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in Boston with an international airbill instead of a domestic one,

and that the package had arrived one day late. He also stated that

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

contacted Federal Express herself, and that Federal Express had

assured her 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 would be

incurred. Brian Schrader's affidavit also included several

representations concerning Designs' conduct 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 Schrader 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 default should 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

claimed that 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 Schrader, Designs

had been 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 procedural history to that point, the court characterized

Schrader's behavior as "stonewalling," and she admonished him in

open court: "We have had trouble with you from the beginning."

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

noted inconsistencies and implausibilities in Schrader's

representations during the hearing about the late answer, and she

found other representations he had made in affidavits to be

incredible. The court explicitly disbelieved Schrader's story

concerning the temporary secretary while believing the affidavit of

the other attorney Schrader concerning Designs' intransigence 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 making its ruling, the district court did not

expressly cite the three factors 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 denied Designs' 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 conference. It had received

numerous written communications from counsel and had taken several

motions (with supporting materials) under advisement. Given the

district court's familiarity with the case, and on the record

developed in 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

Designs' argument that the default was not willful lacked any

factual 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

dim view 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.2d 151, 156 (2d Cir. 1984) ("[W]e infer from the

court's emphasis on its duty to do justice to the litigants before

it that 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 materials offered by Designs in

support of its defense were internally generated balance sheets,

reports, and the like. KPS, on the other hand, attached copies of

actual customer invoices and purchase orders 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 another $30,000, at another

$60,000, and finally over $74,000 (not including the $10 million

claimed in the New York lawsuit).

Schrader also argued before the district court that KPS

would suffer no prejudice if the default were to be set aside.

Schrader was correct on this point. In response, KPS directs us to

Chuang Investments v. Eagle Inns, 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 [plaintiffs] to respond to

discovery requests."). 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 collusion."

FDIC v. Francisco Inv. Corp., 873 F.2d 474, 479 (1st Cir. 1989).

There is no indication that any of these dangers were present 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

fabricated his 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

deceived the court and engaged in 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 15, 2000, Designs filed "a motion pursuant to

FRCP 60(b) for reargument and reconsideration of [the district

court's] May 17, 2000 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

From Judgment or Order." Fed. R. Civ. P. 60. Typically, a Rule

60(b) motion seeks relief from judgment. In this case, Designs'

Rule 60(b) motion sought relief from the court's order "denying

[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

default.3 Designs' appellate brief makes clear, however, that it

now seeks Rule 60(b) relief from judgment under a theory never

presented to the district court. Relying principally on Community

Dental Services v. Tani, 282 F.3d 1164, 1170 (9th Cir. 2002),

Designs argues 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 was "victimized" by its

attorney. Thus, according to Designs, the district court "was

obliged to 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

repeatedly failed 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

and injunction, 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

received a copy of it at his office. Tani then dismissed his

derelict attorney, retained new counsel, and filed 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

alleged representative that results in the client's receiving

practically no representation at all clearly constitutes gross

negligence, and vitiating [sic] the agency 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.

Servs., Inc. v. Fudge, 831 F.2d 18, 21 (1st Cir. 1987). We need

not decide, however, whether to make an exception to this widely

accepted rule because of the second defect in Designs' 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, 43 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 under a "gross 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-

William Darrah & 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 appellate courts subscribing to

Designs' "gross negligence" theory of relief have thus required the

claim to 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, 804 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

indicated that no hearing was necessary to determine the base

quantum of damages4 since "the verified complaint and plaintiff's

affidavit attached thereto set forth a sum certain based on sales

and commission figures there detailed." The order also referred

the matter to the magistrate judge for a hearing on Chapter 93A

liability. The order did not, however, identify the amount of this

"sum certain." 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

entered for plaintiff in double the amount of its damages of
5 Designs was not permitted to challenge the base quantum of

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 damnum clause 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 quantum of damages 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 damnum clause.

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 account or to determine

the amount of damages or to establish the

truth of any averment by evidence or to make

an investigation of any other matter, the

court may conduct such hearings or order such

references as it deems necessary and proper

and shall accord a right of trial by jury to
6 The district court's denomination 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

sum certain 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.

Fed. R. Civ. P. 55(b)(1). However, by its own terms, this

subsection only applies "if the defendant has been defaulted 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

constitutes "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 parties 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

attached thereto set forth 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. 1988) ("We review a

determination that a hearing was not compulsory under Rule 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 the base

quantum of 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

requested in the ad damnum clause, 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 damnum clause, the complaint states that

KPS is entitled to judgment against Designs in the amount of

$183,577 — an unexplained difference of over $50,000. Likewise,

KPS's affidavit filed in support of its complaint contains several

computational errors. Signed by Sayles, the affidavit lists

accounts from six 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

Gottschalk'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 add up to

approximately $160,000 — an unaccounted-for difference of over

$23,000. Moreover, many of the accountings and purchase orders

attached as exhibits to the complaint's supporting affidavit are

illegible or incomprehensible. 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. For example, no evidentiary inquiry is necessary if
7 As one 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 Byrd v. 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 defaulted for failure to appear." Nevertheless,

the concept of a "sum certain" 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 amount 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

an amount which can be rendered certain by calculation, no

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 entitled as a result of the defendant's default. See,
9 Neither the fact that the complaint identifies a purported

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 the complaint is for a

specific dollar amount. A contrary holding

would permit almost any unliquidated amount to

be transformed into a claim for a sum certain

simply by placing a monetary figure on the

item of claimed damage, even though that

amount has not been fixed, settled, or agreed

upon by the parties and regardless of the

nature of the claim.

Farm Family 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 specific 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.2d 106, 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 and negotiable instruments."); see also

Interstate Food Processing Corp. v. Pellerito Foods, Inc., 622 A.2d

1189, 1193 (Me. 1993) ("Such situations include actions on money

judgments, negotiable instruments, or similar actions where the

damages sought can be determined without resort to extrinsic

proof."). The First Circuit case cited by the district court in

its July 27 order, Brockton, was just 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.9
10 Some courts and commentators appear 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 claim is for

liquidated or statutory damages and clearly not met where the claim

is for unliquidated damages."). Other authorities put a more

distinguishing gloss on the terms. For example, 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

determined by 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 delineate 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 hearing is not normally

required if the claim is "liquidated." See 46 Am. Jur. 2d

Judgments § 313 ("As a general proposition, in the context of a

default judgment, unliquidated damages normally are not awarded

without an evidentiary hearing; that rule, however, is subject to

an exception where the amount claimed is a liquidated 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

agreed upon by the parties or fixed by operation of law."10 Farm
-39-

Family Mut. Ins., 501 S.E.2d at 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 liquidated damages 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.

Relying on the erroneous conclusion that KPS's claim

stated a claim for a sum certain, the district court did not look

beyond the complaint's ad damnum clause and an internally

inconsistent supporting affidavit in fixing the base quantum of

damages. For the reasons explained above, 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, Designs is 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.2d at 919 (holding that district court, "intimately familiar with
11 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

forwent hearing and calculated damages from "mortgage and loan

agreements, 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 counsel"); 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

hold hearing when amount claimed was "capable of ascertainment from

definite figures contained in the documentary evidence or in

detailed affidavits"). 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 determination, 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 or
12 The magistrate judge ruled on December 6, 2000, that KPS

would not be permitted to introduce evidence concerning events

which post-dated the activities 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

award 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. 93A, Count 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 only a few months before objected to any sort of
-42-

hearing, demanded an evidentiary hearing on the issue of

willfulness. Designs argued that, even if the default had

established a 93A violation, Designs' conduct was not "knowing or

willful" 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

determined that the complaint stated a claim 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

knowing." The magistrate judge ruled that he would permit

testimony only on that one issue. He then asked counsel for

Designs if Designs, in light of that ruling, still wished to go

forward with the evidentiary hearing. Counsel for Designs

responded in the affirmative.

The magistrate judge then conducted an evidentiary

hearing at 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, Nussen, knowingly and willfully

refused to pay KPS commissions due and owing in violation of known
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contractual obligations." The magistrate judge therefore

recommended an 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 Co. v.

Checkers, Inc., 754 F.2d 10, 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

demonstrated that 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

claim is made," Duclersaint v. Fed. Nat'l Mortgage Ass'n, 696

N.E.2d 536, 540 (Mass. 1998), the Massachusetts Supreme Judicial

Court has made clear that "conduct '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-

had ample 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

did not 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

complaint in which he alleged that 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

demand for payment, and from all that Nussen

said, that his true motivation was, as he so

testified, that he was irked by reason of the

fact that he thought Sayles and KPS served

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 and owing 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

contradicted himself on the witness stand and was impeached with
13 Although the authorities are not uniform, the

prevailing view is that an 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

ground that the complaint does not allege

facts that add up to the elements of a cause

of action.

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his own affidavit filed 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, elsewhere $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 factual finding on the willfulness of

Nussen's and Designs' conduct.

2. The Sufficiency of the 93A Allegations

Designs argued before the district court, and now argues

here, that the factual allegations deemed admitted by virtue of its

default do not constitute a 93A violation. In effect, Designs

seeks to 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.13
Conetta, 236 F.3d at 75–76 (internal quotation marks and citations

omitted). We assume, without deciding, that this case lends itself

to such an argument.

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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.2d 191, 207 n.33 (Mass.

1997) (quoting 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 individual members of a partnership arising from

partnership business, and transactions and disputes between parties

to a joint venture and between fellow shareholders." Id. Designs

tries to avail itself of this "intra-enterprise" exemption by

claiming that KPS's claims constitute 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 independent sales representative; (2) certain
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agreements confirmed that independent status; and (3) the

relationship was not exclusive. On these admitted facts, we can

only conclude that this arrangement constituted "an arm's-length

transaction between two corporations under which [plaintiff]

provided services to [defendant] and received compensation."

Linkage, 679 N.E.2d at 207.

b. The Unfair or Unscrupulous Conduct

Designs next argues that Designs' mere "refusal to pay

Sayles' demand was not an unfair or 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 repeated demands to do so; (2)

used erroneously low commission rates; (3) demanded, without

justification, that KPS stop dealing with Jasco, threatening to

unilaterally terminate Designs' contract with KPS unless KPS

complied; (4) carried through on that threat; and (5) arbitrarily

decided to limit KPS's commissions to orders received less than

ninety days after Designs had unilaterally terminated its contract

with KPS. All of these allegations were deemed admitted as a

result of Designs' default. As a matter of law, the complaint

alleges conduct sufficiently unscrupulous and unfair to state a 93A
14 The magistrate judge noted that, even if the district court

had not ruled that 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.

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claim. See Anthony's Pier Four, Inc. 583 N.E.2d at 821. (Mass.

1991).14

c. Primarily and Substantially Within Massachusetts 

The conduct proscribed by Chapter 93A will only give rise

to a valid claim if "the actions and transactions constituting the

alleged unfair method 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 occurred

"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

end of the unfair or unscrupulous conduct; and (3) the situs of

plaintiff's losses due to the unfair 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
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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

accrued in Massachusetts. The complaint also alleged 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

magistrate judge's "willfulness" determination and his award of

double damages. The fact that we are remanding is unrelated to the

award of double damages, and the issue of "willfulness" under

Chapter 93A should not be revisited on remand. Whatever the

district court finds to be the proper base quantum of damages, that
15 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.

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amount should be doubled as a result of our affirming the 93A

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 that KPS unreasonably and vexatiously

increased the costs of litigation through the inclusion of

unnecessary materials in the joint appendix. KPS filed an

opposition brief in which it cross-moved 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, and we 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 DENIED. 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.