F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

N E W G E N , L L C, a W isconsin limited liability company , Plaintiff-Appellee

,

v

.

S A F E C I G , L L C, a California limited liability company , Defendant-Appellant. Nos. 13-56157 14-57015

D.C. No. 2:12-cv-09112- RGK-J CG

N E W G E N , L L C, a W isconsin limited liability company , Plaintiff-Appellant

,

v

.

S A F E C I G , L L C, a California limited liability company , Defendant-Appellee. N o. 13-56225

D.C. No. 2:12-cv-09112- RGK-J CG

ORDER AND AMENDED OPI NI ON

A ppeal from the United States District Court for the Central District of California R. Gary Klausner, District J udg e, PresidingN E W G E N V

. S A F E C I G 2

Arg ued and Submitted F ebruary 11, 2016 Pasadena, California

F iled September 7, 2016 A mended October 21, 2016

B efore: M. Marg aret McKeown and Sandra S. I kuta, Circuit J udg es, and Robert W . Pratt, * District J udg e.

Opinion by

J udg e McKeown

SUMMARY * *

Diversity Jurisdiction

The panel affirmed the district court’s g rant of an almost $1.5 million default judg ment ag ainst Safe Cig

, L L C an d in favor of NewGen, L L C afte r ac cepting NewGen’s amended alleg ations of diversity citiz enship as true, and re j e c ted NewGen’s cross-appeal for additional damag e s.

T h e panel held that the district c ourt properly p ermitted NewGen to a mend its complaint un d er 2 8 U .S.C. § 1653 to

cure the defect i v e alleg ations of d iversity jurisdiction. The panel further held that nothing in the tex t of § 1653 sug g ested that it applied only to judg me n t s o n t h e merits, and not to

* T h e H o n orab le Ro b ert W

. P ratt, Un ited States District J u d g e f o r th e So u th ern District o f

Io w a, sittin g b y

d esig n atio n

.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.N E W G E N V

. S A F E C I G 3

default judg ments. The panel concluded that the district court acted within its statutory authority to g ive NewGen the opportunity to co rr ec t its alleg a tions, and the amended complaint remedied the deficiencies of the orig inal complaint, by alleg ing the p arties were of diverse citiz enship.

The panel held that the district court had subject matter jurisdiction. The panel reasoned that b o t h Safe Cig ’ s initial appeal and it s Fe d

. R. Civ. P. 60(b) motion were facial a nd
not factual attacks on the district c ourt’s subj ect matter jurisdiction, and that Safe Cig never called into question the factual predicates to establish diversity jurisdiction.

Addressin g the district court’s denial of relief from default judg ment, the panel held that the district court did not

err in weig hing the factors of Eitel v

. McCool

, 782 F

. 2d 1470, 1472 (9th Cir. 1986), and did not ab u s e its discretion in entering default judg ment.

F inally

, the p a

n el upheld the district court’s aw a rd o f $1,483.075.84, and r ejected N ewGen’s cross-appeal for additional damag es.

COUNSEL

Ricardo P. Cestero (arg

ued) and Daniel G. Stone, Greenberg Glusker F ield s Claman & Machting er L L P, L o s Ang eles, California, for Appellant/Cross-Appellee.

Harry E. Van Camp (arg ue d ) and Deborah C. Meiners, DeW itt Ross & Stevens S.C., Madison, W isconsin, for Appellee/Cross-Appellant.N E W G E N V

. S A F E C I G 4

ORDER

The opinion filed on September 7, 2016, a nd appearing at 2016 W L 4651406, is hereby amended. A n amended opinion is filed concurrently

with this order.

W ith these amendments, the panel has voted to deny the petition for panel r ehearing

. J u dg es McKe o wn a nd I k uta have voted to deny the petition for rehearing en b a nc. J udg e Pratt recommends denial of the petition for rehearing en banc.

The full court h as been advised of t he petition for rehearing en banc, and no judg e has r equested a vote on whether to rehear the matter en banc. F ed. R. App. P. 35.

The petition f

or panel rehe a ring and the petition for rehearing e n banc are D ENIED

. No f urther p e titions for en banc or panel rehearing

shall be permitted.

OP INION

McKEOW

N, Circuit J udg e:

This c ase is a procedural tang le complicated by the parties and their c ounsel and serves as a reminder that subject matter jurisdiction must ex ist at the outset o f a suit, althoug h it may be achieved throug h amended p leading s. Safe Cig

, L L C challeng es an almost $1.5 million default judg ment awarded in NewGe n , L L C’s f

avor as void for lack of subject matter jurisdiction.N E W G E N V

. S A F E C I G 5

Althoug h we are sy

mpathetic to a p arty th a t finds itself facing a larg e default judg ment, here the di s t r i c t court invoked the appropriate rules and statutes. The case presents

no procedural irreg ularities, only procedural comp l e x ities. At the time the district court en t e r e d default judg ment, neither
t h e parties nor the court noticed that NewGen’s orig inal complaint f

ailed to adequa t e ly alleg e complete diversity

. Safe Cig only raised the diversity challeng e in a r elated appeal to this c ourt and a concurrently filed F e deral Rule o f Civil Procedure 60(b) motion for relief from the j udg ment. The district c ourt permitted N ewGen to file an amended complaint remedy

ing the defective jurisdictional a lleg ations, but refused to reopen the judg ment w hen Safe Cig protested that it lacked sufficient knowledg e to confi r m o r deny the

new alleg ations reg a

rding the citi z e n s h ip of the parties. B ecause Safe Cig never factually a ttacked N e wGen’s amended jurisdictional a lleg ation s , we accept NewGen’s amended alleg ations of diversity o f citiz ensh i p a s true a nd conclude the district court had subject matter j u r i s diction. W e therefore a ffirm the g rant of default judg ment and the damag es award.

B A C K G R O U N D

Safe Cig was in the busines s of making and selling electronic c ig arettes w hen it contracted w ith N ewGen to h elp with online marketing

. As NewG e n a l l e g es, the p arties set out the terms of the deal in two c o n tracts—an Affiliate Ag reement and a Consu l t ing Ag reement—under which NewGen a g r eed to a ttract o nline customers to Safe Cig ’s sales site. According to N ewGen, Safe Cig d id n ot live up to its end of the barg ain, failing to p a y NewGen its lifetime 20% commission on a ll sales resulting from N ewGen’s referrals,
t o g rant NewGen access to its sales r ecords to verify th o s eN E W G E N V

. S A F E C I G 6

commissions, to pay NewGen in e x chang e for not launching a competitor, and to pay

NewGen for g e neral marketing and business consultant services. This suit followed.

Three day s after NewGen filed its complaint, NewGen properly served Safe Cig ’s r eg istered ag ent, despite resistance

on the a g ent’s part. The deadline to respond to the complaint

came and went without a response; Safe Cig claims t h a t , at the time, it did n o t think service w as effective. On application f

rom NewGen, the dis trict court entered default. The same day

, Safe Cig contacted NewGen and o ffered a deal : i t w o u ld not contest service in ex chang e f or a 60-day

ex tension to respond to the complaint. NewGen rejected the proposal, an d fi l e d for default judg ment. Safe Cig objected
to default judg ment on a n u mber of g rounds, but did not challeng e the district court’s subject matter jurisdiction over the dispute.

The district court entered default jud gm en t , finding that service was effective a

nd holding that it had d i v e r sity jurisdiction u nder 28 U .S.C. § 1332. T h e c o urt concluded
t hat NewGen was entitled to a default judg ment a s t o i t s claims of breach of contract and breach of the covenant o f
g ood faith and fair dealing

, but rejected NewGen’s claims o f fraud as insuffic i e ntly pleaded. The district court awarded NewGen $1,483,075.84 in damag es.

Safe Cig launched a two-pronge d a t t ack on the default judg ment. I t appealed to thi s court, claiming relief from judg ment because the entry of default was an ab u s e o f discretion under Eitel v. McCool

, 782 F .2d 1470 (9 t h C i r. 1986). I n the appeal, for the first t ime in the litig ation, Safe Cig arg ued that NewGen failed to plead diversity jurisdiction in its orig inal complaint and failed to prove jurisdiction priorN E W G E N V

. S A F E C I G 7

to entry of the default judg ment. On the same day , Safe Cig filed in the district c o urt a Rule 60(b) motion for relief from the judg ment, asking the court to declare the d efault judg ment void for lack of subject matter jurisdiction.

At that stag e, NewGen, Safe Cig

, and the district court all

a g reed that NewGen f

ailed to properly plead diversit y jurisd i ction in the orig inal complaint—with respect to a limited l i ability company , the citiz e n ship of all of the members must be pled. See J o h n s on v. Columbia Props. Anchorage, LP
, 437 F .3d 894, 8 9 9 (9th Cir. 20 0 6 )

. The question was how to proceed nex t. I n response t o the Rule 60(b) motion, the district court ordered additional b riefing on diversity jurisdiction. N ewGen submitted a d eclaration with respect to the citiz e nship of the parties and reasserted that the parties were diverse, while S a f e Cig protested that the citiz enship of the parties was “ u ncertain.” Armed with the additional briefing

, the district court c oncluded that while NewGen had not adequately pled subject matter jurisdiction in its orig inal complaint, NewGen could amend the complaint
to cure the defective alleg ations. The c o urt found the record supported the alleg ations: it e st a b lished that “none of the members of Safe Cig were domiciliaries of W isconsin when the case was filed,” and thus, “[ b] ecause N ewGen and Safe Cig were not c itiz ens o f the same state when t h e c a s e was filed, the Court had jurisdiction over this matter.” The district c ourt also held that because Safe Cig had n o t denied NewGen’s f

actual alleg ations of diversity

, NewGen had no affirmative oblig ation to pro v e diversity with affidavits, althoug h it d id submit a declaration; and that NewGen “could have met [ Safe Cig ’s] f

acial c halleng e simply by a m e n d i n g the jurisdictional alleg ations in the Complaint.” T he district

c o u rt thus denied the Rule 60(b) motion on condition t h atN E W G E N V

. S A F E C I G 8

NewGen amend its complaint to c u r e the orig inal, “defective” alleg ations of jurisdiction pursuant to 28 U.S.C. § 1653.

W h en NewGen filed its amended complaint alleg ing that the parties were of diverse citiz enship and cited to supporting evidence of the citiz enship or residence of each mem b e r o f NewGen and Safe Cig

, Safe Cig filed an answer challeng ing the alle g ations based on Safe Cig ’ s purported lack o f knowledg e and information about t h e citiz enship o f its members. The district court struck mu c h o f Safe Cig ’s

answer as “ imma t e r ial [or] impertinent” pursuant to Rule 12(f )

, n o ting that it had “made it clear” in the Rule 60(b) order that it “ was not reopening the final judg ment” and that “the merits of Plaintiff’s claims are not open to d ispute

. ” B ecause the d istric t c o u rt determined Safe Cig had not actually challeng ed the veraci t y of NewGen’s f actual alleg ations of citiz enship, it likewise determin ed that the

answer did not upset “the Court’s previous fi n ding that the judg ment in this case was n ot v oid for want of subject matter jurisdiction.”

There was another jurisdicti o n al wrinkle, however: in May 2014, w hen the district court d enied the motion for relief from judg ment, the case was still pending on appeal in this
court. I t was not until September 2014, a fter the district court had c onducted hearing s and issued its o r ders, 1 that we

1 W e rej ect Saf

e Cig ’ s arg u m en t th at t

h e d i st r i c t c o u rt erred i n tak in g

n ew ev id en ce an d co n sid erin g th e Ru le 6 0 (b ) m o tio n b ef o re th e case w as

rem an d ed f

ro m th is co u

rt. R u le 6 2.1 p ro v id es t

h at “ [i]f a tim ely m o t i on is m ad e f o r relief th a t t h e co u rt lack s au t h o rity to g ran t b ecau se o f an ap p eal th at h as b een d ock eted an d is p en d in g , th e co u rt m ay

. . . (1 ) d ef er

co n sid erin g th e m o t io n ; (2 ) d en y th e m o tio n ; or (3 ) state eith er th at i t

w o u ld g ran t th e m o tio n if th e co u rt o f ap p eals rem an d s f o r th at p u rp o se or th at th e m o tio n raises a su b stan tial i ssu e.” Fed

. R. C iv

. P

. 6 2 .1 (a). InN E W G E N V

. S A F E C I G 9

remanded to the district court “to consider Safe Cig ’s F ederal Rule o f Civil Procedu re 60(b) motion.” F ollowing remand, the district c ourt reissued its May 2014 order deny ing the Rule 60(b) motion with leave to amend the jurisdic tional alleg ations. The parties then refiled the amended complaint and a nswer, and Safe Cig filed its notice o f appeal in the current appeal.

A N A L Y S I S

I. Am e nding the Com plaint Under 28 U.S.C. § 1653

W h en the default judg ment was e ntered, neither t h e parties nor the court r ecog niz ed that NewGen’s jurisdictional alleg ations were defective. Only later did Safe Cig challeng e t he district court’s subject matter jurisdiction in the o rig in al appeal and in a Rule 60(b) motion for relief fro m judg ment. Rather than tear up the d efault judg ment, however, the district
court d enied the motion on the c ondition that NewGen amend its complaint to cure the defective alleg a t i ons of diversity jurisdiction—a condition that NewGen met. Safe Cig urg e s that the p roper course of action w a s t o r eopen the judg ment and p ermit Safe Cig to respond to the complaint and litig ate t h e case on the merits. W e disag r ee: the district cou r t properly p ermitted NewGen to amend i t s complaint under 28 U.S.C. § 1653 without reopening the judg ment. 2

co n sid erin g th ese o p t io n s, th e d i strict co u rt i s fr e e to co n sid er n ew

ev id en ce at its d iscretio n

.

2 W e rev iew d e n o v o q u est i o n s o f l aw an d th e d istrict co u rt’ s in terp retatio n s o f

th e Fed eral Ru les o f Civ il P ro ced u re. Un ited S ta tes v. $ 1 3 3 ,4 2 0 .0 0 in U.S . Cu rren cy , 6 72 F.3 d 6 29 , 6 3 7 (9 th Cir. 2 01 2 ).N E W G E N V

. S A F E C I G 10

N ew Gen c oncedes that its o rig inal complaint f a iled t o adequately alleg e d iversity ju ri sdiction. A limited liability
company “ is a citiz en of e v e r y s tate of which its owners/members are citiz e ns, ” n ot the state in which it was f o r m ed or does business. Johnson

, 437 F

. 3d at 899. T h e orig inal complaint asserts diver s i t y jurisdiction under 28 U.S.C. § 1332, b ut does not alleg e the citiz enship o f NewGen or Safe Cig ’s members. I t o nly states that NewGen

was a W isconsin limited liability company with its principal
p l a c e o f business in W isconsin, and that Safe Cig wa s a California limited liability company with its pri n c i p al place of business in California.

Defective ju

r i s d i c tional alleg ations are not fatal, however. A judg ment is only voi d w h e re there is a “total want o f jurisdiction” a s opposed to an “ er r o r in the ex ercise o f jurisdiction.” W

atts v. P inckney

, 752 F .2d 406, 4 09 ( 9th Cir. 1985) ( internal quotation marks omitted). Courts may p ermit parties to amend defective alleg ations o f jurisdiction at any stag e in the proceeding s. The o perativ e statute, 28 U .S.C. § 1653, provides that “[ d] efective alleg a tion s of jurisdiction
may b e amended, upon terms, in the trial or appellate courts.” W e a g ree that “ [ s] ect i o n 1 653’s liberal amendment rule permits a p a

rty who has not proved, or even a l l e g ed, that diversity ex ists to amend his ple a d ing s even as late as on appeal.” D.C. ex rel. Am. Combustion, Inc. v. Transamerica Ins. Co.
, 797 F .2d 1041, 1044 (D.C. Cir. 1986). The intent o f the provision is to avoid the needless e x penditure of judicial

r e s o u rces w here a court can instead “permit the action to b e maintained if it is a t a ll possible to determine from the record tha t j u r isdiction does in fact ex ist.” Aurecchione v

. Schoolman Transp. Sys.

, Inc.
, 4 26 F .3d 635, 639 (2d Cir. 2005) (internal quotation marks omitted).N E W G E N V

. S A F E C I G 11

Nothing in the tex t of § 1653 sug g e sts that it applies only
t o j udg ments o n the merits, not default judg ments, a s Sa f e Cig contends. 3 W hile judg ments issued after trial admittedly require a steeper investment of judic i a l a n d party resources, the same “ statutory purpose o f avoiding needless sacrifice to defective pleading ,” Math e w s v. Diaz
, 4 26 U.S. 67, 75 n.9 (1976), applies to default judg ments. Our g eneral policy that “doubt, if any , should be resolved in favo r of the motion to set aside the [ default] judg ment,” Sc h w a b v. B ullock’s Inc.
, 508 F .2d 3 5 3
, 355 (9th Cir. 1974) (internal quotation marks omitted), does not justify ex empting d e f ault judg ments from § 1653 without any

tex tual basis.

The Second C i r c u i t adopted a similar view in Jacobs v

. Patent E nforcement Fund, Inc.
, 230 F. 3 d 565, 5 67 (2d Cir. 2000), where defects in jur i sdictional alleg a tions were similarly d iscovered only after entry of default judg ment. The Second Circuit ordered supplemental briefing on d i v e r sity

, and, relying on the affidavits submitted, satisfied itself that there was diversity jurisdiction. Id

. The court h eld that “while a complaint must present certain quite particular alleg ations of diversity jurisdictio n in order to be adequate, the actual e

xistence of divers i t y jurisdiction, ab initio
, does
not depend on the complaint’s complia n c e w ith these procedural requirements. ” I d

. at 567–68. This principle is consistent with a court’s authority —upon a motion to dismiss

3 Saf e Cig ap p ears to h av e co n ced ed in th e district co u rt th at § 1 6 5 3 is
ap p licab le h ere. W e n o n eth eless ad d ress Saf e Cig ’ s arg u m en t o n ap p eal th at § 1 6 53 d oes n o t ap p ly to d ef au l t j u d g m en ts. S

ee P i cku p v. Bro wn , 7 4 0 F.3 d 1 2 0 8
, 1 2 3 2 n .1 0 (9 th Cir. 2 0 1 4 ) (“ W e h av e d iscretio n to ad d ress

an arg u m en t th at o th erw i se w o u ld b e w aiv ed w h en th e issu e p resen ted is
p u rely o ne o f l aw an d eith er d o es n o t d ep en d o n th e f actu al reco rd d ev elo ped belo w , o r th e p erti n e n t r e co rd h as b een f u lly d ev elo p ed .” (in t ern al q u o tatio n

m ark s o m i tted )).N E W G E N V

. S A F E C I G 12

for lack of jurisdiction—to direct the plaintiff to amend. Id. at 568.

The district court thus a cted w ithin its statutory authority
to g ive NewGen the o pportunity to correct its alleg at ions. The amende d complaint remedied the deficiencies of the ori g inal c omplaint, alleg ing the p arties were of diverse citiz enship. I t alleg ed that N ewGen w as an L L C org aniz ed in W isconsin and that its sole member was a citiz e n o f W isconsin when the complaint was filed. I t alleg ed that Safe Cig was an L L C org aniz ed in California with five members, each o f w hich was a c itiz en o f C alifornia at the time the complaint was filed.

II. P leading Subject Matter Jurisdiction

W e nex t ex amine d e no v o whether subject matter jurisdiction e x isted. A -Z Int’l v. P hillips

, 323 F

. 3d 1141, 1145 (9th Cir. 2003). The party seeking to invoke the district court’s diversity jurisdiction alway s bears the burden of both pleading and p roving diversity jurisdict i o n

. See FW /PBS, Inc. v. City o

f Dallas

, 493 U.S. 215, 231 (1990). H owever, at the pleading stag e, alleg ations of jurisdictional fact need not be proven unless c halleng e d. See, e.g. , DaimlerChrysler Corp. v. Cuno
, 547 U.S. 332, 342 n .3 (2006) (“[ B ] ecause we pres u m e t hat federal courts lack jurisdiction unless the contrary appears a ffirmatively from the record

, the party

as s e r t i n g federal jurisdiction when it is challenged has the burden of establishing it.” ( emphasis added) (internal citation and quotation marks omitted)); Kanter v. W a rner-Lambert Co.
, 265 F .3d 853, 857 (9th Cir. 2001) ( “[ A] t [ the pleading ] stag e of the c ase, the defendants were merely requi r e d to alleg e (not to pr o v e ) diversity

. . . .”). The determinative question here is whether, and i n what sense, Safe CigN E W G E N V

. S A F E C I G 13

challeng ed the basis for d iversity jurisdiction, and whether it trig g ered an oblig ation on the part o f N e w G en to offer supplemental evidence proving jurisdiction.

Ordinarily

, a challeng e to t h e d istrict court’s subject
matter jurisdiction would be raised in a Rule 12(b)(1) motion. I n that contex t—and we see no reason to depart in the c ontex t of a Rule 6 0(b)(4) motion for rel i e f f rom a default judg ment—the sufficiency of the p l eading s to establish subject matter jurisdiction is determined by whether the
movant bring s a facial or factual challeng e. Cf. Gould v. M ut. Life I n s

. Co. of N.Y

. , 790 F .2d 769, 771–72 (9th Cir. 1 986) (noting that a “ R ule 60(b) motion may encompass a claim that the dis t r i ct court acted in ex cess of its jurisdiction” (internal quotation marks omitted)). “A facial attack accepts the truth of the plaintiff’s alleg ations but asserts that they a re insufficient on their face to invoke f ederal jurisdiction.” Leite

v. Crane Co.
, 749 F .3d 1117, 1 121 (9th Cir. 2 0 1 4 ) (internal quotation marks omitted). B y contrast, a f a c tual attack “contests the truth of the plaintiff’s f a c t ual a lleg ations, usually by introducing evidence outs i de the pleading s.” Id

. (emphasis added); accord Safe Air for Everyone v

. M e y er , 373 F .3d 1035, 1039 (9th Cir. 2004). O nly u p o n a f actual attack does a plaintiff have an affirmative o b l ig ation to support jurisdictional alleg ations with proof. Leite
, 749 F .3d
at 1121. I n c o n t rast, a facial attack is easily remedied b y leave to a mend juris d ictional alleg ations pursuant to 28 U.S.C. § 1653.

B o th Safe Cig ’s i n i t i al appeal and its Rule 60(b) motion

can only be characteriz ed as facial attacks. Safe Cig d oes not arg ue that NewGen’s sole member is not a c i tiz en o f W isconsin, as set out in N ewGen’s declaration and the amended complaint, claiming on l y that the evidence inN E W G E N V

. S A F E C I G 14

support of his c itiz enship is “weak.” Nor does Safe Cig assert t h at any of its members are citiz ens of W isconsin or reb u t NewGen’s e vidence t h a t Safe Cig ’s members reside in California. I t is a long standing pri n c iple that “[ t] he place where a person lives is taken to b e his domicile until fa c ts adduced establish the contrary .” Anderson v. W atts , 138 U.S. 694, 706 (1891); see also Hollinger v. Home State M ut. Ins. Co.
, 6 5 4 F. 3 d 564, 571 ( 5th Cir. 2011). B ut r ather than presenting evidence about citiz e n s h ip, Safe Cig simply

r e a sserted at multiple junctures that it had doubts abou t t h e citiz enship o f its own o fficers (althoug h it did not even hint they were from W isconsin), and, as the d istrict court put it, it “carefully avoided taking any p osition on [ its] o wn citiz enship.” Safe Cig neve r c a l led into question any of the factual predicates to diversity jurisdiction, and, notably

, never

as k e d for discovery or a delay in proceeding s to clarify the issue. See, e.g. , Crawford v

. U nited States
, 7 96 F .2d 924, 928 (7th Cir. 1986) (“I f the defendant th i n k s the court lacks jurisdiction, his proper course is to request an ev identiary hearing on the issue.”).

Safe Cig insists that upholding the d efault j u d g ment where Safe Cig has denie d “knowledg e or information sufficient to f

orm a belief” as to the citi z enship of its members improperl y r elieves NewGen of the duty to prove subject matter jurisdiction. Safe Cig characteriz es its lack o f knowledg e as raising a jurisdictional challeng e that shifts the burden to Safe Cig to prove jurisdiction was wanting

. 4 I n the

4 T h e d i strict co u rt n ev er placed th e b u rd en o n Saf e Cig to d isp ro v e d iv ersity ; rath er, b ecau se Saf e Cig n ev er co n tested th e tru th o f New Gen ’ s assertio n s, Saf

e Cig n ev er trig g ered an y o b lig atio n o n New Gen ’ s p art to

su p p o rt its alleg atio n s o f d iv ersity w ith a ffi d a v its o r o t h er ev id en ce,N E W G E N V

. S A F E C I G 15

contex t of a Rule 12(b)(1) motion—which is analog ous to the Rule 60(b) motion here—the effect of a denial depends on the nature of the denial:

Once the moving party has converted the [ Rule 12(b)(1)] motion to dismiss into a factual motion by prese nting affidavits o r other evidence properly broug ht before the court, the party o p p osing the motion must furnish affidavits or other e vidence necessary to satisfy i t s burden of establishing subject matter jurisdiction.

Savage v. Glendale Union High S ch., D ist. No. 205
, 343 F .3d 1036, 1039 n.2 (9th Cir. 2003) (emphasis added). The district court correctly held that a facial attack in this posture merits only leave to amend the alleg ations, not wholesale r evival o f

a defaulted defense and a n oblig ation to supplement the record. 5 Hence, Safe Cig ’s ag nosticism is in s u ff i cient to avoid jurisdiction.

alth o u g h N ew Gen d id p ro v id e a d e c l a r a t io n as p art o f su p p l em en t al b rief in g

.

5 W e are at a lo ss to u n d erstan d Saf e Cig ’ s claim th at it w as d en ied a du e p ro cess rig h t b ecau se i t co u ld n o t resp o n d to t h e a m e n d ed alleg atio n s. T h e essen ce o f d u e p ro cess is th e req u irem en t o f n o tice an d an op p ortu n ity
to resp on d

. Ma th ews v. Eld rid g e , 4 2 4 U.S. 31 9
, 3 4 8 (1 9 7 6 ). No tice w as ap p aren t f

ro m th e f ace o f th e co m

p lain t an d Saf

e Cig ce rtain ly d id n o t

su f f er f o r op p o rtu n i ties to co n test d iv ersity j u risd ictio n

. A lth o u g h Saf e C i g t o ok a p ass o n its f

irst o pp o rtu n ity to raise th e i ssu e in th e d ist r i c t

co u rt, it did so in t

h e f irst ap peal an d th en raised th e issu e in i ts Ru le 60 (b )

m o tio n , an d w as o rd ered by th e d istrict co u rt to p ro v id e ad d itio n al b rief in g

o n th e issu e.N E W G E N V

. S A F E C I G 16

W e observe that this approach is in line w i t h our sister circuits. I n American Combustion

, for instance, the p laintiff filed a motion on appeal to correct defects in the jurisdictional a lleg ations. 7 97 F .2d at 1044. The D.C. Circuit ordered the parties to brief any dispute concerning the

ex istence of diversity

. Id. a t 1044–45. When the d ef e ndant did not respond and c onceded diversity at oral arg u ment, the
court concluded that because the defendant d i d not deny
p l aintiff’s “ alleg ations of diversity

, trig g ering the req u i r e m e n t that [ plaintiff] affirmatively prove the facts necessary to support a finding of divers i t y , the amended alleg ations here support a f

inding o f diversity jurisdiction.” Id. at 1045. The same principle applies here: Safe Cig never asserted that the parties are not in fact diverse.

Simply p ut, because the only real challeng e to jurisdiction concerned the sufficiency of the p l e a d ing s, the amended alleg ations—which were undoubtedly leg al ly sufficient— resolved the only question e ver r aised r e g arding the d i s t rict court’s subject matter jurisdiction.

III. Denial of

Relief f rom Def ault Judgm ent

Satisfied that the d istrict c ourt had subject matter jurisdiction and that the amended complaint c o r rected any defect in the pleading s, we turn to review o f the district court’s decision to deny relief from the default judg ment. W e review the district court’s factual finding s for clear e rror, a nd review the g rant of a d efault judg ment f or abuse o f discretion. Alan Neuman Prods., Inc. v. Albright

, 8 62 F .2d 13 8 8, 1391 (9th Cir. 1988).

“Our star t i ng point is the g eneral rule that default judg ments are ordinarily disfavored. Cases should be decidedN E W G E N V

. S A F E C I G 17

upon their merits whenever reasonably pos s i b le.” Eitel

, 782 F .2d at 1472. W e then look to the following factors:

(1) the possibility o f p rejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the c o mplaint, (4) the

sum of m o n e y at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to

ex c usable neg lect, and (7) the strong policy und e r l y ing the F ederal Rules of Civil Procedure favoring

decisions on the merits.

Id. at 1 471–72. I n this case, numerous factors weig h in favor of entry of default judg ment. The district court’s ruling was not “illog ical,” “implausi b l e ,” or without “support in inferences that may be drawn from f acts in the record,” a

nd the d istrict court therefore did not abuse its discretion. United States v. Hinkson

, 585 F .3d 1247, 1261 ( 9 t h Cir. 2009) (en banc) (citing Anderson v

. City of Bessemer City
, 470 U .S. 564 (1985)).

The district court co n s idered in detail the procedural backg round o f the d efault and weig hed the Eitel factors. F irst and f oremost, the default w as c e rtainly not due to ex cusable
neg lect. Notwithstanding its ag ent’s blatant attempts to resist service, Safe Cig was properly served, y et ig nore d t he deadline to respond to the com p l a i n t. I ts counsel instead waited until defa u l t was entered to contact NewGen’s attorney s. 6 S a f

e Cig g ives no “ credible, g ood faith

ex p lanation” for its appare n t bad faith “intention to take

6 Saf e Cig asserts th at it w as n o t rep resen ted b y co u n sel at th e tim e, b u t Saf e Cig ’ s co u n sel leav es am b ig u o u s w

h en h e started actin g f

o r Saf e Cig

.N E W G E N V

. S A F E C I G 18

advantag e of the opposing party , interfer e w i t h judicial decisionmaking

, or otherwise manipulate the leg al process.” TCI Grp. Life I

ns. Plan v. Knoebber

, 244 F .3d 691, 697 (9th Cir. 2001), overruled on o t h e r grounds by Egelhoff v

. Egelhoff ex rel. Breiner , 532 U.S. 141 (2001).

Safe Cig also does l i t t l e to undercut the merits o f NewGen’s claim. To establish its breach of contract claims, NewGen’s complaint sets out the contents of the Affiliate a nd Consulting ag r eements in sufficient detail, and S a fe Cig ’s failure to make pay

ments. Safe Cig does not “ present specific facts that would constitute a def e n s e” or that would substantially alter the liability a t stake. U nited States v

. Signed Pers. Chec k N

o

. 730 of Y

ubran S. Mesle

, 615 F .3d 1085, 1094 (9th Cir. 2010). 7 Stating only g eneral o bjections
to the ex istence of a contra ct, the ex tent of the relationship between the parties, and the alleg ed serv i c e s performed b y NewGen is insufficient to satisfy the “merito r i ous defense” requirement. I

d.

The district c o ur t f

ound that NewGen “ sufficiently demonstrated the possibility of prejudice if default is denied.” I n addition, the court carefully ex amined the damag es issues, stating that “[ NewGen] only seeks contractual damag e s directly proportional to [ Safe Cig ] ’ s breach of the contracts” and thus “the amount of money at stake does not bar an entry of default judg ment.” Ulti m a t e ly the court reduced the requested d a m ag es. None of the f actual finding s were in

7 T h e d eclaratio n o f Saf e Cig ’ s Ch ief In f

o rm atio n Of

f i cer, alb eit

co n clu so ry , do es p ro v id e so m e ad d itio n al d etail. Ho w ev er, as th e d istrict

co u rt n oted

, th e declaratio n an d related arg u m en t s w ere u n tim ely b ecau s e th ey w ere n o t f

iled in op p o s itio n to t

h e f irst m o tio n f

o r d ef au lt j u d g m en t,

an d Saf e Cig p ro v id es n o ev id en ce to su p p o rt its claim s.N E W G E N V

. S A F E C I G 19

clear error. While there is room to d isag ree whether default

was warranted, our r ole is not to s e c ond g u ess the district court’s weig h ing of the E itel factors. W e thus conclude that the d istrict court’s decision to enter default judg ment was not an abuse of discretion.

IV. Calculation of

the Dam ages Aw ard

W e also uphold the district c ourt’s damag e award o f $1,483,075.84, and deny NewGen’s cross-appeal for additional damag es. W e review the d istrict court’s computation of damag es for clea r error. Felder v. United States , 543 F .2d 657, 663 (9th Cir. 1976).

I n reaching its damag e s calculation, the district court relied on a declaration fr o m Dustin Erickson, NewGen’s

owner. See Geddes v. United Fin. Gr p

. , 5 5 9 F.2d 557, 560 (9th Cir. 1977) (“[ U] pon default the factual alleg ations of the complaint, ex cept those relating to the amount of d amag es, will b e taken as true.”). The district court awarded $ 783,558.43 in damag e s f or breach of the consulti n g ag reement, a fig ure reasonably c o n s i stent with the $25,000/month in damag e s claimed in t h e Complaint a nd

s u p p orted by Erickson’s estimate of Safe Cig ’s net tot al profits each month. The d i s trict court also awarded $699,517.41 f

or unpaid co m m i ssions owed under the Affiliate Ag reement for F eb r u a r y 2010 to December 2012, based on h i storical data provided by Safe Cig and future projections w here Safe Cig refused to g rant NewG en access to its sales records.

Erickson’s d e t ailed account of how he calculated e ach fig ure supports the district court’s consideration o f t h e declaration. Nor are we troubled by Safe Cig ’s claim that theN E W G E N V

. S A F E C I G 20

evidence is unreliable. As the district court noted, Safe Cig ’s

“ c o nduct is h ig hly questionable, because it is in the be s t position to have the accurate records required t o r e f ute [ NewGen] ’s estimates. F urther, any necessity for [ NewGen]
to rely on e stimates is due to [ S a fe Cig ] ’s failure to comply

w ith the Affiliate Ag reement, which requires [ Safe C i g] t o provide [ NewGen] with its sales records.”

W e reject N ewGen’s cross-appeal of the damag es award. W h ile N ewGen was entitled to lifetime commissions o n sales made p ursuant to referrals f rom NewGen, as alleg ed in its Amended Complaint, the d i strict court did not clearly err in finding that NewGen was only entitled to Safe Cig ’s sales,

n o t sales by any third-party

, and in finding that once Sa f e Cig ’s website ceased operating in December 2012, there were

no Safe Cig sales. W e ag ree that damag es claimed from 2013 to 2018 were “unsubstantiated.”

C O N C L U S I O N

W e are satisfied that diversity jurisdiction ex ists and that the district court did not abuse its d i s c r etion in deny ing the Rule 60(b) motion to v a c a t e the judg ment. The amended complaint resolved the defective p leading s, and the district
court did n ot abuse its d i s c r e t ion in upholding the default judg ment. W e also a ffirm the award of damag e s a n d r eject NewGen’s cross-appeal.

AF F IRMED.