Opinion ID: 773118
Heading Depth: 1
Heading Rank: 1

Heading: introduction

Text: 1 On this appeal we must determine if the district court abused its discretion in this class action when it entered a default judgment against Galaxiworld in the amount of $22,084,844. In their original complaint, appellees claimed that Jack Banks (Banks), Larry Weltman (Weltman), and Galaxiworld committed fraud by making a series of material misrepresentations about Galaxiworld's acquisition and operation of a gambling paper product business. On May 29, 1998, Galaxiworld's motion to dismiss the complaint in the class action was denied. On January 10, 2000, after merits discovery had been substantially completed in the class action, Galaxiworld's predecessor counsel, Proskauer Rose LLP, filed a motion requesting, inter alia, permission to withdraw as counsel to the defendants. On January 13, 2000, at a hearing regarding Proskauer's withdrawal, attorneys for the plaintiffs in the class action moved for a default to be entered against the appellants. By February 16, 2000, following a series of orders and amended orders published by the district court, Proskauer Rose had been permitted to withdraw, and default judgment had been entered against Galaxiworld in this class action in the amount of $22,084,844. On February 24, 2000, Sheldon Eisenberger filed a notice of appearance for the individual defendants. On March 23, 2000, Eisenberger filed a notice of appearance for Galaxiworld, as its new counsel; he also filed a notice of appeal from the default judgment entered by Judge Patterson. For the reasons explained below, we hold that the district court abused its discretion when it entered a default judgment in the amount of $22,084,844 against Galaxiworld in this securities class action.