In the
United States Court of Appeals
For the Seventh Circuit
No. 11-3369
W ILLIAM R. W EHRS, JR.,
Plaintiff-Appellee,
v.
K EVIN W ELLS,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 07 C 3312—Joan Humphrey Lefkow, Judge.
A RGUED A PRIL 13, 2012—D ECIDED A UGUST 8, 2012
Before B AUER, K ANNE, and T INDER, Circuit Judges.
K ANNE, Circuit Judge. In 2007, William Wehrs filed a
complaint against his stock broker, Kevin Wells, alleging
he violated various federal securities and state laws
by executing unauthorized trades on Wehrs’s account,
resulting in significant losses. Wells never answered the
complaint or appeared in court, and a default judgment
was entered against him. Subsequently, Wells filed a
motion to vacate the default judgment, which was
2 No. 11-3369
granted with respect to damages but denied with
respect to liability. The parties then agreed to submit
the issue of damages to the district court by motion
for summary judgment, which the court granted in favor
of Wehrs. On appeal, Wells argues that the district court
abused its discretion by denying his motion with respect
to liability and not permitting him to file an answer to
the complaint, as well as by considering damages that
he did not proximately cause. We find no merit to
Wells’s challenges, and accordingly affirm the district
court’s judgment.
I. B ACKGROUND
Because the district court entered a default judgment
against Wells, we take as true the facts of the complaint.
e360 Insight v. Spamhaus Project, 500 F.3d 594, 605 (7th Cir.
2007). Wehrs was a client of the stock brokerage firm
Benson York Group, Inc., where Wells worked as a
stock broker. In 2005, Wells recommended shares of
Cyberonics, Inc. (CYBX), a medical technology com-
pany. Wehrs was persuaded by the recommendation,
and on June 23 he authorized Wells to purchase 4,000
shares on margin at a price of $43.75 per share, with a
$7,500 stop-loss order.
Wells deviated from this order, however, and on June 24
instead purchased 4,100 shares on margin at a market
price of $46.00 per share, for a total purchase price
of $192,659 after commission. On June 27, Wells sold the
stock for $43.33 per share (crediting Wehrs’s account
$181,650)—it is not clear whether or not this sale was
No. 11-3369 3
made pursuant to a stop-loss order—before inexplicably
repurchasing another 4,100 shares that same day (charging
Wehrs’s account $190,735 after commission). Wehrs
maintains that neither the initial purchase of CYBX, which
had a higher price per share and quantity than he speci-
fied, nor the subsequent repurchase of the shares were
authorized.
Wehrs discovered the unauthorized transactions,
along with the hefty commission fees charged to his
account, and tried in vain to contact Wells and his super-
visor, Kevin Brennan. After leaving several mes-
sages, Wehrs finally managed to reach Wells by phone
on July 15. Wells told him not to worry about any tempo-
rary losses to his account because the Food and Drug
Administration had just approved one of Cyberonics’s
products. The price of the stock would jump to $65
in just a few days, Wells maintained, and Wehrs
would profit handsomely. Although these assurances
may have temporarily abated Wehrs’s concerns, the
stock price did not increase, and instead began a slow
and steady decline. As the price dropped, shares were
sold at a loss in order to satisfy the maintenance mar-
gin. Wehrs continued to call Wells and Brennan about the
losses, but he was repeatedly assured that all of the
commissions charged to his account would be reversed,
any stock sold on margin would be repurchased, and
CYBX would eventually increase in value. Although the
commissions were eventually refunded, the stock’s
price never recovered. All but eighty-five shares were
eventually sold pursuant to margin calls, crediting
Wehrs’s account $133,855. The remaining eighty-five
shares were sold for $1,398 on July 2, 2009.
4 No. 11-3369
On June 14, 2007, Wehrs filed suit against Wells,
Brennan, and Benson York alleging federal securities
law violations, and state law claims for fraud, negligence,
and breach of fiduciary duty. The case was stayed
from May 30, 2008, to June 3, 2009, while the defendants
appealed the district court’s denial of their motion to
compel arbitration. That appeal was eventually volun-
tarily dismissed by the defendants. Following the dis-
missed appeal, the defendants’ attorney filed a motion
to withdraw as counsel, which was granted by the
district court on August 13, 2009. Subsequently, the
defendants did not hire another attorney and did not
answer the complaint or appear in court. The district
court accordingly declared the defendants in default on
September 10, 2009. After a prove-up hearing to estab-
lish the amount of damages, the court entered default
judgment on September 17, 2009, in favor of Wehrs
for $236,837.75.
Represented by new legal counsel, Benson York and
Brennan filed a motion to vacate the default judgment,
which the district court granted on November 17, 2009.
Wells, representing himself, filed a separate motion to
vacate the default judgment under Rule 60(b) of the
Federal Rules of Civil Procedure on December 9, 2009. In
that motion, Wells also requested that the court grant
him seven days to file an answer to the complaint.1 With-
out specifically addressing his request to file an answer,
1
In his reply brief in support of the motion, Wells modified
this request to “a reasonable period” to answer Wehrs’s antici-
pated amended complaint.
No. 11-3369 5
the district court denied Wells’s motion to vacate the
default judgment as to liability, finding that he did not
state a meritorious defense to the complaint, but permit-
ted him to rebut the amount of damages. Brennan and
Benson York eventually settled with Wehrs, leaving
Wells as the lone defendant remaining in the case.
Wells retained counsel, and the parties agreed to
submit the issue of damages to the court by motion for
summary judgment. At summary judgment, the district
court held that the allegations contained in the original
complaint failed to state a claim under federal securities
law. Nevertheless, the court determined that it was
proper to retain jurisdiction over the supplemental
state law claims, and found that the allegations in the
complaint supported claims for breach of fiduciary duty
and negligence. The district court then calculated the
damages caused by the unauthorized purchase and
repurchase of CYBX stock and granted summary judg-
ment in Wehrs’s favor, finding Wells liable for $49,861.
Wells filed this timely appeal.
II. A NALYSIS
Wells presents three arguments on appeal, although
we have grouped together the first two for ease of analy-
sis. First, he contends that the district court abused
its discretion in denying his motion to vacate the
default judgment with respect to liability. Raising a
related point, he argues that the court should have
first granted him leave to file an answer to the com-
plaint before ruling on his motion. Finally, Wells claims
the district court abused its discretion at summary judg-
6 No. 11-3369
ment by considering damages that he did not proxi-
mately cause. We address each of these arguments in turn.
A. Motion to Vacate the Default Judgment
Wells first challenges the district court’s denial of his
motion to vacate the default judgment as to liability. We
review the district court’s decision only for an abuse of
discretion. Bakery Mach. & Fabrication, Inc. v. Traditional
Baking, Inc., 570 F.3d 845, 848 (7th Cir. 2009). Relief from a
final judgment may be granted pursuant to Rule 60(b)
under exceptional circumstances, and we have character-
ized the district court’s considerable latitude in making
its decision as “discretion piled on discretion.” Swaim v.
Moltan Co., 73 F.3d 711, 722 (7th Cir. 1996). We apply a
deferential standard of review because the district court
is “the forum best equipped for determining the appro-
priate use of default to ensure that litigants who are
vigorously pursuing their cases are not hindered by
those who are not in an environment of limited judicial
resources.” Id. at 716 (quotation marks and citation omit-
ted). In order to have a default judgment vacated, the
moving party must demonstrate: “(1) good cause for
the default; (2) quick action to correct it; and (3) a meritori-
ous defense to the complaint.” Sun v. Bd. of Trs. of Univ.
of Ill., 473 F.3d 799, 810 (7th Cir. 2007).
The district court found that Wells was able to meet the
first two requirements because he took quick action to
correct the default, and had good cause due to
excusable neglect—Wells asserted that his withdrawn
counsel did not provide him notice of the date by which
No. 11-3369 7
he had to file a responsive pleading. Nevertheless, the
district court denied Wells’s motion because he did not
set forth a meritorious defense. In his motion to vacate
the default judgment, Wells stated that he “emphatically
den[ies]” the claims made in Wehrs’s complaint
because “all transactions were authorized.” Wells also
maintained that after Wehrs accused him of making
unauthorized trades, he notified Brennan, who then
took over the account. Finally, Wells’s motion disputed
the amount of damages set forth in the complaint, at-
taching as an exhibit a transaction history of Wehrs’s
account showing that commissions charged for the al-
legedly unauthorized transactions were reversed. The
district court found Wells’s broad denial insufficient
to state a meritorious defense because he did not specifi-
cally deny the complaint’s allegations that he pur-
chased, sold, and repurchased the shares of CYBX
without permission. Indeed, the court found that Wells
implicitly admitted the complaint’s allegations when
contesting the amount of damages.
Wells primarily argues that the district court abused
its discretion because the motion set forth a meritorious
defense: the transactions were authorized. We disagree.
A meritorious defense need not, beyond a doubt, succeed
in defeating a default judgment, but it must at least “raise[]
a serious question regarding the propriety of a
default judgment and . . . [be] supported by a developed
legal and factual basis.” Jones v. Phipps, 39 F.3d 158, 165
(7th Cir. 1994). In his motion to vacate the default judg-
ment, Wells makes only a single conclusory statement
that the transactions were authorized. We have consis-
tently held that such a general denial of the complaint’s
8 No. 11-3369
allegations, without any factual support, is insufficient
to state a meritorious defense. E.g., Pretzel & Stouffer v.
Imperial Adjusters, Inc., 28 F.3d 42, 46 (7th Cir. 1994) (“[A]
meritorious defense requires more than a ‘general denial’
and ‘bare legal conclusions.’ ”); accord Stephenson v. El-
Batrawi, 524 F.3d 907, 914 (8th Cir. 2008) (“simple asser-
tions unsupported by specific facts or evidence” failed to
establish meritorious defense); New York v. Green, 420
F.3d 99, 110 (2d Cir. 2005) (“conclusory denials” insuffi-
cient to raise meritorious defense). Moreover, as the
district court correctly observed, the fact that the com-
missions charged to Wehrs’s account were reversed
undercuts Wells’s contention that the transactions
were authorized.
Neither did the district court abuse its discretion in
denying Wells leave to answer the complaint. Wells
maintains that he would have provided the necessary
factual support to establish a meritorious defense in an
answer to the complaint, if only the district court had
granted him leave to do so. But this argument is illogi-
cal. It makes little sense to claim that a district court
cannot rule on a motion to vacate a default judgment
without first granting a defendant leave to file an
answer, when the failure to file an answer is the reason
default judgment was entered.2
2
After ruling on Wells’s motion to vacate the default judgment,
the district court later permitted Wehrs to file two amended
complaints. In the “summary of argument” and “conclusion”
sections of his opening brief, Wells states that the district judge
(continued...)
No. 11-3369 9
Moreover, Wells was free to raise specific facts to
support his purported meritorious defense in his motion
to vacate the default judgment. He did just that
regarding his claim that the complaint exaggerated
Wehrs’s financial losses, attaching a transaction
history that revealed some charges to Wehrs’s account
had already been refunded. But Wells provided nothing
of the sort regarding his contention that the transactions
were authorized. Wells also could have attached a pro-
posed answer as an exhibit to the motion, to provide
some support for his threadbare assertions. See Anilina
Fabrique de Colorants v. Aakash Chems. & Dyestuffs, Inc., 856
F.2d 873, 879 (7th Cir. 1988) (district court’s denial of
Rule 60(b) motion was abuse of discretion because it
did not consider meritorious defense established in defen-
dant’s proposed answer, exhibits, and counterclaim).
2
(...continued)
“further abused her discretion in denying Wells’ Motion for
Leave to File An Answer to Wehrs’ subsequently filed Second
Amended complaint.” (Appellant’s Br. at 28.) To the extent
Wells is also challenging the district court’s denial of any
subsequent request to file an answer, this argument is
waived. The lone sentences in his summary of argument and
conclusion sections, lacking any citation to governing law, are
insufficient to raise adequately an issue on appeal. See United
States v. Tockes, 530 F.3d 628, 633 (7th Cir. 2008) (“Unsupported
and undeveloped arguments . . . are considered waived.”); see
also Bob Willow Motors, Inc. v. Gen. Motors Corp., 872 F.2d 788,
795 (7th Cir. 1989) (argument unsupported by any authority
and raised in “mere single line in the ‘summary of argument’
section” of opening brief is waived).
10 No. 11-3369
He did not do so, and this left the district court with
only the conclusory statements contained in Wells’s
motion when considering whether he raised a meri-
torious defense. And although Wells was appearing
pro se, this does not excuse the fact that he provided no
specific facts or evidence to support his general denial
of the complaint’s allegations. Cf. Jones, 39 F.3d at 163
(noting that although pro se litigants benefit from
various procedural protections, they are “not entitled to a
general dispensation from the rules of procedure or
court imposed deadlines”).
B. Damages
The district court carefully calculated Wehrs’s
damages, considering the total amount charged to
Wehrs’s account as a result of the purchase and
repurchase of the CYBX shares. The court then deducted
from this total: (1) refunded transaction fees and sales
commissions; (2) credits for the shares of CYBX sold,
including those shares sold pursuant to margin calls;
(3) the $7,500 stop-loss amount; and (4) $27,499, the
settlement amount agreed to by the other defendants.
The district court accordingly found Wells liable for
$49,861 in damages.
Wells does not take issue with the district court’s cal-
culations. Instead, he argues that the court abused its
discretion by not considering evidence that he did not
proximately cause a large portion of the damages. Specifi-
cally, Wells contends he should not be held liable for any
No. 11-3369 11
losses that occurred after June 27, 2005, the date that
Wehrs discovered the unauthorized transactions.
Because Wehrs could have sold his stock on this date,
Wells posits, Wehrs should have mitigated his damages,
rather than holding the stock as the price continued to
fall. But because the default judgment entered against
Wells precluded him from raising this argument at sum-
mary judgment, we disagree.
Generally, we will not reverse a damages award in
a default judgment unless it is clearly excessive. e360,
500 F.3d at 602. “A default judgment establishes, as a
matter of law, that defendants are liable to plaintiff
on each cause of action alleged in the complaint.” Id.
Upon default, the well-pled allegations of the complaint
relating to liability are taken as true, but those relating
to the amount of damages suffered ordinarily are not.
United States v. Di Mucci, 879 F.2d 1488, 1497 (7th Cir.
1989); accord 10A Charles Alan Wright et al., Federal
Practice and Procedure § 2688, at 58-59 (3d ed. 1998 & Supp.
2012) (“If the court determines that defendant is in
default, the factual allegations of the complaint, except
those relating to the amount of damages, will be taken
as true.”). Thus, “[d]amages must be proved unless they
are liquidated or capable of calculation.” Merrill Lynch
Mortg. Corp. v. Narayan, 908 F.2d 246, 253 (7th Cir. 1990).
Because a plaintiff must ordinarily prove damages, the
defaulting party may raise the issue of causation as it
relates to the calculation of damages. 10 Moore’s Federal
Practice, § 55.32[1][c] (3d. ed. 2012) (“The rule that the
claimant must prove the amount of damages may also
12 No. 11-3369
extend to the element of causation. While liability is
admitted, the defaulting party is liable only for those
damages that arise from the acts and injuries that were
pleaded.”); see Trans World Airlines, Inc. v. Hughes, 449
F.2d 51, 70 (2d Cir. 1971), rev’d on other grounds, 409 U.S.
363 (1973) (“The outer bounds of the recovery allowable
are of course measured by the principle of proximate
cause. The default judgment did not give TWA a blank
check to recover from Toolco any losses it had ever suf-
fered from whatever source.”).
Wells relies heavily on the Second Circuit’s broad
language in Hughes to argue that because Wehrs could
have mitigated his damages, Wells did not proximately
cause a significant amount of the financial losses suf-
fered. But Wells misconstrues the Second Circuit’s deci-
sion, ignoring the critical difference between proxi-
mate cause as it relates to liability and proximate cause
as it relates to damages after a default judgment has
been entered. See Greyhound Exhibitgroup, Inc. v. E.L.U.L.
Realty Corp., 973 F.2d 155, 159 (2d Cir. 1992) (finding a
categorical distinction between proximate cause “as it
pertains to the assignment of liability in the first in-
stance,” and proximate cause “as it relates to the ministe-
rial calculation of damages” after a default judgment).
Within the context of a default judgment, proximate
cause “presumes that liability has been established, and
requires only that the compensation sought relate to
the damages that naturally flow from the injuries
pleaded.” Id. Thus, a defaulting landlord whose faulty
sprinkler system caused a warehouse fire could not
No. 11-3369 13
argue he did not proximately cause all of the fire’s dam-
ages by pointing to the plaintiff’s comparative negligence
in causing the fire—that argument would contest settled
issues of liability. Id. In contrast, a plaintiff that lost $3,000
in a defaulting defendant’s fraudulent investment
scheme could not recover for, among other things, money
spent on an abortion she claimed was needed because
“she did not have the money to raise a child due to her
monetary loss”—the money spent on an abortion bore
little relation to the complaint’s allegations, and did not
naturally flow from the injuries pled. Wu v. Ip, No. C 93-
4467, 1996 WL 428342, at *1 (N.D. Cal. July 25, 1996)
(unpublished).
To permit Wells to argue that Wehrs should have sold
his shares of CYBX at an earlier date to mitigate his
damages would allow Wells to contest his liability,
rather than the extent of the damages suffered from the
injuries pled. This he may not do; a defaulting party “has
no right to dispute the issue of liability.” 10 Moore’s
Federal Practice, supra, § 55.32[1][a]. As the district
court duly noted, the duty to mitigate damages is an
affirmative defense, and Wells waived his right to this
defense by not filing a responsive pleading to the com-
plaint. After a default judgment was entered against
him, Wells could not raise the waived defense while
contesting damages under the guise of proximate cause.
Accordingly, the district court did not abuse its discre-
tion in determining damages at summary judgment.
14 No. 11-3369
III. C ONCLUSION
For the foregoing reasons, we A FFIRM the judgment of
the district court.
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