NewGen v. Safe Cig, No. 13-56157 (9th Cir. 2016)
Annotate this CaseSafe Cig challenges an almost $1.5 million default judgment awarded in NewGen's favor as void for lack of subject matter jurisdiction. The court concluded that the district court acted within its statutory authority to give NewGen the opportunity to correct its allegations. In this case, the amended complaint remedied the deficiencies of the original complaint, alleging the parties were of diverse citizenship; alleged that NewGen was an LLC organized in Wisconsin and that its sole member was a citizen of Wisconsin when the complaint was filed; and alleged that Safe Cig was an LLC organized in California with five members, each of which was a citizen of California at the time the complaint was filed. The court also concluded that the district court had subject matter jurisdiction and the amended complaint corrected any defect in the pleadings. Because the only real challenge to jurisdiction concerned the sufficiency of the pleadings, the amended allegations - which were undoubtedly legally sufficient - resolved the only question ever raised regarding the district court’s subject matter jurisdiction. The court further concluded that the district court’s decision to enter default judgment was not an abuse of discretion where none of the district court's factual findings were in clear error. Finally, the court upheld the district court's damage award. Accordingly, the court affirmed the judgment.
Court Description: Diversity Jurisdiction. The panel affirmed the district court’s grant of an almost $1.5 million default judgment against Safe Cig, LLC and in favor of NewGen, LLC after accepting NewGen’s amended allegations of diversity citizenship as true, and rejected NewGen’s cross-appeal for additional damages. The panel held that the district court properly permitted NewGen to amend its complaint under 28 U.S.C. § 1653 to cure the defective allegations of diversity jurisdiction. The panel further held that nothing in the text of § 1653 suggested that it applied only to judgments on the merits, and not to default judgments. The panel concluded that the district court acted within its statutory authority to give NewGen the opportunity to correct its allegations, and the amended NEWGEN V. SAFE CIG 3 complaint remedied the deficiencies of the original complaint, by alleging the parties were of diverse citizenship. The panel held that the district court had subject matter jurisdiction. The panel reasoned that both Safe Cig’s initial appeal and its Fed. R. Civ. P. 60(b) motion were facial and not factual attacks on the district court’s subject matter jurisdiction, and that Safe Cig never called into question the factual predicates to establish diversity jurisdiction. Addressing the district court’s denial of relief from default judgment, the panel held that the district court did not err in weighing the factors of Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986), and did not abuse its discretion in entering default judgment. Finally, the panel upheld the district court’s award of $1,483.075.84, and rejected NewGen’s cross-appeal for additional damages.
The court issued a subsequent related opinion or order on October 21, 2016.
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