United States Securities and Exchange Commission v. Benger et al
Filing
483
MEMORANDUM Opinion and Order Signed by the Honorable Jeffrey Cole on 4/9/2014:Mailed notice(jms, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION,
Plaintiff,
v.
STEFAN H. BENGER, et al.,
Defendants.
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No. 09 C 676
Magistrate Judge Jeffrey Cole
MEMORANDUM OPINION AND ORDER
Stefan von Hase and CTA Worldwide, S.A., two defendants among several in this case, move
for an order vacating the default that was entered against them October 23, 2013. [Dkt. #457].1 The
SEC has objected – and quite vigorously. [Dkt. #471]. Mr. von Hase – resident of the Bahamas and
owner of CTA Worldwide – claims that from April through October 2013, he was being treated for
alcoholism and could not attend to his obligations and those of his company to participate in this
case. Interestingly, Mr. von Hase has not submitted his own declaration or affidavit to support the
claim. Instead, he has submitted statements from three Bahamian doctors, two of whom assert that
during the seven month period from April through October 2013, he was unable to “confer” with his
counsel.
Aside from that, he paints a rather glowing picture of his participation in this lawsuit up to
the time of his claimed period of incapacitation. To hear him tell it, he has dutifully responded to
complaints, sat for depositions, and traveled to Chicago several times to meet with his attorney. But
1
The other defendants have settled with the SEC.
the reality is quite different.
Background
The SEC filed this suit on February 3, 2009, naming eight defendants and two relief
defendants, Mr. von Hase and CTA (“default defendants”). (Dkt. #1). Default defendants moved
to dismiss the complaint on the ground (among others) that the court lacked personal jurisdiction
over them. (Dkt. #70). Judge Lefkow denied the motion, finding that “both [von Hase] and CTA
continually conduct business in the United States and in doing so, have sought to benefit from its
laws.” SEC v. Benger, 2009 WL 1851186, at *8 (N.D. Ill. 2009).
Default defendants’ answer to the Complaint was due on July 14, 2009, but they missed that
deadline – by quite a bit. It was not until August 20th that they even sought an extension of time.
The excuse was that Mr. von Hase was based in the Bahamas, and his counsel had a trial in Virginia
during August. (Dkt. # 153). While this did not account for default defendants’ inactivity during
the entire month of July, Judge Lefkow nevertheless granted the motion and gave the default
defendants until September 4, 2009, to file their answer. (Dkt. # 159). But the default defendants
missed that deadline as well. They did not ask for another extension and, without asking for leave
to file instanter, simply filed their answer well over a month late, on October 15, 2009. (Dkt. # 180).
On April 1, 2010, the SEC filed an amended complaint which, among other things, converted
von Hase and CTA from relief defendants to full defendants. (Dkt. # 238). On April 8, 2010, Judge
Lefkow ordered all defendants to respond to the amended complaint by May 6th. (Dkt. # 239). With
the exception of the default defendants, all the defendants complied. Again, the default defendants
did not seek extra time to file their answer. The SEC subsequently informed default defendants that
it would move for a default judgment if they did not communicate their intent to file an answer by
2
May 19th. (Dkt. # 253, Ex. 1). Default defendants ignored the SEC’s communication, and the SEC
followed through with its motion. (Dkt. # 253).
And so, Judge Lefkow entered the first default judgment against the default defendants on
June 22, 2010. (Dkt. # 261). The judge set a remedies prove-up hearing for August 17, 2010. (Dkt.
# 258).2 Judge Lefkow postponed that hearing until September 2, 2010, at which time default
defendants asked for leave to file a motion to vacate the default judgment. (Dkt. # 264; 266). They
filed their motion on September 9th (Dkt. #267), and the SEC agreed not to oppose it if the default
defendants provided complete discovery responses, filed an answer to the complaint, and produced
Mr. von Hase for a deposition. On November 16, 2010, the default defendants finally sought and
were subsequently granted leave to file their answer to the amended complaint instanter. (Dkt. #
282; 284).
In the wake of the Supreme Court’s ruling in Janus Capital Group, Inc. v. First Derivative
Traders, 131 S.Ct. 2296, 2302 (2011) (holding that “[f]or purposes of Rule 10b-5, the maker of a
statement is the person or entity with ultimate authority over the statement, including its content and
whether and how to communicate it”), the SEC sought and was granted leave to file its current
amended complaint on December 20, 2011. (Dkt. #332-334). Defendants filed various motions to
dismiss and for summary judgment and, following extensive briefing and oral argument, the court
issued a series of rulings in February and March 2013, granting the motions in part and denying them
in part. (Dkt. # 405; 411-413; 415; 418-419). See S.E.C. v. Benger, 2013 WL 593952 (N.D.Ill.
2
On the same day it filed its default motion, the SEC filed a motion to compel the production of
documents from default defendants, based on their failure to make a complete production in response to the
SEC’s prior document requests. (Dkt. # 255). I denied the SEC’s motion for failure to comply with Local
Rule 37.2 (Dkt. # 257), and later, after Judge Lefkow’s ruling, denied it as “moot in light of the default
judgment just entered by Judge Lefkow.” (Dkt. # 259).
3
2013); S.E.C. v. Benger, 931 F.Supp.2d 908 (N.D.Ill. 2013); S.E.C. v. Benger, 931 F.Supp.2d 904
(N.D.Ill. 2013); S.E.C. v. Benger, 931 F.Supp.2d 901 (N.D.Ill. 2013); S.E.C. v. Benger, 934
F.Supp.2d 1008 (N.D.Ill. 2013).
After the SEC elected to stand on the surviving claims in its complaint, certain defendants
moved for an extension of time to answer. (Dkt. #425). The motion was granted, and the defendants
were given until June 13, 2013, to answer the complaint. (Dkt. # 425; 427). Yet again, the default
defendants failed to file their answer by the deadline or move for a further extension of time.
On August 26, 2013, Mr. von Hase’s counsel filed a motion to withdraw as the default
defendants’ attorney, explaining that, since early in 2013, his clients had communicated with him
less frequently. He had not heard from Mr. von Hase since April 13, 2013, despite sending him
thirteen emails and leaving twelve voicemails. (Dkt. #435). He said he made several other efforts
to contact Mr. von Hase, from asking his friends about him, to contacting the Bahamian police.
Finally, counsel was directed to the honorary German consul who told him he knew Mr. von Hase
and explained that he had been drinking heavily and had withdrawn from social contact. (Dkt. #
435). The default defendants’ counsel attempted to FedEx a letter to Mr. von Hase, but the delivery
service was unable to gain entrance to Mr. von Hase’s residence. Conceding that the case must go
forward, the default defendants’ lawyer asked for leave to withdraw as counsel. (Dkt. # 435). The
motion was granted and the default defendants were ordered to answer the complaint by October 7,
2013. (Dkt. # 442). They didn’t, of course.
On October 23, 2013, the court granted the SEC’s oral motion for entry of default against the
default defendants. (Dkt. # 447). Coincidentally, Mr. von Hase’s counsel had apparently reestablished contact with Mr. von Hase and was allowed to re-enter the case. (Dkt. # 447). He
4
explained that Mr. von Hase had endured a “lengthy hospitalization” for alcoholism. (Dkt. # 4711,10/23/2013 Hrg. Tr. at 3:21-25).3 Given the history of what had occurred with the default
defendants, and since “[n]othing is simpler than to make an unsubstantiated allegation,” Parko v.
Shell Oil, 739 F.3d 1083, 1086 (7th Cir. 2014) – it is, in part, for that reason that uncorroborated
statements in briefs and oral argument don't count, see Clifford v. Crop Production Services, Inc.,
627 F.3d 268, 273 n.6 (7th Cir. 2010); IFC Credit Corp. v. Aliano Brothers General Contractors,
Inc., 437 F.3d 606, 610-611 (7th Cir.2006); In re: Payne, 431 F.3d 1055, 1060 (7th Cir.2005) – I told
Mr. von Hase’s counsel that I would need something more than Mr. von Hase’s word given through
his lawyer, who of course had no first hand information at all. Accordingly, I advised counsel that
any motion to vacate the default must be supported by evidence in the form of hospital and doctors’
records documenting his stay in the hospital and visits with his doctors. (# 471-1,10/23/2013 Hrg.
Tr. at 9:6-11). Counsel agreed. (Id.).
In the wake of this hearing, the default defendants took absolutely no action to cure their
default or answer the complaint, waiting over three months – until January 28, 2014 – before filing
their Fed.R.Civ.P. 55(c) motion to vacate. (Dkt. # 457). Coincidentally, that was just five days after
the SEC had moved for an entry of final default judgment against them. (Dkt. # 451). A briefing
schedule was set on January 29th, giving the SEC until February 28th to respond and allowing the
default defendants to file a reply by March 14th. (Dkt. # 463). As one might expect, March 14th
came and went with no reply from the default defendants and no motion for an extension of time.
In fact, no reply was ever filed. There comes a time when a court must say, “enough is enough.” See
Pyramid Energy, Ltd. v. Heyl & Patterson, Inc., 869 F.2d 1058, 1062 (7th Cir. 1989).
3
That turned out to be somewhat of an exaggeration.
5
Analysis
In order to vacate the entry of default prior to the entry of final judgment, a defendant must
show: “(1) good cause for the default; (2) quick action to correct it; and (3) a meritorious defense
to the complaint.” Wehrs v. Wells, 688 F.3d 886, 890 (7th Cir. 2012); Cracco v. Vitran Exp., Inc.,
559 F.3d 625, 630-31 (7th Cir. 2009). On the one hand, the Seventh Circuit has said that the standard
is a “lenient” one. Cracco, 559 F.3d at 631. On the other, it has said that it “no longer disfavors
default judgments . . . .” Comerica Bank v. Esposito, 215 Fed.Appx. 506, 508 (7th Cir. 2007);
Stafford v. Mesnik, 63 F.3d 1445, 1450 (7th Cir. 1995). Whether these are varying stances or merely
different formulations of the same thing is not important. No matter what, the result is the same
since this is not a close case.
1.
The default defendants submit that Mr. von Hase’s alleged treatment for alcoholism
constitutes good cause for their default. They contend that “the fact that the[y] had participated in
the case for years, including submitting to two depositions before the SEC, demonstrates that the
failure during the April through October 2013 time period was an aberration due to von Hase’s
personal medical issues. (Dkt. # 457, at 6). As we know, the default defendants’ record of
participation in these proceedings is a poor one, missing multiple deadlines and not even bothering
to request extensions of time. Their sporadic cooperation and general disinterest in the proceedings
resulted in one default judgment being entered against him already. Interestingly, the second of the
depositions was a condition for the SEC not opposing his motion to vacate his first default, so it is
not as though Mr. von Hase was a willing participant. If anything, the record shows that Mr. von
Hase’s lack of participation from April through October 2013 was not an aberration, but consistent
6
with his customary disregard for his and CTA Worldwide’s obligations in this case.
As for his medical excuse, the cursory evidence Mr. von Hase has submitted does not show
that he is entitled to the relief he seeks. Quite the contrary. The totality of the evidence consists of
three terse, conclusory, unsupported statements from three doctors in the Bahamas. The first is from
Dr. Eugenia Combie, a “consultant psychiatrist,” who “certif[ies]” not under oath that von Hase
spent thirteen days in a rehabilitation facility from September 7 through September 19, 2013, where
he was treated for alcohol withdrawal and Polysubstance dependence. He was committed under the
Mental Health Act of the Bahamas, having been evaluated – by whom she does not say – as a danger
to himself and others. Id. (Motion to Vacate, Ex. A, Dkt. # 457).
Dr. Combie ends her laconic, eight-line letter with the conclusion that Mr. von Hase “was
not able to confer with his counsel during” the period of September 7 to September 19, 2013. Dr.
Combie’s letter is silent regarding Mr. von Hase’s failure to communicate with his lawyer during the
181 days between April 12, 2013 through October 23, 2013 (excluding September 7 to September
19). Thus, even if one were to fully credit Dr. Combie’s letter, all it does is account for 13 days in
September and makes no attempt to explain Mr. von Hase’s abandoning his responsibilities in this
case for six months.
Curiously, Dr. Combie, although a psychiatrist, had no further involvement with Mr. von
Hase, instead returning him, at Mr. von Hase’s request, to “follow up” with his general physician,
Dr. Ian Kelly. (Motion to Vacate, Ex. A, Dkt. # 457). Dr. Kelly tells us that during the six-month
period from April through October 2013 he treated Mr. von Hase for “medical issues relating to
severe alcoholism.” What, he does not say. He concludes that during that entire period, Mr. von
Hase “was incapacitated and was not able to “confer with counsel.” Indeed, he goes so far as to say
7
that during that entire seven month period he was not even “ able to contact family members.”
(Motion, Ex. B, Dkt. #457-1, at 4-5). Friends are not mentioned, but presumably Dr. Kelly means
to include them as well.
But the questions that immediately arise are how was he living during this extended period
of complete reclusiveness? Who took care of him? Where was he living and how was he functioning
if contact even with family and friends was forbidden? How often was Dr. Kelly seeing him during
these seven terrible months of isolation, for surely constant care must have been required given Mr.
von Hase’s dire situation? And if his condition warranted the degree and duration of isolation
adverted by Dr. Kelly, one would expect some explanation, not merely a tendentious conclusion that
served the “patient’s” interests. These and like questions leap to mind but are not answered by Dr.
Kelly, who contents himself with a bare conclusion.
Implausible or improbable testimony need not be accepted, United States v. Johnson, 729F.3d
710, 715 (7th Cir.2013), and fact-finders are permitted to “‘use their common sense’ ” and “‘evaluate
the facts in light of their common knowledge of the natural tendencies and inclinations of human
beings.’” United States v. Ayala, 887 F.2d 62, 67 (5th Cir. 1989). See Coggeshall v. United States
ERS), 69 U.S. (2 Wall.) 383 (1865).4
In any event, Dr. Kelly says that following Mr. von Hase’s release from the hospital on
September 19th, “his condition has improved significantly.” (Motion, Ex. B, Dkt. #457-1, at 4).
Therefore, there were no medical reasons for him to have waited until January 2014 to file the
4
Common sense and human experience always have a role to play in judging. United States v.
Montoya De Hernandez, 473 U.S. 531, 542 (1985); Greenstone v. Cambex Corp., 975 F.2d 22, 26 (1st
Cir.1992) (Breyer, C.J.); Cooney v. Rossiter, 583 F.3d 967, 971 (7th Cir.2009); Posner, How Judges Think
at 116 (Harv. Univ. Press 2008).
8
motion to vacate default. Finally, although Dr. Kelly says that von Hase continued to be “treated by
Dr. Combine [sic],” that statement is not confirmed by Dr. Combie, whose letter does not even
suggest that he saw von Hase after his release to Dr. Kelly on September 19th. Quite the contrary, the
letter is quite clear in saying that thereafter he was under the care of Dr. Kelly pursuant to Mr. von
Hase’s own request.
Dr. Kelly’ statement that Mr. von Hase was so incapacitated from “severe alcoholism” that
for a seven month period he was not even “able to contact family members” or “confer with his
lawyer” is utterly unsupported. Not a single treatment note or other medical record was provided
by Dr. Kelly. Unfortunately for Mr. von Hase, ipse dixits are never enough. General Elec. Co. v.
Joiner, 522 U.S. 136, 146 (1997); United States v. Suffield Terrace, Skokie, Ill., 607 F.3d 504, 510
(7th Cir.2010). “‘An opinion has a significance proportioned to the sources that sustain it.’” Huey
v. United Parcel Service, Inc., 165 F.3d 1084, 1087 (7th Cir.1999). Dr. Kelly’s opinion has nothing
to sustain it beyond his unsupported and in part improbable conclusions.
The final piece of evidence is from Mr. von Hase’s dermatologist, Dr. Rosetta Ingraham. She
treated Mr. von Hase apparently from January 2013 through October 2013 “for skin infections
relating to serious dermatological issues.” (Motion, Ex. C at 7, Dkt. #457-1, at 7). She feels he was
unable “to confer with his counsel” from August 2013 through October 2013 due to a “disoriented
state of mind and a constant itching pain.” (Id.). But this would leave a seven-month period during
which, at least according to her, he would have been able to at least contact his lawyer. In this regard
then, Dr. Ingraham does not support Dr. Kelly’s more extended period of incapacity, which
according to him ran from April 2013 through October 2013. Predictably, not a single treatment note
accompanies Dr. Ingraham’s one page, seven paragraph declaration. Her ipse dixits are no better than
9
Dr. Kelly’s.
Further, although she states that she treated him for the nine month period from January to
October 2013, there is no claim by Dr. Ingraham that Mr. von Hase was unable to contact family
members or consult with his counsel between January and July 2013. She merely states that in her
opinion in the three month period between August and October 2013, Mr. von Hase had a
“disoriented state of mind” that precluded his “conferring with his counsel.” She does not say he
could not contact family members or even that he could not “contact” his lawyer. Contacting and
conferring with a lawyer are quite different things. In sum, there is absolutely nothing to explain the
basis for her conclusion about his incapacity, and thus they fare no better than Dr. Kelly’s.
Finally, it is significant that each of the doctors’ submissions contains the identical statement
that Mr. von Hase was “unable to confer with his counsel.” Obviously, it was not by chance that each
of them used this phrase. But it is one thing to say that Mr. von Hase could not confer with his
counsel and quite another to say that he could not “contact” him. “Conferring” with a lawyer
connotes some period of discussion and analysis. “Contacting” counsel does not. A simply phone
call or email from Mr. von Hase to his lawyer at any time during the period April to October alerting
him to his supposed situation would have sufficed for a dedicated and punctilious lawyer like Mr.
McGurk to have filed a simple statement with the court regarding Mr. von Hase’s situation. Of
course, he did not do that, and nothing in either Dr. Kelly or Dr. Ingraham’s submissions says that
Mr. von Hase was incapable of “contacting” Mr. McGurk in the seven month period from April October 2013 and alerting him to his plight.
We shall assume for the sake of argument that during the thirteen days in September 2013
that Mr. von Hase was at the rehabilitation facility, he was unable to “confer” with his counsel. But
10
in the months prior to September 2013 – which included the June 13th date when the answer to the
complaint was due – the default defendants did nothing. Only Dr. Kelly tries to exonerate his lack
of action in this period. But for the reasons discussed, the attempt fails.
In short, all we have to go on are the conclusory (and partly conflicting) opinions of two
doctors. Significantly, not only is there no attempt to amplify on their conclusory statements, they
are unsupported by any treatment notes or medical record of any kind. It was to ensure that there
would be an adequate basis to evaluate any statement made by doctors that I cautioned counsel at
the October 23, 2013 hearing that he would have to produce records of treatment to support a motion
to vacate the default. Not only have records not been produced, there has been no explanation given
for their conspicuous absence.
The reason for the caution to von Hase’s counsel about blind acceptance of opinions is that
treating physicians may “bend over backwards” and “want to do a favor” for their patients and thus
too easily conclude that they are incapacitated. See, e.g., Schmidt v. Astrue, 496 F.3d 833, 842 (7th
Cir. 2007); Hawkins v. First Union Corporation Long-Term Disability Plan, 326 F.3d 914, 917 (7th
Cir. 2003); Dixon v. Massanari, 270 F.3d 1171, 1177 (7th Cir. 2001). While these are Social Security
and ERISA cases, the principle they espouse necessarily has wider application, based as it is on a
realistic appraisal of “psychological tendencies,” Withrow v. Larkin, 421 U.S. 35, 47 (1975), and
human motivation.5 Without records of treatment, there is no way to determine whether this bias was
5
Moreover, there is a substantial body of authority in this and other Circuits recognizing that that
an expert can be found to say whatever the principal needs him to say. See Mid-State Fertilizer Co. v.
Exchange National Bank of Chicago, 877 F.2d 1333, 1340 (7th Cir. 1989) (the expert “cast aside his scholar's
mantel and became a shill for Mid-State.”); Minasian v. Standard Chartered Bank, PLC, 109 F.3d 1212,
1216 (7th Cir. 1997); Tellabs Operations, Inc. v. Fujitsu Ltd., 283 F.R.D. 374, 385-386
(N.D.Ill.2012)(collecting judicial and scholarly authorities).
(continued...)
11
– or was not – at work. Certainly, I am not bound to accept uncritically even statements under oath,
from any witness, including doctors. See, e.g., Cunningham v. Masterwear Corp., 569 F.3d 673,
674–75 (7th Cir. 2009)(physician had to present evidence to support his opinion); O'Conner v.
Commonwealth Edison Co., 13 F.3d 1090 (7th Cir.), cert. denied, 512 U.S. 1222 (1994)(physician’s
opinion was unreliable where it was unsupported by anything to justify his conclusion).
The default defendants’ failure to produce supporting medical records or explain their absence
is significant for another reason. If a party has it peculiarly within his power to produce evidence that
would elucidate a matter in issue – and Mr. von Hase has placed his medical condition squarely in
issue – the fact that he does not do so permits an inference that the testimony or records, if produced,
would be unfavorable or not supportive. Graves v. United States, 150 U.S. 118, 121 (1893); Gilbert
v. Cosco Inc., 989 F.2d 399, 405 (10th Cir.1993); Miksis v. Howard, 106 F.3d 754, 763 (7th Cir.
1997). There is no claim that the medical records were not available, did not exist, or that the doctors
refused to produce them.
Also at play is the striking coincidence that Mr. von Hase recovered from his severe,
incapacitating alcoholism and painful itching and regained his senses about the week that the SEC
moved for an entry of final default judgment against him. While, of course, possible, in the overall
context of this case, the timing seems too convenient. What the Seventh Circuit said in United States
v. Rodriguez, 975 F.2d 404 (7th Cir. 1992) is not without some force here: “In isolation, any one of
the facts described in the Government proffers might conceivably be dismissed as mere coincidence.
Considering the proposed evidence in total, it more than represents the sort of suspicious
5
(...continued)
12
circumstances that convince us.…” See also Coggeshall v. United States (THE SLAVERS), 69 U.S.
383 (1865)(“Circumstances altogether inconclusive, if separately considered, may, by their number
and joint operation, especially when corroborated by moral coincidences, be sufficient to constitute
conclusive proof.” ).
Finally, I think it significant that Mr. von Hase has chosen not to file any affidavit or
declaration in support of the notion to vacate. He, more than anyone, could speak to his claimed seven
month incapacity and the events that his motion says prevented him from even having any contact
with his family members. Nothing in the doctors’ conclusory statements remotely suggest that he is
incapable of recounting his mental state during the period April through October 2013 – the period
when Dr. Kelly and only Dr. Kelly says he was incapacitated. If his claimed alcoholism resulted in
some inability to recount what occurred – although it seems improbable, to say the least, that anyone
would in effect have amnesia for a seven month period – he certainly could say so under oath. He has
chosen instead to rely on conclusory, unconvincing, and conflicting statements from Dr. Kelly and
Dr. Ingraham, unsupported by a scintilla of evidence beyond their own assertions. Even accepting
Dr. Combie’s statement only accounts for a two week period in September 2013. On the state of this
record, I do not find that the default defendants have carried their burden of demonstrating good cause
for their default.
2.
The default defendants have also failed to show that they took swift action to correct the
default. The default was entered October 23, 2013. Even Dr. Kelly only places the period of Mr. von
Hase’s incapacity through October, and notes that Mr. von Hase’s condition “improved significantly”
following his release from the treatment facility on September 29, 2013. Yet, Mr. von Hase still did
13
not file a motion to vacate until January 28, 2014, three months later. There is nothing in this record
that supports that sort of disregard of his obligations as a party in this litigation.
His claim that the “location of the physicians” – meaning in the Bahamas – prevented timely
action by him certainly does not. The motion could have been filed by his counsel long before the
end of January, and any supporting information submitted thereafter, if it was not immediately
available. Moreover, Mr. von Hase was in the Bahamas where his doctors were. They were a phone
call away. He could have asked them to write the same cursory statement they ultimately submitted
and the requests would have taken but a few minutes.6 Mr. von Hase does not submit anything to
show that he tried promptly to get statements from the doctors and that he was rebuffed. His
submission, therefore, leaves unexplained why it took three months to file the motion and to gather
the exceedingly brief and cursory notes that were ultimately submitted. Call this what you will, it is
anything but “swift” action. It is however action that is consistent with his conspicuously insouciant
attitude towards this case throughout its duration.
The cases simply do not support the contention that von Hase acted with the degree of care
and dispatch the law requires. See, e.g., Casio Computer Co., Ltd. v. Noren, 35 Fed.Appx. 247, 250251 (7th Cir.2002)(55 days too long for pro se defendant to have waited); C.K.S. Eng's, Inc. v. White
Mountain Gypsum Co., 726 F.2d 1202, 1208 (7th Cir.1984) (criticizing a two-month delay); Jones
v. Phipps, 39 F.3d 158, 165 (7th Cir.1994)(5 weeks for incarcerated prisoner too long); Wells Fargo
Equipment Finance, Inc. v. PMRC Services, LLC, 2011 WL 635861, 2 (N.D.Ill. 2011)(ten week delay
cannot be termed swift action). By the time the default defendants finally acted, all other defendants
had settled. The trial date was just six weeks away and had to be stricken. (Dkt. # 463).
6
Whether the doctors promptly complied would have been beside the point.
14
3.
Finally, the default defendants assert that they have a meritorious defense to the SEC’s claims
because Mr. von Hase is a German national residing in the Bahamas. As such, he claims he did not
have to register as a broker/dealer and was beyond the reach of the United States securities laws. His
“argument” consists of a scant few sentences and is unsupported by any citation to authority. The
Seventh Circuit has consistently held that such conclusory, unsupported arguments are insufficient
to establish a meritorious defense. Wehrs v. Wells, 688 F.3d 886, 890-91 (7th Cir. 2012)(collecting
cases).7 Moreover, this is a defense to only one of the four counts against him. Mr. von Hase raises
no defense at all to the fraud claims the SEC has brought in Counts I, II, and III, of its complaint.
4.
Entry of a default judgment is a last resort. A trial on the merits is the favored resolution of
all cases. Cracco, 559 F.3d at 631. But this is not simply a case where the default defendants have
failed to show any one of the three things they are required to in order to vacate their default. What’s
past is prologue. The backdrop of the default defendants’ repeated and glaring failures to meet
deadlines throughout this case should not and cannot be ignored. Those failures occurred when Mr.
von Hase had no alleged health issues and reached a crescendo precipitating the first default having
to be entered against him and his company. His more recent behavior is a continuation of that
disregard for the case. Clearly, that first vacated default was a less drastic sanction that had no lasting
effect. See Domanus v. Lewicki, 742 F.3d 290, 301 (7th Cir. 2014)(in discovery abuse context, default
7
This is merely a particularized application of the principle that skeletal, perfunctory, and
unsupported arguments are waived. Bass v. Joliet Public School Dist. No. 86, _F.3d_, 2014 WL 1229578,
5 (7th Cir.2014 ); McKevitt v. Pallasch, 339 F.3d 530, 533 (7th Cir.2003)(Posner, J.); Kenall Mfg. Co. v. H.E.
Williams, Inc. 2013 WL 427119, 16 (N.D.Ill.2013)(collecting cases).
15
judgment appropriate where there is a record of delays and less drastic sanctions have been
unavailing); Wellness Intern. Network, Ltd. v. Sharif, 727 F.3d 751, 779 (7th Cir. 2013)(also in
discovery context, “despite the severity of the sanction, a court is not required to issue less severe
sanctions before deciding to enter default judgment . . . .”). There is no rule that defendants are
entitled to three defaults before they are out. That is a rule for baseball not litigation.
CONCLUSION
The record in this case shows quite convincingly that throughout the litigation the default
defendants were unconcerned with court orders, with deadlines, and with their obligations to
participate fully and actively in the case. They should have paid heed to the Seventh Circuit’s
warning in United States v. Golden Elevator, Inc., 27 F.3d 301, 302 (7th Cir. 1994): “‘Lawyers and
litigants who decide that they will play by rules of their own invention will find that the game cannot
be won.’” The motion of defendants, Stefan von Hase and CTA Worldwide, S.A., to vacate the
default (Dkt. # 457) is DENIED.
ENTERED:
UNITED STATES MAGISTRATE JUDGE
DATE: 4/9/14
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