Page:Olcott v. Delaware Flood Co.pdf/16

 First, Defendants assert that the evidence introduced at the set-off hearing does not support the court's final judgment. The court's February 8, 1990 order entering default stated that Plaintiff was entitled to reimbursement of the $1.9 million he invested in the partnership interests, but that the damage award would be reduced to the extent Defendants could establish "to the satisfaction of the fact finder that any portion of Plaintiff's contribution was utilized for legitimate business purposes." The court later clarified that evidence in support of any claimed off-set was limited to "direct proof" in the form of an accounting directly tracing Defendants' use of Plaintiff's funds. Defendants failed to introduce any evidence in the form required.

Nonetheless, Defendants claim the evidence introduced at the set-off hearing established that Plaintiff's entire contribution was utilized for legitimate business purposes under the terms of the contract. Defendants' argument requires this Court to interpret the terms of the underlying investment contract. As such, it is a merits argument foreclosed by the district court's default judgment. See Jackson, 302 F.3d at 525 ("[D]efendant by his default, admits the plaintiff's well-pleaded allegations of fact, is precluded from challenging those facts by the judgment, and is barred from contesting on appeal the facts thus established.")(internal quotation marks and citations omitted). The district court expressly instructed the parties that it would not hear arguments based on the contractual provisions in the underlying agreements. After the entry of default,

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