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damages hearing on which the District Court expressly relied in
awarding damages to the plaintiffs in that lawsuit. Cf. Furrer
v. Commissioner, 566 F.2d 1115, 1116 (9th Cir. 1977), affg. T.C.
Memo. 1976-331; Church v. Commissioner, 80 T.C. 1104, 1107
(1983).
In September 1984, DCI and the Diamonds commenced the
Farmers lawsuit in the District Court by filing an initial
complaint. Thereafter, they filed an amended complaint and a
second amended complaint, and the plaintiffs and FIG submitted a
pretrial order. In those submissions, the plaintiffs raised
claims against FIG for breaches of contract, indemnity, and
fraudulent misrepresentations and sought damages from FIG with
respect to those claims. At the conclusion of the pretrial
discovery period, the plaintiffs filed a motion for sanctions
against FIG, and on September 9, 1986, the District Court issued
an order granting that motion and indicating that it would enter
a default judgment in favor of the plaintiffs following the
damages hearing.
On January 20, 1987, the District Court rendered an opinion
in which it concluded (1) that the pretrial order (a) superseded
the various complaints that the plaintiffs had filed in the
Farmers lawsuit and (b) controlled the determination of any
damages to be awarded to the plaintiffs and (2) that the effects
of the entry of default in favor of the plaintiffs and against
FIG were to treat as established the plaintiffs' factual allega-
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