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SARLIE v. E. L. BRUCE CO.

March 1, 1967

Jacques Sarlie, Plaintiffs
v.
E. L. Bruce Co., Inc. and Edward M. Gilbert, Defendants


Cannella, District Judge.


The opinion of the court was delivered by: CANNELLA

CANNELLA, District Judge.

Damages awarded after inquest as follows: Bruce is awarded damages with respect to the First Counterclaim in the amount of $327,476.97, together with 6% interest per annum from July 11, 1962, and, with respect to the Amended Second and Third Counterclaims, the sum of $500,000, together with interest at 6% from June 7, 1962.

 On May 31, 1963, Jacques Sarlie instituted suit against the E.L. Bruce Company and Edward M. Gilbert, the former president of Bruce, *fn1" charging violations of the federal securities laws and seeking thereby to recover $2,000,000, with interest, in damages.

 Sarlie's complaint alleged five causes of action. Firstly, it charged Bruce and Gilbert, jointly and severally, with violations of Section 10(b) *fn2" of the Securities Exchange Act of 1934 and Rule 10(b) (5) *fn3" of the Securities and Exchange Commission, in that the defendants made certain false statements and omitted to state other material facts in connection with the sale of Bruce stock by Gilbert to Sarlie to the latter's damage.

 The second cause of action, brought solely against Gilbert, alleged violations of Sections 12(2) *fn4" and 17(a) *fn5" of the Securities Act by reason of Gilbert's false statements and omissions of material facts as well as his failure to file an effective registration statement for the Bruce stock which had been sold.

 Thirdly, Sarlie alleged a conspiracy between Bruce, Gilbert and others by whom false statements were made and material facts omitted in connection with the sale of Bruce stock by Gilbert to Sarlie.

 The fourth cause of action, based upon the deceptive practices alleged in the other causes of action, alleged a common law fraud against Bruce and Gilbert.

 The fifth cause of action was brought against Bruce and sought indemnification for Sarlie in an action by McDonnell and Company, a registered stock broker-dealer, against Sarlie for monies alleged to be due to McDonnell by reason of Sarlie's purchases of Bruce stock from McDonnell.

 Gilbert, in an answer filed on July 9, 1963, entered a general denial to Sarlie's complaint.

 Bruce, in turn, filed an answer on July 19, 1963, generally denying the allegations of the complaint and raising as an affirmative defense the fact that Sarlie had engaged in a series of transactions for the purpose of pegging, fixing or stabilizing the price of Bruce stock in contravention of Sections 9(a) *fn6" and 10(b) *fn7" of the Exchange Act, along with the Rules of the S.E.C. promulgated thereunder, and Sections 5 *fn8" and 17(a) *fn9" of the Securities Act of 1933.

 In addition, Bruce alleged three counterclaims.

 The first charged Sarlie with the unlawful manipulation in the stock of the Celotex Company, in violation of Sections 9(a) and 10(b) of the Exchange Act.

 The second counterclaim alleged that Gilbert, acting for himself and not in his capacity as Bruce's president, entered into unlawful transactions and agreements with Sarlie by which Gilbert, without authority, misappropriated Bruce funds and passed a substantial portion thereof to Sarlie. The third counterclaim alleged that Sarlie knew, or should have known, that the sums withdrawn by Gilbert from Bruce were monies to which Gilbert was not entitled.

 Each counterclaim was held legally sufficient by Judge Murphy on May 10, 1966. *fn10"

 In July of 1963 the deposition of Sarlie was noticed to be taken. It is clear that the deposition of Sarlie is essential for the proper presentation of Bruce's case. The commencement of the examination was adjourned several times and did not actually commence until December 6, 1963. After that date it was adjourned repeatedly, generally at the request of Sarlie, and, ultimately, was not completed.

 On the fifteenth day of December, 1965, the examination of Sarlie by Bruce had been noticed to be continued. Upon service of this notice Sarlie moved pursuant to Fed. R. Civ. P. 30(b) *fn11" for a protective order directing that the remainder of his examination be taken by written interrogatories or, if taken orally, that this be done at Paris, France, his then alleged place of residence. As a third alternative it was suggested that the examination be postponed until shortly before the trial.

 In response to Sarlie's motion, Bruce moved, by motion filed January 31, 1966, pursuant to Fed. R. Civ. P. 37(d) *fn12" to dismiss the complaint because of Sarlie's alleged wilful failure to complete his deposition. Alternatively, it was suggested that Sarlie be ordered to appear at the Southern District Courthouse for the continuation and completion of his examination.

 By a written memorandum filed March 16, 1966, Judge McGohey disposed ...


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