S.E.C.. v. Research Automation Corp., No. 600

CourtU.S. Court of Appeals — Second Circuit
Writing for the CourtBefore CLARK; MANSFIELD
Citation521 F.2d 585
PartiesSECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee, v. RESEARCH AUTOMATION CORPORATION et al., Defendants, Konstantinos M. Tserpes et al., Defendants-Appellants. ocket 74-2393.
Docket NumberNo. 600,D
Decision Date23 July 1975

Page 585

521 F.2d 585
SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellee,
v.
RESEARCH AUTOMATION CORPORATION et al., Defendants,
Konstantinos M. Tserpes et al., Defendants-Appellants.
No. 600, Docket 74-2393.
United States Court of Appeals,
Second Circuit.
Argued May 28, 1975.
Decided July 23, 1975.

Page 586

Konstantinos M. Tserpes, Basil Martos, Athan Hamos, defendants-appellants pro se.

Martin S. Berglas, Atty., S.E.C. (Lawrence E. Nerheim, Gen. Counsel, Walter P. North, Sr. Asst. Gen. Counsel, S.E.C., Washington, D. C., of counsel), for plaintiff-appellee.

Before CLARK, Associate Justice, * and HAYS and MANSFIELD, Circuit Judges.

MANSFIELD, Circuit Judge:

The principal issue on this appeal is whether a district judge has the power under Rule 37(d), F.R.Civ.P., to enter a default judgment against a defendant who appears for the taking of his pretrial deposition but, in a willful effort to disrupt and to impede discovery, refuses

Page 587

to be sworn or to testify. We hold that under these circumstances, unless the plaintiff first obtains a court order pursuant to Rule 37(a), F.R.Civ.P., directing the defendant to testify, the court lacks the power to impose this severe sanction.

On August 12, 1972, the Securities and Exchange Commission ("SEC" herein) commenced an action against the defendants seeking injunctive relief against their alleged violations of § 5 of the Securities Act of 1933, 15 U.S.C. § 77e (registration provisions), various antifraud provisions of that Act, § 17(a), 15 U.S.C. §§ 77q(a), and of the Securities Exchange Act of 1934, § 10(b), 15 U.S.C. § 78j(b), and Rules and Regulations thereunder, in connection with the offer and sale of securities of Research Automation Corporation ("RAC" herein).

A preliminary injunction was granted by the district court. Following an appeal by the defendants, the SEC decided to drop the § 5 charges and we remanded the case for findings of fact to the district court where it remained dormant for several months pending negotiations for a settlement that never materialized. Thereafter the SEC noticed the taking of the deposition of defendant Tserpes, President of RAC, for May 20, 1974, at the SEC's New York Regional Office, requesting him to bring with him certain documents. Tserpes appeared at the designated time and place but refused to enter the room where his deposition was to be taken, insisting on seeing William D. Moran, Administrator of the SEC's New York Regional Office, who was engaged in conference on other business at the time. The SEC planned to have the examination of the witnesses conducted by Mark N. Jacobs, a staff attorney. Tserpes finally succeeded in forcing Mr. Moran to leave his other business in order to receive the documents personally before Tserpes would enter the room where his deposition was to be taken, all of which wasted about one and a half hours. Upon entering the room where Jacobs was waiting to depose him, Tserpes proceeded to engage in a course of obstructive conduct that made it impossible for Jacobs to take the deposition. Tserpes' obstructive tactics took the form of his erroneously insisting that certain discussions had not been transcribed by the court reporter, haranguing Jacobs with statements to the effect that Tserpes did not propose to be deposed by Jacobs, whom he distrusted and characterized as a "liar," or by anyone associated with him, and finally by his refusing to be sworn when Jacobs repeatedly asked the reporter to administer the oath. Finding it impossible to proceed, Jacobs adjourned Tserpes' deposition and then attempted unsuccessfully to take the depositions of Martos and Hamos, the other RAC officers. In this effort he was frustrated by the further disruptive efforts of Tserpes who, appearing pro se, proceeded to volunteer statements, interrupt the questioning, answer questions put to the deponents, and attack Jacobs personally. Finally Jacobs was compelled by this conduct to adjourn the depositions entirely.

The SEC responded to Tserpes' conduct by moving in the district court, purportedly pursuant to Rule 37(d), F.R.Civ.P., for an order which would strike the answers of the defendants RAC and Tserpes and enter a default judgment against them. Magistrate Harold J. Raby, to whom the motion was referred, found after a hearing that Tserpes had deliberately engaged in a course of conduct designed to harass the SEC, to obstruct the taking of the depositions, and to sabotage the orderly conduct of the proceedings in the case. With respect to Tserpes' disruption of the depositions of Martos and Hamos, the Magistrate further found that Tserpes had "outrageously injected himself into the depositions which the S.E.C. was trying to conduct respecting the other two defendants and in effect, by the process of filibuster made it impossible to depose the other two witnesses." With reference to Tserpes' request for a Greek-English interpreter and his contention, which he reasserts here, that his conduct was due largely to his inability to understand the English language, Magistrate Raby observed

Page 588

that Tserpes appeared to possess fluency in English and that in any event he had failed to make a showing of indigency required for appointment of an interpreter. 1

Accepting Magistrate Raby's recommendations, Judge Ryan granted the SEC's motion, striking the answers of Tserpes and RAC and entering a default judgment against them. By separate orders the court denied a motion by the defendants for...

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103 practice notes
  • Khurana v. JMP United States, Inc., 14-CV-4448 (SIL)
    • United States
    • U.S. District Court — Eastern District of New York
    • 5 Abril 2017
    ...Rule 55, Fed. R. Civ. P." Grace v. Bank Leumi Trust Co. of NY, 443 F.3d 180, 192 (2d Cir. 2006) (citing SEC v. Research Automation Corp., 521 F.2d 585 (2d Cir. 1975)) (internal quotations omitted). This rule is fully applicable even where the sole shareholder of the defaulting corporation e......
  • Partners v. U.S.A, No. CV 09-9061 SVW (FMOx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • 20 Abril 2010
    ...added). Again, the courts are unanimous in holding that these statutory powers are discretionary. In SEC v. Research Automation Corp., 521 F.2d 585, 590 (2d Cir.1975), the court summarily dismissed a defendant's FTCA-based counterclaim because the SEC had discretion “to institute and mainta......
  • Elsevier, Inc. v. Grossman, 12 Civ. 5121 (KPF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 4 Agosto 2016
    ...however, PTI and IBIS could not take any action in this case without an attorney. See Sec. & Exch. Comm'n v. Research Automation Corp. , 521 F.2d 585, 589 (2d Cir. 1975) ("It is settled law that a corporation may not appear in a lawsuit against it except through an attorney [.]" (internal c......
  • The City of N.Y. v. Mickalis Pawn Shop Llc, Docket Nos. 08–4804–cv
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 4 Mayo 2011
    ...707 (2007); Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d 329, 334–36 (2d Cir.1986) (same); SEC v. Research Automation Corp., 521 F.2d 585, 589 (2d Cir.1975) (same); Shapiro, Bernstein & Co. v. Cont'l Record Co., 386 F.2d 426, 427 (2d Cir.1967) (per curiam) (same). We also find persua......
  • Request a trial to view additional results
103 cases
  • Khurana v. JMP United States, Inc., 14-CV-4448 (SIL)
    • United States
    • U.S. District Court — Eastern District of New York
    • 5 Abril 2017
    ...Rule 55, Fed. R. Civ. P." Grace v. Bank Leumi Trust Co. of NY, 443 F.3d 180, 192 (2d Cir. 2006) (citing SEC v. Research Automation Corp., 521 F.2d 585 (2d Cir. 1975)) (internal quotations omitted). This rule is fully applicable even where the sole shareholder of the defaulting corporation e......
  • Partners v. U.S.A, No. CV 09-9061 SVW (FMOx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • 20 Abril 2010
    ...added). Again, the courts are unanimous in holding that these statutory powers are discretionary. In SEC v. Research Automation Corp., 521 F.2d 585, 590 (2d Cir.1975), the court summarily dismissed a defendant's FTCA-based counterclaim because the SEC had discretion “to institute and mainta......
  • Elsevier, Inc. v. Grossman, 12 Civ. 5121 (KPF)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 4 Agosto 2016
    ...however, PTI and IBIS could not take any action in this case without an attorney. See Sec. & Exch. Comm'n v. Research Automation Corp. , 521 F.2d 585, 589 (2d Cir. 1975) ("It is settled law that a corporation may not appear in a lawsuit against it except through an attorney [.]" (internal c......
  • The City of N.Y. v. Mickalis Pawn Shop Llc, Docket Nos. 08–4804–cv
    • United States
    • U.S. Court of Appeals — Second Circuit
    • 4 Mayo 2011
    ...707 (2007); Dow Chem. Pac. Ltd. v. Rascator Mar. S.A., 782 F.2d 329, 334–36 (2d Cir.1986) (same); SEC v. Research Automation Corp., 521 F.2d 585, 589 (2d Cir.1975) (same); Shapiro, Bernstein & Co. v. Cont'l Record Co., 386 F.2d 426, 427 (2d Cir.1967) (per curiam) (same). We also find persua......
  • Request a trial to view additional results

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