from the very beginning. We find that such an inference is warranted here.
Fifth and finally, Stuart-James has presented affidavits which allege that Danforth and Rossini worked together in prior schemes to manipulate Barcan stock. The Richard Berg affidavit states that, in his dealings with Danforth, she continually referred to Rossini as her partner and a fellow director of Barcan. The Edgar Donohoe affidavit alleges an almost identical situation to the one alleged here but in New York. Donohoe claims that his investment banking firm was passed bad checks drawn on a Barcan bank account and signed by Danforth and Rossini to pay for stock accounts which Rossini had opened in the name of Basingstoke.
Danforth and Barcan respond to these two affidavits by claiming that the affiants are lying. Given the standard of review on this motion, the movants apparently believe that they have established the falsity of these affidavits as a matter of law. The main support for this conclusion is a news release issued October 30, 1989, which basically states that Rossini is not an authorized agent of either Barcan or Basingstoke. The release is signed by Danforth in her capacity as director of Barcan. Danforth and Barcan also cite the release as evidence that even Stuart-James should have known of Rossini's fraudulent ways before it went ahead and believed him.
Again, however, the court must remind the movants that the release is, at very best, some evidence either that there was no conspiracy or that any reliance placed on later representations by Rossini was unreasonable. Although the movants are free to argue whatever theories they wish in attempting to avoid liability in this case, a simple reference to a conflict in evidence will never be sufficient to pull them out of the jurisdictional grasp of this court. This is not to even mention the fact that Danforth's post-news release conduct as alleged by Stuart-James appears to be significantly inconsistent with any disavowal.
These pieces of evidence -- and we again note that by no means has every bit of evidence presented been discussed -- overwhelmingly support an inference that Rossini was acting in concert with Danforth and Barcan when he made all his allegedly fraudulent actions in this district. Construing all facts in favor of Stuart-James, we find that in personam jurisdiction over these defendants is proper under 15 U.S.C. § 78aa. This leaves the issue of Rule 11 sanctions.
II. Rule 11 Sanctions
Both sides on this motion have moved for the imposition of Rule 11 sanctions on the grounds that the other has made demonstrably false statements of fact in arguing the merits of the motion to dismiss. We deny both motions as presented.
Stuart-James's motion is based on Danforth and Barcan's statement in its initial motion that Rossini had no authority to act on behalf of Barcan, nor had he ever possessed such authority. The supposed conclusive proof of this statement's falsehood, as put forward by Stuart-James, is the lease for the Skokie, Illinois office signed by Danforth, as Barcan's president, and Rossini, as Barcan's director. Stuart-James also refers the court to the Basingstoke check in payment of the first month's rent on the lease as signed by Danforth.
This "proof" of falsehood, however, is woefully deficient. As described above, the validity of Danforth's signatures on the lease and the check are hotly contested by the movants and a handwriting expert appears to agree with their claim. This is more than sufficient to defeat sanctions on the ground requested.
Not to be outdone, however, Danforth and Barcan claim that Stuart-James made demonstrably false statements in the form of the Donohoe and Berg affidavits. The "proof" of this claim is articulated as the October 30, 1989, news release discussed above and the fact that the movants simply disagree with all the inferences that may be drawn from these affidavits as argued by Stuart-James. This is not demonstrating falsehood by any standard of which this court is aware; it merely indicates disagreement. Although we choose not to impose sanctions sua sponte in this case, we remind Danforth and Barcan that Rule 11 motions are a serious matter and that this court has not hesitated to impose sanctions on attorneys who file such motions without reasonable grounds. See, e.g., Ratkovich v. Smith Kline and French Laboratories, 1990 U.S. Dist. LEXIS 1279, No. 88 C 3758, slip op. at 23-25 (N.D.Ill. Feb. 2, 1990) (Kocoras, J.).
For the foregoing reasons, we deny Danforth and Barcan's motion to dismiss based on a lack of personal jurisdiction as well as the parties' cross-motions for Rule 11 sanctions.
Dated: March 13, 1990
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