Gargallo v. Merrill, Lynch, Pierce, Fenner & Smith

918 F.2d 658 (6th Cir. 1990)

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Nature of the Case

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Facts

Gargallo (D) maintained an account at Merrill (P) from 1976 until 1980 when his investments did not pan out, and losses occurred. P alleged that D owed $17,000. D refused to pay. P sued D and D countersued for negligence, misrepresentation and churning and that P had violated federal securities laws. D's claims were eventually dismissed with prejudice under Ohio Civil Rule 37 for a refusal by D to comply with P's discovery requests. D then filed a suit in federal court charging P with violating federal securities laws. This was based on the same transactions at issue in the state action. The District Court then dismissed the suit against P on res judicata grounds finding that the issues, facts, and evidence to sustain the action were identical to claims asserted in the state counterclaim that was dismissed. D appealed.