*1 already with the actions Ray § U.S.C. assigned court, the Honorable and listed pending in district or consolidat- for coordinated McNichols A. 28 Schedule pursuant proceedings ed SCHEDULE £ of California
Central Corp. Corp. Action Industries, IBM Civil v. Marshall
No. 73-3043-WJF Inc., Computer Products, al. Action et Civil Corp. No. 73-2331-F v. IBM Corp. Corp. Action Civil v. IBM Hudson General
No. 73-2796-F
Northern District of California Computer Co., Corp. Transamerica v. Action Civil Corp. IBM No. C-73-1832-WTS Peripherals Leasing Corp. ILC v. IBM Civil Action Corp. C-73-2238-RHS No. Corp., Corp. Memorex al. et v. IBM Civil Action
No. C-73-2239-SC (Sweden), Memorex A.B. et al. v. IBM Action Civil Corp. No. C-73-2240-ACW EQUITY In re FUNDING CORPORA- TION OF AMERICA SECURI-
TIES LITIGATION.
No. 142. Litigation. Judicial Panel on Multidistrict 11, Dec. 1973. Opinion Feb. Concurring Opinions Dissenting April *2 MURRAH, Chairman,
ORDER ALFRED P. opinion Panel, delivered the having found, upon the ba- ROBSON, which EDWIN A. WILLIAM papers submitted sis LORD, H. BECKER and JOSEPH S. hearing held, the actions listed Judges Panel, joined. *3 A involve common the attached Schedule of questions transfer of fact Background Litigation I. District actions to the Central litigation complex This multidistrict or consolidat- coordinated California collapse Equity arises out pretrial proceedings would serve ed Funding Corporation America, di a parties of the and witnesses convenience company versified financial services efficient further and would part based in California. In the latter litigation, conduct of the of March 1973 Fund ing’s by at- all on the securities was halted the New actions It is ordered Exchange pending districts York A Stock tached Schedule Exchange there District Cali- Soon other than the Central Commission. brought hei'eby are, after, be, in an the SEC action and the same fornia? California, District in the Central to the Central transferred to and, of that a decree consented consent California alleged enjoining assigned court, Mal- the continuation of an Honorable to the And the scheme to defraud investors. or consol- M. coordinated colm Lucas bankrupt company Chapter pursuant X pretrial proceedings, is now in idated pend- cy ac Numerous civil that district.1 with the actions 28 U.S.C. § tions, involving respects the al ing Sched- some and listed on in that district leged fraud, filed different have been ule A. throughout courts federal district embodying opinion full order A country. of these actions upon fi- will be filed the above decision pending Central Dis are either preparation. nal Dis trict of California the Southern trict New York.3 AND ORDER OPINION joined Seidman, & Defendant Seidman parties, has moved to numerous other MURRAH, Chair- ALFED P. Before Dis to the Central actions transfer all WISDOM, man, ED- and JOHN MINOR coordinated trict of California WEINFELD, A. ROB- EDWIN WARD proceedings.4 pretrial ***Prac consolidated BECKER, SON, H. JOSEPH WILLIAM litiga tically all of the III, LORD, A. WEI- STANLEY S. or consolidated GEL, Judges tion favor coordinated of the Panel. ing 1407(c) (ii) suggests proceedings assigned bankruptcy that a of Section 1. The party may Harry Pregerson ac- move for transfer of an of the Cen- Honorable appears party. Such a tion which it tral District of California. however, reading, consistent narrow not Dis- in the Central filed 2. The civil actions purposes legisla- with the intent assigned to have been trict challeng- argument event, any tion. In M. Lucas. Malcolm the Honorable right request an movant’s transfer of appear par- Dis- filed in the Southern 3. civil actions which it as a action ty does assigned Panel, which, disposed have been trict of New York Gagliardi. initiative, simply Lee P. Honorable its own ordered Eq- collapse arising actions out of the litigation magnitude it un- is not of this uity Funding why ac- to show cause those “party” party moving is not usual tions should not be transferred “in for coordi- all actions district or or con- districts for coordinated pretrial proceedings nated or consolidated proceedings solidated under Section appropriate,” under this section (ii). purely (c) read- literal A § U.S.C.
138J pretrial proceedings under sidiaries, Section 1407 and its accountants and audi- in some form or to some extent. prepared Some tors who the financial state- parties, however, reports insist on bifur ments and which concealed the cation of the and transfer of fraud. groups certain of cases to the Southern Trading “Tippee” B. or So-Called District of New York where most Claims comprising groups those are now by purchas- These claims are asserted pending. Equity Funding’s ers of securities extensively The matter been has against parties allegedly possessed orally argued. briefed and twice material, non-public con- information confronting real issue us is whether all cerning and traded in should be transferred ato corporation the securities of the without *4 single assigned district and to a making generally such information judge under Section 1407 or whether the investing public. available to the Plain- litigation should be bifurcated with two typically allege tiffs that in March 1973 For transferee forums. which reasons Equity Funding employee a former in- articulate, we shall we decided that analyst formed a securities for a re- the convenience of the and wit- brokerage search oriented firm that a nesses and efficient conduct and being perpetrated massive fraud was at litigation can best served company; analyst that the conduct- transfer of all of the investigation passed ed his own and, Central District of California gathered information he to certain assigned court, consent that to agents investors and investors the Honorable Malcolm M. for co- Lucas Funding’s Equity securities; and that pro- pretrial or ordinated consolidated possession those in of this infor- inside ceedings pursuant to Section advantage mation used it to their until trading Equity in all Fund- securities Litigation II. the Panel before ing suspended. was Plaintiffs nec- also A classification of the claims asserted essarily allege primary the facts of the in the to an under- essential underlying or fraud. standing of the which considerations complaints Some of the which contain prompt to to transfer all one us trading “tippee” or assign judge claims name de- them to district and one only parties allegedly fendants not which 1407 treatment. Section possession traded securities when Primary Underlying party-de- A. Fraud inside information but also primary
Claims fendants to the fraud claims. underlying primary Primary C. Combination Fraud- alleged claims relate to an Equity scheme Trading Claims Funding its subsidiaries complaints Some of the contain sin- earnings among by, inflate assets gle allega- upon claim for relief based creating selling things, other trading tions of both fraud and bogus policies reinsurers life insurance on inside information. investing present pub- order to image successful, growing lic an of a Underwriting D. Claims prosperous enterprise. The by purchas- fraud, comput- These claims are asserted the use of facilitated Funding Funding Equity ers, Equity ers debentures of to overstate enabled assets, upon and focus financial statements its record'non-existent assets and separate registration eventually appeared finan- statements its prospectuses re- disseminated with cial statements. The defendants public offerings spect Equity typically of the de- fraud actions include necessarily Funding, officers, con- bentures. The claims directors and sub- its alleging Funding debentures, underly- relating allegations tain fiduciary duties Funding. its violated trustee protect fraud at rights the bondholders.6 Rescission Claims E. opposed transfer of either Plaintiff is damages are for rescission Claims complaints on their of face, however, the actions. Funding’s arising out of made questions of fact raise In- Life acquisition National of Bankers find and we to the other actions common Savings Liberty Company and surance to some extent will were Plaintiffs Association. & Loan participation in coor- benefit from corporations at in] stockholders program dinated or consolidated acquisitions and received time in California. exchange stock allege They the fi- Broker-Dealer Actions their shares. by Equity used nancial statements purchased Equi Individuals acquisi- in connection with ty Funding before securities misleading. But false and tions were against suspended have filed actions plaintiffs’ claim for rescis- included in agents representative their brokers and concerning allegations rel- facts sion alleging 10(b) of violations Section primary fraud. evant to the Exchange of 1934 the Securities and Act *5 promulgated thereu Rule 10b-5 F. Miscellaneous Claims necessarily in nder.7 These actions Action 1. Contract primary volve the fraud at a contrac Funding This action involves and, order to eliminate duPont, For dispute Glore between duplicative discovery tual gan possibility Private Income and Federated inconvenience and witness concerning the sale Fund es, they Placement should be transferred to DuPont, debentures.5 placed Central District of California and alleges Forgan In Federated that general supervision Glore under the purchase contract its judge.8 separate come breached transferee If treat misrepresented its warranted, however, plaintiffs the debentures willingness ment is pay under all for them arguments may to the address these Clearly, has this action judge pre circumstances. transferee fashion nothing the other common with ac program trial of these suit needs purpose be no would tions and since plaintiffs and, appropriate, when recom under Section served mend to the that actions be Dis remain in the Southern it should respective remanded to transferor trict of New proceedings. courts further Indenture Trustee Actions 2. G. and Consolidated Com- Unified plaints Independent Protective Investor Pursuant to orders League entered actions in filed two has against the Central District of California and York Southern District York, the Southern District of New the indenture trustees Co., Goldman, DuPont, Forgan, 7. v. & John W. Dalton Sachs Inc. v. Federated 5. Glore 73-H-684; S.D.Texas, Fund, Civil Action No. S.D. and Private Placement Income N.Y., Grien, Trustee, v. Becker & Alfred Co., A. G. 1683. Action No. 73 Civ. Civil al., S.D.N.Y., Action No. 73 Civ. et Civil League, Independent Protective Investor 6. Wiener, 2946; ux v. and Lawrence M. et al., S.D.N.Y., Civil Bank et etc. v. Chemical Co., S.D.N.Y., Oppenheimer al., & et Civil 1551; Independent Inves- No. 73 Civ. Action No. 2420. Action 73 Civ. League, National v. First etc. tor Protective City Bank, Laws S.D.N.Y., 8. In re Four Seasons No. 73 Civil Action Cf. (Jud.Pan.Mult. Litigation, 344 Civ. (Jud.Pan. Lit.1972) F.Supp. 962 and 352 Mult.Lit.1972). legal com- and that set of unified and consolidated most issues and respect plaints with have been filed. Plaintiffs to those claims nothing pri- unified in common with the have filed a containing mary argue complaint They and consolidated fraud claims. therefore requests separate primary for definition of four trans- fraud claims be encompassing primary fraud, ferred to the Califor- classes Central District of underwriting trading “tippee,” tippee, or and re- nia or underwriting scission claims as described earlier.9 and rescission York, the Southern District of New four transferred Southern separate separate consolidated com- New York class action coordinated plaints alleged pretrial proceedings. have been filed.10 consolidated classes as defined in the New York com- proposition We start with the that the plaints overlap and conflict with the alleged primary underlying fraud ac- allegations class in the California consol- litigation and, tuates the entire to some complaint.11 idated least, extent at the various conditions plaintiffs' right recover all of the Question III. The of Transfer quantum actions. The nature and favoring proof primary bifurcation fraud nec- suggest essarily depends fraud issue is on and varies with the only peripherally legal involved in the trad theories of the cases. Not all of ing, underwriting proof and rescission claims the discoverable is common complaint (1) 9. The California consolidated con- Bankers National Life Insurance Com- respect allegations pany, (‘Bankers’), exchange taking tains Rule class said following place described classes : on or about October (1) Open persons (ii) Liberty Savings Association, Market All Purchasers: & Loan purchased stock, debentures, (‘Liberty’), exchange taking place *6 who common or said on Equity Funding Corporation September 14,1970. warrants of or about America, open subsidiaries, (4) Seolurity its or on the March 1978 Purchasers: All beginning ending open purchasers, purchasers market at in least 1964 and market or who 28, 1973, period open price, March being the exact time relied on the market of securi- plaintiffs Corporation unknown to because of the ties of defendants, knowledge fraudulent concealment of the America without of the fraudu- damage practices and who alleged sustained as a lent result of the and scheme hereinafter practices 6, 1973, fraudulent and scheme hereinafter between March and March alleged. damage and who sustained aas result of the (2) Original per- practices Issue Purchasers: fraudulent alleged, All and scheme hereinafter purchased by acquisition, sons who Equity Funding Corporation issued and a debentures as result utilization, as and America dissemination of inside infor- by regarding below, mation certain defendants said described and who continue to hold alleged. fraudulent scheme as hereinafter damages said debentures and who sustained practices as a result fraudulent and (1) A unified consolidated class action alleged. complaint scheme hereinafter on behalf of class. (2) (i) complaint 5y-2% A by unified consolidated debenture due 1991 offered brought class actions on behalf of former prospectus 1971; dated in stockholders of Bankers Life National Insur- (ii) a debenture due 1990 offered 9%% Company. ance by prospectus 1970; dated and (3) complaint A unified consolidated in un- (iii) issue, unlisted, debenture is- 514% derwriting class actions. by Equity Funding Capital Corpora- sued (4) complaint A unified consolidated guaranteed by EFCA, tion and due 1989. fraud and miscellaneous class actions. (3) Exchange Stock All Purchasers: example, 1 1. For York consolidat persons purchased securities of “trading complaint ed on behalf of the class” Funding Corporation of America ex- separate allegations no fewer than 14 class changing corpora- stock owned in the two made, conflict not with the securities, tions noted below for said plaintiffs’ alleged class on behalf injured who were as a result of the fraudu- Security Purchasers,” of “March 1973 but practices lent and scheme hereinafter al- alleged in with other the Cali also classes leged. complaint. fornia unified and consolidated They legislation. trading, implicit in the example, un- ness For actions. derwriting undoubtedly may- to confer intended were rescission judge power to fashion operative a transferee very facts not turn on well discovery program accommodate primary distinctly to the relevant nuances of the different facets and cannot be said even so it claims. But litigation. province of Pan- It alleged underlying is the en- fraud is that the tirely first instance el to decide whether or non-essential irrelevant litigation be should cas- stated of each of the establishment transferred pro- pretrial speak or consolidated allegations coordinated as drafted es. ceedings. province of the It respect. loudly Indeed, as we in that judge whether example, to determine transferee the facts have seen pretrial proceed- carefully pleaded in and what extent the primary fraud are ings be or consolidat- the uni- should coordinated of the counts contained each repeatedly at- complaints ed. We declined filed fied consolidated way tempt determine in what District of New Southern litigation be co- what extent the should necessarily based decision Our From the ordinated consolidated. argument of pleadings and oral very beginning left deter- we have counsel, of fact are statements whose mination discretion the trans- understandably mani- colored judge. feree interest in locale fest processing. do not concede Defendants transferring actions, concept alleged fraud at questions sharing one or more common pleaded. must, course, proven as it legal resting upon of fact but different governed pleaded facts We are assign theories, to district they will be cannot assume that we judge is new them to the same facts of admitted. The always at to the Panel. We have been undergird ac- each fraud underlie pains to leave extent of coordination augurs for the alone tion. This fact ingenuity and re consolidation to the sin- to a of all of judge. sourcefulness of transferee gle district under Section very beginning were confront we proof problem know that We ed of transfer of ac primarily docu- Plumbing litiga this kind consists tions in the Fixtures depositions. is not tion, And it arising ments and out of two criminal *7 province conspiracies charged the to determine separate in two proof quantum Plumbing or relevant the nature re dictments. See In Fixtures pro- by depositions (Jud.Pan.Mult.Lit. Cases, F.Supp. and discoverable 295 33 duction These decisions 1968). of documents. de “short-line” so-called necessarily to trans- be left litigation objected must fendants in that to judge power and the who has the feree discovery proceedings consolidated organize discovery program duty to ground that civil actions were based unnecessary prevent duplication and to conspiracies upon separate and that dis parties and to the witness- covery inconvenience would not be common to all cases. argued es. they preju And that it would be discovery dicial to coordinate their with Pretrial Coordinated Consolidated they not other cases which were Proceedings recog parties and had no We interest. separability alleged nized con speaks in terms The statute spiracies, but transfer we nevertheless “any coordinated district for transfer red all the cases to . . one district “. pretrial proceedings.” or consolidated leaving judge sole transferee 1407(a). dis Used 28 U.S.C. § power to determine his discretion differ juctive, denote the critical words procedures conducting sep order and They indica judicial functions. ent pretrial proceedings respect arate flexibility and resourceful- tive
1385 conspiracies.” separate separate Id. We ordered coordinated or pretrial proceedings consolidated for the at 34. litigation paper commercial because we litiga groups of In two other notable upon found that those cases rested a dif- suggested rejected bifurcation, we tion ferent set of facts than those leaving to which the trans the extent involved in the fraud actions in Phila- litigation coordinated ferred should be delphia. But we transferred the bond- re-, ingenuity or consolidated to holder actions to the Eastern District of judge. sourcefulness the transferee Pennsylvania for coordinated or consoli- Company Properties In re Revenue See pretrial proceedings dated with oth- Litigation, F.Supp. 1002 plain- er fraud actions. The bondholder (Jud.Pan.Mult.Lit.1970), and In re See opposed ground tiffs transfer on the burg-Commonwealth Merger United Lit against they proceeding only were (Jud.Pan.Mult. igation, 312 and accountants who underwriters Lit.1970). litigation latter we participated in the issuance of the bonds groups of noted that while the two might cases and that their would not be appropriate for bifurcated common to the actions. We were treatment did involve sufficient persuaded: commonality of fact to warrant “Although the extent of the factual of all actions to a district “to be overlap certain, is not it is sufficient by judge conducted with both familiar require bond to- these cases be as- groups of cases and sensitive signed pre- other cases for rights parties.” needs and of all And we bondholding purposes. trial observed that: present argu- plaintiffs may judge may “The transferee con- then separate ments for treatment pretrial solidate coordinate the given judge, dis- transferee proceedings groups in the two of cases coordi- the extent of cretion to decide to the extent he deem consolida- or consolidation desirable nation tion or coordination desirable to serve assigned under to him Section the convenience of and wit- 1407.” In re Penn Central Securities promote nesses and ef- Litigation, F.Supp. 1021, 1022- ficient conduct such actions.” In (Jud.Pan.Mult.Lit.1971). Seeburg-Commonwealth re United Merger Litigation, F.Supp. 909, think the reasons for transfer We (Jud.Pan.Mult.Lit.1970). bond in the Penn Central actions Litigation persuasive support equally parties favoring sug bifurcation litiga- the transfer gest the Penn Central tion to the Central District provides bifurcating an ideal model for for coordinated consolidated proceedings. In that we proceedings. transferred all of the securities fraud litigation growing out of the financial De- in Rule Class Potential Conflict difficulties the Penn Central Trans *8 terminations portation Company to the Eastern Dis Pennsylvania12 trict of highly per and yet later or There is another arising dered all actions compelling from sale the for of if not reason suasive Penn Centi’al Paper single judge. Commercial to the of all a transfer actions to Southern District of consistently New York.13 held that We 12. In re Penn separate Litigation, Central separate Securities for relief to a district F.Supp. 322 (Jud.Pan.Mult.Lit.1971). 1021 as Inasmuch com- 1407 treatment. Section equivalent paper of is the unsecured mercial 13. In re Paper Penn Central Commercial cash, it clear us that the claims for to Litigation, F.Supp. (Jud.Pan.Mult. 325 by unsecured relief holders of commercial Lit.1971). unique It was the nature of com paper distinguishable from were other con- paper mercial magnitude as well as the of of ventional claims for relief holders con- litigation Philadelphia which ventional securities. prompted plaintiffs’ us to order for appro- of under Meaning actions is Section 1407 Actions All Transfer
priate, necessary, possi- if not where the Single to a bility conflicting, for class inconsistent of all to Transfer determinations courts of coordinate discovery pro- does not mean that all jurisdiction complaints exists.14 The ceedings place take There is will there. vary skillfully precise from most lawyers necessity no for to across travel high depicting drafted de- documents a participate pretrial the continent to gree legal artistry may to what be de- bearing discovery which has no on their legal boilerplate. a scribed as But ma- litigation. Indeed, the Manual for Com- jority actions contain Rule 23 Litigation plex contains recommenda- allegations upon class based protect party tions disinterest- potentiality Facially fraud. at least discovery.16 particular aspect ed of inconsistent class determinations is mean, however, Transfer does readily apparent. responsibility determining for dis- what covery independ- common what is potential if not Because of ently irrelevant stated theories likely action determina conflict class who, single judge issues rests litigation tions, be think this should we perspective with an overall of the entire assigned single judge the sole to a with counsel, cooperation responsibility making class ac for discovery can schedule the minimize practica soon tion determinations “as as expense to the and maximize ble . .” . . See Fed.R.Civ.P. expeditious termination of Complex 23(c)(1). See also Manual litigation. (revised Litigation, I, Part 1.40 Section 1973). of the burdens this We are well aware edition upon impose the trans- will judge, with all claims The transferee equipped to But we feree court. him, and all before will have a precisely in it provide assistance picture scope complexity clear demonstrate canwe this context making litigation, essential to of Section flexibility resourcefulness class the class de- determinations. Once providing time same at the while made, po- then in a cisions are he will be aspects of all complete over control scope discovery sition to ascertain litigation. is authorized The Panel common all actions and formulate a deposition provide statute to under the pretrial responsive vari- schedule court. judges the transferee assist litigants. Judge ous demands As 1407(b). ac- Inasmuch U.S.C. § Wisdom in In re Four observed Seasons pending York are presently in New tions Litigation, Laws Judge Gagliardi, will assigned (Jud.Pan.Mult.Lit.1971) :15 responsible them if presumably be concerning discovery the Panel at before remanded “Should conflicts proceedings, pretrial objectives develop may ., . conclusion . depo- very judge presented preside well over be he to the transferee necessarily will decide extent the coordina- sitional way, place In this pro- take tion or consolidation the issues ceedings.” he will familiarized Id. at 223. litigation, Company See, g., Seasons instant Four Securi 15. Like the e. re Brown Chapter reorgani- (Jud. F.Supp. 307, Litigation, X in a was also involved ties bankruptcy Pan.Mult.Lit.1971) ; laws In re Gulf Sul zation under Texas *9 Litigation, F.Supp. 1398, phur 344 transferee court. Securities ; (Jud.Pan.Mult.Lit.1972) In re Career Complex Litigation, g., See, Academy Litigation, 16. e. Manual Antitrust 1973). (rev.ed. ; I, 753, (Jud.Pan.Mult.Lit.1972) 2.31 Part section re F.Supp. 484, Plumbing Cases, 298 Fixtures (Jud.Pan.Mult.Lit.1968). pursuant ceedings to 28 U.S.C. evidence involved nature of § the pending in that with the actions district or certain claims event the actions pro- and listed on Schedule him for further A. remanded to are ceedings. Judge BECKER, H. of the WILLIAM flexibility Furthermore, of Panel, concurring opinion. filed a “separate empowers Panel to statute with the of are, coordinated or consolidated tions es and nia will best serve the we find that portant to the Honorable Malcolm M. most districts other than the Central District fraud at We nesses relevant to the conclude that certain documents claims outside the mainstream any conduct on the located within that district. On brought transferee such feree district for Chapter judge at the same time priate for remand third action over-all Central District of of ed IV. Selection It is Virtually delay complete (a). claim, cross-claim, agree and, transferred it appropriate the efficient administration so party obtaining therefore ordered appended to an promote is the Central District of Califor- alleged underlying fraud, litigation may successfully be X Equity Funding, consent of that Once the judge bankruptcy proceedings, remanded.” conclusion before all litigation. expense claim expeditious litigation. be, most underlying Schedule A furthermore, to that and the same transferee reserving parties have majority and remand necessary appropriate Transferee alleged underlying California claims are the Panel. with a minimum in his discretion remainder of concede counterclaim litigation. court, all of that all convenience termination of as well 28 U.S.C. § and efficient fraud claims. district parties and witness- pretrial pro- to a pending in forum Lucas assigned conclude succeed- balance, hereby Forum appro- trans- Thus, while and, wit- im- ac- of which EDWARD WEINFELD and James N. Routh, Anne Panel, joined. America al. al.* Smith, Martin Jerry ley Isidore mission v. et al. blum, al. Corp. Sylvia Sue of ing David M. Stanley Goldblum, Goldblum, Simon Stanley Shigeo Matsuhara, ica, et al. STANLEY A. ing Funding Robert M. Loeffler, May Funding Funding Michael Merrill Hy Anne Funding Funding Funding Funding Hy Franz Equity Funding Funding Central JOHN MINOR Hacker, Hacker, Goldblum, Corp. Corp. [*] Cholondenko, Corp. Panel, Miller, Goldstein, Paul, Oringer, Oringer, Inc. v. Consino, Singer, Funding Lynch, Miller, B. Nimkoff, Ferber Corp. Zucker, Corp. Corp. Corp. Corp. Corp. Corp. Corp. Corp. Corp. et Stern, & etc. etc. v. etc. v. America, al.* America, America, et of America, of of of H. et al. Pierce, Fenner et al. v. et al. v. filed a Exchange v. of America, of America, v. Corp. etc. etc. et al. v. et etc. America, America, America, America, America, America, et al. v. etc. v. Taylor Lynden etc. v. al. v. of Stanley Gold Equity Equity Equity etc. v. al. America, et al. SCHEDULE A WEEGEL, California et v. v. v. et of Amer- et al. v. et al. et al. Stanley Equity Equity Equity Equity Equity Equity Equity Equity al. al. v. dissenting opinion, in Fund Fund Stan Fund et al. et et Com et al. Corp. et al. et et WISDOM, al. al. al. al. et et et & v. Civil Civil Civil No. — — 714 Civil Civil Civil No. — — Civil Civil Civil No. — — No. — — Civil Civil Civil Civil Civil No. — — 742-MML No. No. Civil No. Civil No. No. Civil No. — — 754—MML Civil Civil No. — No. No. — — No. No. — — No. — — 717—MML No. No. No. Civil Judges C 73 1034 C 73 743-MML C 73 753—MML C 73-808-MML C 73 756—MM C 73 C 73 C-73 C-73-710-MML C 73 735—MML C-73-832-MML C-73-741-MML C 73 C 73 797—M C-73-707-MML C-73-705-MML C-73 C 73 708—MML C 73 73 1188 CC Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action Action — — — — — — Judge — — 784-MML 706-MML of the M L of L [*] Dismissed Judge Lucas July [**] Dismissed Judge Lucas April
1388 etc. v. The Action Hanly, Edwards Civil of New York & District Southern Boston al. Civ. 2307 Co., et No. 73 al. v. Civil Action Miller, Equity et May Brothers v. The Sav- Salomon Civil Action Funding al. Civ. America, of et No. 73 1374 Corp. Sharing ings 2531 and Profit Pen- No. 73 Civ. Messinger, Benjamin v. Action etc. Civil sion Fund of Roebuck Sears, Civ. 1390 Goldblum, al. No. 73 et Stanley Co.& etc. v. Action Rosow, Equity Civil A. Bruce etc. v. Civil Action Stanley Spielman, Seid Funding of America No. 73 Civ. 1396 Corp. man Seidman, et al. No. 73 2603 Civ. al. Action et Untermeyer, Michael W. Civil Investor Independent Protective Civil Action Funding 1444 of 73 Civ. Corp. v. No. Equity League First City v. National No. Civ. 2213 73 America Bank of York, New et al. al. Action Miller, Equity et v. Civil Isidore Lawrence M. Weiner v. Oppen- Civil Action Funding et al. Civ. 1466 of No. 73 Corp. America, heimer & Co. No. 73 Civ. 2420 Equity v. Civil Action Betty Levine, etc. Investor Protective Independent Civil Action Funding 1475 al. 73 Civ. et No. Corp. America, League, et al. v. Stanley Gold- No. 73 Civ. 3115 Action v. Fund- Civil Guy Equity Michaels blum, et al. ing 1485 et al. No. 73 Civ. America, Corp. Jonas Cohen, M. L. etc. v. Civil Action Funding v. Action etc. Stan- Civil Parkoff, A. Richard Equity Corp. of Amer- No. Civ. 3255 73 1528 73 Civ. al. No. ley Goldblum, et ica, et al. Action v. Bache & Civil Berens, Nat et al. Irvin Davison v. Boston Co. In- Civil Action 1604 No. 73 Civ. al. Co., Inc., et stitutional Investors, Inc. Civ. 3256 No. 73 Stanley v. Action Fund, Pinetree Inc. Civil Kent M. et v. al. Civil Action Klineman, 73 Civ. 1605 al. No. Funding Goldblum, et Equity Corp. Amer No. 73 Civ. 3164 ica Action v. Fund- Civil Fidelity Corp. Equity ing 1623 et al. No. 73 Civ. America, Corp. Fink, Lowell S. etc. Equity v. Action Civil Funding Corp. of et al. 3275 No. 73 Civ. America, v. Fund- Action Fidelity Corp. Equity Civil Civ. 1624 America, et al. No. 73 Corp. Harold I. v. Fund- Equity Cole Action Civil ing Corp. America, et al. No. 73 Civ. 3314 Stanley v. Civil Action Arnold Elkind Gold 1645 No. Civ. blum, et al. 73 Alfred Trustee v. A. Action Grien, G. Civil Becker & et al. Co., No. 73 Civ. 2946 Protective Civil Action Independent Investor League 1957 Seidman, 73 Civ. v. Seidman & No. Northern District of Illinois et al. Jones, Millicent et al. v. Equity Action Action Investor Protective Civil Civil Independent Funding League, 1519 Life Insurance Co., et 73 C 879 Raymond etc. v. L. No. 73 Civ. No. al. et al. Dirks, Marc et al. W. v. Action Gould, Equity Salomon Brothers v. John Civil Action Civil Funding 1556 Corp. America, Civ. et Co., Bristol et al. No. 73 No. 73 C 905 & al. v. Action Fiduciary Nat et al. Civil Berens, Lunding, 1684 J. et al. v. et 73 Civ. F. York, Equity Trust Co. New al. No. Civil Action Funding Co., Life Insurance et No. C 2018 73 v. Action Corp., Lawton General etc. Civil al. Co., Inc., The Boston et al. No. 73 Civ. Rogosin, District of Maryland Arthur Action etc. v. Chemical Civil Bank, et al. No. 73 Civ. 1885 Irvin Davison, etc. v. Equity Civil Action Independent Investor Protective Action Civil Funding Corp. America, et 73 — 333 — H No. League, etc. v. Seidman Seid Civ. 1994 & No. 73 al. et al. man, Jonas Cohen, M. L. etc. v. Civil Action Inc. v. Delafield Lisadent, Civil Action Funding Corp. Amer No. 73 — 357 — H al. Inc., Childs et No. 73 Civ. ica, et al. Priskwaldo, Russell J. etc. v. Civil Action Eastern of Pennsylvania Stanley Goldblum, et al. No. 73 Civ. 2146 Selig, Robert et al. v. Equity Civil Action Protective Independent Investor Civil Action Funding Corp. America, et al. No. 73-845 League, Bank, v. etc. Chemical No. 73 Civ. Merion etc. v. Associates, et al. Civil Action Corp. America, et al. No. 73-813 Co., Jefferies & Inc. Yura v. Civil Action Duntov, Arkus et al. No. 73 Civ. 1407 Southern District of Texas v. Guy Michaels The Boston Co., Civil Action John W. Dalton v. Goldman, Civil Action et al. No. 73 Civ. 1476 Sachs & Co. No. 73-H-684 Protective Independent Investor Action Civil League v. York No. 73 Civ. Co. BECKER, Judge WILLIAM H. v. Robert R. Felton Civil Action (concurring). Corp. America, et al. No. 73 Civ. 2201 Max et al. v. John W. Israelson, Civil Action In addition to full concurrence in the Inc., & et al. Bristol, Co., No. Civ. majority opinion, a draft of this concur- Gilbert, et al. v. Bank Murray Civil Action ring opinion prepared when Co., ers Trust et al. No. 73 Civ. *11 majority opinion repre The in a was available. trials substantial number original pilot purpose em sentative draft was to had been conducted judgments.2 important phasize final In differences the course of the compared proceedings, many litigat fully ease to the facts facts of this ease, adversary appellate on ed Penn of the second Central reviews trial rulings separ finally court which decision to were submitted was based the cases, pending Appeals. in paper decided ate commercial Courts of These accomplishments districts, provided experience in them other and to transfer and bases for Southern District New to assess the potential negotiating Litigation, re F. Penn Central liabilities set Supp. (Jud.Pan.Mult.Lit.1971). tlements. dissenting Co-Ordinating Only The week did Committee and the cooperating judges proceeded
opinion a become available. There is on the as sumption temptation any on to comment the unusual all actions would minority subject parts be rhetoric of trial until final settlements opinion,1 including incorporated judg the were filed the attribution in See, rule, Goldberg, ments. for- Neal and “but for” never The overtly Equipment applied Electrical mulated, enunciated or Antitrust Cases: consciously Administration, Novel covertly, Judicial subconscious- A.B. (1964); Except A. ly J. 621 any in Panel. Peterson and decision Mc Dermott, Litigation: correcting Multidistrict the inaccurate historical Administration, Forms of equipment Judical A. reference to private electrical (1970); Bane, B. A.J. 737 cases, comment antitrust will Electrical Equipment Conspiracies: limited. Treble Damage Actions, Legal Federal Publica Inc., History tions, (1973). Electrical New York Equipment Litigation Former Chief Justice Earl Warren ac- curately history summarized the In fairness to the able advocates and processing of equipment the electrical processed judges who this electrical antitrust actions in his address equipment cooperation in meeting 1967 annual of the American Co-Ordinating Committee for Multi- Law Institute as follows: Litigation, ple it is noted that the Co- Ordinating highly Committee did much more And now I turn some dra- equipment developments the electrical cases than that matic in administration minority opinion. stated in the The mi- in the federal courts. IWhen ad- nority opinion “In states that a relative- dressed the American Law Institute ly your short time the 1962, ap- Committee settled I called to attention the 25,000 1,900 pearance year actions filed in 36 unprece- before of districts.” The arising facts are the Co- dented multi-district Ordinating Committee did settle out antitrust suits the elec- equipment cases. The industry. Beginning settled cases aft- trical (1) prepared 1961, er most of them been had there were filed in district through pretrial pro- 25,623 for trial separate a national courts civil antitrust gram 1,912 pretrial, (2) actions, claims for civil relief — many appellate legal many multiple plaintiffs decisions vital of which questions secured, joined (3) separate had been full claims in a sin- “tippee” “trading” eases, cases, 1. The terms fraud is not an essential employed by and “non-fraud” cases unadmitted element. are terms litigation op some of the advocates in this Judge Joseph 2. Panel member Chief S. Lord posing They transfer. tend to obscure presided III with distinction the trial of at common issues of in all fact the actions. pilot began the first case which on March designation Further “non-fraud case” is 1964, jury with a concluded verdict No misnomer. one has an identified action June throughout many gle court calendars try the coun- which there action and could well broken down. multiple each based on counts were relief separate Each claim claim. *12 Comparison with the Penn Central Com- and, potentially protracted case was a Litigation Paper mercial unprecedented reported, mul- I this as upon imposed was tidistrict presented questions in this One ever-increasing or- of the burden the dinary in the is whether the decision dockets. and criminal civil majority opinion is consistent with the great understandably alarm was Our Paper Penn Central Commercial decision equally understandable makes and (Jud.Pan. reported at 325 being my satisfaction measure Mult.Lit.1971). report at this the Institute able important The factual difference most meeting every one of these Paper in the Penn Central Commercial Not a sin- cases has been terminated. obligations the nature of the cases was pending. gle Whatever one remains paper of the commercial itself and the problems backlog federal courts purpose pur- manner and of its sale and any may have, they include do not paper differed chase. commercial This these cases. securities, from conventional investment stock, stock, preferred common like Now, history stimulating — bought long- relatively debentures for history. remarkable This and useful investment, conventional and de- foresight term by the was achieved result pendent, wholly in part, on the ability organizing of a committee issuing earnings com- amount pany of the Conference of the Judicial their Judge value and rate of return. States, with Chief United paper in the Penn Cen- commercial Tenth Cir- P. Murrah of the Alfred *13 Greef, like See A. checks. O. perience of the Panel. Paper Commercial House in Unit- There is confidence that trans (1939). Ency- ed The Columbia States grant judge feree will all reasonable re clopedia, ed., p. 459, 3rd Columbia priority See, quests discovery. e. University Press, 1963. g., Litigation, In re IBM Antitrust 319 exceptional F.Supp. (Jud.Pan.Mult.Lit.1970). paper, nature of the 926 exceptional Arguments purpose pessimistic prophecies manner and and purchase, minority opinion its sale and similar those misrepresentations repeatedly concealment have been before made disproved by experience. cases, pending seller made those Panel and later districts, separable predictions delay other The same and transfera- dire were by minority ble to the Southern District made Yarn Proc discriminating (ab- essing Validity Litigation In a decision Patent deci juring mythical rule) reported (Jud. F.Supp. thé “but for” sion at 341 376 Pan.Mult.Lit.1972), dispelled by Panel transferred the similar actions pending subsequent in other districts events. South- processing ern District of New York for exceedingly complex IBM In Anti- by experienced the able and Honorable Litigation complex Telex trust the less Edelstein, Judge David N. now Chief Greyhound Computer were actions refusing In district. to transfer transferred under 1407 Section paper the commercial relief assigned the District Minnesota and pending in the Southern District of New Neville, Philip late able Honorable Pennsyl- York to the Eastern District of Judge. In re District United States vania, to which all other related Penn Litigation, F.Supp. IBM Antitrust 342 Central securities had been (Jud.Pan.Mult.Lit.1972); In re Mul- 200 transferred, the Panel said: Damage tidistrict Private Civil Treble Litigation Involving F.Supp. IBM, 319 pa- We conclude that the commercial (Jud.Pan.Mult.Lit.1970). Proper 926 per sufficiently cases are different given discovery priority from the earlier cases that neither cases, complex after were less convenience and witness- swiftly transferred remanded es nor the and efficient conduct tried the District of Arizona and of the would served be Northern without Oklahoma Philadelphia their transfer [for awaiting discovery completion pretrial proceedings]. section Greyhound complex See, more actions. F.Supp. 309, (Jud.Pan.Mult. Computer Corp. IBM, v. Lit.1971). (D.Minn.1972). examples These recog- The Uniform Commercial Code efficient administration transferee nizes, preserves, sharpens the dis- imagined judge make it dif- evident that paper” tinction between “commercial easily ficulties avoided. “money paper”), (described as “docu- Judge WISDOM, (described JOHN MINOR ments of title” “commodi- (with whom ty paper”), EDWARD and “investment securities.” (Emphasis added.) A. But the un- and STANLEY WEI- cases”. WEINFELD derlying Funding- Judges Panel, GEL, join, dissent- within only ing) actuated the action the Securi- : against Exchange ties and Commission respectfully I dissent. Chapter Funding, X bank- objective legislation “The [28 ruptcy, and direct fraud actions provide centralized is U.S.C. 1407] § brought against company of- and its management supervision of under court ficers, auditors, directors, and account- liti- proceedings multidistrict Discovery in ants. the fraud actions ‘just gation and efficient to assure require investigation of will extensive . . . It conduct’ such actions. extending many years. On conduct over expected to be or- such hand, the other non-fraud cases economy significant dered where filed the acts caused the suits to be efficiency judicial administration by Equity were not committed Fund- added.) (Emphasis may be obtained.”1 ing’s employees. officials and Cong.2d R.Rep. 90th H. No. Sess. tipper, relates to Cong. (1968) & Admin. U.S.Code tippees, brokers, underwriters, Unfortunately, p. this deci- News *14 accountants, of the and the officials man- sion of Panel exalts centralized Bankers National Life Insurance Com- agement just over the and efficiént con- pany Savings Liberty and & Loan Asso- important, distinctive duct of certain In non-fraud each eas- ciation. groups may be referred actions which discovery es the will directed to a be they “non-fraud” eases because to as the period short definite about three —of peripheral to the in- have a relation trading in the weeks claims. Funding. The ternal fraud of or non-fraud cases include favoring No one the Southern District tippee by claims, debenture the claims York the transferee of New as district against underwriters, and Funding’s holders argued inter- has claims. These actions rescission “entirely- im- nal fraud is irrelevant logical have in York and their situs to material”. But is the test proceeding apace. they there To are be con- determine whether there should wrap the differ- in a bundle with them pretrial admin- solidated or coordinated slower-moving massive, ent, Califor- istration of these cases another litigation involving Equity Fund- nia a class of cases. Even the existence ing's produce internal fraud is certain enough; common fact is not the com- significant economy a in and effi- loss monality must involve substantial fac- ciency judicial in administration tual Transfer of all eases shar- issues. the non-fraud actions. question a a common fact sin- gle litigant deprives of his district a Equi- majority that since declares may costs, forum, his Funding’s underlying choice of increase ty “actuates fraud may entangle in action slower litigation, his it ... cannot entire involving moving un- a mass of alleged underlying actions fraud said that the be legal many shared facts and factual entirely irrelevant or non-essential is ac- issues irrelevant the transferred stated of each of the establishment “(a) provides: of such actions. and efficient conduct civil ac 1. The When statute ques involving one or more il tions common pur- Report pending main states: “The Senate different dis tions of fact are pose may coordi- tricts, for consolidation or of transfer be such transferred promote pretrial proceedings is to nation of or consolidated district for coordinated justice, conven- pretrial proceedings. but the ends of efficient transfers shall Such parties by judicial panel be and witnesses should also ience of multidis be made determining by such trans- whether a factor this section trict authorized Sen.Rep.No.454, 90th upon fer be made.” should transfers its determination Cong. (1967). proceedings Sess. 2 1st for the convenience such will be promote parties and will and witnesses question Moreover, tions. “The basic before California. the non-fraud proceeding looking parties to co each will inconvenienced if is, by ordinated consolidated trials of their cases are back held then, objectives discovery required whether the of the stat more extensive sufficiently justify course, any party ute served California cases. Of necessary deprived inconveniences of transfer and if he inconvenienced Pipe, In remand.” re Concrete 302 F. at- forum his choice and if his local Supp. 244, (Jud.Pan.Mult.Lit.1969) torney important does not an role concurring). exposi (Weigel, pretrial proceedings. In J. in- That is language tory Report, House herent in transfers under Section 1407. “significant disadvantage promote may transfer must econ This be offset in a omy judicial particular superior quality efficiency adminis case (Emphasis counsel, added.) tration”. I take counsel lead and liaison perhaps, attorneys’ a mean that there must be bal reduction ancing advantages and disadvan fees other costs when these are tages pooled among of consolidation or coordination and divided a number of transfer; litigants. Here, however, the relevance of a fact shared there is no measuring process, off-setting initiate the but benefit in the for the weigh (“signifi heavily litigation: must scales New York do not lack cantly”) expenses in favor of transfer terms of able counsel will be just, greater economical, substantially appears if, and efficient admin like- ly, istration of the transferred cases. necessarily prolong will the New gives once-over-lightly litigation. short, York the “conven- statutory requirement treatment ience and witnesses” is a stat- *15 that the transfer the serve convenience utory criterion cannot for transfer that of witnesses. It is true that are witnesses cavalierly treated as the as usually they deposed where reside and of the Panel seems to it.4 treat deposition judges that the assist “just transferee court. But when of the most The conduct” and efficient of York, important witnesses live in and around the is the most of the New actions they statutory eases, as do in the it And, non-fraud can- criteria. as the statute disputed congressional reports emphasize, not be that it is and more economi- the administratively cal and more efficient existence a common is not of fact enough pretried justify to have those eases New of transfer single district; York rather than across the continent in to be a there must Judge Weigel many outweigh resulting 2. listed factors relevant of transfer in mies the balancing process. parties.” Comment, in the The first factors convenience the The many questions Experience listed were: “How common of Transferee the Courts Under Litigation of fact Act, are there? AVhat is their nature?” Multidistrict of Chi.L. U. 588, (1972). Some of the other are: factors “Who are Rev. principal in the witnesses cases and Coordinating The bill recommended they where do reside? . . . AVill trans Equipment Electrical Committee saving duplica fer result substantial of Cases of the did not include “convenience * * * many tive work? Can of parties as stand- and witnesses” one advantages of transfer be worked out co Judiciary The ards transfer. Senate operation among counsel without transfer? thought enough this standard Committee delay prog . . . Will transfer hasten or original bill, to add an amendment to the S. Pipe ress the cases?” re Concrete “although implicit bill, because Litigation, (Jud.Pan. introduced”, an amendment was desirable to Mult.Lit.1969). par- make “it clear that convenience not, course, necessarily weighed 3. “Transfer does as a and ties witnesses should be justice, efficiency, determining serve the interests of and transfer factor whether simply Sen.Rep.No.454, convenience because should Cong. be made”. 90th questions present. Sess., common of fact are The 1st question crucial remains whether the econo change trading suspended in the stock produce showing will the transfer published the newspapers efficiency had economy “significant and story. primary are bas- fraud eases Proponents of The
judicial administration”. management Equity ed on internal cases all the motion to transfer going itself, at least back District the Central going possibly to 1964 Equity and back pleadings, that, on the shown organized. “entirely company not when Funding’s internal fraud is But cases. non-fraud to the irrelevant” Equity take fraud will have not shown investiga- unravel, complex years just promote significantly witnesses, will tion involve hundreds of will of those conduct efficient pretrial discovery is- fraud Funding’s underway are not based begin get sues will even fraud. long internal the trad- for a time.5 Transfer of Cali- cases to Central Trading Tippee Claims complicate the fornia would delaying trading cases there besides purpose of Section interminably, liti- detriment of all limited employment of the efficient gants. judicial This conservation resources. energy operates interest judicial in the places fo- are involved. The Different conduct efficient of the California, cus fraud cases is wit- litigation, as far as Funding. headquarters central trans- concerned, when are nesses trading cases The focus discovery re- duplicative fer eliminates York, are where the relevant documents lating issues identical to similar or agents located, and where investors le- The factual more cases. two or upon investors heard and acted in- in the gal involved in the eases issues information Dirks circulated. Most of Funding are so ternal trading pending in New cases involved from those different Co., Inc., York. John & John W. Bristol I deference, that, with Bristol, Inc., Company, W. The Boston the statute suggest misuse of it is a Investors, Inc., Boston Institutional Bos- bag. mixed put in one all the cases (the Deposit ton Trust Co. Safe & Fiduciary defendants”) are involved. times “Bristol Different *16 trading Eq- trading in Company arose from cases moved to Trust of New York during Funding trading three- uity the stock the the South- cases to 1973, 6, to period March for from ern of York. week New Counsel weeks, (only accord- 27, primary two in fraud cas- March several period Brothers). ing joined This to Salomon es who in the motion for transfer Dirks, recog- New began Raymond a L. when of all to California have in- analyst, his balance, started that, York securities nized “On It trading vestigation stock. of decide that the should be claims Ex- York the New Stock when transferred to the District of ended Southern 2, 1, 1974, Judge entered Au- Order a brief 5. Lucas’ Pretrial on these issues. proceedings, justification compelling gust 1, in There the California is no for years perhaps trading several makes it clear that case to to await completion task, in dis- in the fraud cases on will be consumed this mammoth Judge plaintiffs covering are irrelevant Lucas and the fraud case matters which embarking, discovering trading construction are now the de- cases on para- Judge Equity Funding Thus, in order tails facts. Lucas’ of how the fraud was complex prob- justification graph perpetrated; equally a series of there is 9 outlines no discovery computer- Judge relating imposing upon Lucas the addition- lems to material, supervising discovery defend- al ized coordination between burden of computers plaintiffs’ substantially and the like. raised ants’ and different issues Steering Judge trading Lucas directed Plaintiffs’ cases. by March to submit to the court Committee pretrial purposes”. Brief tiffs New York for defendants are unanimous stay Nelson, in Liker Marrifield for desire to in York. & Wolf- their New p. Weiner, Lagin, son, Ratoff & legal liability issues on are entire- in the New Plaintiffs and defendants ly The differences are rele- different. trading “tippee” or unani- York cases vant to transfer under Section 1407 urged mously that their cases be allowed legal the extent issues affect only Illi- in New York. The remain scope discovery.7 “The the factual party memorandum, file nois quantum proof the al- nature and plaintiffs Penn- in three two of the leged primary of the non- fraud [and sylvania agreed fraud cases necessarily depends on and fraud cases] go Cali- in their cases should claims legal varies with the of the cas- theories trading to New fornia and Opinion, p. es.” Only party, defendant ac- one predominantly fraud cases are class ac- Sells, counting firm of Haskins & liability based on de- tions of the argued of all to one for transfer cases aiding or fendants for fraud abet- defendant contended district —and this ting management Eq- in fraud be New district should Funding. uity trading cases, In the York, not California. separate which are and distinct claims relief, parameters are involved. Different defendants Eq- clearly defendants, The fraud as defendants cases name are defined: The Funding’s uity strangers others in- Funding, officials are company’s management. charged violating volved the federal secu- by trading But neither nor rities law inside material party trad- Trustee is of the most information. Most them received this directly are directed indirectly cases. These cases information from against Dirks, York, who lives New Dirks. deci- The effect banks, and New York advis- investment sion is to involve counsel in the non- brokerage ors, principal complex firms. fraud cases case in- tippee volving management are Eq- defendants these cases the internal large uity Funding primarily York based institutional are when analysts.6 clients of New York stock interested what Dirks did and others trading attorneys The defendants in the cas- with his information. The es, employees, and plaintiffs their officers and cases will books and records located want know whether the defendants people New York. The did acted on the information inside circulat- registra- prospectuses Equity Funding. work ed about Truth or falsity Materiality tion statements are in New York. The is not an issue. non-public accountants for the defendants in these are the character issues. Co., Sulphur are in New York. In all of these See SEC v. Texas Gulf Cir., actions it the convenience F.2d details 849. The *17 accomplished the cen- that the witnesses how the fraud signifi- identity tral perpetrators situs be It is irrel- New York. the of its are plain- trading eases, trading cant that in the plain- evant in the cases both plaintiffs allege 1969) ; 6. The in non-fraud cases In Air re Public Travel Tariff Liti “tippees” fraud, (Jud.Pan.Mult.Lit. gation, F.Supp. that discovered the 1397 360 fraud, 1973) ; Litigation, rumors of the in March 1973 from In re Air Fare 322 F. (Jud.Pan.Mult.Lit.1971). Supp. Mr. Dirks and sold their stock before Mr. In tbe 1013 public. alleged Dirks’ became In no case case issue was first the common specifically alleged Trust, unconstitutionality is it In that Bankers statute. Bank, Bristol, Fiduciary principal Chemical Trust or other issues two cases the common questions See, Note, other such institutional investor defendants The Judi were law. knew of the fraud before March 1973. cial Panel and the of Multidistrict Conduct (1974). Litigation, 87 Harv.L.Rev. 1001 Postage Regula In See re Fourth Class tions, F.Supp. (Jud.Pan.Mult.Lit. 298 1326 1396 attorneys The Panel 325 F. The for New York. stated and defendants. at tiffs Supp. (Jud.Pan.Mult.Lit.1971): trading eases will in the
the defendants argue have in- did not that their clients disputed question is whether improperly, information, did not act side Philadel these phia should be sent to cases (and Dirks, them knowledge or what was known to proceedings with the perhaps) on the was common previously-transferred or trans eases alleged street, informa- besides ferred forum. con to some other We have influenced a reason- tion should not paper clude the commercial cases that purchaser. The nonexistence of the able bogus sufficiently are different from policies the unex- insurance earlier cases that neither the conven plained in trea- absence of million $25 nor ience of the and witnesses sury company’s bills from the bank box efficient conduct hardly is unrealis- can be It contested. litigation by their would be served contrary objectives tic and Sec- Philadelphia. These cases transfer to trading up tion to hold cases rest on a different set sophisticated simplistic that notion They all facts than earlier cases. trading cases New York counsel primarily turn the conduct position will have to maintain knowledge Goldman, Sachs bogus insur- issued no principal in rather than the although policies. short, In no at- ance trading, mismanagement sider torney in a non-fraud for a defendant duty fiduciary breaches of within likely case is against to make concessions companies involved Penn Central client, it the interests of his is course, full the earlier Of cases. fraud, certainty the internal virtual development re of these cases trading had no which the defendants investigation quire areas factual part, seriously disputed will never be Philadelphia. ef covered in Whatever trading (or in de- issue in the cases might ficiencies result these limited cases). benture and rescission however, transfer, areas from would outweighed by separate the need re Penn decision In Panel’s major portion of treatment Litigation, F. Central Securities Supp. difficulty cases and the (Jud.Pan.Mult.Lit.1971), judge face in at transferee would compelling authority separate pre tempting un such needs in an to meet trial fraud and treatment large group duly complex of cases. cases. Drug Litigation, See, In re Antibiotic initially transferred to the East (Jud.Pan.Mult.Lit. Pennsylvania (Philadel ern 1971). phia) growing of the fi 17 actions out possibility fears the nancial difficulties of Penn Central conflicting, class determina- inconsistent Transportation Company. See In re if, despite disparity, the' tions Litigation, Penn Central present cases (Jud.Pan.Mult.Lit.1971). F.Supp. 1021 single judge. The fear transferred to a Subsequently, the Panel decided that 12 plaintiffs certain unfounded. While involving Goldman, the sale might eventually in a be class members Company Sachs & of Penn Central in a members action and class Transportation Company’s commercial action, membership of non-fraud dual paper should not be consolidated with in- to conflict or sort will not lead *18 complaints in first 17 cases. The consistency. group the second of cases mis majority apparently The fears statement and omission of material and provisions of Rule 23 stem from non-public seller, information provide judgment in a class Goldman, Sachs & Co. These cases were action, or not whether favorable transferred to the Southern binding District of class, upon members 23(c)(3). Thus, if class. Fed.R.Civ.P. any invite severance in circumstances, same claims are asserted in contem- even if complex litigation. were not poraneous overlap- actions on behalf of Debenture Actions classes, ping membership dual could re- judg- conflicting, The claims sult inconsistent the debenture holders persons are on purchased ments. behalf of Equity Funding percent debentures overlapping In 5% where cases classes in reliance on prospec- a December 1971 judgments could result inconsistent (cid:127) registration tus and statement. The lit- litigation, multidistrict determina- class igation managing on focuses under- single judge. tions should be made writers, Bache & Co. and New York Se- However, central administration of the Company, Inc., curities and the account- fraud and cases the non-fraud for cases prospectus. ants for the corpo- All are purposes defining classes not called rations based in New York. ac- for, plaintiffs These since in the fraud cases liability par- tions concern the of third plaintiffs in the non-fraud cases as- allegedly misleading ties for false against sert different claims different statements prospectus contained in the defendants. registration Again, statements. possibility duplicative discov- legal (which factual and issues bear on ery underlying on may fraud issue scope discovery) entirely dif- by practical be minimized measures ferent from those in the actions based impair which would not and ef- Equity Funding’s internal fraud. litigation. ficient conduct of this Care- brought by The first case a debenture fully discovery pe- limited tailored Untermeyer holder Equity was et v. al. requirements culiar cases Funding Corporation of It America. general more would be efficient than brought in the Southern participation proceed- fraud suit (73 1444). York New Civ. The Un- ings. program Such limited could eas- termeyer plaintiffs and others who have ily be coordinated between the' New brought the debenture actions strenuous- York and California district courts so as ly oppose disruption to cause minimal to Califor- and, argue indeed, Equity that all the proceedings Equity nia Fund- Funding cases, except Chapter X ing trustee. proceedings, be transferred to New present prob- The “mixed eases” no availability In terms of plaintiffs, lem. Several rather than proceed action, par- evidence to with the bring separate actions, two chose to ticularly pretrial discovery stages, single action, combine their claims plaintiffs primarily must move stating against Equity a claim for relief against ac- the underwriters Funding additional, and an managing countants. With both under- separate against “tippees” for claim accounting based writers both firms disclosing the fraud after dis- York, the Southern District every instance, the com- covered it. most forum New York is the convenient clearly distinguishes plaint the conduct and for ef- witnesses charged against trading defendants pretrial proceedings. ficient conduct against from that significant that in the debenture It is personnel. do its Thus the “mixed” cases trading cases, actions, discov- inas not accuse the investor de- institutional against ery should having partici- fendants of themselves Untermeyer relatively simple. pated in the These fraudulent scheme. plaintiffs assert accused, “pure trad- defendants are against Funding promises to be ing” nothing alike, and “mixed” relatively inter- simple. than No more selling than in March more stock requests admissions rogatories emanating from rumors basis copied could be Documents suffice. during disparate Dirks that month. necessary, inspected, in Illinois and, if joined would “mixed” cases *19 merger ing occurred in trans- need to without and California Jersey York. New and New there. fer eases Bank, City Moreover, considering transfer, National Moreover, First in a defendant in two of the rescission ac- holders the debenture distinction between stockholders, eq- in New tions wants the action to remain creditors, as as Equity York for a valid reason. Fund- holders, The uity maintained. should be ing pledged ownership conflicting all of of Bank- its interests. have two classes Liti- National Life First National ers Penn Central Securities See In re security plaintiffs for The chal- holders loans. gation, supra. Plaintiffs were lenge validity notes, of the lien. First Na- promissory short-term discovery points on tional out that bondholders. foreign this the other actions issue is York and New Bache & Co. discovery in will center New and that underwriters, Company, the debenture York. Sells, York; ac- in New Haskins are nothing Funding cases have Equity Life In- The rescission countant common with the fraud cases. Transfer surance, insurer sold the Illinois serve to California will bogus policies, main these cases offices has its delay disposition. Seidman, York; Equity & New Seidman accountants, Funding’s maintains its York
principal in New executive offices Conclusion Michigan. extent, and, to some upon scores of cases which scores Actions Rescission convenience, despite their dis- Equi- parities, be referred to as action cases are class The rescission ty Funding Litigation involve wide- stockholders of of former suits behalf magni- spread frauds of a commercial Com- Life National Insurance Bankers perhaps unprecedented in the tude histo- Funding merged Equity pany. ry country. of the These frauds National Life October Bankers many impact had a substantial merger, Equity As a result aspects of American business. diverse Life, New acquired Bankers groups of mix all of the distinctive To subsidiary, insurer, Jersey based and its some of actions into one because bundle Compa- Life Insurance not have occurred would ny York, in- New York based of New internal fraud of but in force insurance combined surer with Funding’s and directors is not officers Sub- of more than two billion dollars. serving efficient the ends of negotiations stantially cen- all litigation. administration Substantially all in New tered York. cases, tippee the claims of the corporate officials and witnesses holders, and the rescission debenture Life National New Bankers belong York most of in New where cases Equity Funding York are of New cases, wit- to those material assets of two most valuable nesses, documents are locat- and relevant Funding Corporation of America. signifi- the most ed. In those actions alleg- part to fraud relates questions of no cant of fact are interest edly perpetrated upon the Insurance cases; litigants in the fraud Jersey in induc- Commissioner of New fraud cases central of fact in the issues merger approve him to and to only pe- groups the other touch placed upon the violations of conditions enough duplica- ripherally. There is not merger by Jersey Commis- justify tive Superintendent In- sioner and economy savings judicial interest of wit- surance New York. Not a parties, time to the and wit- Discovery ness in California. resides nesses. primarily upon will documents focus Na- sent to the stockholders of Bankers Brothers, Salomon which acted as upon tional Life other matters lead- disputed principal or broker *20 transactions, tively in New York. short settled is located time Committee Inc., 25,000 Co., which in in 36 & 1900 actions filed John W. Bristol acted management agent percent in over of these Centralized as districts. litigation. which al- in securities transactions and is essential that The success management leged improperly acted on in- ful of to have administrative information, complicated Equipment in Electrical Cases side is resident New general Company Institutional Boston success transferee York. alleged judges Investors, Inc., have under which is have had Section 1407 do not, possessed however, presumption information to have inside raise improperly it, litigating cousins, an of acted is affiliate no matter how Inc., Co., distantly independent they Bristol is John W. & resident related and nearby Boston, alleged together may be, in and is to have must live under one much of at transacted the business issue roof and under the control of one man Raymond Dirks, ager during pretrial proceedings. New York. is in passed to have material inside multiple The transfer of actions to a Boston, information Bristol and its district has built-in disadvan- resident New York. Almost all of the tages. litigants Some must sacrifice surrounding documentation the transac- their choice forum the control of question tions in is in York. New While through attorney their case their the institutional involved as de- sellers judicial economy interests many places fendants are located in litigants group. multidistrict as a Con- throughout country (many in New gress therefore fixed limitations York), customarily all of almost them authority of the Panel to transfer under engage through in investment activities Section 1407: “Such transfers shall be advisors, banks, and custodians in New . . made . for the convenience expected Furthermore, it is pro- and witnesses and [to] play most of will these institutions mote the and efficient conduct of passive rather role in the majority opinion such actions.” liability issue will de- ignored virtually stand- convenience primarily pend on the activities of their merely genuflected ard and in the direc- advisory agents. New York investment statutory tion of the other standards. majority The vast have al- judge-made Now we have new standard ready retained counsel in New York and litigation: for multidistrict If there is a lawyers question the New York background group fact in one of cases already deeply for some time been in- might litiga- but which there not be for preparation pur- volved cases, group groups tion in another proceedings. suit A considerable all the must be consolidated already amount of has taken coordinated in the conve- district most place including York both docu- nient for the for” that “but mentary discovery depositions. and oral effect, has estab- fact. majority opinion raises a disturb principle lished “but as for” ing question as to the overriding transfer, Panel’s exercise not- criterion powers. statutory its withstanding insignificance Section 1407 and Complex the Manual for and Multidis pretrial proceedings in fact shared Litigation being trict came groups into because other distinctive performance by. entanglement brilliant of the vol with will be held back untary Coordinating Committee in the for” the “but an cases. This is exercise Equipment Electrical judicial power support Cases. In a rela that finds no having (now Litigation The Panel is fortunate the serv- known the Manual distinguished judges ices Complex Litigation) ; three who served continue to serve Coordinating on the Judge Committee: former on the Board. Lord has vast ex- had Judge Judges perience notably Chief Murrah judge, and Chief Beck- as a transferee er Litigation. Only Robson. These three also were the Penn Central Securities great disagree members of the first Board of Editors with do I reluctance Complex Manual and Multidistrict these veterans. previous deci- 1407 or in our in Section there I here would hold that
sions. *21 commonality of facts rais- no substantial significant Transfer factual issues. for consolidation non-fraud actions actions in with the fraud coordination ignores the statuto- for” forum the “but pur- ry defeat and will standards 1407.9 poses Section SECURITIES re HOLIDAY MAGIC LITIGATION. AND ANTITRUST Holiday Magic, Ward, et al. v. J. James N.D.Illinois, Action al., Civil Inc., et 73 C 2523. No. ORDER Holiday Bridgeman, al. v. et Donald 1407, the Pursuant 28 U.S.C. §§ D.C., al., Civil D. Magic, Inc., et previously several ac Panel transferred Action 2233-73. No. above-captioned tions Holiday Thomas, Magic, et al. v. Teresa and, Northern of California Rico, al., D. Civil Puerto Inc., et assigned court, with the consent of that Action No. 2233-73 Lloyd them to the Burke Honorable H. No. 124. for coordinated or consolidated Litigation. Panel on proceedings Judicial Multidistrict similar actions with certain already pending In re April 29, in that district. 1974. Magic Holiday & Antitrust Opinion May 13, 1974. (Jud.Pan. Litigation, F.Supp. 806 May 17, As Corrected Mult.Lit., and 372 December (Jud.Pan.Mult.Lit., filed 18, 1974). above-cap
March Since appeared tioned actions to raise factual common to issues the actions in district, transferee ordered why these ac show cause tions should also transferred un der Section the Northern Dis trict of On the basis of California. complaints, submitted the briefs hearing action,1 held in the Ward we commonality (1972). there is “Unless substantial At has least one commentator not- questions presented, that, dispute the fact coordinated and ed “A arisen has within pur- proceedings Panel, example, substantiality consolidated can serve no pose produce questions justi- than other chaos and to common factual sufficient complicate proceed- pre-trial fy Comment, slow transfer”. ofU. Chi.L.Rev. ings Kaminsky, 588, 594, (1972). in the various actions.” n. 36 Litigation: Panel on Judicial Multidistrict Emerging Bridgeman Problems and Current Trends 1. The and Thomas Syracuse Decision, right argument L.Rev. oral waived tral notes cases consisted of short-term Judge chairman and cuit as its Co., Goldman, purchased from Sachs & the Northern A. Robson of Edwin great amounts, principal to be used Judge Chief of Illinois and District money. unique place of It form H. Becker Western William paper limited and commercial successive of Missouri as following defini- strict sense noted principal its subcommit- chairmen of tion: judges, a chart without These tee. change power to without comprehensive paper, commercial term procedure de- created for less rules of manding tasks, negotiable of short-term all kinds coop- full secured pay- for the instruments which call judges to eration of all the district money used ment of and which assigned. these cases were whom The term is some- as COLLATERAL. by small, tempo- They were assisted loosely applied to contracts and times rary staff, provided Adminis- agreements. strictly it includes More basis, emergency on an trative Office used that are those instruments in terminat- and now have succeeded ing money, place as dis- commerce pe- 1,912 in a antitrust cases these tinguished paper in invest- from used months, years of six and two riod ment, estate, speculative, personal, regarded as an would not be public It includes short- transactions. proc- length time for the unusual drafts, exchange notes, term bills of essing single complex antitrust of a checks, acceptances, of lad- bills mon- for the case. If it had been ing, receipts, for de- orders warehouse judges on nine umental effort of the livery express goods, orders. Confer- this committee the Judicial By borrowing lading on bills of cooperation ence remarkable receipts (receipts from warehouse judges before whom company 35 district transportation or a ware- goods showing specified pending, the district cases were house it), 3, 7, have been delivered wholesale Articles and comment to § goods merchants are enabled to 7-104, handle U.C.C. greatly capital. excess Judge in the salability of commercial notes is based Confidence Transferee strength on the the bor- financial litiga- decision in this rower, not backed col- confidence, tion is founded on rather Express lateral. are issued orders suggested minority than fears as express companies small opinion. The confidence which it is amounts, payable at office founded is confidence in the transferee company. They may be banked also judge, repeatedly justified by prior ex-