*3 clude National and di- its officers and MURRAH, Before ALFRED P. Chair rectors; Peat, accountant, National’s man, and JOHN MINOR WISDOM* Marwick; attorneys several and their WEINFELD, A. EDWARD EDWIN firms; brokerage law and several houses ROBSON, BECKER, JO WILLIAM H. relations firms. LORD, III,* SEPH A. and STANLEY S. WEIGEL, Judges Panel. A. District Columbia comprehensive complaint The most AND ORDER OPINION been and Ex- Securities change Commission the District
PER CURIAM. alleges Columbia. The SEC that Nation- (“Peat, Marwick, Mitchell & Co. al and its officers and directors hereinafter) employees par- moves to have Marwick” Marwick and its private damage ticipated six under to defraud a scheme Nation- involving federal Nation- securities laws al’s Part of the stockholders others. Marketing Corp. al Student transferred of ac- scheme involves series quisitions pur- to the of New York referred For Southern District to earlier. motion, poses present for the most coordinated or consolidated brought by acquisitions important An involved these Exchange Inc., Impressions by M, acquired Commission Securities against Marketing April 1969; Varsity House, Inc., which National Student hereinafter) exchanged (“National” for and others assets for National stock 1969; injunctive relief and an additional October and Interstate Nation- against Varsity Corp., days acquired al National South- two after * Although Judges Joseph Peat, Marwick, Wisdom and Lord were Kwiatkowski hearing, & et present Co., S.D.N.Y., Mitchell No. 72 they have, al., the consent of all Civ. 2107. parties, partici- decision. pated negotiation given concerning all these attorneys House. merger.2
acquisitions Fi- National’s Consolidated year nancial Statement for the fiscal requested permanent The SEC in- August given ended to the was junction against future securities law corporations acquired and their stock- violations all defendants and man- Varsity And holders. in both House datory injunction requiring the correc- dealings and Interstate an unaudited past filings tion of with the Commission. port quarter third of 1969 was On company, the consent of the which provided by National. allega- neither admitted nor denied the second claim asserted complaint, judgment tions of the such a exclusively relates Interstate subsequent entered quisition adds the at- hearing as defendants to the Panel matter. torneys who advised Interstate and Na- pending against action is still the re- *4 merger. maining tional in connection that defendants. proxy to the Na- The mailed materials B. Southern District New York tional and con- Interstate stockholders Five actions have been filed tained National’s unaudited financial Southern District of New York Na- quarter statement for the 1969. third seeking damages tional stockholders, Peat, merger, As a condition to the Mar- alleged violations federal securi- wick was asked issue a let- “comfort ties laws. Three of the five actions have stating ter” no it had been consolidated for trial and a consoli- believe that the unaudited financial dated, complaint amended has been prepared statement accord- filed, naming many as defendants accounting generally accepted ance with those along named in the SEC action principles required any material ad- brokerage with several public and houses justments. The letter was state Recovery sought firms.3 relations on that National had no suffered material composed behalf persons class of all change position adverse its financial acquired who the securities of National after the date of the state- unaudited April 1, between February 1965 and alleges ment. The SEC after exam- damaged were acts ining National’s unaudited financial the defendants. Peat, statement Marwick informed Na- allegations adjust- tional’s counsel that The material of the consolidated complaint quite ments required statement were similar to those of closing, suggested after the SEC. Plaintiffs assert that Nation- reports, al’s solicitation of the statements, stockholders should fináncial press considered. releases and is further other communications were materially attorneys National and misleading, officers and false causing price and the attorneys the ficially officers of Interstate and their of National's stock to be arti- Peat, concealed Marwick’s con- inflated. And one of the consoli- dated plaintiffs clusions from New investors and acquired other who opinions his stockholders and that false were securities in the Interstate complaint matter, 2. The SEC contains two other defendant AVhite & Case had appealed claims, relating one sale of National the order in the Southern consolidating shares Interstate officers District of before New York appeal three actions. was informed of Marwick’s Because of this alleging recommendations and the other claims of the for relief profits AVhite & Case two National sub- will not be scheduled for misreported pretrial pro- sidiaries were in the Con- or consolidated ceedings at solidated Financial Statement fiscal time. These claims for year immediately separated relief 1969. will be 1407(a) remanded under 28 U.S.C. § 'to parties appeals. the Panel await action The failed to inform on these hearing the time of the on interrogatories allegations Mar- con- served acquisition makes concerning requesting information said cerning which are wick this transaction allegations other informa- financial statements on the based addition, years 1968 to includ- broker- complaint. tion ing relating promoted Inter- Na- information age to have firms are said they acquisition. knew or state stock when tional’s artificially in- price was known its have Texas D. Northern firms public relations while the flated action, remaining and circulated to have written said are unrealistically inves- Texas District of Northern reports on Na- favorable securities, alleges that in National’s tor during period. Peat, Marwick, defendant, is- the sole the Southern Also reports for National financial sued Augenstein York are the New misrepresenta- material which contained Augenstein and Kwiatkowski actions. allega- No tions and class omissions. individuals, stockholders several complaint. tions are contained Impressions became National M, who exchange stockholders, allege that Private II. Actions Impressions by M stock for National made in reliance on the stock was cases are stockholder seven of Na- Statement Financial pre Consolidated clearly appropriate for coordinated *5 the de- of tional and other statements questions of proceedings. Common trial misleading false, which were fendants concerning National’s fact are raised in of the federal law. and violation particularly, con acquisitions more to that the sale of shares is also statements, cerning financial National’s unregistered, plaintiffs constituted press other oral and writ releases and offering non-exempt and that Na- Discovery in each ten communications. agreement merger breached ground of the cover same much case accuracy concerning of warranties the parties and the convenience and and violated its financial statements and and efficient con witnesses the agreement to deliver additional litigation require all the that duct of contingent plaintiffs, upon the shares earnings supervised by pretrial activity a sin Impressions. Kwiat- The gle judge. brought by kowski action another is only opposition to The the transfer Impressions by former stockholder of pretrial proceedings cases for of these Impressions ac- M and based on the plaintiffs in the Monroe from the comes quisition, the Consolidated Financial Augenstein Monroe and actions. alleged decep- Statement 1968 and the plaintiffs in- assert that their action acquisition. tion Interstate Varsity only acquisi- House volves the Southern District Ohio C. pro- needlessly would tion and become pre- The Monroe the if for coordinated tracted included involving brought by acqui- the for- District of trial with other Ohio .is actions Varsity allegedly mer officers directors of other and sitions National and They illegal noted, how- House Marwick. we have conduct. As allege ever, question that the Consolidated Financial the the correctness Statement for 1968 and unaudited the Consolidated Financial State- National’s financial National for the of 1968 these statements of ment is involved all of concerning quarter questions third of 1969 were false cases and similar misleading aid- unaudited and that Marwick the financial statement misrepresenting quarter ed and third raised abetted others of 1969 prove In order to National’s financial condition at the time eases. Varsity acquisition, allegations plaintiffs in vio- their the Monroe House necessarily explore lation of the federal laws. will same factual securities appears background And it as the consolidated New have Augenstein by making part oth- the action plaintiffs, trated pretrial proceedings. plaintiffs. coordinated er above, injunctive case, as noted argument presented A similar granted judg- been consent relief has Augenstein They plaintiffs. concede suggests Further, ment. ques- certain raise claims which led to same considerations ac- to the other of fact common 1407(g),4 the enactment of 28 U.S.C. § tions, they their conten- assert exempting government from transfer National violated the terms tions that injunctive tions for anti- relief under the merger agreement Impressions M laws, require exempt trust their, receipt of National shares its action coordinated or consolidated unregistered, non-exempt public was an pretrial proceedings. We think offering common are not litiga- integral part action is an of this They argue action. that because tion and that it be included these non-common claims their action pretrial proceedings. coordinated pre- from should be excluded coordinated believe, proceedings only not not the common We do and we do agree. contend, understand the SEC to that the claims transferred. We do questions exempt statute can be construed to The common raised Augenstein pretrial proceedings complaint in all are substantial junctive govern questions non-common of fact instituted agency parties ment involve the ly to enforce same as are close- a remedial stat ute in the For related issues. The basic interest. purpose underlying we think it best to include enactment of 28 secure, the entire the coordinated multi litigation pretrial district civil all other as judge, “just, speedy parties, litigation, civil expensive with the assistance and in develop every will then be determination of free ac prompt tion.” *6 schedule which assure 1. The will the Fed.R.Civ.P. draftsmen development impact of were areas aware that the of factual coordi arrangements pretrial proceedings nated and make such under the Augenstein plain- beyond individual needs statute the would extend the anti of any appropriate. tiffs trust as seems area into area where actions pending in different districts raised com III. The SEC Action fact,5 mon attempt issues of no made, other than that contained in Sec opposed in The the SEC to 1407(g), tion limit the civil to actions pre clusion of its in coordinated subject proceedings. to such It would be proceedings pursuant trial to 28 U.S.C. of statutory violative the purpos basic purpose 1407. contends that the of § es for exception us now to read such an prompt injunctive its action is to secure into the statute. protect relief in order to the continuing violations contend, of the securities The however, SEC does that purpose laws including and that this will frus- its action in the coordinated provides: (g) 4. 117; 28 56) ; U.S.C. 1407 15 U.S.C. but shall in- not Nothing apply in this section shall clude section 4A of the Act of October any 15, 1914, which the July 7, (69 United States as added comxjlainant arising 282; is a under 15a). the anti- Stat. 15 U.S.C. trust laws. ‘Antitrust laws’ as used Hearings herein include those acts referred on S. 3815 before the Subcomm. 15, 1914, Improvements the Act October as amended Machinery in Judicial Comm, (38 730; 12), Judiciary, Stat. and also of the Senate on the (49 19, Cong., the Act of 6, 17, include June (1966) ; 89th 2d Sess. 1526; 13, 13a, 13b) H.R.Rep. Cong., Stat. 15 U.S.C. No. 90th 2d Sess. 3 September 26, 1914, and the Act (1968). as (52 added March Stat. by assigning private and the solved both further the proceedings will not pretrial single judge. litiga- the to a the SEC cases just conduct and efficient *7 York. of the existence The SEC has conceded questions in ac of fact these arguments in favor of We find its intention to tions and has indicated persua- the District of more Columbia discovery the defend seek further from years in sive. In the issue the business appears ants. It the defend also largely of National was conducted engage in ants will wish to a substantial offices, through Washington, its D. C. discovery they are amount of before Washington, D. office it was C. ready for trial. The benefits of coordi Peat, provided of Marwick the nec- pretrial proceedings nated are obvious essary accounting services to National. probable these It facts. Many accounting personnel of questions raised Peat, National and Marwick are said plaintiffs concerning access to Washington, reside in the D. area C. transcripts testimony and related ex of while the defendants located in New investigations of hibits in collected dealers, primarily York are the broker this matter which the SEC intends alleged by who are consolidated New in its promoted make available to the defendants York to have Na- illegal in questions tional’s stock an As manner. action. These can best be 1318 contends, pursuant proceedings, broker claim is a event, and, secondary with the actions trans- one these heretofore pending greatly incon- ferred that district. defendants will assigning
venienced cases of rather than New District Columbia SCHEDULE A to the District of Columbia. York. also indicates A comparison two proposed of desirability respective districts transfer dockets wick, Mitchell Joseph Kwiatkowski Morton Student Augenstein, Southern District of New York Marketing & Co., v. et al. v. Na- Peat, et al. Corp. Mar Civil Action Civil Action No. No. Civ. Civ. 2107 Southern Ohio Report of Annual the Administrative Of- District fice of the United States Courts shows al. Monroe, Michael et v. Action Civil Marwick, Mitchell & Co. No. 71-309 pending civil cases number eighteen percent decreased more than Columbia District during of Columbia fiscal Exchange Securities Com- Civil Action mission v. No. 225-72 National Student 1971, while the District of Marketing Corp., et al. experienced New increase of one percent pending Northern District Texas An- civil actions. Report B. Roberts v. nual of the Director Vernon Mar Civil Action Ad- wick, Co. No. Mitchell & CA-3-5782 ministrative Office United States from issue to trial lumbia eighteen months in the District of Co- significantly, Table 45b. Courts Southern District of New York. It is therefore ordered that all actions (1972), twenty-seven the median time interval Table 20. Even more in civil cases was months Id., deil, et Student Louis Domenick L. Student Mildred Garber al. Lipsig, et al. v. National Marketing Marketing Southern District v. Natale Cortes W. Ran- Corp., Corp., et SCHEDULE et al. al. of New York B Civil Action Civil Action No. No. 70 Civ. 835 Civil Action No. 72 Civ. 721 70 Civ. pending on the attached Schedule A WEIGEL, Judge districts other than the Co- STANLEY A. hereby be, are, (concurring).
lumbia and the same transferred to the District Columbia salutary benefits of coordinated court, consent of as- pretrial proceedings, pro- or consolidated signed Barrington to the Honorable D. vided for U.S.C. § Parker for litigants not be denied in cases pretrial proceedings with brought Nothing in the SEC. pending pursuant there to 28 U.S.C. § supports statute itself a different view. speaks first Its sentence of “civil ac- involving tions questions one or more common is further ordered of fact . . . pendency appeal view the of de language different districts”. The fendant White & Case an order not limited to some of those actions nor York, the Southern District of New *8 does it except elsewhere or otherwise against the claims White & Case asserted by actions initiated the SEC. The sole in the actions listed on B Schedule be legislative exemption is accorded to separated ac- and remanded so that those brought by the United States will not claims time, be transferred at this 1407(g). antitrust cases. 28 U.S.C. only § the claims asserted in against those actions particular defendants other Whether a SEC action war- presently than White & Case are judged trans rants transfer must be the and, designated ferred to the District of Columbia criteria e., will i. § assigned court, with the consent of par- transfer serve “the convenience of Barrington to the Honorable Parker just ties and D. witnesses” and “the and ef- for or ficient conduct of actions”? [civil] proper what- balance between example, is strike the if an action SEC Thus, for may justified the priority prop be ever trial, that is fact which close to public deny aspects civil ac- erly it interest SEC may the cause Panel to other, tions, hand, one on the far on the are other which transfer with cases objectives of g., to the See, service salient In W. e. re Glenn from trial. Enterprises Litigation, F. 1407. Turner (Jud.Pan.Mult.Lit.); re In Supp. 1402 Lit
King Company Securities Resources Judge WEINFELD, of the EDWARD F.Supp. n. 13 igation, 342 (dissenting): (Jud.Pan.Mult.Lit., de 1972). Such a is action as the I dissent insofar SEC proper only inter in the nial if would be pre- included the coordinated ordered just promoting con and efficient est of objective action, not it is because duct of the pri- different from those is deny on we the SEC action. If transfer litigations. Basically, the SEC vate ground, nei latter we invoke a standard protect public interest tion to the seeks suggested in nor the ther delineated by enjoining violation continued empowering us statute to act. As a matter acts.1 securities Judge dissent, my Under brother his general policy, it that SEC is undesirable would, effect, jettison the Weinfeld relief, injunctive sole for whose actions majority’s case-by-case of deter- method safeguarding expeditious purpose is the expressed the mination standards subjected to public interest, giving special treat- in favor of statute delays private that are inherent the largely, if not to based ment SEC cases concerns, litigations, with their different solely, upon the nature and motivation private parallel even where those actions government Perhaps agency. the cases, complaints. the the In SEC desirable, Congress, is is for but it subpoena power use of Commission’s to make that There court, decision. substantially developed the essential history suggest any legislative is no to application required support its to facts legislative such the con- decision. On relief; equitable there- the to courts Congress trary, limited fact the discovery fore, is the need further government exemptions to actions vastly from those minimal and different injunctive the those for relief under money allege private injury who and seek strongly (§ 1407(g)) im- antitrust laws damages. lump To action with plies Congress to intended exclude private in a result lawsuits would Expressio exceptions. est unius pub- protect effort slowdown Rybolt Jarrett, exclusio alterius. 112 lic; “pro- would rather than it defeat (4th 1940). F.2d Cir. mote efficient conduct” litigation. due deference Concern that interest SEC With sug- majority, jeopardized delays it is unrealistic occasioned gest why private “there is no reason transfer of SEC.actions with question decision of the class seems me underestimate discovery power capacity judges. necessary unnecessarily delay interest actions should Whatever beneficial preparing giving priority SEC for trial dis- served remaining covery protected by the exercise defendants.” Ofttimes can be delay Indeed, purpose powers. postponement a trans- broad suit private litigant judge position interest in a than whose sole better feree recovery. very questions. is a financial case we to decide such His asessment, upon operative re- the record shows that the Commission based expedition dispatch, level, has moved with the trial best court can alities *9 40, Co., Corp., 38, Mines 346 D’Alene 312 U.S. 61 v. Ralston SEC Purina Cf. 414, (1941) ; 124, 85 L.Ed. Berko 1494 S.Ct. 500 L.Ed. 73 S.Ct. U.S. 97 1963). (2d SEC, (1953); 316 F.2d A. C. Frost & Co. v. Coeur Cir. leisurely pace argu- whereas character- nonconsolidation since the ized most of the Fi- lawsuits. ment of the motion before this Panel nally, general adopt injunction has been entered (which policy permits excep- Marketing course upon National Student situations) tions in unusual would which posture consent and the SEC case is recognize protect- go role early trial, forward for an which ing respect interest no is not pri- the case in the instance of the any Congressional purpose. would offend vate ments, Ship- lawsuits. In re Grain Cf. legislative history 1407(a) F.Supp. (Jud.Pan. indi- given cates that no consideration Mult.Lit.1969); In re Protection Devic- exempting provisions. the SEC from Equipment es and and Central Station circumstance, In that there is no Cases, basis Protection Service Antitrust for a claim that “It F.Supp. would violative (Jud.Pan.Mult.Lit.1968). statutory purpose basic for us now The present result reached in the case exception to read such an into the stat- is inconsistent with that reached ute.” frequently, King The courts have Resources litigation, where the equity exercise of powers, and in Panel declined to consolidate a related adopted interest, policies brought ade- the SEC because of its quate to the occasion. stage “advanced preparation.” In re King Entirely apart general Company policy Resources Lit- Securities considerations, igation, an additional F.Supp. 1179, 1183, n. 13. notes specifically, More tion. the assertion We do find SEC’s disposition the class that the possible delay counter- a sufficient require private will question in eases the advantage of consolidation balance to the the court prompt attention ignores flexibility think it we delay proceedings in its inevitably or inherent its com- that asserts action. SEC pretrial The transferee investigation upon an plaint is based litigation judge in free will be statutory powers and pursuant needs tailor a to fit the schedule discovery com- been of its much actions, of the individual and with relatively pleted in this manner while parties, day-to-day assistance accomplished in discovery has been little litigation, contact with the he able will be paper private actions. gauge ap- the extent of coordination matter, hearing in subsequent to propriate pri- between the SEC and more that no the SEC indicated belief why vate There is no cases. ninety days required to should than question decision the class action against prepare for trial its case discovery necessary maining of those defendants. Certain unnecessarily delay issue with defendants have taken preparing the re- substantially suggesting proposal, maining defendants. longer period them needed for would be prepare for trial. IV. Transferee remaining question only con concedes, in determin As the SEC appropriate district cerns the ing appropriate, we whether transfer litigation. Marwick, for this “weigh the interests all must movant, requests all actions to transfer of plaintiffs defendants, and all York, as New multiple litigation as a must consider serting located that more defendants are light purposes whole district, there than Litigation, law.” In re Books Childrens’ National’s documents are locat (Jud.Pan.Mult.Lit. F.Supp. 385, 386 acqui ed there and the Interstate 1968). Upon we this basis believe sition occurred in that New district. all ac conduct of efficient other de including and various tions would be furthered urge of New fendants selection pretrial proceedings. the SEC action in