51 F.R.D. 18 | D.N.J. | 1969
MEMORANDUM AND ORDER
This is a motion by certain of numerous defendants, supported and resisted by briefs and arguments, upon rehearing, General Rule 12-1, U.S.D.C.N.J.,
The complaint is stated in three counts. In Count I, brought under the Sherman and Clayton Acts, 15 U.S.C. § 1 et seq., plaintiff seeks the following relief: (a) treble damages for himself, (b) for each member of a class which he purports to represent, (c) for each of the defendant externally managed mutual funds, (d) for each member of the class mentioned in (c), (e) a final injunction restraining the defendants from paying or receiving grossly excessive management fees, and (f) costs and counsel fees; in Count II, brought under the Investment Company Act of 1940, 15 U.S.C. § 80a-l et seq., he seeks the same treble damages and equitable relief for himself and others as in Count I; and in Count III, brought under the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a et seq., the Investment Advisors Act of 1940, 15 U.S. C. §§ 80b-l et seq. and under the Investment Company Act of 1940, 15 U.S.C. §§ 80a-20, 80a-33, he demands such damages as are determined to have been sustained by him and the classes which he purports to represent. In essence, the plaintiff maintains that the defendant management and investment advisors, be they corporate or individual, as well as the alleged “self-dealing” directors of the externally managed mutual funds, conspired to fix grossly excessive fees, thereby illegally monopolizing the mutual funds investment market, all to his damage, and to that of the classes, both mutual and shareholder, which he purports to represent.
The four motions
In the alternative, the moving defendants petition for a permissive certification, pursuant to 28 U.S.C. § 1292(b), on the ground that the Order denying their motions to dismiss “involves a controlling question of law as to which there is substantial ground for differ
Full and careful reconsideration has been given to the arguments advanced by able counsel upon rehearing. Nevertheless, this Court is of the conviction that nothing has been adduced which might lead to a conclusion and ruling different from its Order of October 1, 1969.
Although the Court’s prior ruling denying the defendants’ motions to dismiss the complaint, or certain counts thereof, remains unchanged upon rehearing, nevertheless, it is the opinion of the Court that the said Order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal therefrom may materially advance the ultimate termination of the litigation in this complex, potentially protracted and probable multi-district antitrust and securities action, thereby avoiding great expenditures of time and money for pretrial procedures. These motions do go to the merits of the litigation in the sense that they strike at plaintiff’s legal capacity to sue certain defendants in the very first instance. Further, whether or not these large mutual funds should be put to the prohibitive expense of defense, when the plaintiff’s status to maintain such an action against certain of them is challenged as a matter of law, is an issue which should receive early resolution. In these circumstances, one is mindful of Judge Maris’ admonition in 1958, expressed in Milbert v. Bison Laboratories, 3 Cir., 260 F.2d 431 at page 433, when Section 1292(b) of Title 28, United States Code, was but two months old:
«•» * * Congress intended that section 1292(b) should be sparingly applied. It is to be used only in exceptional cases where an intermediate appeal may avoid protracted and expensive litigation and is not intended to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation. Both the district judge and the court of appeals are to exercise independent judgment in each case and are not to act routinely.”
See also: Freedman v. Phila. Terminals Auction Co., 197 F.Supp. 849 (E.D.Pa.1961), aff’d 301 F.2d 830 (3 Cir.1962), cert. den. 371 U.S. 829, 83 S.Ct. 40, 9 L.Ed.2d 67 (1962); King v. Grand Lodge of Inter’l. Ass’n. of Machinists, 215 F.Supp. 351, 355 (N.D.Cal.1963), aff’d 335 F.2d 340 (9 Cir.1964), cert. den. 379 U.S. 920, 85 S.Ct. 274, 13 L.Ed.2d 334 (1964), where the denial of a motion for summary judgment which challenged the plaintiffs’ rights to sue, as a matter of legal capacity, for alleged improper discharges from union offices was held to be properly certified because it involved a controlling question of their rights to relief on three of six causes of action.
The instant case is not an ordinary one—it is, rather, one of great dimension involving, as it does, some 141 defendants and makes an attack nationwide upon the entire mutual fund industry and demands damages in many millions of dollars. Consequently, and particularly in a case of this magnitude, the possibility of judicial error warrants the grant of a certificate for interlocutory appeal in the interest of avoiding needless and large expenditures of time and money by these defendants and, perhaps more importantly, the adverse exposure of their reputations and public images in today’s hyper-sensitive financial markets. In such an event, if there be error, it seems better by far for a trial court to err upon the side of procedural liberality rather than succumb to considerations of rigid conservatism. In these circumstances, certification of appeal seems most appropriate at this critical juncture and well within the sphere of interlocutory appeal provided by Congress for extraordinary litigation.
Accordingly, an order so certified shall be granted and is entered herewith.
ORDER
This matter having been brought on by counsel for defendants for reconsideration of motions denied by Order filed October 1, 1969, and reargument having been made by opposing counsel; and
The Court being satisfied that nothing has been adduced which should lead
Now, therefore, it is on this 18th day of December, 1969, upon reconsideration, ordered that the defendants’ motion for a redetermination of this Court’s prior order filed October 1, 1969 is denied hereby; and
It is further ordered that the phrase “pending pretrial discovery” in the said Order be deleted and deemed amended to that extent only; and further
It is certified that, in the opinion of the Court, the ruling on said motions involves a controlling question of law as to which there is substantial ground for a difference of opinion and that an immediate appeal may materially advance the ultimate disposition of this protracted, complex, expensive and extraordinary litigation with respect to many, if not most, of the parties-defendant hereto; and consonant therewith,
It is further ordered that all proceedings in this Court be stayed until further order by the United States Court of Appeals for the Third Circuit, or this Court.
. These constitute the first set of many motions filed by the defendants, the balance of which are directed to, among other matters, jurisdiction, venue and process and which were held in abeyance pending disposition of these motions.
. Plaintiff is a shareholder in the defendants, The Dreyfus Fund, Ine., Fidelity Fund, Putnam Growth and Manhattan Funds.
. The antitrust statutes distinguish between individuals (15 U.S.C. § 15), requiring personal jurisdiction by territorial process, and corporations (15 U.S.C. § 22) who may be reached with process for jurisdictional purposes if such a corporation can be “found” within the federal district forum, is an “inhabitant” thereof, or has been or is “transacting business” therein. The Securities Acts make no such distinctions. These considerations are most pertinent to some of the remaining motions and may, to a large extent, be dependent upon or resolved by the present motions.
. The Order dated September 30th and filed October 1, 1969, contained an unfortunate choice of words when it made reference to “pretrial discovery” at this juncture of the proceedings. It was not intended to relate discovery to the four motions which were denied, but rather to certain remaining motions which may require extensive factual inquiry. To that extent it will be amended to delete that phrase.