In Re New York City Municipal Securities Litigation

439 F. Supp. 267 (1977)

In re NEW YORK CITY MUNICIPAL SECURITIES LITIGATION.

No. 314.

Judicial Panel on Multidistrict Litigation.

November 1, 1977.

Before JOHN MINOR WISDOM, Chairman, and EDWARD WEINFELD,^[*] EDWIN A. ROBSON, JOSEPH S. LORD, III,^[*] STANLEY A. WEIGEL, ANDREW A. CAFFREY, and ROY W. HARPER, Judges of the Panel.

OPINION AND ORDER

PER CURIAM.

This litigation consists of ten actions pending in two districts: eight in the Southern District of New York,^[1] and two in the District of Massachusetts. The complaint in each action alleges violations of the federal securities laws in connection with the marketing of New York City's securities during 1974 and 1975. Generally, the City, its chief financial officers and various financial institutions are accused of conspiring to conceal the City's financial condition in order to effectuate the sale of various types of New York City obligations. Defendants are alleged to have used false and misleading public statements, improper accounting practices, illegal sales of short-term notes and other fraudulent devices in furtherance of their illegal scheme. In seven actions, including the two Massachusetts actions, defendant financial institutions are accused of conspiring on the basis of material inside information to reduce their own holdings of New York City obligations, while continuing, in the capacity as underwriters or dealers, to market City securities to members of the general public.

The Massachusetts actions, Truncell v. The First National Bank of Boston (Boston I) and Friedlander v. The First National Bank of Boston (Boston II), were brought against the Boston bank after it had been dismissed from two of the New York actions pursuant to the venue provision of the National Bank Act, 12 U.S.C. § 94. The plaintiffs in the Massachusetts actions are also plaintiffs, respectively, in the two New York actions from which the Boston bank obtained dismissal.

All the actions in this litigation have been brought as class actions on behalf of purchasers of various types of New York City securities. A class of original, non-dealer purchasers of four series of New York City short-term notes and a class of purchasers of New York City general obligation bonds have been certified in two of the consolidated New York actions.^[2] Requests for certification of classes similar to one or the other of the certified classes have been denied in the other three consolidated New York actions.

Plaintiffs in Boston I and Boston II each move the Panel for an order pursuant to 28 U.S.C. § 1407 transferring the respective action to which each is a party to the Southern District of New York for coordinated or consolidated pretrial proceedings with the actions pending there. The only party opposing the motions is the First National Bank of Boston. We find that the ten actions in this litigation raise common questions of fact and that transfer of the Massachusetts actions to the Southern District of New York under Section 1407 will best serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.

The First National Bank of Boston contends that transfer of the Massachusetts actions to the Southern District of New York is inappropriate at this time because: 1) the actions in this litigation share no questions of fact that are sufficiently complex to warrant transfer; 2) any economies to be realized from transfer can also be accomplished through voluntary cooperation of counsel in these actions; 3) the class certification issues pending in the Massachusetts actions should be determined by the court that will eventually try the actions; 4) the Boston bank has not participated in any discovery that has occurred to date in the New York actions and would be prejudiced by this lack of participation and by the burden of participating in further discovery activities unrelated to its alleged liability; 5) the plaintiffs in the Massachusetts actions have waived their right to transfer under Section 1407 as a result of dilatoriness in seeking that transfer; and 6) discovery concerning the Boston bank's culpability will perforce occur in Boston, where the bank's headquarters and chief executive officers are located. In addition, the Boston bank argues that Boston II has become moot because the named plaintiff no longer holds New York City obligations and that therefore that action should be left in the Massachusetts forum for prompt disposition.

Finally, the Boston bank argues that the objectives of the venue provision of the National Bank Act are as likely to be frustrated by transfer for pretrial under Section 1407 as by transfer for trial. Accordingly, the Panel is asked to reconsider its ruling in In re Falstaff Brewing Corp. Antitrust Litigation, 434 F. Supp. 1225, 1229-30, (Jud.Pan.Mult.Lit.1977) whereby the Panel refused to exempt national banks from the application of the provisions of Section 1407.

We find these arguments unpersuasive. The actions in this litigation clearly involve common questions of fact concerning (i) the financial position of the City of New York during 1974-1975 and (ii) the existence and implementation of an alleged conspiracy among defendant financial institutions, including the Boston bank, to obtain inside information regarding the City's finances, to conceal that information from the general public while marketing the City's securities as dealers or underwriters, and to reduce their own holdings of the City's securities without disclosing that fact to public purchasers. Transfer under Section 1407 is thus necessary to prevent duplication of discovery, eliminate the possibility of conflicting pretrial rulings, and conserve the efforts of the parties, the witnesses and the judiciary. While voluntary coordination of discovery efforts among parties and their counsel is always commendable, transfer of these actions to a single district under Section 1407 will ensure the streamlining of discovery and all other pretrial proceedings as well. See In re Ascot Oils, Inc. Securities Litigation, 433 F. Supp. 1118, 1120 (Jud. Pan.Mult.Lit.1977).

Because the Boston bank is not a defendant in any of the New York actions, no possibility of conflicting class action determinations exists between the New York actions as compared to the Massachusetts actions. Notwithstanding the absence of this potential conflict, there is no reason, in light of the overriding factors here favoring coordinated or consolidated pretrial proceedings in a single district, why the class determinations regarding the Massachusetts actions should not be made by the transferee judge. Indeed, the transferee judge's participation in this important pretrial process will better enable him to coordinate the pretrial proceedings regarding the common factual questions and to thereby effect the simplification of issues through control of discovery and other means. See also In re Plumbing Fixtures Litigation, 298 F. Supp. 484, 494-95 (Jud. Pan.Mult.Lit.1968). Similarly, we see no reason to delay the transfer of Boston II because of the mootness assertion. The mootness issue is apparently contested by the parties, and the transferee judge will be amply able to resolve the matter if and when any motion to dismiss is filed.

The Boston bank's concern about the impact that participation in coordinated or consolidated pretrial proceedings will have on the conduct of discovery in Boston I and Boston II is unwarranted. Although discovery heretofore completed in New York may be made applicable to the Massachusetts actions by utilizing the procedures recommended in the Manual for Complex Litigation, Part I, § 3.11 (rev.ed.1977), the Boston bank is still free to approach the transferee judge regarding any reasonable discovery needs. And the Boston bank need not participate in discovery unrelated to the actions to which it is a party. See, e. g., id. at Part I, § 2.31. Moreover, prudent counsel in all actions can apportion their work-load and otherwise combine forces to effectuate an overall savings of cost and a minimum of inconvenience to all concerned with the discovery activities. See id. at Part I, §§ 1.90-1.93.

The Boston bank's suggestion that the plaintiffs in Boston I and Boston II have somehow either waived their right to transfer under Section 1407 or otherwise attempted to misuse this statute reflects a misconception of the purposes of Section 1407. The Panel's function is not to supervise the exercise of any individual party's right to transfer, for truly no such right exists. Rather, the Panel weighs the interests of all parties, considers multidistrict litigation as a whole in light of the purposes of Section 1407, and only then makes its determination regarding transfer. See In re Library Editions of Children's Books, 297 F. Supp. 385, 386 (Jud.Pan.Mult.Lit.1968). Where, as here, significant benefits are to be gained by coordinated and consolidate proceedings, the Panel will order transfer.

The Panel has recently reiterated its ruling that the policy considerations surrounding the venue provision of the National Bank Act do not preclude transfer under Section 1407 of actions involving national banks. See In re Investors Funding Corporation of New York Securities Litigation, 437 F. Supp. 1199, 1202-1203 (Jud.Pan.Mult. Lit., filed August 8, 1977). The reasoning in the Investors Funding opinion remains dispositive of the arguments raised by the Boston bank in this litigation.

The Southern District of New York is clearly the most appropriate transferee forum for this litigation. The relevant municipal documents and officers will be found there, as will many other relevant documents and witnesses because New York City is the location of principal offices and executives of all but two of the seventeen corporate defendants involved in this litigation. Also, eight of the ten actions involved herein are already pending in New York. See id. at 1203. Furthermore, the familiarity which Judge Owen has developed with the litigation as a result of the pretrial proceedings that have been conducted in some of the actions pending in the Southern District of New York weighs significantly in favor of that district as the transferee forum. See In re Griseofulvin Antitrust Litigation, 395 F. Supp. 1402, 1403 (Jud.Pan. Mult.Lit.1975).

IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C. § 1407, the actions listed on the following Schedule A and pending in the District of Massachusetts be, and the same hereby are, transferred to the Southern District of New York and, with the consent of that court, assigned to the Honorable Richard Owen for coordinated or consolidated pretrial proceedings with the actions listed on Schedule A and pending in that district.

SCHEDULE A
District of Massachusetts
Civil Action No.
James H. Truncell v. The First         76-3285-C
Bank of Boston
Hortense Friedlander v. The First      76-2685-T
National Bank of Boston
Southern District of New York
Civil Action No.
Michael H. Spector, et al. v. The      75 Civ 5461
City of New York
James H. Truncell v. Bank of America   76 Civ 4997
NT and SA
Hortense Friedlander v. The City       75 Civ 3981
of New York, et al.
Norman Goldfarb v. The City of         75 Civ 5581
New York
Mark Weisberg v. The City of New       75 Civ 5582
York
Ida Velardi, et al. v. First National  76 Civ 0843
City Bank (New York)
Joe Manchester v. The City of New      77 Civ 0990
York
Hortense Friedlander v. Bank of        76 Civ 4468
America NT & SA

NOTES

[*] Judges Weinfeld and Lord took no part in the decision of this matter.

[1] Six of these actions were originally filed in the Southern District of New York. Judge Richard Owen, to whom these actions were assigned, has entered an order consolidating for all purposes five of these six actions. A motion to similarly consolidate the sixth action is presently pending before him. The two remaining actions pending in the Southern District of New York, Truncell v. Bank of America and Friedlander v. Bank of America (the California actions), were originally filed in the Northern District of California after the Bank of America had been dismissed as a defendant in two of the other Southern District of New York actions, pursuant to the venue provision of the National Bank Act, 12 U.S.C. § 94. Judges Stanley A. Weigel and Samuel Conti, upon stipulation by the parties in the respective California action to which each had been assigned, entered orders transferring the California actions to the Southern District of New York for coordinated or consolidated pretrial proceedings with the New York consolidated actions.

[2] Friedlander v. City of New York, 71 F.R.D. 546 (S.D.N.Y.1976); Spector v. City of New York, 71 F.R.D. 550 (S.D.N.Y.1976).