The opinion of the court was delivered by: NEAHER
Defendants have moved before answer under 28 U.S.C. § 1404(a) to transfer this action to the United States District Court for the Central District of California. For the reasons which follow, the motion must be denied.
Plaintiff, Shirley Goldstein, suing individually and as custodian for her son Richard, instituted this action seeking damages for alleged violations of the federal securities laws by defendants, Rusco Industries, Inc. ("Rusco") and Jack Catain, Jr. She seeks to recover $3,643.14, the purchase price of 230 shares of allegedly valueless Rusco common stock, as well as punitive damages, costs of the action and counsel fees.
Defendant Catain has been chairman of the board, president and chief executive of Rusco since November 30, 1967. Rusco, originally incorporated in Ohio, was reincorporated in Delaware in 1965, but its executive offices are located in Los Angeles, California. It is engaged in the manufacture and sale of building products, various types of metal bed frames, security control devices and in the custom precision machining of metal parts. Its operations are far-flung, involving over 20 subsidiaries, two of which are centered in New York. The properties utilized in these operations are located in seven states and Canada.
Rusco has approximately 1,400 employees, of which 17 are executive personnel. Eight of these executives are employed in the Los Angeles office, and are California residents. No executive employees are residents of New York.
Plaintiff's action is grounded in §§ 5, 12 and 17 of the Securities Act of 1933 ("1933 Act"), §§ 10(b), 15(b) and 15(c) of the Securities Exchange Act of 1934 ("1934 Act") and Rules 10b-3, 10b-5, 15c1-4, 15b1-2 and 15c1-7.
The activities said to result in violations of the federal securities laws involved allegedly misleading statements and representations in press releases, brochures, annual reports and letters to stockholders. These statements related to the invention, development, manufacture and sale of a number of component elements of a credit card security system.
Plaintiff's action follows an investigation by the Securities and Exchange Commission ("SEC"). The SEC filed an action on June 21, 1971 involving charges substantially similar to those herein against Rusco and Catain in the Southern District of New York. The case was settled by a consent judgment entered August 5, 1971. The consent decree, according to defendants, has resulted in the instituting of nine other similar actions.
A motion to transfer under § 1404(a) is addressed to the sound discretion of the court. United States v. General Motors Corp., 183 F. Supp. 858, 860 (S.D.N.Y.1960). "In exercising its discretion, the court will ordinarily give great weight to plaintiff's choice of forum, and will look to the defendant to provide cogent reasons why transfer would be appropriate." Erving v. The Virginia Squires Basketball Club, 349 F. Supp. 709 (E.D.N.Y.1972). "Section 1404(a) provides for transfer to a more convenient forum, not to a forum likely to prove equally convenient or inconvenient." Van Dusen v. Barrack, 376 U.S. 612, 645, 84 S. Ct. 805, 824, 11 L. Ed. 2d 945 (1963). In sum, defendants have "the burden of showing that the transfer is warranted, and unless the balance of conveniences clearly favors the [defendant], [plaintiff's] choice of forum will not be disturbed [citations omitted]." Maheu v. Reynolds & Co., 282 F. Supp. 423, 426 (S.D.N.Y.1967).
A transfer motion presents two basic questions: (1) whether the action sought to be transferred "might have been brought" in the proposed transferee forum, and (2) whether the transfer would best serve the convenience of parties and witnesses and the interest of justice. Schneider v. Sears, 265 F. Supp. 257, 261 (S.D.N.Y.1967). Plaintiff understandably does not deny that the action could have been instituted in the Central District of California.
However, she strenuously argues that the interests of justice would not be served by transferring the action.
The criteria applicable to assessing the balance of conveniences include (1) the convenience of the parties; (2) the convenience of witnesses; (3) the relative ease of access to sources of proof; (4) the availability of process to compel attendance of unwilling witnesses; (5) the cost of obtaining willing witnesses; (6) the practical problems indicating where the case can be tried more expeditiously and inexpensively; and (7) the general interests of justice. Schneider v. Sears, supra at 263. Defendants' arguments put into question all the above considerations, except for the fourth one.
The Convenience of Parties and Witnesses
Plaintiff is a resident of Flushing, New York. Defendant Catain is a California resident. Rusco, a Delaware corporation with principal place of business in California, has operations national in scope.
In defendants' view, the principal witnesses in this action are likely to be key management employees of the company, most of whom are located in California. They assert that in order to permit these witnesses to testify in New York Rusco would have to suspend a portion of its businesses during the time they are required to be in this jurisdiction. Three other witnesses, all of whom reside in the Los Angeles area, are likely to be called to testify in this action: Walter Barney, the inventor of the credit card system in question; Al Sweitzer, a former Rusco vice president who was in charge of ...