The opinion of the court was delivered by: CARTER
Plaintiff, Robert S. Somerville, sues on behalf of himself and all other persons
(except defendants and those in privity with them) who purchased the securities of Major Exploration, Inc. ("Major"), Major Drilling, Inc. ("Major Drilling"), and United American Energy, Inc. ("United")--all defendants in this case. The defendant corporations, their officers and directors, their attorneys, Arnheim and McCostis, their accountants, G.L. Walter Co. ("Walter"), their underwriting firm, Fittin, Cunningham & Lauzon, Inc. ("Fittin") and its officers and attorney, and a set of individual and corporate entities defined as the Freeman Group, are all charged with fraud. Specifically, plaintiff's complaint alleges violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b); §§ 12(1), 12(2), and § 17(a) of the Security Act of 1933, 15 U.S.C. §§ 771(1), 771(2), and § 77q; § 901 of the Racketeer Influenced and Corrupt Organizations Act of 1970 ("RICO"), 18 U.S.C. § 1961 et seq.; common law fraud pursuant to pendent jurisdiction; §§ 339-a and 352-c of the General Business Law and § 1611 of the Business Corporation Law of the State of New York; breach of common law fiduciary obligations to plaintiff and members of the class; and breach of contractual duties owed to plaintiff and the class.
Plaintiff contends United, Major, and Major Drilling were organized and promoted for the purpose of defrauding the plaintiff by successive public offerings based upon fraudulent financial statements and deceptive press releases, thereby inflating the price of the companies' securities. As a result of fraudulent representations and omissions in a scheme to sell the securities of the three companies, plaintiff claims millions of dollars were lost by the public.
United, a Tennessee corporation, organized in 1978, is headquartered in San Antonio, as are Major and Major Drilling. United owns a majority interest in Major, a Colorado corporation, that, in turn, wholly owns Major Drilling, also a Colorado corporation. Defendants maintain that the three companies were organized to engage in exploration for potential new oil and gas properties and the exploitation of such new, as well as existing properties, with various drilling and production programs.
Several motions are now before the Court. Defendants United, Major, Major Drilling, their officers and directors ("the Major group") have filed a motion to dismiss the complaint pursuant to F.R.Civ.P. 9(b) for failing to state any claim with sufficient particularity. In the alternative, the Major Group has moved to transfer the case to the Western District of Texas pursuant to 28 U.S.C. § 1404(a).
Defendants Fittin, Thomas Fittin and Joseph Lauzon has joined in these motions. Defendant Walter has joined in the Rule 9(b) motor and, in addition, has moved pursuant to Rule 12(b)(6), F.R.Civ.P. to dismiss Count V of the complaint, which charges defendants with violation of RICO. Curtis D. Robert, allegedly a member of the Freeman group, has filed a separate motion to dismiss the complaint.
Robert maintains that plaintiff has failed to state a claim, or to provide him with minimum notice because the pleadings are insufficient under Rule 9(b). He joins, as well, in the Major group's motion to transfer.
Motions to transfer, pursuant to 28 U.S.C. § 1404(a) are directed to the discretion of the Court. Wyndham Associates v. Bintliff, 398 F.2d 614, 621 (2d Cir.), cert. denied, 393 U.S. 977, 21 L. Ed. 2d 438, 89 S. Ct. 444 (1968).
In this Circuit, the factors which are decisive in deciding whether transfer is warranted are: (1) the convenience of the parties and witnesses (and the availability of process to compel attendance of unwilling witnesses); (2) the relative ease of access to sources of proof, and other practical problems that make trial of a case easy, expeditious, and inexpensive; and (3) the interests of justice. Y
Design, Ltd. v. Regensteiner Public Enterprises, 428 F. Supp. 1067, 1068-69 (S.D.N.Y. 1977) (Bonsal, J.), citing Schneider v. Sears, 265 F. Supp. 257 (S.D.N.Y. 1967) (Weinfeld, J.). Each of these factors will be examined in turn.
A. The Convenience of the Parties and Witnesses
In large part, defendants' arguments for a change of venue concern the location of parties and witnesses involved in this dispute. The majority of the named defendants, both corporate and individual, are located in Texas. The three companies, their officers and directors, and the members of the Freeman group, totaling nine individuals, are located in Texas. A substantial number of defendants, however, live or work in the Southern District of New York, or in the vicinity. Defendant, Gerald Murphy, who is and has been chairman of the Board of Directors of Major, Major Drilling and United, and defendant, Robert Hurwitz, live or work in the Southern District of New York. Defendant, Arnheim & McCostis,
a law firm, has its principal place of business in Manhattan, and so does the accounting firm of defendant, Walter. Finally, defendant, Fittin, and two of its officers and board members, who are also defendants, maintain their residences or business locations in New Jersey.
Defendants assert that New York is an inconvenient forum because the businesses of the corporations located in Texas will be disrupted by litigation requiring their officers to be present in New York. It is an inconvenient forum with respect to the witnesses in the case, defendants maintain, because it is likely that most of them will be from Texas, and it is more likely that they will be subject to compulsory process there than in New York. Defendants further contend that they would be piejudiced if they were required to resort to deposition testimony since credibility is critical in cases involving fraud.
Were numbers alone indicative of inconvenience, defendants would have a strong case indeed.Defendants cannot, however, argue for transfer simply by pointing to the number of defendants who reside in Texas without a concomitant showing of who will be called, or what their testimony might be. Kreisner v. Hilton Hotel, Corp., 468 F. Supp. 176, 178 (E.D.N.Y. 1979). It is very unlikely that all of the individual defendants who are officers and directors of the Major group will prove essential to the case, as their testimony will undoubtedly overlap. Moreover, since two Major group defendants, McCown and Parks, are no longer officers or directors in the companies, their absence could hardly disrupt defendants' business. Where, as here, a substantial number of defendants reside in the district where the case is pending, nothing less than a strong showing of actual inconvenience will suffice to sustain a motion for transfer.
Although defendants contend that they will have difficulty compelling the attendance in New York of various witnesses from Texas with expertise in oil and gas exploration, they fail to identify any specific witnesses so affected. On the contrary, there is no reason given that would prevent defendants from requiring the experts whom they employ or engage to come to New York to testify. In addition, while it is true that deposition testimony is generally unsatisfactory in fraud cases where credibility takes on added importance, Saminsky v. Occidental Petroleum Corp., 373 F. Supp. 257, 260 (S.D.N.Y. 1974) (Ward, J.), the use of discovery techniques such as videotaped depositions can make demeanor evidence available to a jury even when witnesses are not physically present at trial. Bolton v. Tesoro Petroleum Corp., 549 F. Supp. 1312, 1317 (E.D. Pa. 1982).
B. The Relative Ease of Access to Sources of Proof
Defendants allege that Texas is the cite of the relevant documents and records, and it would be less costly to hold the trial where duplication and transportation of those documents is unnecessary. Plaintiff simply challenges as unfounded defendants' estimations of costs.
Defendants have not demonstrated, as they must, that the transportation and production of documents would be unduly burdensome. S-G Securities, Inc. v. Fuqua Inv. Co., 466 F. Supp. 1114, 1123 (D. Mass. 1978). They do not identify the needed documents. Their assertions are thus unsubstantiated and cannot be given serious consideration. See Blender v. Sibley, 396 F. Supp. 300, 303-304 (E.D. Pa. 1975). Since material portions of the fraud and securities violations allegedly occurred in New York and involved misrepresentations made by certain defendants located in New York and New Jersey, it seems likely that a number of relevant documents will be based in New York.
C. The Interests of Justice
Defendants highlight the fact that a similar case to the one before this Court, United Am. Energy, Inc. v. F.X.C. Investors & Curzio, is pending before the Western District of Texas.
The existence of a related action in the transferee district is a strong factor to be weighed in the interest of judicial economy. Dow Jones & Co., Inc. v. Board of Trade of Chicago, 539 F. Supp. 190, 192 (S.D.N.Y. 1982) (Carter, J.); Austin v. Johns-Manville Corp., 524 F. Supp. 1166, 1169 (E.D. Pa. 1981). It appears, however, that here the pendency of a suit in Texas contributes only marginal support for a transfer there. The action ...