United States District Court, Southern District of New York
February 21, 1990
IBJ SCHRODER BANK & TRUST COMPANY, AS SUCCESSOR INDENTURE TRUSTEE, PLAINTIFF
MELLON BANK, N.A., DEFENDANT. IBJ SCHRODER BANK & TRUST COMPANY, AS SUCCESSOR INDENTURE TRUSTEE, PLAINTIFF V. KIRKPATRICK & LOCKHART, DEFENDANT.
The opinion of the court was delivered by: Cedarbaum, District Judge.
OPINION AND ORDER
Defendants have moved under 28 U.S.C. § 1404(a) to transfer these
two related cases to the Western District of Pennsylvania on the ground
that that is a more convenient forum. All parties agree that these two
cases should be prepared and tried in the same forum. Discovery has been
coordinated, and justice and judicial economy require that the two cases
either remain together or be transferred together. Indeed, plaintiff has
moved to consolidate the two.
At the initial pretrial stages of the first case, I gave great weight
to plaintiff's choice of forum, and denied a motion for transfer without
prejudice to its renewal after the parties had acquired more information
about the location of the witnesses. Plaintiff has recently filed the
second case, asserting claims, including a RICO claim, against the
Pittsburgh law firm that advised the defendant in connection with the
conduct complained of in the first case. Until the second case was
filed, the Pittsburgh law firm represented the defendant in the first
After careful consideration, I have concluded that the addition of the
claims against the Pittsburgh law firm tips the balance of convenience.
For the reasons discussed below, these two actions are transferred to the
United States District Court for the Western District of Pennsylvania.
Prior to 1979, Mellon Bank, N.A. ("Mellon"), a national bank
headquartered in Pittsburgh, loaned money to Sharon Steel Corporation
("Sharon"). In 1979 and 1980, respectively, Mellon became the indenture
trustee for two series of subordinated debentures issued by Sharon.
Thus, after 1979, Mellon was both a creditor and an indenture trustee of
In March an~i April of 1985, Sharon failed to pay the interest due on
the debentures, and Sharon has remained in default to date. At the time
of Sharon's default, Mellon attempted to resign as indenture trustee,
effective on the appointment of a successor trustee. After Sharon filed a
petition for reorganization in the Bankruptcy Court for the Western
District of Pennsylvania in August of 1987, plaintiff IBJ Schroder Bank &
Trust Company ("Schroder") was appointed successor trustee.
At the time of Sharon's default, Mellon, pursuant to the indentures,
established a special account into which it deposited all money and
property it collected in repayment of Sharon's indebtedness to Mellon. The
funds in this account total approximately $32,000,000, plus interest.
When Schroder was appointed successor trustee, Mellon and Schroder were
unable to agree about the proper distribution of the funds in the special
account. On October 13, 1987, Mellon filed a declaratory judgment action
in the Western District of Pennsylvania seeking a determination that it,
as creditor, was entitled to the funds in the special account. On the
following day, Schroder filed the first case in this court seeking a
declaratory judgment to the contrary and damages for Mellon's alleged
breach of its contractual, statutory and fiduciary obligations as
indenture trustee. The district court in Pittsburgh determined that it
had jurisdiction over the action and the parties, but dismissed Mellon's
declaratory judgment action because its resolution would "not resolve the
entire controversy between the parties." Mellon Bank, NA. v. IBJ Schroder
Bank & Trust Co., No. 87-2169, slip op. at 8-9, 1989 WL 200443 (W.D.Pa.
August 17, 1989).
On June 13, 1989, Schroder filed the second case in this court, a
complaint against Kirkpatrick & Lockhart ("K & L"), the Pennsylvania law
firm which had advised Mellon with respect to its roles both as creditor
and as indenture trustee of Sharon. The complaint alleges that K & L had
a conflict of interest when it advised Mellon in both capacities and,
that K & L actively participated in Mellon's allegedly improper decisions
and conduct. The complaint also alleges that K & L mishandled lawsuits
brought by Mellon in Pennsylvania state court to recover from Sharon
unpaid interest due on the debentures, and drafted and approved allegedly
misleading press releases, notices of meetings to debenture holders and
trustee reports. When the second case was filed, K & L withdrew as
Mellon's counsel in the first case.
28 U.S.C. § 1404(a) provides:
For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any
civil action to any other district or division where
it might have been brought.
The threshold requirement for transfer under 28 U.S.C. § 1404(a) is
that the action "might have been brought" in the transferee court. It is
undisputed that this statutory requirement is met in these two civil
actions. There is jurisdiction and proper venue in the Western District
of Pennsylvania for Schroder's suit against Mellon and Schroder's suit
against K & L, and both cases could have been brought there.
The moving party bears the burden of demonstrating that the balance of
the statutory factors tips in its favor and warrants transfer. Factors
Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978), cert.
denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455(1979). I turn to the
I. Convenience of Parties and Witnesses
K & L is a Pennsylvania law firm with no branch offices in New York.
The three K & L partners involved in K & L's representation of Mellon,
who would be required to testify at trial, reside and work in
Pittsburgh. In addition, all other K & L attorneys who participated in
any way in K & L's representation of Mellon, and who therefore might be
called as witnesses, are located in Pittsburgh. K & L notes that three K
& L attorneys in addition to the three partners directly involved in the
representation of Mellon have been deposed by Schroder.
Schroder's offices are in New York. However, it is unclear whether any
witnesses from Schroder would be required to testify in either action in
light of the fact that Schroder became involved in these actions after
all the significant events at issue had occurred.*fn1
Mellon has its headquarters in Pittsburgh. Mellon's Corporate Trust
Group, through which Mellon rendered its services as indenture trustee,
is located in Pittsburgh. The two members of the Corporate Trust Group
who dealt with the Sharon debentures reside and work in Pittsburgh.
Mellon's Corporate Banking Group, through which Mellon made loans to
Sharon, is headquartered in Pittsburgh. Four supervisory members of the
Corporate Banking Group who reside and work in Pittsburgh might be called
as witnesses. In addition, K & L points to Mellon's general counsel and
Mellon's chief litigation counsel as a potential witness. Both reside in
Pittsburgh. The general counsel would testify about Mellon's retention of
K & L and Mellon's conduct as creditor and indenture trustee. The chief
litigation counsel would testify about the conduct of the suits brought
by Mellon against Sharon in the Pennsylvania state court to recover
K & L states that members of the law firm of Baskin Flaherty Elliott &
Mannino, a Pittsburgh law firm which undertook the representation of
Mellon as trustee after K & L withdrew, might be required to testify
about their advice and handling of the state court suits. Since the
complaint against K & L alleges that K & L participated in an imprudent
decision not to release a report prepared by Ernst & Whinney regarding
Sharon's liquidation value, K & L may call representatives of Ernst &
Whinney's Pittsburgh office, which prepared the report, to testify about
the preparation and content of that report. The complaint also alleges
that K & L participated in Mellon's failure to investigate Sharon's
financial condition, and witnesses from the Pittsburgh office of Arthur
Anderson & Co., which audited and rendered an opinion as to Sharon's
financial condition, may be called to testify on that issue. These claims
are also part of the complaint against Mellon. Therefore, these witnesses
may also be required to testify in that case. In addition, a former
Sharon employee who has knowledge of Sharon's financial affairs,
including its banking relationships, and who now resides in Pittsburgh,
may be a witness in both actions.
According to defendants, the remaining potential witnesses in
Schroder's suits against them, with the exceptions discussed below, are
scattered throughout the United States. Former officers of Sharon reside
in Florida and Illinois. The three other members of the group of banks
that made the loans to Sharon are located in New York, Illinois and
Schroder notes that the two members of the Corporate Banking Group who
monitored the loans to Sharon work in New York. One of them resides in
New Jersey, the other, in Connecticut. In addition, as discussed above,
one of the banks involved in the loans is headquartered in New York. Its
counsel is also located in New York. Schroder points out that employees
from the bank and the bank's counsel may be required to testify about
Mellon's activity in seeking repayment of its loans to Sharon.
Although it is difficult to predict at this point exactly who will
testify and for how long, it seems clear that the majority of the
witnesses are located in Pittsburgh, not New York. It it more convenient
for each party to litigate near its own offices. However, given the
nature of Schroder's claims against K & L, testimony from members of K &
L is likely to be more significant and more time-consuming than testimony
from Schroder in that suit. Similarly, it is not clear that any testimony
from Schroder will be required in the Mellon action. Further, New York
and Pittsburgh are equally convenient or inconvenient for those witnesses
who are not located in either. Thus, the inconvenience of a trial in New
York to K & L and Mellon would be substantially greater than the
inconvenience of a trial in Pittsburgh to Schroder.
II. The Interest of Justice — Other Considerations That Bear On
A. Location of Relevant Events
Mellon's activities as a creditor of Sharon were conducted primarily in
New York. Mellon's activities as indenture trustee were conducted
primarily in Pittsburgh. However, K & L's activities as counsel to Mellon
in both these roles, which are the focus of Schroder's case against K &
L, occurred primarily in Pittsburgh. Specifically, K & L's representation
of Mellon in its capacity as indenture trustee was undertaken and handled
at all times at the Pittsburgh office. All acts by K & L in connection
with this representation took place in Pittsburgh. The trust indentures,
which form the basis of both suits by Schroder in this court, provide for
the application of Pennsylvania law. The allegedly imprudent decisions by
Mellon in which K & L allegedly participated were made in Pittsburgh, and
K & L's advice was given there. In addition, the state court suits which
K & L allegedly mishandled were prosecuted by K & L in the local courts
from its office in Pittsburgh. The allegedly misleading documents issued
by Mellon with K & L's assistance were prepared and issued in
Pittsburgh. This factor favors transfer to Pennsylvania.
B. Location of Documents
The parties dispute the volume and importance of the documents that
will be necessary for trial. Most of the relevant documents have been
produced in discovery and copies of most of the documents are now located
in both New York and Pittsburgh. Therefore; this factor does not favor
trial in either forum.
C. Docket Conditions
The relative docket conditions of the transferor and proposed
transferee courts may properly be considered in determining a motion to
transfer. De Jesus v. National Railroad Passenger Corp., 725 F. Supp. 207,
209 (S.D.N.Y. 1989). According to an uncontested affidavit of Mark R.
Winston, counsel for K & L, Steven Suddaby, Statistician of the United
States Courts based in the Administrative Office in Washington, D.C.,
informed him that, as of March of 1989, the average docket per judge in
the Southern District of New York was 502.6 cases while the average
docket per judge in the Western District of Pennsylvania was 315.9
cases. While it is impossible to tell from these numbers how long it
would take for any particular case to come to trial in either district,
this factor favors transfer to the Western District of Pennsylvania.
III. Plaintiff's Choice of Forum
Generally, the plaintiff's choice of forum weighs heavily against
transfer. A. Olinick & Sons v. Dempster, 365 F.2d 439, 444 (2d Cir.
1966). Defendants argue that because plaintiff sues in a representative
capacity, its choice of forum carries less weight. In shareholder
derivative suits and other similar types of class actions, the accidental
residence of the named plaintiff is discounted in weighing the transfer
factors. Koster v. American Lumbermens Mutual Casualty Co.,
330 U.S. 518, 524-525, 67 S.Ct. 828, 831-32, 91 L.Ed. 1067(1946).
Here, under the terms of the trust indentures, the indenture trustee is the
only authorized plaintiff, a representative status somewhat different from
the one discussed in Koster. Yet, Schroder's role as plaintiff is not
quite the same as that of a wronged individual, the traditional plaintiff
whose choice of forum is given great weight. The connection of these cases
to New York is completely independent of Schroder. Schroder succeeded
Mellon as indenture trustee after all of the transactions at issue had been
completed and most of the significant events had occurred. It is entirely
fortuitous that some of the controversial events took place in the same
forum in which the successor trustee resides. No testimony is needed from
Schroder because none of Schroder's personnel witnessed the facts in
dispute. After Schroder's choice of forum is given due weight, the
balance tips in favor of transfer to the Western District of
For the foregoing reasons, defendants' motions are granted and IBJ
Schroder Bank & Trust Co. v. Kirkpatrick & Lockhart, 89 Civ. 4183 and IBJ
Schroder Bank & Trust Co. v. Mellon Bank, N.A., 87 Civ. 7396 are
transferred to the Western District of Pennsylvania.