The opinion of the court was delivered by: MILTON POLLACK
Defendants Josephthal Lyon & Ross Incorporated ("Josephthal") and Alan J. Jacobs ("Jacobs") have moved this Court for an order transferring this action to the United States District Court for the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). Defendants Hammer, Mandelblatt, Solomon Corporation, Basics Manufacturing Group, Inc., and Hammer, Mandelblatt and Company have filed an affidavit supporting the motion. For the reasons discussed below, the motion to transfer will be granted.
This action arose out of a June 1992 private offering of 10% Automatically Convertible Subordinated notes by Sheffield Industries, Inc. ("Sheffield"), a Florida corporation that had been engaged in clothing manufacturing and marketing. Plaintiff River Road International, a Delaware limited partnership with offices in Connecticut, purchased $ 2.1 million of the notes. Defendants Josephthal, a New York investment bank, and Jacobs, an Associate Director at Josephthal's Boca Raton, Florida office, participated in the preparation of a Term Sheet by which the offering was promoted. Plaintiff Kingdon Partners, a New York limited partnership with offices in Manhattan, purchased $ 600,000 of the notes. Plaintiff M. Kingdon Offshore, a Netherlands Antilles corporation with a New York investment manager, purchased $ 400,000 of the notes. Sheffield then filed for bankruptcy under Chapter 11 of the Bankruptcy Code on January 20, 1993 in the Southern District of Florida; the Sheffield bankruptcy was subsequently converted to a proceeding under Chapter 7, and Sheffield remains in bankruptcy proceedings today. On April 15, 1993, the bankruptcy court appointed William A Brandt, Jr., a Florida resident, as Examiner to investigate the pre-petition activities of Sheffield; the Unsecured Creditors Committee also retained the Miami office of the accounting firm Price Waterhouse to investigate Sheffield.
On May 28, 1993, the plaintiffs filed this action ("River Road") in the Southern District of New York, by which they seek to recover damages and to rescind their purchase of the notes. The reports that resulted from the Examiner's and Price Waterhouse's investigations supplied much of the information on which the plaintiffs based the allegations in the instant action. The complaint alleged that the Term Sheet, as well as a January 1992 Prospectus prepared for one of Sheffield's stock offerings failed to disclose or misrepresented material facts about Sheffield's financial situation and about the intended uses of the offering proceeds. The plaintiffs brought River Road pursuant to §§ 10(b) and 20 of the Exchange Act and Rule 10b-5 promulgated thereunder, §§ 12(2) and 15 of the Securities Act, and the common law. Other than Josephthal, the corporate defendants named in River Road are all Florida corporations with offices in Florida, and all of the individual defendants apparently reside in Florida.
In June of 1993, purchasers of Sheffield stock and notes -- not including the River Road plaintiffs -- commenced three actions in the Southern District of Florida ("the Florida Actions"). The Florida Actions were subsequently consolidated into a class action entitled Ganz Capital Management, Inc. et al. v. Mitchell A. Hammer; et al., 93-1068-Civ. ("Ganz"). Ganz seeks damages on behalf of two proposed classes -- the Stock Class and the Note Class -- pursuant to §§ 11 and 12(2) of the Securities Act,
§ 10(b) and Rule 10b-5 of the Exchange Act, and the common law duty of care. The Note class consists of all persons who purchased Convertible Subordinated Sheffield Notes in the June 1992 Note Offering. The complaint names as defendants Hammer, Mandelblatt, Hammer, Mandelblatt & Co., Josephthal, Bernstein, Carl Solomon, Edward Solomon, Hochberg, Krimsky, and two parties not named as defendants in River Road: Reich & Co., Inc., an Alabama corporation headquartered in New Jersey that acted as underwriter that participated in Sheffield's January 1992 stock offering; and Cohn, Berke, Bernstein, Brodie & Kondell, P.A., a Florida law firm that advised Sheffield in connection with the note offering. In its answer to the Ganz complaint, Josephthal named the Florida accounting firm Morrison, Brown, Argiz & Co., which audited allegedly fraudulent Sheffield financial statements, as a third-party defendant.
The progress of both actions has been complicated by the entry of a stay order by the Florida bankruptcy court on September 14, 1993. This stay order enjoins litigation against former officers and directors of Sheffield to preserve these Sheffield's directors' and officers' liability insurance policy for satisfaction of claims against these officers and directors that Sheffield has asserted in Florida state court. The stay order specifically states that it does not bar litigation against Josephthal or Jacobs. The stay order remains in effect. Notwithstanding the stay order, discovery and a court-ordered settlement conference in which the plaintiffs participated has occurred in Ganz, and the Southern District of Florida has ordered the parties to submit a scheduling order under which discovery will be complete during the summer of 1995.
Section 1404(a) provides that
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 plaintiffs do not dispute that River Road could have been brought in the Southern District of Florida pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa and that therefore transfer is possible. Instead, the dispute centers on whether transfer would be convenient or in the interests of justice.
"The determination whether to grant a change of venue requires a balancing of conveniences, which is left to the sound discretion of the district court." Film line (Cross-Country) Productions, Inc. v. United Artists Corp., 865 F.2d 513, 520 (2nd Cir. 1989). Factors that the Court should consider include:
(1) the convenience to 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 interests of justice, a term broad enough to cover the particular circumstances of each case, which in sum indicate that the administration of justice will be advanced by a transfer.
Berg v. First American Bankshares, Inc., 576 F. Supp. 1239, 1241 (S.D.N.Y. 1983) (Pollack, J.) (quoting Schneider v. Sears, 265 F. Supp. 257, 263 (S.D.N.Y. 1967)). The movants bear the burden of establishing that transfer is warranted. See Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2nd Cir. 1978) ("the burden is on the defendant, when it is the moving party, to establish that there ...