Glickenhaus v. Lytton Financial Corporation

• Decision Date: 04 May 1962
• Docket Number: Civ. A. No. 2403.
• Citation: 205 F. Supp. 102
• Parties: Seth M. GLICKENHAUS et al., Plaintiffs, v. LYTTON FINANCIAL CORPORATION, Defendant.
• Court: U.S. District Court — District of Delaware

205 F. Supp. 102

Seth M. GLICKENHAUS et al., Plaintiffs, v. LYTTON FINANCIAL CORPORATION, Defendant.

Civ. A. No. 2403.

United States District Court D. Delaware.

May 4, 1962.

William E. Taylor, Jr., Wilmington, Del., and Charles Rembar, New York City, for plaintiffs.

S. Samuel Arsht and Richard H. Allen, Wilmington, Del. (Morris, Nichols, Arsht & Tunnell, Wilmington, Del.), for defendant.

LEAHY, Senior District Judge.

This is a suit for $2,940,000 as damages for breach of an agreement to issue and sell to plaintiffs certain debentures of defendant. Defendant moves to transfer the action to the federal court for the Southern District of California. Since the passage of the transfer statute, 28 U.S.C. § 1404(a), there have been a number of Delaware cases,¹, ^1a yet members of the bar still appear to confuse the burden of proof required of a movant under the old forum non conveniens law with the showing required under § 1404 (a).²

In the 19 cases brought under § 1404 (a) in the District of Delaware in which transfer was requested, it was granted in 10 cases and denied in 9. In those cases in which transfer was granted, the convenience of the parties was named as one of the reasons in the 8 cases of Makela, Cinema Amusements, Bounds, Kirk, Tivoli, Paragon-Revolute, General Felt and Nocona; convenience of witnesses was named in the 10 cases of Makela, Cinema Amusements, Bounds, Kirk, Tivoli, Paragon-Revolute, General Felt, Brownell, Nocona, and Higgins; interest of justice was considered separately as a reason for transfer in the 5 cases of Makela, Cinema Amusements, Bounds, Tivoli and Higgins. In 4 of the remaining 5 cases, Paragon-Revolute, General Felt, Brownell and Nocona, "justice" was not separately considered. In the remaining case, Kirk, "justice" was the key factor in Judge Rodney's determination; after finding that both parties and witnesses would be benefited by a transfer to Arkansas, he spent the bulk of the opinion refuting plaintiff's contention that he could not receive a fair trial in Arkansas.

In cases in which transfer was not granted, the Court often considered all three factors and rejected them as reasons for transfer. This type analysis determined the issue in the 4 cases of Brown, Webster-Chicago, Busch, and Miracle Stretch.

In the 3 cases of Berk, Host and United Industrial, transfer was not granted either because the case could not have been brought in the state to which transfer was requested or because all parties could not have been served there. In Miller, transfer was denied because plaintiff had no counsel and would be unable to obtain one in the state to which transfer was requested, and because he had no funds with which to hire one there. In United Air Lines Inc., transfer was denied because consolidation of the suits was impossible in the state to which transfer was requested and excessive delay would have resulted if transfer had been granted. In both these cases, "interest of justice" was the determining factor.

In toto, "interest of justice" was considered by the court, apart from such interest as results from the convenience of parties and witnesses, in the 8 cases of Makela, Cinema Amusements, Bounds, Kirk, Tivoli, Miller, Higgins, and United Air Lines. The "interest of justice" took on no separate character apart from the convenience of parties and witnesses in the 8 cases of Brown, Webster-Chicago, Paragon-Revolute, Busch, General Felt, Brownell, Miracle Stretch, and Nocona. In the 3 cases of Berk, Host and United Industrial, the court never reached the point where separate consideration was given to the justice factor as the cases all involved some denial of transfer on grounds of impossibility of service of process in the state to which transfer was requested, or the like.

1. The complaint charges defendant refused to perform its agreement to issue and sell to plaintiffs subordinated convertible debentures of defendant in the amount of $4,200,000, and that defendant utilized the agreement in bad faith — "defendant and Bart Lytton, its President and (together with his wife, Beth Lytton) principal stockholder" schemed to escape the agreement and proposed certain amendments calculated to make it unattractive to plaintiffs.³ The answer denies this, puts the terms of the agreement and the extent of plaintiffs' damages, if any, in issue and includes a counterclaim for declaratory judgment that the agreement has no present or future effect.

Defendant is a Delaware corporation, but it does no business here and has the barest nexus of contact with this State. Its business life is in California where it is qualified and has its headquarters.⁴ About August 16, 1961, a writing between Lytton Financial Corporation ("Issuer") and Glickenhaus and Co. ("Underwriter") was signed by Bart Lytton, President of defendant, and Seth M. Glickenhaus, one of the plaintiffs. After negotiations which defendant claims occurred wholly in California⁵ and which plaintiff claims occurred in good part in New York,⁶ the memorandum was signed and delivered in Los Angeles.⁷ It appears defendant's performance was on condition it obtain a permit to issue the debentures from the Commissioner of Corporations in California. Without this Court evaluating the quality of defendant's best efforts to obtain the permit, I find the California Commissioner of Corporations refused to issue one.⁸ The necessary witnesses to this phase of the transaction are residents of California and will appear, defendant claims, only pursuant to a subpoena issued by a court having jurisdiction over them;⁹ and the availability of the files and records of the California Division of Corporations will be subject to the same limitations.¹⁰ The subpoena power of the instant Court has no such reach. Moreover, defendant states it will be necessary to call at least six other witnesses at trial to explain the written memorandum, the negotiations, the signing, and the efforts of defendant to obtain the authority to issue the debentures. These witnesses are officers of the Bank of America, the Union Bank of Los Angeles, defendant's officers and general counsel — all of whom reside in Los Angeles.¹¹ Defendant's burden and expense to bring witnesses and records to Wilmington from Los Angeles for trial here are also argued.¹² Plaintiffs claim they intend to call at least 9 witnesses to various stages of the negotiations, all of whom reside in New York, and at least three expert witnesses, all of whom reside in the New York area.¹³ They maintain that as coast to coast fares are the same both ways and hotel rates are no lower in Los Angeles than Wilmington.¹⁴ no advantage can be bestowed on defendant merely because of the distance of California from Delaware.

2. Of the three statutory factors to be considered, the third is of controlling importance on the question of transfer¹⁵ because the other two factors involving convenience of parties and witnesses are subordinate. The operative facts and events involved here took place in California. This agreement was at least in part negotiated, and was definitely signed and delivered in Los Angeles. The authority for the debenture issue was to be obtained there. The availability of the witnesses and the formal records relating to the incident can only be assured by trial in the California Court. The "availability of compulsory process for attendance of unwilling witnesses" is an important factor on the question of transfer.¹⁶ And, clearly, California law and administrative action governing the rights and liabilities of the parties are matters over which the California District Judges have a greater competence and expertise than does the present Court.¹⁷

3. As for the convenience of witnesses, all of defendant's witnesses are located in California; all of plaintiffs', near New York. The convenience of witnesses is not weighed from the standpoint of greater number of witnesses involved, but from consideration of the qualitative value of the testimony of particular witnesses.¹⁸ Defendant, as previously discussed, plans to call not only its corporate officers, located in California, but California state officials. Plaintiff plans to call not only its officers, witnesses to the background of the agreement here in dispute, but New York "expert witnesses qualified to testify concerning such matters" who are located in New York, "the nation's center for the security business."¹⁹ Assuming the balance of inconvenience to corporate officers and other observers of the negotiation stage of this agreement of both parties to be equal, the scales still tip toward defendant when the inconveniences of the California officials and the New York experts are considered. "It is well settled that the convenience of expert witnesses will be treated as of little or no significance in determining whether an action should be transferred under the statute." Patterson v. Louisville & Nashville RR Co., S.D., Ind., 182 F.Supp. 95, 98.²⁰ The convenience (and availability) of state officials is entitled to greater weight. Plaintiffs claim that such testimony can be introduced "either by certified copies * * * or by written interrogatories * * * or by oral depositions."²¹ But all testimony could be so introduced. Expert testimony, for example, of New York dealers in securities could be as well introduced by depositions in California as can depositions of California officials be introduced here.²² On balance, the convenience of witnesses favors defendant.

4. As for the convenience of the parties, the matter is in equipoise, for it is obvious that Delaware is as inconvenient for defendant as California is for plaintiffs.

5. That Delaware is plaintiffs' choice of forum and defendant's state of incorporation are legal facts which, standing alone, do not control the theatre of litigation. For these two concepts belong to a darker age now that § 1404(a) exists and is augmented by § 1332, giving a duality of citizenship to every...