Goodman v. Fleischmann, Civ. A. No. 73-1097.

• Decision Date: 24 September 1973
• Docket Number: Civ. A. No. 73-1097.
• Citation: 364 F. Supp. 1172
• Parties: Nathan M. GOODMAN, as Trustee for Marjorie Ruth Meyer Goodman v. Peter F. FLEISCHMANN, Individually and as Executor of the Estate of Raoul Fleischmann, et al.
• Court: U.S. District Court — Eastern District of Pennsylvania

364 F. Supp. 1172

Nathan M. GOODMAN, as Trustee for Marjorie Ruth Meyer Goodman v. Peter F. FLEISCHMANN, Individually and as Executor of the Estate of Raoul Fleischmann, et al.

Civ. A. No. 73-1097.

United States District Court, E. D. Pennsylvania.

September 24, 1973.

Theodore R. Mann, Philadelphia, Pa., for plaintiff.

D. Robert Owen, New York City, Thomas M. Kittredge, Philadelphia, Pa., for defendants.

OPINION AND ORDER

FOGEL, District Judge.

Plaintiff, a holder of the common stock of The New Yorker Magazine, Inc., instituted this derivative action alleging, inter alia, (1) a scheme by the defendants to defraud the Shareholders of The New Yorker Magazine, Inc. in order to benefit the heirs of the former chairman of the corporation; (2) the preparation and dissemination of a materially false and misleading proxy statement regarding investment policy; (3) a tender offer for 89,000 shares of the corporation in furtherance of the scheme to defraud the shareholders; and (4) waste, mismanagement, unjust enrichment and self-dealing by corporate fiduciaries.

All causes of action are founded upon either Sections 14(a) and (e) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) and (e); Rule 14(a)(9) promulgated thereunder by the Securities Exchange Commission; the common law of New York State, or all three sources. Jurisdiction of this court over the subject matter and parties is asserted under Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, 28 U.S.C. § 1337, 28 U.S.C. § 1332 and the doctrine of pendent jurisdiction.

Defendants move for dismissal of the complaint pursuant to Rule 12(b) (2), Federal Rules of Civil Procedure, on the ground that the court lacks personal jurisdiction over the defendants, or, in the alternative, for transfer of this matter from the Eastern District of Pennsylvania to the Southern District of New York pursuant to 28 U.S.C. § 1404(a). Because our analysis of the facts agreed upon by all parties relating to the issue of transfer of this action has led us to conclude that the action should be transferred in accordance with controlling legal principles, it is unnecessary to pass upon that portion of the motion calling for dismissal because of lack of personal jurisdiction over the parties.

Notwithstanding the existence of broad venue provisions which have been enacted to "assure that the suit could be brought where the cause of action arose", United States v. National City Lines, 334 U.S. 573, 583, 68 S.Ct. 1169, 1175, 92 L.Ed. 1584 (1948), Congress has vested in the federal courts extensive discretionary powers to transfer cases under appropriate circumstances pursuant to the provisions of 28 U.S.C. § 1404(a).¹ This grant of discretion requires an "individualized, case-by-case consideration of convenience and fairness." Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 812, 11 L.Ed.2d 945 (1964).

Consideration of the following undisputed facts has led us to conclude that the instant case should be transferred in accordance with the guidelines that have evolved in the pertinent case law.

(1) Corporate defendant's headquarters are located in New York City and defendant corporation maintains no place of business in Pennsylvania.

(2) Only 5.8% of the shareholders of record have Pennsylvania addresses, and they hold approximately 2.4% of the shares of capital stock.

(3) Subscription sales in Pennsylvania amount to approximately 4.86% of total subscription sales of the magazine; newsstand circulation in Pennsylvania approximates 4% of total newsstand circulation; revenue emanating from Pennsylvania advertisers amounts to approximately 1.86% of net advertising revenues.

(4) All of the defendant directors and key officers of the corporation reside or work in the New York City metropolitan area.

(5) Nearly all the individual defendants are actively engaged in the daily operations of The New Yorker Magazine, Inc.

(6) All non-party witnesses for the defendants work in New York City including the attorneys and executors for the Estate of Raoul Fleischmann and the team of analysts from Morgan, Stanley and Company.

(7) All corporate documents are in New York City.

(8) All records and documents prepared by Morgan, Stanley and Company relating to their analysis of the tender offer in question are in New York City.

(9) Defendants in this action are and will be represented by three New York law firms currently representing them in a shareholder's derivative suit based upon the same facts in the Supreme Court of the State and County of New York.

(10) Defendants anticipate calling approximately fifteen witnesses from the New York City area. Plaintiff anticipates utilizing four expert witnesses. His counsel tentatively has indicated that these experts will come from the Philadelphia area although he has not yet selected them.

(11) Plaintiff's counsel candidly admitted at oral argument first, that all of the discovery, including deposition of defendants and their witnesses, will occur in New York City irrespective of the place of trial of the issue, and second, that his four expert witnesses, even if located in Philadelphia, could testify in New York City with minimal inconvenience. Defendants have agreed that plaintiff need not be present at the trial and have further agreed to depose plaintiff and his witnesses in Philadelphia.

What, then, are the controlling principles which have persuaded us that these facts dictate the transfer of the action?

A motion to transfer pursuant to Section 1404(a) requires the court to make two determinations. FIRST: the transferee forum must be one in which the plaintiff had the right to bring the action at the time of commencement in the original forum. Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960); Shutte v. Armco Steel Corp., 431 F.2d 22 (3rd Cir. 1970). With respect to the first factor, jurisdiction and venue are based upon Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa. All defendants are amenable to suit in Federal Court in the Southern District of New York, and this action could have been brought there under the venue provisions of Section 27 of the Securities Exchange Act. The New Yorker Magazine, Inc. has its corporate headquarters in New York City; six of the individual defendants either live or have their places of business in the Southern District of New York; most of the allegedly illegal acts occurred in New York City and the proxy in question was prepared there as well.

SECOND: competing public and private interests are to be weighed to determine whether a transfer will further the interests of justice and the convenience of the parties. Critical elements of those interests were delineated by the Supreme Court of the United States in Gulf Oil Corp. v. Gilbert in consideration of the doctrine of forum non conveniens, 330 U.S. 501, 508-509, 67 S.Ct. 839, 91 L.Ed. 1055 (1947).

The principles enunciated in that ruling have served as the polestar guiding the disposition of motions to transfer pursuant to 28 U.S.C. § 1404(a). See 1 Moore's Federal Practice 2nd ed. ¶ 0.145 5.

Relevant to the case before us are six of the key factors referred to by the Court in Gulf Oil, supra: (1) plaintiff's choice of forum; (2) the relative ease of access to sources of proof; (3) the cost of obtaining attendance of willing witnesses; (4) all other practical problems that make trial of a case easy, expeditious and inexpensive; (5) the responsibilities and difficulties of court administration; and (6...