Glicken v. Bradford

• Decision Date: 17 April 1962
• Citation: 204 F. Supp. 300
• Parties: Milton GLICKEN and Ida Glicken, Plaintiffs, v. Harold K. BRADFORD, Charles T. Ireland, Jr., W. Grady Clark, Allan P. Kirby, Jr., John C. Cornelius, Allan P. Kirby, Clarence R. Drake, Clarence W. Meadows, William E. Eppler, John N. Peyton, Randall F. Fullmer, Robert W. Purcell, Eugene B. Hanson, Robert C. Reed, Clint W. Murchison, Jr., and John D. Murchison, individually and as partners doing business under the firm name and style of Murchison Brothers, Alleghany Corporation, Investors Diversified Services, Inc., and Investors Stock Fund, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

204 F. Supp. 300

Milton GLICKEN and Ida Glicken, Plaintiffs, v. Harold K. BRADFORD, Charles T. Ireland, Jr., W. Grady Clark, Allan P. Kirby, Jr., John C. Cornelius, Allan P. Kirby, Clarence R. Drake, Clarence W. Meadows, William E. Eppler, John N. Peyton, Randall F. Fullmer, Robert W. Purcell, Eugene B. Hanson, Robert C. Reed, Clint W. Murchison, Jr., and John D. Murchison, individually and as partners doing business under the firm name and style of Murchison Brothers, Alleghany Corporation, Investors Diversified Services, Inc., and Investors Stock Fund, Inc., Defendants.

United States District Court S. D. New York.

April 17, 1962.

Pomerantz, Levy & Haudek, New York City, for plaintiffs; Abraham L. Pomerantz, William E. Haudek, Morton L. Price, and Rosenfeld & Silverman, New York City, of counsel.

Cleary, Gottlieb, Steen & Hamilton, New York City, for defendant William E. Eppler.

White & Case, New York City, for defendant Robert W. Purcell.

Watters & Donovan, New York City, for defendant Alleghany Corp.; Edward V. Gross, New York City, of counsel.

Debevoise, Plimpton & McLean, New York City, for defendant Investors Diversified Services, Inc.; Samuel E. Gates, Samuel R. Feller, Leo H. Hirsch, Jr., and Robert J. Geniesse, New York City, of counsel.

Davis, Polk, Wardwell, Sunderland & Kiendl, New York City, for defendant Investors Stock Fund, Inc., Taggart Whipple, Philip C. Potter, Jr., and Roland W. Donnem, New York City, of counsel.

METZNER, District Judge.

Defendants Alleghany Corporation, Investors Diversified Services, Inc. and Investors Stock Fund, Inc. seek relief on this motion based on various grounds. First, that the action be transferred to the District Court of Minnesota for the convenience of witnesses and the parties (28 U.S.C. § 1404(a)), or, in the alternative, that the action be dismissed under the doctrine of forum non conveniens. Second, that service on Investors Stock Fund, Inc. be quashed. Third, that if such service is quashed the action be dismissed against Alleghany Corporation and Investors Diversified Services, Inc. for failure to join an indispensable party (Fed.R.Civ.P. 12(b) (7)), 28 U.S.C.

This is a stockholders' derivative suit and jurisdiction is based on diversity of citizenship. The plaintiffs, residents of California, are stockholders of Investors Stock Fund, Inc. (hereinafter referred to as "Stock Fund"). Stock Fund is a mutual fund company registered under the Investment Company Act of 1940, 15 U.S.C.A. § 80a-1 et seq. It is a Nevada corporation with its principal place of business in Minneapolis.

The complaint seeks recovery of the allegedly excessive compensation paid by Stock Fund to Investors Diversified Services, Inc. (hereinafter referred to as "IDS"). IDS is a Minnesota corporation licensed to do business in New York, but conducts its principal activities in Minnesota. It is engaged in furnishing investment advice on a fee basis to its clients, one of which is Stock Fund. There is a second contract whereby Stock Fund pays IDS a commission for distributing its shares.

It is alleged that Alleghany Corporation (hereinafter referred to as "Alleghany") controlled IDS from 1949 until April 1955 and from April 1960 to date. Alleghany is a Maryland corporation having its principal place of business in New York. The individual defendants are alleged to be, or to have been, directors of Stock Fund. Two of these, Allan P. Kirby and Allan P. Kirby, Jr., reside in New Jersey and are alleged to have controlled Alleghany. Two of the other individual defendants, Clint W. Murchison, Jr. and John D. Murchison, are alleged to have controlled IDS for the period 1955 to 1960 and are residents of Texas. Of the remaining individual defendants, six are residents of Minnesota, one is a resident of New Jersey, two are residents of New York, one is a resident of Ohio, and one is a resident of Illinois.

IDS, Stock Fund, Alleghany, William E. Eppler (a resident of New Jersey), and Robert W. Purcell (a resident of New York) are the only defendants who have been served in the action to date. Stock Fund has been served with process in Minnesota pursuant to 28 U.S.C. § 1695, which permits service in any district where the corporation, on behalf of which the action is brought, is doing business. Neither Eppler, Purcell nor Alleghany is subject to process in Minnesota. However, the consents of Eppler, Purcell and Alleghany to be sued in Minnesota have been submitted to the court on this motion.

The defendants have produced voluminous affidavits to substantiate their position that the transfer is warranted because of the convenience of witnesses and the parties. They also argue that a number of named defendants who have not been served in this action could be served in Minnesota, and therefore a greater number of parties would be present if the action had been instituted in that state. This might be true as to some of the directors of Stock Fund, but it is not necessarily true that the Kirbys and the Murchisons who allegedly control, or had control of, Alleghany and IDS could be served in Minnesota.

The first question to be resolved is whether the court has the power to transfer the action to Minnesota. Section 1404(a) reads as follows:

"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."

In Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960), the Court stated, in clear and unequivocal terms, that the rule to be applied is whether the transferee district is one in which the action "might have been brought" by the plaintiff. The Court said, quoting with approval the language used in Blaski v. Hoffman, 260 F.2d 317, 321 (7th Cir. 1958) and Behimer v. Sullivan, 261 F.2d 467, 469 (7th Cir. 1958):

"`If when a suit is commenced, plaintiff has a right to sue in that district, independently of the wishes of defendant, it is a district "where the action might have been brought." If he does not have that right, independently of the wishes of defendant, it is not a district "where it might have been brought," and it is immaterial that the defendant subsequently makes himself subject, by consent, waiver of venue and personal jurisdiction defenses or otherwise, to the jurisdiction of some other forum.'" 363 U.S. at 344, 80 S.Ct. at 1090.

We have here multiparty litigation, and it appears that plaintiffs could not obtain jurisdiction and proper venue in one district as to all named defendants. Consequently, they chose that forum where they could serve process on those defendants whom they consider most advantageous and important to the proof and recovery on the asserted claims. The motion to transfer is made against this background, and the question is whether, at the time the suit was commenced, the plaintiffs could have brought the suit in Minnesota against the defendants served here in New York. Cf. Ackert v. Ausman, 198 F.Supp. 538, 543 (S.D.N.Y. 1961); Schoen v. Mountain Producers Corp., 170 F.2d 707, 710 (3d Cir. 1948). The answer is no because jurisdiction over Alleghany, Purcell and Eppler did not exist independently of the wishes of those defendants.

Movants urge that Hoffman v. Blaski, supra, has been held inapplicable when suit could have been instituted in the transferee district against one of several defendants and the remaining defendants consent to the transfer. They rely on Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960), decided by the Supreme Court two weeks after Hoffman v. Blaski. The two cases are clearly distinguishable, and the Court pointed out in Continental Grain that to deny the transfer there would violate its decision in Blaski.¹ In Continental Grain the Court disregarded the fiction that a vessel is a separate person apart from its owner, and although both were named as defendants the Court granted transfer because there was only one party defendant in a single civil action. The Court said:

"We are asked here, however, to transplant this ancient salt-water admiralty fiction into the dry-land context of forum non conveniens, where its usefulness and possibilities for good are questionable at best. In fact, the fiction appears to have no relevance whatever in a District Court's determination of where a case can most conveniently be tried. A fiction born to provide convenient forums should not be transferred into a weapon to defeat that very purpose." 364 U.S. at 23, 80 S.Ct. at 1473.

The defendants seek to avoid the effect of the Blaski rule by attempting to distinguish the facts of that case from those present here. In Blaski it was stipulated that the action was properly brought in the transferor district, and neither jurisdiction over the defendants nor proper venue existed in the transferee district. Defendants argue that while this action was properly brought in the transferor district (New York) statutory venue does exist in the transferee district (Minnesota), although they admit that defendants served in the transferor district were not within the reach of process in the transferee district at the time the action was commenced. Defendants contend that if either proper venue or jurisdiction over the defendants exists in the transferee district the Blaski rule is inapplicable. I fail to see how proper venue as to the defendants served existed in Minnesota at the time the suit was commenced, but assuming that it did I disagree with the contention that Blaski is inapplicable. I am of the opinion that the reach of Blaski clearly applies if either venue or jurisdiction over the person of the defendant is lacking at the time of the institution of the lawsuit.

In Ackert v. Ausman, supra, a resident of Missouri brought a stockholders' derivative suit on behalf of Investors Mutual, Inc. against IDS, Investors, Mutual, Inc. and thirteen individual defendants, including ...