O'Hopp v. Contifinancial Corp., 99-CV-6794 ILG RML.

• Decision Date: 13 March 2000
• Docket Number: No. 99-CV-8074 ILG RML.,No. 99-CV-8065 ILG RML.,No. 99-CV-8209 ILG RML.,No. 99-CV-6794 ILG RML.,99-CV-6794 ILG RML.,99-CV-8065 ILG RML.,99-CV-8074 ILG RML.,99-CV-8209 ILG RML.
• Parties: Dea O'HOPP, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. CONTIFINANCIAL CORPORATION, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants. Christopher G. Locallo, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants. Scott Brenner, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants. Yisroel Weingarten,, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants.
• Court: U.S. District Court — Eastern District of New York

88 F.Supp.2d 31

Dea O'HOPP, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. CONTIFINANCIAL CORPORATION, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants.

Christopher G. Locallo, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants.

Scott Brenner, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants.

Yisroel Weingarten,, Individually And On Behalf Of All Similarly Situated, Plaintiff, v. ContiFinancial Corporation, Continental Grain Company, James E. Moore, and Daniel J. Willett, Defendants.

No. 99-CV-6794 ILG RML.

No. 99-CV-8065 ILG RML.

No. 99-CV-8074 ILG RML.

No. 99-CV-8209 ILG RML.

United States District Court, E.D. New York.

March 13, 2000.

Aaron Lee Brody, Stull, Stull & Brody, New York City, for Christopher G. Locallo.

Steven G. Shulman, Milberg, Weiss, Bershad, Hynes & lerach LLP, New York City, for Dea O'Hopp.

Shane T. Rowley, Wolf & Haldenstein, New York City, for Scott Brenner.

MEMORANDUM AND ORDER

GLASSER, District Judge.

Defendants in this case are ContiFinancial Corporation ("ContiFinancial"), its majority shareholder, Continental Grain Company, and two former officers of ContiFinancial, James E. Moore and Daniel J. Willett. Pursuant to 28 U.S.C. § 1404(a), defendants seek to transfer the above-captioned cases to the United States District Court for the Southern District of New York for consolidation with the related actions that are already pending there.

Since October 1999, seven putative class actions have been filed against the defendants —four in this Court (the "Eastern District Actions"), and three in the Southern District of New York (the "Southern District Actions"). In all of those cases, plaintiffs seek to represent identical or overlapping classes consisting of all purchasers of the common stock or options of defendant ContiFinancial between January 29, 1998 and July 21, 1999. All of those actions allege, often in verbatim language, violations of Sections 10(b) and 20 of the Securities Exchange Act of 1934, based on the same alleged misstatements and omissions in ContiFinancial's press releases, SEC filings, and statements made to analysts during the purported class period.

All parties agree that the seven actions should be consolidated in a single district. The question before the Court is which of the two districts where these actions have been filed is the more appropriate venue under the circumstances. For the reasons set forth below, this Court finds that it is the Southern District of New York, and grants defendants' motion to transfer.

BACKGROUND

On or about October 21, 1999, a purported class action entitled Dea O'Hopp, Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corporation, et al., No. 99-CV-6794 ("O'Hopp"), was filed against defendants in this Court. Eight days later, on or about October 29, 1999, a virtually identical complaint was filed against the same defendants in the United States District Court for the Southern District of New York in an action entitled I & M Associates, Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corporation, et al., No. 99 Civ. 10941 ("I & M").

Both complaints name the same four defendants and are brought on behalf of identical putative classes, consisting of all purchasers of ContiFinancial's common stock between January 29, 1998 and July 21, 1999, who claim to have been damaged as a result of the "dissemination of materially false and misleading statements concerning, among other things, the Company's deteriorating financial condition, and the effects these adverse undisclosed conditions would ultimately have on the Company's operations, liquidity, and stock price." O'Hopp Complaint, ¶ 2; I & M Compl. ¶ 2. This, plaintiffs allege, gives rise to claims under Sections 10(b) and 20(a) of the Act (15 U.S.C. §§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder.

On November 18, 1999, a third class action, entitled Elfriede Glancy, individually and on behalf of all others similarly situated v. ContiFinancial Corp., et al., 99 Civ. 11436 ("Glancy"), was filed in the Southern District. The Glancy complaint is strikingly similar to the I & M and O'Hopp complaints, alleging the same claims on behalf of the same class against the same defendants.

On December 6, 1999, counsel for the parties in I & M, Glancy and O'Hopp entered into stipulations in each of those cases in which they agreed, among other things, that (a) the claims asserted in all of the actions were substantially identical, (b) the actions should be consolidated in a single district and the proper venue determined, either by stipulation or upon motion, and (c) lead plaintiff and plaintiffs' lead counsel should be appointed pursuant to the Private Securities Litigation Reform Act ("PSLRA"), before any further proceedings took place, following which (d) lead plaintiffs' counsel would have 60 days within which to serve and file a consolidated amended class action complaint, to which defendants would respond within 60 days.

On or about December 9, 1999, two more class actions were filed in this Court: Christopher G. Locallo, Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corp., et al., 99-CV-8065 and Scott Brenner, Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corp., et al., 99-CV-8074. Also on December 9, 1999, the third Southern District putative class action, entitled William J. Black, et al., Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corp., et al., 99 Civ.11941 was filed. These complaints contain numerous paragraphs which are identical to each other, and to the earlier-filed complaints. The fourth Eastern District action, Yisroel Weingarten, Individually And On Behalf Of All Others Similarly Situated v. ContiFinancial Corp., et al., 99-CV-8209, was filed on December 15, 1999 and assigned to this Court as a case related to O'Hopp.

On December 21, 1999, plaintiffs in the Southern District Actions voluntarily dismissed their complaints pursuant to Fed. R.Civ.P. 41(a)(1). Thereafter, all seven plaintiffs filed in this Court a joint Lead Plaintiff motion under § 21D(a)(3)(B) of the PSLRA. Defendants moved in the Southern District on January 18, 2000 to have the three voluntary Rule 41(a)(1)(i) dismissals vacated, arguing that they were improper without court approval. See Fed.R.Civ.P. 23(e). That motion is now before the Southern District.

DISCUSSION

I. General Principles under § 1404(a)

The change of venue statute, 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.

28 U.S.C. § 1404(a). It is well established that "motions for transfer lie within the broad discretion of the district court and are determined upon notions of convenience and fairness on a case-by-case basis." In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir.1992) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)). The burden of demonstrating that a case should be transferred is on the moving party, see 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), and a "clear-cut showing" must be made that transfer is in the best interest of the litigation. Connors v. Lexington Ins. Co., 666 F.Supp. 434, 454 (E.D.N.Y.1987); Schieffelin & Co. v. Jack Co. of Boca, Inc., 725 F.Supp. 1314, 1321 (S.D.N.Y.1989).

Among the factors the court should consider in making this decision are: (1) the weight accorded the plaintiff's choice of forum; (2) the place where the operative facts took place; (3) the convenience of the parties; (4) the convenience of the witnesses; (5) the availability of process to compel unwilling witnesses; (6) the location of relevant documents and the relative case of sources of proof; and (7) trial efficiency and the interests of justice. Balaban v. Pettigrew Auction Co., Inc., 1997 WL 470373 *2 (E.D.N.Y.1997) (citing Bernal v. DuPont De Nemours E.I. and Corp., 1993 WL 378790 (S.D.N.Y.1993); Designs by Glory, Ltd. v. Manhattan Creative Jewelers, Inc., 657 F.Supp. 1257, 1258-59 (S.D.N.Y.1987)); see also Orb Factory, Ltd. v. Design Science Toys, Ltd., 6 F.Supp.2d 203 (S.D.N.Y.1998) (citing Wilshire Credit Corp. v. Barrett Capital Management Corp., 976 F.Supp. 174, 181 (W.D.N.Y.1997)).

II. Application of § 1404(a) to the Present Case

1. Plaintiff's Forum Choice

When considering a § 1404(a) motion, the general rule is that "plaintiff's forum choice should not be disturbed unless the balance of the factors tips heavily in favor of a transfer." S-Fer Int'l, Inc. v. Paladion Partners, Ltd., 906 F.Supp. 211, 213 (S.D.N.Y.1995); see also Seagoing Uniform Corp. v. Texaco, Inc., 705 F.Supp. 918, 936 (S.D.N.Y.1989) (citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947)).

When related lawsuits are filed in different judicial districts, courts generally follow what is known as the "first-filed" rule, which favors the forum where the first action was brought. "[A]s a principle of sound judicial administration, the first suit should have priority, `absent the showing of balance of convenience in favor of the second action.'" Capitol Records, Inc v. Optical Recording Corp., 810 F.Supp. 1350, 1353 (S.D.N.Y.1992) (quoting Remington Prods. Corp. v. American Aerovap, Inc., 192 F.2d 872, 873 (2d Cir.1951)). The first-filed doctrine "does not supersede the inquiry into the balance of convenience required under § 1404(a)." River...