In re Caesars Palace Securities Litigation

Citation360 F. Supp. 366
Decision Date23 May 1973
Docket NumberNo. 110.,110.
PartiesIn re CAESARS PALACE SECURITIES LITIGATION.
CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York

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Sidney Dickstein, Anthony Troy, Dickstein, Shapiro & Galligan, Washington, D. C., for plaintiff Brooks.

David B. S. Cohen, Abraham Glickman, New York City, for plaintiff Fenichal.

David Berger, Leonard Barrack, Gerald Jay Rodos, Philadelphia, Pa., for plaintiff Cope.

Robert Kornreich, Wolf, Popper, Ross, Wolf & Jones, New York City, for plaintiffs Kraut and Gregorio.

Judah Labovitz, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., Stroock, Stroock & Lavan, New York City, for plaintiff Silver.

Irving Bizar, Demov, Morris, Levin & Shein, Ira J. Sands, New York City, for plaintiff Margoles.

Alan Pepper, Kaye, Scholer, Fierman, Hays & Handler, New York City, for plaintiff Channing Securities, Inc.

Kevin Duffy, William Kuehnle, Securities & Exchange Commission, Washington, D. C., Terry N. Christensen, Wyman, Bautzer, Rothman & Kuchel, Beverly Hills, Cal., Jacob Heller, Weiss, Bronstein, Rosenthal & Heller, New York City, Bruce Kauffman, Carl Hanzelik, Dilworth, Paxson, Kalish, Levy & Coleman, Philadelphia, Pa., for defendant Desert Palace, Inc., Desert Palace, and Desert Palace individual defendants.

Guy Quinlan, David W. Bernstein, Royall, Koegal & Wells, New York City, for defendant Caesars World, Inc., and Caesars World individual defendants.

Walter Beebe, Olwine, Connelly, Chase, O'Donnell & Weyher, New York City, for defendant Harris, Kerr.

Jack David, Willkie, Farr & Gallagher, New York City, for defendants Laventhol, Krekstein, Horwath and Horwath.

MEMORANDUM OPINION

WEINER, District Judge.

The above captioned case is before this Court pursuant to 28 U.S.C. ? 1407 on the Order of the Judicial Panel on Multidistrict Litigation filed on December 12, 1972 for the purposes of coordinated or consolidated pretrial proceedings.

The eleven individual cases1 which constitute this litigation primarily involve alleged violations of Sections 10(b), 13, 14(a), and 18 of the Securities Exchange Act of 1934, 15 U.S.C. ?? 78j(b), 78m, 78n(a), and 78r, Rule 10b-5 of the Securities and Exchange Commission, and Sections 11, 12, and 17 of the Securities Act of 1933, 15 U.S.C. ?? 77k, 77l, and 77q, coupled with various allegations of violations of other sections of the Securities acts and common law.

It is not necessary, nor would it be helpful, to embark upon a detailed examination of the quite complex factual bases of each suit. It is sufficient to note, at this time, that eight of the cases are predicated upon a complaint brought by stockholders of Lum's Inc. (now known as Caesar's World) allegedly for damages suffered by them which resulted from the sale, on September 30, 1969, of Caesars Palace to Lum's Inc. Seven of these actions contain class allegations.2 Two other suits, Kraut and Gregorio, are derivative actions filed on behalf of Lum's Inc.

Essentially, the plaintiffs' complaints center around allegations that the January 12, 1971 registration statement, the September 30, 1969 registration statement, and the Lum's 1969 Annual Report were materially false and misleading and that the defendants disseminated false and misleading information concerning the financial status of Caesars Palace which prevented investors from obtaining adequate information in these matters in violation of ? 10(b) and Rule 10b-5. It is further generally alleged that false and misleading statements were made by the defendants in August of 1969 in connection with the solicitation of proxies from stockholders of Lum's Inc. in order to approve the Caesars Palace acquisition in violation of ? 14(a) and Rule 14a-9 of the 1934 Act. In addition, the derivative suits allege breaches of fiduciary duty by certain directors and improper performance by defendant-accountants of duties imposed upon them by the Securities Acts.

MOTIONS TO TRANSFER

Various defendants, including Desert Palace, Desert Palace, Inc., and numerous individual defendants, have requested this Court to transfer six of the lawsuits involved in this litigation, Brooks, Fenichal, Kraut, Gregorio, Margoles v. Powell, and Silver to the District of Nevada pursuant to 28 U.S.C. ? 1404(a) which 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."

In support of their position the movants point out that, as those acts and transactions which comprise the basis of the alleged ? 10(b) and Rule 10b-5 violations occurred in Las Vegas, Nevada, suit could have been brought against all defendants in that district; that the material records are located in Nevada; that a great number of witnesses and defendants are located in Nevada and that the expense and inconvenience of traveling to New York for depositions and trial would be excessive; that compulsory process for the attendance of witnesses would be available to a far greater degree in Nevada; and that 28 U.S.C. ? 1404(a) empowers a district court to authorize transfer if it is warranted to promote the interests of justice. Further, defendants point out that the possibility of an earlier trial in Nevada is a consideration which weighs in favor of transfer and that, given the fact that the bulk of the transactions which are involved in these matters occurred in Nevada, the plaintiff's choice of forum is entitled to de minimus weight.3

Plaintiffs, in opposition, argue that the plaintiff's choice of forum is entitled to great weight; that transfer of these cases would result in fragmentation, duplication, and waste;4 that the Cope action should be transferred to New York from Nevada; that a number of parties and witnesses, including Lum's underwriter and plaintiffs' accountants, are present in New York and would only be available with great difficulty in Nevada; that Caesar's Palace has an office in New York and trades on the New York Stock Exchange; that a number of witnesses are in Florida; and, that the files of the Securities Exchange Commission, which form a large portion of the plaintiffs' case, are in New York. In addition, the plaintiffs point out that transfer would seriously deplete their financial situation and that they would be willing to conduct depositions and to accept copies of documents in Nevada and Florida in order to keep the balance of expenses within permissible limits.

It is clear that a judge to whom cases are assigned by the Judicial Panel on Multidistrict Litigation for pretrial proceedings has the power to issue orders directing transfer of cases from the judicial districts in which they were filed to another district for trial if the convenience of parties and witnesses and other relevant factors warrant such action. Pfizer, Inc. v. Lord, 447 F.2d 122 (2d Cir. 1971); In Re Seeberg-Commonwealth United Litigation, (S.D.N.Y. 1970, M-19-95); cf. Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L. Ed.2d 945 (1964). However, given the limited record which is before us at this time with regard to the conflicting viewpoints outlined above, it is our opinion that further discovery and deposition testimony must be forthcoming prior to our determination of these transfer motions. Therefore, in the exercise of our discretion, we will at this time, decline to pass on this question until discovery testimony furnishes a proper foundation for our ruling.

MOTION TO CONSOLIDATE

The plaintiff in Margoles v. Lum's Inc. has requested this Court to order consolidation5 of his case with five other cases presently before us in this same litigation, Kraut, Brooks, Gregorio, Margoles v. Powell, and Fenichal, on the grounds that each of these suits attack the same basic transactions and involve common parties and issues.

Movant places heavy reliance upon the Second Circuit's discussion of consolidation in a stockholder's derivative action, MacAlister v. Guterma, 263 F.2d 65, 68 (2d Cir. 1958), and upon a number of related stockholder class actions similar to the instant cases in which consolidation has been approved, see, e. g., Feldman v. Hanley, 49 F.R.D. 48 (S.D.N.Y. 1969); Abrams v. Occidental Petroleum Corp., 44 F.R.D. 543 (S.D.N.Y.1968); Fields v. Wolfson, 41 F.R.D. 329 (S.D. N.Y.1967), urging that the dangers envisioned by the MacAlister court, duplication of suits, increased costs to the litigants, delay, and ineffective use of judicial time will inevitably result if such action is not taken in their case. In addition, plaintiff contends that inconsistent results and conflicting class determinations would result from a failure to consolidate.

Defendants' opposition to consolidation is premised primarily upon the proposition that, although the claims made in Margoles v. Powell are essentially duplicative of those made in Margoles v. Lum's, Inc., the converse is not true and, therefore, consolidation should not be granted. In effect, it is the contention of the defendant that Margoles v. Lum's, Inc. includes claims relating to franchising and restaurant and related activities which are not common to the other suits and would only cause confusion if consolidation with them was permitted.

In answer, plaintiff argues that the fact that total identity of issues and parties is not present does not foreclose consolidation, citing Skirvin v. Mesta, 141 F.2d 668 (10th Cir. 1944), and other related cases, so long as substantial identity of parties and issues is present.

Again, as in the foregoing motions to transfer, it is our conclusion that it would be inappropriate for us to attempt to determine this question given the incipient posture of the present proceedings. Therefore, in the exercise of our discretion, we will likewise decline to pass upon consolidation until further discovery has been...

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