In re NASDAQ Market Makers Antitrust Litigation

• Decision Date: 25 June 1996
• Docket Number: MDL No. 1023. No. 96 Civil 2614 (RWS).
• Parties: In re NASDAQ MARKET MAKERS ANTITRUST LITIGATION. Robert Kevin TISDALE and Lillian A. Tisdale, Plaintiffs, v. A.G. EDWARDS & SONS, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

929 F. Supp. 174

In re NASDAQ MARKET MAKERS ANTITRUST LITIGATION Robert Kevin TISDALE and Lillian A. Tisdale, Plaintiffs, v. A.G. EDWARDS & SONS, et al., Defendants.

MDL No. 1023 No. 96 Civil 2614 (RWS).

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

June 25, 1996.

Bainbridge & Straus, Birmingham, AL, New York City (Michael Straus, of counsel), Lovell & Skirnick, Liaison Counsel, New York City (Christopher Lovell, of counsel), for Plaintiffs.

Shearman & Sterling, Liaison Counsel, New York City (Joseph T. McLaughlin, James T. Halverson, Robert Steinbuch, of counsel), for Defendants and Herzog Hein Geduld, Inc.

Lawrence, Kamin, Saunders & Uhlenhop, Chicago, IL (Lawrence A. Rosen, of counsel), for Nash, Weiss & Co.

OPINION

SWEET, District Judge.

In this antitrust action, transferred to this Court from the United States District Court for the Middle District of Alabama (the "Alabama Federal Court") by order of the Judicial Panel on Multi-District Litigation (the "JPML"), Plaintiffs Robert K. Tisdale and Lillian A. Tisdale ("Plaintiffs" or the "Tisdales") have moved pursuant to 28 U.S.C. § 1447(c) to remand the action to the Circuit Court of Montgomery County, Alabama, where the Complaint was originally filed.

Because federal question jurisdiction exists, and for the reasons set forth below, the motion will be denied.

The Parties

The Tisdales, husband and wife, are residents of Montgomery County, Alabama, who purchased securities traded on the NASDAQ exchange.

Defendants — A.G. Edwards & Sons, Inc.; Alex. Brown & Sons, Incorporated; Cantor Fitzgerald & Co.; Cowen & Co.; CS First Boston Corporation; Donaldson, Lufkin & Jenrette Securities Corporation sued herein as Donaldson, Lufkin & Jenrette, Inc.; Hambrecht & Quist L.L.C.; Herzog, Heine, Geduld, Inc.; J.C. Bradford & Co.; Jeffries & Company, Inc.; EVEREN Securities, Inc. sued herein as Kemper Securities Group, Inc.; Kidder, Peabody & Co. Incorporated; Legg Mason Wood Walker, Incorporated; Lehman Brothers Inc.; Mayer & Schweitzer, Inc.; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Montgomery Securities; Morgan Stanley & Co., Incorporated; Nash, Weiss & Co.; OLDE Discount Corporation; Oppenheimer & Co., Inc.; Paine Webber, Incorporated; Piper Jaffray Inc.; Prudential Securities Incorporated; Robertson, Stephens & Company; The Robinson-Humphrey Company Inc.; Salomon Brothers Inc.; Sherwood Securities Corp.; Smith Barney Inc.; Troster Singer; UBS Securities Inc.; and Weeden & Co. L.P. — are market-makers in securities traded on the NASDAQ exchange.

The parties, facts, and prior proceedings in In re Nasdaq Market-Makers Antitrust Litigation, MDL 1023, are set forth in this Court's previous opinions in this action, In re NASDAQ Market-Makers Antitrust Litig., 929 F.Supp. 723 (S.D.N.Y.1996); In re NASDAQ Market-Makers Antitrust Litig., No. 94 Civ. 3996, 1996 WL 187409 (S.D.N.Y. April 18, 1996); In re NASDAQ Market-Makers Antitrust Litig., 164 F.R.D. 346 (S.D.N.Y.1996); In re NASDAQ Market-Makers Antitrust Litig., 894 F.Supp. 703 (S.D.N.Y.1995), familiarity with which is assumed.

Facts and Prior Proceedings

Plaintiffs filed this action in the Circuit Court of Montgomery County, Alabama (the "Alabama State Court"), on December 15, 1995. On January 12, 1996, all Defendants joined in the removal of the action to the Alabama Federal Court, where the action was assigned to the Honorable Ira DeMent. On January 16, 1996, Plaintiffs applied for an order to show cause why the case should not be remanded (the "Remand Motion"). The motion was fully briefed to Judge DeMent by the parties. On April 4, 1996, prior to Judge DeMent's resolving the Remand Motion, the JPML ordered the case transferred to this Court for coordinated pretrial proceedings with In re NASDAQ.

On April 19, 1996, the Tisdales wrote to this Court, directing its attention to the pendency of the Remand Motion and attaching photocopies of the briefs and related papers submitted to Judge DeMent. The letter was deemed to be a motion before this Court for remand. On May 6, 1996, Defendants submitted a supplemental memorandum of law in opposition. Oral argument was heard and the motion was deemed fully submitted on May 8, 1996.

The Complaint

The Tisdales seek redress for Defendants' alleged conduct in colluding to fix and maintain artificially wide "spreads" in the trading of securities on the NASDAQ. The Tisdales, on behalf of themselves and all others similarly situated, assert two claims. One sets out a cause of action pursuant to a pair of Alabama statutes. The first of these statutes states in pertinent part:

(a) Any person, firm, or corporation injured or damaged by an unlawful trust, combine or monopoly, or its effect, direct or indirect, may, in each instance of such injury or damage, recover the sum of $500 and all actual damages from any person, firm, or corporation creating, operating, aiding, or abetting such trust, combine, or monopoly and may commence the action therefor against any one or more of the parties to the trust, combine, or monopoly, or their attorneys, officer, or agents, who aid or abet such trust, combine, or monopoly.

Ala.Code § 6-5-60 (1975). The other statute upon which the first claim seeks relief reads in pertinent part:

Any person or corporation who engages or agrees with another person or corporation or enters, directly or indirectly, into any combination, pool, trust, or confederation to regulate or fix the price of any article or commodity to be sold or produced within this state or any person or corporation who enters into, becomes a member of or party to any pool agreement, combination, or confederation to fix or limit the quantity of any articles or commodity to be produced, manufactured, mined, or sold in this state must be fined, on conviction, not less than $500 nor more than $2,000.

Ala.Code § 8-10-1 (1975).

The second claim in the Complaint seeks relief under the Alabama common law of agency, based on Defendants' alleged violation of the duty of an agent to its principal.

Discussion

I. Legal Standards

A. Standards Governing Removal and Remand

Motions to remand venue from a federal district court to a state court are governed by Section 1447(c) of Title 28 of the United States Code. The statute provides, inter alia, that, "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).

Removal is proper only if the court has original jurisdiction of the matter. Glen 6 Assocs. v. Dedaj, 770 F.Supp. 225, 227 (S.D.N.Y.1991); see also Isaacs v. Group Health, Inc., 668 F.Supp. 306, 311 (S.D.N.Y. 1987) (on motion to remand, removing party bears burden of establishing that case is within federal court's removal jurisdiction); Crazy Eddie, Inc. v. Cotter, 666 F.Supp. 503, 508 (S.D.N.Y.1987) (same).

B. Governing Precedent

Where a case is transferred to a district court for consolidation pursuant to 28 U.S.C. § 1407, as here, "a transferee federal court should apply its interpretations of federal law, not the constructions of federal law of the transferor circuit." Menowitz v. Brown, 991 F.2d 36, 40 (2d Cir.1993) (citing Coker v. Pan Am. World Airways, Inc. (In re Pan Am. Corp.), 950 F.2d 839, 847 (2d Cir.1991); In re Korean Air Lines Disaster, 829 F.2d 1171, 1175-76 (D.C.Cir.1987) (Ruth Bader Ginsburg, J.), aff'd on other grounds sub nom. Chan v. Korean Air Lines, Ltd., 490 U.S. 122, 109 S.Ct. 1676, 104 L.Ed.2d 113 (1989)); see also Coker, 950 F.2d at 847 (where transfer was made pursuant to 28 U.S.C. § 157(b)(5), "`a transferee court should be free to decide a federal claim in the manner it views as correct without deferring to the interpretation of the transferor circuit.'") (quoting Korean Air Lines, 829 F.2d at 1174).

Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), in which the Supreme Court elaborated on Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), is not to the contrary. These cases "require a federal court ruling upon questions of state law to apply the same state substantive law, including choice-of-law rules, that would have been applied by a state court in the jurisdiction in which the case was filed." Menowitz, 991 F.2d at 40. Yet in Menowitz, our Court of Appeals held explicitly that "the rule of Van Dusen does not apply by analogy where a case is transferred under § 1407 to a federal court that has a different construction of relevant federal law than the federal court in which the action was filed." Id. at 40; accord Korean Air Lines, 829 F.2d at 1174.

Indeed, in the absence of a single body of law for unified proceedings, "the conduct of multi district litigation, which is invariably time consuming as it is, will grind to a standstill while transferee judges read separate briefs, each based on the case law of a transferor circuit, on a single issue of federal law." In re Integrated Resources Real Estate Ltd. Partnerships Secs. Litig., 815 F.Supp. 620, 635-36 (S.D.N.Y.1993) (quoting Pan Am, 950 F.2d at 847).

Van Dusen is, therefore, inapposite. The law of the Second Circuit will be applied here where the circuits are in conflict, to avoid potential conflicts in interpretation and to uphold the efficiency sought by 28 U.S.C. § 1407.

II. Federal Question Jurisdiction Exists

A federal court has jurisdiction to hear "only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 2855, 77 L.Ed.2d 420 (1983); see Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 758 (2d Cir.1986) (citing Franchise Tax Bd., 463 U.S. at 1, 103 S.Ct. at 2842; Gully v. First Nat'l Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70; Louisville & Nashville R.R. Co. v....