In re New York City Municipal Securities Litigation, 314.

• Decision Date: 01 November 1977
• Docket Number: No. 314.,314.
• Citation: 439 F. Supp. 267
• Parties: In re NEW YORK CITY MUNICIPAL SECURITIES LITIGATION.
• Court: Judicial Panel on Multidistrict Litigation

439 F. Supp. 267

In re NEW YORK CITY MUNICIPAL SECURITIES LITIGATION.

No. 314.

Judicial Panel on Multidistrict Litigation.

November 1, 1977.

Before JOHN MINOR WISDOM, Chairman, and EDWARD WEINFELD,^* EDWIN A. ROBSON, JOSEPH S. LORD, III,^* STANLEY A. WEIGEL, ANDREW A. CAFFREY, and ROY W. HARPER, Judges of the Panel.

OPINION AND ORDER

PER CURIAM.

This litigation consists of ten actions pending in two districts: eight in the Southern District of New York,¹ and two in the District of Massachusetts. The complaint in each action alleges violations of the federal securities laws in connection with the marketing of New York City's securities during 1974 and 1975. Generally, the City, its chief financial officers and various financial institutions are accused of conspiring to conceal the City's financial condition in order to effectuate the sale of various types of New York City obligations. Defendants are alleged to have used false and misleading public statements, improper accounting practices, illegal sales of short-term notes and other fraudulent devices in furtherance of their illegal scheme. In seven actions, including the two Massachusetts actions, defendant financial institutions are accused of conspiring on the basis of material inside information to reduce their own holdings of New York City obligations, while continuing, in the capacity as underwriters or dealers, to market City securities to members of the general public.

The Massachusetts actions, Truncell v. The First National Bank of Boston (Boston I) and Friedlander v. The First National Bank of Boston (Boston II), were brought against the Boston bank after it had been dismissed from two of the New York actions pursuant to the venue provision of the National Bank Act, 12 U.S.C. § 94. The plaintiffs in the Massachusetts actions are also plaintiffs, respectively, in the two New York actions from which the Boston bank obtained dismissal.

All the actions in this litigation have been brought as class actions on behalf of purchasers of various types of New York City securities. A class of original, non-dealer purchasers of four series of New York City short-term notes and a class of purchasers of New York City general obligation bonds have been certified in two of the consolidated New York actions.² Requests for certification of classes similar to one or the other of the certified classes have been denied in the other three consolidated New York actions.

Plaintiffs in Boston I and Boston II each move the Panel for an order pursuant to 28 U.S.C. § 1407 transferring the respective action to which each is a party to the Southern District of New York for coordinated or consolidated pretrial proceedings with the actions pending there. The only party opposing the motions is the First National Bank of Boston. We find that the ten actions in this litigation raise common questions of fact and that transfer of the Massachusetts actions to the Southern District of New York under Section 1407 will best serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.

The First National Bank of Boston contends that transfer of the Massachusetts actions to the Southern District of New York is inappropriate at this time because: 1) the actions in this litigation share no questions of fact that are sufficiently complex to warrant transfer; 2) any economies to be realized from transfer can also be accomplished through voluntary cooperation of counsel in these actions; 3) the class certification issues pending in the Massachusetts actions should be determined by the court that will eventually try the actions; 4) the Boston bank has not participated in any discovery that has occurred to date in the New York actions and would be prejudiced by this lack of participation and by the burden of participating in further discovery activities unrelated to its alleged liability; 5) the plaintiffs in the Massachusetts actions have waived their right to transfer under Section 1407 as a result of dilatoriness in seeking that transfer; and 6) discovery concerning the Boston bank's culpability will perforce occur in Boston, where the bank's headquarters and chief executive officers are located. In addition, the Boston bank argues that Boston II has become moot because the named plaintiff no longer holds New York City obligations and that therefore that action should be left in the Massachusetts forum for prompt disposition.

Finally, the Boston bank argues that the objectives of the venue provision of the National Bank Act are as likely to be frustrated by transfer for pretrial under Section 1407 as by transfer for trial. Accordingly, the Panel is asked to reconsider its ruling in In re Falstaff Brewing Corp. Antitrust Litigation, 434 F.Supp. 1225, 1229-30, (Jud.Pan.Mult.Lit.1977) whereby the Panel refused to exempt national banks from the application of the provisions of Section 1407.

We find these arguments unpersuasive. The actions in this litigation clearly involve common questions of fact concerning (i) the financial position of the City of New York during 1974-1975 and (ii) the existence and implementation of an alleged conspiracy among defendant financial institutions, including the Boston bank, to obtain inside information regarding the City's finances, to conceal that information from the general public while marketing the City's securities as dealers or underwriters, and to reduce their own holdings of the City's securities without disclosing that fact to public purchasers. Transfer under Section 1407 is thus necessary to prevent duplication of discovery, eliminate the possibility of conflicting pretrial rulings, and conserve the efforts of the parties, the witnesses and the judiciary. While voluntary coordination of discovery efforts among parties and their counsel is always commendable, transfer of these actions to a single district under Section 1407 will ensure the streamlining of discovery and all other pretrial proceedings as well. See In re Ascot Oils, Inc. Securities Litigation, 433 F.Supp. 1118, 1120 (Jud. Pan.Mult.Lit.1977).

Because the Boston bank is not a defendant in any of the New York actions, no possibility of conflicting class action determinations exists between the New York actions as compared to the Massachusetts actions. Notwithstanding the absence of this potential conflict, there is no reason, in light of the overriding factors here favoring coordinated or consolidated pretrial proceedings in a single district, why the class determinations regarding the Massachusetts actions should not be made by the transferee judge. Indeed, the transferee judge's participation in this important pretrial process will better enable him to coordinate the pretrial proceedings regarding the common factual questions and to thereby effect the...