S.E.C. v. Savoy Industries, Inc.

• Decision Date: 28 July 1978
• Docket Number: No. 76-1490,76-1490
• Citation: 587 F.2d 1149,190 U.S.App.D.C. 252
• Parties: , Fed. Sec. L. Rep. P 96,497 SECURITIES AND EXCHANGE COMMISSION v. SAVOY INDUSTRIES, INC., et al. Appeal of S. Mort ZIMMERMAN.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1149

587 F.2d 1149

190 U.S.App.D.C. 252, Fed. Sec. L. Rep. P 96,497

SECURITIES AND EXCHANGE COMMISSION v. SAVOY INDUSTRIES, INC., et al. Appeal of S. Mort ZIMMERMAN.

No. 76-1490.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 20, 1977.

Decided July 14, 1978.

Rehearing Denied July 28, 1978.

Irving R. M. Panzer, Washington, D. C.; Dean Carlton, Dallas, Tex., was on the brief for appellant.

David Ferber, Sol., S. E. C., Washington, D. C., with whom Daniel L. Goelzer, Sp. Counsel, and Lawrence A. Horn, Atty., S. E. C., Washington, D. C., were on the brief, for appellee.

Before McGOWAN, TAMM and ROBINSON, Circuit Judges.

Opinion for the court filed by Circuit Judge TAMM.

TAMM, Circuit Judge:

This case arises out of the plaintiff-appellee Securities and Exchange Commission's (SEC or Commission) successful injunctive action against defendant-appellant S. Mort Zimmerman in the United States District Court for the District of Columbia. The Findings of Fact and Conclusions of Law awarding an injunction to the Commission are reported as SEC v. Zimmerman, 407 F.Supp. 623 (D.D.C.1976). Appellant raises challenges to the district court's decision not to transfer this action under 28 U.S.C. § 1404(a) (1970), and to its findings and conclusions on the merits. We shall treat the issues in that order.

I. THE TRANSFER MOTION

A. Background

The Commission commenced this action through a Complaint for Injunctive and Other Relief dated November 22, 1974. Named as defendants were Savoy Industries, Inc. (Savoy), Philip Weinkrantz, Interstate General, Inc. (Interstate), Lee Mansdorf, Anthony Damato, and appellant Zimmerman. ¹ The Commission alleged that Zimmerman participated in a scheme with the other defendants to gain control of Savoy which was publicly traded on the American Stock Exchange. According to the Commission, this control of Savoy was to be used, in turn, to gain control of one or more insurance companies. In the alleged realization of this scheme, five documents were filed or disseminated by Savoy and others. Zimmerman was charged with violations of certain reporting and anti-fraud provisions of the federal securities laws in connection with these documents. ²

Appellant, a resident of Dallas, immediately made a pro se motion to dismiss, or to transfer to the United States District Court for the Northern District of Texas in Dallas under 28 U.S.C. § 1404(a). The Commission opposed the motion, stating that "a majority of the plaintiff's witnesses in this action are located in the New York metropolitan area, the corporate officers of Savoy and all its records are in New York (footnote omitted)." ³ Zimmerman's motion was denied without comment on January 15, 1975. ⁴ Following this denial, all defendants except Zimmerman either consented to permanent injunctions or defaulted, so that, by July 18, 1975, appellant was the sole defendant in the case. ⁵

Two months later, on September 19, at a hearing on a repeat status call, Zimmerman's counsel sought leave to have the case transferred or dismissed. In its denial, the district court noted that, "we have spent a certain amount of time on this case. We are familiar with it. It is ready for trial." ⁶ A non-jury trial date was set for October 22, 1975. ⁷

One week before trial was scheduled to begin, appellant's counsel once again sought a transfer to Dallas, arguing that "new facts have appeared that make it clear as a bell that this case has no real business being tried in Washington." Joint Appendix (J.A.) at 75. The new development, as alleged by counsel for appellant, was that the Commission intended to call only three witnesses: one from California, one from Dallas, and one from New York. ⁸ Zimmerman, through his counsel, suggested that there were fifteen witnesses "who could appear for him," Id. at 77, all of whom were located in Dallas. He maintained that he was financially unable to bring these witnesses from Dallas, ⁹ and that his right to a fair trial had been jeopardized. ¹⁰ By order of October 16, 1975, the district court denied the appellant's renewed motion to transfer. ¹¹

B. The Decision Not to Transfer

Appellant first argues that, after the hearing of October 15, 1975, the district court should have exercised its discretion to transfer the case to Dallas. See Brief for Appellant at 21-37. The relevant statute, 28 U.S.C. § 1404(a) (1970), 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." This section applies to actions governed by special venue provisions, Ex parte Collett, 337 U.S. 55, 58-59, 69 S.Ct. 944, 93 L.Ed. 1207 (1949); See Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960), including the special venue provisions of the federal securities statutes, See Wyndham Associates v. Bintliff, 398 F.2d 614 (2d Cir.), Cert. denied, 393 U.S. 977, 89 S.Ct. 444, 21 L.Ed.2d 438 (1968). See also United States v. National City Lines, Inc., 337 U.S. 78, 85, 69 S.Ct. 955, 93 L.Ed. 1226 (1949) (Douglas, J., dissenting).

Section 1404(a) finds its origins in the doctrine of Forum non conveniens. See generally Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507-09, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). However, because section 1404(a) contemplates transfer in addition to dismissal to remedy the plaintiff's choice of an inconvenient forum, it is evident "Congress . . . intended to do more than just codify the existing law on Forum non conveniens." Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 546, 99 L.Ed. 789 (1955). Thus, section 1404(a) is a revision as well as a codification, and a transfer is available "upon a lesser showing of inconvenience" than that required for a Forum non conveniens dismissal. Id. "This is not to say that the relevant factors have changed or that the plaintiff's choice of forum is not to be considered, but only that the discretion to be exercised is broader." Id.

This court has said that "it is perhaps impossible to develop any fixed general rules on when cases should be transferred . . . ." Starnes v. McGuire, 168 U.S.App.D.C. 4, 15, 512 F.2d 918, 929 (1974) (en banc). Thus, the proper technique to be employed is a factually analytical, case-by-case determination of convenience and fairness. Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964); Starnes v. McGuire, 168 U.S.App.D.C. 11, 14, 512 F.2d at 925, 928.

The appellant concedes, as indeed he must, ¹² that venue is proper in the District of Columbia. Brief for Appellant at 2, 32-33. If venue is proper, "(t)ransfer elsewhere under Section 1404(a) must . . . be justified by particular circumstances that render the transferor forum inappropriate by reference to the considerations specified in that statute." Starnes v. McGuire, 168 U.S.App.D.C. at 11, 512 F.2d at 925. Appellant must bear the burden of persuasion on the transfer issue. Time, Inc. v. Manning, 366 F.2d 690, 698, 1 A.L.R. Fed. 1, 13 (5th Cir. 1966). Thus, the ruling of the district court denying the motion to transfer in this case is effectively a ruling that Zimmerman had failed to shoulder his burden. We believe that the district court did not abuse its broad discretion in so ruling.

There can be no doubt that a plaintiff's choice of forum is entitled to at least some weight. Menard v. Mitchell, 139 U.S.App.D.C. 113, 115, 430 F.2d 486, 488 n. 3 (D.C.Cir.1970); Zorn v. Anderson, 263 F.Supp. 745, 749 (S.D.N.Y.1966). See also Gulf Oil Corp. v. Gilbert, 330 U.S. at 508, 67 S.Ct. 839. Appellant contends, however, that this factor should be accorded little, if any, significance in this case because the Commission has a field office located near Dallas, Brief for Appellant at 33-34, because venue is "bare-bones", Id. at 32-33, and because, in appellant's view, " 'none of the operative facts' " occurred in the District of Columbia, Id. at 32.

Taking these contentions in reverse order, we note that appellant maintains that "nothing Nothing at all was done in the District of Columbia (with the exception of a single trivial telephone call)." Id. At the very least, we view the matter differently. In addition to the phone call Zimmerman admits having made from Washington, we noted earlier that a Form 8-K was filed with the Commission in Washington, D.C., on or about February 11, 1974; that a Schedule 13D was filed similarly on or about April 10, 1974; and finally, that a Form 10-K was filed on or about May 24, 1974. ¹³ It is plain, contrary to appellant's assertions, that some of the operative facts Did occur within the District of Columbia.

Appellant argues that the filings are relatively insignificant events that create but "bare-bones venue". Id. at 32-33. Once again, we are unable to agree. Both the Supreme Court and this court have held that the place where a document is to be filed may be regarded as the place where any asserted non-filing or misfiling occurred. Travis v. United States, 364 U.S. 631, 636, 81 S.Ct. 358, 362, 5 L.Ed.2d 340 (1961) ("When a place is explicitly designated where a paper must be filed, a prosecution for failure to file lies only at that place."); United States v. Lombardo, 241 U.S. 73, 36 S.Ct. 508, 60 L.Ed. 897 (1916); Investors Funding Corp. v. Jones, 161 U.S.App.D.C. 420, 422-423, 495 F.2d 1000, 1002-03 (1974) (per curiam). Appellant's notion that the Commission's choice of forum in this case is entitled to little weight is not persuasive.

Although it has been held that Section 27 of the Securities Exchange Act of 1934 does not establish a "privilege" for the plaintiff such that a section 1404(a) transfer will be possible only when the "privilege" has been abused, Freiman v. Texas Gulf Sulfur Co., 38 F.R.D. 336 (N.D.Ill.1965), it has been suggested that the presence of such a special venue statute is a factor to be considered. Zorn v. Anderson, ...