Savin v. CSX Corp.

• Decision Date: 15 April 1987
• Docket Number: No. 86 Civ. 5790 (JMW).,86 Civ. 5790 (JMW).
• Parties: Ethel B. SAVIN, individually and on behalf of a class of former debentureholders similarly situated, Plaintiff, v. CSX CORPORATION (formerly Chessie Systems, Inc.), the Chesapeake & Ohio Railroad, the Baltimore and Ohio Railroad Company and the Chase Manhattan Bank, N.A., Defendants.
• Court: U.S. District Court — Southern District of New York

657 F. Supp. 1210

Ethel B. SAVIN, individually and on behalf of a class of former debentureholders similarly situated, Plaintiff, v. CSX CORPORATION (formerly Chessie Systems, Inc.), the Chesapeake & Ohio Railroad, the Baltimore and Ohio Railroad Company and the Chase Manhattan Bank, N.A., Defendants.

No. 86 Civ. 5790 (JMW).

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

April 15, 1987.

Michael P. Malakoff, Berger, Kapetan, Malakoff & Myers, P.C., Pittsburgh, Pa., Edwin J. Mills, Stull, Stull & Brody, New York City, for plaintiff.

Richard T. Wentley, Anthony J. Basinski, Joseph W. Klein, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., Robert C. Myers, Michele Gapinski, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for defendants.

WALKER, District Judge:

INTRODUCTION

Plaintiff Ethel B. Savin ("Savin") has brought a class action against Defendants CSX Corporation ("CSX"), The Chesapeake & Ohio Railroad Company ("C & O"), The Baltimore and Ohio Railroad Company ("B & O"), and The Chase Manhattan Bank, N.A. ("Chase"). The class action alleges that defendants committed securities fraud and a breach of fiduciary duty by failing to disclose B & O's declaration of a dividend, as well as certain facts related to previous securities litigation brought against CSX, C & O, and B & O.

Defendants move to transfer plaintiff's action to The Hon. Gerald J. Weber of the Western District of Pennsylvania. For the reasons set forth below, defendant's motion is granted.

STATEMENT OF FACTS

The instant action relates to debentures issued by B & O. Defendant C & O is the principal owner of B & O common stock, holding 99.8% of the outstanding shares. Defendant C & O is itself a subsidiary of Defendant CSX, which owns 100% of C & O's stock.

Defendant B & O first entered into an indenture agreement with Chase, which served as the indenture trustee, in 1956. Under the agreement, B & O authorized Chase to issue as much as $54 million in debentures. As of 1977, more than $13 million of the debentures were in the hands of the public. Article 10, section 1(c) of the indenture agreement included a forum selection clause, which reads:

All questions or controversies as to the liability of the Trustee Chase under this Indenture shall be decided and determined under the laws of the state of New York, and no action, suit or other proceeding legal or equitable shall be instituted or conducted against the Trustee in the courts of any other state unless with its voluntary written consent.

On December 13, 1977, Defendant B & O declared a dividend in the stock of its wholly-owned subsidiary, the Mid-Allegheny Corporation, to all B & O shareholders. In various actions brought against B & O and other defendants, plaintiffs have claimed that B & O failed to give individuals holding debentures notice of this dividend. The lack of notice allegedly prevented holders of debentures from converting their debentures into stock and receiving the December 13 dividend. See Pittsburgh Terminal Corp. v. Baltimore & Ohio Railroad Co., 509 F.Supp. 1002 (W.D.Pa.1981).

As of December 1, 1979, plaintiff owned $25,000 of B & O 4½% Convertible Debentures. Plaintiff sold ten of her Debentures on December 31, 1979, and sold another fifteen debentures on September 29, 1981. Plaintiff brings her claims as a class action "on behalf of all persons who were owners of the Convertible 4½% B & O Debentures."

Plaintiff alleges that defendants provided her with no notice of her ability to convert her debentures to stock and receive a dividend until they issued a court-approved press release on June 23, 1986. Plaintiff claims that defendant's failure to provide her with notice constitutes securities fraud, under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), as well as a breach of fiduciary duty on the part of C & O, CSX, and Chase.

Plaintiff also alleges that defendants failed to inform plaintiff class members of two other pending securities suits, which other plaintiffs had brought on behalf of holders of B & O debentures. Plaintiff claims that this failure to inform class members as to the status of these pending suits, and the possibility that class members would share in any recovery, constitutes actionable securities fraud and a breach of fiduciary duty on the part of C & O, CSX, and Chase.

A total of six other pending suits allege that B & O and other defendants committed unlawful acts related to the issuance of the 1977 dividend. All of those suits currently are pending before The Hon. Gerald J. Weber of the Western District of Pennsylvania, whose court is located in Pittsburgh. The court calenders in the Western District of Pennsylvania and the Southern District of New York, where plaintiff has filed the instant action, contain roughly the same number of pending actions. For example, in this district the median time between the filing of a complaint and the disposition of a case after trial is nineteen months, while in the Western District of Pennsylvania this same process takes about eighteen months.

Plaintiff is an Illinois resident. Defendant B & O is a Maryland corporation with its principal place of business in Maryland. Defendant C & O is a Virginia corporation with its principle place of business in Maryland. Defendant CSX is a Virginia corporation with its principal place of business in Virginia. The principal place of business of Defendant Chase is in New York City.

Plaintiff is represented by the Pittsburgh law firm of Berger, Kapetan, Malakoff & Meyers. Defendants CSX, C & O, and B & O are represented by the Pittsburgh firm of Reed, Smith, Shaw & McClay. The New York firm of Dewey, Ballantine, Bushby, Palmer & Wood represents Defendant Chase.

DISCUSSION

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer a civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). "Motions to transfer, pursuant to 28 U.S.C. § 1404(a) are directed to the discretion of the Court." Somerville v. Major Exploration, Inc., 576 F.Supp. 902, 906 (S.D.N.Y. 1983). However, "the burden is on the defendant, when it is the moving party, to establish that there should be a change of forum." 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); accord Credit Alliance Corp. v. Crook, 567 F.Supp. 1462, 1464 (S.D.N.Y.1983); Durham Productions, Inc. v. Sterling Film Portfolio, Ltd., 537 F.Supp. 1241, 1243 (S.D.N.Y. 1982).

In considering a motion to transfer, a court must weigh:

(1) The convenience of the parties and witnesses (and the availability of process to compel attendance of unwilling witnesses); (2) the relative ease of access to sources of proof, and other practical problems that make trial of a case easy, expeditious, and inexpensive; and (3) the interests of justice.

Somerville v. Major Exploration, Inc., 576 F.Supp. 902, 906 (S.D.N.Y.1983). "Although a plaintiff's choice of forum is entitled to substantial weight, that weight may be diminished where, as here, suit is brought outside plaintiff's home forum." Pesin v. Goldman, Sachs & Co., 397 F.Supp. 392, 394 (S.D.N.Y.1975); accord Helfant v. Louisiana & Southern Life Insurance Co., 82 F.R.D. 53, 57-58 (E.D.N.Y. 1979).

In evaluating the first factor in this test, "the convenience of the parties and witnesses," the Court finds that the balance tips slightly in favor of this district and against the Western District of Pennsylvania as the more convenient forum. Plaintiff, an Illinois resident, has not shown significant contacts with New York. Although plaintiff argues that a Manhattan trial will prove more convenient for Defendant Chase, which maintains its offices in New York instead of Pittsburgh, this argument is weak, given that Chase itself seeks to transfer the instant litigation to Pittsburgh.

Plaintiff's strongest argument in favor of New York as the most convenient forum is based on the forum selection clause, appearing in Article 10 of the indenture agreement, which specifies New York as the appropriate site for most suits brought by holders of debentures. Case law has held that a "forum-selection clause is determinative as to the convenience of the parties. ..." Richardson Greenshields Securities, Inc. v. Metz, 566 F.Supp. 131, 134 (S.D.N.Y.1983). Accord Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. 71, 74 (S.D.N.Y.1978).

Defendants have made little showing that Pittsburgh provides a more convenient forum than New York. Although defendants argue that witnesses assembled in Pittsburgh to testify in the six other litigations could easily provide testimony relevant to the instant case, defendants do not specify such witnesses. Defendants also argue that the presence of both plaintiff's and defendants' counsel in Pittsburgh indicates that the Western District of Pennsylvania is a more convenient forum for the instant action. However, settled case law holds unambiguously that "mere inconvenience to counsel is not an appropriate factor to consider on a motion to transfer venue." Matra Et Manurhin v. International Armament Co., 628 F.Supp. 1532, 1535 n. 5 (S.D.N.Y.1986); Accord Austin v. Johns-Mansville Corp., 524 F.Supp. 1166, 1169 (E.D.Pa.1981).

Based on the forum selection clause, this Court concludes that the convenience of the parties and the witnesses would be furthered slightly by denying defendants' motion to transfer. However, the fact that plaintiff's choice of forum is somewhat more convenient "does not ... require the transfer motion to be denied. Other factors must be considered." Thomson & McKinnon v. Minyard, 291 F.Supp. 573, 576 (S.D.N.Y.1968).

The second factor which this Court must consider, "the relative ease of access to sources of proof," while not pointing strongly to either New York or Pittsburgh as the proper forum, tips the scale in favor of Pittsburgh. Plai...