Shapiro v. Merrill Lynch & Co.

• Decision Date: 25 February 1986
• Docket Number: Civ. A. No. C-1-85-0625.
• Citation: 634 F. Supp. 587
• Parties: M.A. SHAPIRO, et al., Plaintiffs, v. MERRILL LYNCH & CO., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

634 F. Supp. 587

M.A. SHAPIRO, et al., Plaintiffs, v. MERRILL LYNCH & CO., et al., Defendants.

Civ. A. No. C-1-85-0625.

United States District Court, S.D. Ohio, W.D.

February 25, 1986.

Gene Mesh, Michael Kohn, Cincinnati, Ohio, for plaintiffs.

Mark A. VanderLaan, Cincinnati, Ohio, for defendants.

MEMORANDUM AND ORDER

DAVID S. PORTER, Senior District Judge.

This is a class action by purchasers of Baldwin-United Corporation's common and preferred stock, its 10% Subordinated Debentures Due 2009, and D.H. Baldwin's Debentures Due 1994, against Merrill Lynch & Co., Inc. (ML & Co.) and Merrill Lynch, Pierce, Fenner & Smith, Inc. (MLPFS) (hereinafter collective Merrill Lynch). Plaintiff alleges that Merrill Lynch violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78j et seq. (1981) and Securities and Exchange Commission Rule 10b-5 by using deceptive practices and making false and misleading statements and omissions about Baldwin which affected the market price of Baldwin-United stock. Plaintiff contends that through its business transactions with Baldwin-United Merrill Lynch had actual knowledge or recklessly disregarded the truth regarding Baldwin-United's deteriorating financial condition.

This case is now before this Court on Merrill Lynch's motion to compel arbitration, or to dismiss or transfer this action (doc. 10). Plaintiff has filed his memorandum in opposition (doc. 14) and defendant has replied (doc. 18). We will deal first with the motion to transfer, followed by the arbitration issue and the motion to dismiss.

I. Motion to Transfer

Defendant Merrill Lynch seeks to have this case transferred to the Southern District of New York pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides that a district court may, in its discretion, transfer a case for the convenience of parties and witnesses, in the interest of justice. The purpose of this provision is to avoid unnecessary inconvenience and expense by preventing duplicate trials and to give the defendant some voice in the choice of forum. See 1 Fed.Proc.L.Ed. § 1:745 (1981). Although this section is derived from the common law doctrine of forum non conveniens, it is well settled that a lesser showing of inconvenience is required under the statute. See e.g., Northern Indiana Public Service Co. v. Envirotech Corp., 566 F.Supp. 362 (N.D.Ind.1983); Lake v. Richardson-Merrell, Inc., 538 F.Supp. 262 (N.D.Oh.1982). Nonetheless, the relevant factors considered by a court in applying the common law rule are still relevant under the statute. Among those factors, the ones which are germane here include (1) the plaintiff's choice of forum, (2) the relative ease of access to sources of proof, (3) the nature, materiality and essentiality of testimony to be elicited from witnesses who must be transported, (4) the plaintiff's residence, (5) pendency of a substantially similar action in the transferor or transferee court, which may beneficially be consolidated with the case in question, (6) the respective courts' familiarity with applicable law and condition of their dockets, (7) the place of events in suit, and (8) the nature of the suit. After applying these criteria to the facts in this case, we conclude that a transfer to the Southern District of New York is not warranted, and that defendant's motion is therefore denied.

The plaintiff's choice of forum is traditionally regarded as a significant factor which should not lightly be set aside. Nonetheless, the weight accorded to the plaintiff's choice of forum is reduced where the plaintiff does not reside in the forum. New Image, Inc. v. Travelers Indemnity Co., 536 F.Supp. 58 (E.D.Pa.1981). Moreover, if a case is brought as a class action, factors other than plaintiff's choice must necessarily take on increased significance. Donnelly v. Klosters Rederi A/S, 515 F.Supp. 5 (E.D.Pa.1981). Therefore, we will not regard plaintiffs' choice in this case as controlling, but we will consider it with some deference and in light of the other factors as listed above. Thus, as we have said previously, the burden of showing the desirability of transfer is on the moving party. Murphy v. Allen County Claims & Adjustments, Inc., 550 F.Supp. 128, 133 (S.D. Ohio 1982). This remains true even when the plaintiff does not reside in the transferor district.

Defendant emphasizes the inconvenience and expense it will suffer if this case continues in this forum. The principal officers of defendant are in the Southern District of New York, as are their investment banking and securities research officers. Therefore, a number of defendant's employees who are prospective witnesses would have to interrupt their normal business activities in order to come to this district to testify should this case go to trial. Defendant does not, however, indicate the specific number of witnesses that would be inconvenienced, nor the nature, materiality or essentiality of the testimony that these New York employees would provide. The mere fact that some witnesses from the proposed transferee district may be called is, by itself, inadequate to warrant a transfer where it is not shown that they would be severely inconvenienced or that they are indeed key witnesses. Weltman v. Fletcher, 431 F.Supp. 448 (N.D. Ohio 1976).

Plaintiff also claims that there are many Ohio witnesses who will be needed to testify at trial. Although plaintiff also fails to specify the nature, materiality, or essentiality of the testimony from those witnesses, it seems evident that both parties will want to call non-forum witnesses regardless of where any trial in this case ultimately takes place. Thus, we conclude that defendant has not adequately shown that the inconvenience to it of remaining in this forum outweighs the inconvenience to plaintiff, should the case be transferred to New York.

Defendant also states that most, if not all, of the defendant's documents relevant to the action are in New York. The location of documentary evidence may be a factor in determining whether a case should be transferred, but it is not enough simply to assert that transfer is necessary because relevant documents are at the defendant's main office in the proposed transferee district. Rather, defendant needs to demonstrate that a large volume of documentary evidence must be transported, Richards v. Upjohn Co., 406 F.Supp. 405 (E.D.Mich.1976), and that it is not possible to reduce the volume through other discovery techniques. In this case there has been no showing by defendant as to the necessity of transporting a large volume of documents nor that the volume cannot somehow be consolidated through other devices.

Defendant also has emphasized that plaintiff is not a resident of this district while defendant has its main offices in the proposed transferee district. Although we acknowledge that this is of some significance, it is also true that defendant carries on a nation-wide business. Generally a defendant that does business nation-wide may not obtain a transfer to the district where its main office is solely for that reason. By undertaking a nation-wide business, a corporation assumes the risk of amenability to suit throughout the nation. Samson Cordage Works v. Wellington Puritan Mills, Inc., 303 F.Supp. 155 (D.C.R.I.1969). Defendant MLPFS, a subsidiary of ML & Co., does operate offices in the Southern District of Ohio and conducts business here. Moreover, defendant's activities in this district are pertinent to this case because plaintiff alleges that "relevant transactions between defendants and Baldwin-United took place in Ohio" (doc. 14 at 70). Thus, even if defendant's main offices and relevant actions are based elsewhere, some transactions which may be critical to this case allegedly took place in this district.

Finally, defendant states that the pendency of actions similar to this one in the proposed transferee district, as well as that court's familiarity with the applicable laws, lends additional support to their request for a transfer. One of those similar actions, Rowther v. Merrill Lynch, Inc., 85 Civ. 3146 (CIB), (S.D.N.Y., filed April 24, 1985) has now been dismissed without prejudice in the Southern District of New York. That case has been refiled in this district and it is now on the calendar of this Court. Rowther v. Merrill Lynch, Inc., C-1-86-0026, (filed Jan. 10, 1986, S.D. Ohio).

Defendant contends, however, that the presence of the Rowther case in this district does not moot the question about the transfer of Shapiro. They contend that the primary reason Rowther sought transfer to Ohio was not for ultimate consolidation with this action, but rather because at the time the change of venue was sought, an action was pending in this Court by Baldwin-United against Merrill Lynch. That case, Baldwin-United Corp. v. Merrill Lynch & Co., Inc., No. C-1-85-1579 (S.D. Ohio filed September 25, 1985) has since been dismissed with prejudice.

Defendant also points out that at the December 16, 1985 hearing on the dismissal of the Rowther case in New York, Rowther's counsel specifically agreed to be bound by this Court's decisions in Shapiro, including our decision about transferring Shapiro to New York. Thus, they argue that the mere fact that Rowther is also now before this Court does not necessarily moot the question of whether Shapiro should be transferred to New York (along with Rowther). Nonetheless, the fact that Rowther is no longer pending in New York does undercut one of defendant's original arguments in favor of transfer because consolidation of the two actions can now be accomplished without further transfers.

The fact that other related actions are consolidated before this Court in MDL 606 (In re D.H. Baldwin Debentures Due 1994 Securities Litigation) offers an additional reason for not transferring this action again. It is undeniable that the District Court in the Southern District of New York has great expertise with law applicable in this...