National Student Marketing Corp., 360 F. Supp. 284 (D.C. 1973).
The Convenience of Parties and Witnesses
The complaint alleges that the defendants omitted, in the
course of offering and selling certain securities, to state
material facts relating to the financial condition of two of
the corporate defendants, FNF and Leichner. Among the principal
witnesses, therefore, will be the officers and employees with
knowledge of the financial condition of the two corporations.
These persons, according to the affidavit of defendant Burslem,
reside in the Eastern District of Illinois. Plaintiff argues,
on the other hand, that approximately 70% of the FNF investors,
that is, 110 out of a total number of 160, reside in the
Northern District of Illinois. During oral argument on this
motion, counsel for the SEC stated that some of these investors
would be called as witnesses. There is no indication, however,
that any of the investors have knowledge of the financial
condition of FNF and Leichner at the time of the alleged
fraudulent offerings and sales. The principal witnesses are
those material to the Court's decision on a motion to transfer
under 28 U.S.C. § 1404(a). Grey v. Continental Marketing
Associates, Inc., 315 F. Supp. 826 (N.D.Ga. 1970).
The corporate defendants have their principal places of
business in the Eastern District of Illinois. The principal
individual defendant, Roy Burslem, and the principal witnesses,
reside in the Eastern District. The SEC admits that while
defendant Dedman is a legal resident of Nashville, Tennessee,
he is "often" in Champaign, Illinois. The Northern and Eastern
Districts of Illinois are equally convenient for defendant
Thorn, who resides in Biloxi, Mississippi. On balance,
therefore, it is reasonable to conclude that the Eastern
District of Illinois is a more convenient forum for five of the
six defendants and the principal witnesses.
The Interests of Justice
Presently, the three corporate defendants are involved in
Chapter XI proceedings in bankruptcy court at Danville. A
receiver has been appointed. The movants assert that as a
matter of judicial and litigant economy, the case should be
transferred to the district where the bankruptcy action is
pending. The SEC argues that because Chapter XI proceedings and
securities actions are unrelated, this case and the Chapter XI
proceeding can proceed simultaneously in different districts.
As a general proposition, cases should be transferred to
districts where related actions are pending. Jacobs v. Tenney,
316 F. Supp. 151 (D.Del. 1970). Because, however, the reason for
this rule is the consolidation of related actions, it is
usually applied only where federal civil cases are pending in
the proposed transferee district. Judge Will, therefore,
recently denied a § 1404(a) motion for transfer to a district
where the related actions were pending in state and bankruptcy
courts. Hammond Corp. v. General Electric Credit Corp.,
374 F. Supp. 1356 (N.D.Ill. 1974).
While superficially Hammond appears to dispose of defendants'
"related action" argument, there are significant differences
between it and the case at bar. In Hammond, the actions
pending in the proposed transferee district involved parties
different from those before the forum court, whereas here the
same parties are before this and the bankruptcy court.
Moreover, the bankruptcy court has jurisdiction over the books
and records of the corporate defendants. While many of these
books and records are presently at the SEC offices in Chicago,
they are there by leave of the bankruptcy court, which has
ordered the SEC to return the documents to Danville. In
Schneider v. Sears, 265 F. Supp. 257 (S.D.N.Y. 1967), the court
characterized the control of the Chapter X bankruptcy court
over a corporate defendant's
books and records as a "special factor militat[ing] in favor of
Moreover, as the Sears court observed,
Were these actions transferred . . ., pretrial discovery could
be better coordinated with the requirements of that court and
the needs of the trustee, and the possibility of a conflict
with respect to the need for documents between the efficient
operation of that proceeding and an efficient trial in this
forum could be avoided. Id. at 267.
The SEC relies heavily on Stull v. Baker, 311 F. Supp. 1205
(S.D.N.Y. 1970), where the forum court, the Southern District
of New York, denied a motion to transfer the case to the
Central District of California. In Stull, 11 of 17 individual
defendants resided in the proposed transferee district. Here,
four of six defendants reside in the Eastern District and a
fifth spends most of his time there. In Stull, many of the
principal witnesses were nearer the forum state than
California. Here, the principal witnesses reside in the Eastern
District. Moreover, Judge Bonsal, who decided Stull, observed
in a subsequent opinion that plaintiff's choice of forum
controlled in Stull for the reason that the transferor and
transferee districts were "equally inconvenient." Seiden v.
Price Waterhouse Co., 327 F. Supp. 1325, 1327 (S.D.N.Y. 1971)
(motion to transfer under 28 U.S.C. § 1404(a) allowed). Stull
v. Baker, therefore, has minimal application to the case at
Plaintiff's choice of forum remains a factor for this Court's
consideration. Of course, it must be accorded considerable
weight, but its significance under the common law doctrine of
forum non conveniens has diminished since the enactment of §
1404(a). See Norwood v. Kirkpatrick, 349 U.S. 29, 75 S.Ct.
544,99 L.Ed. 789 (1955). Moreover, the choice of forum, by a
plaintiff agency of the United States, carries no more weight
than that of the ordinary plaintiff. United States v. General
Motors Corp., 183 F. Supp. 858 (S.D.N.Y. 1960).
On November 27, 1974, the bankruptcy court at Danville issued a
restraining order prohibiting, so the parties have assumed, the
SEC and creditors of the three corporate defendants from
continuing or commencing any suits against the corporations.
The order refers only to one of the three corporations, FNF.
Nevertheless, in view of the interlocking relationship of FNF,
Leichner, and Burhold, the order can, as a practical matter, be
interpreted to apply equally to them. The Referee in Bankruptcy
at Danville has, moreover, assured this Court that his intent
in issuing the order was to prohibit action against all three
of the defendant corporations. Although thus restrained from
proceeding against the corporate defendants, the SEC, through
its counsel, has indicated its intention to proceed
independently against the individual defendants. If separate
trials do therefore occur, it will be more convenient for more
people to hold the trials in the Eastern District, where the
defendants, principal witnesses and books and records are
This concentration in the Eastern District of Illinois of
defendants, principal witnesses, books and records, and a
bankruptcy court with jurisdiction over the books and records
establishes a "clear balance of inconvenience" compelling this
Court to transfer this case. Accordingly,
"Defendants' Motion Pursuant To 28 U.S.C. § 1404(a) For Entry
Of Order Transferring This Cause To The United States
District Court For The Eastern District of Illinois At
Danville will be, and the same hereby is, allowed."