The opinion of the court was delivered by: Julius J. Hoffman, Senior District Judge.
MEMORANDUM OF DECISION AND ORDER
This is an action by the Securities Exchange Commission to
enjoin alleged fraudulent offers and sales of securities. It is
brought under Section 17 of the Securities Act of 1933, Section
10(b) of the Securities Exchange Act of 1934, and Rule 10b-5
thereunder. There are six defendants: three corporations and
three individuals. The corporate defendants are the First
National Finance Corporation (FNF), Leichner Industries, Inc.
(Leichner), and Burhold, Inc. (Burhold). The individual
defendants are Roy Burslem, president of each of the three
corporations; Robert Dedman, a former director of FNF and
Leichner; and Rex Thorn, a current director of FNF and
Leichner. With the exceptions of Thorn and Dedman, all
defendants move, pursuant to 28 U.S.C. § 1404(a), for the
transfer of this case to the United States District Court for
the Eastern District of Illinois at Danville. Thorn and Dedman
have interposed no objection to the requested transfer.
The movants assert that the case should be transferred because
the Eastern District of Illinois is the residence of the
principal individual defendant and the principal witnesses, the
principal place of business of the three corporations, and the
district in which a Chapter XI (arrangement) proceeding
involving the three corporations is pending and the corporate
books and records are located. In opposition, the SEC contends
that these factors do not establish the balance of
inconvenience required to disturb plaintiffs' choice of forum.
The Commission asserts further that because many of the alleged
fraudulent offerings occurred in the Northern District of
Illinois, defendants' motion should be denied.
28 U.S.C. § 1404(a) provides as follows:
a) 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
Under this section, the movant must show a "clear balance of
inconvenience." Chicago, Rock Island & Pacific R.R. Co. v.
Igoe, 220 F.2d 299 (7th Cir. 1955), cert. denied, 350 U.S. 822,
76 S.Ct. 49, 100 L.Ed. 735 (1955); Butterick Company, Inc. v.
Will, 316 F.2d 111 (7th Cir. 1963); Hammond Corp. v. General
Electric Credit Corp., 374 F. Supp. 1356 (N. D.Ill. 1974).
Where The Action Might Have Been Brought
The parties have not disputed that this action might have been
brought in the Eastern District of Illinois. Venue under both
the Securities Act of 1933 and the Securities Exchange Act of
1934 is proper in the district "wherein the defendant is found
or is an inhabitant or transacts business . . . ."
15 U.S.C. § 77v, 78aa. Because the three corporations have their
principal places of business in Champaign, Illinois, located in the
Eastern District, and defendant Burslem resides there, venue is
proper in the Eastern District under these sections. Although
defendants Dedman and Thorn have legal residences in states
other than Illinois, venue is not thereby destroyed. Securities
and Exchange Commission v.
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 ...