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BLAKE CONST. CO. v. INTERNATIONAL HARVESTER CO.

September 1, 1981

BLAKE CONSTRUCTION CO., INC., PLAINTIFF,
v.
INTERNATIONAL HARVESTER COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

These are five of the seven class actions filed against Harvester, various of its directors and officers and Morgan Stanley & Co. Incorporated ("Morgan Stanley"). Two other actions are pending before Honorable Mary Johnson Lowe of the United States District Court for the Southern District of New York. Defendants have filed motions to transfer the five actions to that District Court under 28 U.S.C. § 1404(a). Plaintiffs in three of the actions oppose transfer vigorously, while plaintiffs' counsel in the other two have apparently changed their views as to the most convenient forum since they filed their actions and now join with defendants. For the reasons stated in this memorandum opinion and order the motion to transfer is granted.

Background Facts

All seven actions arise out of Harvester's issuance of 3 million shares of $5.76 Cumulative Convertible Preferred Stock, Series C pursuant to a Registration Statement effective October 16, 1980 and a Prospectus bearing the same date. Morgan Stanley was managing underwriter for the issue. All five complaints in this District and the Weinberger case in the Southern District of New York (the earliest-filed of the seven cases) have been brought on behalf of holders of Series C Preferred Stock. They rely principally though not exclusively on Section 11 of the Securities Act of 1933 (the "1933 Act"), 15 U.S.C. § 77k. All Harvester security holders other than those holding the new Preferred Stock issue are the designated class in the Darvin case, the other action pending in the Southern District of New York (asserting claims under Section 10(b) of the Securities Exchange Act of 1934 (the "1934 Act"), 15 U.S.C. § 78j(b) and Rule 10b-5 thereunder).

Counsel for all defendants and for plaintiffs in the New York cases and two of the cases here have reached an agreement, embodied in a stipulation since approved by Judge Lowe, for some important and constructive procedural arrangements to expedite handling of the cases. Under that stipulation, if the two Illinois cases were transferred to the Southern District of New York:

  (1) Both the transferred cases and Weinberger would be
      consolidated for all purposes, with a consolidated
      complaint to be filed.
  (2) Defendants would then answer the consolidated
      complaint rather than filing any pleading motion,
      reserving however their rights to file any motions
      following "substantial discovery including
      depositions" in the consolidated actions.
  (3) Defendants would agree to a stipulated class of
      purchasers of Series C Preferred Stock as to
      claims asserted under Section 11 of the 1933 Act.
  (4) Discovery in Darvin would be consolidated and
      coordinated to the extent possible with discovery
      in the other three actions.
  (5) Prompt efforts would be made to negotiate a
      confidentiality stipulation and a schedule for
      consolidated and coordinated discovery.
  (6) To implement the other understandings defendants
      have agreed to produce copies of documents in the
      Southern District of New York. Harvester has also
      agreed to produce its principal officers and its
      employee directors (the "inside directors") for
      depositions in the Southern District of New York,
      except in the case of substantial unforeseen
      inconvenience. At plaintiffs' request Harvester
      would also produce for trial any witnesses then
      subject to its control and who would then be
      subject to the subpoena power of this Court.
  (7) If the other Illinois cases were transferred to
      the Southern District of New York, the parties
      would promptly move to consolidate those cases
  with the previously consolidated cases.

When this Court was first apprised of the prospect of such an agreement at its July 6, 1981 status hearing, it indicated its view that no such agreement could appropriately be limited in terms of the forum before which the actions were pending, and that it would expect every provision of any such agreement that could be implemented in this District to be adhered to if the cases were not in fact transferred. At the most recent status conference August 20, 1981 all counsel confirmed that such would be the case.*fn1 Morgan Stanley's counsel made it clear however (as was their right) that their client would not agree to the mirror image (in terms of Illinois ...


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