The opinion of the court was delivered by: Bua, District Judge.
Before the Court is the motion of the defendants Touche Ross
& Co. and Thomas P. Flanagan to transfer these actions to the
United States District Court for the Eastern District of New
York pursuant to 28 U.S.C. § 1404(a). For the reasons stated
herein, defendants' motion is granted and the cases are
transferred to the U.S. District Court for the Eastern District
of New York.
These actions are brought by plaintiffs William E. Waites,
Bruce Kahler, and Richard G. Pinkett, who purchased the
defendants' tax-shelter securities in Chicago, Illinois,
Tulsa, Oklahoma, and Chagrin Falls,
Ohio, respectively. Plaintiffs have alleged the existence of
a nationwide securities fraud scheme involving fifty-five
defendants. Defendants Touche and Flanagan have jointly moved
under 28 U.S.C. § 1404(a) to transfer this action to the
Eastern District of New York. Defendant Stuart Becker & Company
joined in and adopted Touche's motion to transfer. Defendants
Zayle A. Bernstein and Bernstein, Bernstein, Bernstein, Stein &
Rush (BBBS&R) joined in plaintiffs' opposition to the transfer.
These suits involve allegations that the defendants created
or otherwise participated in a sophisticated tax shelter
scheme designed to defraud investors by inducing them to
invest in certain energy management equipment to be installed
in business or industrial facilities. Essentially, plaintiffs'
complaint alleges that the energy management system was leased
to various entities who would then sell an energy savings
service to commercial users of energy. Plaintiffs also allege
that participation in this program was marketed nationwide
through a promotional package entitled "Energy Systems
Equipment Leasing Program." This promotional material
allegedly incorporated independent engineering appraisals of
the equipment in question, a description of the Energy Minder
Systems, a tax opinion and legal opinion prepared by Bernstein
and BBBS&R, a supporting tax opinion prepared by Larry Kars,
accounting information prepared by Touche as well as other
representations concerning the program and the relationships
between the various participants.
There are three other civil actions filed alleging fraud in
this energy leasing tax shelter scheme. The other actions are
against many of the defendants named in this case and are
pending in the Western District of Michigan and the Northern
District of Georgia. In addition, certain defendants have
filed a motion to transfer the actions to this Court for
consolidated pretrial proceedings with the Judicial Panel on
Multidistrict Litigation, pursuant to 28 U.S.C. § 1407.
There are three other actions related to the alleged
fraudulent tax scheme. First, there is an investigation by the
New York Attorney General, naming many of the same defendants,
entitled In re An Inquiry of the Attorney General of the State
of New York pursuant to Article 23-A of the General Business
Law in regard to the practice of First Energy Leasing Corp., et
al., Index No. 41457/84 ("In re First Energy"). Second, there
is a civil tax fraud action brought by the United States in the
Eastern District of New York, entitled United States v. OEC
Leasing Corp., et al., CV 84-4112. Finally, defendant First
Energy Leasing obtained a Temporary Restraining Order in New
York state court to prevent Touche Ross from interfering with
First Energy's use of Touche's Report in the marketing of the
Section 1404(a), 28 U.S.C. provides:
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 been brought.
In order to show that transfer of venue is proper, the moving
party must establish that (1) venue is proper in the
transferor court; (2) venue is proper and in the transferee
court, and (3) the transfer is for the "convenience of the
parties and witnesses, in the interest of justice."
Central States, Southeast and Southwest Areas Pension Fund v.
Brown, 587 F. Supp. 1067, 1069 (N.D.Ill. 1984). Although the
party seeking transfer bears the burden of establishing that a
transfer of venue is proper, the burden under § 1404(a) is
substantially less than a transfer under the doctrine of forum
non conveniens. Id.; see Norwood v. Kirkpatrick, 349 U.S. 29,
75 S.Ct. 544, 99 L.Ed.2d 789 (1955).
In the present case, participation in the alleged fraudulent
tax shelter scheme was sold in Chicago; two defendants reside
in Chicago; and eighteen defendants reside in the Eastern
District of New York. Thus, venue ...