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WAITES v. FIRST ENERGY LEASING CORP.

March 28, 1985

WILLIAM E. WAITES AND RICHARD G. PINKETT, INDIVIDUALLY AND ON BEHALF OF A CLASS OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
FIRST ENERGY LEASING CORP., ET AL., DEFENDANTS. AND BRUCE E. KAHLER, PLAINTIFF, V. FIRST ENERGY LEASING CORP., ET AL., DEFENDANTS.



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

ORDER

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.

I. FACTS

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 securities.

II. DISCUSSION

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).

A. Venue

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 ...


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