The opinion of the court was delivered by: Richard Mills, District Judge:
Alas, we must transfer to our sister court in New York.
This case involves a dispute between investors, an investment
manager, and a brokerage house. During the 1980s, the Plaintiffs,
primarily physicians, office profit sharing plans, and pension
trusts, invested in two partnerships, which in turn invested in
Delta Capital Management, a limited partnership. Plaintiffs
allege that although Delta held itself out as fundamentally
conservative, it, unbeknownst to its investors, shifted from a
conservative investment strategy to a high risk strategy. The
focus of this strategy shift was massive investment in First
Executive, a company which eventually collapsed. Plaintiffs claim
that Delta conspired with its broker, Morgan Stanley, and
unspecified others to make First Executive seem to be something
it was not: a desirable takeover target. This was done, claim the
Plaintiffs, by stock churning and other deceptive practices.
As to the parties, Plaintiffs were partners of Springfield
Associates or Springfield Retirement Associates. These two
partnerships were limited partners in Delta. Delta was a Delaware
limited partnership with offices in New York. Morgan Stanley is a
Delaware Corporation with its principal place of business in New
York, New York. John LeFrere is either a Florida or New York
resident and a general partner of Delta Capital Management, L.P.
(Delta), The Estate of William H. Gregory III succeeds William H.
Gregory III, a former general partner of Delta.
Morgan Stanley moves for transfer of venue and asserts that no
substantial acts or omissions giving rise to the claims against
it occurred in this district. Plaintiffs, to successfully oppose
Morgan Stanley's motion, must prove that venue is proper in this
Plaintiffs' lengthy complaint contains very few factual
allegations regarding Morgan Stanley's*fn1 conduct. The section
of the complaint entitled "Course of Wrongful Conduct" describes
Morgan Stanley's alleged role in the scheme to defraud.
According to the Complaint, Morgan Stanley was engaged in the
business of trading securities for LeFrere and his associates.
Morgan Stanley "and/or its agents" made recommendations to
LeFrere and his associates regarding trading in accounts alleged
to be the Plaintiffs'. Morgan Stanley had actual or constructive
knowledge of Plaintiffs' desire to invest conservatively in a
diversified portfolio. Morgan Stanley knew that LeFrere, Gregory,
and Delta were unlicensed to act as either investment advisors,
an investment company, or an introducing broker-dealer. Morgan
Stanley prepared account statements that indicated numerous
trades in First Executive securities over repeated one-month
intervals. Morgan Stanley did not disclose to Plaintiffs various
pieces of information regarding Delta, LeFrere and First
Morgan Stanley submitted an affidavit with its motion to
transfer. This affidavit states that Morgan Stanley acted as a
prime broker for Delta. Prime brokers provide a variety of
services for large investors who deal with several
broker-dealers. Morgan Stanley served Delta through its New York,
New York, office.
Plaintiffs argue that venue is proper in this district because
"a substantial part of the events or omissions giving rise to the
claim occurred" in this district. 28 U.S.C.
1391(a)(2). Morgan Stanley moves for transfer pursuant to
28 U.S.C. § 1406(a), which provides: "The district court of a
district in which is filed a case laying venue in the wrong
division or district shall dismiss, or if it be in the interest
of justice, transfer the case to any district or division in
which it could have been brought." When a defendant challenges
venue, the plaintiff bears the burden of establishing that its
chosen venue is proper. Sheppard v. Jacksonville Marine Supply,
Inc., 877 F. Supp. 260, 269 (D.S.C. 1995); Reed v. Brae Railcar
Management, Inc., 727 F. Supp. 376, 377 n. 1 (N.D.Ill. 1989). The
purpose of general venue statutes*fn2 is to protect defendants
from litigation in inconvenient fora. Leroy v. Great Western
United Corp., 443 U.S. 173, 183-84 (1979). But see Carty v.
Health-Chem Corp., 567 F. Supp. 1 (E.D.Pa. 1982) (discussing
venue under the Securities Exchange Act of 1934, which requires
only an act in furtherance of an unlawful scheme in the forum).
Plaintiffs must, therefore, show that venue is proper as to all
defendants and all claims. Jarrett v. North Carolina,
868 F. Supp. 155, 158 (D.S.C. 1994); Payne v. Marketing Showcase,
Inc., 602 F. Supp. 656, 658 (N.D.Ill. 1985) ("[W]here multiple
causes of action are joined, venue must be proper as to each
one."). Despite the venue statute's recent revision,
Pub.L.Judicial Improvements Act of 1990, No. 101-650, Title III,
§ 311, which replaced venue based on where the cause of action
arose with venue based on substantial acts, venue must still be
established as to each defendant. See Sheppard, 877 F. Supp. at
269, Shuman v. Computer Associates International, Inc.,
762 F. Supp. 114, 115 (E.D.Pa. 1991). But see Magic Toyota, Inc. v.
Southeast Toyota Distributors, Inc., 784 F. Supp. 306, 317 n. 19
(D.S.C. 1992) (asserting that by shifting the emphasis from
contacts to events, the venue statute's amendment supplanted the
rule that venue must be proper as to each defendant). The purpose
of the venue statute is still to protect defendants, but the
statute does not protect defendants if it allows plaintiffs to
establish venue as to several defendants simply because venue is
proper there as to one defendant.
Courts decide questions of venue largely on the basis of the
pleadings. Because venue and personal jurisdiction are similar,
it is appropriate to apply the same evidentiary standard to both
issues. Reed, 727 F. Supp. at 377 n. 1. "The allegations in
[Plaintiffs'] complaint are to be taken as true unless
controverted by the defendant's affidavits; and any conflicts in
the affidavits are to be resolved in [Plaintiffs'] favor."
Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). The Court
is not obliged, however, to treat all allegations as true, no
matter how speculative, conclusory, or lacking of necessary
supporting factual allegations. Matter v. Williams, 832 F. Supp. 244,
246 (C.D.Ill. 1993). Instead, the Court's function in
deciding factual questions related to venue is similar to its
function when reviewing a motion to dismiss. To survive a motion
to dismiss, a complaint must allege a factual basis for its legal
claims. Cushing v. City of Chicago, 3 F.3d 1156, 1161 n. 5 (7th
Cir. 1993) ("`[C]onclusory allegations unsupported by any factual
assertions will not ...