United States District Court, N.D. Illinois, Eastern Division
November 2, 2004.
WILLIAM MORRIS, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
AMERICAN BIOSCIENCE, INC., AMERICAN PHARMACEUTICAL PARTNERS, INC., PATRICK SOON-SHIONG, Defendants.
The opinion of the court was delivered by: RONALD GUZMAN, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Morris and all others similarly situated brought this
action against defendants American Bioscience, Inc., ("ABI"),
American Pharmaceutical Partners, Inc., ("APP"), and Patrick
Soon-Shiong ("Soon-Shiong") for allegedly artificially inflating
APP's stock. Before the Court is ABI, APP, and Soon-Shiong's
Motion to Transfer Venue pursuant to 28 U.S.C. § 1404(a) to the
Central District of California. For the reasons set forth below,
the Court grants Defendants' motion.
Plaintiffs allege that Defendants made materially false and
misleading statements regarding the drug Abraxane, a reformulated
version of Taxol under development for the treatment of breast
cancer, in order to artificially inflate the value of APP's stock
between October 25, 2002 and September 24, 2003. (Compl. ¶ 1.) In
order to develop and test the new drug, Abraxane, the defendants
instituted clinical trials. (Id. ¶ 51.) The trials for Abraxane
consisted of three phases. (Id.) In Phase I, researchers test
the drug or treatment in a small number of people to evaluate safety, dosage, and side effects.
(Id.) In Phase II, researchers enlarge the study group in order
to determine the drug's effectiveness. (Id.) In Phase III,
researchers give Abraxane to a larger study group in order to
evaluate the drug's success and to collect information for safe
drug treatment. (Id.) It is in Phase III that the plaintiffs
allege Defendants made materially false and misleading statements
with regard to Abraxane. (Id. ¶ 16.)
On December 14, 2001, APP became a publicly traded company.
(Id. ¶ 2.) Shares began trading that day at sixteen dollars a
share. (Id.) During Phase III, APP issued press releases in
order to describe Abraxane to potential stock purchasers. (Id.
¶ 11.) These releases, dated October 25, 2002 through September
19, 2003, attempted to differentiate Abraxane from its competitor
Taxol by asserting that Abraxane did not require steroid
treatment. (Id.) On September 24, 2003, APP changed the press
release to state that "no routine steroid pretreatment" would be
needed. (Id. ¶ 17.) Plaintiffs allege that this was a material
change and that consequently stock prices fell dramatically
within two days of the September 24 press release. (Id. ¶ 18.)
Moreover, Plaintiffs allege that Defendants artificially inflated
stock prices using language that misled potential investors in
all of the press releases that pre-dated September 24, 2003.
(Id. ¶¶ 20-21.)
Defendants move to transfer this action to the Central District
of California pursuant to 28 U.S.C. § 1404(a). District courts
may transfer a civil action "[f]or the convenience of parties and
witnesses, in the interest of justice . . . to any other district
or division where it might have been brought."
28 U.S.C. § 1404(a). Consequently, transfer is proper under 1404(a) when "(1)
venue was proper in the transferor district, (2) venue and
jurisdiction would be proper in the transferee district, and (3) the transfer will serve the
convenience of the parties and the witnesses as well as the
interests of justice." United Air Lines, Inc. v. Mesa Airlines,
Inc., 8 F. Supp. 2d 796, 798 (N.D. Ill. 1998); see Coffey v.
Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986);
Plotkin v. IP Axess, Inc., 168 F. Supp. 2d 899, 901-02 (N.D.
Ill. Oct. 11, 2001). Weighing the "factors for and against
transfer necessarily involves a large degree of subtlety and
latitude, and therefore, is committed to the sound discretion of
the trial judge." Coffey, 796 F.2d at 219-20.
Here the parties do not dispute that venue is proper in both
the Central District of California and the Northern District of
Illinois. Therefore, the Court focuses on whether the convenience
of the witnesses and parties and the interests of justice weigh
in favor of transfer. The party seeking to transfer venue bears
"the burden of establishing, by reference to particular
circumstances, that the transfer forum is clearly more
convenient." Id. When making a transfer determination, the
court must consider both the private interests of the parties as
well as the public interests of the court. Medi USA v. Jobst
Inst., Inc., 791 F. Supp. 208, 210 (N.D. Ill. 1992). Factors
that the court considers in balancing the private interests
include: "(1) the plaintiff's choice of forum, (2) the situs of
material events, (3) the relative ease of access to sources of
proof, (4) the convenience of the parties and (5) the convenience
of the witnesses." Technical Concepts L.P., v. Zurn Indus.,
Inc., No. 02 C 5150, 2002 WL 31433408, at *2 (N.D. Ill. Oct. 31,
2002). The public interests include "the court's familiarity with
the applicable law, the speed at which the case will proceed to
trial, and the desirability of resolving controversies in their
locale." Von Holdt v. Husky Injecting Molding Sys. Ltd.,
887 F. Supp. 185, 188 (N.D. Ill. 1995). I. Private Factors
A. Plaintiff's Choice of Forum
In general, a plaintiff's choice of forum is given substantial
weight. Macedo v. Boeing Co., 693 F.2d 683, 688 (7th Cir.
1982). However, the plaintiff's choice of forum is not absolute.
Source Servs. Corp. v. Technisource, No. 95 C 1420, 1995 WL
493499, at *1 (N.D. Ill. Aug. 9, 1995). For example, in class
action suits the weight given to the plaintiff's choice of forum
is not substantial. Roots P'ship v. Lands' End, Inc., No. 90 C
1310, 1990 WL 186776, at *3 (N.D. Ill. Nov. 14, 1990). When a
nationwide class is alleged, less deference should be given to
the plaintiff's choice of forum because any member of the "`class
who subsequently chooses to appear might be faced with similar
inconveniences, depending on where the action proceeds.'" Id.
(quoting Blake Constr. Co. v. Int'l Harvester Co.,
521 F. Supp. 1268, 1271-72 (N.D. Ill. 1981)).
In this case, Plaintiff resides in Illinois. However, Plaintiff
alleges there are "hundreds or thousands of members in the
Proposed class" throughout the country. (Compl. ¶ 31.) Many of
these class members could be inconvenienced by litigation in the
Northern District of Illinois. Further, as discussed below, from
the evidence that the parties have submitted, it appears that the
majority of the material events took place in California and not
Illinois. Therefore, Plaintiff's choice of forum factor neither
favors nor disfavors the transfer of venue to the Central
District of California.
B. Situs of Material Events
Courts must determine whether a "lawsuit has any material
relationship to the district in which it is brought." QSN Indus.
Inc. v. Sanderson, No. 95 C 3356, 1995 WL 743751, at *5 (N.D. Ill. Dec. 13, 1995); see also Technical Concepts, 2002 WL
31433408, at *3. Plaintiff's complaint alleges that Defendants'
press releases contained false statements concerning the use of
steroids in the clinical trials of Abraxane. (Compl. ¶ 1.)
Therefore, the Court must determine whether the false statements
themselves have a material relationship to the Northern District
of Illinois. Although the complaint alleges that Defendants made
misleading statements, Plaintiff asserts that the material events
underlying this cause of action were the clinical trials
themselves, which were scattered across the country and the
world. (Id.) The Court disagrees.
Clearly, the press releases were received and purchases of
stock occurred in Illinois as well as across the country.
However, the material events at issue in this "case are not the
actual purchases of stock or the receipt of the press releases."
See Plotkin, 168 F. Supp. 2d at 903. Nor are the material
events the actual trials in which steroids were used. Rather, the
material events are the "creation and dissemination" of the press
releases, all of which occurred in the Central District of
California. See id. Defendant APP in Los Angeles, California,
together with the non-party Los Angeles-based investor relations
firm, Pondel-Wilkinson, prepared and issued the press releases.
Any decisions regarding the creation or dissemination of the
press releases occurred in California. Therefore, because the
material events occurred in the Central District of California,
this factor weighs heavily in favor of transfer.
C. Relative Ease of Access to Sources of Proof
As stated above, the challenged statements were drafted in the
Central District of California by APP with the assistance of
Pondel-Wilkenson. Defendants assert that to the extent any other
documents exist regarding the preparation or dissemination of the
press releases, this relevant evidence would be located in the
Central District of California. However, the location of documents is not a "compelling factor, given the ready
availability of photocopying and the relative ease with which
documents may be selectively shipped around the country." Bianco
v. Texas Instruments, Inc., 627 F. Supp. 154, 165 (N.D. Ill.
1985). The location of pertinent documents does not "militate for
or against transfer." Law Bulletin Publ'g Co. v. LRP Publ'ns,
Inc., 992 F. Supp. 1014, 1018 (N.D. Ill. 1998). Consequently,
the location of documents neither favors nor disfavors transfer.
D. Convenience of the Parties and Witnesses
Courts in this district view convenience of witness as a prime
factor in determining transfer. Brandon Apparel Group, Inc. v.
Quitman Mfg. Co., 42 F. Supp. 2d 821, 834 (N.D. Ill. 1999).
However, courts generally do not assign as much weight to the
convenience of employee witnesses, "as they are under the control
of the parties themselves." Coleman v. Buchheit, No. 03 C 7495,
2004 WL 609369, at *2 (N.D. Ill. Mar. 22, 2004). Rather, courts
generally look at the "nature and quality of the witnesses'
testimony with respect to the issues of the case." Schwarz v.
Nat'l Van Lines, Inc., 317 F. Supp. 2d 829, 836 (N.D. Ill.
Defendants' witnesses all reside in the Central District of
California. However, the majority of the witnesses are party
witnesses or employee witnesses. Consequently, their convenience
does not weigh for or against transfer. However, Defendant also
intends to call employees from the Los Angeles-based investor
relations firm, Pondel-Wilkenson. Taking into account relevant
testimony that could be provided by non-party witnesses, "it is
important to consider which forum will be more convenient for
those individuals." Coleman, 2004 WL 609369, at *2. The
Pondel-Wilkenson witnesses' testimony is highly relevant as it
involves the creation of the press releases at issue. Moreover, a majority of the plaintiff's witnesses reside
outside of Illinois. For example, Plaintiff intends to call
"several employees" from North Carolina responsible for setting
up, administrating and managing the clinical trials, and at least
one witness from the United Kingdom. Plaintiff only intends to
call two non-party witnesses, who are located in the Northern
District of Illinois.*fn1 (Pls.' Br. at 10-11.) Neither of
these witnesses, however, has direct information regarding the
material events of this cause of action, i.e., the
dissemination and creation of the alleged false statements.
Consequently, the convenience of the witnesses factor favors
II. Public Factors
In addition to weighing the private interests of the parties
regarding transfer, the Court considers whether the interests of
justice weigh for or against transfer. The interests of justice
component of the court's transfer analysis primarily relates "to
the efficient functioning of the courts, not to the merits of the
underlying dispute." Coffey, 796 F.2d at 221. The court must
hold "traditional notions of judicial economy, rather than the
private interests of the litigants and their witnesses" as
primary. TIG Ins. Co. v. Brightly Galvanized Prods., Inc.,
911 F. Supp. 344, 346 (N.D. Ill. 1996). Considerations include: "(1)
the speed at which the case will proceed to trial, (2) the
court's familiarity with the applicable law, (3) the relation of
the community to the occurrence at issue, and (4) the desirability of resolving
controversies in their locale." Plotkin,
168 F. Supp. 2d at 904.
As to the speed at which the case will proceed to trial,
defendants introduce data examining the times at which cases
proceed from filing to trial in both the Central District of
California and the Northern District of Illinois. (Defs.' Ex. G,
United States District Court Judicial Caseload Profile). The
difference between the two districts from filing to trial is
approximately five months in favor of the Central District of
California.*fn2 See id. However, the same data illustrates
that from filing to disposition the difference is two months in
favor of the Northern District of Illinois.*fn3 See id.
These statistics seem to suggest that although a case might find
quicker non-trial resolution in the Northern District of
Illinois, the parties might receive a trial quicker in the
Central District of California. See id. The Court is confident
that these differences would not significantly impinge on the
speed of the proceedings. Therefore, this factor neither favors
nor disfavors transfer.
The court's familiarity with applicable law is also a neutral
factor that weighs neither for nor against a transfer. This cases
hinges on a question of federal securities law which both this
court and the Central District of California are equally
competent to decide. See Technical Concepts L.P., 2002 WL
31433408, at *8.
Finally, as to the factor regarding the relation of the
community to the occurrence and the desirability of resolving
controversies in their locale, as discussed above, the Central
District of California is the situs of the material events. Although APP's
principal place of business is in the Northern District of
Illinois, the statements in question emanated from APP's offices
in the Central District of California. (Defs.' Reply at 6.)
Although it is true that clinical trials took place across the
country and the world, the allegedly fraudulent statements were
generated in and emanated from the Central District of
California. Thus, this Court finds that the Central District of
California has a "stronger interest [in] and connection" with
this case. See Plotkin, 168 F. Supp. 2d at 905. Consequently,
this factor favors transfer.
In sum, the Court holds that transfer to the Central District
of California is proper. For the reasons stated, both the private
interests and the public interests weigh in favor of transfer.
Consequently, the Court grants defendants' motion to transfer the
case pursuant to 28 U.S.C. § 1404(a).*fn4
For the foregoing reasons, the Courts grants defendant's motion
to transfer venue [doc. 43-1]. This case is hereby transferred to
the Central District of California.