IN RE: Value Line Special Situations Fund Litigation

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a BEFORE THE JUDICIAL PANEL ~~ © . PAMULTIDISTRICT LITIGATION |REET EG Fab
® IN RE VALUE LINE SPECIAL ) RE
SITUATIONS FUND LITIGATION ) DOCKET NO. 75
OPINION AND ORDER oo oo
BEFORE ALFRED P. MURRAH*, CHAIRMAN AND JOHN MINOR WISDOM,
EDWARD WEINFELD, EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH
S. LORD, III, AND STANLEY A. WEIGEL, JUDGES OF THE PANEL
PER CURIAM
This litigation is composed of three stockholder and derivative
actions growing out of an earlier action brought by the SEC against
the agents and investment advisers of Value Line Special Situations
Fund, Inc. (VLSSF). In its complaint the SEC alleged that defendants
Arnold Bernhard & Co., Value Line Appraisals, Inc., Value Line
Securities, Inc. and related defendants had damaged VLSSF by their
® activities in finding mergers, acquisitions and financing for, and
in accepting fees from issuers whose unregistered securities were ’
purchased for VLSSF. A final consent judgment of permanent injunc— !
tion was entered against all but one of the defendants in May of
1971. After the filing of the SEC action, plaintiffs Schulsselberg
and Mendelsohn filed their actions in the Southern District of New }
York and the Eastern District of Pennsylvania respectively. The
| third action, brought by plaintiff Dacey in 1969 in the Southern
District of New York, originally involved only allegations of the
improper valuation of restricted stock held by VLSSF. After the |
filing of the SEC complaint	the Dacey complaint was amended to
T% Although Judge Murrah was not present at the hearing he has,
® with the consent of all parties, participated in this decision.

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include the allegations common to the other complaints concerning
® the activities of the managers and agents of the fund.
The common defendants in these three cases have moved the
Panel for transfer of the Mendelsohn action from the Eastern
District of Pennsylvania to the Southern District of New York for
coordinated ox consolidated pretrial proceedings with Schlusselberg
and Dacey. Plaintiffs in the New York actions are agreeable to
transfer of the Mendelsohn case to their own district but plain-
tiff Mendelsohn objects. Our review of the pleadings and the
| hearing on this question has convinced us that the case should be
transferred to the Southern District of New York.
All of the plaintiffs clearly place great reliance on the
prior SEC proceeding and there are certainly extensive common
factual issues in these cases. It also seems clear that discovery
® on these common issues will be centered in the Southern District
of New York, where the corporate and individual defendants, their
documents and many of the prospective non-party witnesses are
located.
An additional reason for transfer is presented by the con-
| flicting claims of class representation asserted in the Dacey
and Mendelsohn complaints. In the Dacey complaint, which contains
| the non-common count concerning the improper valuation of securities,
the plaintiff seeks to represent all VLSSF shareholders. In one
count of his complaint, Mendelsohn seeks to represent a class
composed of all purchasers of shares of VLSSF and other funds
managed by defendants. Unless these conflicting overlapping
® |

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claims of class representation are presented to one judge,
¢ inconsistent determinations might result.
Plaintiff Mendelsohn seeks to minimize this compelling
case for transfer of his action by pointing to an earlier denial
of defendants' motion for transfer of his case under 28 U.S.C.
§1404 (a). That motion was denied without prejudice on the con-
dition that Mendelsohn coordinate his discovery efforts with
those of plaintiff Schlusselberg in New York.l/ Correspondence
between counsel filed with the Panel, however, indicates that
attempts at informal coordination has been singularly unsuccessful.
This fact serves to support our conclusion that transfer is
necessary. The plaintiffs have apparently made no attempt to
keep each other informed of their discovery efforts and defendants
® have refused to cooperate in providing this information. Morever,even if coordination of discovery were possible here, inconsistent
pretrial class action rulings still might result.
Mendelsohn also opposes transfer on the grounds that these
three cases are not sufficiently complex to merit the Panel's
attention. We think the already-described commonality of fact
issues, conflicting class representation claims and apparent
inability of counsel to coordinate proceedings demonstrate sufficient
complexity to make these actions appropriate for treatment under
Section 1407. These actions may not be so complex in their factual
backgrounds as the IBM Litigation, but we think that because of the
enumerated factors transfer will produce "a substantial saving of
I/Plaintiff	Dacey had, at that time, not yet amended his complaint
® To include the common allegations. oo

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® time and effort for court and counsel" with "minimal inconvenienceto the parties." In re CBS Licensing Antitrust Litigation,	328 F.
Supp. S11 (J.P.M.L. Jan. 20, 1971); In re Willingham Patent
Litigation, 322 F. Supp. 1018 (J.P.M.L. 1971).
IT IS THEREFORE ORDERED that the defendants' motion to
transfer be and the same hereby is GRANTED and that the action
listed on the attached Schudule A pending in the Eastern District
of Pennsylvania be and the same hereby is transferred to the
Southern District of New York and assigned to the Honorable
Charles H. Tenney for coordinated or consolidated pretrial pro-
ceedings witn the other actions	on Schedule A pursuant to 28
U.S.C. §1407.
®
J |

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oo. : 5- "ee
DOCKET NO. 75 SCHEDULE A
® EASTERN DISTRICT OF PENNSYLVANIA
Jack R. Mendelsohn, etc. Vv. Arnold Bernhard civil Action
& Co., et al. No. 70-2885
SOUTHERN DISTRICT OF NEW YORK
Claire Schlusselberg v. Arnold Bernhard Civil Action
& Co., et al. No. 70 Civ. 2823
Norman F. Dacey, et al. v. The Value Line Civil Action
Special Situation Fund, Inc., et al. ~ No. 69 Civ. 699