IN RE: Kauffman Mutual Fund Actions

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] : BEFORE THE JUDICIAL pan COL
| MULTIDISTRICT LITIGATION . co )	Ji	21 er
IN RE KAUFFMAN MUTUAL FUND ACTIONS ) DOCKET Noy. 78,
OPINION AND ORDER
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
In 1968 Joseph B. Kauffman filed an action in the
United States District Court for the District of New Jersey
against sixty-five (65) mutual funds, thirty-eight (38) invest-
ment advisers managing those funds, thirty-seven (37) directors
affiliated with both the funds and the investment advisers,
® and the Investment Company Institute, the trade associationh representative for the mutual fund industry. The complaint
consisted of three counts. Count 1 was brought for violations
of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2,
and alleged a conspiracy among the defendants to fix the sche-
dule of management fees charged the funds and to refrain from
competing for the business of externally-managed mutual
funds or of investment advisers. Count 2 alleged violation
of the Investment Company Act, of 1940, 15 U.S.C. §§ 80a-1 to -52,
in connection with the brokerage practices of "give-ups" and
*¥Although Judge Alfred P. Murrah was unable to attend the
hearing, he has, with the consent of the parties, participated
in this decision.
®

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n 4 wl/ . .
reciprocals, "= Count 3 was brought under the Securities
Exchange Act of 1934, 15 U.S.C. §§ 78a ~—77hh, the Invest-
ment Advisers Act of 1940, 15 U.S.C. §§ 80b-1 to -21, and
the Investment Company Act and alleged that the defendants
had issued certain proxy statements and other announcements
and reports which misstated and/or failed to disclose material
facts concerning the alleged antitrust and Investment Company
Act violations.
The district court allowed Kauffman to represent a
class composed of all shareholders of the defendant funds,
as well as representing all the funds derivatively. On
appeal, however, Kauffman's standing was limited to deriva-
tive claims on behalf of the four funds in which he was a
@ shareholder. Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727
(3d cir. 1970). Kauffman now asserts the antitrust allega-
tions of Count 1 on behalf of those four funds against the
other defendants and asserts the securities law counts
against those four funds.
After the decision on appeal, the action was remanded
to the District of New Jersey where the great majority of
1/ "Give-ups" are defined in paragraph 40 of plaintiff's
uniform complaint as occurring where, pursuant to agreement,
brokers executing portfolio transactions for a fund at the
direction of an investment adviser execute such transactions
for less than the commission paid them, giving the balance
to other non-executing brokers. "Reciprocals," are defined
by plaintiff in paragraph 41 as the providing of investment
advisory and management services by brokers not executing
portfolio transactions either for no charge or at a discount
o after the allocation to them of portions of commissionsearned by executing brokers.

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| defendants moved for dismissal on venue grounds. It appears
that Kauffman agreed not to contest these motions and con-
sented to the transfer of the action, under 28 U.S.C. §1406 (a),
to the district courts previously designated by the defendants
as ones wherein the action could have been brought. The
district court severed the alleged securities law violations
of Counts 2 and 3 from the antitrust claims of Count 1 and
treated them separately for purposes of transfer. The result
was the transfer of the antitrust action to nine additional
districts and the separate transfer of the securities law
action to two districts (in which antitrust actions were also
pending).
- After the transfers became effective, Kauffman moved
o the Panel for transfer of the ten antitrust and two securities
law actions to the Southern District of New York under 28 U.S.C.
§1407. He asserts that the identical allegations of the ten
antitrust complaints raise common questions of fact con-
cerning the existence of the alleged conspiracy among the
defendants, including the Investment Company Institute, and
the fraudulent concealment of that conspiracy. The securities
law actions are said to be a necessary part of the litigation
because they involve common defendants and rest, in part,
on proxy law violations concerning failure to disclose the
alleged antitrust violations.
All defendants responding to the motion have opposed
@ transfer, urging two basic contentions. First they deny the

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. Ca
é existence of sufficient questions of fact common to both theantitrust and securities law actions to justify coordinated pre-
trial proceedings. Second, they urge that despite the obvious
common questions of fact in the antitrust actions Kauffman is
precluded from seeking their transfer under Section 1407 by
his prior conduct. Although we find the defendants' argument
against inclusion of the securities law actions compelling, we
deem it necessary, absent a voluntary plan for coordination of
discovery, to transfer the antitrust actions for coordinated or
consolidated pretrial proceedings and have concluded that the
District of Massachusetts is the most appropriate transferee
district.
The defendants have convincingly argued that, after
® the appellate decision limiting Kauffman's standing, the two
securities law actions involve only the four mutual funds
in which Kauffman holds stock. Obvious support for this
contention is provided by the fact that the district court
severed the antitrust counts from the securities law counts
in its transfer under Section 1406(a). The fact that the
defendants in these two actions are also among the parties
in the antitrust counts and that one of the alleged securities
law violations was their failure to disclose the alleged
antitrust violations is not sufficient common factual back-
ground to tie the otherwise quite different groups of cases
together. In re Scotch Whiskey Antitrust Litigation, 302
F. Supp. 239 (J.P.M.L. 1969).
@

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é The defendants' opposition to transfer of the anti-
trust cases, however, is unconvincing. They concede the existence
of common questions of fact and apparently acknowledge the
potential for duplication of effort and judicial inconsistency.
At the hearing on this matter, it was suggested to the defendants
that voluntary coordination of discovery by agreement of the
defendants might be a workable alternative to transfer by the
Panel and the defendants were given an opportunity to work out
such a plan and submit it to the Panel. The defendants have not
used the opportunity and apparently choose to rely on the arguments
in opposition to transfer advanced in their briefs and at the
hearing.
The defendants advance several arguments against transfer
® of the antitrust cases to a single district. They say that it
would be unfair to order transfer of all defendants to one district
for pretrial proceedings when defendants have expended considerable
time and effort in defeating Kauffman's attempt to sue all defend-
ants in one district. In essence, their argument is that Kauffman
should not be able to secure from the Panel, under 28 U.S.C. §1407,
what the venue provisions of federal law otherwise prohibit. How-
ever, the Panel's discretion under Section 1407 is not limited
by venue considerations andthe fact that defendants may not all
be amenable to suit in the same jurisdiction does not prevent their
transfer to a single district for pretrial proceedings where the
prerequisites of Section 1407 are otherwise satisfied.
_

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@ Defendants also argue that Section 1407 should not be
used to further litigation of questionable merit. Kauffman's
complaint must be presumed meritorious at this stage of the
litigation, however. The framers of Section 1407 did not con-
template that the Panel would decide the merits of the actions
before it and neither the statute nor the implementing Rules
of the Panel are drafted to allow for such determinations.
If defendants are correct in their contention that the complaints
are unmeritorious, the most fair and efficient way for them to
obtain dismissal is to place the question before a single judge,
rather than allowing ten groups of defendants to proceed separ-
ately over the same common factual background before ten different
[] judges. Transfer will also be beneficial if the actions proceedbeyond preliminary motions to dismiss for it seems certain that
common discovery requests will produce common objections and
that the common allegations of the complaint will produce common
defenses. Transfer to a single district for pretrial proceedings
is the only way in which duplication of effort by court and
| counsel and possible inconsistent judicial treatment can be avoided.
Plaintiffs have proposed that the actions be transferred
to the Southern District of New York and a number of defendants
have agreed to this choice in the event transfer is ordered.
We have concluded, however, that all antitrust actions should be
transferred to the District of Massachusetts. Fifty-one (51) of
the defendants are said to have their principal offices in the
J

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ponpeeTEn	TURRET a |
® Southern District of New York and forty-four (44) in the District
of Massachusetts. The remaining thirteen (13) defendants are
from the eight other districts and will find it no more incon-
venient to travel to Massachusetts than to New York. The
‘choice between Massachusetts and New York is relatively close
in terms of convenience to the parties.
The deciding factor in our estimation is the more
current docket in the District of Massachusetts. The most re-
cent statistics on that subject indicate a median interval from
issue to trial of fifteen months in all trials:	in the District
of Massachusetts and of thirty months in all trials in the
* Southern District of New York. Annual Report of the Director
é of the Administrative Office of the United States Courts (1971),Table C-10. In this complex litigation, Section 1407's goal of
expetition will best be served by transfer to the District of
Massachusetts.
| IT IS THEREFORE ORDERED that all actions listed on the
attached Schedule A pending in districts other than the District
of Massachusetts be, and the same hereby are, transferred to the
District of Massachusetts and, with the consent of that court,
are hereby assigned to the Honorable Raymond J. Pettine, sitting
in the District of Massachusetts, for coordinated or consolidated
pretrial proceedings pursuant to 28 U.S.C. §1407.
IT IS FURTHER ORDERED that the motion to transfer the
actions listed on Schedule B be, and hereby is, DENIED.
®

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DOCKET NO. 78 SCHEDULE A
DISTRICT OF MASSACHUSETTS |
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71-1408-G
SOUTHERN DISTRICT OF NEW YORK
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71 Civ. 3009
NORTHERN DISTRICT OF ILLINOIS
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71 C 1652
DISTRICT OF COLORADO
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. C-3240
DISTRICT OF COLUMBIA
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 1381-71
® DISTRICT OF MARYLAND
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71-725
DISTRICT OF MINNESOTA
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 3-71-1776
CENTRAL DISTRICT OF CALIFORWIA
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71-1695-WPG
NORTHERN DISTRICT OF CALIFORNIA
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71-1346-SC
DISTRICT OF NEW JERSEY
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 1348-68

Case MDL No. 78 Document 2 Filed 04/30/15 Page 9 of 9
DOCKET NO. 78 SCHEDULE B
é DISTRICT OF MASSACHUSETTSJoseph B. Kauffman, etc. v. Fidelity Trend Fund, Inc., Civil Action
et al. 71-1407-G
SOUTHERN DISTRICY OF NEW YORK
Joseph B. Kauffman, etc. v. The Dreyfus Fund, Inc., Civil Action
et al. 71 Civ. 3256