IN RE: Stirling Homex Corporation Securities Litigation

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PS BEFORE THE JUDICIAL PANEL = =ON Ea
= MULTIDISTRICT LITIGATION en
IN RE STIRLING HOMEX ) :
SECURITIES LITIGATION ) DOCKET NO. 126
ORDER
The Panel having found, upon the basis of the papers
submitted and the hearing held, that the actions listed on the
attached Schedule A involve common questions of fact and that
transfer of these actions to the Southern District of New York
for coordinated or consolidated pretrial proceedings would serve
the convenience of the parties and witnesses and would further
the just and efficient conduct of the litigation,
IT IS ORDERED that all actions on the attached Schedule
A pending in districts other than the Southern District of New York
be, and the same hereby are, transferred to the Southern District
of New York and, with the consent of that court, assigned to the
Honorable Dudley B. Bonsal for coordinated or consolidated pre-
trial proceedings, pursuant to 28 U.S.C. §1407, with the actions
L pending in that district and listed on Schedule A.
A full opinion and order will be filed hereafter.
FOR THE PANEL:
Alfred P. Murrah
Chairman

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SCHEDULE A DOCKET NO. 126
Qo DISTRICT OF COLORADO
Arthur E. Risley v. Merrill Lynch, Pierce, Civil Action
Fenner & Smith, Inc. No. C-4641
DISTRICT OF MARYLAND
Frank R. Cancelotta, Jr. v. Merrill Lynch, Civil Action
Pierce, Fenner & Smith, Inc. No. 72-1186-H
EASTERN DISTRICT OF MICHIGAN
Joseph Gittleman, et ux. v. Merrill Lynch, Civil Action
Pierce, Fenner & Smith Inc. No. 39055
DISTRICT OF MINNESOTA
Terry F. Tobeck, etc. v. Merrill Lynch, Civil Action
Pierce, Fenner & Smith, Inc. et al. No. 4-73 Civ. 22
WESTERN DISTRICT OF MISSOURI
Rolf Stanford v. Merrill Lynch, Pierce Civil Action
Fenner & Smith Inc. No. 20613-3
L SOUTHERN DISTRICT OF NEW YORK
Gregory Jezarian, et al. v. Frank Csapo, Civil Action
et al. No. 72 Civ. 1671
Daniel C. Aguirre v. Merrill Lynch, Pierce Civil Action
Fenner & Smith, et al. No. 72 Civ. 4744
WESTERN DISTRICT OF NEW YORK
H. E. Jones, et al. v. David Stirling, Jr., Civil Action
et al. No. 1972-579
SOUTHERN DISTRICT OF OHIO
Richard DeCoursey, et al. v. Stirling Civil Action
Homex Corp., et al. No. 8632
EASTERN DISTRICT OF PENNSYLVANIA
David Steinberg v. Merrill Lynch, Pierce, Civil Action
Fenner & Smith, Inc., et al. No. 72-234-1

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BELTIDISTRICT Hi
LC) BEFORE THE JUDICIAL PANEL Fagg TU	ON -
MULTIDISTRICT LITIGATION OC 28 p77
IN RE STIRLING HOMEX CORPORATION ) DOCKET NO. Legit D.50virnSECURITIES LITIGATION 0) VLERK OF THE PIE
) } Plaiaie
Frank G. Raichle, etc. v. David ) 72 sen
Stirling, et al., W.D. New York, ) TE SEAS EE .
Civil action No. 77-28 ) a ‘) pfOPINION AND ORDER
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD,
EDWIN A. ROBSON, JOSEPH S. LORD, III*, STANLEY A. WEIGEL,
ANDREW A. CAFFREY, AND ROY W. HARPER, JUDGES OF THE PANEL.
PER CURIAM
: The Panel, pursuant to 28 U.S.C. §1407, has pre-
viously transferred several actions in this litigation
® to the Southern District of New York and, with the
consent of that court, assigned them to the Honorable
Dudley B. Bonsal for coordinated or consolidated pretrial
1/
proceedings. The complaints in the centralized
actions allege violations of the federal securities laws
in connection with the sale of stock of Stirling HomeX
Corporation (Stirling), a company presently engaged in Chapter X
bankruptcy proceedings	in the Western District of New York.
In the centralized actions, Stirling, certain officers and
directors of Stirling, and its underwriters	and accountants are
charged with illegally misrepresenting or omitting material
information about Stirling to securities purchasers. Claims
® x Judge Lord took no part in the decision of this matter.
i/ 388 F. Supp. 567 (J.P.M.L. 1975); 388 F. Supp. 570
(J.P.M.L. 1975); and 405 F. Supp. 314 (J.P.M.L. 1975).

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® in some of those actions also allege that certain individual
defendants sold Stirling stock on the basis of material
information not disclosed to the general public. | CL
The above-captioned action (Raichle) was brought by
Stirling's bankruptcy trustee against certain former officers
and directors of Stirling, all of whom are also defendants
in actions in the transferee district. The defendants in
Raichle are charged with (1) fraudulently selling Stirling
stock while in the possession of material, undisclosed in-
formation concerning losses incurred by the company, (2)
misappropriating corporate funds by depositing money in
: bank accounts for the use of labor leaders; (3) impairing:
capital by declaring and paying dividends on preferred
@ stock; and (4) voting themselves excessive salaries and
using corporate assets for private use.
Because Raichle appeared to involve questions of fact
common to actions previously transferred in this litigation,
the Panel issued an order conditionally transferring Raichle
to the Southern District of New York for inclusion in the
Section 1407 proceedings pending there. Plaintiff in.
Raichle has moved the Panel to vacate the order.” :
We find that this action raises questions of fact
common to the actions previously transferred to the Southern
District of New York and that its transfer to that district
will best serve the convenience of the parties and witnesses
® 2/ see Rule	9, R.P.J.P.M.L., 65 F.R.D. 253, 259-60 (1975).

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. ’ _ 3 _
and promote the just and efficient conduct of the liti-
) ® gation. |
Stirling's trustee, the plaintiff in Raichle, argues ’
in opposition to transfer of Raichle that: (1) there are
ho shared questions of fact between Raichle and the actions
in the transferee district because Raichle relates to the
: duty of conduct owed by the defendants to the corporation where-
as the previously transferred actions relate to the duties owed
by the defendants in Raichle to Stirling's shareholders;
(2) the Western District of New York is a more convenient
forum, since it is where the trustee and Stirling's corporate
headquarters are located; (3) transfer to the Southern |
District of New York would delay progress of Raichle
@ | because the trustee has not participated in the prior
pretrial proceedings in the Southern District of New York
and because discovery there will focus on many issues un-
related to Raichle; and (4) in keeping with the purpose and
intent of the Bankruptcy Act, exclusive jurisdiction in all
actions directly relating to Stirling and the management of
its assets should remain in the Western District of New York.
We are persuaded, however, that Raichle should be
transferred to the Southern District of New York. Raichle
and the actions in the transferee district clearly involve
common questions of fact concerning the conduct of the
individual defendants with respect to the operation of
®

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: _a :
SEE i
® Stirling and the sale of Stirling stock. In light of this
common factual core, the fact that Raichle and the actions ’
in the transferee district are based on different theories :
of liability does not affect the desirability of transfer
under Section 1407. See In re Air Crash Disaster in the
. Ionian Sea on September 8, 1974, 407 F. Supp. 238, 239-40
(F.p.M.L. 1976). Thus, transfer of Raichle for inclusion
in the coordinated or consolidated pretrial proceedings will
prevent duplicative discovery, eliminate the possibility of |
conflicting pretrial rulings and otherwise streamline the |
efforts of the parties, the witnesses and the judiciary.
Of course, transfer of an action under Section 1407 :
does not mean that all discovery must take place in the Bh
C transferee district. Depositions of witnesses may still
~ take place where they reside, see Fed. R. Civ. P. 45(d) {2),
and any party may always request an order from the transferee
court that its documents be inspected at its offices or at
another convenient location in or near the city in which
it is located, see Manual for Complex Litigation, Part I,
§2.50 (rev. ed. 1977). |
We do not believe that the trustee in Raichle will exper-
ience delay as a result of his participation in the coordinated
or consolidated pretrial proceedings in the Southern District
of New York. While discovery heretofore completed	in the
previously transferred actions may be made applicable to
® Raichle by utilizing the procedures recommended in the Manual,

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> . ' | ) .
® see id. at Part I, §3.11, the trustee remains free to
' move before the transferee judge regarding any reasonable
discovery needs. See In re New York Municipal Securities
Litigation, Y29r. supp. 207 Aas dem. filed |
Nov. 1, 1977) (siip—-epinion	-at 6-7). Moreover, the
trustee need not participate in discovery unrelated
to Raichle, see, e.g., Manual, supra, at Part I, §2.31,
and, of course, the transferee judge has broad discretion .
to design	a pretrial program which will allow discovery
on any unique issues to proceed concurrently with discovery
on the common issues. See In re Republic National-Realty :
Equities Securities Litigation, 382	F. Supp. 1403, 1405-06
(J.P.M.L. 1974). .
® | While there may be circumstances where ‘the fact a
that the action is one by a trustee in bankruptcy may
militate against a transfer so’ that the administration
of the estate should not be unduly delayed, this is
not such a case. See generally In re Falstaff Brewing
Corporation Antitrust Litigation, 434 F. Supp. 1225,
| 1229-30 (J.P.M.L. 1977). See also In re Franklin National
Bank Securities Litigation, 393 F. Supp. 1093, 1095-96
(J.P.M.L. 1975). The Panel's statutory mandate is to
weigh the interests of all parties and to consider multi- |
district litigation asa whole in light of the purposes of
Section 1407. In re Library Editions of Children's Books,
® 297 F. Supp. 385, 386 (J.P.M.L. 1968). We note that the
effect of the bankruptcy laws on pretrial proceedings in

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® Raichle is entirely a matter to be resolved by the trans-— :
feree court, the bankruptcy court and the parties. See |
In re Franklin National Bank Securities Litigation, supra,
393 F. Supp. at 1095-96; In re Stirling Homex Corporation
. Securities Litigation, supra, 388 F. Supp. at 5609.
IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C. §1407,
the action entitled Frank G. Raichle, etc. v. David Stirling,
et al., W.D.N.Y., Civil Action No. 77-28, be, and the same
hereby is, transferred to the Southern District of New York
and, with the ccnsent of that court, assigned to the
Honorable Dudley BP. Bonsal for coordinated or consolidated
proceedings with the actions already pending there in MDL-126.
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