IN RE: Scientific Control Corporation Securities Litigation

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BEFQRE THE JUDIC EL JUBICEL PEL
MULTIDISTRICT LITIGATION En
IN RE SCIENTIFIC CONTROL ) DocKET JUL 2 tanhCORPORATION SECURITIES LITIGATION ) PLR, © HOWARD
CLERX GF THE PANEL
- 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
This litigation consists of three actions against
Merrill Lynch, Pierce, Fenner & Smith, Inc. in three different
districts: the Northern District of Texas, the Southern District
of New York and the Western District of Kentucky. The complaints
in these actions contain allegations that Merrill Lynch violated
the anti-fraud provisions of the federal securities laws by
recommending and selling the common stock of Scientific Control
Corporation. Plaintiffs in the Texas and New York actions purport
to represent a nationwide class composed of all persons who pur-
" chased Scientific common stock from Merrill Lynch; plaintiffs in
the Kentucky action purport to represent a class	of persons -
who purchased the stock ‘from Merrill Lynch's Louisville office.
Plaintiffs in the Texas action initially moved the
Panel for an order transferring all actions to the Southern
District of New York for coordinated or consolidated pretrial
proceedings pursuant to 28 U.S.C. §1407. Defendant Merrill Lynch
filed a cross-motion to transfer the actions to the Northern
District of Texas. The Texas plaintiffs later withdrew their
* 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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motion before the Panel because	they had filed a motion to dismiss
their Texas action. Y In light of the pendency of Merrill Lynch's
cross~motion, however, the Texas plaintiffs maintain the position
that this litigation belongs in the Southern District of New York.
Plaintiffs in the New York and Kentucky actions also favor transfer
of all actions to the Southern District of New York. We find that
all three actions involve common questions of fact and that their
transfer to the Southern District of New York under Section 1407
will best serve the convenience of the parties and witnesses and
promote the just and efficient conduct of the litigation.
All parties agree that these actions are virtually
identical and that they should be transferred to a single district
pursuant to Section 1407 in order to avoid duplicative discovery
and inconsistent Rule 23 class determinations and other pretrial
rulings. The only disputed issue is the selection of the appropri-
ate transferee forum.
In favoring the Northern District of Texas, defendant
Merrill Lynch argues that the allegations in these actions focus
on Scientific's financial condition and Merrill Lynch's knowledge
thereof during the period that Merrill Lynch was recommending
the stock. It contends that the records and personnel relevant
to these matters are located at Scientific's home office in the
‘Northern District of Texas. Plaintiffs, on the other hand, favor
Ee a Le Th a ths Rosascourt	for decision.”	as tion is still pending, c
rc Teacon to delay sur decision to sonpier Chat scrion toNon plaintiffs motion once it has been fully presentedfor decision.

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the Southern District of New York and assert that this litigation
centers around the activities at Merrill Lynch's headquarters
in New York.
We conclude that the Southern District of New York is
the most appropriate transferee forum. Merrill Lynch is the only
defendant in each action and it is clear that plaintiffs' discovery
will focus primarily upon defendant's documents and witnesses
located in New York City. And the New York court has moved
steadily with the pretrial of the action pending there and, as
a result, the New York action is at a more advanced stage than
either the Kentucky or Texas actions.
In addition, when a determination pursuant to 28 U.S.C.
§1404 (a) has preceded our decision under Section 1407, we have
often shown deference to the district judge's decision. See,
e.g., In re Hanover, New Hampshire,	Air Disaster Litigation,
314 F. Supp. 60, 63 (J.P.M.L. 1970);	In re Master Key Antitrust :
Litigation, 320 F. Supp. 1404, 1406 (J.P.M.L. 1971); In re Yarn
Processing Patent Validity Litigation, 341 F. Supp. 376,
381-82 (J.P.M.L. 1972). In the context of this litigation,
Judge Harold R. Tyler, Jx. has denied two motions by Merrill
Lynch to transfer the New York action to the Northern District
of Texas under Section 1404(a). In his second ruling, Judge
Tyler emphasized that:

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a 4 hat
(TYhe focus of this action is upon the
internal workings, knowledge and repre-
sentations of Merrill Lynch in New York
City. New York is Merrill Lynch's
principal place of business, the situs
of its securities research division and
its "computer booth®™, that section of
the research division plaintiffs allege
to have been charged with the investigation .
of Scientific and responsible for Merrill
Lynch policy recommending Scientific to
its customers after facts were available
to it as to Scientific's unfortunate
condition.= Key witnesses, therefore,
are New York based.
Mascolo	v. Merrill Lynch, Pierce, Fenner
-& Smith, Tnc., CCH FED. SEC. L. REP.
194,054, at 94,248 (S.D.N.Y. July 6, 1973).
Furthermore, the Securities and Exchange Commission
has commenced an administrative proceeding against Merrill Lynch
in New York which involves allegations of misconduct similar to
those asserted by the private plaintiffs in this litigation.
The possibility of coordinating the plaintiffs' discovery and
the SEC investigation to ensure a just and expeditious resolution
of the charges against Merrill Lynch and minimize the inconvenience
to its witnesses is also a factor favoring the Southern District
of New York as the transferee district.
IT IS THEREFORE ORDERED that all actions listed on
the attached Schedule A pending in districts other than the
Southern District of New York be, and the same hereby are, trans-
ferred to the Southern District of New York and, with the consent
of that court, assigned to the Honorable Harold R. Tyler, Jr. for
coordinated or consolidated pretrial proceedings pursuant to
28 U.S.C. §1407 with the action listed on Schedule A which is
already pending in that district.

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SCHEDULE A DOCKET NO. 157
NORTHERN DISTRICT OF TEXAS
Kenneth F. Reilly, et al. v. Merrill Lynch Civil Action
Pierce, Fenner & Smith, Inc. No. CA-3-6130-E
SOUTHERN DISTRICT OF NEW YORK
Delfino P. Mascolo, et al. v. Merrill Lynch, Civil Action
Pierce, Fenner& Smith, Inc. No. 72 Civ. 3292
WESTERN DISTRICT OF KENTUCKY
Max G. Baumgardener, et al. v. Merrill Lynch, Civil Action
Pierce, Fenner & Smith, Inc. No. 7803-A