IN RE: Royal American Industries, Inc., Securities Litigation

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JUDICIAL RANE] Od)
NULTIISTRICT STI
SHED
BEFORE THE JUDICIAL PANEL -
ON TT ATF?
MULTIDISTRICT r1rIcATION" 23 1878PATRICIA	D. HOWARD
KEERRYCF THE FANEL
IN RE ROYAL AMERICAN INDUSTRIES, INE) DOCKET N 225SECURITIES LITIGATION ) 0.
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 centers around the June 19, 1975
merger of Royal American Industries, Inc. (Royal) and
Royam Industries Corporation (Royam), with Royal remaining
as the surviving corporation. Royam, allegedly formed for
the sole purpose of merging with Royal, was a wholly-owned
subsidiary of Bankers Life & Casualty Co. (Bankers), which,
in turn, was controlled by John D. McArthur. Prior to
the merger, Bankers also owned 74.6 per cent of Royal's
common stock.
In connection with the then proposed merger of
Royal and Royam, Royal, on May 23, 1975, issued a proxy
statement to its shareholders advising them that they
would receive $10.30 per share held, with no opportunity
to remain a shareholder following consummation of the merger.
* Judge Murrah took no part in the consideration or
decision of this matter.

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It further informed shareholders that a majority vote
of the outstanding stock in each of the corporations was
required to approve the merger but that approval by both
corporations was assured since Bankers held 100 per cent
of the stock of Royam and 74.6 per cent of the stock of Royal.
There are two actions in this litigation: one in
the Southern District of Florida and the other in the District
of Delaware. Each of the actions is brought as a class action
on behalf of all public stockholders of Royal, except the
named defendants. Bankers, Royal and McArthur are defendants
in both actions while the Delaware action includes, as addi=
tional defendants, certain employees of Bankers who allegedly
acted as McArthur's nominees in connection with the trans-
actions at issue.
Plaintiffs in each action allege that the sole
purpose of the merger is to effect a freeze-out of the public
shareholders of Royal by eliminating their stock interests.
They contend that the merger agreement and the merger itself,
if consummated, constitute acts and practices which will
operate as a fraud or deceit upon plaintiffs in violation of
§10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder. Plaintiffs further allege that the proxy state-
ment issued by defendants in connection with the then proposed
merger violated §10(b) and §l4(a) of the Exchange Act and
that defendants breached their common law fiduciary duties
to Royal's minority stockholders.

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This matter is before the Panel on the motion
of plaintiffs in the Florida action to transfer the Delaware
action to the Southern District of Florida for coordinated
or consolidated pretrial proceedings, pursuant to 28 U.S.C.
§1407, with the action pending in that district. Plaintiffs
in the Delaware action and all defendants do not oppose
Section 1407 proceedings in these actions but they request
that the Panel select the District of Delaware as the
tran sferee forum instead of the Southern District of Florida.
Although we recognize the existence of common
questions of fact between these actions, it is our view
that, in the particular circumstances of this litigation,
coordinated or consolidated pretrial proceedings pursuant to
Section 1407 would not necessarily promote the just and
efficient conduct of the two actions. Accordingly, the
motion to transfer is denied.
In In re Scotch Whiskey Antitrust Litigation,
299 F. Supp. 543 (J.P.M.L. 1969), the Panel refused to order
Section 1407 proceedings where only two actions were involved.
This determination resulted from our conclusion that, in
the circumstances there found, the just and efficient om nduct
of the two actions would not be furthered by the requested
/ The parties waived their right to oral argument and,
pursuant to R.P.J.P.M.L. 14, 65 F.R.D. 253, 264 (1975),
the question of transfer of these actions under
Section 1407 was submitted for decision on the briefs.

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transfer. The principle which emerged from our decision
in Scotch Whiskey is that in order to demonstrate that the
just and efficient conduct of the litigation would be promoted
by transfer where only a minimal number of actions are involved,
the moving party bears a strong burden to show that the common
questions of fact are so complex and the accompanying discov-
ery so time-consuming as to overcome the inconvenience to
the party whose action is being transferred and its witnesses.
299 F. Supp. at 544.
In addition to balancing complexity and commonality
against the convenience of parties and witnesses, the deter-
mination of whether transfer of a minimal number of actions
would promote the just and efficient conduct of the litigation
requires consideration of the relative effect on judicial
effort. See In re Photocopy Paper Litigation, 305 F. Supp. 60,
62 (J.P.M.L. 1969). In deciding whether the overall expendi-
ture of judicial energies will be minimized by transfer,
the possibility of cooperation among the judges to whom
the constituent actions are assigned must be evaluated as
an alternative. See In re Iowa Beef Packers, Inc. Litigation,
309 F. Supp. 1259, 1260 (J.P.M.L. 1970).
Application of the Scotch Whiskey balancing test
in the instant litigation leads us to a somewhat curious
result, Plaintiffs in the Florida action maintain that it
would be inconvenient for them to have that action trans-
ferred to Delaware while the Delaware plaintiffs contend that

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transfer to Florida would be inconvenient to them. The
principal defendants, on the other hand, would not be incon-
venienced by transfer to either forum since they are already
present in each. In our view, plaintiffs in neither action
: have demonstrated that these actions are so complex and the
accompanying discovery so time-consuming as to overcome
the inconvenience of the other in having its action trans-
ferred to a different forum.
Although the presence of competing requests for
class designations has previously distinguished Scotch
Whiskey and served to justify transfer, In re Clark 0il and
. Refining Corporation Antitrust Litigation, 364 F. Supp. 458,
459 (J.P.M.L. 1973), we are not similarly persuaded here.
Instead, we believe that consultation and coordination between
the two concerned courts coupled with cooperation of the
parties will suffice. See Manual for Complex Litigation,
Part I, §5.40 (rev. ed. 1973). Under the guidance of these
courts, we are confident that procedures will be utilized
to govern the conduct of each action in light of the pendency
of the other which will minimize efforts by the parties and
the judiciary, prevent duplication of discovery and eliminate
any possibility of inconsistent pretrial rulings.
IT IS THEREFORE ORDERED that the motion to transfer
the action listed on the following Schedule A and pending
in the District of Delaware to the Southern District of
Florida for coordinated or consolidated pretrial proceedings

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with the action pending in that district and listed on
schedule A, be, and the same hereby is, DENIED.
IT IS FURTHER ORDERED that the request to transfer
the action listed on the following Schedule A and pending
in the Southern District of Florida to the District of Delaware
for coordinated or consolidated pretrial proceedings with
the action pending in that district and listed on Schedule A
be, and the same hereby is, DENIED.

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SCHEDULE A DOCKET NO. 225
SOUTHERN DISTRICT OF FLORIDA
Sam and Marilyn Pill v. Bankers Life Civil Action
and Casualty Co., et al. No. 75-134-Civ-CF
DISTRICT OF DELAWARE
520 Broadway Corp., et al. v. Civil Action
John D. McArthur, et al. No. 75-173