IN RE: Ownership of Longoria Bank Deposits Litigation

oo Case MDL No. 260 Document 2 Filed 05/08 gnpage 1of11pO Pl	NA] PT
BEFORE THE JUDICIAL PANEL R52 fr: SCR FA
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MULTIDISTRICT LITIGATION “ny A) 4 “By no	tod >,	aco :
IN RE OWNERSHIP OF LONGORIA BANK ) “rl, z -
DEPOSITS LITIGATION ) DOCKET NO. 260,75) oo :	KV]
OPINION AND ORDER
BEFORE JOHN MINOR WISDOM*, CHAIRMAN, AND EDWARD WEINFELD, ;
EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH S. LORD, III*, CO :
STANLEY A. WEIGEL*, AND ANDREW A. CAFFREY, JUDGES OF THE : oo
PANEL oC
[ eer eet renee .
PER CURIAM
This litigation consists of an action pepding in the
Northern District of California (the California action) and Lo :
’ an action pending in the Northern District of Texas (the EE ES Co
Texas action). SE
Essentially, this litigation is a family dispute
among the Longoria brothers and sisters and the children |
of a deceased sister, all of whom are Mexican citizens, : :
concerning their ownership of the extensive and complex : oo
Longoria business enterprises in Mexico-and, to a lesser extent, oo
in the United States. The brothers allegedly operated under
an agreement that all their business interests belonged to
them equally even though they might hold title to certain
interests in different proportions, or in the name of
*Although Judges Wisdom, Lord and Weigel were unable to
attend the Panel hearing, they have, with the consent of
all parties, participated in this decision.

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® one of them, or in a third party's name. Octaviano,~ the oldest brother, acted as head of the Longoria family.
Prior to this litigation,	he managed Empresas Longoria S.A.
(Empresas), a Mexican corporation allegedly owned by the
: five Longoria brothers. After consulting with his
brothers, Octaviano allegedly made investments in other
businesses with money belonging to Empresas. Occasionally,
Octaviano allegedly would assign these investments back to
Empresas to cancel or reduce the account that was debited
upon making the investments. These withdrawals, debiting
~ and crediting of accounts, and reassignments of stock were
allegedly merely bookkeeping exercises made with the under-
standing that the five brothers ultimately owned the |
® investments equally, subject to any indebtedness.
One of the investments made by Octaviano from funds
allegedly belonging to Empresas was the purchase of a sub-
stantial portion of the stock of a Mexican real estate
development company named Bosques de las Lomas, S.A.
(Bosques). In the early 1970's, the Longorias, in an
alleged series of transactions designed to produce favorable
Mexican tax consequences for Bosques, made various deposits
. in a.branch of the Bank of America National Trust and oo
Savings Association (Bank of America), located in Panama
City, Panama and in the Republic National Bank	of Dallas
(Republic) in Dallas, Texas for the benefit of Bosques'
®

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® stockholders. Bosques simultaneously borrowed the same
amounts as deposited, using the deposits as security for the
loans. It is alleged that these deposits were made at the
direction of Octaviano in the names of Octaviano and/or his brother
Federico on the premise that octaviano was recognized by .
Bosques as the nominal shareholder of the Longoria brothers’
interests. After these deposits were made, interest was
allegedly paid to Bosques, which in turn used the monies to
pay the interest on the loans it had made with Republic and
Bank of America. Any interest differential owed to the
banks was allegedly satisfied by Empresas. Bosques
apparently has now fully repaid the loans to both banks.
Following Octaviano's alleged mismanagement of Empresas,
C Octaviano resigned from managing Empresas in 1975. The
management of all the Longoria companies, including Empresas,
then allegedly was turned over to the four remaining brothers.
Octaviano now claims to own substantially all the Longoria
businesses and all the funds that were deposited in Bank of
| America and Republic. His brothers dispute these claims.
After Octaviano left Empresas, the other brothers advised
Bank of America and Republic of their disagreement with
Octaviano over the ownership of the funds that were deposited
in those banks, and each bank has since refused to disburse
the funds or interest on those funds to Empresas, to Bosques,
or to any of the brothers.
®

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® Octaviano instituted the Texas action in May, 1975
against Republic claiming that all interest payments due
on the deposits of over $4,000,000 with Republic should
correctly have been paid to Octaviano. Octaviano also sought
an injunction requiring Republic to carry all of the deposits
in his name alone. |
Empresas intervened in the Texas action as a de-
fendant, impleading into this contest all the Longoria
brothers except Octaviano. In its intervention complaint,
Empresas claims that ownership of the funds deposited
with Republic is dependent upon ownership of 40,000 shares
of Bosques held by Longoria interests at the time the
deposits were made. Empresas alleges that the brothers
® transferred ownership in 24,000 shares of Bosques (repre-
senting 60% of the funds deposited with Republic) to
Empresas as repayment for certain debts they owed to
Empresas. The complaint further claims that Octaviano
acquired ownership of an additional 16,000 shares of
Bosques (representing 40% of the funds deposited with
Republic) for Empresas by the exercise of preemptive rights
in his capacity as presiding officer of Empresas. Thus,
Empresas alleges that it is entitled to all the funds de-
posited with Republic.
The four Longoria brothers other than Octaviano,
impleaded as defendants in the Texas action, claim that the
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® Republic funds are owned by Empresas and that the Empresas
stock is beneficially owned in equal shares by the five
brothers. Alternatively, these four brothers claim that
the funds are owned by the five brothers in equal shares.
Republic filed a claim for interpleader against
the five Longoria brothers in the Texas action, claiming that
conflicting demands had been made upon Republic concerning the funds
in question and the interast due on those funds. Republic alleged
that it might be exposed to multiple liability without the
court's intervention.
In late 1975, the Texas court dismissed Republic from
the Texas action and ordered the deposit of the funds on
account with Republic into the registry of the court pending
[J disposition of this action.
Finally, two Longoria sisters and the four children
of a third Longoria sister who is deceased have intervened
as plaintiffs in the Texas action, each claiming a portion
of the disputed funds as alleged heirs of the deceased
mother of the Longoria brothers and sisters.
The California action was commenced in April, 1976
by Empresas against Bank of America. Empresas alleges
that $4,000,000 was deposited in Bank of America's Panama
City, Panama branch in 1970 for the account of "Octaviano
L. Longoria and/or Federico Longoria," each individually
acting as a trustee for Empresas’ benefit. Bank of America,
in turn, issued two certificates of deposit evidencing
® | | |

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® the amount deposited, Empresas alleges, which were pledgedto Bank of America as security for a loan made in :
approximately the same amount to Bosques. Because these
certificates of deposit subsequently matured and the
pledge of these certificates to Bank of America was
- discharged, Empresas claims that the $4,000,000 evi-
| denced by these certificates is Empresas' property.
Bank of America, however, has refused to turn these
funds over to Empresas, the complaint charges, re-
quiring Empresas to institute this action against
Bank of America for these funds plus interest.
Thereafter, Octaviano intervened as a plaintiff
in the california action contending that he owns the
® $4,000,000 that was deposited with Bank of America. In
addition, Octaviano alleges that from 1974 until the present,
Bank of America has wrongfully refused to pay him any
interest due. on that principal.
The four remaining Longoria brothers have also inter-
vened as plaintiffs in the california action. Their com-
plaint in intervention alleges that plaintiff Empresas is
entitled to the funds deposited with Bank of America and
that the five brothers own Empresas in equal shares. If
Py :

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® a determination in this action holds that any portion of
the disputed funds is not Empresas', then these intervening
plaintiffs alternatively allege that the funds are the prop-
erty of the five Longoria brothers equally.
The two Longoria sisters and the children of the third
(deceased) Longoria sister, all of whom have intervened in
the Texas action, see p. 5 supra, have also intervened in the
california action and allege various ownership interests in
the funds involved in this action. :
Bank of America filed claims for interpleader
against Empresas and the five Longoria brothers in the
california action. Bank of America alleged that it had had
® several demands made upon it by the interpleader defendantsand that it might be subject to multiple liability without
the court's intervention.
The California court has dismissed Bank of America
from the California action, and, pursuant to the court's
order, the disputed funds are now on deposit at the Wells
Fargo Bank, San Francisco, California. The California court
has also denied Octaviano's motion for summary judgment.
Empresas and the four Longoria brothers other than
Octaviano move the Panel for an order transferring the
California action to the Northern District of Texas for
coordinated or consolidated pretrial proceedings pursuant
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® to 28 U.S.C. §1407 with the action pending there. Octaviano
originally opposed transfer, but after the Panel hearing on
this matter Octaviano changed his position and now agrees
with movants that both actions.belong in the same district
for Section 1407 pretrial proceedings. Octaviano still |
disagrees with movants' choice of the Northern District of
Texas as the transferee forum for this litigation and in-
stead urges the Panel to transfer both the California and
Texas actions to the Southern District of Texas.
We find that these actions involve common questions
of fact and that transfer of the California action to the
Northern District of Texas for coordinated or consolidated
pretrial proceedings under Section 1407 with the action
® pending there will best serve the convenience of the parties
and witnesses and promote the just and efficient conduct of
this litigation.
A careful review of the complaints, answers and counter-
claims in this litigation reveals that these two actions
share numerous complex factual questions concerning the
ownership of funds originally deposited with Bank of
America and Republic, and the right to payment of interest
on those funds. This litigation will focus not only upon
the deposit transactions themselves, but also upon complex
matters of corporate structure, financial dealings, tracing
of funds through many years of mutations and transactions,
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® and intra-family relationships and arrangements, any or
all of which may be determinative of the ownership of the
funds. We also note that, because Bank of America and
Republic have been dismissed from, respectively, the
California and Texas actions, there is a complete identity
of parties in these two actions. Section 1407 proceedings
will thus prevent inconsistent pretrial rulings and avoid
the possibility of duplicative discovery. Compare In re
Scotch Whiskey, 299 F. Supp. 543, 544 (J.P.M.L. 1969) with
In re Japanese Electronic Products Litigation, 388 F. Supp.
565, 567 (J.P.M.L. 1975).
Octaviano argues that there is likely to be a language
problem in the processing of these actions because all the
® ~ parties and many of the potential witnesses are citizens
of Mexico, and that therefore these actions should be
transferred to the Southern District of Texas and assigned
to either of two judges who normally sit in that district
and are fluent in Spanish. Moreover, Octaviano contends,
related litigation is pending in the state courts of Texas
at Laredo, which is located in the Southern District of
Texas.
| On balance, however, we agree with movants' selection
of the Northern District of Texas as the transferee forum
because the reasons for choosing that district are more
compelling. The Panel has traditionally been reluctant
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. to select a transferee forum wherein none of the actions
LJ under consideration for transfer is pending. See, e.d..,
In re Celotex Corp. "Technifoam" Products Liability
Litigation, 68 F.R.D. 502, 505 (J.P.M.L. 1975). Neither
of the actions in this litigation, of course, is currently
pending in the Southern District of Texas, and no judge in
that district is familiar with the complex factual issues
involved in these actions. Of the districts wherein the
two actions before us are pending, the Northern District
of Texas is preferable because the action pending there
is more advanced than the action pending in the Northern
District of California. Judge Sarah T. Hughes, before
whom the Texas action is pending, has had an opportunity to
become thoroughly familiar with the complex factual issues
@ presented here, and thus is in the best position to super-
vise these actions toward their most just and efficient
termination. See In re Griseofulvin Antitrust Litigation,°
305 F. Supp. 1402, 1403 (J.P.M.L. 1975). Furthermore, we
are confident that Judge Hughes will take all necessary
steps to minimize any language problems that may arise in
’ this litigation.
IT IS THEREFORE ORDERED that the action listed on the
following Schedule A and pending in the Northern District of |
California be, and the same hereby is, transferred to the
Northern District of Texas and, with the consent of that
court, assigned to the Honorable Sarah T. Hughes for
coordinated or consolidated pretrial proceedings, pursuant
@ to 28 U.S.C. §1407, with the action pending in that district
and listed on Schedule A. :

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SCHEDULE A
@ DOCKET NO. 260 :
NORTHERN DISTRICT OF CALIFORNIA
Empresas Longoria, S.A., a corporation Civil Action No.
Vv. Bank of America, et al. C-76-731~RFP
NORTHERN DISTRICT OF TEXAS
Octaviano L. Longoria v. Republic | Civil Action No.
National Bank of Dallas CA3-75-0567~-B