IN RE: Falstaff Brewing Corporation Antitrust Litigation

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: JUDICIAL PANEL ON ER
BEFORE THE JUDICIAL PANE TIDIS TRICT LITIGATION 5 Ce :
MULTIDISTRICT LITIGATION ju 3 (977 a
IN RE FALSTAFF BREWING CORPORATION bATROCKET	NO. 263 Co
ANTITRUST LITIGATION FLERK OF THE PANEL So
OPINION AND ORDER .
BEFORE JOHN MINOR WISDOM*, CHAIRMAN, AND EDWARD WEINFELD,
EDWIN A. ROBSON, WILLIAM H. BECKER, JOSEPH S. LORD, III*, So :
STANLEY A. WEIGEL*, AND ANDREW	A. CAFFREY, JUDGES OF THE -
PANEL. BE
PER CURIAM
I. OVERVIEW | |
This litigation consists of seven actions commenced :
in five federal districts: three in the Northern "63 Lo Co
CL SN hy
District of California, and one each in the Eastern District : oo
of Missouri, the Eastern District of Louisiana, the Eastern : oo
District of Pennsylvania, and the District of Rhode Island.
The actions arose from a series of events surrounding the
renegotiation of provisions for repayment of certain loans .
taken out by Falstaff Brewing Corporation (Falstaff), and the
concurrent purchase of a considerable amount of stock in 3
Falstaff by Paul Kalmanovitz. Defendants include six creditors oo
of Falstaff: two insurance companies--New York Life Insur-
ance Company (N.Y. Life) and Mutual Life Insurance Company
of New York (MONY): and four national banks--Boatmen's
National Bank of St. Louis, First. National Bank of Commerce
*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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@® (in Louisiana), First Pennsylvania Bank and Trust Company,
and Industrial National Bank of Rhode Island. Several former
officers and directors of Falstaff, and Haskins & Sells |
(Falstaff's accountants during the events in question) are
also defendants.
II. FACTUAL BACKGROUND
The factual background of this litigation as alleged
by the two plaintiffs in their papers before the Panel is TT
briefly summarized as follows:
. Date Event
1961 and 1965 Long term notes negotiated by Falstaff
with defendants MONY and N.Y. Life.
December 1972 Short term notes negotiated by Falstaff
® with four national bank defendants.
November 1974 Technical conditions of default occur
on all notes, though Falstaff remains
current on payments of principal and
interest. Lenders agree as a group
to waive this default if they receive
a security interest in some of
Falstaff's assets.
January 20, 1975 Lenders execute Collateral Agency
: Agreement appointing one bank as agent
for all lenders and agreeing to share
any prepayments by Falstaff to reduce
the loans on a pro-rata basis.
February 5, 1975 Falstaff's officers execute with lenders
the security interest in some of
Falstaff's assets.

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® Date Event
March 10, 1975 Paul Kalmanovitz enters into an agree-
ment with Falstaff to purchase certain
stock of Falstaff for $10 million, to
designate a majority of the Board of
Directors of Falstaff, and to guarantee
. payment of Falstaff's obligations up
to $10 million.
March 24, 1975 Falstaff's officers agree to the terms
of the Collateral Agency Agreement.
April 28, 1975 Stockholders approve Kalmanovitz's
purchase of stock in Falstaff.
May 19, 1975 Security interest of lenders in
Falstaff's assets filed in California.
oo ~ June 30, 1975 Falstaff, with Kalmanovitz in control,
] : repays in full short term bank loans with
$4.9 millien payment. Banks accept this
money and do not share it pro-rata with
the insurance companies.
C July 11 and 16, N.Y. Life and MONY serve notice of	1975 breach of Collateral Agency Agreement
on banks and Falstaff.
July 24, 1975 Falstaff files first action.
III. DESCRIPTION OF ACTIONS
The actions are of three types--declaratory judgment,
antitrust and securities. The first action was filed in
the Northern District of California by Falstaff and Kalmanovitz
i in July 1975 (declaratory judgmert action), the second	in
November 1975 in the same district (California antitrust
action) and the third in January 1976, also in that district

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CB (securities action). The national banks were originally oo
named as defendants in the California antitrust and
securities actions but were dismissed under the venue pro-
vision of the National Bank Act, 12 U.S.C. §94. The
plaintiffs subsequently filed antitrust complaints
virtually identical to the one in the California anti-
trust action against each bank in its home district. |
A. Declaratory Judgment Action
The declaratory judgment action includes Falstaff as -
plaintiff and N.Y. Life and MONY as defendants. The complaint
in this action seeks a judicial determination of the rights
and duties of the various parties under the loan agreements
® and the Collateral Agency Agreement. Falstaff alleges thatthe Collateral Agency Agreement is void and unenforceable
against itself as a restraint of trade; that it properly
repaid only the banks and therefore is not in default on
its loan agreements with the insurance companies; and that
the lenders attempted to improperly interfere with Kalmano-
vitz's negotiations with Falstaff by imposing conditions on
Falstaff's method of repayment. |
B. Antitrust Actions
Falstaff and/or Kalmanovitz are plaintiffs in all five
antitrust actions. The California antitrust action in-
cludes N.Y. Life and MONY as defendants, while a different
@

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® national bank is the sole defendant in each of the other
four antitrust actions. The complaints in the five anti-
. trust actions allege that the six lenders conspired to
restrain trade and eliminate competition in the financing
of Falstaff by entering into the Collateral Agency Agreement
and by requiring a security interest from Falstaff in
connection with outstanding loans, the effect of which was
to fix interest rates and credit terms at noncompetitive
levels and to allocate among themselves lending opportunities
and prepayments of loans. A second count in each complaint
in these five actions alleges that the lenders committed fraud
by conspiring to conceal from potential investors, specifically
® Kalmanovitz, the existence of the security agreements withintent to deceive potential investors and induce them to
invest in Falstaff.
C. The Securities Action
Kalmanovitz is the plaintiff in the securities action
and N.Y. Life, MONY, Haskins & Sells, and several former
officers and directors of Falstaff are defendants. The
complaint in this action alleges that the security agree-
ments between Falstaff and the lenders, and the Collateral
Agency Agreement among the lenders, were not properly dis-
closed to Kalmanovitz prior to his decision to invest in
Falstaff. Kalmanovitz alleges that when Falstaff's financial
condition began to deteriorate, the lenders, the former
] officers and directors of Falstaff, and Haskins & Sells
conspired to induce him to invest in the company through

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® misrepresentations, failures to disclose, and preparation
of false and misleading financial statements.
IV. PROCEEDINGS BEFORE THE PANEL
Plaintiffs Falstaff and Kalmanovitz move the Panel
pursuant to 28 U.S.C. §1407 to transfer the foregoing
actions pending in districts other than the Northern District
of California to that district for coordinated or consolidated
1/
pretrial proceedings with the actions pending there. At
the Panel hearing on this matter, Falstaff stated that the
Eastern District of Missouri would also be a suitable trans-
feree district for this litigation. Several parties oppose
) transfer of some or all of the actions.
We find that the antitrust actions and the securities
action share common questions of fact and that their trans-
fer under Section 1407 to the Eastern District of Missouri
for coordinated or consolidated pretrial proceedings will
1/A few days before the Panel hearing on this matter,
plaintiff Kalmanovitz moved the Panel under Section 1407
to transfer four additional actions that were "in the pro-
cess of being filed." These contemplated actions were to
be against each of the four national banks that were dis-
missed from the California securities action under the
venue provision of the National Bank Act. Since this
motion does not involve actions that were actually pending
in different federal judicial districts at the time the
motion was filed with the Panel, the motion is denied without
prejudice. The Panel has since been advised, however, that	ese four actions have been filed. Accordingly, the Panel
will treat these four actions as tag-along actions. See
@ Rae) 9 and 10, R.P.J.P.M.L., 65 F.R.D. 253, 255, 259-60

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® best serve the convenience of the parties and witnesses and
promote the just and efficient conduct of this litigation.
We also find that transfer of the declaratory judgment
action for coordinated or consolidated pretrial proceedings
with the other actions will neither serve the convenience of
the parties and witnesses nor promote the just and efficient
conduct of the litigation and, accordingly, we deny transfer
of that action.
V. THE QUESTION OF TRANSFER
A. The Antitrust and Securities Actions
As all parties recognize in varying degrees, the anti-
® trust and securities actions clearly share common questions
N of fact regarding defendants' conduct. Certain conduct
of the defendants is alleged to have constituted anti-
trust violations while non-disclosure of that same conduct
is alleged to have also resulted in violations of the
secyrities laws. Thus, transfer of the antitrust and
securities actions under Section 1407 is necessary in order
© to eliminate the possibility of duplicative discovery and
prevent inconsistent pretrial rulings. See In re Pittsburgh
& Lake Erie Railroad Company Securities and Antitrust
Litigation, 374 F. Supp. 1404, 1405 (J.P.M.L. 1974).
®

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® The four national banks argue that with respect to the
four antitrust actions in which national banks are defendants,
the motion before the Panel is in reality an attempt to
circumvent the venue restrictions of the National Bank Act,
12 U.S.C. §94, and that the Panel should accordingly deny
| transfer of those actions. They contend that movants are
attempting to misuse Section 1407, citing In re Highway
Accident Near Rockville, Connecticut, 388 F. Supp. 574,
576 (J.P.M.L. 1975) and In re Truck Accident Near Alamagordo,
New Mexico, 387 F. Supp. 732, 734 (J.P.M.L. 1975). They
® stress that 12 U.S.C. §94 was enacted for the convenience) of the national banks to protect them from having to move
their records outside their home districts. This policy
of the Act, they assert, as discussed in the recent United
States Supreme Court case of Radzanower Vv. Touche Ross &
Co., 426 U.S. 148 (1976), would be violated by transferring
the actions against the banks for pretrial purposes. Though
the national banks realize that transfers under Section 1407
are not restricted by considerations of venue, they urge the
panel to give deference to the policy behind the venue
provision of the National Bank Act by denying transfer.
®

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® We see no reason, including anything in Radzanower, to
exempt actions involving national banks from transfer under
Section 1407. In considering transfer under Section 1407,
the Panel is not encumbered by considerations of venue, in-
cluding those under 12 U.S.C. §94. In re Great Western Ranches
Litigation, 369 FP. Supp. 1406, n. 1 (J.P.M.L. 1974). The fact
that defendants may not all be amenable to suit in the same
jurisdiction does not prevent transfer of the actions against
i them to a single district for pretrial proceedings where the |
prerequisites of Section 1407 are otherwise satisfied. In
re Kauffman Mutual Fund Actions, 337 F. Supp. 1337, 1339
® (F.P.M.L. 1972). Indeed, 28 U.S.C. §1407 (a) states that
"actions may be transferred to any district for coordinated
or consolidated pretrial proceedings." (Emphasis added.)
~The legislative history of Section 1407 is also instructive
on this point. In re Plumbing Fixture Cases, 298 F. Supp.
484, 499-500 (J.P.M.L. 1968). The recent Radzanower opinion
by the Supreme Court has no effect on transfers under i
Section 1407 because the opinion deals exclusively with the
guestion whether the venue provision of the National Bank
Act or the venue provision of the Securities Exchange Act
controls in the event a national banking association is
sued in a federal court for allegedly violating the Securities
® Exchange Act. |

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® Furthermore, we see no reason to accord national banks
any special treatment in considering transfer of actions
under Section 1407. The Panel's statutory mandate is to
weigh the interests of all the plaintiffs and all the de-
fendants, and to consider multidistrict litigation as a whole
in light of the purposes of the law. In re Library Editions
of Children's Books, 297 F. Supp. 385, 386 (J.P.M.L. 1968).
We emphasize that defendant national banks need not worry
about a transferee court's entering an order requiring that their
| documents be moved outside their home districts for trial
because transfers under Section 1407 are for pretrial only and
® the actions against them will be remanded to their home districts
for trial. See Rule 11, R.P.J.P.M.L., 65 F.R.D. 253, 260-63
(1975). Moreover, we note that transfer of an action under
Section 1407 does not mean that all discovery must take place
in the transferee district. For example, depositions of
witnesses may still occur where they reside, see Fed. R. Civ. P.
45(d) (2), and of course any party may 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. 1973).
The defendant banks' reliance on In re Highway
® Accident Near Rockville, Connegticut, supra, and

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® In re Truck Accident Near Alamagordo, New Mexico, supra,
in suggesting that plaintiffs Kalmanovitz and Falstaff are
attempting to misuse Section 1407 in seeking transfer is
misplaced. Those two litigations did not otherwise meet
the standards for transfer under Section 1407, in contrast
to the litigation	now before us. Here significant benefits
are to be gained by coordinated or consolidated pretrial
proceedings.
Some parties argue that the securities action in-
volves many issues which are unique to that action, and
therefore that it is not appropriate for transfer. Defendant
o Haskins & Sells maintains that it would be inconvenienced by
any coordination or consolidation between the securities
action and the other actions because it is a defendant in
only the securities action and should not be forced to
participate in discovery on complex issues in other actions
which involve only other defendants.
Viewing this litigation as a whole, we rule that any
inconvenience claimed by Haskins & Sells to result from the fact
| that it is a party in only one of the actions being transferred
®

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® is outweighed by the overall benefits of coordinated or
consolidated pretrial proceedings in these actions. See
In re Library Editions of Children's Books, supra, 297 F. Supp.
at 386. Of course Haskins & Sells, as well as any other
. party, need not participate in discovery unrelated to the
particular issues with which it is involved. See, e.q.,
Manual for Complex Litigation, supra, Part I, §2.31.
Moreover, any discovery unique to a particular action may
be scheduled by the transferee judge to proceed concurrently
with the common discovery. See In re Republic National-Reality
® Equities Securities Litigation, 382 F. Supp. 1403, 1405=06
(J.P.M.L. 1974).
B. The Declaratory Judgment Action |
Although the declaratory judgment action shares common
questions of fact with the other actions in this litigation,
we are persuaded that it should not be included in the
coordinated or consolidated pretrial proceedings we are
herewith ordering. The record before us reveals that the
declaratory judgment action is rapidly approaching trial.
The just and efficient conduct of this action as well as the
other actions can therefore best be achieved by allowing
it to remain in the Northern District of california. See
®

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( ) In re Celotex Corp. "Technifoam" Products Liability Liti-
gation, 68 F.R.D. 502, 505 (J.P.M.L. 1975).
VI. SELECTION OF THE TRANSFEREE DISTRICT |
The Eastern District of Missouri and the Northern
District of California have each been suggested by the
parties as the transferee district for this litigation.
A The parties favoring the Northern District of California
contend that that district is preferable because the
documents and witnesses of Falstaff which are relevant to
this litigation are now located at Falstaff's corporate
headquarters in San Francisco, and because the declaratory
~~ + judgment action pending in the Northern District of
® California is further advanced in pretrial proceedings than
any of the other actions. Though either district would be
: ~an appropriate transferee forum, we find that the Eastern
District of Missouri is preferable. -
Falstaff's corporate headquarters were located in
St. Louis prior to and during the events from which this
litigation arose. Many of the individuals who were officers
and directors of Falstaff during that period still reside in
the St. Louis area. Falstaff's headquarters were not moved
to California until after the takeover by Kalmanovitz.
® Therefore, many documents and witnesses relevant to this

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® litigation will be found in the Eastern District of Missouri,
as well as in. the vicinity of Falstaff's present corporate
headquarters in the Northern District of California.
Furthermore, the relevant documents and witnesses regarding
the four defendant banks are located in Missouri, Louisiana,
Pennsylvania and Rhode Island. Thus the Eastern District of
Missouri provides a central location for the overall con-
venience of the parties and witnesses. Moreover, of the
actions for which coordinated or consolidated pretrial
proceedings are being ordered, the discovery schedule in
the Eastern District of Missouri action is the most advanced.
: Finally, the civil action docket in the Eastern District
® of Missouri is more current than the one in the Northern
District of california and therefore the former district
is in a better position to process the pretrial proceedings
in this litigation toward their most expeditious termin-
ation. See Administrative Office of the United States Courts,
Management Statistics for United States Courts 92, 101 (1976).
| IT IS THEREFORE ORDERED that transfer of the action }
entitled Falstaff Brewing Corp., et al., v. New York Life
Insurance Co., et. al., N.D. California, Civil Action No.
C75-1560-RHS be, and the same hereby is, DENIED.
IT IS FURTHER ORDERED that the remaining actions listed
on the following Schedule A and pending in districts other
® than the Eastern District of Missouri be, and the same hereby

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® are, transferred to the Eastern District of Missouri and,
| with the consent of that court, assigned to the Honorable
H. Kenneth Wangelin for coordinated or consolidated pretrial
proceedings pursuant to 28 U.S.C. §1407 with the action
listed on Schedule A and pending in that district.
®
®

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SCHEDULE A DOCKET NO. 263
DISTRICT OF RHODE ISLAND
Falstaff Brewing Corp., et al. v. Industrial Civil Action
National Bank of Rhode Island No. C-76-0074
EASTERN DISTRICT OF PENNSYLVANIA
Falstaff Brewing Corp., et al. v. The First Civil Action
Pennsylvania Banking and Trust Co. No. C-76-438
| EASTERN DISTRICT OF MISSOURI
Falstaff Brewing Corp., et al. v. Boatmen's Civil Action
National Bank of St. Louis No. 76-120C (3)
EASTERN DISTRICT OF IOUISIANA
Falstaff Brewing Corp., et al. v. First Civil Action
National Bank of Commerce No. E-76-452
® NORTHERN DISTRICT OF CALIFORNIA
Falstaff Brewing Corp., et al. v. New York Civil Action
Life Insurance Co,, et el. No. C 75-2342-SW
Falstaff Brewing Corp., et al. v. New York Civil Action
Life Insurance Co., et al. No. C 75-1560-RHS
Paul Kalmanovitz	v. New York Life Insurance Civil Action

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JUDIn a:
® BEFORE THEJUDICIAL PANEL HLEL,
MULTIDISTRICT LITIGATION JUN -3 1977
IN RE FALSTAFF BREWING CORPORATION ) DOCKET, NO. 263
ANTITRUST LITIGATION ) RE OF ThE Pap
| CONCURRING OPINION
EDWARD WEINFELD, J.
I concur in the decision of my brethren that the
antitrust actions and the securities action which are
pending in districts other than the Eastern District of
Missouri should, pursuant to 28 U.S.C. §1407, be transferred
to that district for coordinated or consolidated pretrial ]
proceedings with the action pending in that district and
that transfer pursuant to Section 1407 of the declaratory
® judgment action should be denied. I also agree with my
brethren that the venue provision of the National Bank Act,
12 u.s.C. §94, does not prohibit transfer under Section 1407
of actions in which national banks are parties. Unlike my
brethren, however, I am of the view that the Panel should
adopt as pelicy the Supreme Court's recent recognition in
Radzanower v. Touche Ross & Co., 426 U.S. 148 (1976), that
tte purpose of 12 U.S.C. §94 was to prevent interruption in
the business of national banks that might result from their .
records being sent to distant counties, 426 U.S. at 156.
Accordingly, I would include in the Panel's transfer order
in this litigation a provision that with respect to the
® national bank defendants any discovery or inspection of their
records shall be had only in each bank's home district.