IN RE: Buffalo Valley Gas Authority Litigation

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’ BEFORE THE JUDICIAL PANEL .
.. ON JUDICIAL Lay CL oo
TRS TRICT LITICATIC CT ’ Co . co	MULTIDISTRICT LITIGAWE ZILED Le
1971 boo Te
AU T NO. i. a
IN RE BUFFALO VALLEY GAS THORITY ) RRR AE 271 174 ;	LITIGATION : ) PATRICIA	D. 03 ARD 8/7.CLERK CF THE PAKEL : . NE a
OPINION AND ORDER :
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD, Ls Conn e
EDWIN A. ROBSON, WILLIAM H. BECKER¥ JOSEPH S. LORD, III, Coe
STANLEY A. WEIGEL, AND ANDREW A. CAFFREY*, JUDGES OF THE SLT
PANEL. ET
PER CURIAM : :
This litigation includes three actions, one each pending .
in the Eastern District of Oklahoma, the Southern District oo
of New York, and the District of Arizona. All thése actions
arise out of the creation of the Buffalo Valley Gas Authority
(the Authority) in southeastern Oklahoma, the purchase and con-
struction of its facilities, and the sale of its bonds to the
public.
On July 1, 1973, the three trustees of the Authority . :
entered into a bond indenture with Commercial and Industrial
Bank of Memphis (C & I) as mortgagee and bond trustee. Pur- BE
suant to the indenture, the Authority's trustees issued and sold RE
revenue bonds in the total principal amount of $700,000 (the first
bonds). The funds realized from the sale of the first bonds were to
be used for the construction of a natural	gas transmission ol Poo
system (the system) to serve three small Oklahoma tawns.
*Judges Becker and Caffrey were unable to attend the Panel :
hearing and, therefore, took no part in the consideration or
decision of this matter.

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® The Authority entered into contracts with Wyoming 0il
and Gas Company (Wyoming) for the construction, operation,
repair and maintenance of the system. After the first bonds were
issued, Wyoming began construction of the system.
In late 1973, C & I and the Authority entered into :
first and second supplemental	bond indentures.
Pursuant to these supplemental indentures, the Authority
issued and sold additional revenue bonds in the total principal
© amount of $770,000 (the second bonds) . Both the first and
second bonds were secured by the same assets and revenues of
the Authority. The revenue realized from the second bonds
was to be used for the purchase of a natural gas well from
Wyoming and to extend the system to serve additional customers.
| ~ At the present time, the system has not been completed
and Wyoming apparently is no longer in business. Although
the system is partially in operation under the supervision
of a receiver appointed by an Oklahoma state court, the |
bondholders have not received any interest due subsequent to
January 1, 1975.
The New York action was commenced in March 1975 and is
brought as a class action on behalf of all purchasers of
revenue bonds issued by the Authority. Plaintiffs in this
action assert claims under the federal securities statutes
and under the theories of common law fraud and negligence.
® | :

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® The complaint basically alleges a conspiracy to create a
| natural gas district, to purchase a gas well and sell it
to the Authority at an exorbitant profit, to skim funds from
the construction of the system, and to fund these endeavors by
selling bonds to the public. ‘The complaint also alleges that
the offering statements concerning both the first and second
bonds contain material misstatements and fail to disclose
material facts. Named as defendants are C & I; Wyoming;
the Authority and its trustees; several individuals involved
in the creation of the Authority and the construction of its
facilities; and certain underwriters, law firms and
attorneys involved in issuance of the bonds. In addition,
Judge Thomas P. Greisa, to whom the New York action has been
J assigned, recently granted the motion of the Authority's
receiver to intervene as a defendant in the New York action.
On July 7, 1976, Judge Greisa denied a motion brought
by C & I, one of the defendant	law firms and one of the
defendant underwriters to transfer the New York action to the
Eastern District of Oklahoma pursuant to 28 U.S.C. §1404 (a).
The Arizona action was filed in July 1976 both in-
dividually and as a class action on behalf of the purchasers
of the first bonds. The complaint is founded upon the same
conspiracy alleged in the New York action and is brought under
the federal securities statutes and under the theories of,
inter alia, common law fraud, misrepresentation, breach of
@®

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® fiduciary duty and breach of contract. All the defendants
in the New York action except the underwriters and one law
firm are also named as defendants in the Arizona action.
On September 13, 1976, Judge Griesa granted the motion
of plaintiffs in the Arizona action to intervene in the New
York action and to adopt the complaint filed in that action..
Thus the Arizona plaintiffs presently seek in the New York
action to represent a subclass of the purchasers of the first
bonds. These plaintiffs apparently have advised Judge
Greisa that they would not presently seek discovery in the
Arizona action.
The Oklahoma action was commenced by C & I inOctober
1975. C & I filed an amended complaint in this action on
@® July 1, 1976, which names Wyoming, the Authority, the
Authority's trustees and several individuals involved in |
. Wyoming as defendants. This complaint alleges that defendants
breached their agreements with C & I as bond trustee. C & I
seeks specific performance to complete construction
of the system, damages for delays and defects in construction
of the system, damages for unpaid operating expenses of the
system, and an accounting. C & I also includes a count based
upon the alleged lack of an arm's length transaction re-
garding Wyoming's sale of the natural gas well to the Authority.
C & I, defendant in the New York and Arizona actions
and plaintiff in the Oklahoma action, moves the Panel for
@® an order transferring the New York and arizona actions to

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- 5 =
® the Eastern District of Oklahoma for coordinated or con-
solidated pretrial proceedings pursuant to 28 U.S.C. §1407.
The intervenor-defendant in the New York action and two
defendants in both the New York and Arizona actions join in
this motion. Two defendants in the New York action join in the
motion to the extent that the Arizona and New York
actions should be placed in a single district for coordinated
or consolidated pretrial proceedings. We find insufficient
basis for transfer under Section 1407 and, accordingly, deny
the motion.
Movants concede that the allegations in the New York
and Arizona actions are broader than the allegations in the
Oklahoma action because the latter does not involve issues
@ relating to sale of the bonds. Nevertheless, movants assert
that issues concerning those who organized the Authority,
why they did so, how the Authority was operated, and whether
it was ever possible for the Authority to sell natural gas
to the public on a profitable basis are central to the claims
in all three actions. Absent Section 1407 proceedings, these
parties maintain, there is a danger of duplicative discovery
and conflicting class and other pretrial rulings.
Although the New York and Arizona actions involve sub-
stantially similar allegations, we believe that the inter-
vention of plaintiffs in the Arizona action into the New
York action, and the apparent willingness of those plaintiffs
@ to cease activity in the Arizona action while the New York
action proceeds, obviate any danger of duplicative pretrial

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® proceedings or conflicting class determinations between those
two actions. Moreover, under these circumstances, the dis-
position of the New York action could have a res judicata |
effect on the Arizona action. Thus, there is no need for
transfer under Section 1407 regarding the Arizona action.
This leaves the Oklahoma and New York actions. While we
recognize that the Oklahoma and New York actions may share
some minimal questions of fact concerning the underlying
fraud alleged in the New York action, movants have not met |
their burden ofdemonstrating that these factual questions
are complex enough to justify transfer under Section 1407.
See In re scotch Whiskey, 299 F. Supp. 543, 544 (J.P.M.L.
1969). The Oklahoma action is essentially a simple breach
® of contract action and will focus on the contractual re-
lationship between plaintiff C & I and the defendants in
that action. The New York action, on the other hand, is much more
extensive than the Oklahoma action and will center on the
alleged conspiracy and the issuance of the revenue bonds.
IT IS THEREFORE ORDERED that the motion pursuant to
28 U.S.C. §1407 to transfer the actions listed on the
following Schedule A be, and the same hereby is, DENIED. i
@ oo oo |

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} SCHEDULE A
® ~ DOCKET NO. 271
FASTERN DISTRICT OF. OKLAHOMA
Commercial & Industrial Bank of Memphis, Civil Action No.
etc. v. Wyoming 0il & Gas Corp., et al. 75-287-C :
SOUTHERN DISTRICT OF NEW YORK
Jack Baron, et al. v. Commercial & civil Action No.
Industrial Bank of Memphis, et al. 75 civ. 1274
DISTRICT OF ARIZONA
George A. Vincent, Jr., et al. v. Civil Action No.
Commerical & Industrial Bank of Memphis, 76-457-PHX WEC
et al.
~N