IN RE: Westinghouse Electric Corporation Litigation

Case MDL No. 295 Document 2 Filed 05/05/15 Page 1 of 17
: BEFORE THE JUDICIAL PANE	rit 7) es in
ON wn i \ STR { 2)
MULTIDISTRICT LITIGATION . =
LT | na (61 i
IN RE WESTINGHOUSE ELECTRIC CORPORATION RIE )
URANIUM CONTRACT LITIGATION nerdy	HOV ERD
. ; Elen wd (HE PANS. Sherman Steinberg v. Westinghouse CLERR =
Blectric Corp., et al., S.D. New York, )
Civil Action No. 75 Civ. 6317 )
)
Franklin Freeman v. Westinghouse Electric )
Corp., et al., S.D. New York, Civil Action )
No. 76 Civ. 3352 )
) DOCKET NO. 235
Westinghouse Electric Corp. v. Rio Algom ) i
Ltd., et al., N.D. Illinois, Civil Action )
No. 76C3830 )
)
Homestake Mining Co. v. Westinghouse Electric )
gorp., N.D. California, Civil Action No. )
C-76-2192 RFP )
IN RE MISCELLANEOUS SECURITIES LITIGATION ) DOCKET NO. 295
INVOLVING WESTINGHOUSE ELECTRIC CORPORATION )
OPINION AND ORDER
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD,
EDWIN A. ROBSON, JOSEPH S. LORD, III*, STANLEY A. WEIGEL,
ANDREW A. CAFFREY AND ROY W. HARPER, JUDGES OF THE PANEL.
PER CURIAM
I. BACKGROUND
A. MDL-235
On December 19, 1975, the Panel transferred twelve actions
pursuant to 28 U.S.C. §14C7 to the Eastern District of Virginia
and, with the consent of that court, assigned them to the
Honorable Robert R. Merhige, Jr., for coordinated or consoli-
dated pretrial proceedings with an action pending there. In
re Westinghouse Electric Corp. Uranium Contracts Litigation, 405 F.
Supp. 316 (J.P.M.L. 1975). This group of actions has been
* Judge Lord took no part in the consideration or decision of
this matter.

Case MDL No. 295 Document 2, Filed 05/05/15 Page 2 of 17 |
denominated MDL-235. Each of these actions was commenced by a
different utility company against Westinghouse Electric Corp.
Plaintiffs in each action allege that Westinghouse breached its
contractual obligation for the present and/or future delivery
of uranium to fuel nuclear power plants operated by. the
1/
plaintiff-utilities or planned for operation in the future.
Westinghouse pleads in defense in these actions that full
performance of its contractual obligations for the supply of
uranium has become "commercially impracticable" by reason of
unforeseen developments resulting from the worldwide energy
crisis and that accordingly Westinghouse is excused from such
performance by reason of Section 2-615 of the Uniform Commercial
Code. In addition, Westinghouse alleges in defense in these
actions that the availability and price of uranium were manipu-
lated by the anticompetitive activities of certain foreign
governments, producers and cartels.
In transferring these actions under Section 1407, the
Panel stated that:
jTlhere are some very significant common questions of
fact among these actions. For example, a determination
of the commercial impracticability of the present and
future performance of Westinghouse's contractual obli-
gations for the supply of uranium depends, in part, on
the present and foreseeable supply of uranium on the
open market and its cost. And even assuming that a
large part of the §2-615 defenses rests on the separate
contemplation of the individual parties negotiating each
of the contracts, it is nonetheless clear that common
factual questions will be raised concerning the effect
of any alleged unforeseen intervening circumstances on
1/A similar action was commenced against Westinghouse by three
different utilities in Pennsylvania state court. This action
recently was settled.

Case MDL No. 295 Document 2 Filed 05/05/15 Page 3 of 17
: 3 -
: : the price and supply of uranium, Thus, while we recog-
nize that these actions involve some individual questions
of fact pertaining to each utility's contractual re-
lationship with Westinghouse, we are persuaded that
sufficient commonality of factual issues exists to
warrant transfer and that the most just and efficient
conduct of these actions can best be achieved through
: centralized management by a single judge. Id. at 318-19.
Judge Merhige set a cutoff date of August.	9, 1977, for
the completion of all common discovery in MDL-235. Moreover,
a final pretrial conference is set for August 29, 1977, and
trial is scheduled to begin in some of the actions in the
transferee district on September 12, 1977.
Because Steinberg, Freeman, and Rio Algom appeared
to share questions of fact with the actions previously trans-
ferred to the Eastern District of Virginia, the Panel issued an
order conditionally transferring Steinberg, Freeman and Rio Algom
for inclusion in the Section 1407 proceedings pending there.
Subsequently, the Panel issued an order to show cause why
Homestake should not also be transferred to the Eastern District
of Virginia pursuant to Section 1407.
The complaints in Steinberg and Freeman were commenced
in the Southern District of New York under the federal securities
statutes and allege that Westinghouse issued financial statements
and other reports that were materially false and misleading
because they omitted to disclose that Westinghouse had entered
into the long-term uranium supply contracts involved in the
actions in MDL-235. Plaintiff in Freeman also brings his action
under the common law principles of fraud, waste, mismanagement

| Case MDL No. 295 Document 2 Filed 05/05/15 Page 4 of 17
and breach	of fiduciary duties. Westinghouse and Price
Waterhouse & Co. are defendants in both Steinberg and Freeman.
The Freeman complaint also names as defendants various officers
and directors of Westinghouse. Both Steinberg and Freeman
are brought as class actions. Plaintiff in Steinberg seeks
to represent a class composed of all persons who purchased
Westinghouse stock from February 2, 1973, through July 15, 1975,
whereas the class in Freeman allegedly consists of all
purchasers of Westinghouse securities from 1966 to July 14, 1975.
Rio Algom was commenced in the Northern District ot
Illinois under the federal antitrust laws by Westinghouse
against twelve foreign and seventeen domestic corporations
engaged in various aspects of the uranium pusiness.> Westing-
house alleges that beginning in 1972, certain of the foreign
defendants formed a cartel that rigged bids, fixed prices,
boycotted Westinghouse and other resellers of uranium, and
divided portions of the world uranium market. The complaint
also charges that the foreign producers promised not to sell
uranium at prices lower than those prevailing in the United
States as an inducement for domestic producers to drop their
apposition to removal of the embargo on enrichment of
foreign uranium, and that foreign producers then attempted to
influence domestic producers to raise uranium prices in the
United States. Finally, the complaint charges that uranium
2/ Thedistrict	court in the Northern District of Illinois has
found nine of the twelve foreign defendants in default for
failing to file answers to Westinghouse's complaint.

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‘prices in the United States were in fact raised, allegedly as
a result of concerted action on the part of domestic producers.
Westinghouse seeks treble damages and injunctive relief.
Three defendants in Rio Algom, including
defendant Homestake Mining Co., have filed counterclaims
against Westinghouse, alleging that Westinghouse itself has
violated the antitrust laws by: (1) tying its sale of
uranium to its sale of nuclear reactors and fuel assemblies;
(2) entering exclusive dealing contracts with utilities; and
(3) attempting to monopolize or monopolizing the markets for
nuclear reactors, fuel fabrication and fuel supplies. Two
utility-plaintiffs in the actions in MDL-235 have made similar
allegations.
Homestake Mining Co., a defendant in Rio Algom,
filed Homestake against Westinghouse in the Northern District
of California in early October 1976, shortly before Rio Algom
was filed in the Northern District of Illinois. Homestake
involves the rights and obligations of Homestake and Westing-
house under a 1974 contract (the Westinghouse-Homestake
contract) by which Homestake agreed to sell 700,000 pounds
of uranium to Westinghouse. The Westinghouse-Homestake contract
states that the source of this uranium would be a contract between
Homestake and a French corporation, Uranex, and that Homestake
would have no liability to Westinghouse for any breach of the
Westinghouse-Homestake contract resulting from failure by Uranex
to make delivery. The Westinghouse-Homestake contract further
provides that in the event of failure or breach by Uranex,

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'Homestake's obligation.	to obtain performance by Uranex is limited
to the pursuit of arbitration proceedings against Uranex, if
requested to do so by Westinghouse and at Westinghouse's expense.
During 1975 and early 1976, Uranex allegedly informed
Homestake that Uranex was unable or unwilling to deliver the
uranium under their contract. Homestake allegedly reported this
development to Westinghouse, but Westinghouse took no action as a
result of this information. In August 1976, Homestake tendered to
Westinghouse a proposed amendment to the Westinghouse-Homestake
contract reflecting certain changes Homestake allegedly had been
compelled to accept as a condition of securing further deliveries
of uranium from Uranex. The amendment allegedly included a
three-fold price increase demanded by Uranex, and a waiver of all |
profit by Homestake. Westinghouse allegedly rejected this amend-
ment. ,
Thereafter, Homestake filed its action against
Westinghouse in the Northern District of california, seeking
declaratory and injunctive relief. Basically, Homestake prays :
for a declaration that, because of Uranex's failure or refusal
to perform its contract with Homestak.e, Homestake's obligation
to deliver uranium to Westinghouse uncler the Westinghouse-
Homestake contract was terminated. Westinghouse has counterclaimed
against Homestake in this action for breach of contract and
unjust enrichment. In addition, Westinghouse has raised the
defense of "unclean hands" against Homestake, alleging that
Homestake participated in the antitrust conspiracy alleged in
Westinghouse's complaint in Rio Algom.

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. ) oa
B. MDL-295
Westinghouse and Price Waterhouse have moved the
Panel pursuant to Section 1407 to transfer four actions pending
in two federal districts to the Southern District of New York
for coordinated or consolidated pretrial proceedings with two
actions pending there. These six actions are: Steinberg and
Freeman, which are subject to conditional transfer orders in
3/
MDL-235, in the Southern District of New York: Simon and Roth
4/
in the Eastern District of Pennsylvania; and Lemberger and
Zeit in the Eastern District of New York.
All six actions are brought by shareholders of Westinghouse.
The plaintiffs in Steinberg, Freeman, Simon, Roth and Zeit each
bring their respective actions on behalf of a class of in-
dividuals who purchased Westinghouse securities during over-
lapping periods (Steinberg, February 2, 1973 to July 15, 1975,
see p. 4 supra; Freeman, 1966 to July 14, 1975, see p. 4 supra;
Simon and Roth, December 7, 1971 to December 1, 1975; Zeit,
December 7, 1971 to December 21, 1975). On January 26, 1977, a
class was certified in Simon consisting of purchasers of Westinghouse
common stock during the period from December 7, 1971 to October 30, 1974.
Simon, et al. v. Westinghouse Electric Corp., et al., 73 RR.D. 480
3/Plaintiff Simon sought leave to intervene in Steinberg in
the Southern District of New York, but intervention was denied
because Simon already was prosecuting his claims in the Eastern
District of Pennsylvania.
4/In November 1976, the Honorable Jack B. Weinstein denied
Westinghouse's motion to transfer Lemberger from the Eastern
District of New York to the Eastern District of Pennsylvania
under 28 U.S.C. §l404(a).

Case MDL No. 295 Document 2 Filed 05/05/15 Page 8 of 17
(E.D. Pa. 1977). Class determinations have not yet been made in the
other actions, however. The plaintiffs in the sixth action, Lemberger,
which is not brought as a class action, were the controlling
shareholders of Host Enterprises, Inc. (Host), who exchanged
their shares in Host for shares of Westinghouse in connection
with the merger of Host with a wholly-owned subsidiary of
Westinghouse, Westhost, Inc., in August 1972. The plaintiff
in Ziet acquired her Westinghouse shares in the same manner
as the plaintiffs in Lemberger. Plaintiff in Ziet brings her
action on behalf of a class of certain Host shareholders who
acquired Westinghouse shares as a result of the Host-Westhost
merger, as well as on behalf of a class of all purchasers of
Westinghouse securities from December	7, 1971 to December	21, 1975.
The complaints in all six actions allege that the
financial statements and other reports disseminated by Westing-
house during overlapping periods of time were materially false
and misleading in violation of the federal securities statutes and
that these allegedly false and misleading statements and re-—
ports artificially inflated the market price or exchange value
of Westinghouse securities. The complaints in all actions
except Lemberger refer specifically to nondisclosures and
misrepresentations relating to Westinghouse's long-term con-
tracts for the supply of uranium as a purported cause of
the alleged artificial inflation of the value of
Westinghouse stock. The complaints in Simon, Roth, Ziet
and Lemberger include allegations of certain other mis-
representations in and omissions from Westinghouse's financial
statements and reports. These additional allegations involve,

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SE inter alia, misrepresentations and omissions concerning: 1)
Westinghouse's water quality control operations; 2) Westinghouse's
cash flow and loan problems; 3) Westinghouse's illegal political
contributions and payments; 4) Westinghouse's problems
concerning sales and performance of turbine generators; and
5) Westinghouse's sale of its Major Appliances Division in 1974. %
Westinghouse is named as a defendant in all six actions,
and Price Waterhouse is named as a defendant in Steinberg,
Freeman, Simon and Roth. Freeman, Simon and Roth also include
certain officers and directors of Westinghouse as defendants.
Westinghouse's investment bankers are named as defendants only
in the Simon action, while Westhost, Inc., the wholly-owned
Westinghouse subsidiary that merged with Host, is named as a
defendant only in the Lemberger and Ziet actions.
II. SUMMARY OF THE PARTIES' POSITIONS
A. MDL-235
Westinghouse and Price Waterhouse move the Panel to
vacate the orders conditionally transferring Steinberg and
Freeman to the Eastern District of Virginia. All responding
parties concur.
Unlike its position concerning Steinberg and Freeman,
Westinghouse favors transfer of Rio Algom and Homestake to
5/ in _reWestinghouse Electric Corp. Securities Fraud Litigation,
MDL-231 (J.P.M.L., filed December 9, 1975), involved allegations
in three actions that Westinghouse violated the federal securities
statutes concerning the sale of its Major Appliances Division
in 1974. The Section 1407 motion in MDL-231 became moot when
two of the three actions in that litigation were transferred
pursuant to 28 U.S.C. §1404(a) to the Western District of
Pennsylvania, wherein the third action was pending.

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Co the Eastern District of Virginia. All other responding
parties oppose transfer of Rio Algom and Homestake, however.
B. MDL-295
only plaintiffs in Lemberger and ziet disagree with
movants that Steinberg, Freeman, Roth, Simon, Lemberger, and
Ziet belong in a single district for coordinated or consolidated
pretrial proceedings. Those plaintiffs oppose transfer of
their actions from the Eastern District of New York. In
addition, each of the three districts wherein these six actions
are pending has been suggested by various parties as an
appropriate transferee district.
III. HOLDING
A. MDL-235
Although Rio Algom, Steinberg, Freeman and Homestake
each may share some questions of fact with the actions in
MDL-235, we have concluded that the inclusion of Rio Algom,
Steinberg, Freeman and Homestake in MDL-235 would not necessarily
serve the convenience of the parties and witnesses or promote
the just and efficient conduct of that litigation. Accordingly,
the conditional transfer orders in Rio Algom, Steinberg and
Freeman are vacated, and the show cause order regarding transfer
of Homestake is vacated.
B. MDL-295
We find that Steinberg, Freeman, Simon, Roth, .Lemberger
and Ziet raise common questions of fact and that transfer of
Steinberg, Freeman, Simon and Roth under Section 1407 to the

| Case MDL No. 295 Document 2 Filed 05/05/15 Page 11 of 17
Eastern District of New York for coordinated or consolidated
pretrial proceedings with Lemberger and Ziet will best serve
the convenience of the parties and witnesses and promote the
just and efficient conduct of this group of actions.
IV. ARGUMENTS AND REASONING
A. MDL-235
Westinghouse, the only party that favors transfer of
Rio Algom to the Eastern District of Virginia, contends that
the Panel's original opinion and order in MDL-235 clearly
suggests that Rio Algom should be included in MDL-235.
Westinghouse states that the Panel recognized that the
actions in MDL-235 involve the issue of whether unforeseen
contingencies occurred to render the performance by Westing-
house of its uranium supply contracts "commercially im-
practicable" under Section 2-615 of the Uniform Commercial
Code, and found that "common factual questions will be raised
concerning the effect of any alleged unforeseen intervening
circumstances on the price and supply of uranium." In re
Westinghouse Electric Corp. Uranium Contract Litigation, supra,
405 F. Supp. at 319. One of the "intervening circumstances" that
Westinghouse has raised in its answers to the complaints in
MDL-235 is the alleged illegal agreement among uranium producers
to manipulate the price and availability of uranium, Westinghouse
points out. Evidence of this alleged conspiracy is central both
to Rio Algom and the actions in MDL-235, Westinghouse stresses.
Westinghouse argues that if there has, in fact, been an
international conspiracy to raise prices and manipulate the
uranium market, then proof of this conspiracy might not only

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"7 éstablish Westinghouse's Section 2-615 defense in MDL-235 but
also provide the basis for relief to Westinghouse in Rio Algom.
Although Westinghouse concedes that transfer of Rio Algom to
MDL~235 would delay trial of the actions in MDL-235, Westinghouse
maintains that unless Rio Algom is included in MDL-235
resolution of a nationally important issue will be complicated
by unnecessarily repetitive discovery and trials with the
possibility of conflicting results. As an alternative to
transferring Rio Algom to the Eastern District of Virginia for
inclusion in MDL-235, Westinghouse suggests that the Panel order
expedited discovery and trial in Rio Algom in the Northern District
of Illinois. :
Westinghouse's main argument for including Homestake
in MDL-235 is that Westinghouse's "unclean hands" defense in
Homestake involves the issue of Homestake's participation in the
international conspiracy raised by Westinghouse in defense of
the actions in MDL-235.
While we recognize that the allegations of a uranium
price-fixing and market manipulation conspiracy in Rio Algom
and the actions in MDL-235 involve common questions of fact, on
the basis of the record before us we are not convinced that
these conspiracy issues predominate over the contractual issues
that form the basis of MDL~-235. Moreover, although Westinghouse's
"unclean hands" defense in Homestake may share questions of
fact with Westinghouse's defense in the actions in MDL-235
concerning the alleged international conspiracy, the issues in

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Co Homestake are basically unique to that action because	they involve
the contractual relationships between Westinghouse and Homestake ‘as
well as Homestake and Uranex. Furthermore, we agree with all
responding parties that the fundamental factual issues raised
by Steinberg and Freeman are distinct from those involved in the
actions in MDL-235. The complaints in Steinberg and Freeman,
brought under the federal securities laws, focus on Westinghouse's
alleged nondisclosures of the long-term uranium supply contracts
and its inability to meet those contracts, as well as the effect
those nondisclosures had on the value of Westinghouse stock.
In MDL-235, on the other hand, the utility-plaintiffs seek to
recover damages stemming from the alleged breach of certain of
the uranium supply contracts. While Steinberg and Freeman may
share some questions of fact with the actions in MDL-235 because
all these actions relate in some manner to Westinghouse's nuclear
energy business, we are persuaded that any common factual issues
do not predominate. In any event, unlike Rio Algom, Homestake,
Steinberg and Freeman, trial is imminent in the actions in
MDL-235. Under these circumstances, we believe that the
purposes of Section 1407 can best be achieved by allowing the
actions in MDL-235 to be left alone. See In re Celotex Corporation
"Pechnifoam” Products Liability Litigation, 68 F.R.D. 502, 505
(J.P.M.L. 1975).
Westinghouse's alternative proposal that the Panel
order expedited discovery and trial in Rio Algom is beyond
the Panel's authority under. Section 1407. The
Panel has neither the power nor the inclination to

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dictate in any way the manner in which judges process actions
pending before them. See In re Molinaro/Catanzaro Patent
Litigation, 402 F. Supp. 1404, 1406 (J.P.M.L. 1975); In re
Plumbing Fixtures Cases, 298 F. Supp. 484, 489 (J.P.M.L. 1968).
B. MDL-295
With the exception of plaintiffs in Lemberger and
Ziet, all responding parties recognize that the six actions in MDL-
295 involve many common guestions of fact. Plaintiffs in Lemberger
and Ziet argue that although Ziet shares some guestions of fact
concerning defendants' allegedly fraudulent conduct with
Steinberg, Freeman, Roth and Simon, the predominant issues in
Ziet and Lemberger are unique because they involve the merger
of Host into Westhost.
A thorough review of the complaints in Roth, Simon,
Lemberger, Ziet, Steinberg and Freeman reveals that these actions
all involve numerous common questions of fact concerning de-
fendants' allegedly fraudulent activities that resulted in arti-
ficially inflating the value of Westinghouse securities.
Although plaintiffs in Lemberger and Ziet acquired their
Westinghouse stock pursuant to a merger and not on the open
market, nearly all the specific misrepresentations and omissions
alleged by plaintiffs in Lemberger and Ziet are also complained
of in one or more of the other actions in MDL-295.
Furthermore, the period during which the Host-Westhost merger
negotiations occurred (1972) fits squarely within the period
complained of in the Freeman, Steinberg, Simon and Roth complaints.

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Co In addition, the purported classes in Roth, Ziet, Steinberg and
Freeman and the determined class in Simon all overlap. Thus,
Section 1407 proceedings will not only avoid the possibility
of duplicative discovery but will also prevent inconsistent
class determinations and other pretrial rulings. Should any
unique factual issues concerning the Host-Westhost merger, or
any other aspect of MDL-295, arise in the transferee district,
the transferee judge has the flexibility to design a pretrial
program that will accommodate	the needs of each party for any
unique discovery or judicial attention concurrently with common
pretrial matters. See In re Republic National-Reality Equities
Securities Litigation, 382 F. Supp. 1403, 1405-06 (J.P.M.L. 1974).
We are of the view that each of the three districts
wherein the various actions in MDL-295 are pending may be
described as an appropriate transferee forum. On balance, however,
we are persuaded that the Eastern District of New York is most
preferable. Four of the six actions in MDL-295 already are
pending in districts in the New York City area. And a majority
of the parties prefer a transferee district in the New York City
area.
IT IS THEREFORE ORDERED that the conditional transfer
orders regarding the actions entitled §S. Sherman Steinberg v.
Westinghouse Electric Corp., et. al., S. D. New York, Civil Action
No. 75-Civ-6317; Franklin Freeman v. Westinghouse Electric Corp.,
et. al., S. D. New York, Civil Action No. 76-Civ-3352; and
Westinghouse Electric Corp. v. Rio Algom Ltd., et. al., N.D. Illinois,

Case MDL No. 295 bocument 2 Filed 05/05/15 Page 16 of 17
Civil Action No. 76C3830, be, and the same hereby are, VACATED.
IT IS FURTHER ORDERED that the order to show cause
regarding the action entitled Homestake Mining Co. V.
Westinghouse Electric Corp., N. D. California, Civil Action No.
C-76-2192-RFP, be, and the same hereby is, VACATED.
IT IS FURTHER ORDERED that, pursuant to 28 U.S.C. §1407,
the actions listed on the following Schedule A and pending
in districts other than the Eastern District of New York be, and
the same hereby are, transferred to the Eastern District of
New York and, with the consent of that court, assigned to the
Honorable Jack B. Weinstein for coordinated or consolidated
pretrial proceedings with the actions already pending there and
listed on Schedule A.

Case MDL No. 295 Document 2 Filed 05/05/15 Page 17 of 17
k r SCHEDULE A
Co Docket No. 295
EASTERN DISTRICT OF NEW YORK civil Action No.
Milton Lemberger, et al. v. 76-552
Westinghouse Electric Corp., et al.
Judith Ziet v. Westinghouse Electric 76-2031Corp., et al.
SOUTHERN DISTRICT OF NEW YORK
S. Sherman Steinberg v. Westinghouse 75-Civ-6317
Electric Corp.,	et al.
Franklin Freeman v. Westinghouse 76-Civ-3352
Electric Corp.., eC. ali
EASTERN DISTRICT OF PENNSYLVANIA
Se onsen Or FANNOYLVANIA
M. Simon, et al. v. Westinghouse 76-874
Electric Corp., et al.
Martin Roth v. Westinghouse Electric Corp., 76-3605et al.