IN RE: Raymond Lee Organization, Inc., Securities Litigation

UREN Case MDL No. 337 Document 2 Filed 050525 mrt	JunicIAUPANCL oN : SE
: ULTIDISTRICT LITIGATION IE
: BEFORE THE JUDICIAL PANEL FILED SRE
ON :
MULTIDISTRICT LITIGATION MAR 22 1978 957	D. HOWARD ] a.
IN RE RAYMOND LEE ORGANIZATION, INC.) PATRICIA XE PANEL 3/42 %SECURITIES LITIGATION ) pot NO. 337
OPINION AND ORDER
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD, i : a
EDWIN A. ROBSON, JOSEPH S. LORD, III*, STANLEY A. WEIGEL, Sn
ANDREW A. CAFFREY*, AND ROY W. HARPER, JUDGES OF THE PANEL h
PER CURIAM
“This litigation consists of two actions, one in the B
Central District of California and one in the Southern .
District of New York. Each of these actions arises from
the business relationships of the various plaintiffs oo
with the Raymond Lee Organization, Inc. (RLO), a company EE
that provides patenting, development and marketing Le
services to inventors. oo
The California action was filed in October 1973 against
RIO; Raymond Lee, who is the president of RLO; two officers oo Lo
and/or employees of RLO; "four companies that are allegedly SL i
agents and/or affiliates of RLO; and four patent attorneys | Co
or agents of RLO who are registered with the Patent Office
* Judges Lord and Caffrey took no part in the decision Co
of this matter.

TT TT TTT eT TT mmm FEE Se | .
Case MDL No. 337 Document 2 Filed 05/05/15 Page 2 of 8 ©
ct )
and who have from time to time performed certain patent- : Co
| related services for some of the other defendants. The RE
| | » Co
! complaint in the California action alleges that defendants: :
(1) conspired to and did lead plaintiffs falsely to believe that
certain defendants were qualified to prepare patent appli-
cations and were recognized to practice before the Patent } NER
Office, all in violation of 35 U.S.C. §33; (2) made
certain false representations and descriptions in connection
with the services they purported to provide plaintiffs, in
vidlation of §43 (a) of the Lanham Trademark Act, 15 U.S.C. CL
. 2/ - 3 oo Co§ll25(a); and (3) violated the federal securities laws :
1l/ 35 U.S.C. §33 provides as follows: .
Whoever, not being recognized to practice before Co
the Patent Office, holds himself out or permits EE
himself to be held out as so recognized, or as being
qualified to prepare or prosecute applications for oo
patents, shall be fined not more than $1,000 for each a
offense.
2/ 15 U.S.C. §l1l125(a) provides in part as follows:
Any person who shall affix, apply, or annex, or Co
use in connection with any goods or services...a : ULE
false Jesignation of origin, or any false description ERE
or representation, including words or other symbols Co
tending falsely to describe or represent the same, Co
and cause such goods or services to enter into commerce,
and any person who shall with knowledge of the falsity
of such designation of origin or description or a
representation cause Or procure the same to be...used : oo
in commerce, shall be liable to a civil action by any SE
person doing business in the locality falsely indicated Co
as that of origin or in the region in which said :
locality is situated, or by any person who believes
that he is or is likely to be damaged by the use of
any such false description or representation.

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® in connection with the solicitation and sale to plaintiffs
of development agreements concerning plaintiffs' inventions.
The district court in California has ruled from the bench in
this action that these development agreements do not constitute |
securities within the meaning of the federal securities statutes,
and has orally granted defendants' motion for summary judgment
dismissing the count of plaintiffs' complaint that alleges
federal securities law violations. No formal written order
incorporating these rulings has yet been filed, however.
The California action was brought as a purported class
action on behalf of all persons who, from on or about July 7,
eo 1967 through late 1973, entered into certain specified |
written agreements with the defendants. The parties have
represented before us that the California district
court has orally denied class certification in this
action. | |
Extensive discovery and other pretrial proceedings have
already taken place in the California action, and all parties who
have taken a position before the Panel concede that discovery
has been completed in that action. The court has not yet set
a trial date for the California action.
® oo

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The New York action was commenced in December 1977 | @
against RLO and Raymond Lee. The complaint in this action was
brought both individually and on behalf of a class consisting of
"all clients of defendants." The first cause of action, asserted
on behalf of the individual plaintiff and the purported class,
alleges federal securities laws violations similar to those
alleged in the California action. The other counts of the
New York complaint are asserted solely on behalf of the |
individual plaintiff, and allege that: (1) defendants mis-
| represented to the plaintiff the terms of the development
agreement into which plaintiff entered, and that plaintiff
lacked an opportunity to ascertain the true contents of the ®
contract by reason of plaintiff's "limited command of the
English language"; (2) defendants breached that same contract;
and (3) defendants, in violation of the federal securities
laws, made certain material misrepresentations and omissions
directly to plaintiff in connection with that contract.
This litigation is before the Panel on the motion of
defendants RLO and Lee for transfer, pursuant to 28 U.S.C. §1407,
of the New York action to the Central District of California
for coordinated or consolidated pretrial proceedings with the
®

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action pending there. The plaintiffs in the California and
® New York actions oppose transfer. No other parties have
3/
responded to the motion.
Movants argue that these two actions share numerous
complex questions of fact concerning defendants' transaction
of their invention development business, including defendants’
allegedly fraudulent misrepresentations and omissions to
plaintiffs, either orally or through written promotional
material. The extensive discovery already completed in the
California action with respect to these common questions of
fact may most expeditiously be made applicable to the New York
action under the supervision of the judge assigned to the
@ |
California action because he has gained substantial familiarity
with those questions, movants maintain.
~~ Movants point out that a class action determination and
a ruling on the status of the development agreements as
securities under federal law have already been made in the
California action. They argue that a risk of inconsistent
rulings on nearly those same issues in the New York action
would be created unless that action is transferred to the
Central District of California pursuant to Section 1407.
3/ Sixdefendants in the California action submitted a short
reply to the New York plaintiff's memorandum in opposition
@® to transfer. These defendants have not expressly taken anyposition on the issue of transfer under Section 1407, however.

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When, as here, a minimal number of actions are under @
consideration for transfer under Section 1407, the movants
bear a strong burden to show that the common questions
of fact are so complex and the accompanying discovery so time-
consuming that Section 1407 transfer would serve the convenience
of the parties and witnesses and promote the just and efficient
conduct of the litigation. See In re Scotch Whiskey Antitrust -
Litigation, 299 F. Supp. 543, 544 (J.P.M.L. 1969). We find
that movants have not met that burden, although we recognize
that these actions share common questions of fact. Furthermore,
the fact that discovery has been completed in one of the
two actions before us, and thus that action is nearing trial,
diminishes any benefits that could be gained by Section 1407 (
proceadings.
We observe that suitable alternatives to transfer under
| 4/
Section 1407 are available to all parties in this litigation.
Any party could ask the judge supervising the New York action
4/ Movants stated at oral argument before the Panel that they
may seek transfer of the New York action to the Central
District of California pursuant to 28 U.S.C. §l404(a). We
note that, because of the different considerations that
underlie Sections 1407 and 1404 (a), our denial of transfer
under Section 1407 would not be dispositive of a Section 1404 (a)
motion. See In re American Financial Corporation Litigation,
434 F. Supp. 1232, 1234 (J.P.M.L. 1977).

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[| to issue an order to show cause why the discovery already
completed in the California action should not be made
applicable to the New York action. See Manual for Complex
Litigation, Parts I and II, §§3.1l1 (rev. ed. 1977). Or
the parties simply could stipulate that that discovery could
be used in the New York action. See In re American Financial
Corporation Litigation, supra note 4, at 1234. In
addition, communication and cooperation between the
California and New York courts, if deemed appropriate by
those courts, along with the cooperation of the parties,
would minimize the possibility of conflicting pretrial
rulings. See In re Eli Lilly & Co. (Cephalexin Monohydrate)
[ Patent Litigation, F. Supp. : (J.P.M.L., filed	) 2/
February 28, 1978) (slip opinion at 4).
IT IS THEREFORE ORDERED that the motion for transrer
pursuant to 28 U.S.C. §1407 pertaining to the actions listed
on the following Schedule A be, and the same hereby is,
DENIED.
5/ In particular, there appears to be little likelihood of
inconsistent class action determinations in this litigation.
The New York plaintiff has represented to the Panel that his
motion for class action determination, which has not yet been
filed, will cover a later time period than that involved in
the California action and will be limited to persons who con-
tracted with defendants and who reside in the Southern and
Eastern Districts of New York. Brief of New York Plaintiff,
at 11-13, In re Raymond Lee Organization, Inc. Securities
Litigation, MDL-337 (filed February 1, 1978).

Case MDL No. 337 Document 2 Filed 05/05/15 Page 8 of 8 ane
SCHEDULE A
SOUTHERN DISTRICT OF NEW YORK Civil Action No.
Ko-Ming Sheih v. The Raymond Lee Organization, 77-5822
Inc., et al.
CENTRAL DISTRICT OF CALIFORNIA
Constance C. Jones, et al. v. The Raymond 73-2500
Lee Organization, Inc., et al.