IN RE: First National Bank, Heavener, Oklahoma (First Mortgage Revenue Bonds) Securities Litigation

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JUDICIAL ppe Te
HUTS ARE ON : Ce
!FiLep- GAT ay Po	BEFGRE THE JUDICIAL PANEL
ON Hay 5 1978 TF ERMULTIDISTRICT LITIGATION PaTR: 78 aeL ucia 0, Hires Ea] Ve |
IN RE FIRST NATIONAL BANK, ) CLERK OF The paidHEAVENER, OKLAHOMA (FIRST ) DOCKET NO. 339 AES
MORTGAGE REVENUE BONDS) )
SECURITIES LITIGATION )
OPINION AND ORDER
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD, Ln
EDWIN A. ROBSON, JOSEPH S. LORD, III, STANLEY A. WEIGEL, s
ANDREW A. CAFFREY, AND ROY W. HARPER, JUDGES OF THE PANEL.
PER CURIAM :
“This litigation consists of two actions pending in _ Le
different districts —- one in the Eastern District of =
Oklahoma and one in the Western District of Oklahoma. | N
The subject of this controversy is $1.3 million of oo
First Mortgage Revenue Bonds, Series 1968 (the bonds), ER
issued by the Eufaula Utility Authority (Utility : CL
Authority). The bonds were issued for the purpose of no
providing funds for the construction of a water system,
improving streets and roads and constructing related oo EEE
facilities on the properties of the Utility Authority A
in Eufaula, Oklahoma. Plaintiff in both actions is : Cn
the First National Bank, Heavener, Oklahoma (Heavener
bank), a purchaser of some of the bonds. In each action,
the Heavener bank seeks to represent a class consisting IT
of all holders of the bonds. Defendants in the Eastern :

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E Oklahoma action are the Utility Authority and its JRE
| trustees; Perry, Adams and Louis,Inc. (Perry, Adams), EEallegedly the primary broker for sale of the bonds;
Eufaula Enterprises, Inc., allegedly a wholly owned
subsidiary of Perry, Adams; John I. Willhauck, Jr.,
the president of Eufaula Enterprises; several other :
brokers that allegedly acted as agents of Perry, Adams : oo
for sale of the bonds; and several alleged recipients | Tn
of funds diverted from Eufaula Enterprises. The sole 8
defendant in the Western Oklahoma action is the First
National Bank and Trust Company of Ponca City, Oklahoma :
: (Ponca City bank), the trustee for the bonds. The Ponca : SE
City bank was originally named as a defendant in the | oo E
Eastern Oklahoma action, but, in accordance with the venue :
provision of the National Bank Act, 12 U.S.C. §94, the i
Ponca City bank was dismissed for improper venue. The ARE
Western Oklahoma action was filed after that dismissal. : -
The allegations,	in the two complaints are sub- | EE
stantially the same. The Heavener bank alleges that the B
defendants violated the federal securities laws by FR
entering into a common scheme to defraud the bond- SE
holders. All but one of the defendants in the Eastern oo
Oklahoma action are listed in the complaint in the CL
Western Oklahoma action as participants in the alleged -
scheme. Similarly, the Ponca City bank is listed in 0

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0 the amended complaint in the Eastern Oklahoma
action as a participant in the alleged scheme.
Particulars of the alleged scheme include the
following: the bonds were delivered by the trustees
of the Utility Authority to Willhauck for no consider-
ation or for inadequate consideration; the Ponca City
bank violated its duty to the bondholders as trustee for
the bonds by permitting delivery of the bonds to Willhauck
without making certain that the proceeds from the sale
of the bonds were used for the benefit of the Utility
Authority; an offering circular was disseminated which
falsely represented that proceeds from the sale of the
C bonds would be used to purchase and improve certain residen-tial properties and to improve other properties owned
by the Utility Authority; Eufaula Enterprises was allowed
to exercise the responsibilities of the Utility Authority
in connection with the bonds, including the collection
of proceeds from the sale of properties that served as
security for the bonds and including the collection of
charges for utility services from occupants of those
properties, but Eufaula Enterprises did not remit those
collections to the Ponca City bank and instead diverted
those funds to several other enterprises; Eufaula
Enterprises misrepresented to the Utility Authority that
certain work had been performed on behalf of the Utility
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Case MDL No. 339 Docurpent 2 Filed 05/05/15 Page	4 of 8 :
Authority pursuant to a contract; the Ponca City bank ®further violated its fiduciary duty to the bondholders
when, after demand by the bondholders, it failed to commence
foreclosure proceedings concerning the properties that
served as security for the bonds. The Heavener bank
alleges that as a result of defendants' conduct the bonds
went into default and substantial losses to the bondholders
ensued.
The Heavener bank moves the Panel for an order pur-
suant to 28 U.S.C. §1407 transferring the Western
Oklahoma action to the Eastern District of Oklahoma
for coordinated or consolidated pretrial proceedings
with the action pending in that district. Ponca City
bank, Perry, Adams, Willhauck and four other defendants C
oppose transfer. In the event transfer is ordered,
the opponents of transfer favor the Western District
of Oklahoma as the transferee forum.
We find that these actions involve common questions
of fact and that transfer of the action pending in the
Eastern District of Oklahoma to the Western District
of Oklahoma for coordinated or consolidated pretrial
proceedings with the action pending in that district
will serve the convenience of the parties and witnesses
and promote the just and efficient conduct of this
litigation.
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C The opponents of transfer admit that these actionsinvolve common questions of fact, but they assert
that substantial individual questions of fact concerning
the alleged liability of the Ponca City bank in its unique
capacity as trustee for the bonds are involved in the
Western Oklahoma action. The opponents also maintain
"that the two actions before the Panel are not exceptional
cases, that the issues involved are not unduly complex
and that transfer should therefore be denied in accordance
with the principles enunciated in In re Scotch Whiskey
Antitrust Litigation, 299 F. Supp. 543, 544 (J.P.M.L.
1969). Voluntary cooperation among the parties and the
two involved courts to share any common aspects of
C discovery would serve as a suitable alternative to
transfer, the opponents contend.
We find these arguments unpersuasive. These two
actions arise from the same factual situation and share
numerous complex questions of fact concerning the
financial condition and the operation of the Utility
Authority and concerning the allegedly concerted
activities of the various defendants in connection with
the distribution and sale of the bonds. Discovery
on these complex factual questions will be time-consuming.
Transfer under Section 1407 is thus necessary, even
though only two actions are involved, in order to prevent
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duplicative pretrial proceedings and eliminate the poss-
ibility of inconsistent pretrial rulings. See In re ®
Ascot Oils, Inc. Securities Litigation, 433 F. Supp.
1118, 1120 (J.P.M.L. 1977). See generally In re Scotch
Whiskey Antitrust Litigation, supra, 299 F. Supp. at
544. Because these actions have been brought on behalf
. of the same plaintiff class, we emphasize that it is
desirable to have a single judge oversee the class action
issues in both actions to avoid duplicative efforts
in this area. While voluntary coordination of discovery
efforts among parties and their counsel is always
commendable, transfer of these actions to a single
district under Section 1407 will ensure the stream-
lining of discovery and all other pretrial proceedings C
as well. See In re Ascot Oils, Inc. Securities Litigation,
supra, 433 F. Supp. at 1120. The transferee judge, of
course, has the broad discretion to design a pretrial
program that will allow discovery on any issues unique
to either action to proceed concurrently with the
common discovery. See In re Republic National-Realty
Equities Securities Litigation, 382 F. Supp. 1403,
1405-06 (J.P.M.L. 1974).
The actions before us are pending in adjacent
districts and either district could be described as
an appropriate transferee forum for this litigation.
On balance, however, we are of the view that the Western ®

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District of Oklahoma is preferable. The record before
® us reveals that the parties, anticipated witnesses and
relevant documents in these actions are located throughout
Oklahoma and in other states. Since the situs of the
Western District of Oklahoma is in a major metropolitan
area, Oklahoma City, whereas the situs of the Eastern
. District of Oklahoma is in a much smaller locality,
Muskogee, the former district is the more convenient forum.
IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C.
§1407, the action listed on the following Schedule A and
pending in the Eastern District of Oklahoma be, and the
same hereby is, transferred to the Western District of
Oklahoma and, with the consent of that court, assigned
C to the Honorable Ralph G. Thompson for coordinated or
consolidated pretrial proceedings with the action listed
on Schedule A and pending in that district.
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® Schedule A - Docket No. 339EASTERN DISTRICT OF OKLAHOMA Civil Action No.
First National Bank, Heavener, 76-343-C
Oklahoma, etc. v. Eufaula
Enterprises, Inc., et al.
WESTERN DISTRICT OF OKLAHOMA
First National Bank, Heavener, 77-0461-T
Oklahoma, etc. v. First National
Bank & Trust Co. of Ponca City,
Ponca City, Oklahoma