IN RE: LTV Corp. Securities Litigation

Case MDL No. 371 Document 2 Filed 05/16/55 1of9 |
BEFORE THE JUDICIAL PANEL MUFISIAL Pane oy SRR NON FE RAT :
MULTIDISTRICT LITIGATION MY -g 10 . oo
In re LTV Corp. Securities Litigation ) Docket opis, | aEOPINION AND ORDER VEO Thepa) ol oo
BEFORE MURRAY I. GURFEIN, CHAIRMAN, AND EDWIN A. ROBSON, STANLEY A. Sz.WEIGEL*, ANDREW A. CAFFREY, ROY W. HARPER, AND CHARLES R. WEINER, Co
JUDGES OF THE PANEL. oo
PER CURIAM | | | Co
This litigation consists of seven actions pending in five co
federal districts -- two in the Northern District of Texas, two
in the Eastern District of New York, and one each in the Southern :
District of Ohio, the Southern District of Florida, and the Northern |
district of Illinois. a
On October 16, 1978, the Securities and Exchange Commission
(SEC) filed a civil enforcement action (SEC action) under the Lo
federal securities laws in the Northern District of Texas against
LTV Corporation; Jones and Laughlin Steel Corporation (J & LJ),
a subsidiary of LTV; and an individual who is a vice-president
of LTV and a former vice-president of J & L. The complaint in h
the SEC action alleged that the results of operations of LTV Le
and J & L for the years 1975 and 1976 were materially misstated Co REE
because of misapplications by J & L of its "last-in, first-out" |
(LIFO) method of accounting for inventories. The SEC alleged
that these misrepresentations were incorporated into reports or
¥ Judge Weigel did notparticipate in the decision of this matter.

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filed by LTV and J & L with the SEC and into materials distributed | BESTE
by LTV and J & L to shareholders and to the investing oublic. oo oo
In particular, the SEC alleged that the misrepresentations | Lon
. were incorporated into the prospectuses for four specific offerings
of LTV or J & L securities.
On the same date that the SEC action was filed, the SEC IR
and the three defendants entered into a consent judgment - EE
pursuant to which the defendants, inter alia, were per- oo oo
manently enjoined from further violations of the federal
securities laws; were required to effect any necessary
restatements of inventory and earnings for prior years, and in
the future to report inventory and earnings in accordance with oo )
generally accepted LIFO accounting practices; and were required : oo
to appoint a special officer and establish an audit committee
to investigate the practices complained of by the SEC, and to - oo
recommend appropriate changes in accounting practices. 3 B
The complaints in five of the actions before the Panel (Kent
in Texas, the Ohio action, the Florida action, the Illinois action, ;
and the later-filed New York action (second New York action)), i. i
each of which is brought under, inter alia, the federal securities EE) Co
laws, call into question, among other alleged irregularities, :
essentially the same practices by LTV and J & L that were complained
of in the SEC action. LTV, J & L, and the accountants for LTV oo
and J & L are named as defendants in each of these actions.
In addition, twelve officers and/or directors of LTV are named
as defendants in four of these actions (Kent in Texas, the Ohio

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® the Florida action and the Illinois action), and 120
| brokers and underwriters that participated in offerings of LTV
securities are named as defendants in the Kent action in Texas.
Plaintiffs in these five actions are purchasers of LTV securities.
Each of these actions is brought as a class action on behalf
of all open market purchasers of LTV securities from 1975 to
1978 and/or on behalf of purchasers of one or more of the specific
offerings of LTV securities mentioned in the SEC complaint.
The complaint in the sixth action (Bronheim in Texas) contains
general allegations of misstatements of facts and omissions of
material information relating to the inventories of J & L in
LTV corporate reports and prospectuses, and is brought under,
@-- alia, the federal securities laws. Defendants are LTV,
LTV's accountants, and 22 individual officers and/or directors
of LTV (including the twelve individuals named in four of the
other actions before the Panel). Plaintiff is a purchaser of
LTV securities, and this action is brought as a class action
on behalf of all purchasers of LTV securities from 1975 to 1978.
The seventh action, the first New York action, has been
brought against LTV by a purchaser of one of the specific offerings
of LTV securities mentioned in the SEC complaint. A class of
all purchasers of this offering has been certified and class
notice has been distributed. The complaint in the first New
York action, which was filed prior to the filing of the SEC action,
alleges that the prospectus for this offering contained misrepre-
Q.... and omitted material facts in violation of the federal

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@®securities laws. Specifically, the complaint alleges, the prospectus
failed to disclose that after the sale of this offering LTV planned
to divest itself of numerous subsidiaries owned and controlled
by LTV, at a net loss to LTV of approximately $45 million. On
November 16, 1978, plaintiff in the first New York action moved
for leave to file an amended complaint, which contains additional
allegations closely tracking the allegations in the SEC complaint.
The class for which representation is sought in the proposed
amended complaint would remain the same as the class already
certified. Ruling on the motion for leave to file the amended
complaint has been deferred pending the Panel's decision on the
question of transfer in this docket.
LTV, J & L, their accountants, and the 22 individual setenca
move the Panel, pursuant to 28 U.S.C. §1407, for transfer of
the five actions pending in districts other than the Northern
District of Texas to that district for coordinated or consolidated
pretrial proceedings with the actions pending there. Plaintiffs
in the two Texas actions, plaintiff in the Florida action and
plaintiff in the Ohio action support this motion. Plaintiff
in the two New York actions (the same individual is plaintiff
in both actions) opposes transfer of the two New Ydbrk actions.
In the alternative, if transfer is ordered, this plaintiff favors
selection of the Eastern District of New York as the transferee
forum.
We find that these seven actions involve common questions Cof fact and that their centralization under Section 1407 in the

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®Northern District of Texas for coordinated or consolidated pretrial
proceedings will serve the convenience of the parties and witnesses
and promote the just and efficient conduct of the litigation.
Plaintiff in the New York actions asserts, in opposition
to transfer of the New York actions, that the present complaint
and the proposed amended complaint in the first New York action
involve substantial unique claims relating to the alleged failure
of LTV to disclose in the prospectus for a specific securities
offering that LTV intended to divest itself of numerous subsidiaries
at a substantial loss to LTV. A class has already been certified
in that action, the class notice has been distributed, and sub-
stantial discovery has occurred on these claims, opponent stresses.
@- opponent maintains, the first New York action is in-
appropriate for inclusion in coordinated or consolidated pretrial
proceedings with any of the other actions presently before the
Panel.
With respect to the second New York action, opponent admits
that the complaint in this action and the complaints in the actions
before the Panel that are pending in other districts raise common
factual questions. Opponent argues, however, that if the first
New York action is excluded from transfer, the second New York
action should also be excluded from transfer in order to allow
coordinated or consolidated pretrial proceedings in the Eastern
District of New York between the two New York actions.
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We [ind these arguments unpersuasive. As all responding
parties recognize, the five actions pending in districts other
than the Southern District of New York and the second New York
action involve substantial common questions of fact concerning
J & L's inventory accounting methods during the years in question
and the effect of those inventory accounting methods on the accuracy
of the corporate reports and prospectuses issued by LTV and/or
J & L. Though the present complaint in the first New York action
alleges specific deficiencies in the prospectus for the offering
of LTV securities of which plaintiff was a purchaser that are
different from the specific deficiencies alleged in the complaints
| in the other actions before the Panel, the complaints in several
of the other actions also include generalized allegations of ®
irregularities during the same time period in the corporate reports
and prospectuses issued by LTV and/or J & L. These generalized
allegations necessarily encompass the specific irregularities
alleged in the complaint in the first New York action. Therefore,
the first New York action and several of the other actions before
the Panel share common factual questions as well. Transfer under
Section 1407 is thus necessary to prevent duplicative discovery
efforts and eliminate the possibility of inconsistent pretrial
rulings. See In re Commonwealth Oil/Tesoro Petroleum Securities
Litigation, 458 F. Supp. 225, 229 (J.P.M.L. 1978). An additional
Justification for transfer 1s the fact that several of the actions
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®before the Panel, including the first New York action, have been
brought on behalf of similar or overlapping classes of purchasers
of LTV securities. It is desirable to have a single judge oversee
the class action issues in all these actions to avoid duplicative
efforts and inconsistent rulings in this area. See In re First
National Bank, Heavener, Oklahoma (First Mortgage Revenue Bonds)
Securities Litigation, 451 F. Supp. 995, 997 (J.P.M.L. 1978).
The transferee judge, of course, has the broad discretion
to design a pretrial program that will allow discovery on any
issues unique to any action or party to proceed concurrently
with the common discovery. See In re Republic National-Realty
9. Securities Litigation, 382 F. Supp. 1403, 1405-06 (J.P.M.L.	N97.) . And no party need participate in pretrial proceedings
unrelated to that party's interests. See, e.g., Parts I and
IT, §§2.31, Manual for Complex Litigation (rev. ed. 1977).
The Northern District of Texas is clearly the most appropriate
transferee district for this litigation. LTV is headquartered
within that district and therefore the relevant files of LTV
and the relevant officers, directors and employees of LTV are
located there. See In re Vernitron Securities Litigation, L462
F. Supp. 391, 394 (J.P.M.L. 1978). In addition, we note that
movants and all responding parties before the Panel, except the
plaintiff in the New York action, favor the Northern District
of Texas as the transferee forum.
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Case MDL No. 371 Documegt?2 Filed 05/18/15 Page	8 of 9 ; “=
IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C, §1407, ®
the actions listed on the following Schedule A and pending in
districts other than the Northern District of Texas be, and the
same hereby are, transferred to the Northern District of Texas
and, with the consent of that court, assigned to the Honorable
Patrick E. Higginbotham for coordinated or consolidated pretrial
proceedings with the actions already pending there and listed
on Schedule A,
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a ‘ Case MDL No. 371 Document 2 Filed 05/18/15 Page 9 of 9
® DOCKEET NO. 371
Schedule A
SOUTHERN DISTRICT OF FLORIDA Civil Action No.
William G. Reynolds, etc. v. 79-401-Civ-JAG
The LTV Corp., et al.
NORTHERN DISTRICT OF ILLINOIS
Marhart, Inc., etc. v. The LTV 78C-4853
Corp., et al.
EASTERN DISTRICT OF NEW YORK
Abraham Fruchthandler v. LTV Corp., 77-C-1879
Abraham Fruchthandler v. LTV Corp., 78-C-2457
= *! SournERN DISTRICT OF OHIO
Model Associates, Inc. v. LTV Corp., C-1-78-742
et al.
C NORTHERN DISTRICT OF TEXAS :
Bert Bronheim v. LTV Corp., et al. 3-78-0937-C
Gladys L. Kent v. LTV Corp., et al. 3-78-1347-F |
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