IN RE: General Tire and Rubber Company Securities Litigation

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JUDIGHEL PANE ON Co A
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OPINION AND ORDER :
BEFORE JOHN MINOR WISDOM, CHAIRMAN,’ AND EDWARD WEINFELD, } .
EDWIN A. ROBSON, WILLIAM H. BECKER*, JOSEPH S. LORD, III,
STANLEY A. WEIGEL, AND ANDREW A. CAFFREY*, JUDGES OF THE : Ba :
PANEL. oo
PER CURIAM
This litigation consists of three actions each pending
in a different federal district: the Eastern District of SUR
Pennsylvania, the District of New Jersey, and the Southern - EEE
District of Ohio.
These three actions (the private actions) were filed
shortly after a related action was filed by the Securities E
and Exchange Commission (SEC) in the District of the : : Co
District of Columbia on May 10, 1976. The SEC action was
brought against General Tire and Rubber Company (General
: Tire) and its president, Michael G. O'Neil. The SEC alleged :
that officers and directors of General Tire and officers Ea
and directors of certain of its subsidiaries participated
in a scheme of illegal corporate contributions to domestic
political candidates and of illegal corporate payments to
*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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® foreign officials. Several specific instances of foreign
payments are set forth in considerable detail in the SEC com-
plaint. The SEC further alleged that the contributions and
payments were concealed in violation of the federal securities
laws by the issuance of false and misleading statements to
stockholders and the SEC and by the falsification of cor-
porate ledgers. A consent decree was entered in the SEC action
| through which General Tire and Michael O'Neil agreed to a
permanent injunction prohibiting any future false or mis- ,
leading statements by General Tire or future use of corporate
funds for illegal purposes. The consent decree also re-
- guired the Board of Directors of General Tire to establish
a Special Review Committee and retain a Special Counsel to
® conduct an investigation into the matters of which the SEC
complained. That committee was. required to report its findings
to the Board of Directors within 180 days, and a copy of the
report was to be filed with the SEC and the court.
The three private actions are derivative actions	each brought
by a single named plaintiff on behalf of General Tire. The
| Southern District of Ohio action is also brought as a class
action on behalf of all shareholders of General Tire. The
private actions share five common defendants -- General Tire
and four of its officers and directors. Also named in one or
more of these actions are nine other present or former officers
and directors of General Tire; two other corporations which are
J | |

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) wholly or partly owned subsidiaries of General Tire; four
officers of those subsidiaries; Price, Waterhouse and Co.,
certified public accountants for General Tire during the
events in question; and various unnamed recipients and
disbursers of funds. |
The complaints in all the private actions are brought
under the federal securities laws, inter alia, and, in
essence, the allegations in those complaints track the
allegations in the SEC complaint. Like the complaint in
the SEC action, the complaint in the District of New Jersey
action sets forth specific instances of foreign payments in
considerable detail. The complaints in the other two
actions are less specific.
@® General Tire and all other defendants have moved the
Panel pursuant to 28 u.s.c. §1407 to transfer the three private
actions	to the Northern District of Ohio for coordinated or
consolidated pretrial proceedings. Plaintiff in the
Eastern District of Pennsylvania action opposes transfer, or
in the alternative suggests the Eastern District of Pennsyl-
) vania as the transferee district. Plaintiff in the Scuthern
District of Ohio action also opposes transfer.
We find that the three private actions involve common
questions of fact and that their transfer to the Northern
District of Ohio for coordinated or consolidated pretrial
oo proceedings under Section 1407 will best serve the convenience
® |

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of the parties and witnesses and promote the just and
hyd
® : efficient conduct of the litigation.
Plaintiff in the Eastern District of Pennsylvania action
admits that his action shares common questions of fact with
the other two private actions. He contends, however, that
this litigation involves only a minimal number of actions
which do not share unusually complex facts, and that therefore
transfer is inappropriate. He suggests, as an alternative to
transfer, that voluntary cooperation among the parties can
avoid any duplicative discovery efforts. Plaintiff in the
Southern District of Ohio action argues that his action is
inappropriate for coordination or consolidation with the |
other two actions because it is the only action which is
® brought as a class action as well as a derivative action.
. He contends that factual and legal issues will arise in the
class claims which will not be shared by the derivative
claims. If the action is transferred, he requests that
the class claims not be consolidated with the derivative
claims.
We find these arguments unpersuasive. An analysis of the
complaints in these actions reveals that they share common
factual questions concerning intricate events and methods of
1/After the Panel hearing on this matter, an apparently related
action, Harry Lewis v. Michael G. O'Neil, et al., Civil Action
No. C76-344, was filed in the Northern District of Ohio. Since
that action is pending in the district we are herewith designating
as the transferee forum for this litigation, the guestion of
whether that action should be included in the coordinated or
@® + consolidated pretrial proceedings reguires no action on the partof the Panel and should be considered in accordance with local
rules. See Rule 10(a), R.P.J.P.M.L., 65 F.R.D. 253, 260 (1975).

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® operation and that these questions are sufficiently complex
| to warrant transfer under Section 1407. (Compare In re
Scotch Whiskey, 299 F. Supp. 543, 544 (J.P.M.L. 1969) with
In re Alodex Corporation Securities Litigation, 380 F. Supp.
790, 790-91 (J.P.M.L. 1974). Though voluntary cooperation
among the parties as a means of avoiding duplicative dis-
covery is commendable, placing these actions under the con-
trol of a single judge will ensure that duplicative discovery
on the complex factual questions will be prevented	and have
the salutary effect of eliminating the possibility of con-
flicting pretrial rulings. See In re Bristol Bay, Alaska,
Salmon Fishery Antitrust Litigation, 424 F. Supp. 504, 506
(J.P.M.L. 1976).
@® We see no reason to exclude the class claims in the
: Southern District of Ohio action from the coordinated or con-
solidated pretrial proceedings because those claims are
founded upon the same factual averments that are involved in
the derivative claims asserted in all three private actions.
The transferee judge, of course, 1s empowered to design a
pretrial program that will accommodate the parties' interests
on both the common issues and any unique issues presented by
the class claims. See In re Franklin National Bank Securities
Litigation, 393 F. Supp. 1093, 1095 (J.P.M.L. 1975). The de-
gree and manner of coordination or consolidation between the
| class and derivative claims is entirely within the discretion
® |

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ce BN 6 -
® of the transferee judge. See In re Equity Funding Corporation
of America Securities Litigation, 375 F. Supp. 1378, 1384-85
| (J.P.M.L. 1974). So
On the basis of the record before us, the Northern District
of Ohio is the most appropriate transferee forum for this
: | litigation. Since the headquarters of General Tire is within
that district, many of the relevant documents and witnesses,
insofar as they are located in the United States will be
found there. See In re U. S. Financial Securities Litigation,
375 F. Supp. 1403, 1404 (J.P.M.L. 1974).
IT IS THEREFORE ORDERED that, pursuant to 28 U.S.C. :
§1407, the actions listed on the following Schedule A be,
and the same hereby are, transferred to the Northern District
® of Ohio and, with the consent of that court, assigned to the
Honorable Frank J. Battisti for coordinated or consolidated
pretrial proceedings. |
® | |

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SCHEDULE A
C) DOCKET NO. 265
EASTERN DISTRICT OF PENNSYLVANIA
Mitchell A. Kramer v. The General Tire Civil Action No.
& Rubber Co., et al : 76-1525
DISTRICT OF NEW JERSEY
David Cohn, etc. v. John O'Neil, et al. Civil Action No.
76-1006
SOUTHERN DISTRICT OF OHIO
Alter Milberg, etc. v. General Tire Civil Action No.
& Rubber Co., et al. Cc-1-76-323