IN RE: Cenco Incorporated Securities Litigation

Cr Case MDL No. 291 Document 2 Filed 05/05/15 Page 1 of 9 ;
BEFORE THE JUDICIAL PANEL )
: ON JURID 4+ Se :
MULTIDISTRICT LITIGATION MULTICIS TR DATEL OH STR osFIL =p ATs Lo
IN RE CENCO INCORPORATED ) DOCKET MO. 251° =n
SECURITIES LITIGATION ne E
) JUL 25 p77 Tp-H)
OPINION AND ORDER ERICA D. Howany 7h” ooOF THE PANEL : |
BEFORE JOHN MINOR WISDOM, CHAIRMAN, AND EDWARD WEINFELD, EDWIN
A. ROBSON, WILLIAM H. BECKER*, JOSEPH L. LORD, III*, STANLEY
A. WEIGEL, AND ANDREW A. CAFFREY**, JUDGES OF THE PANEL . RA
PER CURIAM | oo
In June 1975 Cenco Inc. disclosed that scme of its financial
statements concerning its 1973 and 1974 fiscal years, and
possibly prior fiscal years, were erroneous. This disclosure Co
generated nine private actions that are currently pending in two :
federal districts: eight in the Northern District of Illinois
1/ oo
and one in the Central District of California. Five of the
* Judges Becker and Lord took no part in the consideration or oe
decision of this matter. : :
** Judge Caffrey recused himself and took no part in the considera-
tion or decision of this matter.
1/ A tenth private action, filed in the District of New Jersey and :
subsequently transferred to the Northern District of Illinois oo :
pursuant to 28 U.S.C. §1404(a), was originally included in the motion
before the Panel. Because a motion to re-transfer this action to
the District of New Jersey is currently sub judice in the Northern : BE
District of Illinois, all interested parties agreed to exclude this
action from the motion before the Panel. If the 1404(a) re-transfer
motion is denied and this action remains before the transferee
court regardless of the transfer we are herewith ordering,
the question of whether this action should be included in
the coordinated or consolidated pretrial proceedings would be left
to the discretion of the transferee judge. See In re Liguid Carbonic
Truck Drivers Chemical Poisoning Litigation, 423 F. Supp. 937, 939
(J.P.M.L. 1976). See also Rule 10(a), R.P.J.P.M.L., 65 F.R.D. 253, :
260 (1975). If the 1404 (a) re-transfer motion is granted, the Panel
might then consider treating this action as a tag-along action. See
Rules 1, 9 and 10, 65 F.R.D. 253, 255, 259-60 (1975).

Case MDL No. 291 Document2 Filed 05/05/15 Page	2 of 9
Illinois private actions originally had been filed in_other districts
| and were transferred to the Northern District of Illinois under
28 U.S.C. §1404(a). In addition to these private actions, the
Securities and Exchange Commission (SEC) has filed a related action
in the Northern Dietrict of Illinois.
Six of the eight Illinois private actions are brought as
class actions on behalf of all purchasers of Cenco securities
during various periods commencing approximately May 1, 1970, and
ending June 24, 1975, who either sold or continue to hold the
securities at a loss. No classes have yet been certified, however.
The two remaining Illinois private actions are brought individually
"by open market purchasers of Cenco securities. Defendants in the
Illinois private actions include Cenco, several of its present
® or former officers, directors and employees, and the accounting
firm that certified Cenco's financial reports from 1970 through
1975. Many of these parties are also named as defendants in the
© SEC's action. In addition, seven of the eight Illinois private
actions have been consolidated for all.purposes.
The California action was commenced by persons who owned
Seelect Dietary Products, Inc. (Seelect), sold Seelect to Cenco
in exchange for Cenco stock in April 1972, and reacquired part
of Seelect from Cenco in June 1975. Named as defendants are
Seelect, Cenco, several of Cenco's present and former directors,
officers and employees, and Cenco's accounting firm. With the
exception of Seelect, all these defendants are also defendants
® in the Illinois actions. In late 1976, the district court in theh California action denied a motion brought by many of the defendants

. . Case MDL No. 291 -RBecument 2 Filed 05/05/15 Page 3 of 9
in that action to transfer it to the Northern District of Illinois
® pursuant to Section 1404 (a).
The complaints in all nine private actions basically allege
that between May 1970 and June 1975 the defendants violated
the federal securities laws and various state securities statutes
by participating in the issuance of numerous false and misleading
financial statements in order to artificially inflate the market
price of Cenco securities. In addition, the plaintiffs in the
California action allege that during the negotiations for the sale
of Seelect to Cenco and during the negotiations to sell back part
of Seelect the defendants made express material misrepresentations to
these plaintiffs concerning the value of Cenco securities.”
Defendant Cenco and three individual defendants move the
@:cznet for an order pursuant to 28 U.S.C. §1407 transferring the
California action to the Northern District of Illinois for
coordinated or consolidated pretrial proceedings with the actions
" . already pending there. Only the plaintiffs in the California
action oppose transfer.
We find that the private actions involve common questions of
fact and that transfer of the California action under Section 1407 to
2/ InSeptember	1976, Cenco filed two actions in California state
court against some of the original owners of Seelect, claiming
default on the obligations arising from their reacquiring part of
Seelect in June 1975. These original owners of Seelect have
raised as defenses in these actions many of the allegations which
they made in their complaint in the California federal court action.
®
|

. . Case MDL No. 291 Dorément 2 Filed 05/05/15 Page 4 of 9
the Northern District of Illinois will best serve the convenience
o of the parties and witnesses and promote the just and efficient
conduct of the litigation.
Plaintiffs in the California action argue that unique factual
issues involving the parties face to face dealings, the value
of the business sold to Cenco, a warranty of Cenco's financial
condition given to plaintiffs and the question af
restitution predominate in that action. And while these plaintiffs
concede that the actions in this litigation share questions
of fact concerning defendants' alleged omissions and misrepresent-
ations, they contend that Section 1407 pretrial proceedings are
. not necessary to prevent duplicative discovery on these common
factual issues. They state that the district court in the
@ California action already has anticipated the possibility of
duplicative discovery and, in denying the motion to transfer the
California action to the Northern District	of Illinois under
.. Section 1404(a), specifically found the problem to be manageable.
Tn addition, these plaintiffs assert that their counsel and lead
counsel for plaintiffs in the consolidated Illinois actions have
made informal arrangements to cooperate in the conduct of
discovery on common tesues.
3/ These plaintiffs also state that they have taken steps to
coordinate discovery efforts with a related California state
court action filed by different plaintiffs against Cenco and
most of the other defendants involved in the Central District of
California action.
®

SL Case MDL No. 291 Document2 Filed 05/05/15 Page	5 of 9
~5- |
C These plaintiffs further contend that the Central District
of California is the only appropriate district in which to conduct
pretrial proceedings in their action. They argue that all their
contacts with the defendants occurred within that district and
that all of plaintiffs'witnesses reside there. In addition,
they state that they do not have the financial resources to
litigate their claims in the Northern District of Illinois.
Cenco, on the other hand, has extensive facilities in California
and has chosen to file related actions in California state court
against some of the plaintiffs in the Central District of
California action, it is asserted.
These arguments are not persuasive. While we recognize that
® the California action will involve some unique factual issues
concerning plaintiffs' negotiations directly with some of the
defendants, we are convinced that all the actions before the
Panel involve a common and predominating core of facts concerning
the allegations that Cenco securities had an artificially inflated
market price because of Cenco's and the other common defendants’
involvement in issuing false and misleading statements to the
general public. Although the California district court has expressed
its willingness closely to monitor discovery in the california action
and to take all steps necessary to avoid duplication OF conflict
between that action and the Illinois actions, transfer of the
california action to the Northern District of Illinois for
® pretrial under Section 1407 will ensure the prevention of

. . Case MDL No. 291 Ded#snent 2 Filed 05/05/15 Page 6 of 9
duplicative discovery, eliminate the possibility of inconsistent
® pretrial rulings, maximize the use of judicial time and resources,
and thereby best promote the just and expeditious termination
of this Litigation. y The transferee judge, of course, has
the discretion and flexibility to accommodate the needs of the
california plaintiffs, or any other party, for any unique
discovery or judicial attention concurrently with the conduct
of common pretrial matters. See In re Republic National-Realty
Equities Securities Litigation, 382 F. Supp. 1403, 1405-06
(J.P.M.L. 1974). )
Furthermore, if the plaintiffs in the California action wisely
pool their efforts with the plaintiffs in the Illinois actions,
we are confident that all plaintiffs will experience a net savings
@ of time, effort and expense. See In re Ascot Oils, Inc. Securities
Litigation, __ F. Supp.___, __ (J.P.M.L., filed June 17, 1977).
We note that plaintiffs' witnesses will likely be deposed in
+ proximity to their residences, see Fed. R. Civ. P. 45(d) (2), and
thereby would not be required to travel to the transferee district
for pretrial under Section 1407.
Clearly, the Northern District of Illinois is the most
appropriate transferee forum for this litigation. Eight of the
nine actions before the Panel already are pending there. And all the
4/ Wnile the Panel does not have the authority to include the
related California state court actions, see nn. 2 & 3 supra, in
the Section 1407 proceedings we are herewith ordering, we
see no obstacle to prevent the parties from continuing to
share discovery and coordinate discovery efforts between the
® California state and federal actions.

. . Case MDL No. 291 Document 2 Filed 05/05/15 Page 7 of 9
® ”
Tllinois actions are assigned to Judge John Powers Crowley who
has had an opportunity to become acquainted with the issues involved
here and is therefore in the best position to supervise the
coordinated or consolidated pretrial proceedings toward their
most just and expeditious termination. See In re Griseofulvin
Antitrust Litigation,	395 F. Supp. 1402, 1403 (J.P.M.L. 1975).
IT IS THEREFORE ORDERED that the action listed on the
following Schedule A and pending in the Central District of
california be, and the same hereby is, transferred pursuant to
28 U.S.C. §1407 to the Northern District of Illinois and, with
the consent of that court, assigned to the Honorable John Powers
® Crowley for coordinated or consolidated pretrial proceedingswith the actions already pending there and listed on Schedule A.
®

.“, . Case MDL No. 291 Document 2 Filed 05/05/15 - Page 8 of 9
SCHEDULE A
® Docket No. 291
NORTHERN DISTRICT OF ILLINOIS Civil Action No.
Robert Helfand, et. al. v. Cenco 75-C-2227
Incorporated, et. al.
Robert Helfand, et. al. v. Cenco 75-C-2506
Incorporated, et. al.
Robert Helfand, et. al. v. Cenco 75-C-3394
Incorporated, et. al.
Sonny Merrit v. Cenco Incorporated, 75-C-2981
et. al.
Robert Helfand, et. al. v. Cenco 76-C-1085
Incorporated, et. al.
Melville N. Rothschild, Jr., et. al. 76~-C-3854
v. Cenco Incorporated, et. al.
H. David Spirt, et. al. v. Cenco 76-C-4310
Incorporated
@ 23: club, et. al. v. cenco 76-C-4496
Incorporated
CENTRAL DISTRICT OF CALIFORNIA
Max Lessin, et. al. v. Cenco 76-1299-F
oe Incorporated, et. al.

Case MDL No. 291 Document 2 Filed 05/05/15 Page 9 of 9 j
JUS, |. £11 SAL] ~ .
HLTies,TiS oy | Co ERE	~~ ~~ GATmy : Hi
DOCKET NO. 291 | Noy Tics 1)
UL ~7 13g, V7, ooBEFORE THE JUDICIAL PANEL ON MULTIDISTRICT LITIGATION 74 :Clea. tig ry	gp pu ARD / : )
IN RE CENCO, INC. SECURITIES LITIGATION THERE] a
ORDER REASSIGNING LITIGATION
Inasmuch as the actions in the above litigation have been URE
reassigned from Judge John Powers Crowley to Judge Marvin E. Soe
Aspen, in accordance with the Local Rules for the United states oo
District Court for the Northern District of Illinois, :
IT IS THEREFORE ORDERED that the above-captioned litigation
be, and the same hereby is, reassigned to the Honorable Marvin
E. Aspen for the remainder of the coordinated or consolidated
pretrial proceedings pursuant to 28 U.S.C. 1407.
FOR THE PANEL: . oo :
Andrew A. Caffrey 2
Chairman :
I{
||