Defendants have also moved to dismiss plaintiff's complaint under 12(b)(6) for failure to state a claim upon which relief can be granted. They contend that even if plaintiff's allegations as to defendants' actions are true, they do not constitute fraud. Initially defendants contend that no duty has ever been imposed upon a broker to disclose to a customer that in addition to purchasing securities of a certain corporation for that customer's account, it is also purchasing the same corporation's securities for its own account or accounts of other customers. Therefore, defendants argue, their failure to disclose to plaintiffs that they were purchasing General Host Corporation Securities not only for plaintiff's account but also for their own account and that of other customers was not a violation of Section 10(b) and Rule 10b-5. Defendants further contend that the fact that they continued to purchase General Host securities for their own account attests to their good faith belief that the securities were a good investment. Moreover, they contend, if they were buying General Host securities for their own account, it would have been in their best interest to have sold plaintiff's securities in order to lower the price at which they were buying. Finally they argue that the alleged representation by defendant Tennenbaum is not admissible into evidence, as it was an oral statement made prior to or contemporaneously with a written contract.
A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957). We believe that the facts of this case, viewed in the light most favorable to plaintiff state a claim of fraud under Section 10(b) and Rule 10b-5. We agree with defendants that there is no recognized duty on a broker's part to disclose to its customers that it is purchasing the same securities for its own account as it is for their accounts.
However, the non-disclosure is only one element of plaintiff's case. When, in addition plaintiff claims that defendants misrepresented that they would sell plaintiff's securities in a declining market and then failed to do so because the sale would have devalued their own holdings, a claim of fraud is made out. See Opper v. Hancock Securities Corporation, 250 F. Supp. 668 (S.D.N.Y. 1966), aff'd. 367 F.2d 157 (2nd Cir. 1966).
We are also unable to sustain defendants' contention that the alleged misrepresentation by defendant Tennenbaum is inadmissible as an oral contradiction of a written contract. Clearly there is a dispute between the parties as to the nature of the representation and the circumstances surrounding it. Consequently we cannot determine with certainty whether it was a prior oral statement incorporated into a final written agreement or whether it was made subsequent to the contract and completely independent of it.
Finally we note that we make no decision regarding the merits of plaintiff's case. Certainly, defendants are correct in arguing that the facts are not necessarily inconsistent with "good faith" on their part. It may develop, as defendants contend, that the case is nothing more than an attempt on plaintiff's part to shift its stock market loss to defendants. However, at this preliminary stage of the proceedings, it does not appear with certainty that under no set of facts would plaintiff be entitled to relief.
As defendants' motions to dismiss or stay proceedings on counts II and III of plaintiff's complaint were made contingent on the dismissal of count I, it is unnecessary to decide them at this time.
Finally, defendants have moved pursuant to 28 U.S.C. § 1404(a) for a change of venue to the Southern District of New York. Defendants contend that all acts constituting the alleged violation occurred in New York, that defendants' records are there, that relevant witnesses reside there, that their having to travel to this district for trial will greatly inconvenience them and defendant Bear, Stearns & Co. and that defendant Tennenbaum having recently broken his leg will be particularly inconvenienced by having to travel to Philadelphia.
On a motion for a change of venue, the plaintiff's choice of forum is entitled to great weight, and defendants have a heavy burden of showing a strong balance of inconvenience. Clendenin v. United Fruit Co., 214 F. Supp. 137 (E.D. Pa. 1963). We do not believe that such inconvenience has been shown in this case. While it does appear that defendant Tennenbaum, presently recuperating from a serious accident, would be greatly inconvenienced by having to travel to Philadelphia at this time, there is nothing to indicate that he will not be fully recovered by the time this case is ready to proceed to trial. Moreover, plaintiff has agreed to depose Tennenbaum in New York, so he will not have to appear here before trial. The remaining considerations also indicate that the case should not be transferred to New York. Defendants will not be inconvenienced to a significantly greater degree by having this case adjudicated here than would plaintiff Silverman, a Pennsylvania resident, by having it transferred to New York. As the interests appear to us to be relatively even, plaintiff's choice of forum should prevail.