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POLIN v. CONDUCTRON CORP.

March 24, 1972

Howard POLIN on behalf of himself and on behalf of all others similarly situated shareholders of Conductron Corporation and derivatively, on behalf of Conductron Corporation, Plaintiff,
v.
CONDUCTRON CORPORATION et al., Defendants


Higginbotham, District Judge.


The opinion of the court was delivered by: HIGGINBOTHAM

HIGGINBOTHAM, District Judge.

 The above captioned case has been before me since the original three count complaint was filed on July 28, 1968.

 Countless orders, arguments and appeals later, the present issue is whether the case should be transferred to the Eastern District of Missouri pursuant to § 1404(a), 28 U.S.C. Section 1404(a) which provides in part as follows:

 
"(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district where it might have been brought."

 The balancing process in this case has been the closest and most difficult that I have ever encountered. I find that the defendants have met their burden of proof by the barest scintilla and accordingly that the case should be transferred to the Eastern District of Missouri. A brief history of the motion to transfer this case is a prerequisite to a complete understanding of my decision to transfer.

 On February 4, 1970, I entered an Order that until all discovery had been finished the defendants' motion to dismiss or in the alternative to transfer the matter to the Eastern District of Missouri would be denied. On March 31, 1970, I denied the defendants' motion to certify the Order of February 4, 1970 pursuant to 28 U.S.C. § 1292. On April 8, 1970 the defendant petitioned the United States Court of Appeals for the Third Circuit for a writ of mandamus, to order this court to either transfer this case pursuant to 28 U.S.C. § 1404(a) to the Eastern District of Missouri or to rule finally upon the motion for transfer prior to the commencement of discovery on the merits of the action. McDonnell Douglas Corp. v. Polin, 429 F.2d 30 (3rd Cir. 1970). On July 10, 1970, the Court of Appeals for the Third Circuit vacated my Order of February 4, 1970 and held that discovery only which was directly related to transfer, and not related to the merits of the cause of action, should be completed. The Court of Appeals stated the following:

 
". . . we feel it is not proper to postpone consideration of the application for transfer under § 1404(a) until discovery on the merits is completed, since it is irrelevant to the determination of the preliminary question of transfer. Even if on the motion to transfer certain factual questions appear, and though the inquiries may overlap, they should not be merged and wise discretion should be exercised in preventing such discovery from leading into the merits of the claim." McDonnell Douglas Corp. v. Polin, supra, at 30-31.

 The Court of Appeals denied reargument on August 19, 1970. On September 28, 1970, I ordered counsel to complete discovery in accordance with the Court of Appeals mandate. Argument was held on the defendant's motion to transfer pursuant to 28 U.S.C. § 1404(a) on July 21, 1971.

 Since the oral argument of this matter, counsel for all parties have continued a written argument by means of several letters to this Court, the most recent of which is dated November 21, 1971.

 The plaintiffs assert derivative claims in behalf of the defendant corporations and class actions against the corporations and their respective officers and directors. The complaint is in five counts. Count I alleges derivative and class action claims arising out of the acquisition of Conductron by McDonnell Douglas and involving the preparation of an allegedly false and misleading proxy statement. Count II states a derivative claim on behalf of Conductron for breach of fiduciary duties. Count III alleges a class claim against the officers and directors of Conductron involving the preparation and mailing of misleading proxies and other documents. Count IV states derivative and class claims arising from facts and circumstances arising after the merger of Conductron and McDonnell Douglas in the setting of the exchange rate for Conductron shares in the statutory merger of Conductron and McDonnell. Count V asserts derivative and class claims for breach of fiduciary duties arising out of post merger conduct of the officers and directors of McDonnell and Conductron. The original complaint was filed on July 28, 1968. With the exception of the five defendants who have filed answers in the Eastern District of Pennsylvania, all other defendants on September 12, 1968 filed a motion to dismiss or in the alternative to transfer the action to Eastern District of Missouri. On May 28, 1971, the plaintiff filed an amended complaint which added Counts IV and V to the original claims.

 The first requirement for a transfer under § 1404(a) is that the action can be transferred only to a district where the action might have been brought originally, that is, at the time the suit was originally commenced. Van Dusen v. Barrack, 376 U.S. 612, 84 S. Ct. 805, 11 L. Ed. 2d 945 (1964). In the instant case, jurisdiction and venue are based on § 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa. There is no question that both corporate defendants have their headquarters in the St. Louis area, at least seven of the individual defendants live in the St. Louis area, *fn1" most of the alleged illegal acts occurred in St. Louis, the allegedly illegal proxy statements were prepared in St. Louis, and this action could have been commenced in St. Louis under the broad special venue provisions of § 27 of the Securities Exchange Act of 1934 (15 U.S.C. § 78aa).

 The second consideration under § 1404(a) is whether the proposed transfer would be for the convenience of the parties and witnesses and in the interest of justice. The plaintiff's choice of a proper forum is a paramount consideration and that choice is not to be lightly disturbed. Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3rd Cir. 1970). The burden is on the moving party to establish that "a balancing of proper interests weigh in favor of the transfer (citations omitted), and 'unless the balance of convenience of the parties is strongly in favor of defendant, the plaintiff's choice of forum should prevail.'" (Citations omitted.) Shutte v. Armco Steel Corp., 431 F.2d at 25. While both under § 1404(a) and under the predecessor doctrine of forum non conveniens, the plaintiff's choice of forum is to be given great weight. The weight accorded the plaintiff's choice is reduced where, as in the instant case, the cause of action states grounds for recovery of a class and derivative nature. Koster v. (American) Lumbermens Mutual Casualty Co., 330 U.S. 518, 67 S. Ct. 828, 91 L. Ed. 1067 (1947). In the Koster Case, the Supreme Court held that the weight to be accorded a plaintiff's choice of forum is reduced in a derivative action where "what forum is appropriate * * * may require consideration of its relation to the whole group of members and stockholders whom plaintiff volunteers to represent as well as to the nominal plaintiff himself." Koster v. (American) Lumbermens Mutual Casualty Co., supra, 330 U.S. at 526, 67 S. Ct. at 832. The Court went on to state that ". . . where there are hundreds of potential plaintiffs, all equally entitled voluntarily to invest themselves with the corporation's cause of action and all of whom could with equal show of right go into their many home courts, the claim of any one plaintiff that a forum is appropriate merely because it is his home forum is considerably weakened." Koster v. (American) Lumbermens Mutual Casualty Co., 330 U.S. at 524, 67 S. Ct. at 832 (1947). This rule that the plaintiff's choice of forum is accorded less weight has been extended to class actions. Schneider v. Sears, 265 F. Supp. 257, 266 (S.D.N.Y. 1967). *fn2" Thus, this court views the appropriate legal test as being that the party moving the transfer, here the defendant, must meet the strong burden imposed by the Shutte case, reduced to account for the fact that the showing need not be so great where, as here, the complaint states derivative and class claims.

 In determining whether the defendant has met the requisite burden here, one must examine the factors which are relevant under § 1404(a), whether the transfer is "for the convenience of parties and witness" and whether the transfer is in the "interest of justice". The criteria for decision under § 1404(a) are set forth in United ...


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