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RESIDEX CORP. v. FARROW

March 26, 1974

RESIDEX CORPORATION
v.
Eugene FARROW et al. Richard S. ROBINSON, Individually and as representative of a class v. CO-BUILD COMPANIES, INC., et al.


Hannum, District Judge.


The opinion of the court was delivered by: HANNUM

HANNUM, District Judge.

Presently before the Court are Motions for Change of Venue in both the Robinson, etc. v. Co-Build Companies, Inc., et al. and the Residex Corporation v. Farrow et al. cases (hereinafter the Robinson and Residex cases, respectively). Due to the similarity of the issues and the parties involved in the two cases, it is appropriate that both cases should either stay in this district or both be transferred. Therefore, the two motions will be decided together.

 The plaintiff in the Residex case brought the action August 6, 1973 to recover damages allegedly caused by non-disclosures and misrepresentations of material facts in violation of the federal security laws by defendants, individually and in conspiracy with each other, in connection with the plaintiff's purchase in April and May of 1973 of 45% of the common stock of Co-Build Companies, Inc. (hereinafter "Co-Build"). The defendants are Eugene Farrow and Sidney Kessler, former officers and directors of Co-Build, from whom Residex Corporation purchased 500,000 shares of Co-Build stock at allegedly grossly excessive prices, Husnu Ozyegin, former Vice-President and Treasurer of Co-Build, Kenneth Klein, an individual who allegedly participated in the conspiracy, and Laventhol, Krekstein, Horwath & Horwath (hereinafter "Laventhol"), an accounting firm that from 1969 until 1973 audited the financial statements of Co-Build, and who allegedly participated in the conspiracy and also negligently and fraudulently prepared and certified Co-Build's financial statements upon which plaintiff claims it relied in purchasing the Co-Build stock.

 The Robinson case was brought by Richard S. Robinson August 9, 1973, individually and as a representative of a class, against the same defendants named in the Residex action (except Klein), plus a number of other defendants. Co-Build Companies, Inc. was added as a defendant. In addition, six individual defendants that are present or former officers and directors of Co-Build were also named. Thereafter, the Complaint was amended to include two additional defendants, investment and banking firms Butcher & Singer (formerly known as Butcher & Sherrerd) and Thomson & McKinnon Auchincloss Kohlmeyer, Inc.) formerly Thomson & McKinnon Auchincloss, Inc.), who acted as co-underwriters with respect to the sale of 715,500 shares of Co-Build stock on January 25, 1972 pursuant to a registration statement and prospectus which became effective on that date.

 The Robinson case seeks damages allegedly sustained by the Co-Build shareholders as a result of substantially the same misrepresentations and nondisclosures alleged in the Residex Complaint.

 The motions to transfer the two actions are made pursuant to 28 U.S.C. § 1404(a) which provides:

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

 A federal court exercises broad discretion in considering motions to transfer under this section. Detrick v. Baltimore & Ohio Railroad Company, 330 F. Supp. 257 (E.D. Pa. 1971); Country Maid, Inc. v. Haseotes, 312 F. Supp. 1116 (E.D. Pa. 1970).

 It is well established that in considering a motion to transfer under 28 U.S.C. § 1404(a), the plaintiff's choice of forum is entitled to great weight. City of Philadelphia v. Emhart Corp., 317 F. Supp. 1320 (E.D. Pa. 1970); Clendenin v. United Fruit Co., 214 F. Supp. 137 (E.D. Pa. 1963). In order to overturn the plaintiff's choice of forum, the party seeking a transfer bears a heavy burden of showing a strong balance of inconvenience. City of Philadelphia, Pa. v. General Motors Corp., 324 F. Supp. 181 (E.D. Pa. 1971). As was recently stated in Shutte v. Armco Steel Corporation, 431 F.2d 22, 25 (3d Cir. 1970) cert. denied 401 U.S. 910, 91 S. Ct. 871, 27 L. Ed. 2d 808 (1971):

 
"It is black letter law that a plaintiff's choice of a proper forum is a paramount consideration in any determination of a transfer request, and that choice '. . . should not be lightly disturbed ' (citations) . . . 'The decision to transfer is in the court's discretion but a transfer is not to be liberally granted. ' (citations) The burden is on the moving party to establish that a balancing of proper interests weigh in favor of the transfer (citation) and '. . . unless the balance of convenience of the parties is strongly in favor of defendant, the plaintiff's choice of forum should prevail. '" (Emphasis in original).

 The movants in the Residex case argue that the plaintiff is a Delaware Corporation, with its principal place of business in New Jersey, and that Courts applying the standard which gives great weight to plaintiff's choice of forum have found that weight to be minimal where the plaintiff is not a resident of the district of his choice. Grubs v. Consolidated Freightways, Inc., 189 F. Supp. 404 (D.C. Mont. 1960). However, even if the Court grants only minimal consideration to plaintiff's choice of forum in the Residex case, such minimal consideration taken together with the results of balancing all the relevant factors involved in the Robinson and Residex cases militates that the actions remain in this district.

 Plaintiff Richard S. Robinson in the Robinson case is a resident of the Eastern District of Pennsylvania. However, the movants contend that his choice of forum is entitled to less weight because he has initiated this suit on behalf of a class. To support their argument the movants rely, inter alia, on Harris v. American Investment Co., 333 F. Supp. 325 (E.D. Pa. 1971) and Schneider v. Sears, 265 F. Supp. 257 (S.D.N.Y. 1967). Both of these cases are distinguishable on their facts from the Robinson case.

 The Harris case was brought by plaintiffs on their own behalf, derivatively and as representatives of a class of all present and former common stockholders of an investment company, asserting violations of the federal securities laws. In the Harris case, the Court ordered a transfer from this District to Missouri, however, the Court found Missouri was clearly a more convenient jurisdiction for litigating the dispute. It should also be noted that the corporate defendant, the sale of whose securities was the principal issue, had argued for the ...


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