The opinion of the court was delivered by: HANNUM
The defendants have requested this Court to transfer this action to the United States District Court for the Southern District of New York, pursuant to either 28 U.S.C. § 1404(a)
or 28 U.S.C. § 1406(a).
We grant the motion to transfer this action pursuant to 28 U.S.C. § 1404(a).
The plaintiffs are eleven individuals who have brought this suit against TDA Industries, Inc., (hereinafter "TDA") Douglas P. Fields, President and Chairman of the Board of TDA; Frederick M. Friedman, Financial Vice President, Secretary, Treasurer, and Director of TDA; Alan E. Sandberg, Vice President and Director of TDA; and Peter S. Davis, Officer and General Counsel of TDA. The plaintiffs allege that the defendants violated Section 10(b) of the Securities and Exchange Act of 1934 by entering into a conspiracy to defraud plaintiffs by inducing them to purchase 20,000 shares of TDA stock for an excessive price. Such inducement was made by misrepresentations and nondisclosures presented in press releases, prospectuses and annual and quarterly reports issued during the years 1971 through 1973. The plaintiffs all reside in the Washington, D.C. area and were purchasers of TDA stock. TDA is a New York corporation with its principal place of business located in New York city.
The first issue presented is whether venue is proper for this action in the Eastern District of Pennsylvania. The applicable venue provision is 15 U.S.C. § 78aa.
If venue is proper under 15 U.S.C. § 78aa, then 28 U.S.C. § 1404(a) is the applicable transfer provision. If venue is not proper in this district, then 28 U.S.C. § 1406(a) applies.
VENUE UNDER 15 U.S.C. § 78aa.
These mailings are sufficient to establish proper venue in the Eastern District of Pennsylvania. 15 U.S.C. § 78aa provides that venue properly lies in a district "wherein any act or transaction constituting the violation occurred." This provision was construed in Hooper v. Mountain States Securities Corp., 282 F.2d 195, 204-05 (5th Cir. 1960), cert. denied, 365 U.S. 814, 5 L. Ed. 2d 693, 81 S. Ct. 695 (1961) as follows:
We think that any use of instrumentalities of the mails or other interstate facilities made within the forum district constituting an important step in the execution of the fraudulent, deceitful scheme or in its consummation is sufficient. Generally speaking we would say that any act which would be sufficient to constitute an offense under the mail fraud, or similar criminal statutes, occurring within the forum district would be adequate to authorize extraterritorial service of process * * *. This approach automatically reads into this Act general provisions such as 18 U.S.C. § 3237 * * * that jurisdiction is in "any district from, through, or into which" interstate commerce or mail matter moves.
The Court went on to say:
The statute was one designed to put an end to interstate frauds in the sale and trading of securities. The legislative pattern envisages the likelihood that actions would take place in many places requiring the frequent use of instrumentalities of the mail or of communication. The Act meant to vest jurisdiction in every district where any use of such instrumentalities of the mail or interstate commerce was of material importance to the consummation of the scheme.
Hooper held that a phone call from outside Alabama to a party in Alabama was sufficiently material to the scheme alleged for venue to be proper in the Middle District of Alabama. 282 F.2d at 205.
The issue here is whether the materiality test set forth in Hooper v. Mountain States Securities Corp., supra, and expanded in Dauphin Corp. v. Redwall Corp., 201 F. Supp. 466, 496-70 (D.Del. 1962), applies to the present facts. This Court has determined that the materiality test set forth in Hooper applies to any act or transaction except where the act or transaction upon which venue is based constitutes a completed violation of the ...