Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-01656/USCOURTS-casd-3_09-cv-01656-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 15:77 Securities Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DONALD L. COHN and KAREN S.

COHN, husband and wife, as joint

tenants,

Plaintiffs,

CASE NO. 09cv1656-WQH-BLM

ORDER

vs.

OPPENHEIMERFUNDS, INC.,

OPPENHEIMERFUNDS

DISTRIBUTOR, INC., OPPENHEIMER

CHAMPION INCOME FUND,

CHARLES KANDILIS, WILLIAM L.

ARMSTRONG, JOHN V. MURPHY,

AND BRIAN W. WIXTED,

Defendants.

HAYES, Judge:

The matter before the Court is the Motion to Transfer Venue Pursuant to 28 U.S.C. §

1404(a), filed by all Defendants. (Doc. # 7).

I. Background

A. Oppenheimer Litigation in Other Courts

On February 13, 2009, a complaint alleging violations of the Securities Exchange Act

in connection with alleged public misstatements made regarding the Oppenheimer Champion

Income Fund (“Champion Fund”), was filed in the Southern District of New York. (Larrabee

Decl., Ex. A, Doc. # 7-4). Between February 24, 2009 and April 10, 2009, five additional

complaints were filed containing similar allegations against many of the same Defendants in

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both Colorado and New York. (Doc. # 7-1 at 2). Four of the six actions were voluntarily

dismissed. (Id. at 2-3). The two remaining actions pending in the District of Colorado

(Janssen v. OppenheimerFunds, Inc., No. 09-cv-0386-JLK, and Peters v. Oppenheimer Funds,

Inc., No. 09-cv-0525-JLK) were consolidated by United States District Judge John L. Kane,

Jr. into In re Oppenheimer Champion Fund Securities Fraud Class Actions, No.

09-cv-0386-JLK (the “Colorado Champion Actions”). (Id. at 3).

Judge Kane is also presiding over an additional thirty-one actions alleging securities law

violations against eight Oppenheimer mutual funds, other than the Champion Fund, that were

originally filed in or transferred to the District of Colorado. Among these are actions related

to Oppenheimer municipal bond mutual funds, which were centralized by the Judicial Panel

on Multidistrict Litigation (the “MDL Panel”) for pre-trial coordination and consolidation on

June 17, 2009. (Larrabee Decl., Ex. C, Doc. # 7-6). The MDL Panel found that “transfer to

a single district ... allows pretrial proceedings with respect to any non-common issues to

proceed concurrently with pretrial proceedings on common issues ... [and] ensures that pretrial

proceedings will be conducted in a streamlined manner leading to the just and expeditious

resolution of all actions to the overall benefit of the parties.” (Id. at 2). The MDL Panel

denied Defendants’ request for transfer to New York, denied certain plaintiffs’ requests for

transfer to the Northern District of California or the Western District of Pennsylvania, and

transferred all Oppenheimer municipal bond fund actions to the District of Colorado, for

assignment to Judge Kane. (Id. at 1-2). The MDL Panel found that the “parties, witnesses and

documents will likely be found in or near Denver, Colorado.” (Id. at 2). 

On June 24, 2009, Judge Kane issued an order in the Colorado Champion Actions,

denying Defendants’ motion to transfer the Colorado Champion Actions to New York because

the “overlapping defendants and concomitant efficiencies that will result from keeping them

here far outweigh the grounds asserted by Defendants for transferring them to the Southern

District of New York.” (Larrabee Decl., Ex. D at 1, Doc. # 7-7). Judge Kane further stated:

“Unless brought within the MDL as tagalong actions, [the Colorado Champion Actions] will

remain separate and distinct from it for filing and docketing purposes. It is anticipated,

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however, that the cases will be part of all hearings and pretrial proceedings scheduled in the

MDL cases.” (Id. at 2).

On July 20, 2009, Judge Kane issued a Case Management Order which consolidated

the thirty-two pending Oppenheimer actions currently pending before him, including the

Colorado Champion Actions, into nine consolidated actions. (Larrabee Decl., Ex. F at 2-3,

Doc. # 7-9). The Case Management Order provides that “[t]he terms of this and previous

orders governing case management in this Oppenheimer securities litigation, including pretrial

consolidation, shall apply automatically to actions later instituted in, or removed or transferred

to, this Court that involve claims against the nine Oppenheimer Funds currently at issue.” (Id.

at 7).

B. Oppenheimer Litigation in This Court

On July 31, 2009, Plaintiff Donald L. Cohn initiated this action by filing the Complaint.

(Doc. # 1). On September 9, 2009, Plaintiff Donald L. Cohn filed the First Amended

Complaint, adding Plaintiff Karen S. Cohn, “as joint tenants.” (Doc. # 6). 

The First Amended Complaint alleges as follows. “The Registration Statements,

Prospectuses, and Statements of Additional Information ... used through the relevant period

of time [2006, 2007, and 2008] ... to register and offer the Champion Fund to [Plaintiff Donald

L.] Cohn contained untrue statements of material facts and omitted material facts necessary

to make the statements therein not misleading.” (Doc. # 6 ¶ 19). The First Amended

Complaint includes numerous quotes of allegedly false or misleading statements made in

written materials distributed to the public by Defendants to market the Champion Fund. (Doc.

# 6 at 4-15). “In October 2008, Plaintiff Donald L. Cohn was considering making an

investment of $2,000,000 in the Champion Fund.” (Doc. # 6 ¶ 34). Cohn’s stockbroker, a

non-party, “made a review of the OppenheimerFunds Portfolio Quarterly Updates available

at the time pertaining to the Champion Fund, and other general sources, and thereafter he and

Cohn elected to make further inquiry before making a final decision on Cohn’s potential

investment.” (Doc. # 6 ¶ 35). On October 13, 2008, Cohn and his stockbroker participated in

a conference call with Defendant Charles Kandilis, a Vice-President for Oppenheimer. (Doc.

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# 6 ¶ 38). “The telephone conference between Kandilis, Cohn, and [Cohn’s stockbroker] did

not take a great deal of time, but in his statements to Cohn and [Cohn’s stockbroker], Kandilis

was adamant that the Champion Fund was ‘a safe investment.’” (Doc. # 6 ¶ 42). “Kandilis

also most emphatically stated that the Champion Fund share price was now at a point ‘that an

Armageddon would have to occur to lose monies in the funds, if Cohn invested at the current

price.’” (Doc. # 6 ¶ 41). “After reviewing the public information regarding the status and

nature of the Champion Fund, and the assurances provided by Kandilis, and in reliance upon

Kandilis’ representations regarding the safety and overall health of the Champion Fund,” Cohn

invested $1,000,000 in the Champion Fund on October 14, 2008 and an additional $1,000,000

in the Champion Fund on October 15, 2008. (Doc. # 6 ¶ 43). “[T]he value of the Champion

Fund began immediately to spiral downward. By the end of October 2008, Cohn’s $2,000,000

investment had been reduced to $1,763,600, and by the end of calendar year 2008, his

investment had been reduced further to $770,000.... [C]urrently the value of [Cohn’s]

investment in the Champion Fund equals $732,205.” (Doc. # 6 ¶ 47). Plaintiffs allege

violations of federal and California securities law, including violations of Section 11 of the

Securities Act of 1933, 15 U.S.C. § 77(k), and Section 10(b) of the Securities Exchange Act

of 1934, 15 U.S.C. § 78j(b). Plaintiffs seek compensatory and punitive damages.

On September 29, 2009, Defendants filed the Motion to Transfer Venue, requesting that

the Court transfer this action to the District of Colorado. (Doc. # 7). Defendants contend that

the Colorado Champion Actions and this action (the “Cohn Champion Action”) allege similar

facts and claim that the same federal securities laws were violated:

In both the Cohn Champion Action and the Colorado Champion Actions, all

claims arise from the same issue, namely whether the Fund misrepresented the

investments it planned to make and the risks of those investments. Compare

Cohn Compl. ¶ 19 (alleging that quoted excerpts from the Funds’ August 7,

2006 Registration Statement are misleading) with Janssen Compl. ¶ 43 (same)

(Larrabee Decl. Ex. J), and Peters Compl. ¶ 41 (same) (Larrabee Decl. Ex. I).

The disclosures at issue in all three cases involve sophisticated investments in

high-yield debt instruments, commercial mortgage-backed securities and

complex derivatives, including single name and index-linked credit default

swaps. Id. In addition, plaintiffs in all three cases allege that their losses can be

attributed to the Champion Income Fund’s alleged statements and omissions.

Compare Cohn Compl. ¶¶ 49-52 (attributing plaintiffs’ losses to Defendants’

failure to disclose investments in ‘high-risk, more speculative investment

products’), with Peters Compl. ¶¶ 72-76 (attributing plaintiffs’ losses to

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allegedly ‘false and misleading statements’ that ‘misrepresent[ed] the Funds’

investing outlook’), and Janssen Compl. ¶ 57 (attributing plaintiffs’ losses to

‘Defendants’ positive, but misleading or untrue statements, and ... omissions’).

Moreover, the Colorado Champion Actions are putative class actions that would

include the Cohns as members of their alleged respective putative classes.

(Doc. # 7-1 at 5-6). Defendants contend:

[A]djudication of the Cohn Champion Action in the same forum as the Colorado

Champion Actions and the Related Actions will best serve the interests of justice

and the convenience of the parties and witnesses because transfer will: 1)

preserve party and judicial resources by avoiding wasteful duplication,

especially during motion practice and discovery (e.g., redundant depositions,

discovery requests and document productions), thereby facilitating economical

and expeditious pre-trial proceedings; 2) eliminate the risk of inconsistent

rulings on identical issues of law and similar motions; and 3) avoid the prospect

of satellite litigation outside the center of gravity for the Oppenheimer Mutual

Fund Litigation in the District of Colorado.

(Doc. # 7-1 at 2).

On October 19, 2009, Plaintiffs filed an opposition to the Motion to Transfer. (Doc. #

9). Plaintiffs contend that there are key differences between the Cohn Champion Action and

the Colorado Champion Actions—most notably, the alleged conference call with Defendant

Kandilis (who is not a Defendant in the Colorado Champion Actions) and the addition of the

California securities law claims. Plaintiffs contend: “The involvement of Defendant Kandilis

in the Cohns’ investment decision differentiates and distinguishes this case from all pending

OppenheimerFunds cases now pending in the District Court of Colorado....” (Doc. # 9 at 3).

Plaintiffs, who reside in La Jolla, California, contend that it would be inconvenient for them

to litigate in Colorado. Plaintiffs also contend that the Defendants do not have meaningful

contacts with Colorado, relying upon the arguments made by Defendants in their motions to

transfer the Colorado Oppenheimer actions to New York, which were denied by the MDL

Panel and Judge Kane. (Doc. # 9 at 9-13; see also Larrabee Decl., Exs. B (Defendants’ motion

to transfer before MDL Panel); C (MDL Panel Order transferring actions to Colorado, rather

than New York); K (Defendants’ motion to transfer one of the Champion Actions before Judge

Kane); D (Judge Kane Order denying the motion to transfer the Colorado Champion Actions)).

On October 26, 2009, Defendants filed a reply brief, wherein Defendants contend:

“[C]laims brought under Plaintiffs’ primary claim, Section 11 of the Securities Act of 1933,

can only be brought based on written disclosures in the registration statements. 15 U.S.C. §

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77(k). Accordingly, the ‘difference’ [between the Colorado Champion Actions and the Cohn

Champion Action] Plaintiffs highlight, that Mr. Kandilis allegedly orally assured them that

investing in the Champion Fund was ‘a safe investment,’ is legally irrelevant.” (Doc. # 10 at

3).

II. Discussion

A. Standard of Review

Title 28 of the United States Code, section 1404(a) provides that “[f]or 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.” 28 U.S.C. § 1404(a). The

purpose of § 1404(a) is to “prevent the waste of time, energy, and money and to protect

litigants, witnesses and the public against unnecessary inconvenience and expense.” Van

Dusen v. Barrack, 376 U.S. 612, 616 (1964) (internal citations and quotation omitted). The

statute requires a court to consider the convenience of the parties and witnesses and the

interests of justice. See Jones v. GNC Franchising, Inc., 211 F.3d 495, 499 (9th Cir. 2000);

see also A.J. Indus., Inc. v. U.S. Dist. Court for Cent. Dist. of Cal., 503 F.2d 384, 386-87 (9th

Cir. 1974). To undertake this analysis of “convenience” and the “interests of injustice,” a

district court weighs “multiple factors,” including the plaintiff’s choice of forum, the contacts

relating to the plaintiff’s cause of action in the chosen forum, the convenience of witnesses,

the ease of access to sources of proof, the state that is most familiar with the governing law,

the differences in the costs of litigation in the two forums, and the relevant public policy.

Jones, 211 F.3d at 498-99. The party moving for a transfer pursuant to § 1404(a) bears the

burden to show that another forum is more convenient and serves the interest of justice. See

id. at 499; Commodity Futures Trading Comm’n. v. Savage, 611 F.2d 270, 279 (9th Cir. 1979).

B. This Case Might Have Been Brought in Colorado

The parties do not dispute that this case could have been brought in the District of

Colorado. Plaintiffs bring claims under federal securities laws which provide that venue is

proper in any district “wherein the defendant is found or is an inhabitant or transacts business.”

15 U.S.C. § 77aa; see also Wash. Pub. Utils. Group v. U.S. Dist. Court for W. Dist. Of Wash.,

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843 F.2d 319, 328 (9th Cir. 1987). Defendants are found in, are inhabitants of, and transact

business in Colorado. (Zack Decl. ¶¶ 6-8, 15-16, Doc. # 7-2). Therefore, this action “might

have been brought” in the District of Colorado. 28 U.S.C. § 1404(a).

C. Convenience of the Parties and Witnesses

“Although the convenience of the plaintiff is not important to the balancing process, the

[plaintiff]’s choice of forum must be given some weight.” Commodity Futures Trading

Comm’n v. Savage, 611 F.2d 270, 278 (9th Cir. 1979). “In judging the weight to be accorded

[plaintiff]’s choice of forum, consideration must be given to the extent of both [plaintiff]’s and

the [defendants]’ contacts with the forum, including those relating to [plaintiff]’s cause of

action. If the operative facts have not occurred within the forum and the forum has no interest

in the parties or subject matter, [plaintiff]’s choice is entitled to only minimal consideration.”

Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987) (citation omitted).

“Because this is a securities fraud action, plaintiffs’ claims are based on defendants’

alleged misrepresentations and omissions, which are deemed to occur in the district where they

are transmitted or withheld, not where they are received.” In re Yahoo! Inc., No CV 07-3125,

2008 WL 707405, at *8 (C.D. Cal., Mar. 10, 2008) (citations omitted). The operative conduct

alleged in the First Amended Complaint revolves around documents and statements that were

transmitted from outside of California. (Zack Decl. ¶¶ 9-17, Doc. # 7-2). None of the

corporate Defendants have facilities or employees in California, and the only conduct alleged

to have occurred in California involves Plaintiff Donald Cohn and his stockbroker. The Court

accords Plaintiff’s choice of forum some weight, although the amount of weight is reduced

because of the few relevant contacts with California.

Litigation in this Court would be more convenient for Plaintiffs and their stockbroker,

each of whom are California residents. The remaining parties and potential witnesses are

located outside of California. Defendant OppenheimerFunds, Inc. is a Colorado corporation

with its headquarters in New York City. (Id. ¶ 3). Defendant OppenheimerFunds Distributor,

Inc. is a New York corporation with its headquarters in New York City. (Id. ¶ 4). Defendant

Champion Fund is a Massachusetts business trust, and its Board of Trustees meet regularly in

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Colorado. (Id. ¶¶ 5-6). Defendants Charles Kandilis and William L. Armstrong reside in

Massachusetts, and Defendants John V. Murphy and Brian W. Wixted reside in Colorado. (Id.

¶¶ 13-16). Management operations for the Champion Fund occur in New York City, while

“certain ... back office operations [are maintained] in Colorado, including its accounting and

some of its compliance operations.” (Id. ¶ 7). KPMG, LLP is the Champion Fund’s

independent registered public accounting firm, which audits the Champion Fund through its

Denver, Colorado offices. (Id. ¶ 12). All of the documents related to the Champion Fund are

located in Colorado or New York. (Id. ¶ 18). For each of the Defendants and their

representatives (with the possible exception of Defendant Kandilis, who is not a Defendant in

the Colorado Champion Actions), litigation in Colorado would be more convenient than

litigation in this Court, either because they are based in Colorado, or they will be required to

appear in Colorado for the earlier-filed Colorado Champion Actions. See Alexander v.

Franklin Res., Inc., No. C 06-7121, 2007 WL 518859, at *3 (N.D. Cal., Feb. 14, 2007) (“With

respect to the convenience of the parties, appearing in a single district is more convenient than

appearing in two different districts on opposite coasts of the country.”). Similarly, transfer to

Colorado would be more convenient for the third-party witnesses who already would be

required to testify in the Colorado Champion Actions. See Papaleo v. Cingular Wireless

Corp., No. C-07-1234, 2007 WL 1238713, at *2 (N.D. Cal., Apr. 26, 2007) (“[W]ith respect

to the convenience of third-party witnesses, which often is the most significant factor, the

Court finds transfer would be substantially more convenient for each such witness, because

such witnesses would not be required to engage in duplicative litigation or travel to two

different forums to attend court proceedings.”); Jolly v. Purdue Pharma L.P., No. 05-cv-1452,

2005 WL 2439197, at *2 (S.D. Cal., Sept. 28, 2005) (“[G]iven the probable overlap between

the witnesses called in Plaintiff’s case and the witnesses called in the sixty-six other cases

currently pending against Purdue in the Southern District of New York, the convenience of the

witnesses and of the parties would be better served if all cases were within one district, as

opposed to scattered throughout the United States.”).

The Court finds that the factors related to the convenience of the parties and witnesses

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are evenly balanced.

D. Interest of Justice

“The question of which forum will better serve the interest of justice is of predominant

importance on the question of transfer, and the factors involving convenience of parties and

witnesses are in fact subordinate.” Madani v. Shell Oil Co., No. 07-4296, 2008 WL 268986,

at *2 (N.D. Cal., Jan. 30, 2008) (quotation omitted); see also Mussetter Distrib., Inc. v. DBI

Beverage Inc., No. Civ. 09-1442, 2009 WL 1992356, at *6 (E.D. Cal., July 8, 2009) (same);

Amazon.com v. Cendant Corp., 404 F. Supp. 2d 1256, 1261 (W.D. Wash. 2005) (same).

“The pendency of related actions in the transferee forum is a significant factor in

considering the interest of justice factor.” Jolly, 2005 WL 2439197, at *2; see also Madani,

2008 WL 268986, at *2 (“An important consideration in determining whether the interests of

justice dictate a transfer of venue is the pendency of a related case in the transferee forum.”);

Bratton v. Schering-Plough Corp., No. CV 07-653, 2007 WL 2023482, at *5 (D. Ariz., July

12, 2007) (“In general, cases should be transferred to districts where related actions are

pending.”). “The feasibility of consolidation is a significant factor in a transfer decision,

although even the pendency of an action in another district is important because of the positive

effects it might have in possible consolidation of discovery and convenience to witnesses and

parties.” A.J. Indus., Inc. v. U.S. Dist. Court for Cent. Dist. of Cal., 503 F.2d 384, 386-87 (9th

Cir. 1974) (citations omitted). “In addition to the possible consolidation of discovery and the

conservation of time, energy and money, centralizing the adjudication of similar cases will also

avoid the possibility of inconsistent judgments.” Mussetter Distrib., 2009 WL 1992356, at *5;

see also Jolly, 2005 WL 2439197, at *2 (“Litigation of related claims in the same tribunal is

strongly favored because it facilitates efficient, economical and expeditious pre-trial

proceedings and discovery and avoids duplic[ative] litigation and inconsistent results.”);

Argonaut Ins. Co. v. MacArthur Co., No. 12-3878, 2002 WL 145400, at *4 (N.D. Cal., Jan.

18, 2002) (“The best way to ensure consistency is to prevent related issues from being litigated

in two separate venues.”).

The pendency of the Colorado Champion Actions and the related Oppenheimer

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litigation in Colorado weighs heavily in favor of transfer. Although the allegations related to

Defendant Kandilis are unique to the Cohn Champion Action, there is “substantial overlap”

between the claims brought by the Cohns and the claims in the Colorado Champion Actions.

Mussetter Distrib., 2009 WL 1992356, at *5 (“Here, there is substantial overlap between the

claims in the Northern District actions and those in the instant case.... [T]he pendency of

related cases in the Northern District and the feasibility of consolidation weigh heavily in favor

of transfer.”). The Court finds that the transfer of this action to the District of Colorado would

serve the interest of justice, due to the possible consolidation of discovery and the conservation

of time, energy and money, and the avoidance of the possibility of inconsistent judgments.

The other relevant “interest of justice” factors do not weigh strongly in either direction.

Although this Court presumes it is generally more familiar with California state law than a

Colorado district court, the relevant California securities law mirrors federal securities law.

See Flaxel v. Johnson, 541 F. Supp. 2d 1127, 1144 (S.D. Cal. 2008) (“The Court finds that

California’s securities fraud provisions are analogous to § 10(b) [of the federal Securities

Exchange Act] and Rule 10b-5. Therefore, the Court grants plaintiffs’ motion for summary

judgment ... for state-law securities fraud to the same extent ... as the Court granted summary

judgment on plaintiffs’ cause of action for federal securities fraud.”). While California has a

strong interest in protecting its citizens from securities fraud, see S. Cal. First Nat’l Bank v.

Quincy Cass Assoc., 3 Cal. 3d 667, 676 (1970), Colorado has a strong interest in the activities

of its corporations. See Jarvis v. Marietta Corp., No. C-98-4951, 1999 WL 638231, at *7

(N.D. Cal., Aug. 12, 1999) (“While California does have an interest in protecting its citizens,

New York clearly has an interest in its corporations and the activities they undertake.

Especially given that most of the documentary evidence, witnesses and actions at issue in this

case are, or occurred in, New York, New York has a greater local interest in the controversy

at issue than does California.”) (citation omitted).

The purpose of § 1404(a) is to “prevent the waste of time, energy, and money and to

protect litigants, witnesses and the public against unnecessary inconvenience and expense.”

Van Dusen, 376 U.S. at 616. The Court concludes that this purpose would be best served by

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transferring this action to the District of Colorado.

III. Conclusion

IT IS HEREBY ORDERED that the Motion to Transfer Venue is GRANTED. (Doc.

# 7). The Clerk of the Court shall TRANSFER this action to the United States District Court

for the District of Colorado pursuant to 28 U.S.C. § 1404(a).

DATED: November 12, 2009

WILLIAM Q. HAYES

United States District Judge

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