Court Opinion

ID: 9634047
Source: CourtListenerOpinion
Date Created: 2023-08-22 12:18:55.874228+00
Date Added: 2024-06-11T09:28:43.336027
License: Public Domain

EDWARD WEINFELD, Judge of the Panel,
with whom JOHN MINOR WISDOM and STANLEY A. WEIGEL, Judges of the Panel join, dissenting:
Various actions pending in four district courts are before the Panel on its order to show cause why they should not be transferred to a single district for coordinated or consolidated pretrial pur*385poses.1 In all, there are thirty-five actions pending in four districts — twenty-five in the Eastern District of New York, one in the Eastern District of Pennsylvania, three in the Middle District of North Carolina, and six in the Southern District of Florida. The actions revolve about patents used in the processing of synthetic yarn and the manufacturing of machines for that purpose, and described as (1) the single heater patents,2 (2) the double heater patents,3 and (3) the spindle patents, related to false twist spindles and spindle drives for false twisting machinery (the Hilbert patents).4 The patents are generally referred to as the “false twist” patents. False twisting is the most widely used method of texturizing yarn by means of thermal processing.
The issues in the various lawsuits include validity of the patents, infringement, patent misuse and antitrust violations. The actions, with related and assorted claims and counterclaims, present a classic case for transfer under section 1407(a). Indeed, all the contending litigants appear in agreement that the actions should be transferred for coordinated pretrial purposes, but disagree as to the district of transfer, and also as to whether the transfers should encompass all claims and counterclaims:
I agree with the majority determination that all claims and counterclaims should be transferred to a single district for coordinated or consolidated pretrial proceedings; however, I dissent from the transfer of the cases to the Southern District of Florida, where suits were filed only this year, instead of to the Eastern District of New York, where actions have been pending since 1969 and pretrial discovery and procedure has been carried on in substantial degree. In my view, transfer to Florida of the actions penalizes diligent litigants, rewards the latecomer, runs counter to the command of the statute that the transfers shall be “for the convenience of the parties and witnesses,” and defeats rather than “promote[s] the just and efficient conduct of such actions.”
The Parties
The parties to the various litigations include Leesona Corporation (Leesona), the owner of the single heater and spindle patents, and alleged by a number of litigants to be the sole manufacturer in the United States of false twisting machinery; Permatwist Company (Permatwist), a partnership composed of original patent owners who reserved certain controls under the single heater and double heater patents and allegedly share in royalties received under Leesona’s licensing program; Lex-Tex, Ltd., Inc. (LexTex), a North Carolina corporation, subsequently incorporated in Florida under the same name and alleged to be a related or affiliated corporation of Leesona, from which it acquired title to the double heater patents; Celanese Corporation (Celanese), the most recent litigant, which seeks a declaratory judgment of invalidity of the false twist patents; licensees, processors of yarn, and others who instituted the first lawsuits attacking the validity of the patents and charge the patent owners and others with a continuing antitrust conspiracy and misuse of patents.
*386THE VARIOUS ACTIONS
1. Eastern District of New York (New York actions)
These are the earliest, the first having been commenced by a licensee against Leesona in August 1969. In all, there are twenty-four actions, which have been consolidated. A number of plaintiffs in the twenty-four consolidated actions were named as defendants in the remaining action commenced by Leesona in the District Court of Rhode Island, and transferred to New York, pursuant to section 1404(a) of Title 28.5 The New York plaintiffs, formerly licensees under Leesona’s false twisting licensing program, assert various claims against Leesona with respect to the patents, including invalidity, misuse, an antitrust conspiracy with other alleged conspirators, including Lex-Tex, plaintiff in five of the Florida actions, which actions are charged to be part of the continuing conspiracy. In essence, the plaintiffs in the New York actions seek a declaratory judgment declaring the patents invalid; also a judgment of non-infringement and unenforceability of the single heater and spindle patents, as well as relief under the Sherman Act. Leesona has counterclaimed, charging plaintiffs with a conspiracy among themselves, and to induce others, to breach their licensing agreements and to boycott Leesona’s licensing program. Upon this record, there can be no question that with respect to the various issues presented in the different actions, the New York cases are the most advanced.
2. Eastern District of Pennsylvania
This action was commenced in June 1970, by Saquoit Fibers Co., a licensee, against Leesona, for a declaratory judgment that the single heater process is invalid. The complaint also contains charges of misuse, including the double heater patents, and antitrust violations by Leesona and Permatwist and its partners.
Plaintiff has moved for summary judgment declaring the single heater patents invalid and Permatwist and the individual defendants have moved for partial summary judgment on the ground that they no longer own the patents but the motions have not been argued. These, of course, can be heard and disposed of by the transferee judge.
3. Middle District of North Carolina
Three actions were commenced, the earliest in October 1970. Two plaintiffs (Universal Textured Yarns and Texfi Industries), licensees, have named LexTex and Leesona as defendants and seek a declaratory judgment of the unenforceability of the Lex-Tex-Leesona licensing program and invalidity of the double heater patents. The two plaintiffs are also plaintiffs in the New York consolidated actions against Leesona, and one (Universal Textured Yarns) is named as a defendant in an action commenced by Lex-Tex in the Southern District of Florida. The third action in this district was commenced by Leesona against Customs Industries, Inc. for alleged infringement of one of the spindle patents.
4. Southern District of Florida
Six actions were commenced in this district, and in point of time they are the latest filed — from January 21 to June 1971. The last action was filed on June 28, 1971 by Celanese Corporation and Fiber Industries, Inc. against Leesona and Lex-Tex, and seeks a declaratory judgment of invalidity of the six single heater and double heater patents.
The other five actions were commenced by Lex-Tex, a Florida corporation 6 and assignee of Leesona patents, and charge various defendants (some plaintiffs in the New York action; *387one, as already noted, a plaintiff in an action in North Carolina), with infringement of one of the double heater patents. A defendant in one of those actions has interposed an antitrust counterclaim against Lex-Tex and others have asserted the unenforceability of the patent because of misuse by Lex-Tex. All the cases have been assigned to one judge.
Celanese, the latest entry in the controversies, joined Leesona and Lex-Tex in asking that all actions be transferred to Florida, but sought to limit the transfer to the single and double heater claims, and urged upon the Panel that the spindle patent claims and their related issues, as well as the antitrust claims be severed and transferred to another district, presumably New York.
Apparently there is more than meets the eye in Celanese’s filing of its action in Florida for a declaratory judgment of invalidity, in close proximity to the filing by Lex-Tex of its actions in that district. The New York plaintiffs, the licensees, have charged that the suit was filed only after Celanese, Leesona and Lex-Tex7 unsuccessfully sought to conclude an agreement which would have given Celanese a lower and discriminatory royalty rate than that granted to other licensees, and that the suit by Celanese and those by Lex-Tex in Florida are in fact in furtherance of a purpose to benefit Celanese at the expense of other licensees. Whether these claims are of substance or groundless, I am of the view that Celanese should not at this late hour be permitted to interrupt the orderly procedures which have gone forward in the New York actions for over two years. Whatever the merits of Celanese’s position with respect to the patent it challenges, it can be readily advanced by participating in the current procedures in the consolidated New York claims.
I am persuaded a compelling case has been made that judicial economy, efficiency of administration and expeditious resolution of the issues presented by these litigations will most readily be achieved by a transfer to the Eastern District of New York, and that such a disposition will most effectively and •speedily terminate these complex and complicated litigations. That district is the most convenient for the witnesses, parties and counsel.
The deposition and discovery process has moved forward there with dispatch. A comprehensive plan for consolidated discovery of the patent and antitrust issues was there developed under the guidance of District Judge John F. Dooling, to whom the cases were originally assigned for all purposes.8 To date, the plaintiffs, initially under his supervision and later that of former Chief Judge Zavatt, have gone forward with the pretrial procedures on a broad front encompassing all issues. All parties can benefit from discovery thus far had in the consolidated New York actions.
The discovery process has to date resulted in the production of a massive volume of material and documents, all stored in New York, and the transfer of them from New York to Florida would impose an undue and unwarranted burden upon diligent litigants. Plaintiffs already have examined over 200,000 documents, including 300,000 pages, have copied 130,000 for use on the trial, have spent 250 man days in discovery and examination, and have taken more than 3,000 pages of testimony of witnesses, with examinations still in progress. The deposition of Leesona’s chief patent counsel alone consumed twenty-four full day sessions in New York, and resulted *388in 2500 pages of testimony, and is not yet completed. Depositions of three Permatwist partners have taken another fourteen days, with one deposition completed and those of two other witnesses scheduled for this past month, and may be in progress or have been completed at this writing. Chief Judge Zavatt has indicated he is ready and available to try the case whenever the parties have completed their pretrial discovery proceedings. A study of the voluminous record here presented fully bears out the statement of an attorney on the Steering Committee in the New York consolidated actions made before this Panel that he had “never seen a case that would constitute a model for multidistrict litigation or complex litigation that has moved along as effectively and as efficiently as the case in New York.” 9
In contrast, in the Florida action so recently filed, there has been comparatively little discovery, particularly so since dismissal was sought of the Celanese action by one defendant for improper service, lack of jurisdiction and improper venue, and also because stays of proposed depositions were granted. To date, document discovery has been meager and limited to a handful of documents located in the Lex-Tex office there, and depositions have only been scheduled but none taken. There is testimony that the total Lex-Tex files in its Florida office consist of one 12-inch drawer of a filing cabinet, only half of which is current, and obviously can be moved with slight, if any, inconvenience. Leesona maintains records pertaining to its six owned patents in Rhode Island, its principal place of business, and other records pertaining to patents in question are located at Permatwist’s office in Philadelphia, and still other records are in New York. Leesona and Lex-Tex have failed to make any showing that any relevant records are in Florida.
It is of some significance that Leesona’s action against sixty licensees, commenced in Rhode Island, the principal place of business of Leesona, was, on a section 1404(a) motion, transferred to the New York district.10 Also of significance is that Leesona, in the Pennsylvania suit, moved to transfer that action under Section 1404(a) to the New York district;11 further, that a number of Leesona’s licensing agreements, no matter where entered into and regardless of where the licensees or Leesona do business provide that arbitration of disputes thereunder are to be conducted in New York. These factors strongly militate against Leesona’s plea for transfer to Florida — if New York is a convenient district for Leesona for arbitration regardless of where the other disputants are located and also for a Section 1404 (a) transfer, it certainly is convenient for pretrial purposes of these actions.
The convenience of all litigants and witnesses dictates New York as the proper transferee district. The record here gives support to the licensees’ charge that Lex-Tex, Ltd., a Florida corporation, is a nominal corporation, organized as a conduit to receive royalty payments; that it performs no substantial business of any kind in Florida; that its sole stockholders are two attorneys, one a resident of Washington, D.C., who represents Leesona in this litigation, and the other, general counsel to Permatwist, who resides in Philadelphia, Pennsylvania. With the exception of an attorney in Florida who is a nominal pres*389ident and employee of Lex-Tex, no other person in Florida has knowledge of the basic facts upon which the various suits are grounded. Surely there is no basis for any rational claim that as to these attorneys Florida is a more convenient forum than New York. And any other persons, directors and officers of LexTex having knowledge of the relevant facts are located or reside at places far more accessible and convenient to New York than to Florida.
As to Celanese, New York is the natural and most convenient district for transferee purposes. It maintains its principal place of business there; its house patent counsel, who are “of counsel” in the Florida action, are located in New York City, and Celanese and Fiber Industries trial counsel are located in Washington, D.C. Celanese conducts no yarn processing activities in Florida, and no New York plaintiff conducts yarn processing there. While the Florida plaintiffs asserted “many retired persons formerly employed by various parties (including Celanese) . . . now reside in the Southern District of Florida and are ‘likely witnesses,’ ” with the single exception of one of the patentees who allegedly resides in Florida, whether as a permanent resident or transient vacationer is not stated, neither the names of the purported witnesses nor the nature of their testimony is stated.12
The New York plaintiffs either have their principal place of business in New York, or transact business or maintain offices there, and the majority there keep records relevant to the litigation. Most of the attorneys representing these litigants maintain offices there. These twenty-four plaintiffs are represented in the consolidated action by a Steering Committee of attorneys with offices in New Yoi'k, Washington, D.C., and Greensboro, North Carolina. These attorneys, although widely separated, have functioned effectively as a team, have actively participated in the pretrial deposition discovery procedure in the New York district, and find it most convenient. Thus, in terms of actual experience extending over a two-year period, that district has been a satisfactory forum for the efficient conduct of the litigation. All parties, whatever the issues in their respective cases, have much to gain by a transfer to that district, and much to lose by a transfer elsewhere.
Surely we have an interest in avoiding repetitious and duplicative discovery.13 With discovery in the most advanced state in the New York actions, and hardly off the ground in other districts, in the words of this Panel, “Judge [Zavatt’s] familiarity with this litigation compels the selection of the District of [Eastern New York] as the only practical transferee forum at this time.”14 The transfer should be to that district.

. Previously, Celanese Corporation (Celanese) and Fiber Industries, Inc., plaintiffs in a Florida action, moved for an order under 28 U.S.C. § 1407 (except in an action pending in Rhode Island and one pending in North Carolina), but for reasons which do not appear withdrew their motion, following which the Panel issued the instant order to show cause.

. Consisting of 3 patents, Nos. 2,803,105; 2,803,10S; 2,803,109, which expire in 1974.

. These consist of 3 double heater patents, Nos. 3,077,724 ; 3,091,912; 3,472,011, which remain in force, expiring in ten to fifteen more years.

. Patent Nos. 2,791,086; 3,044,247; 3,-134,218.

. Leesona Corp. v. Duplan Corp., 317 F.Supp. 290 (D.R.I.1970).

. It is alleged Lex-Tex was originally incorporated in North Carolina, but later moved to Florida and there incorporated, allegedly because the climate there was considered more receptive for favorable adjudication of patents. Affidavit of Phillips, p. 10.

. The doubt referred to by the majority that Lex-Tex, named as a conspirator in the New York actions, can be made a party-defendant in that district for purposes of trial is beside the point. Whether plaintiffs succeed or not in subjecting Lex-Tex to jurisdiction there, a transfer under Section 1407(n) of the Florida actions to New York will permit the depositions in all actions to proceed apace, no. matter where the cases are eventually tried.

. Judge Dooling later found it necessary to disqualify himself.

. Hearing of Judicial Panel on Multidistrict Litigation, Oct. 29, 1971, p. 59.

. In all, the claims against 30 defendants were transferred to the Eastern District of New York; the others, which were not transferable under Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960) were severed and stayed. See Leesona Corp. v. Duplan Corp., 317 F.Supp. 290, 300 (D.R.I.1970).

. I am not unaware of Leesona’s contention that the motion was made before the Florida suits were commenced, but this circumstance does not down the basic facts upon which it applied for the transfer “for the convenience of parties and witnesses in the interests of justice . . . . ”

. Cf. Oil & Gas Ventures—First 1958 Fund Ltd. v. Kung, 250 F.Supp. 744, 756-757 (S.D.N.Y.1966); Strypek v. Schreyer, 118 F.Supp. 918 (S.D.N.Y.1954).

. Cf. In re Frost Patent, 316 F.Supp. 977, 979 (J.P.M.L.1970); In re Gypsum Wallboard, 303 F.Supp. 510 (J.P.M.L.1969).

. In re Frost Patent, 316 F.Supp. 977, 978 (J.P.M.L.1970).