Western and Southern Life Insurance Company et al v. Countrywide Financial Corp. et al

Filing 102

OPINION AND ORDER denying 53 Motion to Transfer Venue Under 28 USC Section 1404(a) to the U.S. District Court for the Central District of California. Signed by Judge S Arthur Spiegel on 8/30/2011. (km1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
THE WESTERN AND SOUTHERN LIFE :
INSURANCE COMPANY, et al.,
:
:
Plaintiffs,
:
:
:
v.
:
:
COUNTRYWIDE FINANCIAL CORP., :
et al.,
:
:
Defendants.
:

NO. 1:11-CV-00267

OPINION AND ORDER

This matter is before the Court on Defendants’ Motion to
Transfer Venue Under 28 U.S.C. § 1404(a) to the United States
District Court for the Central District of California (doc. 53),
Plaintiffs’ Response in Opposition (doc. 75), and Defendants’ Reply
(doc. 86).
2011.

For

The Court held a hearing on this matter on August 9,
the

reasons

indicated

herein,

the

Court

DENIES

Defendants’ motion.
I.

Background
Plaintiffs (which the Court will collectively refer to as

“Western and Southern”) filed their Complaint in April 2011,
alleging that Defendants (which the Court will collectively refer
to as “Countrywide”) sold Plaintiffs mortgage-backed securities
(“MBS”) pursuant to registration statements and prospectuses that
contained untrue statements and omissions of material facts (doc.

1).1 Plaintiffs allege Defendants’ actions amount to violations of
the Securities Act of 1933, the Securities and Exchange Act of
1934,

and

Ohio

misrepresentation

common
(doc.

law

regarding

1).

fraud

Plaintiffs

and

contend

negligent
Defendants

systematically ignored their own underwriting standards when they
sold the securities, and as a result sold toxic mixes of loans that
defaulted on such a large scale that Plaintiffs’ certificates lost
value such that 94% of them are now not even considered to be
investment grade (Id.).
II.

Defendants’ Motion
The U.S. Code allows for change of venue to any other

district or division where a civil action might have been brought
“(f)or the convenience of parties and witnesses, [and] in the
interest of justice.”

28 U.S.C. § 1404(a).

Defendants move the

Court to transfer this case pursuant to Section 1404 to the Central
District of California, which is presiding over six related cases
that involve the same allegations and the same Defendants (doc.

1

Plaintiffs are five insurance companies and an investment
advisor, all of which, save one, are domiciled in Ohio. The
Defendants are Defendant Countrywide Financial (“Countrywide”),
headquartered in Calabasas, California; eight of its corporate
officers, all of whom are domiciled in California; and two of
Countrywide’s subsidiaries. Also named in the Complaint are
Defendant Countrywide Securities Corporation, and Defendant
depositors CWALT, CWABS, CWHEQ, and CWMBS.
Defendant the Bank
of America (“BOA”), aquired Countrywide in July 2008. In
addition, Plaintiffs have named as Defendants BOA subsidiary BAC
Home Loans Servicing, and Defendant NB Holdings Corporation, a
entity used to effectuate the BOA-Countrywide merger.
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53).

In Defendants’ view, the convenience of the witnesses and

parties and the location of relevant documents favors transfer
(Id.).

Citing Stinchcombe v. Caruso, 2008 WL 4561515 (E.D. Mich.

Oct. 9, 2008), Defendants contend that when plaintiffs claim a
pervasive and systematic wrongdoing by a corporate defendant, the
locus of operative facts will typically be deemed the company’s
headquarters, from where the policies originated (Id.). Here, that
is Calabasas, California (Id.).
Defendants further contend Plaintiffs’ choice of forum is
not entitled to deference in this case because Ohio has no real
connection to the events of the case, and California is the locus
of facts (Id.).

Finally Defendants contend the interest of the

state of Ohio is irrelevant under Section 1404, despite Plaintiffs’
contention that the courts of Ohio have an interest in adjudicating
the claims of individuals injured in Ohio (Id.).
III.

Applicable Legal Standard
When ruling on transfer motions, this Court employs the

balancing approach developed by the Honorable David Porter in
Artisan Development v. Mountain States Development Corp., 402 F.
Supp. 1312 (S.D.Ohio 1975).

Under this approach, the Court

considers a variety of factors including the convenience of the
witnesses,

where

the

operative

facts

occurred,

location

of

documentary evidence, and the possibility of prejudice in either
the

forum

or

transfer

state.

The

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Court

must

give

foremost

consideration to the plaintiff's choice of forum, and the balance
must weigh "strongly in favor of a transfer" before the Court
should grant a Section 1404(a) motion.

Nicol v. Koscinski, 188

F.2d 537 (6th Cir. 1951); Lewis v. ACB Bus. Servs., 135 F.3d 389,
413

(6th

Cir.

1998),

Artisan

Development

v.

Mountain

Development Corp., 402 F. Supp. 1312 (S.D.Ohio 1975).

States

In addition

to the factors above, Section 1404(a) requires that the Court
consider “public-interest concerns,” specifically the “issues of
congested dockets [and] concerns with resolving controversies
locally.”

Wm. R. Hague, Inc. v. Sandburg, 468 F.Supp.2d 952, 963

(S.D. Ohio 2006)(citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501,
508-09 (1947)).
IV.

The August 9, 2011 Hearing
At the hearing, Defendants reiterated their position

that the principal reason that transfer would be appropriate is
that there are numerous related actions pending in the Central
District of California, before the Honorable Mariana R. Pfaelzer,
in which Plaintiffs “assert many of the very same claims based on
the very same allegations and against the very same parties that
are asserted in in this case.”

Citing the Honorable James L.

Graham in Ltd Serv. Corp. V. M/V APL Peru, No. 2:09-CV-1025, 2010
U.S. Dist. LEXIS 53632 (S.D. Ohio, May 25, 2010), Defendants
contended there’s a substantial savings of time and judicial
resources that can result from transfer to another court that is

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already presiding over similar cases.
Plaintiffs indicated that, yes the cases in California
are indeed related to the instant case, but that certain of the
securities that Plaintiffs now sue upon were originally covered by
a class action pending in California.
“Countrywide

succeeded

in

ejecting

According to Plaintiffs

Western

and

Southern,

and

countless other[s]. . . by arguing that the class plaintiff only
had standing to serve as a representative with respect to the
specific securities it owned, not the broader offering by which
those securities were sold.”

Plaintiffs contended that such

outcome reduced Defendants’ exposure by billions and compelled
Plaintiffs to file the instant action to preserve their rights.
Plaintiffs indicated that the MDL Panel (which ultimately has
transferred this matter to the Central District of California,
(doc. 99)), noted, “Wait a minute.

They were in California, you

kicked them out by arguing unique facts of their case, they filed
their own action in Ohio, and now you want them back in California.
Isn’t that a little bit ironic?”

Defendants responded at the

hearing that there is no inconsistency in their argument in the
class action that different certificates backed by different loans
are different securities for the purposes of statutory standing
under the 1933 Act and contending here that there are substantial
similarities in this case that will require the same witnesses and
documents.

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In reply, Plaintiffs argued that any factual overlap
between the instant cases and the California cases is exaggerated,
as

many

of

the

other

cases

do

not

involve

mortgage-backed

securities, a couple of them are class actions, and one is a SECenforcement proceeding. Plaintiffs further argued that Defendants’
reliance on Ltd Serv. Corp., 2010 U.S. Dist. LEXIS 53632 (S.D.
Ohio, May 25, 2010) is misplaced because Judge Graham did not say
that judicial economy trumps other factors in all cases, only that
the specific facts of that case militated toward transfer.
Plaintiffs

contend

Defendants

improperly

frame

this

case

as

“California-centric,” because although the mortgages were “bundled”
in California, the underlying transactions were nationwide, and in
fact, Defendants “reached” into Ohio with the alleged misleading
prospectuses and sales materials.

Citing Arters v. Sandoz, Inc.,

No 2:10-CV-00142, 2010 U.S. Dist. LEXIS 101197, at *23 (S.D. Ohio,
September 27, 2010), Plaintiffs noted that the court refused to
transfer a suit from Ohio when it was clear Defendants sold and
distributed their product into the national stream of commerce,
including Ohio.

When Defendants reached into Ohio, contends

Plaintiffs, this gave Ohio a significant interest and connection to
the instant litigation.
In Plaintiffs’ view, having shown a connection to Ohio,
the next step is to evaluate the convenience factors.

Plaintiffs

contended at the hearing that Defendants have made no persuasive

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showing of witness inconvenience to justify disturbing Plaintiffs’
choice of forum.
concerning

some

Although Defendants provided a Declaration
twenty-five

witnesses

located

in

California,

Plaintiffs argued the declaration does not identify whether they
still work for Defendants, the content of any testimony, or the
connection to any of the specific securities that Plaintiffs
purchased.

Without any such specificity, Plaintiffs contend under

Purcell v. National Bank of Detroit, 93 Civ. 8786 (MBM), 1994 U.S.
Dist. LEXIS 15196, *16-17 (S.D.N.Y. October 24, 1994), the Court is
unable to ascertain the significance of the proposed testimony. As
for

documents,

Plaintiffs

argued

Defendants’

assertions

that

documents are likely to be in California are too generalized,
especially for a national operation.

Second, Plaintiffs indicated

that the District of Connecticut recently rejected the notion that
Countrywide documents would be difficult to produce outside of
California, in these days of electronic discovery.

Finally as for

docket congestion, Plaintiffs contend that on average, the courts
in the Southern District of Ohio have twenty to twenty-five percent
less active cases than the court in the Central District of
California.

As for such final point, Defendants respond that its

statistics show time to trial would go faster in California, and
that the presiding judge, the Honorable Mariana R. Pfaelzer, is a
senior status judge with a reduced case load.

As such, Defendants

contend this matter should be transferred to the Central District

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of California.
V.

Discussion
As

noted

above,

the

Court

must

give

foremost

consideration to the Plaintiffs' choice of forum, and the balance
must weigh "strongly in favor of a transfer" before the Court
should grant a Section 1404(a) motion.

Nicol v. Koscinski, 188

F.2d 537 (6th Cir. 1951); Artisan Development v. Mountain States
Development Corp., 402 F. Supp. 1312 (S.D.Ohio 1975).
plaintiff’s choice of forum should rarely be disturbed.

Indeed, a
Reese v.

CNH Am. LLC., 574 F.3d 315 (6th Cir. 2009).
Having reviewed the parties’ arguments at the hearing,
and

in

their

briefing,

the

Court

is

not

convinced

that

the

requisite factors weigh heavily enough in Defendants’ favor so as
to justify transfer of this matter to the Central District of
California.

Section 1404(a) aside, it is clear that Plaintiffs’

claims, which are predicated on the Federal Securities Act of 1933,
“to grant potential plaintiffs liberal choice in their selection of
a forum.”

Wayne County Employees Retirement System v. MGIC

Investment

Corp.,

604

F.

Supp.

2d

969,

976

(E.D.

Mich.

2009)(quoting Ritter v. Zuspan, 451 F.Supp. 926, 928 (E.D. Mich.
1978)).
The facts of this matter show that Defendants were
already successul in removing Plaintiffs from a class action in
California.

Plaintiffs, having been booted from the California

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action, filed here in Ohio, and are now subject to Defendants’
efforts to have Plaintiffs transferred back to California again.
Although the Court accepts Defendants’ argument in good faith that
their efforts in removing Plaintiffs from the class action had an
independent basis, it still strikes the Court as inconsistent with
the interests of justice under such circumstance to disallow
Plaintiffs’ choice of forum.
There seems to be no real dispute that where allegations
of misrepresentations are involved, the locus of facts is generally
deemed to be where such misrepresentations were made.

However,

here, there is also no real dispute that Defendants’ alleged
actions

reached

into

misrepresentations.

Ohio,

where

Plaintiffs

relied

on

such

In addition, Defendants’ actions were not

limited to California, but involved the bundling of mortages that
originated nationwide, including Ohio.

After the bundling, the

mortgage-backed securities were marketed nationwide. As Plaintiffs
have argued, this case is not so “California-centric” so as to
preclude venue in the Southern District of Ohio.
The Court is also not convinced that this action is on
all fours with the cases pending in California, as Plaintiffs have
demonstrated that different offerings are involved, and not all of
the other actions involve mortgage-backed securities.
can

be

argued,

as

Defendants

persuasively

did,

Although it

that

similar

practices, registration statements, and prospectuses are involved,

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the Court does not find that this factor overrides the fact that
the underlying offerings differ.
Congress intended that the convenience of the parties be
taken into consideration as well, 28 U.S.C. § 1404, and as five out
of

six

of

the

Plaintiffs

are

headquartered

consideration weighs in Plaintiffs’ favor.

in

Ohio,

such

Indeed, Defendant Bank

of America, headquartered in North Carolina, certainly might also
find Ohio more convenient than California.

Of course, though many

of the California Defendants might find California more convenient,
“28 U.S.C. § 1404 does not allow for transfer to a forum that is
equally convenient or inconvenient, nor does it allow for transfer
if that transfer would only shift the inconvenience from one party
to another.”

Shanehchian v. Macy’s, Inc., 251 F.R.D. 287 at 292

(S.D. Ohio 2008).

Defendants simply have not demonstrated they

will be prejudiced by allowing this matter to proceed in the
Southern District of Ohio.
Although Defendants proffer a list of California-based
witnesses and identifies their titles, the Court agrees with
Plaintiffs that the onus is on Defendants to show what each of the
witnesses would presumably testify about.

As it stands the Court

can only speculate as to the necessity of each witness and whether
the bulk of such testimony could adequately be conveyed by video
deposition. Purcell, 1994 U.S. Dist. LEXIS 15196, *16-17 (S.D.N.Y.
October 24, 1994), Graham v. UPS, 519 F. Supp. 2d 801, 810 (N.D.

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Ill. 2007)(denying transfer because Defendant failed to state the
substance of supposed key witnesses’ testimony), Laumman Mfg. Corp.
v. Castings USA, Inc., 913 F.Supp. 712, 721 (E.D.N.Y. 1996)(denying
transfer because defendant failed to state substance of supposed
key

witnesses’

testimony).

Similarly,

the

Court

remains

unconvinced that the documents at issue in this case are all in the
Central District of California, and to the extent that they are,
that they are not easily available through electronic media.
Putnam Bank v. Countrywide Fin. Corp., No. 3:11-CV-00145-JCH (D.
Conn. May 16, 2011). Finally, although the Court has no doubt that
the

Central

presiding

District

over

this

of

California

matter,

the

is

Court

more
finds

than
no

capable

of

significant

difference with the Southern District of Ohio in court congestion
or ability to try this matter expeditiously.
In conclusion, the Court notes that the oral argument
presented by counsel was some of the best it has ever witnessed.
Counsel are to be congratulated for their efforts on behalf of
their clients.

This is a close call, as Defendants made a strong

case in favor of transfer.

However, the Court concludes that the

circumstances of this case, the weighing of the requisite factors,
the convenience of the parties, and the interests of justice all
militate in favor of Plaintiffs’ position.
Accordingly, the Court DENIES Defendants’ Motion to
Transfer Venue Under 28 U.S.C. § 1404(a) to the United States

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District Court for the Central District of California (doc. 53).

SO ORDERED.

Dated: August 30, 2011

s/S. Arthur Spiegel
S. Arthur Spiegel
United States Senior District Judge

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