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Halbert v. Credit Suisse AG

United States District Court, N.D. Alabama, Southern Division

December 17, 2018

ERICH HALBERT, et al., Plaintiffs,
CREDIT SUISSE AG, et al., Defendants.



         Erich, Sherri, and John Halbert (“the Halberts”) bring this action against Credit Suisse AG and Janus Index & Calculation Services, LLC (“JICS”) alleging federal and state securities violations and tortious conduct. Docs. 1; 45. The Defendants have jointly moved to transfer venue to the S.D.N.Y. under 28 U.S.C. § 1404(a) or, alternatively, to stay the action pending the resolution of similar cases in the S.D.N.Y. under the first-filed rule. Doc. 23. The motion, which is fully briefed and ripe for review, id.; docs. 24, 30, 31, is due to be denied.


         The Halberts allege that they suffered significant losses after investing in Credit Suisse's VelocityShares Daily Inverse VIX Short Term exchange traded notes (“XIV ETNs”) due to a precipitous drop in the securities' value on February 5, 2018. Doc. 45 at 1-2. According to the Halberts, Credit Suisse and JICS caused them to suffer these losses by manipulating and failing to disclose the published estimates of the XIV's value on and before February 5, 2018. Id. ¶¶ 41-42. Allegedly, Credit Suisse intentionally issued false and misleading offering documents in connection with the XIV ETNs, failed to disclose that it was engaging in activities that inflated their value, failed to update the estimated value of the XIV while its value was dropping, and then ended trading on the XIV in order to realize a profit at investors' expense. Id. ¶¶ 8-49. Based on these contentions, the Halberts assert claims against Credit Suisse and JICS for alleged violations of § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, as well as common law claims of negligence, wantonness, fraudulent misrepresentation, negligent misrepresentation, and fraudulent suppression, and assert claims for alleged breach of contract and violations of § 11 of the Securities Act, 15 U.S.C. § 77k, and the Alabama Blue Sky Law, Ala. Code § 8-6-19(a)(2), solely against Credit Suisse. Docs. 1; 45.

         Relevant to the pending motion, in addition to the Halberts' lawsuit, other investors filed three putative class actions against Credit Suisse AG, JICS, and six other defendants in the S.D.N.Y. to recover for their losses from the collapse of Credit Suisse's XIV on behalf of themselves and other investors, including the Halberts. See Chahal v. Credit Suisse Group AG et al., No. 1:18-cv-2268-AT-SN (S.D.N.Y. Mar. 14, 2018), ECF Nos. 1, 74; Eisenberg v. Credit Suisse Group AG et al., No. 1:18-cv-2319-AT-SN (S.D.N.Y. Mar. 15, 2018); Qiu v. Credit Suisse Group AG et al., No. 1:18-cv-4045-AT-SN (S.D.N.Y. May 4, 2018). These actions were subsequently consolidated by Magistrate Judge Sarah Netburn, and the plaintiffs have filed a consolidated amended complaint alleging violations of the Securities and Exchange Acts. See Set Capital LLC et al. v. Credit Suisse Group AG, No. 1:18-cv-2268-AT-SN (S.D.N.Y. Aug. 20, 2018), ECF No. 82 (hereinafter “the New York action”). The defendants in the New York action have moved to dismiss, id., ECF. Nos. 100, 101, 105, and, to date, the court has not certified a class.

         II. ANALYSIS

         The Defendants raise two points in their pending motion. First, they contend that the balance of factors under 28 U.S.C. § 1404(a) favor a transfer to the S.D.N.Y. Alternatively, they contend that the court should stay this case pending resolution of the New York action based on the first-filed rule. The court addresses each of these contentions in turn.

         A. Transfer of Venue Under 28 U.S.C. § 1404(a)

         Section 1404(a) allows a district court, “[f]or the convenience of parties and witnesses, in the interest of justice, ” to “transfer any civil action to any other district . . . where it might have been brought . . . .” 28 U.S.C. § 1404(a). It is undisputed that venue would be proper in the S.D.N.Y.: the alleged violations of federal securities laws occurred in this district, Credit Suisse AG resides in this district, and a substantial part of the events or omissions giving rise to the claims occurred in this district. See docs. 45, 24-2; 15 U.S.C. § 77v (any civil action under the Securities Act “may be brought in the district wherein the defendant is found or is an inhabitant or transacts business, or in the district where the offer or sale took place, if the defendant participated therein”); 15 U.S.C.A. § 78aa (any civil action under the Exchange Act “may be brought in the district wherein any act or transaction constituting the violation occurred . . . or in the district wherein the defendant is found or is an inhabitant or transacts business”); 28 U.S.C. § 1391(b)(2) (venue is proper in any “judicial district in which a substantial part of the events or omissions giving rise to the claim occurred”). Therefore, the only issue is whether the Defendants have met their burden of showing that the balance of § 1404(a) factors justifies a transfer in this case.[1] As explained below, the Defendants have failed to meet this burden.

         1. Factors Supporting Transfer

         Only three of the relevant factors affirmatively favor transfer: the convenience of the witnesses, the availability of process to compel the attendance of unwilling witnesses, and the location of relevant documents and relative ease of access to sources of proof. More specifically, most of the potential witnesses concerning the allegedly illegal conduct appear to be located either in New York or Darien, Connecticut, see docs. 24-1 ¶¶ 4-6; 24-2 ¶¶ 5-10, and it seems the only potential witnesses in Alabama are the Halberts, see docs. 45; 24-1 ¶¶ 7-9; 24-2 ¶ 5. Likewise, as the Defendants note, the location of potential witnesses, which also includes Colorado, likely places them beyond the reach of this court's subpoena power. See docs. 24 at 8; 24-1 ¶¶ 9-10; 24-2; Fed.R.Civ.P. 45(c). Furthermore, because the offering documents at issue were prepared in New York, Credit Suisse's only U.S. branch is in New York, and JICS's principal place of business is Darien, Connecticut, the location of relevant documents and access to sources of proof also appears to favor transfer. See docs. 24-1 ¶¶ 4, 6; 24-2 ¶¶ 5-10.

         Nevertheless, the circumstances of this case mitigate the weight of these factors. For instance, the significance of the convenience of witnesses factor is diminished where, as here, most of the potential witnesses, “although in another district, are employees of a party and their presence at trial can be obtained by that party.” See Trinity Christian Ctr. of Santa Ana, Inc. v. New Frontier Media, Inc., 761 F.Supp.2d 1322, 1328-29 (M.D. Fla. 2010) (citation omitted). Furthermore, because the Halberts are willing to travel to New York, Connecticut, and Colorado to depose the Defendants' employees, see doc. 30 at 11, the convenience of the witnesses does not weigh heavily in favor of transfer. Similarly, the availability of process is of less significance here, where there is no indication the potential witnesses would be unwilling to appear. See F.D.I.C. ex rel. Citizens State Bank v. Fedorov, No. 10-20912-Civ., 2011 WL 2110830 (S.D. Fla. May 26, 2011) (finding this factor did not support transfer where “[n]either of the parties has identified any specific witness who would be unwilling to appear and may require the court's subpoena power.”). Finally, although many of the relevant documents and other evidence are located in or around New York, this factor is less significant in the absence of any contention by the Defendants that they face substantial difficulty in producing relevant documents and given “the predominance of electronic discovery in the modern era.” Weintraub v. Advanced Correctional Healthcare, Inc., 161 F.Supp.3d 1272, 1283 (N.D.Ga. 2015); see Steifel Labs., Inc. v. Galderma Labs., Inc., 588 F.Supp.2d 1336, 1340 (S.D. Fla. 2008) (“Defendant has not demonstrated that there is any particular difficulty in producing the materials or relevant documents . . .”).

         2. Neutral Factors and Factors Militating Against Transfer

          By contrast, the remaining factors are either neutral or militate against transfer. To begin, “[t]he plaintiff's choice of forum should not be disturbed unless it is clearly outweighed by other considerations, ” Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253, 261 (11th Cir. 1996) (quoting Howell v. Tanner, 650 F.3d 610, 616 (5th Cir. 1981)), and this choice receives “greater deference when the plaintiff has chosen the home forum, ” as the plaintiffs have done in this case, see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 266 (1981) (citation omitted). Next, the presence of six state common law claims and a claim for violations of Alabama's Blue Sky Law, doc. 45 ¶¶ 67-90, also supports greater deference to the Halberts' choice of forum and disfavors transfer. See Trafalgar Capital Specialized Inv. Fund (in Liquidation) ...

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