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Yang v. Odom

January 18, 2006

PEDRO YANG, CAROL JACKSON, AND PETER S. KELSCH, ON BEHALF OF THEMSELVES AND ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
STEVEN A. ODOM, MARK GERGEL, HENSLEY E. WEST, MARTIN D. KIDDER AND STEPHEN J. CLEARMAN, DEFENDANTS.



The opinion of the court was delivered by: Pisano, District Judge.

FOR PUBLICATION

OPINION

Plaintiffs Pedro Yang, Carol Jackson, and Peter S. Kelsch (collectively, the "Plaintiffs") bring this action on behalf of themselves and other persons similarly situated against Defendants Steven A. Odom, Mark Gergel, Hensley A. West, Martin D. Kidder and Stephen J. Clearman (collectively, the "Defendants").*fn1 Plaintiffs allege that Defendants violated various provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the rules promulgated thereunder. Currently before the Court is Defendants' Motion to Dismiss or alternatively Motion to Transfer this action to the Northern District of Georgia.*fn2 For the following reasons, the Court grants Defendants' Motion to Transfer this action to the Northern District of Georgia.*fn3

I. Factual History

This case has a tortured history.*fn4 Defendants are former officers and directors of World Access, Inc. ("WAXS"),*fn5 a publicly-held telecommunications company headquartered in Atlanta, Georgia. On January 5, 1999, WAXS announced that it did not expect to meet its earnings estimates for the fourth quarter of 1998. This announcement triggered the filing of twenty-three securities fraud class action lawsuits in the United States District Court for the Northern District of Georgia between January 7, 1999 and March 18, 1999 against WAXS and the individual defendants named in the instant case.*fn6 In these lawsuits, the plaintiffs alleged that WAXS issued false and misleading press releases, financial statements, and other corporate documents relating to a telephone switching product called the "CDX Switch."

The plaintiffs in these twenty-three putative class actions represented three classes of individuals: (1) persons who acquired WAXS securities in its merger with NACT Telecommunications, Inc. (the "NACT Class") which closed on October 29, 1998; (2) persons who acquired WAXS securities in its merger with Telco Systems, Inc. (the "Telco Class") which closed on November 30, 1998; and (3) persons who purchased securities of WAXS on the open market during the proposed class period (the "Open Market Class").

The cases were consolidated before Chief Judge Orinda D. Evans in the Northern District of Georgia and lead plaintiffs were appointed for each class. The lead plaintiffs moved for class certification. Judge Evans denied the motion for class certification on July 26, 2001. Subsequently, many individual plaintiffs dismissed their claims; however, two individual plaintiffs continued to pursue their claims in Georgia. After fact and expert discovery, in March 2004, Judge Evans granted summary judgment to the defendants on the remaining plaintiffs' securities fraud claims. See In re: World Access, Inc. Sec. Litig., 310 F. Supp. 2d 1281 (N.D. Ga. 2004).

Plaintiffs filed the instant action in New Jersey on December 17, 2002. The Plaintiffs in the New Jersey action were would-be members of the three classes in the Georgia action which Judge Evans refused to certify. The Defendants in the New Jersey action were defendants in the Georgia Action. Further, it is undisputed that most, if not all, of the essential acts, transactions, and wrongful conduct at issue occurred in the Northern District of Georgia.*fn7

Thus, the question is: Why did Plaintiffs file this case in New Jersey as opposed to either filing a new class action lawsuit in Georgia or intervening as individual plaintiffs to assert their rights in the pending Georgia action? Plaintiffs did not file a purported class action in Georgia naming themselves as class representatives because they believed that their claims would be time-barred in that district under the Eleventh Circuit's holding in Griffin v. Singletary, 17 F.3d 356 (11th Cir. 1994). In Griffin, the Eleventh Circuit held that the existence of a pending class action, such as the original action filed in Georgia, does not toll the statute of limitations period for later class actions brought by putative class members. Griffin, 17 F.3d at 359.

Plaintiffs did not individually intervene in the Georgia litigation, although it appears from this Court's reading of Griffin that they would have been permitted to do so under Eleventh Circuit precedent,*fn8 because they felt that "given the size of their losses, it was not economically feasible to prosecute the action on an individual basis." Yang v. Odom, 392 F.3d 97, 101 (3d Cir. 2004). Thus, because they wanted to file a class action lawsuit, Plaintiffs filed their lawsuit in the District of New Jersey because their claims were not clearly time-barred under Third Circuit precedent.

During the course of this litigation, the Third Circuit was required to consider whether the existence of a pending class action tolls the statute of limitations period for later class actions brought by putative class members. Yang v. Odom, 392 F.3d 97 (3d Cir. 2004). The Third Circuit rejected the Eleventh Circuit's approach in Griffin, stating that where a court's refusal to certify a class was based on Rule 23 deficiencies in the putative class representative, as opposed to deficiencies in the class itself, the statue of limitations should be tolled with respect to additional class actions by putative members of the original asserted class. Id. at 111. Applying this rule, the Third Circuit found the claims of the Telco and Open Market Classes to be timely and allowed them to proceed; however, the court dismissed the claims of the NACT class. Id. at 109-111.

On August 16, 2005, the Court granted Plaintiffs' motion for class certification and certified two classes for the purposes of this litigation, the Telco and Open Market Classes. The Court appointed Jason Thompson and Peter S. Kelsch class representatives for the Telco Class and Raymond T. Crump as class representative of the Open Market Class. Defendants then filed the instant motion to dismiss or transfer venue.

For the following reasons, the Court transfers this case to the Northern District of Georgia pursuant to 28 U.S.C. § 1404(a). However, before discussing the relevant legal standard and principles, the Court must explain that it transfers this case reluctantly and only after thoroughly considering dismissing this case.*fn9 Despite the Third Circuit's belief that its decision in Yang v. Odom, 392 F.3d 97, 112 (3d Cir. 2004) will not "invite forum shopping," this case represents the most blatant example of forum shopping seen by this Court. Plaintiffs could have timely asserted their claims in the Northern District of Georgia. Instead, faced with unfavorable rulings in that district, including Judge Evans's denial of class certification, Plaintiffs chose to wait until the statute of limitations on their claims had long expired in Georgia and bring their claims in New Jersey, a district which has very little connection to this dispute.

Accordingly, the Court must transfer this action pursuant to section 1404(a) to the district where it belongs - the Northern District of Georgia - a district that has already expended substantial judicial resources and carefully considered the same issues before this Court in order to achieve ...


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