text:
    Jean Ann CONE, as Personal Representative of the Estate of Evelyn M. Glaeser, deceased, and as representative of a class of all persons similarly situated, Plaintiff, v. THE FLORIDA BAR, The Florida Bar Foundation, Inc., and Holland & Knight, on behalf of itself and as a representative of a class of all persons similarly situated, Defendants.
    No. 84-1345-Civ.T-13.
    United States District Court, M.D. Florida, Tampa Division.
    Dec. 18, 1985.

      Herbert P. Schlanger, Atlanta, Ga., for plaintiff.
    Michael Nachwalter, Brian F. Spector, William J. Bleehman, Kenny Nachwalter & Seymour, P.A., Miami, Fla., Rayford H. Taylor, Tallahassee, Fla., for defendant The Florida Bar.
    Thomas C. MacDonald, Jr., Craig B. Glidden, Lynn Welter, Shackleford, Farrior, Stallings & Evans, P.A., Tampa, Fla., for defendant The Florida Bar Foundation, Inc.
    F. Wallace Pope, Jr., Johnson, Blakely, Pope, Bokor & Ruppel, P.A., Clearwater, Fla., for defendant Holland & Knight.
    Arthur J. England, Jr., Fine, Jacobson, Schwartz, Nash, Block & England, Miami, Fla., L. David Shear, Shear, Newman & Hahn, P.A., Tampa, Fla., Peter M. Siegel, Randall C. Berg, Jr., IOLTA, Miami, Fla., for amici curiae.
   MEMORANDUM OPINION

LYNNE, District Judge, Sitting by Designation.

I.

This action comes before the Court on cross motions for partial summary judgment. In her claim against The Florida Bar, Florida Bar Foundation, Inc., and the Holland & Knight law firm, the plaintiff challenges the constitutionality of Florida’s Interest on Trust Accounts (IOTA) program, through which certain funds held in lawyers’ trust accounts are placed in interest bearing accounts to produce income for legal aid programs and other public purposes. The plaintiff alleges that this appropriation of interest earned on her money constitutes an uncompensated taking of private property in violation of the fifth amendment.

The plaintiff’s constitutional claim stands or falls on one threshold question: Is interest earned on nominal or short-term funds held in an IOTA account the property of the client for purposes of the fifth amendment? If so, then that property interest may not be appropriated by Florida’s IOTA program without just compensation. Having considered the motions and the submissions of counsel and amici curiae, the Court finds as a matter of law that, by pooling funds otherwise unproductive and inappropriate for investment, Florida’s IOTA program interferes with no property interest protected under the taking clause of the fifth amendment.

II.

The facts underlying this dispute are stipulated for purposes of the motions for partial summary judgment. In February, 1969, Evelyn M. Glaeser retained the Holland & Knight law firm to probate the estate of her deceased husband. Mrs. Glaeser paid a cost deposit of $100.00 to Holland & Knight, which was placed in a non-interest bearing trust account. When the firm’s representation of Mrs. Glaeser was concluded in 1970, $13.75 of the original cost deposit remained in the trust account. Through inadvertence, this amount was not refunded to Mrs. Glaeser but remained in the firm’s non-interest bearing account until December 1, 1981.

During the period in which Mrs. Glaeser’s money was held by Holland & Knight, the Supreme Court of Florida approved and implemented a plan to earn interest on the tremendous sums of money lying dormant in trust accounts across the state. Following the example of several other English-speaking jurisdictions, the supreme court promulgated a plan for lawyers and law firms to place nominal or short-term trust funds into interest bearing accounts, the proceeds of which would be allotted to legal aid organizations, law student scholarships, and other appropriate measures to benefit the public. After a seven-year period of investigation, study, and modification, the supreme court adopted in final form the Interest on Trust Accounts (IOTA) program on July 16, 1981. Financial institutions paid accumulated interest to the Florida Bar Foundation, Inc., a nonprofit charitable corporation authorized by the supreme court in 1978 to receive funds generated by IOTA accounts and to oversee the allotment and distribution of these funds in accordance with IOTA’s stated goals.

On December 1, 1981, Holland & Knight transferred all of the firm’s nominal or short-term trust account funds, including Mrs. Glaeser’s $13.75, to an interest bearing IOTA account, where it remained for almost three years. After discovering its error, Holland & Knight returned the principal amount to Mrs. Glaeser by check dated September 26, 1984.

III.

The plaintiff’s constitutional challenge of Florida’s IOTA program is based upon her contention that any interest earned on her money while entrusted to Holland & Knight must belong to her. The plaintiff contends that any appropriation of this interest by the state — no matter how small the amount or justifiable the reason — is an uncompensated taking in violation of the fifth amendment.

It is axiomatic that the fifth amendment prohibits government from taking citizens’ private property without just compensation. See U.S. Const, amend V. It is equally well-settled that this proscription applies to the states through the fourteenth amendment. E.g., Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161, 101 S.Ct. 446, 450, 66 L.Ed.2d 358 (1980). The fifth amendment, however, safeguards only those private interests that fall within a specialized definition of “property” for purposes of constitutional protection. Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124-25, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978). “To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than an unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it.” Board of Regents v. Roth, 408 U.S. 564, 578, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). Although the federal constitution guarantees the protection of private property from uncompensated governmental interference, it does not undertake to define a protectable and legitimate claim of entitlement. Roth, 408 U.S. at 577, 92 S.Ct. at 2709. Such claims are created and their dimensions are defined by existing independent sources such as positive rules of substantive law or mutually explicit understandings. Id.; Perry v. Sindermann, 408 U.S. 593, 602, 92 S.Ct. 2694, 2700, 33 L.Ed.2d 570 (1972). When applied to the IOTA program, neither of these sources confers upon the plaintiff a legitimate claim of entitlement to any interest generated by her $13.75.

A. Substantive Law

As the foundation for her theory that she owns any interest earned on her portion of the Holland & Knight IOTA account, the plaintiff relies upon the traditional property doctrine that interest follows principal. The attempt to extend this principle to the present facts ignores the realities of the IOTA program and is not persuasive.

First, federal banking laws negate any contention that the plaintiff has a substantive legal right to expect interest on nominal funds on deposit with Holland & Knight. Lawyers and law firms must use available-on-demand accounts to facilitate the frequent transactions attendant to trust accounts for nominal or short-term client funds. Federal law historically has forbidden financial institutions from paying interest on such accounts and only recently has been amended to allow interest-bearing demand accounts, commonly known as Negotiable Order of Withdrawal (NOW) accounts. Compare Banking Act of 1933, ch. 89, 11(b), Pub.L. No. 66, 48 Stat. 181 (1933) (forbidding payment of interest on demand accounts), with Consumer Checking Account Equity Act, 12 U.S.C. § 1832(a)(1) (1982) (allowing interest for certain NOW account depositors). Presently, NOW accounts are restricted by statute to accounts consisting only of funds owned by individuals, charitable non-profit organizations, or public entities. See 12 U.S.C. § 1832(a)(2) (1982); 12 C.F.R. §§ 217.157, 329.103, 526.-1(1) (1985) (discussing eligible depositors for NOW accounts). These ownership restrictions prevent a law firm from maintaining a pooled NOW account for private investment of client funds. See id. The capacity to earn interest on nominal or short-term funds held by lawyers and law firms is created and remains viable only through IOTA, which channels the interest to the Florida Bar Foundation, Inc., an appropriate NOW account beneficiary. See Carroll v. State Bar of California, 166 Cal.App.3d 1193, 213 Cal.Rptr. 305 (upholding constitutionality of California’s mandatory IOTA program), cert. denied sub nom Chapman v. State Bar of California, — U.S. -, 106 S.Ct. 142, 88 L.Ed.2d 118 (1985).

In her contention that she has a substantive right to IOTA proceeds, the plaintiff relies most strongly upon a somewhat similar fact situation in Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980). In the Webb’s case, the Supreme Court held that a Florida statute allowing a county to retain more than $90,000 interest earned on interpleader funds deposited with the court effected an uncompensated taking in violation of the fifth amendment. The facts in the Webb’s case, however, are clearly distinguishable from the IOTA program and the plaintiff’s claim. First, the Supreme Court invalidated the Florida statute in large part because the state had authority pursuant to another statute to assess a statutory service charge for interpleader deposits, so that the challenged statute in fact allowed the state to “exact two tolls” upon the interpleader funds. 449 U.S. at 159, 101 S.Ct. at 450. The Court expressly limited its finding of an unconstitutional taking of interest to the narrow circumstances where a separate statute authorized a clerk’s fee, id. at 164, 101 S.Ct. at 452, which sharply diminishes Webb’s relevancy to the instant case.

The Webb’s decision is further distinguishable in that the interest earned on the interpleader funds gave rise to a legitimate claim of interest. The funds were sufficient in amount and were to be held for a sufficient period of time to generate actual income. In contrast, no such claim of entitlement exists for the plaintiff’s nominal funds, which could garner no net income. In a pivotal passage from the Webb’s decision, the Court held that the challenged statute had “the practical effect of appropriating for the county the value of the use of the fund for the period for which it [was] held in the registry.” Id. (emphasis supplied). This language lends further support for the finding that Mrs. Glaeser had no substantive property right: when the use of specific funds has no net value, there can be no property interest for the state to appropriate.

The plaintiff’s argument that interest always follows principal is therefore inapposite in the context of the IOTA program. When Justice Johnson observed in Himely v. Rose, 9 U.S. (5 Crunch) 313, 319, 3 L.Ed. Ill (1809), that “interest goes with the principal, as the fruit with the tree,” his illustration necessarily assumed the existence of a fruit-bearing tree. Mrs. Glaeser had no legitimate expectancy that she would receive income from her $13.75. She may not use the fifth amendment to create a pecuniary windfall where none previously existed. See, e.g., United States v. Willow River Power Co., 324 U.S. 499, 502, 65 S.Ct. 761, 89 L.Ed. 1101 (1945) (purpose of taking clause is to protect against certain economic losses).

B. Mutually Explicit Understandings

Federal banking regulations impose certain ownership restrictions that effectively negate any mutual understanding between lawyers and clients that nominal or short-term funds will be pooled and invested to generate interest. See discussion, supra at page 135. Individual NOW accounts for such funds, although viable under relevant banking law, nevertheless could not produce net income for clients because of service charges and limitations imposed by the financial institution. Monthly service charges, minimum balance requirements, and per-check charges on all but the larger NOW accounts render these investment vehicles worthless for client funds appropriate for IOTA investment. Nor would individual investment of nominal or short-term funds be practical in light of transaction costs associated with the administration of such an account. See A.B.A. Task Force and Advisory Board on Interest on Lawyer Trust Accounts, Report to the Board of Governors, 22-24 (July 1982) (describing transaction costs in administering NOW account); A.B.A. Formal Opinion 348, 68 A.B.A. J. 1502, 1503 (1982) (requiring lawyers to invest client funds only when clear economic justification for time and effort involved). The end result of these economic and practical impediments to individual investment of IOTA funds is to negate any reasonable unilateral expectation, much less a mutually explicit understanding, that a client such as Mrs. Glaeser should receive interest generated by the IOTA program.

Based on the foregoing analysis, the Court finds that the Florida IOTA program encroaches upon no constitutionally protected property interest.

IV.

There is an additional independent reason for the Court’s granting the defendants’ motion for partial summary judgment. Even assuming there is a protectable “property” interest, Florida’s IOTA program does not constitute an unlawful “taking.” This case does not involve a physical invasion but, at most, the regulation of the use of property to serve a vital public interest. As such, the “bundle” and “strand” analysis articulated in Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979), is persuasive.

Under the Allard analysis, the bundle of property rights of clients with nominal or short-term trust deposits is substantially intact: the IOTA program does not interfere with the client’s ability to withdraw the nominal or short-term deposit and do with it as he wishes. At most, IOTA affects merely one strand of property rights by putting otherwise dormant, non-productive nominal or short-term client trust deposits to work to improve the legal system.

V.

For the reasons set forth above, this Court finds that the IOTA program is facially constitutional and that it does not constitute an unconstitutional taking under the Fifth Amendment. Therefore, an order will be entered denying plaintiff’s motion for partial summary judgment and granting that of defendants. Because the resolution of these constitutional issues is tantamount to a final judgment in favor of defendants, such order will dismiss the constitutional claims with prejudice and decline to exercise pendant jurisdiction of plaintiff’s state law claims.

DONE this 16th day of December, 1985.

      . For a more detailed description of the background and operation of the IOTA program, see In re Interest on Trust Accounts, 402 So.2d 389 (Fla.1981), and Note, Interest on Lawyers’ Trust Accounts — Legal Issues and the Kansas Program, 33 Kan.L.Rev. 145, 145-52 (1984).

      . The plaintiff also alleges that the IOTA program constitutes a denial of procedural due process, conversion of property, and breach of fiduciary duty. By order of this Court on March 5, 1985, the constitutional issues were submitted on stipulated facts. No other pending motions or issues are addressed in this opinion.

      . Therefore, this case may properly be resolved by way of summary judgment under Fed.R. Civ.P. 56(c). See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Mercantile Bank & Trust Co. v. Fidelity & Deposit Co., 750 F.2d 838, 841 (11th Cir.1985).

      . The Florida IOTA plan was amended in 1979 to drop three objectives for fear that these proposed uses were not sufficiently charitable for IRS approval. See In re Interest on Trust Accounts, 372 So.2d 67, 69 (Fla. 1979). The program was further amended to remove all client control over the determination whether to participate in IOTA in order to avoid possible assignment-of-income issues and resultant income tax liability. See In re Interest on Trust Accounts, 402 So.2d 389, 391 (Fla.1981).

      . Although Roth involved an alleged deprivation of property without procedural due process, its definition of a protectable property interest is equally applicable in the context of a taking clause claim. See Texaco, Inc. v. Short, 454 U.S. 516, 525, 102 S.Ct. 781, 790, 70 L.Ed.2d 738 (1982) (applying Roth test to claims under procedural due process and taking clauses).

      . The Carroll case is the only adversarial proceeding to address the constitutionality of a state IOTA program. Eight other state supreme courts, in adopting IOTA programs, have determined that IOTA does not violate a constitutionally-protected property right. See Matter of Interest on Lawyers’ Trust Accounts, 283 Ark. 252, 675 S.W.2d 355 (1984); In re Interest on Trust Accounts, 402 So.2d 389, 395 (Fla.1981); In re Petition of Iowa State Bar Ass’n, No. 84-1641, slip op. at 2 (Iowa 1984), cert. denied sub nom Ronwin v. Supreme Court of Iowa, — U.S.-, 105 S.Ct. 2325, 85 L.Ed.2d 843 (1985); In re Massachusetts Bar Ass’n, 395 Mass. 1, 478 N.E.2d 715 (1985); Petition of Minn. State Bar Ass’n, 332 N.W.2d 151, 158 (Minn.1982); Petition of New Hampshire Bar Ass’n, 122 N.H. 971, 453 A.2d 1258 (1982); In re Interest on Lawyers’ Trust Accounts, 672 P.2d 406, 407-08 (Utah 1983); In re Adoption of Amendments to CPR DR9-102, IOLTA, 102 Wash.2d 1101 (1984).

      . The interpleader fund consisted of $1,800,000 and was held in the registry of the court for approximately one year. See Webb's, 449 U.S. at 161-62, 101 S.Ct. at 450-51. The crucial distinction is not the amount of interest earned, but that the circumstances led to a legitimate expectation of interest exclusive of administration costs and expenses.
      It is also interesting to note that the interest earned on the Webb’s fund accrued to the benefit of the eventual recipients of the fund rather than the depositor. The defendants raise the point that many trust account funds eventually are distributed to parties other than the client who, therefore, should likewise receive any interest accrued.

      . The Webb's case was also rejected as controlling in Carroll, which stated that "Webb's does not address issues pertinent to this case.” 209 Cal.Rptr. at 748. The Florida Supreme Court also distinguished IOTA from the Webb’s facts, stating that "no client is compelled to part with ‘property’, since the program creates income where there has been none before, and the income thus created would never benefit the client under any set of circumstances. 402 So.2d at 395.

      . The minimum deposit requirement alone would have thwarted Mrs. Glaeser’s chance to earn interest. NCNB National Bank of Florida, where Holland & Knight maintains its IOTA account, has always required a minimum balance of at least $100.00.

      . Because the property interests protected by the procedural due process and taking clauses are identical, see supra note 5, this determination also disposes of the plaintiff’s procedural due process claim.

      . The Florida Supreme Court has clearly determined that the IOTA program serves a vital public interest, see In re Interest on Trust Accounts, 402 So.2d at 396, and the plaintiff has readily acknowledged the public purposes served by Florida’s IOTA program.

       This opinion is the product of exhaustive research and careful analysis by Luther M. Dorr, Jr., Law Clerk.


source: Caselaw Access Project

author: HAROLD H. GREENE, District Judge.

license: Public Domain

text:
    COMPTROLLER OF the CURRENCY, Plaintiff, v. CALHOUN FIRST NATIONAL BANK, et al., Defendants.
    Civ. A. No. 85-2800.
    United States District Court, District of Columbia.
    Dec. 20, 1985.

      Charles M. Horn, Robert B. Serino, Eugene M. Katz, Deborah S. Hechinger, Ralph E. Sharpe, Robert S. Pasley, Ellen Broadman, Comptroller of the Currency, Washington, D.C., for plaintiff.
    John D. Hawke, Howard N. Cayne, Arnold &, Porter, Washington, D.C., Kenneth L. Millwood, John L. Latham, Smith, Gambrell & Russell, Atlanta, Ga., for defendant Calhoun First Nat. Bank.
    Nickolas P. Chilivis, Gary G. Grindler, Anthony L. Cochran, Chilivis & Grindler, Atlanta, Ga., Jamie S. Gorelick, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for defendant T. Bertram Lance.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

Plaintiff Comptroller of the Currency (Comptroller) brought this action for a preliminary injunction against defendants Calhoun First National Bank (CFNB) and T. Bertram Lance (Lance), seeking injunctive relief to remedy alleged violations of the federal securities laws. Both defendants have responded by filing a series of preliminary motions which are now pending, including motions to transfer this case to the Northern District of Georgia. For the reasons stated herein, the Court grants defendants’ motions to transfer and leaves resolution of the remaining motions to the transferee court.

I

The Comptroller of the Currency is a federal agency with authority, inter alia, to administer and enforce the reporting and proxy provisions of the Securities Exchange Act against entities with securities registered at the office of the Comptroller of the Currency. CFNB is a national banking association located in Calhoun, Georgia, with its common stock registered with the Comptroller. CFNB and its officers and agents are thus subject to the securities laws and the regulations promulgated thereunder and are policed in their compliance by the Comptroller. The Comptroller instituted an investigation of CFNB in October 1984, which resulted in the institution of several actions against the defendants, including this civil action.

In this suit, the Comptroller requests a preliminary injunction against CFNB and Lance, the bank’s chairman and principal shareholder, seeking to restrain defendants “from further violations of the reporting and proxy provisions of the Securities Exchange Act of 1934____” The Comptroller alleges that the defendants have violated and will continue to violate the securities laws in two ways: (1) by failing to disclose material information to CFNB shareholders in the bank’s proxy solicitation statements, and (2) by failing to disclose material information to the Comptroller in the annual reports CFNB is required under law to file with the Office of the Comptroller.

As relief from these alleged violations, the Comptroller seeks injunctive orders from the Court as follows: an injunction to restrain the defendants from issuing proxy materials and annual reports in the future which contain the material omissions complained about above; another to require defendants to amend the allegedly misleading proxy materials and annual reports issued in the past to include the material information previously omitted; and a third to require Lance to tender to CFNB all information within his possession necessary to enable CFNB to comply with the order to amend its past filings.

II

Both defendants have responded to the Comptroller’s complaint by a multitude of preliminary motions. Most pressing are motions filed by each defendant to transfer this action to the Northern District of Georgia, Rome Division, pursuant to 28 U.S.C. § 1404(a). Defendants contend that this action more properly belongs in the Northern District of Georgia because the transactions underlying the alleged securities violations all occurred there; all but one prospective witness resides there; all original documents are located there; and several other legal actions arising out of the same investigation have already been instituted there. The Comptroller opposes the motion on several grounds which are discussed infra.

Section 1404(a) of Title 28 permits transfer of an action from a district in which venue is proper to another district in which the action might have been brought if the transfer is “for the convenience of parties and witnesses, [and] in the interest of justice.” Since there is no dispute that venue is proper in this district or that this action “might have been brought” in the Northern District of Georgia, the question of whether this action should be transferred to the Northern District of Georgia depends on whether the plaintiffs choice of forum outweighs “the convenience of the parties and witnesses, [and] ... interest of justice.”

Defendants contend that trial of this action in Georgia will be more convenient for both of the defendants and the plaintiff than a trial here. The' bank’s principal place of business is in northern Georgia; Lance resides and works in northern Georgia; and all of the employees and management of CFNB, many of whom defendants claim will be called as witnesses, reside in northern Georgia. Consequently, defendants argue, it would be extremely disruptive to the bank’s business and thus inconvenient to try the case in this district. See Securities and Exchange Commission v. Page Airways, supra, 464 F.Supp. at 463-64 (disruption of defendant’s business due to trying forum in distant forum which would cause prolonged absence from business of top executives and employees factor to be weighed under section 1404(a)). Defendants also claim that the transfer will not be inconvenient for the plaintiff because the Comptroller maintains a fully-staffed field office in Atlanta, Georgia, which actually conducted the investigation giving rise to this suit, and that almost all of the government employees having knowledge of this matter will be employees of that office. Further, since the investigation was conducted there, all of the depositions taken, records obtained, and other evidence gathered in the course of the investigation are in locations embraced by the Northern District of Georgia. Finally, since it is undisputed that all of the underlying transactions at issue in this case took place in northern Georgia, most of the witnesses who would be expected to testify about the underlying transactions reside in Georgia.

The Comptroller does not dispute the claims regarding the location of the witnesses, the evidence, or the residence of the parties. He contends instead that convenience should carry little weight here because this case will be largely a documentary one and will require a minimum of live testimony. If that characterization were correct, the Court might indeed discount defendants’ assertions regarding the convenience of witnesses and parties. However, the Comptroller’s argument rests upon an assumption that is deficient.

The Comptroller asserts that the case will be largely a documentary one because only two issues will be involved — whether the underlying transactions occurred and whether their disclosure was required by law — and that neither of these issues involves fraud or even scienter. That assumption does not take account of the fact, however, that necessary prerequisites to the element of disclosure — e.g., whether the bank made improper inside loans — may turn out to be fiercely contested on the facts. If that is so, and there is reason to believe that it will be so, the testimony of the individuals involved on both sides of the various transactions will clearly be important. On that basis, the Northern District of Georgia is a more appropriate forum than this District.

A second significant factor bearing upon a decision regarding a section 1404(a) motion is whether the transfer would be in the interest of justice. See 15 Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction, § 3854 (1976).

In this regard, defendants rely primarily upon the fact that a number of other actions are currently pending in various courts in northern Georgia which arose from the same Comptroller investigation leading to the institution of this lawsuit, and that transfer of the case would allow coordination of pretrial discovery and otherwise with respect to all these cases.

There are, indeed, at least five related actions pending in various stages in the courts in northern Georgia: (1) actions to quash subpoenas related to the Comptroller's investigation; (2) a civil action in federal court filed by Lance alleging Privacy Act violations arising from the Comptroller’s handling of the investigation; (3) an administrative cease and desist proceeding pursuant to 12 U.S.C. § 1818(b) pending before an administrative law judge; (4) an administrative proceeding to remove Lance from office pursuant to 12 U.S.C. § 1818(e), also currently pending before an administrative tribunal; and (5) an ongoing federal criminal grand jury investigation.

To be sure, as the Comptroller asserts, some of these actions, or all of them, involve legal issues different than those underlying the lawsuit before this Court. However, all of these actions clearly have the same factual underpinning as this case since they all arise from the same Comptroller investigation. While a transfer of this case would not be likely to result in the consolidation of this action with the others, at a minimum such a transfer could facilitate the coordination of pretrial discovery. Additionally, since the same witnesses and documents will probably be important to all actions, it would save the time and energies of the witnesses, the parties, and the attorneys to have all the actions litigated in the same geographical area. By contrast, it would probably result in a waste of judicial and other resources to litigate one case arising out of these facts in the District of Columbia and all the others in Georgia.

For the reasons stated, the Court concludes that a transfer is warranted pursuant to section 1404(a). Accordingly, defendants’ motions to transfer this cause of action to the Northern District of Georgia will be granted.

      . Defendant Lance has also filed a motion for a stay, a request for an extension of time to respond to the Comptroller's complaint, and three motions to dismiss on various jurisdictional grounds. Defendant CFNB has filed similar motions for an extension of time to respond to the Comptroller's complaint and one motion to dismiss. The Comptroller has opposed all nine motions.

      . See § 12(i), 13(a) and 14(a), 15 U.S.C. §§ 781(i), 78m(a), and 78n(a).

      . See § 12(i), 13(a), and 14(a), and the regulations promulgated thereunder. One of the defendants’ motions to dismiss disputes the Comptroller’s jurisdiction under the relevant statutory provisions to enforce the securities laws. The Court does not pass on the merits of that motion, leaving that issue to the transferee court. The Court merely assumes for present purposes that the Comptroller has indeed power to do under the statute what he claims he may do.

      . Specifically, plaintiff alleges that defendants have violated section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a), as well as the regulations promulgated thereunder, codified at 12 C.F.R. 11.5 and 11.51.

      . The "material information” the defendants allegedly failed to disclose in the proxy statements and the annual reports falls roughly into four categories: (1) that Lance engaged in repeated check-kiting at the expense of CFNB; (2) that Lance made or caused the bank to make several improper "insider” loans; (3) that Lance improperly received money which rightfully belonged to CFNB from a credit life insurance policy; and (4) that CFNB bought real estate in which Lance had a material interest.

      . Although both defendants have filed separate motions to transfer, the motions are virtually identical and will be treated together here as one.

      . Section 1404(a) provides:
      For the convenience of the 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.

      . Defendants do not dispute that the action was properly brought in this district. The special venue provision governing the Comptroller's action, 15 U.S.C. § 78aa, provides that an enforcement action may be brought in any district where any act or transaction instituting the violation occurred or where the defendant resides or transacts business. See Investors Funding Corp. v. Jones, 495 F.2d 1000, 1002 (D.C.Cir. 1974). This Circuit has held that filing an allegedly false and misleading statement constitutes an “act or transaction constituting the violation” within the meaning of 15 U.S.C. § 78aa. Securities and Exchange Commission v. Savoy Industries, 587 F.2d 1149, 1155 (D.C.Cir.1978); accord Securities and Exchange Commission v. Carriba Air, Inc., 681 F.2d 1318 (11th Cir.1982). The filing of the proxy materials and the annual reports at issue in this case occurred in the District of Columbia at the office of the Comptroller of the Currency. Consequently, venue is properly laid in the District of Columbia. See Investors Funding Corp. v. Jones, supra, at 1002. It is worthwhile to note, however, that although venue is proper in the District of Columbia, there is no factual nexus between this case and the District of Columbia other than that the filings were made at the office of the Comptroller here. Similarly, there does not appear to be any dispute that the action "might have been brought" in the Northern District of Georgia. Both defendants reside in and transact business in Calhoun, Georgia, located in the Northern District of Georgia, thus making venue proper in the Northern District of Georgia under the terms of section 78aa.

      . The Court notes that some decisions in this Circuit suggest that the plaintiff’s choice of forum is no longer entitled to a great deal of weight (Securities and Exchange Commission v. Savoy Industries, Inc., 587 F.2d at 1154; Securities and Exchange Commission v. Page Airways, 464 F.Supp. 461, 464 n. 7 (D.D.C.1978)), particularly when there is an insubstantial factual nexus with the plaintiff’s choice. In any event, section 1404(a) factors militate strongly enough in favor of transfer.

      . In consideration whether to transfer a case pursuant to section 1404(a), the District Court has broad discretion to give "individual, case-by-case consideration of convenience and fairness.” Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 812, 11 L.Ed.2d 945 (1964). The defendant has the burden of proving why there should be a change of forum. Securities and Exchange Commission v. Savoy Industries, Inc., 587 F.2d 1149, 1154 (D.D.C.1978); 15 Wright, Miller & Cooper, Jurisdiction and Related Matters § 3848.

      . CFNB’s principle place of business is at 215 North Wall Street, Calhoun, Georgia. Defendant Lance resides in Calhoun, Georgia.

      . Plaintiff does not dispute this claim.

      . Only the filing of the proxy statements and annual reports occurred in the District of Columbia.

      . It should also be noted that based upon the witnesses called at an administrative proceeding related to this litigation currently pending before an administrative tribunal, see discussion infra, defendant CFNB claims that the Comptroller could call as many as 34 witnesses and the bank 33 witnesses. Only two out of the possible 67 witnesses do not reside in the northern district of Georgia.

      . Defendants’ numerous filings in this relatively new case indicate that neither defendant intends simply to acquiesce in the Comptroller’s factual descriptions.

      . The Comptroller asserts that these considerations are outweighed by his claim for speedy relief. But there is no reason to believe that in that respect a transfer would make any difference. There is no evidence either that significant docket congestion exists in the Georgia courts which might delay trial (see Securities and Exchange Commission v. Page Airways, supra, 464 F.Supp. at 464, 465) or that the litigation in this Court has advanced to such a stage that transfer would result in delay. See Securities and Exchange Commission v. Savoy Industries, Inc., supra, 587 F.2d 1149, 1156 (D.C.Cir. 1978).


author: LATCHUM, Senior District Judge.

text:
    MINSTAR, INC., Irwin L. Jacobs, Dennis M. Mathisen, Daniel T. Lindsay, Gerald A. Schwalbach, and TR Holdings, Inc., on behalf of themselves and derivatively on behalf of Tidewater, Inc., Plaintiffs, v. John P. LABORDE, Tidewater, Inc., Damon B. Bankston, David B. Graf, Sr., Arthur R. Carlson, Paul W. Murrill, Warren M. Shapleigh, Ronald H. Boh, Alden J. Laborde, Hellenic, Inc., and Otto Candies, Inc., Defendants. Brocha KATZMAN, Plaintiff, v. John P. LABORDE, Damon B. Bankston, David B. Graf, Sr., Arthur R. Carlson, Paul W. Murrill, Warren M. Shapleigh, Ronald H. Boh, Alden J. Laborde, Hellenic, Inc., Otto Candies, Inc. and Tidewater, Inc., Defendants.
    Civ. A. Nos. 85-535-JLL, 85-554-JLL.
    United States District Court, D. Delaware.
    Dec. 24, 1985.

      R. Franklin Balotti of Richards, Layton & Finger, Wilmington, Del. (Nancy E. Barton of Weil, Gotshal & Manges, New York City, of counsel), for plaintiffs Minstar, Inc. et al.
    Kevin Gross of Morris & Rosenthal, Wilmington, Del. (Stull, Stull & Brody, and Law Offices of Joseph H. Weiss, New York City, of counsel), for plaintiff Katzman. ‘
    Rodman Ward, Jr., of Skadden, Arps, Slate, Meagher & Flom, Wilmington, Del. (Robert E. Zimet and Clifford H. Aronson of Skadden, Arps, Slate, Meagher & Flom, New York City, of counsel), for defendants.
   LATCHUM, Senior District Judge.

These consolidated actions are brought pursuant to §§ 13(d) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa et seq., as well as under Delaware state law. Plaintiffs Minstar, Inc. (“Minstar”), Irwin L. Jacobs, Dennis M. Mathisen, Daniel T. Lindsay, Gerald A. Schwalbach (collectively “the Jacobs Group”), and TR Holdings, Inc. (“TR Holdings”) filed this action against Tidewater, Inc. (“Tidewater”), the eight Tidewater directors, Hellenic, Inc. (“Hellenic”), and Otto Candies, Inc. (“Otto Candies”) on September 3,1985. On September 13, 1985, Brocha Katzman (“Katzman”), a Tidewater shareholder, filed a shareholder derivative action against the same defendants alleging similar securities law and Delaware law violations. Pursuant to Fed.R.Civ.P. 42(a), this Court consolidated the two actions.

The individual plaintiffs are all residents of Minnesota; Minstar and TR Holdings are incorporated in Delaware and their principal places of business are in Minnesota. The three corporate defendants in this case, Tidewater, Hellenic, and Otto Candies all have their principal places of business in Louisiana. Tidewater is incorporated in Delaware, but has no Delaware facilities. With respect to the eight individual defendants, six are residents of Louisiana, one is a resident of Missouri, and one is a resident of California.

Two additional derivative actions seeking similar relief have been filed against Tidewater and its directors in Delaware State Chancery Court. Presently before this Court is defendants’ motion, pursuant to 28 U.S.C. § 1404(a), for an order transferring this action to the United States District Court for the Eastern District of Louisiana, which sits in New Orleans.

For the reasons set forth below, the Court has determined that the convenience of the parties and witnesses, in the interests of justice, weigh strongly in favor of transferring this action to the Eastern District of Louisiana. Accordingly, defendants’ motion will be granted.

I. STATUTORY REQUIREMENTS

A civil action may be transferred under § 1404(a) to another district “where it might have been brought” if the court, in its discretion, determines that the transfer would be “[fjor the convenience of the parties and witnesses, [and] in the interest of justice.” 28 U.S.C. § 1404(a). The preliminary question is whether the Eastern District of Louisiana is a district where this action “might have been brought.” Under either the specific venue provision for the alleged securities law violations, § 27 of the Exchange Act, 15 U.S.C. § 78aa, or the general venue provision, 28 U.S.C. § 1391(b), an action may be brought in any district in which the claims arose. Since the events surrounding plaintiffs’ allegations all took place primarily in New Orleans, the Court finds that the claims arose in the Eastern District of Louisiana. Indeed, the plaintiffs do not contend that venue is improper in the Eastern District of Louisiana. Therefore, the Court has the power to transfer this action.

The remaining question is whether this Court should exercise its discretion to transfer this case. In evaluating the three statutory criteria set forth in § 1404(a), courts in this circuit apply the well settled standard enunciated in Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.1970), cert. denied, 401 U.S. 910, 91 S.Ct. 871, 27 L.Ed.2d 808 (1971), which states that: “unless the balance of convenience of the parties is strongly in favor of defendant, the plaintiffs choice of forum should prevail.” (Emphasis original.) See also Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947) (similar standard set forth when applying the doctrine of forum non conveniens -the precursor to § 1404(a)). Shutte established that the proponent of a § 1404(a) transfer must make an ample showing to overcome the substantial weight attributable to plaintiffs’ choice of forum.

Nevertheless, when plaintiffs choose to bring suit in a district that is not at or near their place of residence, the “convenience to plaintiff[s] of litigating in [their] choice of forum is not as great as it would be were [they] litigating at or near [their] residence, [their] principal place of business, or the site of the activities at issue in the lawsuit.” Pall Corp. v. Bentley Laboratories, Inc., 523 F.Supp. 450, 452 (D.Del.1981); General Instrument Corp. v. Mostek Corp., 417 F.Supp. 821, 822-23 (D.Del.1976); accord Clopay Corp. v. Newell Cos., 527 F.Supp. 733 (D.Del. 1981). Thus, the Shutte rule has “less of an impact in those cases where the plaintiff selects a forum which is connected neither with the plaintiff or the subject matter of the lawsuit.” Hardy v. Beloit Corp., No. 79-198, slip. op. at 2 (D.Del. May 5, 1976).

II. CONVENIENCE OF PARTIES

Since the businesses of Minstar and TR Holdings are primarily conducted by the four individual plaintiffs, these individuals’ relative conveniences must be balanced against the conveniences of the defendants. Here, the convenience to the defendants strongly militates in favor of transferring this action to the Eastern District of Louisiana. Tidewater’s corporate headquarters and principal place of business are in New Orleans, situated within the Eastern District of Louisiana. Moreover, all of Tidewater’s business records relevant to the allegations in this case are located at its corporate offices in New Orleans.

Additionally, the eight individual defendants serve on the board of directors of Tidewater. Six of the eight individuals reside in Louisiana; of the remaining two, one resides in California and one resides in Missouri. The other two corporate defendants, Otto Candies and Hellenic, likewise have their principal places of business in Louisiana.

Moreover, of the four individual plaintiffs comprising the Jacobs Group, none appear to have any significant ties to Delaware. Rather, each of the individual plaintiffs reside in Minnesota. Thus, transferring this case to the Eastern District of Louisiana will add very little inconvenience to the Jacobs Group. Furthermore, TR Holdings, although incorporated in Delaware, has its corporate offices in Minnesota. Minstar, incorporated in Delaware, also has its corporate offices and principal place of business in Minnesota.

In balancing the parties’ relative conveniences between trying this action in New Orleans or Wilmington, the most salient factor is that the Jacobs Group has to travel to a foreign jurisdiction no matter where this action is tried. Although defendants have a lesser burden in these instances, the increase in convenience that will accrue to them by transferring this action to the Eastern District of Louisiana significantly outweighs any marginal increase in inconvenience to plaintiffs.

This Court has repeatedly held that a § 1404(a) motion should be granted when a transfer will greatly aid the movant, yet barely disadvantage the opponent. See, e.g., Pall Corp. v. Bentley Laboratories, Inc., 523 F.Supp. 450, 452-53 (D.Del.1981) (minimal inconvenience to New York plaintiff to litigate case in California when neither party had facilities in Delaware; case transferred pursuant to § 1404(a)); General Instrument Corp. v. Mostek Corp., 417 F.Supp. 821, 823 (D.Del.1976) (plaintiff’s additional travel time of two and one-half hours significantly outweighed by substantial disruption to defendant’s business; case transferred to district where defendant resided).

Plaintiffs’ arguments that its choice of forum should be accorded great deference and that transfer of this action to the Eastern District of Louisiana would simply result in shifting the inconvenience from defendants to plaintiffs are untenable. “[Tjhe mere fact that Delaware is the plaintiffs’ choice of forum and [some of] the defendants’ state of incorporation will not, standing alone, prevent this Court from transferring this suit to another forum.” Kaiser Industries Corp. v. Wheeling-Pittsburgh Steel Corp., 328 F.Supp. 365, 369 (D.Del.1971). Accord Quandt v. Beech Aircraft Corp., 317 F.Supp. 1009, 1012 (D.Del.1970) (plaintiff’s choice of forum is not determinative “when the forum chosen is only the statutory home state” of the corporate parties; see also Sanyo Electric Trading Co. v. Masco Corp., 429 F.Supp. 1023, 1024-25 n. 11 (D.Del.1977). Since the Jacobs Group has to travel to a foreign jurisdiction to litigate this suit, requiring them to travel from Minnesota to New Orleans instead of Wilmington results in minimal inconvenience when juxtaposed against the significant convenience accorded to defendants by transferring this case.

III. CONVENIENCE OF WITNESSES

Since most of the individual parties to this action are likely to be witnesses, balancing their relative inconveniences as parties is equally applicable to the parties as witnesses. Since plaintiffs’ allegations are based on issues of nondisclosure and fiduciary duty, the sixteen employees of Tidewater who entered into employee severance agreements with Tidewater are likely witnesses in this case. Of the sixteen employees, fourteen reside in New Orleans, Louisiana; of the remaining two employees, one resides in Texas and one resides in Venezuela, both of which are geographically closer to Louisiana than to Delaware.

Moreover, any other prospective witnesses are likely to be employees of either Tidewater, Otto Candies, or Hellenic, and would therefore be situated in Louisiana. Plaintiffs have not identified any other witnesses that they might call at trial. Since the three corporate defendants have their principal places of business in Louisiana, litigating this action in the Eastern District of Louisiana will greatly add to the convenience of the witnesses because the relevant documents are situated in that forum.

Tidewater’s as well as Otto Candies’ and Hellenic’s operations would be severely hampered if they were required to transport their directors, officers, and key employees, as well as their documents, to Delaware. Conversely, requiring the Jacobs Group to litigate in Louisiana, as opposed to Delaware, will result in minimal inconvenience to them because they chose to file this action in a foreign jurisdiction. Had plaintiffs chose to commence this litigation in Minnesota, assuming venue would have been proper there, a different case would be presented to the Court. Plaintiffs’ arguments that the conveniences would be merely shifted, and that its choice of forum is entitled to great deference, would be much stronger had they filed this action in Minnesota.

Accordingly, like the convenience to the parties, the convenience to the prospective witnesses weighs heavily in favor of transferring this action to the Eastern District of Louisiana.

IV. INTEREST OF JUSTICE

The remaining statutory criterion enunciated in § 1404(a) is whether the transfer would be in the interest of justice. Although a prime component of this criterion is the economic and efficient utilization of judicial resources, see Bell Tel. Laboratories Inc. v. International Business Machines, No. 84-02, slip op. at 4 (D.Del. Oct. 18, 1984), other components include the cost to the parties, access to proof, and the availability of compulsory process. Tex-tron Inc. v. Elco Indus. Inc., No. 85-286, slip op. at 3 (D.Del. Sept. 10, 1985); Jackson Jordan, Inc. v. Plasser American Corp., No. 82-459, slip op. (D.Del. Oct. 22, 1982).

Plaintiffs assert that the primary reason they chose Delaware as the forum for this case is because a Delaware federal court would be more familiar with the complex issues of Delaware corporate law, especially in light of recent groundbreaking Delaware state court decisions. Thus plaintiffs assert that judicial resources will be more efficiently utilized if this case is tried in Delaware, as opposed to Louisiana.

Plaintiffs support their argument by relying on Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), which reasoned that it might be more appropriate to litigate a state law question in the federal forum at home with the state law. However, plaintiffs omitted the fact that Van Dusen was a diversity of citizenship case, and that the Supreme Court’s reasoning was limited to diversity situations. See id. at 645, 84 S.Ct. at 824.

Here, there is federal question jurisdiction with pendent state law claims attached. This distinction is crucial for two reasons. First, Delaware corporate law is national in scope, see, e.g., Moran v. Household Int’l Inc., 500 A.2d 1346 (Del.Sup.Ct. 1985). Thus, more state forums have a familiarity with Delaware corporate law than with each state’s negligence laws, which were at issue in Van Dusen. Second, here plaintiffs have an opportunity to litigate their pendent Delaware corporate law claims in Delaware state court. This could be done by severing the pendent state law claims from the federal securities law claims. While this solution is inefficient from a judicial resources perspective, plaintiffs cannot piggyback their pendent state law claims, over which federal jurisdiction is discretionary, onto federal question claims for the purpose of thwarting an otherwise compelling case for granting a § 1404(a) transfer motion.

Moreover, this Court, in an opinion by Judge Stapleton, rejected the argument that other federal courts cannot interpret Delaware corporate law as easily as this Court could. In NLT Corp. v. Great Southern Corp., No. 78-350, slip op. at 4 (D.Del. Sept. 14, 1978), Judge Stapleton opined: “I am not persuaded that any special knowledge of Delaware law is necessary for the court which will hear this case. There is no reason to believe that the [federal] court in Texas will not be able to apply properly the Delaware fiduciary law the plaintiff relies upon.”

Moreover, if Delaware corporate law regarding plaintiffs’ allegations is in the early stages of its evolution, as plaintiffs argue, then this Court, as well as the Eastern District of Louisiana, is approaching a body of corporate law from a similar perspective of unfamiliarity. Therefore, both the District of Delaware and the Eastern District of Louisiana are approaching Delaware state corporate law from the same starting point.

Plaintiffs also argue that judicial economy will be served by maintaining this action in Delaware because the Delaware courts are less congested than the Louisiana courts. Although the caseload per judge in the District of Delaware is less than the caseload per judge in the Eastern District of Louisiana, the median length of time to trial in Louisiana is five months less than in Delaware. Thus, the judicial economy statistics advanced by plaintiffs are inconclusive. Nonetheless, a backlog of cases is insufficient to prevent a § 1404(a) transfer which is otherwise mandated by the convenience of the parties and witnesses. NLT Corp., slip op. at 4; see Hall v. Kittay, 396 F.Supp. 261, 264 (D.Del.1975) (“the mere possibility of reaching trial in a shorter space of time in Delaware ... does not justify the denial of a transfer motion which is otherwise called for under the standards of § 1404(a)”).

The remaining components of the interest of justice criterion weigh strongly in favor of transferring this case to the Eastern District of Louisiana. The litigation costs defendants will be forced to incur will be much less by trying this case in the Eastern District of Louisiana. Conversely, the litigation costs plaintiffs will be forced to incur should be approximately the same. This is because the plaintiffs must travel whether this case is heard in Wilmington or New Orleans. Likewise, since all the relevant documents are located in Louisiana, the interest of justice is also served by utilizing the Louisiana forum because of the easier access to proof.

Regarding the availability of compulsory process, the court’s subpoena power over third party witnesses is a factor in evaluating the interest of justice. Bergman v. Brainin, 512 F.Supp. 972, 974-75 (D.Del.1981). Defendants make unsubstantiated assertions that essential third party witnesses reside within the subpoena power of the Eastern District of Louisiana and without the subpoena of the District of Delaware. Plaintiffs counter, quite correctly, that the vast majority of potential third party witnesses are employees, officers, or other persons within the control of defendants. Although most of the potential third party witnesses are located in Louisiana, defendants make no showing of either the necessity for their live testimony or their unwillingness to attend voluntarily. Therefore, the Court disregards the availability of compulsory process as a factor in evaluating the interest of justice. See Burroughs Wellcome Co. v. Giant Food Inc., 392 F.Supp. 761, 764 (D.Del.1975).

Plaintiffs also argue that defendants bear a heightened burden on a § 1404(a) motion because of the liberal venue provisions of the federal securities laws, Securities Exchange Act of 1934 § 27, 15 U. S.C. § 78aa. Although there is sparse support for this proposition, see S-G Securities Inc. v. Fuqua Investors Co., 466 F.Supp. 1114, 1122 (D.Mass.1978), there is no authority in this circuit for the proposition that the burden to transfer a federal securities case is somehow higher than the burden in other types of civil actions. This Court is of the view that 28 U.S.C. § 1404(a) applies in the same form to all types of civil actions; further, Congress could have, but did not, carve out a securities law exception to § 1404(a).

Both parties advance arguments based on the nexus between certain transactions and the parties’ desired forums, relying on this nexus as support for their respective positions. These “contact” arguments are irrelevant to a § 1404(a) evaluation. Since the parties do not contend that these contacts have any role in their presentation of this case at trial, there is no connection between these contacts and balancing the parties’ and witnesses’ relative conveniences between trying this case in Delaware or Louisiana.

V. CONCLUSION

Because plaintiffs will suffer minimal inconvenience from transferring this case to the Eastern District of Louisiana, and defendants will receive a significant increase in convenience, the Court finds, in its discretion, that this ease should be transferred to the United States District Court for the Eastern District of Louisiana. The convenience that will accrue to the witnesses, when combined with the interest of justice, make a compelling case for transfer under § 1404(a).

An order will be entered in accordance with this Memorandum Opinion.

      . Civil Action No. 85-554.

      . Docket Item ("D.I.") 12.

      . D.I. 17 at 2; D.I. 4 at 9.

      . D.I. 4 at 2-4.

      . Id. at 2.

      . Id. at 3-4.

      . Stepak v. Tidewater, Inc., C.A. No. 8164 (Del. Ch.1985); Minstar, Inc. v. Tidewater, Inc., C.A. No. 8175 (Del.Ch.1985).

      . D.I. 5.

      . This consolidated action challenges under Federal securities laws and state law certain transactions allegedly engaged in by the defendants, as welt as certain disclosures made by the defendants. Specifically challenged are: (1) employee agreements entered into by Tidewater and certain of its directors and management; (2) the acquisition by Tidewater of five vessels from Otto Candies in exchange for 600,000 shares of Tidewater common stock; (3) a proposal by Tidewater to amend the bylaws to require an 80% shareholder vote for certain future bylaw amendments; (4) a proposal by Tidewater to amend its stock option program; (5) an alleged breach of the standstill agreement entered into between Tidewater and the plaintiffs; (6) the accuracy of the proxy statement for the 1985 annual meeting; and (7) the failure of the defendants to file a Schedule 13D disclosing their ownership of Tidewater stock. D.I. 4 at 4-5.

      . Katzman, the plaintiff in one of these consolidated actions, has expressly adopted the arguments set forth in the other plaintiffs’ brief in opposition to defendants’ motion to transfer. Since Katzman does not raise any additional considerations in opposing defendants' motion to transfer and the other plaintiffs do not argue that Katzman will suffer any inconvenience if this action is transferred, the Court need not interject the relative conveniences of plaintiff Katzman into the § 1404(a) calculus. See D.I. 22.
      Because these actions were consolidated for all purposes, the Katzman action, formerly C.A. No. 85-554, falls within the ambit of this Court’s order transferring these consolidated cases to the Eastern District of Louisiana. See D.I. 12.

      . D.I. 4 at 2.

      . Id.

      . Id. at 3-4.

      . Id. at 4.

      . Id. at 9.

        . Id.

        . Id.

      . In their brief, D.I. 16 at 18, plaintiffs argue that one of the reasons it would be more convenient for them to retain this action in Delaware is because their attorneys are situated in New York, which is geographically closer to Delaware than Louisiana. This argument lacks merit. "[T]he convenience of counsel, of course, is not a factor for consideration in an application for transfer." General Electric Co. v. Westinghouse Electric Co., 294 F.Supp. 36, 37 (D.Del.1968).

      . D.I. 4 at 5-6.

      . To alleviate some of the inconvenience to witnesses and defendants, plaintiffs represent that they are willing to use photocopies of defendants’ documents at trial. D.I. 17 at 8. Although this mechanism would lessen the disruption of defendants’ businesses, see, e.g., Zorn v. Anderson, 263 F.Supp. 745, 749 (S.D.N.Y.1966), this is not enough to overcome defendants' strong showing of inconvenience to witnesses and parties if this case were tried in Delaware.

      . D.I. 17 at 6-7.

      . D.I. 16 at 21.

      . In their answering brief, D.I. 16 at 14 n. 2., plaintiffs contend that the "mirror image" of this case would be a case involving an attempt to transfer from Louisiana District Court an action which involves a question of Louisiana civil law. This contention is unmeritorious because Delaware corporate law has a much broader national application than does Louisiana civil law. Furthermore, the contract between Tidewater and Otto Candies to purchase five ships expressly provides that it is governed by Louisiana law. D.I. 4 at 6-7. Since the Eastern District of Louisiana is compelled to apply the law of the transferor forum, see Van Dusen v. Barrack, 376 U.S. 612, 641-43, 84 S.Ct. 805, 821-23, 11 L.Ed.2d 945 (1964), it may well be that Louisiana state law will govern the interpretation of one of the contracts in this case.

      . See Federal Court Management Statistics (1984).

      . Section 27 provides that an action may be brought in any district "wherein any act or transaction constituting the violation occurred.” 15 U.S.C. § 78aa.

      . D.I. 6 at 8, 10-11; D.I. 16 at 14.


author: BOHANON, District Judge.

text:
    FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, a corporate agency of the United States, Plaintiff, v. TWT EXPLORATION COMPANY, INC., Robert J. Piner, a/k/a R.J. Pinder, Charles E. Carter, Bob Alexander and William A. Jenkins, Defendants. Bob ALEXANDER, Defendant and Third-Party Plaintiff, v. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver of Penn Square Bank N.A., Third-Party Defendant.
    No. 83-1857-B.
    United States District Court, W.D. Oklahoma.
    Dec. 27, 1985.
    Stipulation Jan. 14, 1986.

      William J. Reifman and Barbara Bertok of Mayer, Brown & Platt, Chicago, Ill., Jimmy Goodman of Crowe & Dunlevy, Oklahoma City, Okl., for plaintiff.
    Michael E. Joseph and W. Chris Coleman of McAfee & Taft, Oklahoma City, Okl., for defendant and third-party plaintiff.
    Sidney G. Dunagan of Gable & Gotwals, Tulsa, Okl., for third-party defendant.
   BOHANON, District Judge.

This matter is now before the court upon three separate motions for summary judgment. The plaintiff, Federal Deposit Insurance Corporation, in its corporate capacity (“Corporate FDIC”), seeks judgment as to liability on Count V of its Amended Complaint against defendant Bob Alexander, and on Count VI against defendant William A. Jenkins, on the basis of these defendants’ alleged unconditional, unlimited guarantees of $9,050,106.59 worth of indebtedness of an Oklahoma corporation, J.P. Exploration, Inc. (“J.P. Exploration”). Bob Alexander has himself filed a motion for summary judgment in his favor on Corporate FDIC’s claims against him. Lastly, the third-party defendant Federal Deposit Insurance Corporation, as Receiver of Penn Square Bank, N.A. (“Receiver FDIC”), moves for summary judgment against Alexander on his third-party complaint which seeks to hold Receiver FDIC accountable for alleged wrongdoing on the part of either the now defunct Penn Square Bank or Receiver FDIC itself in connection with the same guarantees used by Corporate FDIC as the basis for its claims against Alexander.

The court recognizes from the outset that Corporate FDIC and Receiver FDIC are separate and distinct legal entities. The possibility that FDIC may act simultaneously in a dual capacity under its governing statutes was recognized as early as 1961 in Freeling v. Sebring, 296 F.2d 244 (10th Cir.1961); see also Jones v. Federal Deposit Ins. Corp., 748 F.2d 1400, 1402 (10th Cir.1984); Federal Deposit Ins. Corp. v. Ashley, 585 F.2d 157 (6th Cir. 1978); Federal Deposit Ins. Corp. v. Gods-hall, 558 F.2d 220 (4th Cir.1977); Federal Deposit Ins. Corp. v. Glickman, 450 F.2d 416 (9th Cir.1971). The legal distinction between the two facets of FDIC’s operations as corporate insurer and as receiver must be recognized even where a note is transferred from the one branch of FDIC to the other and “FDIC did not maintain separate offices for its receiver and insuror capacities, and ..; the same FDIC personnel who acted for the FDIC as receiver also acted for the FDIC as corporate insuror.” Gunter v. Hutcheson, 674 F.2d 862, 873-74 (11th Cir.1982); 12 U.S.C. § 1823(d).

In the present case the difference in functions is much easier to perceive than in Gunter since Corporate FDIC did not acquire the notes and guarantees underlying the suit directly from Receiver FDIC but rather from Continental Illinois National Bank and Trust Company of Chicago (“Continental”) which had originally participated in the loans made by Penn Square Bank, N.A. (“Penn Square”). After Penn Square was declared insolvent, Receiver FDIC agreed to transfer all of the defunct bank’s right, title and interest in the loans to Continental on July 28, 1983. Thereafter on August 3, 1983, Continental commenced this suit, though Alexander and Jenkins were not joined as defendants until the filing of an amended complaint on March 19, 1984. When Continental itself subsequently became unstable, the subject loans were purchased by Corporate FDIC on September 26, 1984, as part of the government’s corrective action or “bailout” to protect the national banking system from the possible collapse of that bank. Based on this last transfer of interest, this court, on April 8, 1985, granted Continental’s Motion for Substitution of Party-Plaintiff pursuant to F.R.Civ.P. 25(c), and since that date Corporate FDIC alone has been the plaintiff in this cause. Receiver FDIC did not become a party to the action until April 29, 1985, when Alexander filed his third-party complaint.

This third-party complaint must be dismissed outright because it fails to allege facts supporting this court’s jurisdiction. The pleading, which asserts several claims sounding in tort against Receiver FDIC, states that this court has jurisdiction under 12 U.S.C. § 1819 which allows FDIC to “sue and be sued” and grants United States courts original jurisdiction of “[a]ll suits of a civil nature at common law or in equity to which [FDIC] ... shall be a party____” The FDIC is, however, a federal agency within the meaning of the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2671 et seq., and Alexander’s action, therefore, must proceed, if at all, directly against the United States in conformity with the requirements of the FTCA. Freeling v. Federal Deposit Ins. Corp., 221 F.Supp. 955 (W.D.Okla.1962) affirmed 326 F.2d 971 (10th Cir.1963); Federal Deposit Ins. Corp. v. Citizens Bank & Trust Co., 592 F.2d 364 (7th Cir.1979); Safeway Portland E. F.C.U. v. Federal Deposit Ins. Corp., 506 F.2d 1213 (9th Cir.1974); Segarra Ocasio v. Banco Regional de Bayamon, 581 F.Supp. 1255 (D.Puerto Rico, 1984); 28 U.S.C. § 2679(a). Alexander has failed to plead jurisdiction under the FTCA and also has not alleged facts constituting compliance with the procedural requirements of that Act, including the filing of an administrative claim with the appropriate federal agency and a final denial of the administrative claim by that agency. 28 U.S.C. § 2675(a). This court, therefore, lacks jurisdiction over the subject matter of Alexander’s third-party complaint, and it must be dismissed. Lann v. Hill, 436 F.Supp. 463 (W.D.Okla.1977); F.R.Civ.P. 12(h)(3). Receiver FDIC’s motion for summary judgment on the third-party complaint will be mooted by this dismissal.

Turning to the remaining motions, the entry of summary judgment is appropriate only when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” F.R.Civ.P. 56(c). “In determining whether summary judgment is proper, a court ordinarily must look at the record in the light most favorable to the party opposing the motion, drawing all inferences most favorable to that party.” Harlow v. Fitzgerald, 457 U.S. 800, 816 n. 26, 102 S.Ct. 2727, 2737 n. 26, 73 L.Ed.2d 396 (1982); Norton v. Liddel, 620 F.2d 1375 (10th Cir. 1980). In the present case, Alexander is both a moving and an opposing party, but the court deems it appropriate in the circumstances to give him the benefit of the doubt with respect to any facts alleged by him. In accordance with these principles, the relevant facts, only for the purposes of resolution of the pending motions, are as follows:

In 1980, J.P. Exploration was incorporated. Charles E. Carter, R.J. Pinder, Bob Alexander and William A. Jenkins were named as directors of the corporation which was intended to operate as an oil and gas drilling company. Prior to the incorporation of J.P. Exploration, Alexander had already formed an oil and gas operating company, Alexander Energy Company. Because Pinder wanted to establish ties to Alexander Energy as a source of potential business for the new drilling company, Alexander agreed to participate in J.P. Exploration to the extent of a 10 percent shareholder.

In October of 1980, the four directors of J.P. Exploration met in Pinder’s office in Oklahoma City to discuss corporate business, including the acquisition of additional drilling rigs. Alexander opposed the proposed acquisitions and stated that he was unwilling to finance any rigs or lend his personal credit to the financing of rigs. He did, however, agree to guarantee 10 percent of a $500,000 line of credit from Penn Square and signed a blank form of guaranty which was undated, did not state that it was furnished to guarantee debts of J.P. Exploration and did not bear on its face any express limitation of the amount of liability. According to Alexander, he orally advised Pinder that the guaranty should be completed to provide that Alexander’s liability was limited to 10 percent of the $500,000 working capital line of credit, or $50,000.

The guaranty Alexander signed was delivered to Penn Square and shortly after the October, 1980, meeting Alexander called William G.P. Patterson, a loan officer at Penn Square, and confirmed with him that the guaranty was limited to 10 percent of a $500,000 working capital line of credit. Patterson also agreed to send Alexander a copy of the guaranty, but failed to do so.

Alexander never received any dividends or other financial benefits from J.P. Exploration and, in the late summer of 1981, Alexander resigned his position as director of the company and surrendered his stock in the company upon the advice of counsel in order to avoid potential conflicts of interest with Alexander Energy Corporation, which was going public. Alexander sent Patterson a copy of his letter of resignation to Pinder, dated July 27, 1981, and notified Patterson by telephone of his resignation and surrender of stock. Alexander asked Patterson that he be released and discharged from all existing and future liability under his guaranty and Patterson orally agreed, assuring Alexander that he was never liable for any J.P. Exploration debt anyway, that Penn Square had never relied on the guaranty in making loans to J.P. Exploration, and that the guaranty should not be in any of Penn Square’s loan files. Alexander did not offer or give any consideration for this release.'

Alexander subsequently believed his guaranty would be destroyed, but Patterson instead kept it, still blank in his desk drawer, until Penn Square was declared insolvent. The document was then filled in by an employee of either Penn Square or Receiver FDIC in a manner not in accord with Alexander’s original instructions. The document was dated March 31, 1981, and in the blank after the printed sentence which read: “It is understood that the amount of credit extended by or liability incurred to you is limited to:”, in place of a limitation to 10 percent of $500,000, the word “unlimited” was typed. Alexander was not aware until this suit commenced of any of the loans made by Penn Square to J.P. Exploration which are now sued upon by Corporate FDIC.

The Alexander guaranty is not listed on some of Penn Square’s internal paperwork with respect to these loans although it is listed on the commercial loan worksheets for notes Nos. 26994 and 26993. A deposition of Patterson attached to one of FDIC’s briefs indicates that Penn Square loan officers did not always list all guaranties on loan memos and applications. Reference to the guaranty, along with a financial statement for Alexander, does appear in the minutes of the May 27, 1981, meeting of Continental’s loan committee (credit policy committee) which discuss Continental’s participation in Penn Square loans to J.P. Exploration; however, a subsequent Continental memorandum dated March 30, 1982, does not list Alexander as a guarantor of other loans.

Corporate FDIC concedes that the original of Alexander’s guaranty cannot now be found. However, the copy Corporate FDIC received through Continental from Receiver FDIC bears on its face a stamp indicating that the original existed and was included among documents subpoened when a grand jury of the Western District of Oklahoma investigated matters concerning Penn Square after that bank closed.

Corporate FDIC premises William A. Jenkins’ liability for the notes in question upon two separate guaranties. One, dated October 7, 1980, has “(UNLIMITED)” typed in the space provided for limitations. The other, dated September 25,1981, states that Jenkins’ liability is limited to $250,000. Jenkins denies that he would have signed an unlimited guaranty for J.P. Exploration but concedes that he may have signed a blank guaranty at the October, 1980, meeting with Alexander, Pinder and Carter, and further admits that Patterson already held blank guaranties signed by Jenkins at that date. The signatures on the guaranties held by Corporate FDIC are authentic, but the documents have been filled in contrary to Jenkins’ instructions.

Jenkins had a falling out with Pinder by the fall of 1981 and did not sign or authorize the $250,000 guaranty on September 25 of that year as the document indicates. Jenkins did not, however, inform Patterson that he was withdrawing from J.P. Exploration until he talked with Patterson in late October or November and advised him that his (Jenkins’) attorneys had told him to sever his relationship with any petroleum service companies. Patterson at that time tried to persuade Jenkins to stay with J.P. Exploration because he thought it would be very profitable. Subsequently, in late January or February of 1982 Jenkins met with Patterson in Oklahoma City to discuss his personal financial dealings with Penn Square. During the course of that meeting, the matter of the J.P. Exploration guaranty came up again, and Jenkins told Patterson that he wanted out of any obligation or involvement with J.P. Exploration. Patterson replied: “Don’t worry, I’ll take care of it.” There were no witnesses to this conversation, however, and Jenkins did not demand the physical return of his guaranty. Jenkins formally notified the other officers and directors of J.P. Exploration of his decision to resign as officer and director of the company by a letter dated March 10, 1982.

Thereafter in May of 1982, Jenkins was again at Penn Square on business when he encountered Janelle Cates, another bank employee who worked with Patterson. Cates asked Jenkins if he was aware that Pinder was planning to sell J.P. Exploration and that he, Jenkins, was still on the guaranty. Jenkins acknowledged the pending merger but strongly denied being on the guaranty and told Cates that Patterson had assured him he was completely out of all business connected with J.P. Exploration. Immediately afterwards, Jenkins sent a letter to Patterson, with a copy to Cates, referring to the earlier conversation with Patterson and recounting Jenkins’ understanding that Patterson had granted Jenkins a release from all his financial obligations connected with J.P. Exploration. Jenkins also advised Patterson that he had learned that Pinder obtained sizeable loans for J.P. Exploration without Jenkins’ knowledge or approval. Neither Patterson nor Cates ever acknowledged this letter.

Having thus given Alexander and Jenkins the full benefit of the doubt with respect to the facts they allege, the court must now conclude that the only material fact in the lot is that both of these defendants admit signing the guaranties Corporate FDIC now sues upon. The immateriality of the remainder of the facts recounted above stems from the unique status accorded the FDIC by Congress and recognized by the courts, beginning with the landmark case of D’Oench, Duhme & Co. v. Federal Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676, 86 L.Ed. 956 (1942). Briefly, that case held that one who gives a note to a bank insured thereafter by FDIC cannot defend an action on the note brought by FDIC as purchaser of bank assets, including the note, on the basis of any unwritten agreement that the note would be unenforceable. Although D’Oench is still cited often by the cases, the principles enunciated in it have since been codified and expanded into more generally applicable language by Congress in the Federal Deposit Insurance Act § 2[13](e) codified at 12 U.S.C. § 1823(e). That statute provides that

No agreement which tends to diminish or defeat the right, title or interest of [FDIC] in any asset acquired by it under this section either as security for a loan or by purchase, shall be valid against [FDIC] unless such agreement (1) shall be in writing, (2) shall have been executed by the bank and the person or persons claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the bank, (3) shall have been approved by the board of directors of the bank or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) shall have been, continuously, from the time of its execution, an official record of the bank.

This language is very clear and straightforward and leaves no room for doubting that the guaranties signed by the defendants in this case are enforceable in full and cannot be defeated by any evidence of oral conversations that defendants may have had with Pinder or Patterson or by letters signed only by the defendants but not executed by Penn Square, approved by its loan committee and made an official record of that bank. Not one of the cases cited by defendants in their briefs supports their arguments to the contrary.

Defendants themselves cite the case of Federal Deposit Ins. Corp. v. Powers, 576 F.Supp. 1167 (N.D.Ill.1983) affirmed mem., 753 F.2d 1076 (7th Cir.1984) for its statement that “the language of § 1823(e) only denies validity to certain unwritten agreements, and does not bar extrinsic proof that a written document in fact does not reflect any valid agreement.” 576 F.Supp. at 1170, citing Gunter v. Hutcheson, 674 F.2d at 867. Their citation of Powers is plainly audacious, however, since it held, on facts remarkably similar to those now at issue, that one who gave an insured bank guaranty forms signed in blank could not defend an action brought by FDIC on one of the guaranties by asserting that the guaranty was invalid because bank officials filled in the blanks in a manner contrary to his informal, unwritten arrangements and understandings with them. The Powers court noted that “Powers wishes ultimately to prove that no guarantee contract ever existed, but that does not change the fact that he is asserting the type of private agreement that is invalidated by § 1823(e).” 576 F.Supp. at 1171 (footnote omitted); Cf. Federal Deposit Ins. Corp. v. Webb, 464 F.Supp. 520 (E.D.Tenn.1978) (notes signed in blank).

Alexander also cites In Re Longhorn Securities Litigation, 573 F.Supp. 278 (W.D.Okla.1983), apparently in an attempt to use some of the oral statements Patterson made to him as an escape from the doctrine of D’Oench by claiming that they constituted false and misleading representations designed to defraud Alexander, rather than a secret agreement in fraud of the FDIC. In In Re Longhorn, the plaintiff investors claimed they had been induced to purchase limited partnership interests by representations made by some of the defendants that stand-by letters of credit, used to secure loans made by Penn Square to the investors to finance their purchases, would not be called or would not likely be called. The court found D’Oench inapplicable. In the present case, the defendants’ response brief to corporate FDIC’s motion states: “Alexander's defense also arises from the representation made to him at the time by Bill Patterson that he was never liable on any of the debts of [J.P. Exploration] anyway.” The curious thing about this assertion lies in the words, “at the time.” According to Alexander himself, Patterson’s assertion that Alexander was never liable for J.P. Exploration debts anyway was made in a conversation nearly a year after Alexander admits he signed the blank guaranty. Further, Alexander also clearly signed the guaranty before ever talking to Patterson about the alleged limitation of liability. The “representations” therefore could not possibly have induced Alexander’s signature. Without commenting on the correctness of the In Re Longhorn decision the court must note that upon its facts it is thoroughly and obviously distinguishable from the present circumstances. The defendants’ unexplained use of the words “at the time” in conjunction with citation of In Re Longhorn bears an uncomfortable resemblance to a deliberate and poorly concealed attempt to mislead the court.

Alexander also attempts to conjure a defense of want of consideration out of Patterson’s comment that Alexander’s guaranty had never been used by Penn Square. The gist of the argument, which is unsupported by citation of any authority other than the very general language of 15 Okla. Stat. § 323 (1981), is that Penn Square did not rely on the guaranty in extending credit to J.P. Exploration, and the guaranty remained in blank form until after the loans were made, so the guaranty fails for want of a distinct supporting consideration. This reasoning presupposes a reading of the Oklahoma statute's language referring to the time when “a guaranty is entered into” to mean when “a guaranty is completed in all respects.”

The court is inclined instead to adopt a more natural understanding and hold that Alexander entered into the guaranty when he signed it, not when someone else filled in the remaining blanks. This is the understanding demanded by the public policy of protecting the FDIC behind § 1823(e). At the moment Alexander signed the guaranty in blank, he “lent himself to a transaction which [was] likely to mislead banking authorities.” Federal Deposit Ins. Corp. v. Investors Associates X., 775 F.2d 152, 154 (6th Cir.1985) (discussed infra)] D’Oench, 315 U.S. at 460, 62 S.Ct. at 680-81. It is irrelevant for the purposes of § 1823(e) whether Penn Square relied on the guaranty in making loans to J.P. Exploration since the statute was designed to protect FDIC, not Penn Square.

Defendants’ appeal to equity is also inappropriate. Section 1823(e) does not grant this court discretion to balance the equities in determining whether an oral agreement tending to diminish FDIC’s interest in purchased bank assets may be enforced. Defendants are in any event presumed to know the legal consequences of their actions and that a secret agreement limiting the liability created by a guaranty signed in blank may “conceal the truth from the vigilant eyes of the bank examiners” D’Oench, 315 U.S. at 460, 62 S.Ct. at 680-81. It is unfortunate if they have placed their trust in persons who have abused that trust to deceive the FDIC, but equity does not require that the wholly innocent Corporate FDIC plaintiff in this case bear the cost of that deception rather than those who enabled the deception to occur.

Defendants' attempt to read Gunter v. Hutcheson, 674 F.2d 862 (11th Cir.1982) as representative of a body of case law reading into § 1823(e) a requirement that obligations be purchased by FDIC without any knowledge of claims that the obligations are invalid and unenforceable possesses no merit whatsoever. Gunter is in the first place a unique case upon its facts, and stands as an expansion of federal common law protection of the FDIC, rather than as a limitation of the protections provided by the plain language of § 1823(e). The crux of the fraud claims brought by William L. and Camille S. Gunter in that case lay in alleged misrepresentations of existing fact (e.g. that a particular banking system was in “sound financial condition”) made to induce an investment, rather than in breached unwritten promises of future performance. 674 F.2d at 867. FDIC had in fact, for purposes of a summary judgment motion, conceded that the Gunters were actually defrauded. Under those circumstances the court found that the action was not based on an attempt to enforce an oral side argument, and therefore that § 1823(e) did not apply. The court nonetheless adopted a new rule of federal common law holding that

The FDIC has a complete defense to state and common law fraud claims on a note acquired by the FDIC in the execution of a purchase and assumption transaction, for value, in good faith, and without actual knowledge of the fraud at the time the FDIC entered into the purchase and assumption agreement.

674 F.2d at 873. This new rule was applied to shield FDIC from the Gunters’ claims even though § 1823(e) itself provided no protection. Gunter cannot reasonably be understood as holding that the protection afforded by § 1823(e) is not available when FDIC has knowledge of claims based on oral side agreements at the time it purchases the obligations those side agreements are alleged to nullify or modify. Indeed, such a holding would have no basis whatsoever in the clear and unambiguous language of the statute and would thwart Congress’ obvious intent.

The defendants’ attempt to distinguish this case from Federal Deposit Ins. Corp. v. Investors Associate X., 775 F.2d 152 (6th Cir.1985), and Federal Deposit Ins. Corp. v. Van Laanen, 769 F.2d 666 (10th Cir. 1985), and D’Oench is also without merit. Defendants’ response to Corporate FDIC’s motion states, on page 14

Alexander and Jenkins do not assert any simultaneous, fraudulent agreement that they would not be held liable on their respective guaranties. Nor do the material alteration defenses of Alexander and Jenkins originate from a secret agreement or transaction, but rather from the subsequent, unilateral, and fraudulent conduct of Penn Square or the FDIC as receiver of Penn Square (the “Receiver”). The guaranty documents held by the FDIC in this case appear as they do solely as a result of the subsequent wrongful acts of Penn Square or the Receiver.

These statements are simply false given the defendants’ own account of the facts of this case. If every allegation of an oral, unrecorded agreement with Pinder or Patterson was deleted from the defendants’ statement of facts, one would have to conclude that they have indeed alleged nothing at all in opposition to Corporate FDIC’s suit on their guaranties. Defendants’ own briefs repeatedly argue that statements made by Patterson constituted agreements binding on Penn Square. Although defendants’ attempt to reconstrue their own allegations to focus on alleged “subsequent, unilateral, and fraudulent conduct of Penn Square or” Receiver FDIC, it is obvious that the only possible basis for finding such misconduct would be the oral agreements regarding the completion of the guaranties which defendants allege Penn Square or Receiver FDIC violated. See Federal Deposit Ins. Corp. v. Powers, discussed supra. This case is solidly within the scope of the holding in Investors Associates X. where the defendant Turner alleged that a bank’s chief executive officer had filled in two promissory notes signed in blank by Turner in a manner that made Turner liable for $140,000 more than the $750,000 the bank officer had promised.

Perhaps defendants are arguing that they did not intend or anticipate that they were committing fraud upon anyone when they signed their blank guaranties. However, Investors Associates X. clearly endorsed the D’Oench court’s statements to the effect that fraudulent intent was not relevant to its holding and held that “the only relevant inquiry in determining if a maker of a note is estopped from asserting a defense under D’Oench is whether he lent himself to a transaction which is likely to mislead banking authorities.” 775 F.2d at 154. The delivery of a guaranty signed in blank to Penn Square officials is just such a transaction, and defendants’ attempts to place all of the blame for the present appearance of their guaranties on alleged subsequent acts of Penn Square or Receiver FDIC are transparent, since it is obvious that the documents would not exist at all but for the defendants’ decision to sign them in blank in the first place, thus giving others the ability to mislead by completing the forms improperly. It should be noted also that the existence vel non of fraudulent intent or knowledge of fraud is even more clearly irrelevant under the language of § 1823(e).

Lastly, defendants would in fact be well advised to pay special attention to the ■Tenth Circuit opinion in Van Laanen, where an attempt to argue the inapplicability of the doctrine of D’Oench in § 1823(e) was found to be “legally frivolous” prompting the court to assess the appellant double the costs of the appeal and $500 in attorney’s fees. 769 F.2d at 667. The defendants’ arguments in this case are likewise frivolous and contrary to the obvious weight of the authorities. Under the circumstances, however, since the notes sued upon themselves include a generous provision for attorney’s fees and costs of collection, the court does not feel additional sanctions to be necessary.

An appropriate judgment will enter.

JUDGMENT AND ORDER

In accordance with the memorandum opinion filed herein this day,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED that the plaintiff, Federal Deposit Insurance Corporation, in its corporate capacity, a corporate agency of the United States, have judgment as to liability on its complaint against the defendants Bob Alexander and William A. Jenkins.

IT IS FURTHER ORDERED that the motion for summary judgment filed by the defendant Bob Alexander against the plaintiff Federal Deposit Insurance Corporation, in its corporate capacity, a corporate agency of the United States, is DENIED.

IT IS FURTHER ORDERED that the third-party complaint of Bob Alexander against the Federal Deposit Insurance Corporation, as Receiver of Penn Square Bank, N.A. be dismissed for lack of jurisdiction of the subject matter.

IT IS FURTHER ORDERED that this matter is set for hearing on the 15th day of January, 1986, in the Fifth Floor Courtroom No. 5409 at 10:00 a.m. for a determination of the actual amounts due under the notes and guaranties in question including principal, interest and costs of collection, including attorneys’ fees.

IT IS FURTHER ORDERED that the plaintiff Federal Deposit Insurance Corporation, in its corporate capacity, a corporate agency of the United States, appear and show cause on the 15th day of January, 1986, in the Fifth Floor Courtroom No. 5409 at 10:00 a.m. why its complaint against Charles E. Carter should not be dismissed for failure to make service of the summons and complaint within the 120 day period provided by Federal Rule of Civil Procedure 4(j).

STIPULATION

The plaintiff, Federal Deposit Insurance Corporation, in its corporate capacity, a corporate agency of the United States, and the defendants, Bob Alexander and William A. Jenkins, by and through their respective attorneys, for purposes of the hearing scheduled herein on January 15, 1986, hereby agree and stipulate as follows:

1. The principal amount due under the notes and guaranties in question as of January 15, 1986 is $7,139,025.22.

2. The accumulated interest due and unpaid under the notes and guaranties in question as of January 15, 1986 is $3,083,-605.96.

3. The total for principal and interest due as of January 15, 1986 is $10,222,-631.18.

4. Per diem interest accrues at the rate of $2,249.26 per day from January 15, 1986 until paid.

5. The parties stipulate and agree that the only matter left for the Court to rule on at the hearing on January 15, 1986 is the question of attorney’s fees.

6. The parties further agree and stipulate that the Journal Entry of Judgment against defendant Bob Alexander, when signed by the Court, once the Court has determined attorneys’ fees, may be held by the attorneys for plaintiff and not filed, if ever, until such time as the parties conclude that they cannot reach an amicable settlement of the disputes involved in this action.

7. The parties hereby request that the judgment to be entered with respect to liability and damages be certified by the Court as final and appealable pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

FEDERAL DEPOSIT INSURANCE CORPORATION, in its corporate capacity, a corporate agency of the United States

By: /s/ Jimmy Goodman

JIMMY GOODMAN

CROWE & DUNLEVY

1800 Mid-America Tower

20 North Broadway

Oklahoma City, OK 73102

(405) 235-7700

One of Its Attorneys of Record

BOB ALEXANDER and

WILLIAM A. JENKINS.

By: /s/ Michael E. Joseph

MICHAEL E. JOSEPH

W. CHRIS COLEMAN

Tenth Floor, Two Leadership Square

Oklahoma City, OK 73102

(405) 235-9621

Their Attorneys of Record

      . In this opinion "FDIC” standing alone without "Corporate” or "Receiver" preceding constitutes a reference to the Federal Deposit Insurance Corporation generally, and not specifically to either of its capacities as party to this action.

      . R.J. Pinder and Charles E. Carter, along with TWT Exploration Company, Inc., were also named as defendants by the amended complaint in this action. TWT Exploration Company, Inc., has since filed for protection under Chapter 11 of the Bankruptcy Code, thereby automatically staying this action against it. Default judgment was entered against Pinder in this case on February 1, 1985. Service has not been obtained on Carter.

      . These loans are evidenced by the following notes:
      (1) No. 26994 for $3,330,000 dated March 31, 1981;
      (2) No. 26993 for $2,800,000 dated March 31, 1981;
      (3) No. 27659 for $1,500,000 dated May 29, 1981;
      (4) No. 28960 for $500,000 dated September 25, 1981.
      The notes all provide for interest at a floating rate P/2 percent above Penn Square prime and for payment of reasonable costs of collection, including an attorney’s fee of 15 percent of all sums due upon default.

      . Howell v. Continental Credit Corp., 655 F.2d 743 (7th Cir.1981) and Federal Deposit Ins. Corp. v. Hoover-Morris Enterprises, 642 F.2d 785 (5th Cir.1981) do not stand for the proposition that § 1983(e) says no more than D’Oench, as defendants’ response brief to Corporation FDIC's motion seems to imply.

      . It may be noted that in the In Re Longhorn Securities Litigation opinion the court construed D’Oench narrowly, 573 F.Supp. at 280, and for reasons unknown did not mention or address the expanded doctrine codified in § 1823(e). Because the present decision is based on the express language approved by Congress subsequent to D’Oench, the Longhorn opinion would be of questionable precedential value even if the facts of that case were plausibly similar to those at hand.

      . Where a guaranty is entered into at the same time with the original obligation, or with the acceptance of the latter by the guarantee, and forms, with that obligation, a part of the consideration to him, no other consideration need exist. In all other cases there must be a consideration distinct from that of the original obligation.

      . The essence of consideration is, in any event, legal detriment, not reliance. See J. Calamari & J, Perillo, Contracts § 4-1 (1977). By signing the guaranty Alexander promised to do something he was not legally obligated to do, and that promise was itself consideration. Further, it is not disputed that Alexander received legal consideration for his promise. The face of the guaranty in question provides that it is “for the purpose of enabling J.P. Exploration, Inc., to obtain credit or other financial accommodations from” Penn Square, and both Alexander and Jenkins concede in their briefs that they did in fact give their guaranties in order to induce Penn Square to extend credit to J.P. Exploration, albeit not in the amounts actually given. There is no question that the bargained for credit was actually extended.