Katz v. Realty Equities Corp. of New York

The Securities and Exchange Commission (SEC) filed an action in the United States District Court for the Southern District of New York against Republic National Life Insurance (Republic) (defendant) and Realty Equities Corporation of New York (Realty) (defendant), among others, alleging that they cooperated to conceal Realty’s financial condition in an effort to defraud investors. The SEC’s action gave rise to a total of 15 private actions filed in three different federal district courts. Twelve of these private actions were filed in the Southern District of New York, including two actions naming as defendants Klein, Hinds & Finke (KHF) (defendant) and Alexander Grant & Company (Grant) (defendant). The court ordered the consolidation of the twelve private actions for all pretrial purposes and further ordered the preparation of a single pretrial complaint. The order stated that the court would wait until the conclusion of pretrial proceedings before deciding whether to order a consolidated trial. The consolidated complaint included 30 counts asserted by 21 plaintiffs against 39 defendants. KHF and Grant, who were named in only two of the initial complaints, appealed the district court’s order, arguing that the consolidated complaint impermissibly merged the plaintiffs’ claims, that relevant precedent required the exclusion of claims against KHF and Grant from the consolidated complaint, and that the district court’s order prejudiced KHF and Grant.