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Law School Case Brief

Katz v. Realty Equities Corp. - 521 F.2d 1354 (2d Cir. 1975)

Rule:

It is axiomatic that consolidation is a procedural device designed to promote judicial economy and that consolidation cannot affect a physical merger of the actions or the defenses of the separate parties.

Facts:

Klein, and the other appellant auditors, sought review of the district court's pretrial consolidation of the private security cases. The Securities and Exchange Commission (SEC) commenced an enforcement action against appellees, life insurance company, officers and directors, investment company, and two other individuals and appellants. The SEC complaint alleged that appellees participated in a scheme to defraud the investing public by concealing the actual facts of appellee investment company's financial condition. The district court filed an order of consolidation. Appellants filed a timely notice of appeal. 

Issue:

Did the district court err in its pretrial consolidation of the private security cases?

Answer:

No.

Conclusion:

The Second Circuit held that the order was a proper exercise of the trial judge's authority in the management of the preliminary stages of complex multiparty litigation. Moreover, the appellate court was not convinced that appellants have been prejudiced by the consolidated complaint or that the district court would not be alert to the possibility of prejudice to them in the future. According to the appellate court, there was no clear showing that the appellants have been prejudiced as a result of the district court's order requiring the filing of a consolidated complaint for pretrial purposes.

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