## Facts

- The SEC filed an enforcement action in the Southern District of New York alleging a scheme that concealed Realty Equities Corporation of New York’s financial condition through transactions involving Republic National Life Insurance Company.
- After the SEC action, numerous private securities suits were filed in multiple federal districts based on the same alleged Realty–Republic transactions.
- Several out-of-district actions were transferred to the Southern District of New York by the Judicial Panel on Multidistrict Litigation and consolidated with the New York actions.
- The district court ordered consolidation of the related private actions and directed plaintiffs to file and serve a single consolidated complaint “for pretrial purposes.”
- Two accounting-firm defendants, Klein, Hinds & Finke and Alexander Grant & Company, objected and appealed, arguing the consolidated complaint would effectively merge distinct suits, expand class scope and liability exposure, and prejudice defenses.

## Issues

1. Whether a district court may require the filing and service of a single consolidated complaint for pretrial purposes in complex multiparty securities litigation.
2. Whether such a consolidated complaint order impermissibly merges separate actions or prejudices defendants’ substantive rights and defenses.

## Decision

- The Second Circuit affirmed the district court’s order.
- The court held the order was a proper exercise of the district judge’s authority to manage the preliminary stages of complex multiparty litigation.
- The court concluded the order, expressly limited to pretrial purposes, did not merge the actions or alter substantive rights.
- The court found no clear showing of actual prejudice to the accounting-firm appellants and noted any later-emerging prejudice could be addressed by the district court.

## Legal Principles

- Consolidation is a procedural case-management device intended to improve efficiency and judicial economy; it does not, without more, merge separate actions into a single suit or eliminate distinct defenses.
- A district court has broad discretion to structure pretrial proceedings in complex, overlapping litigation, including requiring a consolidated complaint for pretrial management.
- A consolidation order limited to pretrial purposes is generally permissible absent a concrete showing that it changes substantive rights or causes actual prejudice.

## Conclusion

The court upheld the use of a single consolidated complaint as a pretrial management tool in complex securities litigation, emphasizing that consolidation is procedural, does not itself merge actions, and is valid where defendants cannot show actual prejudice.


Katz v. Realty Equities Corp. of N.Y., 521 F.2d 1354 (2d Cir. 1975)