Opinion ID: 508426
Heading Depth: 2
Heading Rank: 1

Heading: Consideration of Matters Outside the Complaint

Text: 14 On appeal Zenith and NAPM argue that the magistrate erred by considering certain matters outside the complaint in deciding Ayerst's motion. According to appellants, the complaint clearly alleges that: (a) the [January 1986 L]etter effectively said to pharmacists that Ayerst's product was therapeutically superior to the generic and that they should not dispense generic propranolol for any indications (not just [post-]MI); and (b) the [L]etter was ... false and misleading. Appellants object to the magistrate's conclusions that the January 1986 Letter (1) fairly states that the issues discussed are open ones; (2) was sent in the context of an ongoing public debate; (3) was part of Ayerst's efforts to compete aggressively on the merits; (4) was in response to other letters; and (5) was, as a matter of law, not deceptive. Before we can address appellants' argument, we must discuss at some length precisely what extrinsic materials the magistrate considered. 15 On October 29, 1986, Ayerst filed a notice of motion and motion to dismiss or, in the alternative, for summary judgment. The notice of motion stated, first, that [s]ince the Complaint fails to state a claim against defendant upon which relief can be granted, this action should be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. 2 In the alternative, the notice of motion claimed that [s]ince there are no genuine issues as to any material facts regarding this action, and since defendant is entitled to judgment on this action as a matter of law, summary judgment should be granted pursuant to Rule 56 of the Federal Rules of Civil Procedure. 16 Accompanying the notice of motion were two affidavits. The first affidavit (the Mahady Affidavit), which was signed by the aforementioned Joseph Mahady, claimed that the January 1986 Letter was merely part of an ongoing public debate relating to generic drugs. Copies of the letters sent by Martec Pharmaceuticals and Lederle Laboratories, as well as Ayerst's January 1986 Letter, were appended as exhibits to the Mahady Affidavit. The second affidavit (the Gooen Affidavit), which was signed by Ayerst executive Steven M. Gooen, was submitted as evidence of Ayerst's lack of monopoly power. The Gooen Affidavit claimed that Inderal competed with many other drugs, including other beta-blockers and drugs from many other therapeutic classes, and concluded that Inderal had between an 8.5% and 29.2% share of the relevant market. 17 In support of its motion, Ayerst filed a memorandum of law and, in accordance with Local Rule 3(g) of the Civil Rules of the Southern District of New York, a Statement of Material Facts as to Which There is No Genuine Issue to be Tried (Rule 3(g) Statement). With respect to the Lanham Act claim, Ayerst's memorandum of law argued that: (1) the injury alleged in the complaint was not legally cognizable under the Lanham Act; (2) the January 1986 Letter made no false representations; and (3) the January 1986 Letter made no representations relating to the inherent quality or characteristics of Inderal. With respect to the antitrust claim, Ayerst argued that (1) Zenith had failed to allege two of the essential elements of a monopolization claim: (a) what the relevant market was, and (b) that Ayerst possessed monopoly power; and (2) in the alternative, summary judgment was appropriate because the undisputed facts demonstrated that Ayerst did not possess monopoly power. Finally, Ayerst's Rule 3(g) Statement claimed that there was no genuine issue of material fact as to Inderal's market share in the various markets in which Inderal competes. In response, appellants submitted, inter alia, a motion to compel discovery on the issue of Inderal's market share, and two memoranda of law in opposition to Ayerst's motion. 18 As noted above, in February 1987, Magistrate Buchwald denied summary judgment on the antitrust claim, reasoning that, despite the allegations set forth in the Gooen Affidavit and the Rule 3(g) Statement, the determination of the relevant market in which Inderal competes raised a disputed factual issue. While Zenith claimed that the relevant market was the market for propranolol, Ayerst argued that the relevant market was the market for all beta blockers, a class of pharmaceutical products that includes propranolol as well as certain other drugs. In denying summary judgment on this aspect of Zenith's claim, the magistrate also denied appellant's motion to compel discovery on this issue as moot. Given that the magistrate denied Ayerst's motion for summary judgment on the market share issue, we do not understand Zenith to be arguing on appeal that the magistrate erred by considering the allegations set forth in the Gooen Affidavit. 19 In all other respects, however, appellants claim that the Complaint [was] the only document that should have been examined. 3 In response, Ayerst claims that the magistrate's consideration of matters outside the pleadings in effect converted the motion to dismiss into a motion for summary judgment. Ayerst notes that, in connection with a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), or a motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c), when matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56. See, e.g., Villante v. Department of Corrections, 786 F.2d 516, 521 (2d Cir.1986); Goldman v. Belden, 754 F.2d 1059, 1066 (2d Cir. 1985). To determine whether the district court properly converted a 12(b)(6) or 12(c) motion into a motion for summary judgment, [t]he essential inquiry is whether the appellant should reasonably have recognized the possibility that the motion might be converted into one for summary judgment or was taken by surprise and deprived of a reasonable opportunity to meet facts outside the pleadings. In re G. & A. Books, Inc., 770 F.2d 288, 295 (2d Cir.1985), cert. denied, 475 U.S. 1015, 106 S.Ct. 1195, 89 L.Ed.2d 310 (1986). Resolution of this issue depends largely on the facts and circumstances of each case. Id., 770 F.2d at 295. 20 Several factors suggest that appellants should have been on notice that Ayerst's motion to dismiss might be converted into a motion for summary judgment. As this court has noted previously, [e]ven where only the party moving to dismiss has submitted extrinsic material such as depositions or affidavits, the opposing party may be deemed to have had adequate notice that the motion to dismiss would be converted. Id. (citing Condon v. Local 2944, United Steelworkers of America, 683 F.2d 590, 593-94 (1st Cir.1982), and Cook v. Hirschberg, 258 F.2d 56, 57-58 (2d Cir.1958)). Among the factors suggesting that appellants were on notice are the following: (1) Ayerst styled its motion as a motion to dismiss or, in the alternative, for summary judgment  (emphasis added); (2) the Mahady and Gooen affidavits were filed on the very same date as the notice of motion; and (3) Ayerst argued, in its memorandum of law, that as a matter of law the January 1986 Letter was not deceptive, and in so arguing Ayerst quoted extensively from the Letter itself and the other exhibits attached to the Mahady Affidavit. Additionally, we note that appellants have been represented by counsel throughout this litigation and are therefore not entitled to the deference which on occasion we have extended to pro se litigants who have claimed that a summary judgment conversion caught them by surprise. See, e.g., Chandler v. Coughlin, 763 F.2d 110, 113 (2d Cir.1985); Beacon Enters. v. Menzies, 715 F.2d 757, 767 (2d Cir.1983). 21 Nevertheless, despite the foregoing considerations, certain other factors lead us to conclude that appellants were not adequately notified that the magistrate would consider matters outside the pleadings. We note first that Ayerst's Rule 3(g) Statement addressed only the issue of Inderal's market share. Accordingly, appellants might reasonably have believed that Ayerst would not seek summary judgment on the other issues. Second, an affidavit Ayerst submitted on December 17, 1986, in opposition to appellants' motion to compel discovery stated that [t]he only facts beyond the pleadings raised by Ayerst's pending motion are certain facts identifying Ayerst's share of the market in which Inderal competes. Again, we conclude that appellants might reasonably have understood this statement to mean that Ayerst was seeking summary judgment on the market share issue only. Third, we note that appellants stated in their memorandum of law in opposition to Ayerst's motion to dismiss the Lanham Act claim that they planned to take discovery as to the impression Ayerst intended as a factor in determining whether the falsity [of the January 1986 Letter] did not relate to Inderal, but only if they survived the pending motion to dismiss. In other words, appellants made clear that they did not consider the motion then before the court to be a motion for summary judgment, except with respect to the market share issue. Accordingly, in our view conversion of the motion into a motion for summary judgment would have been inappropriate unless appellants had been timely notified that their impression was mistaken. We therefore hold that the magistrate erred by failing to notify appellants that she would be considering the contents of the Mahady Affidavit in connection with Ayerst's motion to dismiss.