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INTERMEDICS, INC. v. VENTRITEX

May 9, 1991

INTERMEDICS, INC., a Texas corporation, Plaintiff,
v.
VENTRITEX, INC., a California corporation; MICHAEL SWEENEY, an individual; and BENJAMIN PLESS, an individual, Defendants


Wayne D. Brazil, United States District Judge


The opinion of the court was delivered by: BRAZIL

WAYNE D. BRAZIL, UNITED STATES DISTRICT JUDGE

 I. Introduction

 The plaintiff in this action, Intermedics Inc., (Intermedics), develops and markets complex devices for treating malfunctions of the heart. The corporate defendant, Ventritex Company Inc. (Ventritex) is a competitor of Intermedics. The individual defendants are ex-employees of Intermedics who presently work for Ventritex.

 Both companies are in the process of developing devices known as implantable defibrillators. *fn1" Plaintiff's complaint, filed on April 23, 1990, includes counts for infringement of seven patents assigned to Intermedics regarding an implantable defibrillator (counts I-VII), declaratory relief (counts VIII-IX), misappropriation of trade secrets and confidential and proprietary information (counts X-XI), breach of and inducement to breach fiduciary and contractual obligations (counts XII, XIII, XV and XVI), unfair competition (count XIV), and conspiracy (count XVII).

 On February 21, 1991, Intermedics filed a first amended complaint. The amended complaint added an independent basis for the court's jurisdiction over the state counts (diversity) and added a new federal count (correction of inventorship on U.S. Patent No. 4,827,936) and one new state count (constructive trust). The case was originally assigned to Judge Ware, but the parties have subsequently consented to the undersigned's jurisdiction over this matter.

 Counts X-IXX of plaintiff's first amended complaint, the counts which are the subject of this motion to dismiss, allege misappropriation of plaintiff's trade secrets, breach of contract and fiduciary duty, conspiracy, unfair competition, constructive trust, and correction of inventorship. Having considered the parties' written and oral submissions, the court hereby ORDERS the following:

 II. Characterization of the Motion.

 A threshold question we face is whether to consider defendants' motions under the standards emanating from Rule 12(b)(6) or those emanating from Rule 56. Defendants' formally presented their motion as a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, a motion for a more definite statement under Federal Rule of Civil Procedure 12(e). F.R.C.P. 12(b) provides that if, on a motion under 12(b)(6), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as a motion for summary judgment under F.R.C.P. 56. Mack V. South Bay beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986).

 Defendants' motion does refer to matters outside the pleadings. Defendants' papers ask the court to draw a number of inferences from the entry of a dismissal, with prejudice, by the plaintiff in a prior action between these same parties. To that end, the defendants and the plaintiff requested that the court take judicial notice of plaintiff's prior complaint (filed in 1985), plaintiff's earlier application for a preliminary injunction, (filed in 1985), a stipulation entered by the parties whereby the parties agreed to participate in an informal audit as a possible alternative to litigation, and the dismissal entered in the 1985 action.

 As a general proposition, a court may take judicial notice of facts outside the pleadings without converting the motion into one for summary judgment only when the facts are properly the object of "strict" notice. Id.; Schwartz V. Commonwealth Land Title Insurance Co., 374 F. Supp. 564 (E.D. Pa. 1974). Facts properly held the object of judicial notice in the context of a motion to dismiss under 12(b)(6) include, among others, records and reports of administrative bodies, Interstate Natural gas Co., V. Southern California Gas Co., 209 F.2d 380, 385 (9th Cir. 1953), items in the record of the case or matters of general public record, Phillips V. Bureau of Prisons, 192 App. D.C. 357, 591 F.2d 966, 969 (D.C. Cir. 1979), and copies of a document (i.e. a contract) attached to the complaint as an exhibit. Case V. State Farm Mutual Automobile Insurance Company, 294 F.2d 676 (5th Cir. 1961).

 Given the authorities just cited, it is arguable that the court could take judicial notice of all of the facts presented by defendants without converting their motion into a motion for summary judgment. The complaint filed by the plaintiff against the defendants in 1985, the application for a preliminary injunction, the stipulation to participate in the informal audit, and the order entering the dismissal of the 1985 action, are all matters of public record.

 The difficulty is that in arguing their respective positions the parties also make frequent references to facts not contained within the documents described above. For example, counsel have directed our attention to letters related to the ADR/audit process, and have made proffers about the character of that undertaking. These references to materials beyond the pleadings would justify our treatment of defendants' motion as a motion for summary judgment.

 After working through the substance of the parties' arguments and supporting materials, however, this issue has taken on something of an academic cast. For reasons that we make clear below, we conclude that defendants' motion (with one exception, which we specify infra) fails under either the standards emanating from Rule 12 or those emanating from Rule 56. Thus, we deny defendants' motion (except in one part) under both rules.

 We also note that, as required by the Ninth Circuit, the parties were fairly appraised that the court would look beyond the pleadings when deciding this motion. See, Grove V. Mead School Dist., 753 F.2d 1528, 1532 (9th Cir. 1985).

 At the status conference at which the briefing schedule for this motion was established, counsel for the plaintiff urged the court to recognize that this, and other motions to dismiss filed by the defendants, were really motions for summary judgment. Counsel for the defendants did not dispute this characterization of the pending motions. Moreover, both parties have submitted material outside of the pleadings in their briefs on this matter. "A represented party who submits matters outside the pleadings to the judge and invites consideration of them has notice that the judge may use them to decide a motion originally noted as motion to dismiss. . ." Id.

 III. Defendants' Res Judicata Attack on the State Law Claims.

 Defendants argue that a 1985 action between these parties, dismissed with prejudice, has the effect of precluding all of plaintiff's current state court claims.

 In 1985, after individual defendants Sweeny and Pless left Intermedics to join in the start up of Ventritex, plaintiff sued defendants over defendants' plans to create a new implantable defibrillator. The 1985 complaint included counts for misappropriation of Intermedics' trade secrets, breaches of contractual and fiduciary duties, and a variety of other allegedly unfair business practices. Defendants responded to the suit by filing their own complaint for declaratory relief.

 After removal of the case to Federal court and transfer of venue to California, the parties agreed to participate in an alternative dispute resolution procedure whereby a third party would conduct an informal review (the audit) of Ventritex's documents to determine whether the individual defendants had misappropriated Intermedics' trade secrets. The parties stipulated that the results of the audit would not be disclosed in that or any related action (the auditor was directed to destroy all of his notes if a dismissal of the action was entered) and that the purpose of the audit procedure was to enable Intermedics to assess the strength of the trade secrets aspect of the pending, 1985, action. The ...


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