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Gibson v. Credit Suisse AG

May 11, 2010

L.J. GIBSON, BEAU BLIXSETH; AMY KOENIG, DEAN FRESONKE, VERN JENNINGS, TERRI FROEHLICH, MONIQUE LEFLEUR, AND GRIFFEN DEVELOPMENT, LLC, EACH INDIVIDUALLY, AND ON BEHALF OF PLAINTIFF MEMBERS OF TAMARACK RESORT, YELLOWSTONE CLUB, LAKE LAS VEGAS AND GINN SUR MER, PLAINTIFFS,
v.
CREDIT SUISSE AG, A SWISS CORPORATION; CREDIT SUISSE SECURITIES (USA), LLC, A DELAWARE LIMITED LIABILITY COMPANY, CREDIT SUISSE FIRST BOSTON, A DELAWARE LIMITED LIABILITY CORPORATION; CREDIT SUISSE CAYMAN ISLAND BRANCH, AN ENTITY OF UNKNOWN TYPE; CUSHMAN & WAKEFIELD, INC., A DELAWARE CORPORATION AND DOES 1 THROUGH 100 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Honorable Ronald E. Bush U. S. Magistrate Judge

MEMORANDUM DECISION AND ORDER RE: PROPOSED CLASS (1) MOTION TO CONVERT THE MOTIONS TO DISMISS TO RULE 56 STATUS (Docket No. 57) (2) MOTION FOR STAY OF DISCOVERY (Docket Nos. 52 & 55) (3) MOTION TO FILE DOCUMENTS UNDER SEAL (Docket No. 50) (4) MOTION/REQUEST FOR JUDICIAL NOTICE (Docket No. 69)

Currently pending before the Court are (1) Plaintiffs' Motion to Convert the Motions to Dismiss to Rule 56 Status ("Motion to Convert") (Docket No. 57); (2) Defendants' Motion for Stay of Discovery ("Motion to Stay") (Docket Nos. 52 & 55); (3) Defendant Cushman & Wakefield, Inc.'s Motion to File Documents Under Seal ("Motion to Seal") (Docket No. 50); and (4) Plaintiffs' Request for Judicial Notice in Support of Motion to Convert and in Opposition to Motion to Stay ("Motion/Request for Judicial Notice") (Docket No. 69). Having carefully reviewed the record, participated in oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:*fn1

I. DISCUSSION

A. Motion to Convert

Defendants Cushman & Wakefield, Inc. ("C & W") and the Credit Suisse Defendants (collectively "Credit Suisse") filed separate Motions to Dismiss. See Docket Nos. 48 & 51. Through their Motion to Convert, Plaintiffs argue that these Motions to Dismiss, "accompanied by hundreds of pages of extraneous materials" and containing Defendants' counsel's subjective argument and "purported facts" (see Mem. in Supp. of Mot. to Convert, p. 2 (Docket No. 56)), must be converted into Motions for Summary Judgment, thus permitting Plaintiffs to conduct discovery before responding to Defendants' arguments.

There is no dispute that FRCP 12(d) generally allows for the relief Plaintiffs seek here. See Fed. R. Civ. P. 12(d) ("If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56."). Indeed, the parties appropriately reference this Court's recent consideration of the relevant principles in Seraphin v. SBC Internet Servs., Inc., 2010 WL 1326820, *2 (D. Idaho 2010) ("'When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 56 motion for summary judgment, and it must give the nonmoving party an opportunity to respond.") (quoting U.S. v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003)). However, a court may consider documents incorporated by reference within the pleadings, without converting a motion to dismiss into one for summary judgment. See Seraphin, 2010 WL 1326820 at *2 (citing U.S. v. Ibrahim, 522 F.3d 1003, 1006 (9th Cir. 2008)). That is, "even if a document is not attached to a complaint, a defendant may offer it and the court may incorporate it by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim." See id. at *2, fn. 2 (citing Ritchie, 342 F.3d at 908).

Plaintiffs emphasize (in their briefing and during oral argument) the volume of materials offered in support of Defendants' Motions to Dismiss. See, e.g., Mem. in Supp. of Mot. to Convert, p. 3 (Docket No. 56) ("After presenting a total of 1,107 pages outside the Complaint, the Defendants are now seeking to stay discovery pending ruling under Rule 12, in a transparent effort to cherry-pick which extraneous documents they wish the Court to see, while precluding Plaintiffs from presenting evidence that directly and unequivocally contradicts the Defendants' 'purported facts.'"). The Court is more focused, however, upon the import rather than the volume of such materials. In the Court's mind, the majority of these documents deal with the credit agreements, engagement letters, and appraisals referenced in Plaintiffs' underlying Second Amended Complaint - their mere inclusion as exhibits in support of Defendants' Motions to Dismiss (assuming authenticity is not at issue) does not transmute an otherwise proper motion to dismiss into a motion for summary judgment.*fn2 Additionally, the volume of documents is in large part reflective of the template that Plaintiffs' Second Amended Complaint laid down upon this case. In other words, it was Plaintiffs' decision to seek relief pertaining to four different real property resort developments, each of which alone would be expected to carry a significant amount of "paper," given the nature of the developments and the dollars at play. Hence, the fact that there is a large volume of paperwork, albeit leading to Defendants' request to apply the Rule 12(b) incorporation doctrine, still stems initially from the way in which Plaintiffs chose to frame their Second Amended Complaint.

Nonetheless, Plaintiffs' arguments are a bit more nuanced. Specifically, Plaintiffs contend that although certain at-issue documents are presented in their entirety, other documents sought to be incorporated into the record by Defendants are only excerpts of larger documents, and the use of such excerpts may offer a skewed and/or incomplete perspective if the Court takes up Defendants' Motions to Dismiss. See Mem. in Supp. of Mot. to Convert, pp. 4-7 (Docket No. 56). Further, Plaintiffs argue that subjective arguments made by Defendants' counsel permeate Defendants' Motions to Dismiss, masquerading as "purported facts" in contrast to Plaintiffs' own allegations. See id. at pp. 7-8.

The Court has considered such concerns, but concludes that they can be resolved and addressed without the need to convert Defendants' Motions to Dismiss into summary judgment motions. To begin, a plaintiff's factual allegations are lent considerable weight at this stage of the litigation and, for the most part, must be considered true and given the benefit of inferences when confronted with a motion to dismiss. See, e.g., Carter v. Seventh Judicial Dist. of Idaho, 2009 WL 1635389, *3 (D. Idaho 2009) ("When analyzing a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must accept as true the allegations contained in the complaint and construe them in the light most favorable to the non-moving party."). With this standard in mind, it would seem that Plaintiffs' angst over many of Defendants' counsel's "purported facts" can be countered by reference to the salient allegations in their own 115-page Second Amended Complaint.

Second, Plaintiffs are (or should be) permitted to utilize the same credit agreements, engagement letters, and appraisals (coupled with their own allegations) to counter the arguments raised in Defendants' Motions to Dismiss. Likewise, where the record contains only excerpts from larger, more comprehensive sources, Plaintiffs are permitted to refer to those sources, in their complete state, if they think it necessary to do so to diffuse any of Defendants' related arguments.*fn3

Third, the Court is not convinced that an attorney's arguments (factual and legal) in support of a motion to dismiss automatically morph that motion to dismiss into a motion for summary judgment; otherwise, motions for summary judgment would crowd and eventually push out the use of motions to dismiss. A motion to dismiss, by design of the rules of procedure, generally proceeds on a much smaller framework than does a Rule 56 motion. However, the fact of a more sparse record for decision does not preclude appropriate advocacy as to the application of the law and the facts upon such a record. Neither is it a unilateral exercise - where disagreement exists between the parties as to the applicable law, the facts, or the facts applied to the law, Plaintiffs are free to advance their own arguments in opposition to Defendants' unfolding dismissal efforts.*fn4 Discovery is not necessarily a prerequisite for such a preliminary litigation battleground.

Finally, the Court agrees that it is appropriate to consider the Defendants' jurisdictional arguments in advance of what could become a time-consuming and expensive discovery expedition. This is not reflective of any anticipated ruling upon the possible merits of Defendants' Motions to Dismiss; to the contrary, the Court is paying careful attention to the arguments of both sides of the issues raised therein. The Court does have concern, however, that even the most narrowly-defined discovery boundaries, particularly in a case like this, could very well blossom into a morass of tangled factual and legal arguments that raise more questions than answers - all before Defendants even submit a formal Answer to Plaintiffs' Second Amended Complaint. Still, while not now granting the relief Plaintiffs seek, the Court acknowledges that, after fully considering the briefing relative to Defendants' Motions to Dismiss, the Court may decide to exclude certain materials from its consideration or permit some form of discovery to address what the Court may otherwise conclude is a mislabeled motion for summary judgment. Until then, however, Plaintiffs' Motion to Convert is denied.

Consistent with this Court's prior discussion on the issue, a schedule for responding to Defendants' Motions to Dismiss must now be addressed. See 4/13/10 Notice, p. 3 (Docket No. 60) ("In the event the Court deems Defendants' Motions to Dismiss as Rule 12(b) motions to dismiss and not Rule 56 motions for summary judgment, Plaintiffs are now on notice that the briefing schedule will commence immediately after such a decision and may reflect a relatively quick response time, given the time that has elapsed to date since the filing of said motions."). Accordingly, Plaintiffs' responses to Defendants' ...


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