Hise v. Philip Morris ( 2000 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 17 2000
TENTH CIRCUIT
__________________________ PATRICK FISHER
Clerk
LEO HISE and JACK ISCH, individually and as
representatives of a class of others similarly
situated,
Plaintiffs-Appellants, No. 99-5113
(N.D. Okla.)
v. (D.Ct. No. 98-CV-947)
PHILIP MORRIS INCORPORATED, a Virginia
Corporation; R.J. REYNOLDS TOBACCO
COMPANY, a New Jersey Corporation; BROWN &
WILLIAMSON, a Delaware Corporation;
LORILLARD TOBACCO COMPANY, a Delaware
Corporation; LIGGETT GROUP, INC., sued as:
The Liggett Group, a Delaware Corporation d/b/a
Liggett and Myers Tobacco Company,
Defendants-Appellees,
A.D. BEDELL WHOLESALE COMPANY, INC.,
Amicus Curiae.
____________________________
ORDER AND JUDGMENT *
Before BRORBY, KELLY and MURPHY, Circuit Judges.
*
This order and judgment is not binding precedent except under the doctrines of
law of the case, res judicata and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1.9(G). The case is
therefore ordered submitted without oral argument.
Appellants Leo Hise and Jack Isch appeal the district court’s decision
granting summary judgment to the Appellees (hereafter “tobacco companies”),
and also appeal its order denying their motion for default judgment. We exercise
jurisdiction under 28 U.S.C. § 1291 and affirm.
A. Factual Background
The undisputed facts giving rise to this controversy are chronicled in the
district court decision. See Hise v. Philip Morris Inc., 46 F. Supp.2d 1201, 1204
(N.D. Okla. 1999). In short, over forty states, including Oklahoma, commenced
litigation against numerous tobacco concerns, including the named tobacco
companies, requesting monetary and other relief for claims related to public
health and underage tobacco consumption issues. Id. To avoid the expense and
delay inherent in litigation, the litigants entered into a settlement agreement
designed to provide states funding for various tobacco-related health programs
and measures. Id. Following the settlement, the tobacco companies involved in
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this suit raised the price of their products, presumably to cover the settlement
costs. Id.B. Procedural Background
Mr. Hise and Mr. Isch, individual over-the-counter tobacco consumers,
filed a complaint on behalf of themselves and a purported class of an estimated
forty million other tobacco consumers, alleging the tobacco companies unlawfully
entered into a “sham” settlement agreement. 1 Id. at 1203 & n.3. Specifically,
they claimed the tobacco companies engaged in unlawful activities to: (1) raise
tobacco prices in order to pay for the settlement in “collusion” with the various
state Attorneys General, in violation of the Sherman Anti-Trust Act; (2) deprive
tobacco consumers of their property interest without due process of law in
violation of their constitutional rights; and (3) regulate and govern the
manufacture, interstate trade and consumption of tobacco products in violation of
the United States Constitution. Id. at 1203 & n.3.
The tobacco companies did not file an answer to the complaint, but instead
filed motions to dismiss. Id. at 1204. Because these motions requested
1
Hereafter, any reference to Mr. Hise and Mr. Isch refers also to all the purported
class-action Appellants.
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consideration of materials outside the pleadings, 2 the district court issued an
Order on March 17, 1999, converting the tobacco companies’ motions to dismiss
into motions for summary judgment pursuant to Federal Rule of Civil Procedure
12(b). The order gave the companies fifteen additional days to supplement their
motions and gave Mr. Hise and Mr. Isch fifteen days to respond Id.After the tobacco companies filed their supplemental motions, Mr. Hise and
Mr. Isch filed a “Motion for Default Judgment or in the Alternative Motion to
Compel Compliance With Rules,” in which they asked the district court to either
enter a default judgment against the tobacco companies for failing to file an
answer within twenty days after the March 17, 1999 Order, or alternatively, to
compel the tobacco companies to comply with the Federal Rules of Civil
Procedure and the district court’s local rules.Specifically, in their supporting
brief, Mr. Hise and Mr. Isch requested default judgment against the tobacco
companies because their supplemental motions did not set forth: (1) a section
containing a concise statement of duly numbered paragraphs of material facts, as
required under the district court’s local rules of civil procedure, Rule 56.1B, or
2
The district court does not explicitly indicate what outside evidence it
considered, but from a review of the record, it is evident this evidence consisted of the
settlement agreement and the statements therein.
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supporting affidavits; or (2) provide any responsive pleading which admits or
denies the allegations in the complaint, in accordance with Fed. R. Civ. P. 12.
At a status hearing, the district court (1) denied Mr. Hise’s and Mr. Isch’s
motion for default judgment in its entirety, and (2) allowed the tobacco companies
the right to file their answers within ten days after any adverse ruling on their
summary judgment motions. In addition, the parties agreed to delay discovery
pending the district court’s ruling on the summary judgment motions.
Thereafter, the district court entered a decision granting the tobacco
companies summary judgment. The district court rejected Mr. Hise’s and Mr.
Isch’s first claim that the settlement agreement violates the Sherman Anti-Trust
Act. Hise, 46 F. Supp.2d at 1205. In so holding, the district court determined the
tobacco companies’ action in negotiating and executing the settlement agreement
fell under the protections of the “Noerr-Pennington” doctrine which shields from
the Sherman Anti-Trust Act any concerted effort to influence public officials,
regardless of intent or purpose. Id. at 1206-07. The court also determined Mr.
Hise and Mr. Isch, as indirect purchasers of tobacco, lacked standing under the
“Illinois indirect purchaser rule” to pursue monetary damages. Id. at 1207-1208.
As to injunctive relief, the district court determined Mr. Hise and Mr. Isch failed
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to adequately plead a price-fixing conspiracy in either their complaint or other
responsive pleadings. Id. at 1208.
The district court also rejected, as frivolous, Mr. Hise’s and Mr. Isch’s
second claim that the tobacco companies’ actions in raising prices deprived
consumers of a property interest without due process of law. Id. at 1209. The
district court concluded Mr. Hise, Mr. Isch, and the other consumers possessed no
clearly recognized property interest in paying a certain sum to a retailer to
purchase tobacco. Id. Similarly, the district court rejected, as frivolous and
unsupported by legal authority, Mr. Hise’s and Mr. Isch’s third claim, alleging the
parties to the settlement agreement conspired to regulate and govern the
manufacture, interstate trade and consumption of tobacco products.
On appeal, Mr. Hise and Mr. Isch renew essentially the same arguments
presented to, and addressed by, the district court in its decision granting summary
judgment in favor of the tobacco companies. They also renew the same issues
raised in their motion for default judgment, which the district court summarily
denied at the status hearing. In addition, for the first time on appeal, Mr. Hise
and Mr. Isch contend the district court erred in converting the tobacco companies’
motions to dismiss to summary judgment motions, claiming instead that the
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district court should have allowed them to refile or amend their complaint to
correct any deficiencies, as allowed under Fed. R. Civ. P. 15. 3
C. Discussion
1. Conversion of Motions to Dismiss and Amendment of Complaint
We begin with Mr. Hise’s and Mr. Isch’s contentions concerning the
district court’s conversion of the tobacco companies’ motions and alleged error in
not allowing them to amend their complaint. While we do not ordinarily consider
arguments raised for the first time on appeal, we note the issues raised here lack
merit. See United States v. Alamillo, 941 F.2d 1085, 1086 (10th Cir. 1991).
Specifically, we feel compelled to point out that under Rule 12(b)(6), a district
court has broad discretion in determining whether to consider materials outside of
the pleadings, and if the court chooses to consider such material, it must treat a
3
In addition, A.D. Bedell Wholesale Company, Inc. filed an amicus curiae brief
in favor of Mr. Hise and Mr. Isch, claiming the district court sweepingly applied the
“Noerr-Pennington doctrine” without the necessary “closer examination of the terms of
the [settlement agreement] itself and the circumstances pursuant” thereto. The tobacco
companies filed a motion requesting permission to file a supplemental response, as
attached to their motion, to the amicus brief. Shortly thereafter, A.D. Bedell Wholesale
Company filed a similar motion requesting permission to file a supplemental response, as
attached to its motion, to the tobacco companies’ response to its brief. We deny both
motions, holding supplemental responses unnecessary in this case. However, in so doing,
we note we have reviewed the responsive briefs, and conclude that even if considered,
they would not affect our disposition in this case.
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motion to dismiss as a motion for summary judgment. See Lowe v. Town of
Fairland, 143 F.3d 1378, 1381 (10th Cir. 1998). If, as here, the district court
decides to convert a motion to dismiss into a summary judgment motion, it must
provide notice to the opposing party and an opportunity for him to serve opposing
affidavits. See Hall v. Bellmon, 935 F.2d 1106, 1110-11 (10th Cir. 1991). These
affidavits must create a genuine issue for trial. Id. at 1111.
In this case, the district court considered material outside the pleadings, and
therefore properly converted the motions to dismiss into summary judgment
motions. In so doing, he provided both parties with notice, allowing the tobacco
companies fifteen days to supplement their motions and Mr. Hise and Mr. Isch
fifteen days to respond thereto. Under the circumstances presented, the district
court clearly did not abuse its discretion in converting the motions. While Mr.
Hise and Mr. Isch responded to the tobacco companies’ supplemented motions,
they did so only through a motion for default judgment, and not any affidavit or
other evidence creating a genuine issue for trial. Moreover, given their failure to
move to amend their complaint, and based on our review of the complaint and
other pleadings, the district court did not err in converting the motions, rather
than recommending Mr. Hise and Mr. Isch amend their complaint.
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2. Default Judgment Motion
Mr. Hise and Mr. Isch correctly point out that under Rule 55, default
judgment shall be entered if a party fails to plead or “otherwise defend.” Fed. R.
Civ. P. 55(a). Applying this rule, they contend the district court should have
entered default judgment because the tobacco companies did not file an answer to
their complaint after the district court “denied” or “postponed” the tobacco
companies’ motions to dismiss. We disagree.
Decisions on whether to enter default judgment fall within the district
court’s discretion, and we review them for an abuse of discretion. Dennis
Garberg & Assoc., Inc. v. Pack-Tech Int’l Corp., 115 F.3d 767, 771 (10th Cir.
1997). In this case, the district court did not deny or postpone the motions to
dismiss, but rather, treated them as motions for summary judgment under Fed. R.
Civ. P. 12(c). We believe a summary judgment motion, seeking to dispose of all
the issues of a case, is an effort to “otherwise defend,” and as such, is sufficient
to prevent default judgment. See Rashidi v. Albright, 818 F. Supp. 1354, 1355-56
(D. Nev. 1993), aff’d, No. 93-15623, 1994 WL594637 (9th Cir., Oct. 31, 1994)
(unpublished opinion). Our determination is strengthened here by the fact the
summary judgment motions in this case actually initiated from motions to dismiss,
showing a continuation of an initial affirmative action by the tobacco companies
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to defend themselves against the complaint. Moreover, default judgment is a
harsh sanction, and instead, we strongly favor resolution of a dispute on the
merits. Ruplinger v. Rains (In re Rains), 946 F.2d 731, 732 (10th Cir. 1991)
(quotation marks and citations omitted). In fact, default judgment is normally
viewed as only available when the adversary process is halted because of an
unresponsive party. Id. In this case, the tobacco companies actively litigated
their defense, without unresponsive tactics or delays.
We also reject Mr. Hise’s and Mr. Isch’s suggestion default judgment must
be entered against the tobacco companies because their summary judgment
motions did not provide a concise statement of numbered facts as required under
Fed. R. Civ. P. 56 or contain affidavits supporting their motions. Instead, the
motions to dismiss filed by the tobacco companies set forth facts that are
undisputed by Mr. Hise and Mr. Isch and based almost exclusively on the
settlement agreement, attached to their motions. Thus, no affidavit in this
instance was necessary. Likewise, the fact the tobacco companies did not number
their short, one-page version of facts, or reiterate them in their supplemental
submission, does not provide sufficient reason in this case to enter a default
judgment or require an order compelling them to amend their motions. Under
these circumstances, we hold the district court did not abuse its discretion in
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denying the motion for default judgment against the tobacco companies.
3. Summary Judgment
In cases involving summary judgment conversions, as in other summary
judgment cases, we review de novo the granting of summary judgment, applying
the same legal standard the district court used. See United States ex rel. Fine v.
Advanced Sciences, Inc., 99 F.3d 1000, 1003 (10th Cir. 1996); see also Hise, 46
F. Supp.2d at 1204 (articulating summary judgment legal standard). Applying
this standard, and on review of the record, we must agree with the district court
that summary judgment should be granted in favor of the tobacco companies.
Because the district court issued a well-reasoned decision, thoroughly explaining
the reasons for granting summary judgment, Hise, 46 F. Supp. at 1205-10, we
decline to duplicate its analysis here.
D. Conclusion
For the reasons contained herein, and for substantially the same reasons
articulated in the district court’s April 29, 1999 decision, we AFFIRM summary
judgment in favor of the Appellee tobacco companies.
Entered by the Court:
WADE BRORBY
United States Circuit Judge
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