In the
United States Court of Appeals
For the Seventh Circuit
No. 00-3254
Berthold Types Limited,
Plaintiff-Appellee,
v.
Adobe Systems Incorporated,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 00 C 1490--Elaine E. Bucklo, Judge.
Argued February 16, 2001--Decided March 9, 2001
Before Easterbrook, Manion, and Diane P. Wood, Circuit
Judges.
Easterbrook, Circuit Judge. Both Berthold Types
and Adobe Systems design and sell typefaces.
Adobe includes all of its own faces, plus many
licensed from other type foundries such as Agfa
and Monotype, in the Adobe Type Library, which
contains more than 2,750 typefaces in PostScript
and OpenType formats. Individual faces (or
collections of related faces) can be licensed and
downloaded from Adobe’s Web site or purchased on
CD-ROM. The Adobe Font Folio, a CD-ROM that gives the
purchaser access to all of the Library’s type, is
available for about $9,000. Berthold Types has
been among Adobe’s partners in this endeavor: a
contract between Adobe and two German firms (H.
Berthold AG and Berthold Types GmbH) gives Adobe
a non-exclusive right to include many of
Berthold’s typefaces in the Adobe Type Library,
and to use Berthold’s trademarks in connection
with the Library, from 1990 through 2015.
Berthold Types Ltd., a U.S. corporation that we
call Berthold, succeeded to the German firms’
interests in 1997 and the next year signed its
own contract with Adobe as a continuation of the
1990 deal.
According to the complaint Adobe first included
Berthold typefaces in the Library in 1991, and
since 1993 "parties other than Adobe, including
Berthold, have marketed the Adobe Type Library as
including the Berthold typefaces" (emphasis
added). Berthold receives royalties when
customers purchase individual Berthold typefaces
from the Library or buy the Adobe Font Folio
disc; it also believes that the presence of
Berthold typefaces in the Library amounts to an
endorsement by Adobe (the creator of PostScript
and co-designer of OpenType) that has "greatly
contributed to Berthold’s reputation as a
provider of high-quality typefaces and has
materially enhanced the prestige and goodwill
associated with the Berthold typefaces and
associated trademarks." Berthold also alleged
that some time in 1999 or early 2000 Adobe
removed all Berthold typefaces from the Adobe
Type Library. This step, Berthold contended,
violated the contract, the Lanham Act, 15 U.S.C.
sec.1125(a) (on the theory that customers have
come to expect the Library to contain Berthold
faces, making it misleading for Adobe to offer
the Library without Berthold type), and the
consumer-deception statutes of several states (on
the theory that Adobe has falsely told customers
that they can get Berthold typefaces direct from
Berthold at prices higher than Adobe used to
charge).
Adobe moved to dismiss the complaint under Fed.
R. Civ. P. 12(b)(6) for failure to state a claim
on which relief may be granted. The district
court agreed with Adobe’s position. 101 F. Supp.
2d 697 (N.D. Ill. 2000). The contract claim
failed for a simple reason: neither the 1990
contract nor the 1998 replacement requires Adobe
to use any Berthold typefaces. Adobe has the
right, but not the obligation, to include the
typefaces; Adobe’s only obligation is to pay
royalties for typefaces it licenses through the
Library. The Lanham Act claim failed because
federal law does not prohibit resellers from
changing their inventory or require them to alert
the public to every alteration in product mix.
(One wonders what Berthold had in mind. "New!
Improved! No Berthold typefaces!" would not
flatter the foundry. Alternatives such as "The
Adobe Type Library contains no caffeine,
saturated fats, or Berthold typefaces" also would
displease it. Advertising exactly what changes
had been made between editions of the Font Folio
would be cumbersome, given the large number of
faces and type designers involved.) As the
district judge observed, the Adobe Type Library
has many attributes of a catalog or retail store,
and no one thinks that Neiman Marcus must
perpetually carry the clothing of designers whose
line it has sold in the past (or post signs at
entrances and warnings in catalogs that
particular suppliers’ products no longer are for
sale within). Finally, the district judge wrote,
even if some of Adobe’s sales personnel have
overstated the prices at which Berthold licenses
its own typefaces, this cannot be deemed
fraudulent or deceptive "if it is unwitting and
innocent, and Berthold does not say that it was
not." 101 F. Supp. 2d at 699.
While the district court had under advisement
Adobe’s motion to dismiss the contract, Lanham
Act, and state-law claims, Berthold filed a
motion to amend its complaint by dropping a
fourth claim and replacing it with a new
contention that Adobe wrongly interfered with a
contract between Berthold and a German
partnership, Freydank Korbis Pillich Talke GbR.
The partnership, which succeeded to some of the
royalty interests H. Berthold AG held in the 1990
contract with Adobe, believes that Adobe had not
paid all of the royalties due. According to
Berthold’s revised complaint, the partnership
assigned to Berthold its claim for unpaid
royalties, and Adobe then interfered with this
assignment by attempting to settle the matter
directly with the partnership. The district court
allowed Berthold to file the new complaint:
Adobe’s motion to dismiss Count I (breach
of contract), Count II (false and
misleading advertising), Count III (fraud,
deceptive trade and business practices),
and Count IV (unjust enrichment) of the
plaintiff’s first amended complaint is
GRANTED, and the complaint is DISMISSED without
prejudice. Berthold’s motion to file a
second amended complaint is GRANTED as to
Count IV only (the intentional
interference with contract claim). Counts
I-III in the second amended complaint are
identical with those in the First Amended
Complaint, and so have already been dealt
with.
101 F. Supp. 2d at 699. This language has led to
the dispute that we must resolve on this appeal.
After the district court received Berthold’s
amended complaint, Adobe filed a motion to
dismiss the new claim under Rule 12(b)(6). Before
the district court could act on this motion,
Berthold filed a document purporting to dismiss
its entire complaint voluntarily under Fed. R.
Civ. P. 41(a)(1)(i). Adobe objected to dismissal,
pointing out that it had already prevailed on
three of Berthold’s claims and filed a motion to
dismiss the fourth; Berthold replied that Rule
41(a)(1)(i) permits a plaintiff to dismiss as of
right "at any time before service by the adverse
party of an answer or of a motion for summary
judgment, whichever first occurs" and that Adobe
had never filed either an answer to the complaint
or a motion for summary judgment. The district
judge took Berthold’s side and dismissed the
complaint. Next Adobe sought attorneys’ fees on
the claims that earlier had been dismissed
involuntarily (para.7.10 of the 1998 contract
entitles the "prevailing party" in "any suit,
action or proceeding in connection with this
Agreement" to recover reasonable attorneys’
fees). The district court denied this request
summarily.
The district court’s handling of this litigation
leaves much to be desired. The order denying
Adobe’s request for attorneys’ fees does not
explain the judge’s thinking, leaving everyone in
the dark about the rationale--and that is just
the last of several problems. The first problem,
which set the stage for everything that ensued,
is that Berthold’s initial complaint should not
have been dismissed under Rule 12(b)(6). It
pleads a claim for breach of contract and is not
self-defeating. The district judge’s reasoning is
based not on the complaint but on the text of the
contract, which was not attached to the
complaint. Cf. Fed. R. Civ. P. 10(c). Under Rule
12(b), when "matters outside the pleading 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
Wilkow v. Forbes, Inc., No. 00-2519 (7th Cir.
Feb. 20, 2001), slip op. 3-4. So the judge should
have treated Adobe’s motion as one for summary
judgment--which also means that Berthold did not
file its Rule 41(a)(1)(i) notice before the
service of a motion for summary judgment. Our
point is not that a motion styled as one to
dismiss is a motion for summary judgment at the
instant of its filing just because the movant
attaches extra documents. It is, rather, that
once the district court actually considers
additional documents, the motion must be treated
as one for summary judgment, with multiple
procedural consequences--both the opportunity for
discovery (which Berthold did not request) and
the closing of the window for dismissal under
Rule 41(a)(1)(i). See Wilson-Cook Medical, Inc.
v. Wilson, 942 F.2d 247 (4th Cir. 1991); Yousef
v. Passamaquoddy Tribe, 876 F.2d 283, 286 (2d
Cir. 1989). See also Charles Alan Wright & Arthur
R. Miller, 9 Federal Practice and Procedure
sec.2363 at p. 259 (2d ed. 1994).
What is more, the district court’s description
of its original dismissal as one "without
prejudice" is at best misleading. The judge’s
rationale for dismissing the state-law deception
claim sounds like an invocation of Fed. R. Civ.
P. 9(b), which implied that Berthold could plead
anew with an express allegation that Adobe had
known Berthold’s prices, but the rationale for
dismissing the contract and Lanham Act claims did
not allow repleading. Perhaps it made sense to
describe the dismissal overall as "without
prejudice" in the sense that the judge agreed to
receive the amended complaint and planned to
enter a final judgment with prejudice on the
contract and Lanham Act claims at the end of the
suit, but, if this was the plan, the court did
not carry through, and here as in Otis v.
Chicago, 29 F.3d 1159 (7th Cir. 1994) (en banc),
the district court’s failure to finish the
litigation with the proper judgment has led to
unnecessary uncertainty and conflict. The
contract and Lanham Act claims were (and remain)
over and done with; the state-law statutory
claim, which might have been amended to pass
muster under Rule 9(b), was not amended, and so
it too has been conclusively resolved in Adobe’s
favor. But the final judgment entered by the
district court does not reflect any of these
outcomes.
Seizing on the words "without prejudice",
Berthold insists that Adobe either cannot appeal
at all (because it is not aggrieved by the
judgment) or has appealed too late (because it
should have appealed as soon as the district
court’s order was entered, arguing that the court
erred in failing to dismiss the complaint with
prejudice). Neither branch of the argument is
persuasive. Adobe is out of pocket the amount it
has paid its attorneys; this concrete loss means
that it is aggrieved by the outcome and entitled
to appeal in pursuit of legal fees without regard
to the district judge’s decision to apply the
label "without prejudice." See Citizens for a
Better Environment v. The Steel Co., 230 F.3d
923, 926-29 (7th Cir. 2000). Nor can Adobe be
blamed for waiting until the conclusion of the
case in the district court. The order dismissing
Berthold’s first complaint but allowing it to
file a second was not a "final decision" and
therefore could not be appealed under 28 U.S.C.
sec.1291. See Van Cauwenberghe v. Biard, 486 U.S.
517, 521-22 (1988); Catlin v. United States, 324
U.S. 229, 233 (1945). Adobe appealed as soon as
it was able, and it has not forfeited any rights
by failing to act quicker (or otherwise) than it
did.
Adobe persuaded the district judge to knock out
Berthold’s contract claim--and to do so in a way
that logically precludes revival in this or any
later suit. Berthold does not contend that the
decision is substantively incorrect, nor does it
contest the district court’s failure to employ
summary judgment procedures. Adobe therefore is
the "prevailing party," see Citizens for a Better
Environment, 230 F.3d at 929-30, and is entitled
to attorneys’ fees under the contract. The Lanham
Act claim arose "in connection with" the
contract, so Adobe is entitled to recover the
legal fees devoted to defending that claim as
well.
Berthold could not cancel Adobe’s entitlement by
amending its complaint and then dismissing the
amended complaint. If even the parties’ mutual
assent cannot wipe a judicial decision from the
books, see U.S. Bancorp Mortgage Co. v. Bonner
Mall Partnership, 513 U.S. 18 (1994), a
unilateral dismissal under Rule 41(a)(1)(i)
cannot do so. See Lee v. River Forest, 936 F.2d
976, 981 (7th Cir. 1991). Cf. Villegas v.
Princeton Farms, Inc., 893 F.2d 919, 924 (7th
Cir. 1990) (same conclusion under Rule 41(a)(2)).
Berthold litigated, and lost on the merits,
claims arising from its contract with Adobe, and
as a result it must reimburse Adobe for the legal
expenses of its defense.
One question remains: Whether Berthold was
entitled to dismiss its new claim (the one
alleging wrongful interference with contract)
under Rule 41(a)(1)(i). The district court
allowed Berthold to do this because Adobe had
neither answered the amended complaint nor filed
a motion for summary judgment. Adobe argues on
appeal that its motion to dismiss this claim,
although captioned as a motion to dismiss under
Rule 12(b)(6), really was a motion for summary
judgment because counsel attached (and relied on)
materials outside the complaint. For reasons
already mentioned, this is not so. A motion to
dismiss must be treated as a motion for summary
judgment if the judge considers matters outside
the complaint, but the judge may elect to treat
a motion as what it purports to be and disregard
the additional papers. Berthold filed its notice
of dismissal under Rule 41(a)(1)(i) before the
district judge could decide whether to consider
Adobe’s additional submissions. So far as the
wrongful-interference claim is concerned,
therefore, Adobe had filed neither an answer nor
a motion for summary judgment.
Nonetheless, Rule 41(a)(1)(i) does not speak of
dismissing one claim in a suit; it speaks of
dismissing "an action"--which is to say, the
whole case. This is exactly what Berthold tried
to do. Thus the right question is not whether
Adobe had filed an answer or motion for summary
judgment directed to this claim, newly added by
amendment. It is instead whether Adobe had filed
an answer or motion for summary judgment in the
"action"-- and to this question the answer is
yes, because Adobe’s motion to dismiss the
initial claim had to be treated as a motion for
summary judgment once the district judge
considered matters outside the complaint, as she
did. (Recall that the judge relied on the
contract, which was not part of the complaint.)
Berthold thus lost its privilege to dismiss the
action by notice under Rule 41(a)(1)(i).
The order of the district court denying Adobe’s
motion for attorneys’ fees is vacated, and the
case is remanded with instructions to determine,
and award, the legal expenses reasonably incurred
in defending the aspects of this litigation that
arose "in connection with" the 1998 contract. The
contract entitled Adobe to recover costs and fees
incurred in appeal, so the district court should
include these expenses in the award. The district
court also should proceed to resolve the
wrongful-interference claim on the merits, unless
that claim is dismissed under authority other
than Rule 41(a)(1)(i).