New England Anti-Vivisection Soc., Inc. v. U.S. Surgical Corp., Inc., ANTI-VIVISECTION

• Citation: 889 F.2d 1198
• Decision Date: 03 October 1989
• Docket Number: ANTI-VIVISECTION,No. 89-1549,89-1549
• Parties: Fed. Sec. L. Rep. P 94,800 NEW ENGLANDSOCIETY, INC., Plaintiff, Appellant, v. UNITED STATES SURGICAL CORPORATION, INC., Defendant, Appellee. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 1198

889 F.2d 1198

Fed. Sec. L. Rep. P 94,800

NEW ENGLAND ANTI-VIVISECTION SOCIETY, INC., Plaintiff, Appellant, v. UNITED STATES SURGICAL CORPORATION, INC., Defendant, Appellee.

No. 89-1549.

United States Court of Appeals, First Circuit.

Heard Oct. 3, 1989.

Decided Nov. 27, 1989.

Rehearing Denied Jan. 16, 1990.

Steven M. Wise, with whom Fraser & Wise, P.C., Boston, Mass., was on brief, for plaintiff, appellant.

Sanford M. Litvack, with whom Dewey, Ballantine, Bushby, Palmer & Wood, Peter B. Ellis, and Foley, Hoag & Eliot, Boston, Mass., were on brief, for defendant, appellee.

Before BOWNES, Circuit Judge, TIMBERS, ^* Senior Circuit Judge, and TORRUELLA, Circuit Judge.

TIMBERS, Circuit Judge:

In this action to enjoin the holding of an annual meeting because of alleged false and misleading statements in a company's proxy materials, appellant, New England Anti-Vivisection Society, Inc. ("NEAVS"), appeals from a judgment entered April 24, 1989, in the District of Massachusetts, Douglas P. Woodlock, District Judge, which dismissed NEAVS' complaint, after a hearing on NEAVS' motion for a preliminary injunction was consolidated, pursuant to Fed.R.Civ.P. 65(a)(2), with a trial on the merits.

NEAVS' complaint alleged that a proxy statement issued by the United States Surgical Corporation ("the Company") contained false and misleading statements regarding a shareholders' resolution, in violation of Section 14(a) of the Securities and Exchange Act of 1934, 15 U.S.C. Sec. 78n(a) (1988) ("1934 Act") and Rule 14a-9 promulgated thereunder, 17 C.F.R. Sec. 240.14a-9 (1989). The district court after a bench trial entered judgment for the Company, finding nothing false or misleading about the proxy materials and, consequently, no violation of the federal securities laws.

On appeal, NEAVS asserts that we should review the case as though it were an appeal from a summary judgment, rather than from an order under Rule 65(a)(2). It also asserts that the district court applied the wrong legal standard to determine the sufficiency of the Company's statements in its proxy materials under Rule 14a-9 and 15 U.S.C. Sec. 78n(a). It further asserts that the district court erred in refusing to strike the affidavit of Thomas R. Bremer, Vice-President and General Counsel of the Company.

We affirm.

I.

We shall summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.

United States Surgical Corporation, a New York corporation with its principal place of business in Norwalk, Connecticut, is engaged in the business of manufacturing and selling medical products, including devices for closing surgical wounds by stapling. From the time it began marketing its stapling products, the Company has used dogs for research purposes and to train physicians in the use of its products.

On November 14, 1988, NEAVS, a Massachusetts charitable corporation with its principal place of business in Boston, and Ms. Priscilla Feral ("Feral") submitted a shareholders' proposal for inclusion in the Company's proxy statement, to be acted upon at its May 2, 1989 annual shareholders meeting. The proposal sought a resolution that the Company should cease using dogs or other animals in its business and sales operations unless required by law. The resolution set forth a five paragraph preamble, which criticized the Company's use of dogs in its business and sales operations. ¹

On or about March 13, 1989, the Company mailed its proxy materials for the annual meeting and included the resolution exactly as submitted. The Board of Directors ("the Board") also set forth its objections to the resolution and its recommendation that the shareholders vote against it. At the May 2 annual meeting, more than 97% of the Company's stock voted to reject the proposed resolution.

NEAVS commenced the instant action on April 12, 1989, and filed a motion for preliminary and permanent injunctions to void all proxies the Company had received and would receive, to correct allegedly false and misleading statements in the proxy materials, and to continue the May 2 annual meeting until after the time a new proxy solicitation had been sent. The amended verified complaint and motion for a preliminary injunction alleged that the proxy statement issued by the Company contained false and misleading statements regarding the proposed resolution. NEAVS challenged the following statements made by the Board as false and misleading:

1. "The preamble of the resolution, which purports to be a factual rationale of the action to be taken, the Company believes is false throughout."

2. "Priscilla Feral for years has attempted by demonstrations, threats and misrepresentations to the media, to prohibit the Company's legal and essential use of live animal tissue (of approximately 1,000 animals per year)."

3. "Only the animal rights activists have attempted to damage the Company's image and reputation, and it is an unsupportable cynicism on their part to urge their own unsuccessful attempts as a basis for approving their proposal."

Specifically, NEAVS claimed that the statement that the preamble was "false throughout" itself was false and misleading because the preamble in fact was true; that the reference to Feral's past attempts to prohibit the Company's use of "live animal tissue" was false and misleading because the statement made it appear that what was at issue was not the use of the whole dog, but only a portion of the dog; and that the statement that "[o]nly the animal rights activists have attempted to damage the Company's image and reputation" was false and misleading because the Company itself, and not animal rights activists, had caused damage to its image and reputation by its use of dogs.

On April 24, 1989, the district court held a hearing on NEAVS' motion for a preliminary injunction. At the outset of the hearing, the court asked counsel whether there was any objection to consolidating, pursuant to Rule 65(a)(2), the hearing on the preliminary injunction motion with a trial on the merits. NEAVS' counsel initially objected. After some discussion with counsel, however, the court announced its intention to consolidate. At that point, NEAVS' counsel did not raise any objection, nor did he request additional time. At the conclusion of the hearing, the court repeated that the motion had been consolidated with the trial on the merits. NEAVS' counsel remained silent, raising no objections to the court's statement.

In its oral statement of reasons for judgment in favor of the Company, the district court found nothing false or misleading about the Company's statements regarding the shareholders' resolution. This appeal followed.

For the reasons stated below, we affirm the judgment of the district court.

II.

We turn first to NEAVS' contention that the applicable standard of review here should be no broader than that applied in reviewing a summary judgment where the evidence is viewed in the light most favorable to the party against whom judgment was entered. NEAVS asserts that the district court improperly invoked Rule 65(a)(2) since its counsel had objected to a consolidation and assented only to a hearing in the nature of cross-motions for summary judgment or a motion for judgment on the pleadings. According to NEAVS, we should review this case as though it were an appeal from an order granting a motion for summary judgment, rather than as an appeal from a judgment after a trial on the merits. ² Fed.R.Civ.P. 65(a)(2) provides that "[b]efore or after the commencement of the hearing of an application for a preliminary injunction, the court may order the trial of the action on the merits to be advanced and consolidated with the hearing of the application."

Courts may order consolidation only after " 'clear and unambiguous notice ... either before the hearing commences or at a time which will still afford the parties a full opportunity to present their respective cases.' " University of Texas v. Camenisch, 451 U.S. 390, 395, (1981) (citations omitted). We recently have held that, once a party is clearly advised of the court's intention to proceed under Rule 65(a)(2), unless a party raises an immediate objection, it may not be heard to complain later. K-Mart Corp. v. Oriental Plaza Inc., 875 F.2d 907, 913-14 (1st Cir.1989).

In the instant case, the Company, in its papers opposing NEAVS' motion for a preliminary injunction, filed April 19, initially requested the district court to invoke Rule 65(a)(2). At the commencement of the trial, Judge Woodlock asked counsel for NEAVS whether he had an objection to the "suggestion ... that we ought to conflate this hearing into a trial on the merits." NEAVS' counsel replied, "Yes, I do, Judge." Thereafter, NEAVS' counsel suggested alternatives to the Rule 65(a)(2) procedure, namely, something "in the nature of a motion for judgment on the pleadings or a cross motion for summary judgment or something like that." During this discussion with counsel, in which the court pointed out that the case is "either one way or the other", the court ultimately decided to proceed under Rule 65(a)(2). It announced that "whatever I do today--unless you have additional materials or something that you want to bring to my attention--is likely to dispose of the matter in this Court." At this point, NEAVS' counsel stated "[t]hen I don't have an objection." The court then asked the Company's counsel whether he had any objection. He replied: "No, Your Honor. I agree that whatever you do ought to dispose of the matter for the District Court." The trial proceeded accordingly. At the conclusion of the trial, Judge Woodlock repeated that the matter had been consolidated under Rule 65(a)(2). ³ Again, NEAVS did not object to the court's determining the matter on the merits nor did it request leave to produce additional evidence.

In view of NEAVS' failure to object to the district court's "clear and unambiguous"...