Law360

A plaintiff files a complaint in federal court that cites or refers to documents — newspaper articles, blog posts, U.S. Securities and Exchange Commission filings, agency reports, press releases, and more — but does not attach any of these documents as exhibits to the filed complaint. If the defendant submits copies of the referenced documents with its motion to dismiss under Rule 12(b)(6), may the district court rely on those documents as a basis for dismissal without converting the motion to a motion for summary judgment?

Authors: Brian A. Sutherland James C. Martin

The Ninth Circuit took up this subject in Khoja v. Orexigen Therapeutics Inc. (filed Aug. 13, 2018), after perceiving a need to clarify “when and how” a district court should consider documents that a plaintiff does not file with its complaint. The court’s opinion expresses unmistakable hostility to the practice of relying on documents incorporated into the complaint by reference and, in the process, breaks new ground. The message for defendants is this: Limit the number of documents you submit with your Rule 12(b)(6) motion and provide a substantial justification for each one. And then prepare to litigate the inclusion of any and all of them.

Khoja is a securities fraud class action against a biotechnology firm, Orexigen, and three of its executive officers. The plaintiff alleged that Orexigen and its executives caused the dissemination of interim clinical trial data without disclosing that the data were statistically unreliable. The complaint referenced and relied on numerous documents, the publication of which allegedly caused the price of Orexigen’s publicly traded shares to rise and fall. The defendants moved to dismiss under Rule 12(b)(6) and submitted 22 documents with their motion. The district court concluded that it could consider 21 of them, and dismissed the complaint.

In its detailed opinion, the district court reviewed then-existing Ninth Circuit case law, including United States v. Ritchie — a case on which the panel would subsequently rely in reversing — and held that most of the exhibits were incorporated by reference because they were “explicitly referenced and relied on” in the consolidated complaint and the plaintiff did not contest their authenticity. This reasoning was consistent with Ritchie, which had stated that a document may be incorporated into a complaint if the plaintiff “refers extensively to the document” but did not hold that “extensive” reference was a condition precedent to incorporation.