Judges: Easterbrook
Filed: Jun. 15, 2015
Latest Update: Mar. 02, 2020
Summary: In the United States Court of Appeals For the Seventh Circuit _ No. 14---3045 GLOBAL TECHNOLOGY & TRADING, INC., and MANOJ JAIN, Plaintiffs---Appellants, v. TECH MAHINDRA LIMITED, formerly known as SATYAM COMPUTER SERVICES LIMITED, Defendant---Appellee. _ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 5111 — William T. Hart, Judge. _ ARGUED MAY 28, 2015 — DECIDED JUNE 15, 2015 _ Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judg
Summary: In the United States Court of Appeals For the Seventh Circuit _ No. 14---3045 GLOBAL TECHNOLOGY & TRADING, INC., and MANOJ JAIN, Plaintiffs---Appellants, v. TECH MAHINDRA LIMITED, formerly known as SATYAM COMPUTER SERVICES LIMITED, Defendant---Appellee. _ Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 5111 — William T. Hart, Judge. _ ARGUED MAY 28, 2015 — DECIDED JUNE 15, 2015 _ Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judge..
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-‐‑3045
GLOBAL TECHNOLOGY & TRADING, INC., and MANOJ JAIN,
Plaintiffs-‐‑Appellants,
v.
TECH MAHINDRA LIMITED, formerly known as SATYAM
COMPUTER SERVICES LIMITED,
Defendant-‐‑Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 C 5111 — William T. Hart, Judge.
____________________
ARGUED MAY 28, 2015 — DECIDED JUNE 15, 2015
____________________
Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judges.
EASTERBROOK, Circuit Judge. The Illinois Business Brokers
Act of 1995 requires brokers for the sale of businesses in the
state to register. 815 ILCS 307/10-‐‑10. Brokerage agreements
must be in writing. 815 ILCS 307/10-‐‑35. Promises to pay un-‐‑
registered brokers for their services are unenforceable. 815
ILCS 307/10-‐‑60. Global Technology & Trading, Inc., appar-‐‑
ently was unaware of this statute when it orally agreed with
2 No. 14-‐‑3045
Satyam Computer Services to act as a broker in the purchase
of Bridge Strategy Group, LLC, a business operating in Illi-‐‑
nois. (Satyam, based in India, is now known as Tech Mahin-‐‑
dra; we use its old name for congruence with the district
court’s opinion and the parties’ submissions.)
Global brokered the acquisition, but Satyam refused to
pay for its services. Global sued in state court, seeking a 3%
commission (about $600,000). Satyam removed to federal
court under the alien diversity jurisdiction. 28 U.S.C.
§§ 1332(a)(2), 1441(b). It contended that Bridge Strategy had
compensated Global for its services as an intermediary and
that it had never promised any additional compensation.
The lack of a writing, according to Satyam, reflects the fact
that there is no agreement, period.
Pleadings were exchanged and discovery conducted.
When the litigation was four years old, Satyam filed a mo-‐‑
tion for summary judgment with a brand new argument:
that Global is not registered under the Business Brokers Act
and for this reason, as well as the oral nature of the promise
Global sought to enforce, the Act blocks any relief. Global
was taken aback; apparently its lawyers, like its principals,
had never heard of the Business Brokers Act. Global has not
denied that the Act, if applied, dooms this lawsuit. But it
maintains that the Act is an affirmative defense, which un-‐‑
der Fed. R. Civ. P. 8(c) had to appear in Satyam’s answer to
the complaint. By waiting four years to invoke the Act,
Global insists, Satyam has forfeited its benefit.
Rule 8(c) says that a defendant “must” include all affirm-‐‑
ative defenses in the answer to the complaint. The district
court analogized §307/10-‐‑35 (the written-‐‑contract require-‐‑
ment) to a Statute of Frauds and concluded that the Business
No. 14-‐‑3045 3
Brokers Act is an affirmative defense. But the court added
that Rule 8(c) does not specify a consequence for a litigant’s
failure to include an affirmative defense in an answer. Sev-‐‑
eral of our decisions hold that a district court may (though it
need not) permit an untimely affirmative defense, provided
the plaintiff does not suffer prejudice from the delay. See,
e.g., Williams v. Lampe, 399 F.3d 867, 871 (7th Cir. 2005);
Schmidt v. Eagle Waste & Recycling, Inc., 599 F.3d 626, 632 (7th
Cir. 2010). Most other circuits follow the same approach. See,
e.g., Brinkley v. Harbour Recreation Club, 180 F.3d 598, 612–13
(4th Cir. 1999); Camarillo v. McCarthy, 998 F.2d 638, 639 (9th
Cir. 1993); Moore, Owen, Thomas & Co. v. Coffey, 992 F.2d
1439, 1445 (6th Cir. 1993); Kleinknecht v. Gettysburg College,
989 F.2d 1360, 1374 (3d Cir. 1993); Ball Corp. v. Xidex Corp.,
967 F.2d 1440, 1443–44 (10th Cir. 1992).
Williams and Schmidt add that the expense of conducting
a suit does not count as prejudice; what they mean by “prej-‐‑
udice” is a reduction in the plaintiff’s ability to meet the de-‐‑
fense on the merits—if, say, a witness has died, or docu-‐‑
ments have been destroyed, during the time between when
the defense should have been raised and when it was actual-‐‑
ly raised. Finding that Global had not suffered prejudice, the
district court excused Satyam’s delay and entered judgment
in its favor.
Global contends that Williams and similar decisions are
inconsistent with the language of Rule 8(c), which says that
affirmative defenses “must” be raised no later than the an-‐‑
swer to the complaint. Yet Rule 8(c) does not provide a con-‐‑
sequence for delay. It differs in this respect from Fed. R.
Crim. P. 12(e), which until recently provided that the omis-‐‑
sion of an affirmative defense from pretrial motions practice
4 No. 14-‐‑3045
in a criminal case “waives” that defense; the civil rules say
nothing of the sort. Criminal Rule 12(e) has been replaced by
Fed. R. Crim. P. 12(c)(3), which says that failure to raise a de-‐‑
fense on time blocks its presentation unless the district judge
finds “good cause” for the delay; this language, too, is with-‐‑
out a parallel in Civil Rule 8(c)—though it does have a paral-‐‑
lel in Civil Rule 12(h)(1), which says that four specific de-‐‑
fenses are waived by their omission from the answer or a
motion governed by Rule 12(g)(2). Affirmative defenses un-‐‑
der Rule 8(c) are not on the list of those waived by omission.
Although Civil Rule 8(c) does not specify a consequence
for the omission of an affirmative defense, a different rule
authorizes district judges to excuse untimely filings. Rule
6(b)(1)(B) provides that a judge may extend the time to do
something, even after the deadline has passed, “if the party
failed to act because of excusable neglect.” See Pioneer In-‐‑
vestment Services Co. v. Brunswick Associates L.P., 507 U.S. 380
(1993) (defining “excusable neglect”). Some deadlines cannot
be extended under any circumstances, see Rule 6(b)(2), but
Rule 8(c) is not on that list. The district court did not make
an excusable-‐‑neglect finding, perhaps because none of the
litigants drew Rule 6(b)(1)(B) to its attention—even in this
court neither side mentions it—but a basis for such a finding
is easy to appreciate. Until shortly before Satyam filed its
motion, no one knew about the Business Brokers Act. Global
and its lawyers, Satyam and its lawyers, and the judge all
were in the dark about a statute that has been called a pitfall
for the unwary. The Illinois Business Brokers Act: Pitfalls for the
Unwary, 85 Ill. B.J. 542 (1997). Professional business brokers
doubtless know about the Act and follow its rules, but
someone who occasionally or rarely serves as an intermedi-‐‑
ary may not. Pioneer Investment Services holds that district
No. 14-‐‑3045 5
judges have discretion when evaluating claims of excusable
neglect; had the judge been asked to exercise that discretion,
he would not have abused it by allowing Satyam to invoke
the Act belatedly. As a practical matter, that’s what the dis-‐‑
trict judge did by relying on Williams and similar decisions.
Alternatively, the district court might have turned to
Rule 15(a)(2), which provides that judges may allow plead-‐‑
ings to be amended and “should freely give leave when jus-‐‑
tice so requires.” The only circuit that has nominally rejected
the approach of Williams and Schmidt has reached the same
functional result by using Rule 15(c)(2) to allow belated
amendments to add affirmative defenses. See Jackson v. Dis-‐‑
trict of Columbia, 254 F.3d 262, 267 (D.C. Cir. 2001); Harris v.
Secretary of Veterans Affairs, 126 F.3d 339, 345 (D.C. Cir. 1997).
Jackson says that the district judge should allow the amend-‐‑
ment when that would not prejudice the plaintiff’s oppor-‐‑
tunity to address the merits. That’s the Williams and Schmidt
approach by another name. (The Fifth Circuit’s approach
likewise differs from Williams and Schmidt in nomenclature
but not result. See Lucas v. United States, 807 F.2d 414, 417–18
(5th Cir. 1986).)
Global observes that litigation should be efficiently man-‐‑
aged, see Fed. R. Civ. P. 1, and that it is inefficient to allow
matters to last for four years longer than necessary. That’s
true enough, but it takes chutzpah for Global to blame
Satyam. Had Global’s lawyers done better legal research be-‐‑
fore suing, see Fed. R. Civ. P. 11(b)(2), they would have rec-‐‑
ognized that the Business Brokers Act makes recovery im-‐‑
possible. The bills Global has footed in this suit stem from its
own lawyers’ poor preparation. Global should count itself
lucky that the district court did not impose a sanction for fil-‐‑
6 No. 14-‐‑3045
ing what is, with knowledge of the Act, a frivolous suit. For
their part, Satyam’s lawyers failed to track down the Busi-‐‑
ness Brokers Act early in the litigation, but that delay carries
a self-‐‑inflicted penalty: under the American Rule, Satyam
must bear its own legal fees for the extra years this suit lin-‐‑
gered. It is unnecessary for the judiciary to be stingy with
extensions of the Rule 8(c) deadline, or with amendments
under Rule 15(a)(2), since both plaintiffs and defendants
want to recognize and raise affirmative defenses as soon as
possible, in order to cut their own legal bills.
We need not decide whether the Business Brokers Act is
an affirmative defense for the purpose of Rule 8(c). We de-‐‑
cline to overrule Williams and similar decisions. District
judges have authority to authorize a litigant to assert an af-‐‑
firmative defense despite its omission from the answer. That
authority was not abused in this case.
AFFIRMED