Global Technology & Trading, Inc. v. Tech Mahindra Ltd.
789 F.3d 730, 2015 U.S. App. LEXIS 10057, 2015 WL 3654239 (2015)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A defendant's failure to raise an affirmative defense in the initial answer, as directed by Federal Rule of Civil Procedure 8(c), does not automatically result in forfeiture if the plaintiff is not prejudiced by the delay, as district courts have discretion to permit untimely affirmative defenses.
Facts:
- Global Technology & Trading, Inc. ('Global') orally agreed to act as a business broker for Satyam Computer Services ('Satyam') in its acquisition of Bridge Strategy Group, LLC.
- Bridge Strategy Group was a business operating in Illinois.
- Global was not registered as a business broker in Illinois, as required by the Illinois Business Brokers Act.
- The brokerage agreement between Global and Satyam was not in writing, also in violation of the Act.
- Global successfully brokered the acquisition for Satyam.
- After the deal closed, Satyam refused to pay Global its commission.
- At the time of their agreement and the subsequent dispute, both Global and its lawyers were unaware of the Illinois Business Brokers Act.
Procedural Posture:
- Global Technology & Trading, Inc. sued Satyam Computer Services in an Illinois state court for breach of contract.
- Satyam removed the case to the U.S. District Court for the Northern District of Illinois, a federal trial court, based on alien diversity jurisdiction.
- In its answer to the complaint, Satyam did not raise the Illinois Business Brokers Act as a defense.
- Four years into the litigation, Satyam filed a motion for summary judgment, raising the Business Brokers Act as a defense for the first time.
- The district court granted summary judgment for Satyam, finding that the delay was excusable because Global was not prejudiced.
- Global (appellant) appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit, with Satyam as the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a defendant's failure to plead an affirmative defense in the answer, as required by Federal Rule of Civil Procedure 8(c), automatically result in the forfeiture of that defense?
Opinions:
Majority - Easterbrook, Circuit Judge.
No. A defendant’s failure to plead an affirmative defense in the answer does not automatically result in its forfeiture. While Federal Rule of Civil Procedure 8(c) states that affirmative defenses 'must' be raised in the answer, it does not specify a consequence for failure to do so. Unlike other rules that explicitly state that omission results in waiver, Rule 8(c) is silent. District courts may permit a defendant to raise an untimely affirmative defense, provided the plaintiff does not suffer prejudice, which is defined as a reduction in the plaintiff's ability to respond to the defense on the merits, not merely the financial cost of litigation. This discretion is also supported by other federal rules, such as Rule 6(b) for excusable neglect and Rule 15(a) for amending pleadings. In this case, Global suffered no prejudice to its ability to litigate the defense, and the delay was understandable as both parties' counsel were unaware of the obscure state statute for years.
Analysis:
This decision reaffirms the prevailing flexible standard among federal circuits, prioritizing substance over procedural technicalities in the application of Rule 8(c). It clarifies that forfeiture of an affirmative defense is not automatic and hinges on a finding of prejudice, which it narrowly defines as a substantive disadvantage in litigating the merits, not just the added expense of litigation. This approach provides a safety net for defendants who inadvertently omit a defense, while still protecting plaintiffs from being unfairly disadvantaged by an unreasonable delay. The ruling solidifies the principle that district courts have broad discretion to manage pleadings to achieve a just outcome.
