GLOBAL TECHNOLOGY & TRADING, INC., and MANOJ JAIN, Plaintiffs-Appellants,
TECH MAHINDRA LIMITED, formerly known as SATYAM COMPUTER SERVICES LIMITED, Defendant-Appellee
Argued May 28, 2015.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 09 C 5111 -- William T. Hart, Judge.
GLOBAL TECHNOLOGY & TRADING, INC., an Illinois corporation, Manoj Jain, Plaintiff - Appellant, Michael W. Tootooian, Attorney, Hinsdale, IL.
Tech Mahindra Limited, formerly known as: SATYAM COMPUTER SERVICES LIMITED, Defendant - Appellee: Christopher T. Conrad, Attorney, Barrington, IL.
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 unregistered brokers for their services are unenforceable. 815 ILCS 307/10-60. Global Technology & Trading, Inc., apparently was unaware of this statute when it orally agreed with Satyam Computer Services to act as a broker in the purchase of Bridge Strategy Group, LLC, a business operating in Illinois. (Satyam, based in India, is now known as Tech Mahindra; 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 motion 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 under 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 affirmative defenses in the answer to the complaint. The district court analogized § 307/10-35 (the written-contract requirement) to a Statute of Frauds and concluded that the Business 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. Several 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 " prejudice" is a reduction in the plaintiff's ability to meet the defense on the merits--if, say, a witness has died, or documents have been destroyed, during the time between when the defense should have been raised and when it was actually 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 answer to the complaint. Yet Rule 8(c) does not provide a consequence for delay. It differs in this respect from Fed. R. Crim. P. 12(e), which until recently provided that the omission of an affirmative defense from pretrial motions practice 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 defense on time blocks its presentation unless the district judge finds " good cause" for the delay; this language, too, is without a parallel in Civil Rule 8(c)--though it does have a parallel in Civil Rule 12(h)(1), which says that four ...