Global Technology & Trading, Inc. v. Tech Mahindra Ltd. , 789 F.3d 730 ( 2015 )

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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