Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-03045/USCOURTS-ca7-14-03045-0/pdf.json

Parties Involved:
Global Technology & Trading, Inc.
Appellant
Manoj Jain
Appellant
Satyam Computer Services Limited
Appellee
Tech Mahindra Limited
Appellee

Document Text:

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 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 

Case: 14-3045 Document: 39 Filed: 06/15/2015 Pages: 6
2 No. 14-3045

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 

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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. 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 

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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 specific defenses are waived by their omission from the answer or a 

motion governed by Rule 12(g)(2). Affirmative defenses under 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 Investment 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 intermediary may not. Pioneer Investment Services holds that district 

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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 district 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 pleadings to be amended and “should freely give leave when justice 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. District 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 amendment when that would not prejudice the plaintiff’s opportunity 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 managed, 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 before suing, see Fed. R. Civ. P. 11(b)(2), they would have recognized that the Business Brokers Act makes recovery impossible. 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 filCase: 14-3045 Document: 39 Filed: 06/15/2015 Pages: 6
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 Business 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 lingered. 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 decline to overrule Williams and similar decisions. District 

judges have authority to authorize a litigant to assert an affirmative defense despite its omission from the answer. That 

authority was not abused in this case.

AFFIRMED

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