Opinion ID: 4539951
Heading Depth: 2
Heading Rank: 2

Heading: Waiver and Forfeiture of Res Judicata

Text: So what happens when an aﬃrmative defense is not raised in accordance with Rule 8(c)? An aﬃrmative defense is waived when it has been knowingly and intelligently relin‐ quished and forfeited when the defendant has failed to pre‐ serve the defense by pleading it. Reed, 915 F.3d at 478, citing Wood v. Milyard, 566 U.S. 463, 470 & n.4 (2012). A district court may, however, exercise its discretion to allow a late aﬃrma‐ tive defense if the plaintiﬀ does not suﬀer prejudice from the delay. Global Technology & Trading, Inc. v. Tech Mahindra Ltd., No. 19‐1360 9 789 F.3d 730, 732 (7th Cir. 2015); Garofalo v. Village of Hazel Crest, 754 F.3d 428, 436 (7th Cir. 2014); see also Fed. R. Civ. P. 15(a)(2) (courts should freely grant leave to amend pleadings when justice requires). An aﬃrmative defense that is not raised in a defendant’s first answer is not necessarily untimely and forfeited. Only when the defense is asserted later than it should have been do prejudice and the district judge’s discretion become relevant. If a defendant could not have reasonably known of the avail‐ ability of an aﬃrmative defense at the time of the answer, rais‐ ing that defense through later amendment should be consid‐ ered timely, and the district court should grant leave to amend under Rule 15(a)(2). This will often be the case where the basis for the defense is disclosed through discovery. See Venters, 123 F.3d at 967–68. If the defense is raised promptly after the basis for it becomes available, there will ordinarily be no unfair prejudice to the plaintiﬀ, and amendment under Rule 15(a)(2) will be appropriate. See id. at 967. But if the defense is untimely and the delay prejudices (i.e., significantly harms) the plaintiﬀ, it is forfeited and normally may not be considered by the court. Reed, 915 F.3d at 478–79. Cf. Jackson, 213 F.3d at 393 (“As a rule, we have allowed de‐ fendants to amend when the plaintiﬀ had adequate notice that a statute of limitations defense was available, and had an adequate opportunity to respond to it despite the defendant’s tardy assertion.”), citing Venters, 123 F.3d at 968.1 1 Under certain circumstances, a court may invoke res judicata or claim preclusion sua sponte to defend the institutional interests of the judi‐ ciary. Arizona v. California, 530 U.S. 392, 412–13 (2000). As described below, these circumstances are absent here. 10 No. 19‐1360 By “prejudice,” we do not mean whether the defense will succeed on the merits and cause the plaintiﬀ to lose. We mean unfair prejudice, meaning that the late assertion of the defense causes some unfairness independent of the potential merits of the defense. For example, in Reed v. Columbia St. Maryʹs Hos‐ pital, we held that a plaintiﬀ was prejudiced by an untimely defense first raised at summary judgment, based on infor‐ mation that had always been in the defendant’s control, be‐ cause the timing deprived her of notice and the opportunity to prepare to meet the defense through discovery. 915 F.3d at 482. In Venters v. City of Delphi, we identified a more proce‐ dural form of prejudice: the way the defense was raised harmed the plaintiﬀ by impairing her ability to respond eﬀec‐ tively. The defendant in Venters first raised its aﬃrmative de‐ fense in its reply memorandum in support of a motion for summary judgment. 123 F.3d at 969. Because the defense was presented “at the eleventh hour, without excuse and without adequate notice to the plaintiﬀ,” we reversed the grant of summary judgment and remanded for trial. Id. C. Amended Complaints and Revival of Waived or Forfeited Aﬃrmative Defenses Defendants argue that forfeiture, waiver, and prejudice do not matter here because Massey v. Helman, 196 F.3d 727 (7th Cir. 1999), requires district courts to allow new aﬃrmative de‐ fenses whenever a plaintiﬀ files an amended complaint. The district court allowed defendants’ late res judicata defense and dismissed the case based on this supposedly categorical rule. But Massey did not adopt or apply such a categorical rule and does not compel the revival of defendants’ untimely de‐ fense. No. 19‐1360 11 In Massey, we concluded that an aﬃrmative defense of fail‐ ure to exhaust administrative remedies was not waived when it was asserted in response to an amended complaint that changed the case substantially. 196 F.3d at 735. The initial Massey plaintiﬀ was a prisoner bringing an Eighth Amend‐ ment claim against prison oﬃcials. The defendants asserted their exhaustion defense only after an amended complaint added a prison doctor as a new plaintiﬀ and added a new First Amendment retaliation claim. Id. at 734–36. The new af‐ firmative defense was allowed after the plaintiﬀs had funda‐ mentally changed the scope of the case by adding an addi‐ tional plaintiﬀ and new theory of recovery. Defendants rely almost entirely on a single sentence of the Massey opinion: “Because a plaintiﬀ’s new complaint wipes away prior pleadings, the amended complaint opens the door for defendants to raise new and previously unmentioned af‐ firmative defenses.” Id. at 735. This sentence should not be read in isolation. When read in context, it does not support defendants’ proposed rule. We meant that the particular amended complaint at issue opened the door for new aﬃrmative defenses because of how significantly it changed the scope of the litigation.2 We explained: “To hold to the contrary would, in essence, enable plaintiﬀs to change their theory of the case while simultaneously locking defendants into their original 2 For support, this sentence cited Harris v. Secretary, U.S. Depʹt of Vet‐ erans Affairs, 126 F.3d 339, 343 n.2 (D.C. Cir. 1997), which is telling. The cited text in Harris said that an affirmative defense may be waived or for‐ feited when a defendant fails to plead it properly. If the defense is for‐ feited, the defendant may be able to recover it through a Rule 15 amend‐ ment, which will “cure any problem of timeliness associated with the for‐ feiture.” But under Rule 15, such amendments are granted at the discre‐ tion of the district judge. 12 No. 19‐1360 pleading.” Id. To deny the aﬃrmative defense under those cir‐ cumstances would “clearly contravene Federal Rule of Civil Procedure 15(a)” because the interests of justice required amendment. Id. Massey is best understood as an application of Rule 15(a)(2): when an amended complaint fundamentally changes the scope or theory of the case, the interests of justice will gen‐ erally allow a new, relevant aﬃrmative defense to be asserted. This is just a diﬀerent articulation of the principle that an un‐ pleaded defense is not forfeited when raised promptly once its availability becomes apparent. Defendants assert that any amendment, regardless of its scope, should open the door to any and all new defenses. A changed name, a substituted party, correcting a typograph‐ ical error? According to defendants, even the slightest change is enough. Defendants’ rule would drastically undermine dis‐ trict judges’ control over the pleading process under Rule 15 and would lose sight of Rule 1’s instruction to construe the Rules to secure the just, speedy, and inexpensive resolution of civil actions. In the usual course, the district judge should be free to exercise discretion within the bounds established by Rule 15, and Rule 15 does not require leave in every case. See Park v. City of Chicago, 297 F.3d 606, 612 (7th Cir. 2002). For example, the court “need not allow an amendment when there is undue delay [or] undue prejudice to the opposing party.” Bell v. Taylor, 827 F.3d 699, 705 (7th Cir. 2016), quoting Bethany Pharmacal Co., Inc. v. QVC, Inc., 241 F.3d 854, 861 (7th Cir. 2001); see also Wright & Miller, 5C Federal Practice & Pro‐ cedure § 1388 (“The filing of an amended complaint will not No. 19‐1360 13 revive the right to present by motion defenses that were avail‐ able but were not asserted in timely fashion prior to the amendment of the pleading.”). Other circuits have adopted the approach we apply here. In Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194 (11th Cir. 2011), the Eleventh Circuit held that a defendant should have been allowed to rescind its waiver of its right to arbitration when the plaintiﬀs amended their complaint to broaden the class definition. Id. at 1203. The court based its decision not on the mere fact of an amendment but explained that “when a plain‐ tiﬀ files an amended pleading that unexpectedly changes the shape of the case,” the case may be so altered that the defend‐ ant should be allowed to rescind its waiver. Id., citing Cabine‐ tree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995). The defense was “revived” by the amended complaint because “plain fairness” required it, id. at 1204, but the court did not imply that even a trifling amend‐ ment would have the same eﬀect.3 This case is outside the bounds of the Massey teaching be‐ cause the amended complaint did not change the theory or scope of the case in a way relevant to the new defense. Bur‐ ton’s amended complaint did not add a new cause of action, change the theory of liability, change the parties, assert new claims, or otherwise transform the litigation in any way. In‐ stead, it added detail to the existing factual allegations and 3 A frequently‐cited nonprecedential order, Manasher v. NECC Tele‐ com, 310 F. App’x 804, 807 (6th Cir. 2009), came to the same conclusion we reach here, affirming a denial of arbitration because the defendant had waived any right to arbitrate. The waived defense could not be revived in response to an amended complaint that “did not substantially change the theory or scope” of the case. Id. 14 No. 19‐1360 emphasized the delay in medical treatment as a part of Bur‐ ton’s deliberate‐indiﬀerence claim using information ob‐ tained from discovery. The minor amendments had nothing to do with a res judicata defense. They could not support al‐ lowing this new aﬃrmative defense so late in the case. Defendants also argue that the district judge’s instruction to “answer or otherwise plead to Plaintiﬀ’s amended com‐ plaint” was an invitation to raise new aﬃrmative defenses. This argument is without merit. First, a new answer is required when a complaint is amended. The district court merely com‐ plied with Rule 15(a)(3) by setting a 14‐day timeline for the “required response” to the amended pleading. No one con‐ tends that defendants were not permitted to respond to the amended complaint. But the invitation to answer an amended complaint should be understood as permission to plead in re‐ sponse to the amendments, as contemplated by Rule 15(a)(3), unless leave is expressly given to raise new defenses unre‐ lated to the amendments. In the usual course, this means re‐ sponding to the new substance of the amended complaint.4 4 Before 2007, Rule 15(a) specifically required that “[a] party shall plead in response to an amended pleading.” (2006). Courts interpreting this rule have understood this required responsive pleading to be limited in scope by the substance of amendments to the first pleading. See St. Paul Fire & Marine Insurance Co. v. Onvia, Inc., No. C06‐1056‐RSL, 2007 WL 1575955, at  (W.D. Wash. May 29, 2007) (allowing only responsive coun‐ terclaims following an amended complaint and noting that the approach “is predominant in the caselaw and consistent with Rule 15’s requirement that an amended pleading must ‘plead in response’ to the amended plead‐ ing”); E.E.O.C. v. Morgan Stanley & Co., Inc., 211 F.R.D. 225, 227 (S.D.N.Y. 2002) (“If every amendment, no matter how minor or substantive, allowed defendants to assert counterclaims or defenses as of right, claims that would otherwise be barred or precluded could be revived without cause. No. 19‐1360 15 Second, the district judge made clear in granting defend‐ ants’ motion to dismiss that she was not exercising discretion. Rather, the judge felt compelled by Massey to allow the new aﬃrmative defense. (Also, defendants did not actually “an‐ swer or otherwise plead” the aﬃrmative defense but instead raised the new defense in a motion to dismiss. See Fed. R. Civ. P. 7 (distinguishing pleadings from motions). Confusing pleadings and motions contributed to some of the problems presented by this appeal.) The district court erred in concluding that Massey required it to allow defendants’ new aﬃrmative defense. Because of the limited scope of the amendments, Burton’s amended com‐ plaint was irrelevant to defendants’ late assertion of an aﬃrm‐ ative defense. It did not wipe the slate clean and render irrel‐ evant the previous failure to raise it. D. Forfeiture of Defendants’ Res Judicata Defense We now consider whether the district court may, within its discretion, consider the res judicata defense on remand. Burton argues that the defense was waived or forfeited. We agree that the defense was forfeited, at least, and we agree with Burton that the untimely assertion of the defense preju‐ diced Burton. On this record, allowing defendants’ late res ju‐ dicata defense would be an abuse of discretion even under the liberal standard of Rule 15(a)(2). This would deprive the Court of its ability to effectively manage the liti‐ gation.”). We agree with this view. The Committee Notes on the 2007 Amendments to the Rules say that the changes to Rule 15 that gave it its current wording were “intended to be stylistic only.” 16 No. 19‐1360 Burton first argues that defendants have waived the res ju‐ dicata defense. When moving for reconsideration of the dis‐ trict court judgment, Burton submitted a sworn declaration from his first attorney, Joshua Grenard, who testified that he informed Dr. Ghosh’s prior counsel, Patrick Halliday, of the first case before Halliday even appeared in this new case. Hal‐ liday responded that he would not raise the untimely filing of the new complaint after the prior dismissal as a defense, and he filed an answer to the new complaint without raising res judicata. If these facts are correct, they would show a knowing and intelligent relinquishment—i.e., waiver by any defini‐ tion—of res judicata. See Wood, 566 U.S. at 470 n.4. This evi‐ dence was presented in the district court over a year before defendants submitted their briefs on appeal. Defendants have not contested this evidence. Instead, they have insisted that their notice of the earlier lawsuit is “immaterial.” It is not. But despite defendants’ repeated avoidance of this issue, we can‐ not settle the factual dispute now because it was not ad‐ dressed in the district court and the proper resolution of the issue is not “beyond doubt.” Metropolitan Milwaukee Assʹn of Commerce v. Milwaukee County, 325 F.3d 879, 884 (7th Cir. 2003), quoting AAR Intʹl, Inc. v. Nimelias Enterprises, S.A., 250 F.3d 510, 523 (7th Cir. 2001), quoting in turn Singleton v. Wulﬀ, 428 U.S. 106, 121 (1976). Beyond any factual dispute, however, defendants’ aﬃrm‐ ative defense was untimely and forfeited. Defendants were never served with the complaint and summons in the first case. But the key information at issue—the existence of the earlier lawsuit—was a matter of public record. Most im‐ portant, defendants were told about the previous case at sev‐ eral points during this second case. Burton referred to the ear‐ lier complaint during his deposition testimony in 2015, three No. 19‐1360 17 years before defendants raised their defense. He explained that he had filed an earlier complaint against another doctor at an IDOC facility and that there was “one big complaint” including that doctor, Dr. Ghosh, and others. Defense counsel responded that “the only complaint I have right now naming Dr. Ghosh … names Dr. Ghosh and Wexford Health Sources, the employer,” and moved on. Two years later, in June 2017, attorney Grenard moved to withdraw. His motion stated specifically that he had been re‐ cruited by the court to serve as pro bono counsel to Burton and cited the case number of the earlier matter. Even if these events were not enough to show intentional waiver, when combined with the six‐year history of the case, extensive dis‐ covery, and the public nature of the relevant information, they establish that the defense was untimely in 2018. We arrive at this conclusion even though the aﬃrmative defense focuses on omissions by Burton’s original counsel. He missed the deadline for filing an amended complaint and then said incorrectly on the civil cover sheet for the new case that it was “not a refiling of a previously dismissed action.” If he had correctly characterized the case as a refiling of the original case, the case would have been assigned to Judge Gettleman and any conflict with the earlier judgment could have been resolved immediately. Still, given the information available to defendants, six years is simply too long for this res judicata defense to be timely. Burton was prejudiced by the delay in raising the defense. Burton proceeded for over six years in pursuing this claim, including years of discovery. We have said that the expense of conducting a suit does not count as prejudice. Global Tech‐ nology & Trading, Inc. v. Tech Mahindra Ltd., 789 F.3d 730, 732 18 No. 19‐1360 (7th Cir. 2015), citing Williams v. Lampe, 399 F.3d 867, 871 (7th Cir. 2005), and Schmidt v. Eagle Waste & Recycling, Inc., 599 F.3d 626, 632 (7th Cir. 2010). But as this case shows, delay can dis‐ advantage a party in ways that go beyond mere cost. If the res judicata defense had been timely raised in the original answer, Burton would still have been able to seek re‐ lief from the earlier final judgment under Rule 60. The final judgment in the earlier case resulted from the odd metamor‐ phosis of a dismissal without prejudice into a dismissal with prejudice. This new case, in which a plaintiﬀ filed a new com‐ plaint several months late, would certainly permit an argu‐ ment that the error amounted to “excusable neglect” that would permit relief from judgment. Fed. R. Civ. P. 60(b)(1). The case for allowing relief from judgment would have been particularly strong because the lack of service in the first case meant that defendants were not prejudiced at all. Conditions imposed on voluntary dismissals are imposed to protect other parties from prejudice, which was not necessary in this case because the first case had been dismissed before these defend‐ ants even knew it existed. See Ratkovich v. Smith Kline, 951 F.2d 155, 158 (7th Cir. 1991). Burton was further prejudiced by defendants’ improper raising of res judicata in a late motion to dismiss. The events here show why presenting aﬃrmative defenses in a motion to dismiss can be so troublesome. It allows a defendant to am‐ bush a plaintiﬀ, distorting the process contemplated by the Rules and impairing plaintiﬀ’s ability to confront untimely defenses. Ghosh and Wexford filed their Rule 12(b)(6) motion after discovery had concluded and with a summary judgment deadline looming. Burton’s attorneys were expecting to ad‐ No. 19‐1360 19 dress the merits of the case, not an untimely res judicata de‐ fense brought years into the litigation. They had limited time to respond to an unexpected motion that required them not only to address the defense on its merits but also to search years of litigation history to determine whether the defense had been waived or forfeited. This procedural tactic thus gave defendants the benefit of an amended pleading without having to address in their mo‐ tion whether amendment was appropriate. Defendants said nothing in the motion about Rule 8(c), the timing of aﬃrma‐ tive defenses, or the standard for amendment. They first ad‐ dressed the core issue—the propriety of the amendment— only in their reply, after Burton correctly pointed out that the motion to dismiss put the cart before the horse. And even when they got there, defendants argued in reply, when it was too late for plaintiﬀ to be heard on the issue, that the district court was required by case law to allow the new defense. These tactics blindsided plaintiﬀ. He had to both rebut the substantive defense and bring to the court’s attention the pro‐ cedural issue that should have required its own motion for leave to amend from defendants. And because defendants did not raise the core issue until their reply, plaintiﬀ was unable to respond as eﬀectively as if the issue of amendment had been raised properly. The procedural errors created by de‐ fendants’ improper motion to dismiss unfairly prejudiced Burton’s ability both to contest the merits of the res judicata defense and to encourage the district court to exercise its dis‐ cretion to forbid amendment of the answer. This is the kind of procedural prejudice that led us to reverse in Venters, 123 F.3d at 968. Cf. Jackson, 213 F.3d at 393 (plaintiﬀ was not prejudiced 20 No. 19‐1360 when district court permitted defendant to amend answer be‐ cause the court required defendant to request leave to amend, required defendant to brief the motion separately, and gave plaintiﬀ opportunity for additional discovery to oppose mo‐ tion).5 This procedural prejudice is particularly striking here be‐ cause there were substantive questions about the applicability of res judicata that needed to be fully addressed. Defendants assert that they were not on notice of the first case because they were never served. The lack of notice is essential to their defense. If they were on notice, waiting almost six years to raise the defense would amount to waiver. Yet if, as they say, they were not on notice, none of the rationales for applying res judicata apply. Preclusion doctrines serve to limit “the ex‐ pense and vexation attending multiple lawsuits, conserve[] judicial resources, and foster[] reliance on judicial action by minimizing the possibility of inconsistent decisions.” Walczak v. Chicago Board of Education, 739 F.3d 1013, 1020 (7th Cir. 2014), quoting Matrix IV, Inc. v. American Nat’l Bank & Trust 5Defendants point out that plaintiff could have sought leave to file a sur‐reply. Perhaps, but we will not hold against a party its decision not to seek leave to file a sur‐reply. See Costello v. Grundon, 651 F.3d 614, 635 (7th Cir. 2011) (“there is no requirement that a party file a sur‐reply to address an argument believed to be improperly addressed”), quoting Hardrick v. City of Bolingbrook, 522 F.3d 758, 763 n.1 (7th Cir. 2008). Ironically, defend‐ ants argue in their sur‐reply on appeal that they experienced prejudice be‐ cause Burton raised new arguments in his reply brief affording them “lit‐ tle opportunity to review the new arguments” and respond. Burton did not present new arguments in his reply brief. He merely developed those made in the opening brief, which is appropriate. The point is well taken, however, with respect to prejudice Burton experienced in the district court. No. 19‐1360 21 Co., 649 F.3d 539, 547 (7th Cir. 2011), quoting in turn Montana v. United States, 440 U.S. 147, 153–54 (1979) (alterations in Ma‐ trix IV). There is no unfairness, no vexation, no undue ex‐ pense, and no violation of reliance interests when defendants must confront on the merits a claim whose predecessor went completely unnoticed before it was dismissed. They did not have to litigate the claim in the first place. This case is the sec‐ ond trip to court for Burton, but it is the first for Ghosh and Wexford on his claims.6 These equitable considerations are reflected in the doc‐ trine. Courts still apply the mutuality requirement for claim preclusion even though that requirement has been aban‐ doned for issue preclusion. Coleman v. Labor & Industry Review Commʹn of Wisconsin, 860 F.3d 461, 469 (7th Cir. 2017), citing Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979), and Blonder‐ Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313 (1971); see also Wright & Miller, 18A Federal Practice 6 The judicial economy rationale is similarly weak here because the district judge in the first lawsuit originally dismissed the case without prejudice, expecting that the case would proceed once Burton filed a new complaint. And inconsistent decisions will not result when the first case was dismissed voluntarily at the pleadings stage. Courts should be partic‐ ularly cautious in raising res judicata sua sponte in such cases: [I]f a court is on notice that it has previously decided the issue pre‐ sented, the court may dismiss the action sua sponte, even though the defense has not been raised. … [But] [w]here no judicial resources have been spent on the resolution of a question, trial courts must be cautious about raising a preclusion bar sua sponte, thereby eroding the principle of party presentation so basic to our system of adjudication. Arizona v. California, 530 U.S. 392, 412–13 (2000) (citation and quotation marks omitted). This is not a case in which it would be appropriate for the district court to consider a preclusion defense sua sponte. 22 No. 19‐1360 & Procedure § 4464.1. Under the doctrine of mutuality, “nei‐ ther party c[an] use a prior judgment as an estoppel against the other unless both parties were bound by the judgment.” Parklane Hosiery, 439 U.S. at 326–27. To bind a person by an in personam judgment, the court must acquire jurisdiction over the that person by service of process. Taylor v. Sturgell, 553 U.S. 880, 884 (2008), quoting Hansberry v. Lee, 311 U.S. 32, 40 (1940), citing in turn Pennoyer v. Neﬀ, 95 U.S. 714 (1877). If a party has not been served and is not under the court’s jurisdiction, then the court’s judgment cannot bind it. If a party could not have been bound itself, then mutuality would forbid that party from invoking claim preclusion. The late aﬃrmative defense of res judicata is thus highly doubtful on the merits here. If the aﬃrmative defense had been raised properly, Burton would have been better able to address these issues. To sum up, defendants’ untimely res judicata defense pre‐ judiced Burton both substantively and procedurally, so it would be an abuse of discretion to allow them to raise the de‐ fense on remand. E. Separate Ground for Dismissal of Wexford The district court gave an additional reason for dismissing the claim against Wexford. Defendants argued before the dis‐ trict court that if Ghosh were dismissed, Burton would be un‐ able to prove an underlying constitutional violation, citing Monell v. Depʹt of Social Services, 436 U.S. 658 (1978). Burton failed to assert any defense to the argument, so Wexford was dismissed on this ground as well.7 7 The district court further observed that the “amended complaint does not appear to set forth a Monell claim against Wexford” (emphasis added). Because this issue was not clearly resolved by the district court and was No. 19‐1360 23 The claim against Dr. Ghosh is going forward, but defend‐ ants’ theory was also wrong as a matter of law. Individual li‐ ability is not a prerequisite for a Monell claim. E.g., Glisson v. Indiana Department of Corrections, 849 F.3d 372, 378 (7th Cir. 2017) (en banc) (reversing summary judgment for corporation on Monell claim for policies deliberately indiﬀerent to serious health needs of prisoners with complex, multiple illnesses, despite absence of evidence that any one employee‐physician was deliberately indiﬀerent). Indeed, that is a central point of Monell: the municipal entity is liable because of its own ac‐ tions, not merely because of the wrongful conduct of one of its employees.