March 24, 2014

Craft Those Affirmative Defenses Carefully

Category: Claims & Defenses | Author: | Share:

In lawsuits, allegations matter, and this principle applies to affirmative defenses as strongly as it applies to an affirmative claim for relief. If you don’t specifically plead an affirmative defense, then there is a serious risk that the Court will find that defense waived, as the defendant discovered in TABFG, LLC v. Pfeil, ___ F.3d ___ (7th Cir. Mar. 20, 2014), Cause No. 12-3557.

A couple of entities formed a joint venture, while one man (the eventual defendant) funded the venture, the parties agreed to split all profits evenly. The venture fell apart when litigation over a non-compete agreement prevented two individuals from working for the venture. Per the terms of the Joint Venture Agreement, funds were to be disbursed to the parties on October 2, 2003.

The funds were not distributed on that date and negotiations ensued. Eventually, the defendant caused most of the funds to be distributed to himself, with only some of the funds going to the other parties to the venture. These distributions occurred on January 6, 2004.

At some point (the Court doesn’t say exactly when), a suit was filed against Pfeil, asserting tortious interference with a contract.  The applicable (Illinois) statute of limitations was five years, so Pfeil pled the following affirmative defense:

Plaintiff’s claims are barred by the statute of limitations. Plaintiff knew or had reason to know of the distributions allegedly made by NT Prop prior to January 2004 and failed to file the instant lawsuit within the applicable statute of limitations period.

After a bench trial, the trial court entered judgment against Pfeil. He then moved to alter or amend the judgment, arguing that the statute of limitations began to run on October 2, 2003, so the claims against him were time-barred.  The trial court denied that motion and Pfeil appealed.

Pfeil made this same argument on appeal, but the Court found that his current argument was distinct from the statute-of-limitations-related affirmative defense he actually pleaded. Thus, while Pfeil pleaded a statute of limitations affirmative defense, his failure to raise or pursue this statute of limitations defense before judgment waived the defense.

Parties should be careful when dealing with affirmative defenses, because the way that the defense is worded may preclude defending against the suit on similar, but unpled, grounds.

Lessons:

  1. An affirmative defense that it neither raised not pursued prior to judgment is waived.
  2. An affirmative defense that describes one application of a legal doctrine will not cover other applications of that doctrine.

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