Seventh Circuit Rejects Permissive Approach To Assertion Of Affirmative Defenses Or Counterclaims In Response To An Amended Complaint

• Published date: 24 June 2020
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Cahill Gordon & Reindel LLP
• Author: Mr Joel Kurtzberg, Peter J. Linken and G. Kevin Judy II

The Federal Rules of Civil Procedure do not address whether a defendant may assert, as a matter of right, previously unpleaded affirmative defenses or counterclaims in response to an amended complaint. Courts evaluating the propriety of newly-pleaded affirmative defenses or counterclaims typically employ one of three approaches: the narrow, permissive, or moderate rule. In Burton v. Ghosh, --- F.3d ----, 2020 WL 3045954 (7th Cir. June 8, 2020), the Seventh Circuit rejected the permissive approach ' which permits a defendant to assert any affirmative defense or counterclaim whenever an amended complaint is filed ' because such an approach "would drastically undermine district 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." Id. at *5.

I. The Three Approaches

Before delving into the Burton decision, a short primer on the three approaches referenced above is appropriate. "Under the narrow approach, in order for a counterclaim or defense to be permitted as a matter of right, the amendment(s) in the answer must be related to the specific amendment(s) to the complaint." RamsayNobles v. Keyser, 2018 WL 6985228, at *3 (S.D.N.Y. Dec. 18, 2018) (citation omitted). In other words, courts applying the narrow approach hold "that an amended answer must be confined specifically to the amendments" made by the plaintiff. See Virginia Innovation Scis., Inc. v. Samsung Elecs. Co., Ltd., 11 F. Supp. 3d 622, 630 (E.D. Va. 2014). Historically, the narrow approach has been premised on Federal Rule 13(f), which was abrogated by the 2009 amendments to the Federal Rules of Civil Procedure. See, e.g., Ramsay-Nobles, 2018 WL 6985228, at *3-*4. Most courts have construed the 2009 amendments as precluding application of the narrow approach. Id. at *4; but see GEOMC Co., Ltd. v. Calmare Therapeutics Incorporated, 918 F.3d 92, 99-100 (2d Cir. 2019) (adopting the permissive approach for early-in-the-litigation counterclaims and the narrow approach for later-in-the-litigation counterclaims because, "[a]s a general rule, the risk of substantial prejudice increases with the passage of time") (citations omitted).

At the opposite end of the spectrum is the permissive approach, which treats an amended complaint as wiping away the prior pleading and, thus, allowing a defendant to belatedly plead any defense or counterclaim in response to the amendment. "Under the permissive...