Global Technology & Trading, Inc. et al v. Satyam Computer Services, Ltd.

Filing 118

Opinion and Order; Defendant's cross-motion for summary judgment [ 75] is granted, and Plaintiffs' cross-motion for partial summaryjudgment 79 is denied. Judgment is entered in favor of Defendant and against Plaintiffs dismissing Plaintiffs' causes of action with prejudice and awarding Defendant the costs of suit. Signed by the Honorable William T. Hart on 8/14/2014:Mailed notice(clw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

GLOBAL TECHNOLOGY & TRADING, )
INC., an Illinois corporation, and
)
MANOJ JAIN,
)
)
Plaintiffs,
)
)
)
)
v.
)
)
SATYAM COMPUTER SERVICES
)
LIMITED,
)
)
)
Defendant.
)

No. 09 C 5111

OPINION AND ORDER
Manoj Jain and his company, Global Technology & Trading, Inc. (“GTTI”),
filed this lawsuit to recover $600,000 in commissions for helping defendant
Satyam Computer Services Limited (“Satyam”) buy an Illinois company called
Bridge Strategy Group, LLC (“Bridge Strategy”) in 2008. Plaintiffs allege that
Satyam’s former employee, Shailesh Shah, orally promised Plaintiffs that they
would receive 3% of the sales price if the deal closed.
The lawsuit was initially filed in Illinois state court but removed to this
Court based on diversity jurisdiction. At all relevant times and at the time of the

filing of this lawsuit, Plaintiff GTTI was an Illinois corporation with its principal
place of business in DuPage County, Illinois; Plaintiff Jain was an Illinois resident
and citizen; and Defendant Satyam was a foreign corporation organized under the
laws of the Republic of India, with its principal place of business in Hyderabad,
India.
Plaintiffs asserted a claim for breach of an oral contract, as well as
alternative quasi-contract claims. The case was initially assigned to Judge Zagel
who ruled on several motions to dismiss. On December 9, 2009, he granted
Satyam’s motion to dismiss all four counts in the original complaint and gave
Plaintiffs leave to re-plead. Satyam filed a motion to dismiss the first amended
complaint, which was granted without prejudice on April 6, 2010. Plaintiffs filed a
second amended complaint. Satyam move to dismiss three of the four counts. On
January 28, 2011, Judge Zagel granted the motion to dismiss the breach of contract
claim with prejudice, finding that Plaintiffs had failed to allege definite and certain
terms to establish an oral contract claim under Illinois law. Judge Zagel also
dismissed the unjust enrichment claim without prejudice giving Plaintiffs leave to
cure the deficiencies in that count. Plaintiffs did not move to file a third amended
complaint, and Satyam filed its answer and affirmative defenses on March 9, 2011.

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Discovery ensued. At a December 19, 2013 status hearing, Judge Zagel
granted the parties leave to file cross-motions for summary judgment, on the issue
of liability only, by February 14, 2014. Both sides filed motions for summary
judgment, and a briefing schedule was set. On May 8, 2014, the case was
reassigned to this court.
In their opening summary judgment briefs, each side asserted a number of
arguments. Satyam raised these four: (1) Plaintiffs’ claims are barred by the
Illinois Business Brokers Act of 1995, 815 ILCS § 307/10-1, et seq., because
Plaintiffs were required to register with the Illinois Secretary of State and were also
required to obtain a signed written contract, neither of which they did; (2)
Plaintiffs’ claims fail because GTTI has already been paid $255,000 by Bridge
Strategy to perform the same services Plaintiffs seek to be compensated for in this
lawsuit; (3) Plaintiffs’ promissory estoppel claim fails because Jain was highly
experienced and educated and could not reasonably rely on the alleged oral
promise; and (4) Plaintiffs’ quantum meruit claim fails because the services
Plaintiffs provided to Satyam in the hope of later obtaining a contract are not
compensable, and any subsequent services Plaintiffs provided which incidentally
benefitted Satyam were services they were already obligated to perform on behalf
of Bridge Strategy.

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Of these four arguments, the first one under Brokers Act dominated the
remaining briefs. Specifically, Plaintiffs argued that this defense had been waived
because Satyam never raised it in its three motions to dismiss nor included it as an
affirmative defense when it answered the second amended complaint. The defense
was first raised in Satyam’s opening summary judgment brief in February 2014.
Plaintiffs complain that Satyam could have raised this defense years earlier and
that Plaintiffs have been prejudiced by expending hundreds of hours of attorney
time and spending thousands of dollars litigating this case.
As discussed below, the parties seem to agree that this defense, if not waived
by Satyam, is dispositive regarding the two remaining counts in this lawsuit.
Therefore, the central issue is whether the defense has been waived.
Satyam asserts four arguments against a finding of waiver. First, the
Brokers Act argument is not an affirmative defense under Rule 8(c). Second, even
if it is, Satyam asserted four affirmative defenses that effectively put Plaintiffs on
notice of this defense. Third, Plaintiffs have not been prejudiced because they have
had an opportunity, in their summary judgment briefs, to respond to this argument.
Fourth, if this Court is not persuaded by the first three arguments, Satyam asks for
leave to amend its answer.

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The first two arguments are not persuasive, as the Brokers Act argument is
akin to a statute of frauds, which is a classic affirmative defense, a point Satyam
implicitly agrees with. Likewise, although Satyam did assert four affirmative
defenses challenging the enforceability of any agreement, it never explicitly
mentioned the Brokers Act.
However, the third argument is meritorious. The Seventh Circuit has held
that, “[w]hile Fed. R. Civ. P. 8(c) directs parties to raise affirmative defenses in the
pleadings, a delay in raising an affirmative defense only results in waiver if the
other party is prejudiced as a result.” Schmidt v. Eagle Waste & Recycling, Inc.,
599 F.3d 626, 632 (7th Cir. 2010). The Seventh Circuit has further held that
“where the plaintiff has an opportunity to respond to a late affirmative defense, he
cannot establish prejudice merely by showing that the case has progressed
significantly since the defendants answered his complaint.” Williams v. Lampe,
399 F.3d 867, 871 (7th Cir. 2005).
The key factor in determining prejudice under Seventh Circuit case law is
whether the plaintiff had an opportunity to respond to the argument by, for
example, filing a summary judgment response brief. If the plaintiff had such an
opportunity, courts typically have found no waiver. See, e.g., Garofalo v. Village
of Hazel Crest, __ F.3d __, 2014 WL 2609895, *7 (7th Cir. June 12, 2014)

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(finding no waiver of affirmative defense first raised in summary judgment brief
because defendants “had the opportunity to challenge this argument in their own
summary judgment submissions”); Carter v. U.S., 333 F.3d 791, 796 (7th Cir.
2003) (no waiver where government raised affirmative defense for the first time six
weeks before trial); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d
326, 334 (7th Cir. 1987) (“when parties argue an affirmative defense in the district
court, technical failure to plead the defense is not fatal”); Manson v. City of
Chicago, 795 F.Supp.2d 763, 770 (N.D. Ill. 2011) (affirmative defense first
asserted during briefing on summary judgment was not waived because plaintiff
had the opportunity to file an additional brief, although he declined to file one);
West v. United States, 2010 WL 4781146, *3 (S.D. Ill. Oct. 25, 2010) (allowing
assertion of affirmative defense, even though there is “some question about why
the government has waited,” because the plaintiff cannot claim significant
prejudice where he “had the opportunity to respond in writing to the government’s
motion to amend and motion for summary judgment” and where the defense
“presents a straightforward question of law” under a statute of repose); Neuma
Inc. v. Wells Fargo & Co., 515 F.Supp.2d 825, 851 (N.D. Ill. 2006) (“because
Neuma has not been prejudiced and has had ample opportunity to respond, the
court concludes that Wells Fargo has not waived its statute of limitations defense

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by raising it for the first time in its motion for summary judgment rather than in its
answer”).
This Court allowed Plaintiffs the opportunity to file a sur-reply brief to
further address the Brokers Act defense and the waiver issue. In asking for leave
to file this sur-reply brief, Plaintiffs argued that it was appropriate because the
waiver issue was “outcome-determinative.” Id. In the sur-reply, Plaintiffs
acknowledge that the Seventh Circuit has ruled repeatedly that no waiver should be
found where the plaintiff had an opportunity to respond. Plaintiffs’ only argument
is that it would be better as a matter of policy to adopt a stricter approach on
waiver of affirmative defenses in this type of situation.
Whatever the merits of these policy arguments may be, this Court will
follow the prevailing Seventh Circuit rule. Applying this rule here, this Court finds
that Satyam did not waive its Brokers Act defense because Plaintiffs have had an
opportunity to respond to the defense. Satyam first raised the defense in its
opening summary judgment brief. In their response brief, Plaintiffs argued
strenuously that this defense had been waived, but they chose not to offer any
additional arguments on the merits even though they were free to do so. Likewise,
in their sur-reply brief, Plaintiffs again focused their entire argument on the waiver
question, declining the opportunity to offer an alternative defense on the merits of

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the defense. Plaintiffs thus have had two opportunities to respond on the merits.
Their failure to respond is an implicit acknowledgment that the defense bars their
two claims, a conclusion consistent with Plaintiffs’ characterization of the waiver
issue as being outcome-determinative.
In its opening summary judgment brief, Satyam laid out step by step the
reasons why Plaintiffs’ promissory estoppel and quantum meruit claims are barred
under the Brokers Act. The Act defines a “business broker” as (among other
things) a person who “assists any person in procuring a business from any third
person” and also a person who “assists or directs in the procuring of prospects
intended to result in the purchase, sale, or exchange of a business.” 815 ILCS §
307/10-5.10(1) & (5). The Act requires a business broker to register with the
Secretary of State. 815 ILCS § 307/10-10. Any contract for the services of a
business broker “shall be in writing and signed by all contracting parties.” 815
ILCS § 307/10-35.
It is undisputed that Plaintiffs acted as brokers in connection with Satyam’s
purchase of Bridge Strategy. Plaintiffs have alleged in their Second Amended
Complaint that they “supported and facilitated the merger discussions between
Defendants and Bridge Strategy,” “provided brokering or consulting services to
Defendant’s Board of Directors and/or officers in connection with the possible

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acquisition of Bridge Strategy by Defendant,” and “assisted with the negotiation of
a purchase price in connection with the anticipated transaction between Defendant
and Bridge Strategy.” Plaintiffs further allege that payment of any fees was
contingent upon the transaction closing. All these actions fit squarely within the
Act’s definition of a “business broker.”
It is also undisputed that Plaintiffs never registered with the Secretary of
State nor obtained a signed written contract. Failing to meet these two
requirements means that any contract for broker services is void. The Act applies
“when the company or business sought to be sold has its principal place of
business in this State.” 815 IlCS § 307/10-105. Bridge Strategy was
headquartered in Illinois.
It is thus clear that the Act bars any claim based on a contract. As noted
above, Judge Zagel previously dismissed this claim with prejudice. The two
claims remaining are for promissory estoppel and quantum meruit. Satyam argues
that these counts are also barred under the Act because it is “axiomatic that the law
will not allow a party to do indirectly that which he is precluded from doing
directly.” Greiner v. Dominick’s Finer Foods, Inc., 652 N.E.2d 1162, 1167 (Ill.
App. Ct. 1995). In Sandra F. Monroe & Company v. Nat’l Equip. Servs., Inc.,
2000 WL 420746 (N.D. Ill. Apr. 12, 2000), the court granted a motion to dismiss
the plaintiff’s breach of an oral contract claim under the Brokers Act and rejected
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the plaintiff’s request to pursue a quantum meruit claim because such a claim
would “circumvent the purpose of the statute.” Id. at *5; see also Thomas v.
Daubs, 684 N.E.2d 1011, 1015 (Ill. App. Ct. 1997) (affirming dismissal of
plaintiffs’ oral contract, promissory estoppel, and quantum meruit claims, arising
out of the brokering of a sale of a landfill business, because plaintiffs were not
registered under the Real Estate License Act or Business Brokers Act and because
the contract was not in writing). Based on these cases, this Court finds that
Plaintiffs’ quasi-contract claims are also barred under the Act. Having concluded
that Plaintiffs’ only two remaining claims are barred, this Court need not address
Satyam’s other arguments for summary judgment.
IT IS THEREFORE ORDERED that Defendant’s cross-motion for summary
judgment [ 75] is granted, and Plaintiffs’ cross-motion for partial summary
judgment [79] is denied. The Clerk of Court is directed to enter judgment in favor
of Defendant and against Plaintiffs dismissing Plaintiffs’ causes of action with
prejudice and awarding Defendant the costs of suit.
ENTER:

UNITED STATES DISTRICT JUDGE
DATED: AUGUST 14, 2014

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