Litigation over pictures of the Indianapolis skyline form the backdrop for the Seventh Circuit’s recent examination of the elements of a proper affirmative defense under Federal pleading rules and the concept of ‘finality’ for res judicata purposes in Bell v. Taylor.
There, several small businesses infringed plaintiff’s copyrights in two photographs of downtown Indianapolis: one taken at night, the other in daytime. The defendants – an insurance company, a realtor, and a computer repair firm – all used at least one the plaintiff’s photos on company websites. When the plaintiff couldn’t prove damages, the District Court granted summary judgment for the defendants and later dismissed a second lawsuit filed by the plaintiff against one of the defendants based on the same facts. The plaintiff appealed.
The Seventh Circuit affirmed summary judgment of the first lawsuit and dismissal of the second action on both procedural and substantive grounds.
Turning to the claims against the computer company defendant, the court noted that the defendant denied using the plaintiff’s daytime photo. The defendant used only the nighttime photo. The plaintiff argued that the defendant failed to comply with Rule 8(b) by not asserting facts to support its denial that it used plaintiff’s daytime photo.
Rejecting this argument, the court noted that a proper affirmative defense limits or excuses a defendant’s liability even where the plaintiff establishes a prima facie case. If the facts that underlie an affirmative defense are proven true, they will defeat the plaintiff’s claim even if all of the complaint allegations are true. A defendant’s contesting a plaintiff’s factual allegation is not an affirmative defense. It is instead a simple denial. Since the computer defendant denied it used the daytime photo, there was no affirmative matter involved and the defendant didn’t have to comply with Rule 8’s pleading requirements.
The Seventh Circuit also affirmed the denial of the plaintiff’s attempt to amend his complaint several months after pleadings closed. In Federal court, the right to amend pleadings is broad but not absolute. Where allowing an amendment would result in undue delay or prejudice to the opposing party, a court has discretion to refuse a request to amend a complaint. FRCP 15(a)(2). Here, the Court agreed with the lower court that the plaintiff showed a lack of diligence by waiting until well after the amending pleadings deadline passed. The plaintiff’s failure to timely seek leave to amend its complaint supported the court’s denial of its motion.
The Court also affirmed the District Court’s dismissal of the plaintiff’s second lawsuit on res judicata grounds. When the District Court entered summary judgment for defendants on plaintiff’s copyright and state law claims (conversion, unfair competition), plaintiff’s equitable relief claims (declaratory judgment and injunctive relief) were pending. Because of this, the summary judgment order wasn’t final for purposes of appeal. (Plaintiff could only appeal final orders – and until the court disposed of the equitable claims, the summary judgment order wasn’t final and appealable.)
Still, finality for res judicata purposes is different from appellate finality. An order can be final and have preclusive effect under res judicata or collateral estoppel even where other claims remain. This was the case here as plaintiff’s sole claim against the computer company defendant was for copyright infringement. The pending equitable claims were directed to other defendants. So the District Court’s summary judgment order on plaintiff’s copyright infringement claims was final as to the computer defendant. This finality triggered res judicata and barred the plaintiff’s second lawsuit on the same facts.
The case’s academic value lies in its thorough summary of the pleading requirements for affirmative defenses and the factors guiding a court when determining whether to permit amendments to pleadings. The case also stresses that finality for appeal purposes is not the same as for res judicata or collateral estoppel. If an order disposes of a plaintiff’s claims against one but not all defendants, the order is still final as to that defendant and the plaintiff will be precluded from later filing a second lawsuit against that earlier victorious defendant.