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December 21, 2020

Lit Alerts—December 2020

A Publication of the Litigation Practice Group

Federal Pleading: New Answer Not Required Where Amended Complaint Does Not Change Case Scope or Theory

The US Court of Appeals for the Ninth Circuit recently held as a matter of first impression that a defendant is not required to file a new answer to an amended complaint to avoid waiver of affirmative defenses when the amended complaint does not change the theory or scope of the case. In KST Data, Inc. v. DXC Tech. Co., KST Data, Inc. (KST) sued Enterprise Services, LLC (ES) for, inter alia, breach of contract. 980 F.3d 709 (9th Cir. 2020). ES answered KST's first amended complaint with counterclaims and affirmative defenses. The district court dismissed all of KST's claims except for breach of contract. KST then filed a second amended complaint (SAC), and the court again dismissed all claims except for breach of contract. ES did not answer the SAC.

The district court granted summary judgment sua sponte for KST on its claim for breach of contract, ruling that ES had waived its affirmative defenses of unclean hands, fraud, and misrepresentation by failing to file an answer that specified its affirmative defenses to the operative pleading, the SAC.

The Ninth Circuit reversed, holding that the district court had "invited" but "did not require" ES to file an answer to the SAC. Although Federal Rule of Civil Procedure 15(a)(3) mandates that "any required response to an amended pleading must be made within the time remaining to respond to the original pleading or within 14 days after service," the Ninth Circuit held that no response was required here and Rule 15(a)(3) "does not render a prior response to a prior pleading moot and require the filing of a new answer."

Statutory Interpretation: Jurisdictional Elements and the "Clear-Statement Rule"

In Biziko v. Horne, 2020 WL 7022384 (5th Cir. Nov. 30, 2020), as a matter of first impression in the Fifth Circuit, the court of appeals held that the "enterprise" element of the Fair Labor Standards Act (FLSA) is non-jurisdictional and thus subject to forfeiture. Title 29, section 207(a)(1) of the FLSA generally guarantees overtime pay to employees who are "employed in an enterprise engaged in commerce or in the production of goods for commerce" and who work more than forty hours in a workweek. Section 20(s)(1) of the Act defines an "enterprise engaged in commerce or in the production of goods for commerce," and when an entity satisfies this definition, it is subject to the FLSA's overtime pay requirement.

Pursuant to the FLSA, Amber Biziko sued Michelle Van Horne, Steven Van Horne, and the Van Hornes' organizations, alleging they had failed to properly calculate and pay her overtime wages as required by the Act.

In the district court, the defendants stipulated that their organizations were "enterprises" subject to the FLSA. On appeal, however, the defendants denied the organizations were enterprises and contended that the enterprise coverage element of the FLSA is a jurisdictional issue.

The Fifth Circuit disagreed. Relying on the US Supreme Court's rationale in Arbaugh v. Y&H Corp., 546 U.S. 500 (2006), the court held that the FLSA's enterprise element is non-jurisdictional and the defendants had therefore forfeited any contention that their organizations were not enterprises under the FLSA. In doing so, the court applied the Arbaugh "clear-statement rule": "[W]hen Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-jurisdictional in character." 546 U.S. at 516. In accordance with this rule, the Fifth Circuit noted that the FLSA's enterprise element contains no jurisdictional language and is included in the Act's definition section. Finally, the court observed that the First Circuit reached a similar conclusion in Chao v. Hotel Oasis, Inc., 493 F.3d 26 (1st Cir. 2007), and Martinez v. Petrenko, 792 F.3d 173 (1st Cir. 2015).

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.