Lead Opinion
NORRIS, J., delivered the opinion of the court which COOK, J., joined, and CLAY, J., joined in part. CLAY, J. (pp. 858-66), delivered a separate opinion concurring in part and dissenting in part.
OPINION
Plaintiff Jon Rogers (“Rogers”) appeals the district court’s grant of summary judgment to defendant Internal Revenue Service (the “IRS”). For the reasons that follow, we affirm the district court’s decision.
Before Rogers brought the instant action, the IRS conducted a criminal investigation into several businesses owned by Rogers and two of his associates. Following the investigation, the IRS seized millions of dollars from Rogers and initiated four forfeiture actions in the Western District of Pennsylvania.
The parties subsequently settled the forfeiture actions and executed a settlement agreement on August 1, 2012. The settlement agreement included a release clause, wherein Rogers released his right to bring future claims “related to and/or in connection with or arising out of’ the forfeiture actions.
On November 29, 2012, Rogers requested records from the IRS pursuant to the Freedom of Information Act (“FOIA”). 5 U.S.C. § 552. The IRS denied the request. On August 9, 2013, Rogers filed this FOIA action in the District Court for the Southern District of Ohio.
The parties filed a Rule 26(f) report pursuant to the Federal Rules of Civil Procedure. The report split discovery into two phases. Phase I included a “rolling production report plan” under which the IRS would review the documents it had determined responsive to Rogers’ FOIA request. According to the report, Phase I did not constitute formal discovery under Rule 26 of the Federal Rules of Civil Procedure, and the IRS could move for summary judgment before commencing Phase II.
On November 13, 2014, the IRS moved for summary judgment on the grounds that the parties entered into a settlement agreement which contained a release that affirmatively waived Rogers’ right to bring his FOIA action. Rogers opposed the motion, arguing that (1) the IRS forfeited its right to rely on the release clause by not pleading it as an affirmative defense; '(2) the IRS should be estopped from asserting the affirmative defense; and (3) the release clause did not apply because the FOIA claim was not related to the forfeiture actions.
The district court rejected Rogers’ arguments and granted the IRS’s motion for summary judgment. The district court held that the release’s language was broad enough to encompass Rogers’ FOIA action, noting that it “covers all claims, rights and demands ‘of every kind’ related to the forfeiture actions and discharges the [IRS] from all duties of every kind relating to the actions.”
On April 10, 2015, Rogers filed this appeal. He raises the same arguments stated above.
II.
A.. Forfeiture of Affirmative Defense
This Court reviews a finding that a party did not forfeit an affirmative defense for abuse of discretion. See Smith v. Sushka,
“A district court may, in its discretion, allow a defendant to raise an affirmative defense for the first time in a motion for summary judgment if doing so does not result in surprise or prejudice to the plaintiff;” Lauderdale v. Wells Fargo Home Mortg.,
In determining what constitutes prejudice, the court considers whether the assertion of the new claim or defense would: require the opponent to expend significant additional resources to conduct discovery and prepare for trial; significantly delay the resolution of the dispute; or prevent the plaintiff from bringing a timely action in another jurisdiction.
Phelps v. McClellan,
Rogers notes that Rule 8(c) of the Federal Rules of Civil Procedure specifies “waiver,” “release,” and “accord and satisfaction” as affirmative defenses that must be raised in responsive pleadings. He argues that the IRS forfeited its right to rely on the release clause because it failed to raise the release as a defense in its answer.
Because we agree with the district court that under the circumstances of this case, Rogers cannot establish the existence of prejudice, we are unable to say the district court abused the discretion afforded it when it permitted the IRS to assert the defense. Rogers argues that he was prejudiced because the IRS allowed litigation to proceed for fifteen months before raising its defense. Although the IRS waited over a year to assert the defense, the delay does not appear to have prejudiced Rogers, since he received documents he was seeking during the rolling produc-. tion process. And, manifestly, allowing the IRS to assert its affirmative waiver defense does not require Rogers to expend significant additional resources to condúct discovery and prepare for trial, as it puts an end to the litigation.
Similarly, Rogers’ contention that he was surprised is without merit. A sophisticated party, he was represented' by counsel when he signed the settlement agreement. The same lawyer who signed the settlement agreement represents Rogers in this action. Rogers should have anticipated that, the IRS would raise the defense of waiver by release. And, Rogers had actual notice when the IRS raised the defense in its motion for summary judgment, and he was afforded ample opportunity to respond to it. Stupak-Thrall v. Glickman,
While the IRS could have been more diligent in raising its defense, we are unable to say the district court abused its discretion by permitting the IRS to raise the defense in its summary judgment motion.
B. Estoppel by Conduct and Scope of the Release
Rogers also contended that the IRS should be estopped from raising the release as a defense, and that his FOIA lawsuit does not fall within the scope of the release’s language. We now turn to the issues of estoppel and the scope of the release. Having had the opportunity to review the record below, the briefs submitted by the parties, and benefitted from oral argument on these issues, we conclude that the district court correctly rejected Rogers’ contentions for the reasons stated by the district court in its order of March 2, 2015, granting summary judgment to the IRS.
III.
The judgment of the district court is affirmed.
CONCURRING IN PART AND DISSENTING IN PART
Concurrence in Part
concurring in part and dissenting in part.
I agree with the majority’s holding that Rogers waived his ability to bring a FOIA claim against the IRS when he signed the release at issue. I write separately, in part, because I believe the issue — one of first impression in this circuit — merits additional analysis. I also write separately to dissent from the majority’s holding that the IRS did not waive the defense of release.
I.
For nearly ten years, the IRS conducted an investigation into several offshore gambling businesses owned by Rogers and two of his partners. The IRS suspected that Rogers and his partners, through their business in Antigua and Belize, illegally accepted sports bets from U.S.-based customers. As a result of the investigation, the IRS filed four civil forfeiture complaints in 2003 and 2004 under 18 U.S.C. §§ 981(a)(1)(A) and (C) against $10 million in assets allegedly traceable to the gambling business.
On August 1, 2012, Rogers eventually settled the forfeiture cases with the IRS by agreeing to forfeit $500,000 of his individual assets. The settlement agreement contains, in pertinent part, the following release provision:
This release is conditioned upon the United States paying to Jon R. Rogers and releasing from arrest/seizure/freeze that portion of the Jon R. Rogers Assets set forth in paragraph four (4) above. By reason of and in reliance upon this Stipulation and Settlement Agreement, Jon R. Rogers, his assigns, and heirs, hereby unconditionally release and forever discharge the United States, its agents, servants, employees, officers, attorneys, insurers, successors, representatives and assigns (including without limitation any victims, persons or entities which receive the forfeited property or any portion thereof), and each of them, from and against any and all manner of claims, actions, causes of action, rights, set-offs, promises, allegations, expenses, assessments, penalties, charges, injuries, losses, costs, obligations, duties, suits, proceedings, debts, dues, contracts, judgments, damages, claims, counterclaims, liabilities and/or demands of every kind, character and manner whatsoever in law or equity, administrative or judicial, contract, tort (including negligence of all kinds) or otherwise, whether known or unknown, claimed or unclaimed, asserted or unasserted, suspected or unsuspected, discovered or undiscovered, choate or inchoate, accrued or unaccrued, anticipated or unanticipated, contingent or fixed, for, upon, or by reason of any and all matters whatsoever, related to and/or in connection with or arising out of these Forfeiture Actions.
(R. 37-7, Rogers Settlement, Pa-gelD# 1318 (emphasis added).)
The agreement defines “Forfeiture Actions” as the four civil forfeiture actions brought by the IRS against Rogers. Rog
On November 29, 2012, about four months after signing the agreement, Rogers submitted a FOIA request to the IRS. The 36-page request sought 71 categories of documents from the period 1993 through 2012 relating to the IRS’ criminal investigation and the civil forfeiture actions. On December 12, 2012, the IRS acknowledged receipt of Rogers’ FOIA request. After requesting and receiving additional information, the IRS ultimately denied the request in its entirety on February 28, 2013. The IRS cited a number of exemptions as its basis for refusing to provide the documents Rogers requested. This decision was affirmed in an administrative appeal.
On August 9, 2013, Rogers filed this suit against the IRS under the FOIA Act, 5 U.S.C. § 552, and the Privacy Act, see id. § 552a. Rogers’ complaint alleged that the IRS possessed non-exempt records which it failed to provide him pursuant to his FOIA request. Rogers moved the district court to order the IRS to produce the non-exempt records, complete its search for responsive records, and award him attorney’s fees and costs. The IRS never filed an answer to the complaint. Instead, it filed a partial motion to dismiss for failure to state a claim, directed toward that part of Rogers’ complaint seeking an order requiring the IRS to complete its search for records.
While the motion to dismiss was pending, the parties agreed on a “rolling production and report plan” under which the IRS would review the 500,000 pages it had determined were responsive to Rogers’ FOIA request. (R. 18, Rule 26(f) Report, PagelD# 180-84.) Under the plan, the IRS would issue monthly reports to Rogers identifying the records that it determined could be disclosed and those that it determined to be exempt. The IRS provided several monthly reports to Rogers. Based on the IRS’ representation about the rolling production and report plan, the district court denied the IRS’ partial motion to dismiss without prejudice.
On November 13, 2014, more than a year after Rogers filed his lawsuit, the IRS moved for summary judgment on the grounds that the August 2012 release waived future claims from Rogers, including his FOIA complaint. In his opposition to that motion, Rogers argued that the IRS waived its ability to rely on the release by not pleading it as an affirmative defense under Federal Rule of Civil Procedure 8(c)(1). Rogers also argued that the IRS was estopped from relying on the release because it had considered the FOIA request on the merits. Finally, Rogers argued that the release agreement did not extend to his FOIA complaint. The district court disagreed with Rogers and granted the IRS’ summary judgment motion.
II.
While it would appear that Rogers waived his ability to bring a FOIA claim against the IRS when he signed the release agreement, this issue requires a much more thorough analysis than that provided by the majority.
The release and settlement at issue was entered into pursuant to 28 U.S.C. § 2465, which governs the return of property in forfeiture proceedings. Because the agreement at issue involves the United States and was entered into pursuant to a federal statute, federal common law applies. United States v. Seckinger,
A release is a contract subject to principles of contract interpretation. See Hauf v. Life Extension Found.,
In a number of contexts, courts have upheld contractual releases of future claims. See, e.g., Nicklin v. Henderson,
The issue here is narrower than any suggested by these basic principles. It is whether Rogers’ FOIA claim is covered and precluded by the broad language of the release he signed. The IRS says yes. Rogers, on the other hand, argues that he and the IRS never intended the release to include claims made under the FOIA.
Only one federal court appears to have confronted this issue. The District of Columbia District Court addressed the question in Pub. Emps. for Envtl. Responsibility v. U.S. EPA,
Dr. Hammer appealed only the EPA’s refusal to release the report, but that deci
Several months later, Public Employees for Environmental Responsibility (“PEER”), a non-profit organization that works on behalf of EPA employees, submitted a FOIA request to the EPA for the same report, but that request was denied. Id. at 53-54. PEER and Dr. Hammer then sued the EPA under the FOIA to obtain the report. Id. at 53.
The court’s analysis was rather brief, going no further than recognizing that because “[a] settlement agreement is a contract, and Dr. Hammer is bound by the contract he signed,” he was precluded from filing a FOIA request. Id. at 54. The court reasoned that as part of the settlement agreement, Dr. Hammer expressly agreed not to institute any complaint or civil action in the future. Id. The court found that Dr. Hammer’s FOIA claim “was covered and precluded by the broad language of the settlement agreement.” Id. The court also reasoned that because Dr. Hammer was a sophisticated party represented by counsel, it did not need to look beyond the language of the release. Id. Rather, the court found, the agreement spoke for itself. Id. According to the court, the “settlement agreement should be construed for enforcement purposes basically as a contract.” Id. (citations and quotations omitted). Based on these principles, the court “ha[d] no hesitancy in holding Dr. Hammer to the bargain he struck.” Id.
If Public Employees were to apply to the case at hand, the analysis would be rather straightforward. The release at issue reads, in pertinent part:
[Rogers] ... hereby unconditionally re-léasele] and forever discharge^] the United States ... from and against any and all manner of claims, actions, causes of action, rights, ... suits, proceedings, ... and/or demands of every kind, whether known or unknown, claimed or unclaimed, asserted or unas-serted, suspected or unsuspected, ... choate or inchoate, accrued or unac-crued, anticipated or unanticipated, ... any and all matters whatsoever, related to and/or in connection with or arising out of these Forfeiture Actions.
(R. 37-7 at 1318 (emphasis added).)
The language of the release is broad. It is also very general. When one looks at1 the “causes of action, rights, ... suits, proceedings, ... and/or demands of every kind” language, one cannot help but conclude that the release includes an action-under the FOIA. Under Public Employees, there is no fair way to read the lan
Public Employees would also suggest that whether Rogers really intended to release his FOIA rights under the release is one of those subjective questions that this Court cannot answer. Instead, this Court must read the words for what they say. Rogers is, by all accounts, a sophisticated party. And like Dr. Hammer, Rogers was represented by counsel when he signed the agreement — two attorneys to be exact. This is the agreement that he made. Just like the agreement in Public Employees, the agreement here is clearly expressed. This Court’s function, therefore, should be a limited one — it is to give meaning and substance to the words that the parties freely choose.
Without any case law to the contrary, there is no reason not to follow the reasoning of Public Employees and hold that Rogers — a sophisticated party represented by two attorneys — is bound by the contract he signed. Therefore, his FOIA claim is covered and precluded by the broad language of the release. For these reasons, I concur in the majority’s holding affirming the district court’s decision in this respect.
III.
Once again, however, the analysis cannot end there because Rogers raises a number of other arguments related to the nature of his FOIA claim. First, he argues that the release he signed does not bar his FOIA claim because the release was executed before his FOIA claim arose. In other words, he argues that his FOIA claim did not accrue until the IRS denied his request. But the terms of the release are unambiguous: Rogers agreed to give up “any and all manner of claims ... whether accrued or unaccrued, ...” (R. ■ 37-7 at 1318 (emphasis added).) The release speaks for itself, and it clearly and unequivocally shows that Rogers specifically agreed to release unaccrued claims.
But even if Rogers had not agreed to release unaccrued claims, his FOIA claim arose well before the release was executed. Rogers’ FOIA request sought documents dating back to 1993. The civil forfeiture-actions were filed in 2003 and 2004 and continued until the 2012 settlement. Rogers could have submitted his FOIA request at any time prior to -the 2012 settlement. The fact that he chose to submit his request four months after signing the release does not mean that his claim was unaccrued on the date of the settlement. In other words, Rogers did not have to settle the forfeiture suits before his FOIA claim could be considered as having arisen.
Somewhat relatedly, Rogers also argues that he was not aware of the potential for a FOIA claim when he signed the release. However, he submitted an extraordinarily lengthy and detailed FOIA request just four months after he signed the release. The timing alone suggests that Rogers and his attorneys were at least aware of the potential for a FOIA claim at the time the release was executed. And regardless, as far as can be determined, all the circuits to have considered the issue agree that a party can release both unaccrued and unknown claims. See, e.g., Convey Compliance Sys., Inc. v. 1099 Pro, Inc.,
Second, as the majority alludes to, Rogers asks this Court to declare void the release he signed. Generally, “[a] signed release is binding upon the parties unless executed and procured by fraud, duress, accident or mutual mistake.” Three Rivers Motors Co. v. Ford Motor Co., 522
Rogers did not raise this argument in the district court. In general, “[ijssues not presented to the district court but raised for the first time on appeal are not properly before the court.” McFarland v. Henderson,
This is not such a case. In order to rule on Rogers’ allegations of mutual mistake, this Court would need to do much more than simply apply the law to the facts as they are alleged in Rogers’ complaint. There are no facts in Rogers’ complaint or in any of his district court pleadings that can be construed to support the existence of mutual mistake. By addressing the merits of this argument, this Court would be “designing [Rogers’] theory of liability for him, including the facts and the law.” Cheatom v. Quicken Loans,
Rogers’ final argument is that his FOIA claim does not arise from and is not related to the civil forfeiture actions. Rather, he says his claim arises from the IRS’ decision to withhold documents in response to his FOIA request. However, this argument defies common sense. Without the civil forfeiture actions, Rogers would not have submitted his FOIA request because there would have been nothing to request. And even if the FOIA action is somewhat attenuated from the civil forfeiture actions themselves, it seems clear that Rogers’ complaint related to and arises out of the civil forfeiture actions. To be sure, the FOIA request specifically references each civil forfeiture action in its first three pages.
Along the same lines, Rogers argues that the district court erred by conflating the civil forfeiture proceedings with the criminal investigation. He says that the district court should have made a distinction between documents generated during the criminal investigation and those generated during the civil forfeiture proceedings. The problem with this argument is that in the context of forfeiture proceedings, there is generally not a clear separation between the criminal and civil cases. But even when there is a clear separation, courts generally find relatedness between the two cases if there are common facts, similar alleged violations, and common parties. See, e.g., United States v. $6,976,934.65, Plus interest,
The criminal investigation of Rogers is unquestionably related to the forfeiture ac
The bottom line is that the district court correctly held that Rogers’ FOIA claim is covered and precluded by the broad language of the release he signed. The language plainly states that Rogers released the IRS from any and all manner of claims. At best, there may be ambiguity as to which “claims” are included by the release, but there does not appear to be any ambiguity about which types of claims are released. On this issue, I agree with the majority that Rogers’ FOIA claim falls within the scope of the release he signed.
IV.
While I agree with the majority that the IRS was not estopped from relying on the release, the IRS was precluded from relying on the release because of its failure to timely assert its rights pursuant to the release. Contrary to the IRS’ argument, the IRS should not have been permitted to raise the defense of release in its summary judgment motion — a motion which was filed more than a year after the lawsuit began. To be blunt, if this situation— tantamount to neglectful silence — does not amount to waiver, then nothing will.
Federal Rule of Civil Procedure 8(c)(1) provides the basic rule for affirmative defenses: “In responding to a pleading, a party must affirmatively state any avoidance or affirmative defense.” Fed. R. Civ. P. 8(c)(1). Rule 8(c)(1) specifically lists “waiver” as an affirmative defense. Id. The general rule in federal court is that a party’s failure to plead specifically any given affirmative defense will result in waiver of that defense. See, e.g., Wood v. Milyard, -U.S.-,
Like the Supreme Court, this Court has held that “[a]s a general rule, failure to plead an affirmative defense results in a waiver of that defense.” Old Line Life Ins. Co. of Am. v. Garcia,
Whether or not a court will find prejudice depends in large part on the amount of time a party had to bring the affirmative defense and its reason for not doing so earlier. See, e.g., Macurdy v. Sikov & Love, P.A.,
, What all this comes down to is this: where there is unfair prejudice, a party is taken by surprise, or unnecessary delay, the general waiver rule applies; on the other hand, where there is no unfair prejudice, surprise, or delay, the general waiver rule is left to the district court’s discretion. See Moore, Owen, Thomas & Co.,
All of those factors, which establish prejudice, are present here. Rogers submitted his FOIA request just four months after he signed the release agreement with the IRS. That release agreement marked the end of a near ten-year long investigation by the IRS into Rogers’ offshore gambling business. It is difficult to believe that the IRS — having just signed a settlement agreement stemming from an investigation that spanned so many years— would have been unaware of the release it signed four months earlier. Yet when the IRS responded to Rogers’ request just two weeks later, it did not point to the release as it should have. The IRS did not, in the first instance, tell Rogers that the agreement he signed released it from any obligation under the FOIA to produce records relating to the civil forfeiture actions.
Instead, the IRS acknowledged receipt of Rogers’ request and asked him to send more information. When the IRS denied Rogers’ request in its entirety about two and a half months later, it cited a number of exemptions under the FOIA and left out the fact that the release applied to Rogers’ request. The IRS got its third opportuni- ■ ty to point to the release when it considered Rogers’ administrative appeal — but no such luck for Rogers there. Not once in the near five-month long period, that began with Rogers’ request and ended with the denial of his appeal, did the IRS even remotely refer to the release.
Even giving the IRS the benefit of the doubt that its FOIA examiners may not have known about the release, counsel for the IRS certainly should have known about the release when it was served with Rogers’ complaint. But the IRS did not mention the release when it filed a motion to dismiss. Nor did the IRS mention the release during the time it issued monthly reports to Rogers identifying the records that it determined could be disclosed and those it determined to be exempt. Not once in the 461 days between receiving Rogers’ complaint and filing its motion for summary judgment did the IRS even mention the release.
Only one of two scenarios is possible here: (1) either the IRS waited two years to raise the waiver defense, with no good reason for the delay, or (2) the IRS had a eureka moment in the middle of litigation. Either way, Rogers should not have to bear the brunt of something the IRS should have done two years earlier.
This dissent should not be construed as applying the Federal Rules of Civil Procedure to the IRS’ administrative process. Nor am I suggesting that the IRS was required to assert an affirmative defense in its initial FOIA response. The analysis here is based solely upon the IRS’ failure to assert its affirmative defense in the litigation proceedings until 461 days after being served with the complaint. That being said, when considering whether or not Rogers had been prejudiced, one cannot help but take notice of the equities involved when considering the time in which Rogers’ request sat on someone’s-desk without one mention of the release.
While the majority maintains that there was no prejudice to Rogers, the facts suggest otherwise. Through all this time, Rogers no doubt spent a significant