No Waiver Even Though Argument Was Not Raised Below

Barefoot Architect, Inc. v. Bunge, 632 F.3d 822 (3d Cir. 2011).  This was a group of appeals in a Virgin Islands case that involved, among other things, copyright, Lanham Act, and common law claims, including a claim for tortuous interference.  (Yes, the Virgin Islands are part of the Third Circuit just as New Jersey is, despite the dramatic differences in winter weather).  One of the many issues raised related to the district court’s Rule 12(b)(6) dismissal of the defendants’ counterclaim for tortious interference with contractual relations.

On their appeal on the tortious interference issue, the defendants relied on the Restatement (Second) of Torts, §766A, an argument they had not raised below.  The plaintiffs asserted that the §766A argument had therefore been waived.  The Third Circuit, through Judge Smith, disagreed, for several reasons.

First, the court stated that the waiver rule is “one of discretion rather than jurisdiction” that may be “relaxed whenever the public interest … so warrants.”  In the court’s view, the public interest was “better served by addressing §766A than by ignoring it.”

Second, neither of the two underlying purposes of the waiver rule was served by enforcing waiver in the circumstances of this case.  The first purpose— “ensuring that the necessary evidential development occurs in the trial court”— was irrelevant to a Rule 12(b)(6) motion to dismiss, which addresses only purely legal issues, not evidence.  The second purpose— preventing surprise to the opposing party— the counterclaim itself put the plaintiffs on notice of a potential tortious interference claim even though the district court briefing did not.

The defendants dodged the waiver bullet on this claim, since waiver remains the normal result of failure to make an argument below.  This opinion may be especially useful to parties appealing adverse rulings on motions to dismiss, since it appears to open the door to purely legal issues not raised below, at least in some circumstances.  But don’t count on it.