Defense That Suit Was Brought Under Assumed Name Was Waived

Defense That Suit Was Brought Under Assumed Name Was Waived

      In a January opinion from the Court of Appeals, it rejected the defendant’s assertion that a lawsuit, initiated by the plaintiff under its assumed, not its real, name was invalid.  Edwards v. Headcount Management, 2014 WL 346070 (Ky. App. Jan. 31, 2014). 

      Staff Corp. and Headcount Management entered into a Master Service Agreement (“MSA”) pursuant to which Headcount Management provided payroll processing and personnel services to Staff Corp.  “Headcount Management” was an assumed name of Arrow Funding Corp.  Staff Corp.’s obligation under the MSA were guaranteed by Debbie Edwards, Amanda Wood and Russell Wood, III.  Ultimately, Headcount Management, under that name, would bring suit against Staff Corp. and each of the guarantors for payment on an open account of some $22,467.65. 

       Neither the motion to dismiss nor the answer filed by the defendants raised the issue that Arrow Funding was attempting to proceed under its assumed name, Headcount Management, rather than its real name.  Ultimately, in response to a motion for summary judgment brought by Headcount Management, the defendants then for the first time raised the issue that Headcount Management is not itself a legal entity, but rather only an assumed name of Arrow Funding.  The circuit court granted Headcount Management’s motion for summary judgment, which, in the words of the Court of Appeals, thereby “tacitly reject[ed] Edwards’s capacity defense.”  After additional motion practice at the trial court level, this appeal followed.

       While noting that there does not appear to be either a Kentucky statute or case to the effect that it is not possible to bring suit under an assumed, as contrasted with a real, name, the Court found that even if that defense was available, it is in a nature of an affirmative defense that was waived when not raised in either the motion to dismiss or the answer:

Here, Edwards wholly failed to assert capacity as a defense, by motion or responsive pleading, in a timely manner. Edwards faced two opportunities to raise a capacity defense: first in her pre-answer motion to dismiss, and second in her answer. No mention of capacity was asserted in either. At no point did Edwards seek leave to amend her answer. CR 15.01. Indeed, Edwards concedes the defense of capacity was first raised during the March 2011 summary-judgment hearing, several months after Edwards filed her responsive pleading. Therefore, we conclude that Edwards waived the defense of lack of capacity.  2014 WL 346070, *3.