Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca4-07-01973/USCOURTS-ca4-07-01973-1/pdf.json

Parties Involved:
Nourison Rug Corporation
Appellee
Parinco of Virginia, Incorporated

Abdi Parvizian
Appellant

Document Text:

Filed: August 21, 2008

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 07-1973

(8:06-cv-02697-DKC)

NOURISON RUG CORPORATION,

Plaintiff - Appellee,

v.

ABDI PARVIZIAN,

Defendant - Appellant,

and

PARINCO OF VIRGINIA, INCORPORATED,

Defendant.

O R D E R

The court amends its opinion filed July 28, 2008, as follows:

On page 5, footnote 2, the following sentence is added: “The

Court notes that appellate counsel did not represent either

Parvizian or Parinco in the matter before the District Court.” 

For the Court - By Direction

 /s/ Patricia S. Connor 

 Clerk

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PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

NOURISON RUG CORPORATION, 

Plaintiff-Appellee,

v.

ABDI PARVIZIAN,

 No. 07-1973 Defendant-Appellant,

and

PARINCO OF VIRGINIA, INCORPORATED,

Defendant. 

Appeal from the United States District Court

for the District of Maryland, at Greenbelt.

Deborah K. Chasanow, District Judge.

(8:06-cv-02697-DKC)

Argued: May 15, 2008

Decided: July 28, 2008

Before TRAXLER and KING, Circuit Judges, and

Jackson L. KISER, Senior United States District Judge

for the Western District of Virginia, sitting by designation.

Affirmed by published opinion. Senior Judge Kiser wrote the opinion,

in which Judge Traxler and Judge King joined. 

COUNSEL

ARGUED: Judah Lifschitz, SHAPIRO, LIFSCHITZ & SCHRAM,

Washington, D.C., for Appellant. James M. Andriola, REED &

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SMITH, LLP, New York, New York, for Appellee. ON BRIEF:

Thomas A. DiBiase, Alexis M. Lockshin, SHAPIRO, LIFSCHITZ &

SCHRAM, Washington, D.C., for Appellant.

OPINION

KISER, Senior District Judge: 

Abdi Parvizian ("Parvizian") guaranteed a debt owed to Nourison

Rug Corporation ("Nourison") by Parinco of Virginia, Inc.

("Parinco"). When Parinco defaulted, Nourison sued Parvizian to

recover the balance due. After the deadline for amending the pleadings had passed, Parvizian attempted to amend his answer to add the

defense of release. The United States District Court for the District of

Maryland denied the proposed amendment, and granted summary

judgment for Nourison. Parvizian now challenges the denial of the

amended complaint and the granting of summary judgment. Because

we find that the District Court did not abuse its discretion, we affirm.

I.

The relevant facts are not in dispute. Nourison is a manufacturer

and supplier of rugs and carpets. Parinco is a wholesaler of rugs, furniture, and furnishings. The President of Parinco is Allen Parvizian

("Allen"). Parvizian, the Appellant, is Allen’s father, but is not otherwise involved with the operations of Parinco.

In August 2004, Nourison and Parinco entered into a consignment

agreement under which Nourison would deliver rugs to Parinco on a

consignment basis and Parinco would sell them to the public. Parinco

sold these rugs but did not remit the payments to Nourison. By

August 2005 Parinco owed Nourison $2,386,735.98.

To satisfy this debt, Parinco delivered a Promissory Note (the

"Note") to Nourison on August 24, 2005. Parinco was to make

biweekly (semimonthly) payments of approximately $50,000 for two

years. The Note was to be self-liquidating and the balance could be

accelerated if a default was not cured within ten days. Further, "ac2 NOURISON RUG v. PARVIZIAN

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ceptance of any installment payment after default shall not serve as

a waiver with respect to any of the note holder’s rights regarding any

future late payments." J.A. 93.

On October 14, 2005, Parvizian executed a guaranty letter (the

"Guaranty") under which he guaranteed the full payment of all

amounts due under the Note. In return Nourison was to subordinate

its lien to any bank that requests such action. 

Parinco made its last full payment in February 2006. To rectify the

account, Nourison allowed Parinco to make the following alternative

payments: 1) By the end of the week Parinco would pay its past due

balance of $18,219; 2) Parinco would pay $56,000 by April 15; 3)

Parinco would reconcile its remaining balance owed by April 30; 4)

Parinco would provide a list of unsold merchandise so that Nourison

could issue a return authorization number; 5) Parinco will pay for all

its sold consignment merchandise by April 30. Over the course of the

next few months, Parinco made sporadic payments to Nourison. At

some point the parties agreed for Parinco to pay $25,000 biweekly

(semimonthly), half of what the Note required. The last payment

made by Parinco was in June 2006. 

Parvizian claims that he was not informed of these alternative

arrangements, and that they were material alterations to the Note.

Nourison contends that these were a voluntary temporary forbearance

which did not affect Parvizian’s rights or obligations as a guarantor.

On September 7, 2006, Nourison informed Parvizian of Parinco’s

default and demanded payment under the Guaranty. The demand letter states that "Parinco has not made any of the bi-weekly payments

due under the Note since February 3, 2006 (nor made any other payments since June 21, 2006)." J.A. 31. Parvizian has made no payments. 

Nourison filed its Complaint on October 12, 2006, to which was

attached the letter from September 7. On December 1, 2006, Defendants Parinco and Parvizian filed their joint Answer (a stipulated

order extended their deadline to this date). The Answer admitted the

existence of the agreements between the parties and that Parinco was

in default of its obligations. 

NOURISON RUG v. PARVIZIAN 3

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On December 12, 2006, the District Court entered a scheduling

order, which stated in bold that it "will not be changed except for

good cause." J.A. 50. Among other dates, the scheduling order set out

the following deadlines: 1) January 18, 2007 — Moving for amendment of pleadings; 2) April 18, 2007 — Discovery deadline; and 3)

May 18, 2007 — Dispositive pretrial motions deadline. 

On February 13, 2007, Nourison filed a Motion for Summary Judgment. In the Joint Opposition, filed on March 2, 2007, Parvizian

raised the defense of release for the first time, stating "Parvizian is not

liable under the Guaranty because Nourison and Parinco have

changed the terms of Parinco’s obligations under the Note." J.A. 137.

On March 16, 2007, Parvizian filed a Motion for Leave to Amend

Answer to add his defense of release. That Motion explains: "In

responding to the motion for summary judgment, Mr. Parvizian’s

counsel reviewed his defenses to the guaranty letter (the "Guaranty")

at issue in this case and noted that there was a defense available to

Mr. Parvizian that he had not raised in his Answer: release." J.A. 228.

On May 18, 2007, Parvizian filed a Motion for Summary Judgment

on the basis of release.1

On September 7, 2007, the District Court issued an Order denying

the Motion for Leave to Amend Complaint and granting Nourison’s

Motion for Summary Judgment, thus awarding Nourison $2,080,872

from Parvizian and Parinco. 

In ruling on the Motion for Leave to Amend, the District Court

relied on Rule 16(b), which requires good cause to justify amendment

of the pleadings, rather than Rule 15(a). The Court found that Parvizian "provides no reason for his failure either to include the defense of

release in his original answer or to make a timely motion for leave to

amend the answer to include this defense. There is no indication that

any of the facts upon which Abdi Parvizian seeks to base his defense

of release came into his possession after his original answer was filed,

and there is certainly no indication that he learned of these facts after

1Parvizian’s Motion for Summary Judgment was denied and has not

been appealed. 

4 NOURISON RUG v. PARVIZIAN

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the scheduling order deadline for amendments to the pleadings." J.A.

491.2

Further, the court then expressed that the defense of release would

be futile for several reasons. First, because the proposed amended

answer "asserts no facts to support [its] bare legal conclusion," it

would be stricken pursuant to Rule 12(f). J.A. 496. Therefore it would

not preserve the defense and would be futile. 

Second, "the evidence that Abdi Parvizian forecasts in response to

Plaintiff’s Motion for Summary Judgment and in support of his own

Motion for Summary Judgment based on this defense does not support the defense, and would be insufficient to withstand Plaintiff’s

Motion for Summary Judgment." Id. The proffered evidence "does

not constitute an agreement modifying the terms of the Promissory

Note for separate consideration, but rather a temporary forbearance or

indulgence of Parinco’s default under the Promissory Note." J.A. 497.

Therefore, "because Plaintiff has shown that Parinco was in default

under the Promissory Note and that Abdi Parvizian was notified of

the default but failed to make good on his promise to perform pursuant to the Guarantee Agreement, he is in breach of the Guarantee

Agreement." J.A. 500. 

Parvizian advances his appeal on two theories: 1) That the District

Court abused its discretion by refusing to allow Parvizian to amend

his Answer; and 2) that the District Court erred in granting summary

judgment for Nourison.

II.

The District Court’s denial of Parvizian’s Motion for Leave to

Amend is reviewed for abuse of discretion. GE Inv. Private Placement Partners II v. Parker, 247 F.3d 543, 548 (4th Cir. 2001).

2Both Parvizian and Parinco were represented by the same counsel

from the time the Answer was filed on behalf of both defendants. It is

inconceivable that counsel, and thus Parvizian, were not informed as to

the arrangement between Nourison and Parinco from the beginning of

the case. The Court notes that appellate counsel did not represent either

Parvizian or Parinco in the matter before the District Court. 

NOURISON RUG v. PARVIZIAN 5

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There is tension within the Federal Rules of Civil Procedure

between Rule 15(a) and Rule 16(b) amply illustrated by this appeal.

Rule 15(a) provides that leave to amend "shall be freely given when

justice so requires." A motion to amend should be denied only where

it would be prejudicial, there has been bad faith, or the amendment

would be futile. HMCF Corp. v. Allen, 238 F.3d 273, 276-77 (4th Cir.

2001). On the other hand, Rule 16(b) provides that "a schedule shall

not be modified except upon a showing of good cause and by leave

of the district judge." 

The Fourth Circuit has never directly spoken to the conflict

between these two provisions in a published opinion. However, in

Montgomery v. Anne Arundel County, 182 F.Appx. 156, 2006 WL

1194308, *5 (4th Cir. May 3, 2006), this Court affirmed a district

court’s refusal to grant an amendment filed after the scheduling order

deadline on the basis of Rule 16(b). 

Given their heavy case loads, district courts require the effective

case management tools provided by Rule 16. Therefore, after the

deadlines provided by a scheduling order have passed, the good cause

standard must be satisfied to justify leave to amend the pleadings.

This result is consistent with rulings of other circuits. See O’Connell

v. Hyatt Hotels of Puerto Rico, 357 F.3d 152, 154-55 (1st Cir. 2004);

Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir.

2000); S & W Enters. v. SouthTrust Bank of Ala., 315 F.3d 533, 536

(5th Cir. 2003); Leary v. Daeschner, 349 F.3d 888, 906 (6th Cir.

2003); In re Milk Prods. Antitrust Litig., 195 F.3d 430, 437-38 (8th

Cir. 1999); Sosa v. Airprint Sys., Inc., 133 F.3d 1417, 1419 (11th Cir.

1998).

In his Motion for Leave to Amend, Parvizian explained his delay:

"In responding to the motion for summary judgment, Mr. Parvizian’s

counsel reviewed his defenses to the guaranty letter at issue in this

case and noted that there was a defense available to Mr. Parvizian that

he had not raised in his Answer: release." J.A. 228. Further, his Reply

Memorandum did not add any detail to his reasons. This is far short

of what is required to satisfy the good cause standard, and the District

Court thus properly denied the Motion.

Though Parvizian failed to rely on the March 2007 emails in his

Motion for Leave to Amend, he urges us to consider his appeal in

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light of them. In his Opposition to Nourison’s Motion for Summary

Judgment, which was filed before his Motion for Leave to Amend,

Parvizian attached the March 2007 emails to support his argument.

Parvizian suggests that these attachments were sufficient notice of the

source of his Motion for Leave to Amend. Regardless of our consideration of the March 2007 emails, Parvizian still does not establish that

the district judge abused her discretion.

The email messages demonstrate that Nourison was attempting to

recover payments from Parinco, which had again fallen behind on its

commitments, by temporarily allowing Parinco to make alternative

payments. Parvizian argues that "Nourison and Parinco had entered

into a new agreement that significantly altered the payment terms of

the Note or that each installment was now half of what was originally

agreed to, thereby drastically increasing Mr. Parvizian’s exposure on

the Guaranty." (App. Reply Br. 9.) This interpretation of the emails

is highly questionable. Nourison and Parinco were sophisticated parties that on several previous occasions entered into formal written

agreements as to their ongoing relationship. 

It is much more natural to construe these emails as Nourison’s

agreement to a temporary forbearance in an attempt to recover some

of the money it was due. Forbearance should be encouraged as a matter of policy as it is a creditor’s compromise between accepting no

payment and entering into costly litigation. The District Court thus

properly interpreted the emails as an agreement of temporary forbearance. Therefore there was no error in finding that the facts did not

support satisfaction of the "good cause" standard.

Parvizian urges us to adopt a new standard, reading Rule 16(b) in

light of Rule 15(a)’s liberal allowances. We refuse to do so. Because

we sustain the District Court’s application of Rule 16(b), there is no

cause for us to address the Court’s finding that amendment would be

futile, which is a Rule 15(a) consideration. 

III.

We review de novo a district court’s denial of summary judgment,

construing all facts and reasonable inferences in the light most favorNOURISON RUG v. PARVIZIAN 7

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able to the nonmovant. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir.

1994) (citations omitted), cert. denied, 513 U.S. 813 (1994).

Parvizian’s arguments on this point are largely dependent on the

arguments addressed above — If the District Court erred in excluding

the defense of release, then it surely erred in granting summary judgment against Parvizian. However, the exclusion of the defense of

release was not in error. Parvizian admitted that he guaranteed the

debt, that the debt was in default, and that he was on notice of such

default. Therefore the granting of summary judgment was appropriate.

IV.

For the foregoing reasons, the judgment of the district court is 

AFFIRMED.

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