Court Opinion

ID: 1026462
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:06:56.836203+00
Date Added: 2024-06-11T15:14:00.764007
License: Public Domain

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
                          PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

NOURISON RUG CORPORATION,             
                Plaintiff-Appellee,
                 v.
ABDI PARVIZIAN,
               Defendant-Appellant,             No. 07-1973

                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 &
2                     NOURISON RUG v. PARVIZIAN
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 plead-
ings 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, fur-
niture, and furnishings. The President of Parinco is Allen Parvizian
("Allen"). Parvizian, the Appellant, is Allen’s father, but is not other-
wise 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, "ac-
                     NOURISON RUG v. PARVIZIAN                      3
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 let-
ter states that "Parinco has not made any of the bi-weekly payments
due under the Note since February 3, 2006 (nor made any other pay-
ments since June 21, 2006)." J.A. 31. Parvizian has made no pay-
ments.

   Nourison filed its Complaint on October 12, 2006, to which was
attached the letter from September 7. On December 1, 2006, Defen-
dants 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.
4                      NOURISON RUG v. PARVIZIAN
   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 amend-
ment 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 Judg-
ment. 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 Parviz-
ian "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
    1
   Parvizian’s Motion for Summary Judgment was denied and has not
been appealed.
                      NOURISON RUG v. PARVIZIAN                        5
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 sup-
port 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 pursu-
ant 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 Place-
ment Partners II v. Parker, 247 F.3d 543, 548 (4th Cir. 2001).
  2
   Both 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.
6                     NOURISON RUG v. PARVIZIAN
   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
                     NOURISON RUG v. PARVIZIAN                       7
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 consider-
ation 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 par-
ties 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 mat-
ter 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 forbear-
ance. 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 favor-
8                     NOURISON RUG v. PARVIZIAN
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 judg-
ment 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 appropri-
ate.

                                  IV.

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

                                                          AFFIRMED.