Virginia Lawyers Weekly

A recent decision of the 4th U.S. Circuit Court of Appeals serves as an important reminder to lawyers practicing in federal court that they risk waiving critical claims or defenses by waiting too long to solidify their legal theories.

In Nourison Rug Corp. v. Parvizian, 535 F.3d 295 (4th Cir. July 28, 2008), the defendant did not move to amend his answer to include the affirmative defense of release until nearly two months after the deadline in the court’s scheduling order for amending pleadings. Due to the delay, the court required the defendant to establish “good cause” for modifying the scheduling order under Federal Rule of Civil Procedure 16(b), rather than applying the liberal standard for amending pleadings in Federal Rule of Civil Procedure 15(a).

Finding no good cause, the court said the defendant, who had guaranteed a debt for his son’s rug company, had waived the defense, resulting in a $2 million judgment against him. Nourison presents three important lessons for federal court litigators.

Lesson 1: Think Strategically About Amendment Before the Rule 26(f) Conference. Rule 16(b)(1) requires district judges to issue a scheduling order after receiving the parties’ Rule 26(f) discovery report or after consulting with the parties’ attorneys. Once the scheduling order is entered, it “may be modified only for good cause and with the judge’s consent.” Rule 16(b)(3)(A) sets forth the required contents of the order: “The scheduling order must limit the time to join other parties, amend the pleadings, complete discovery, and file motions.” Despite these requirements, district courts frequently issue scheduling orders that do not set a deadline for amending pleadings. Other district courts set a deadline only insofar as the scheduling order adopts the deadlines in the parties’ Rule 26(f) report and the parties proposed a deadline for amendment.

In light of the requirements of Rules 16(b) and 26(f) and the variations in local practice, before a Rule 26(f) conference, a lawyer should determine whether the judge typically enters a scheduling order setting a deadline for amending pleadings. If the judge does not usually set a deadline, the lawyer should think carefully about whether it would be in the client’s interest to propose such a deadline for inclusion in the Rule 26(f) report. Without a deadline in the scheduling order, the parties could amend pleadings up to the time of trial so long as, pursuant to Rule 15(a)(2), they have the written consent of the opposing party or have leave of court, which should be freely given when justice requires.

Whether it is in the client’s interest to have the claims and defenses fixed early in the proceedings will depend on the circumstances of the case. For example, plaintiff’s counsel may expect that discovery will reveal critical facts that could not be obtained by pre-complaint investigation, and therefore may want maximum flexibility to revise or expand the legal theories in light of discovery. In contrast, defendant’s counsel may oppose such flexibility, although Nourison highlights that even defendants may want the benefit of Rule 15(a)’s liberal amendment standard in some circumstances, such as where there is not sufficient time for pre-answer investigation or where discovery is needed to determine possible affirmative defenses or counterclaims.

If the lawyer concludes that an amendment deadline should be included in the Rule 26(f) report, he should propose one to opposing counsel and should ensure that the deadline is not too early. Rather, the deadline should be late enough to allow counsel sufficient time to conduct at least some investigation and discovery and evaluate whether the legal theories should be adjusted in light of the evidence developed. Counsel also should allow sufficient time to research and understand the relevant legal standards. In Nourison, the deadline for amendment was barely a month after discovery began. Ordinarily, parties may have difficulty solidifying their claims and defenses by such an early deadline.

The lawyer also should ensure, to the extent possible, that the language in the scheduling order setting the deadline for amendments is clear. The parties’ Rule 26(f) report could propose a deadline for moving for leave to amend, in which case, all attempts to amend the pleadings before that deadline must be made by a motion for leave to amend that satisfies the requirements of Rule 15(a). Alternatively, the parties’ report could propose a deadline for amending the pleadings and provide that the parties consent in advance to any such amendment under Rule 15(a), so that no motion for leave to amend would be necessary. Without this clarity—which was missing in the scheduling order in Nourison—the parties are bound to argue later about whether leave is required for pre-deadline amendments.

Lesson 2: Do Not Delay Researching and Solidifying Claims and Defenses. Nourison should serve as a reminder to lawyers to view a scheduling order’s deadline for amending pleadings as seriously as the discovery cut-off. After the deadline for amendments passes, a party will face a much higher bar to amending the pleadings with a new claim or defense than before the deadline. Therefore, counsel should plan to conclude a thorough collection and review of evidence and careful legal research for possible claims and defenses before the amendment deadline. Under Nourison, a party will not be able to satisfy the Rule 16(b) good cause requirement by contending that counsel just did not think hard about the case until after the amendment deadline.

Lesson 3: Where Necessary, Make a Strong Case for Amendment. Ideally, counsel will determine before the deadline for amending pleadings that more time (and discovery) may be needed for amendment, and will therefore make a motion to modify the scheduling order before the deadline, even if the party is not yet in a position to determine definitively whether it will need to amend. However, even with the greatest diligence, counsel may not realize that the client has a claim or defense until after the scheduling order’s deadline for amending pleadings. In that case, at least in the First, Second, Fourth, Fifth, Sixth, Eighth and Eleventh Circuits, the party should simultaneously move for leave to modify the scheduling order under Rule 16(b) and for leave to amend the pleadings under Rule 15(a). The court’s good cause analysis under Rule 16(b) will focus on the timeliness of the amendment and the diligence of the moving party. Therefore, the motion should specify precisely the information that surfaced to support the new claim or defense, when and how the information surfaced, and why, even with the exercise of due diligence, counsel could not have known that the claim or defense existed before the amendment deadline. The motion also should address the strength of the new claim or defense, in order to establish lack of futility and satisfy the Rule 15(a) standard for amendment.

Lawyers practicing in federal court always have had cause to act promptly and diligently in developing their clients’ legal theories, claims and defenses. The 4th Circuit’s decision in Nourison provides yet another compelling reason for such diligence—to ensure that valid claims and defenses are not sacrificed at the altar of effective case management.

Ellen D. Marcus, a partner at Zuckerman Spaeder LLP, focuses her practice on commercial and complex civil litigation. She formerly served as a law clerk to U.S. District Judge Leonie M. Brinkema in Alexandria.

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