Bassi & Bellotti S.p.A. v. Transcontinental Granite, Inc. et al

Filing 151

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 3/9/11. (sat, Chambers)

Bassi & Bellotti S.p.A. v. Transcontinental Granite, Inc. et al

Doc. 151

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : BASSI & BELLOTTI S.p.A. : v. : : TRANSCONTINENTAL GRANITE, INC., et al. : Civil Action No. DKC 08-1309

MEMORANDUM OPINION Presently pending and ready for resolution are (1) the

motion for leave to file a second amended complaint filed by Plaintiff Bassi & Bellotti, S.p.A. (ECF No. 131), (2) the

motions for summary judgment filed by Plaintiff Bassi & Bellotti (ECF No. 132) and Defendant Thomas R. Passarelli (ECF No. 137), (3) the motion for an extension of time to file a response/reply to the summary judgment motions filed by Plaintiff Bassi &

Bellotti (ECF No. 139), and (4) the motion to strike Plaintiff's supplemental opposition to Defendant Passarelli's motion for

summary judgment or in the alternative for leave to file a reply to the supplemental The opposition issues filed been by Defendant Passarelli and no

(ECF No. 148).

have

fully

briefed

hearing is necessary.

Local Rule 105.6.

For the reasons that

follow, Plaintiff's motion for leave to amend will be granted in part and denied in part, Plaintiff's motion for summary judgment will be denied, judgment Defendant will be Thomas R. Passarelli's and Defendant motion Thomas for R.

summary

granted,

Dockets.Justia.com

Passarelli's motion to strike or in the alternative for leave to file a reply will be granted in part. I. Background A. Factual Background Bassi & Bellotti, S.p.A. is an Italian

Plaintiff

corporation registered to do business in Maryland. a vendor of Italian granite slabs.

Plaintiff is

Defendant Thomas Passarelli

is the President, Director, and sole shareholder of Defendant Transcontinental Granite Inc., ("Transcontinental") a company

incorporated in Virginia and at one time in the business of selling kitchen and bathroom counter tops through retail stores in Maryland, Virginia, North Carolina, and Georgia. Transcontinental been one of began operations since in 1997, or and Defendant had

Plaintiff By

its

vendors

2000

2001.

2007,

Transcontinental had eight showrooms in Virginia, Maryland, and North Carolina. Defendant Artin Afsharjavan is a citizen of

Maryland who entered into two purchase and sale agreements with Transcontinental in early 2008. Defendant Stone Surfaces, MD,

Inc. ("Stone Surfaces") is a company organized under the laws of the State of Maryland that was engaged in the retail sale and installation of granite surfaces in Maryland and Virginia. claims against Stone Surfaces are currently The

administratively

closed due to its bankruptcy proceedings.

(ECF No. 90).

The remaining facts are disputed unless otherwise stated. 2

1. The Terms of the Agreement Between Bassi & Bellotti & Transcontinental According to Plaintiff Bassi & Bellotti, its business

relationship with Transcontinental began in 2001 when it agreed to sell and Transcontinental agreed to buy its polished granite slabs of various types and sizes manufactured in Italy.

Plaintiff avers that at the beginning of their relationship the parties entered into a credit agreement whereby Bassi & Bellotti would provide Transcontinental a credit for each purchase and invoices were to be paid in one-seventh increments every thirty days so that every invoice would be paid in full within 210 days. Plaintiff states that each invoice submitted to

Transcontinental identified the items purchased, the agreed upon unit price, the total price for the shipment in euros and U.S. dollars and, the conversion rate used, which was the prevailing rate in Milan, Italy, on the date of the invoice. contends that Transcontinental owes $484,599.41 Plaintiff for unpaid

invoices dating back to October 11, 2006. Defendant Transcontinental contends that the terms of the parties' agreement varied over time. Transcontinental avers

that under their first agreement Plaintiff's invoices required payment in dollars in three installments commencing ninety days after the bill of lading date. The parties then modified the

terms to allow Transcontinental to make payments for orders paid

3

in monthly installments of one seventh of the amount of the order. In 2007, Transcontinental contends two further

modifications were made.

The first allowed Transcontinental to

make payments of $10,000.00 a week for past due amounts; the second reduced the amount to $5,000.00 a week. With respect to

the conversion rate, Transcontinental insists that the parties agreed to use the conversion rate determined by the Federal Reserve Bank of New York and that the conversion was to be calculated on the payment's due date. Transcontinental also

disputes the total sum due to Bassi & Bellotti and argues that $484,599.41 is inflated for out of of because certain pocket it fails to made, with that credit for the were

Transcontinental Transcontinental's delayed delivery

payments costs

associated of granite

several

containers

rejected by customs officials for improper packaging, and for Plaintiff's delivery of the wrong granite, Amadeus instead of Marlyn Blue, in April 2007. 2. Transaction Between Defendant Transcontinental and Defendant Artin Afsharjavan In early 2008, Transcontinental decided to discontinue

operations at five of its showrooms and sought a buyer for the furniture and fixtures therein. Transcontinental initially Stone

approached one of its competitors, Stone Surfaces, Inc. Surfaces' president, Daryoush Afsharjavan,

introduced

4

Transcontinental

to

his

young

entrepreneur

son,

Artin

Afsharjavan, who was interested in purchasing the materials from Transcontinental. Artin Afsharjavan and Transcontinental executed two The the its

purchase and sale agreements in January and March of 2008. agreements furniture, provided fixtures, that and Transcontinental equipment would in sell five all of

located

showrooms located in Virginia and Maryland. also agreed for to assist the younger from

Transcontinental in obtaining existing to use

Afsharjavan

leases

these and it

showrooms granted

Transcontinental's a license

landlords,

Afsharjavan

Transcontinental's registered trademark, The Countertop Company, at those locations. In exchange, Afsharjavan consented, in the

first agreement, to pay $90,000 and, in the second, to pay four percent of sales from two of the showrooms for the subsequent thirty-six months. initial payment, Afsharjavan paid approximately $37,000 as an but never made any additional payments.

Defendants maintain that no manufacturing operations took place at the showrooms referenced in the agreements and that no

inventory of any kind was transferred, including granite slabs from Bassi & Bellotti. B. Procedural Background

Plaintiff initially filed a complaint in this court on the basis of diversity jurisdiction on May 20, 2008, (ECF No. 1) and 5

subsequently filed an amended complaint on January 29, 2009, alleging claims of breach of contract, fraudulent transfer, and unjust enrichment. (ECF No. 30). Plaintiff's amended complaint

alleged that Transcontinental's failure to pay for a quantity of granite slabs totaling 364,543.64 or $484,599.41 was a breach of contract. (Id. ¶ 17). It also alleged that after receipt of

the slabs, Defendant Passarelli allegedly sold Transcontinental to Defendant Artin Afsharjavan. (Id. ¶ 9). Plaintiff claims

that this sale was a fraudulent conveyance from Transcontinental to Defendant Afsharjavan are liable for which II) Defendants and that Passarelli as a and

Afsharjavan Defendants

(count

result enriched

Passarelli

and

Afsharjavan

were

unjustly

(counts III and IV).

(Id. ¶¶ 18-27).1

Earlier in the case Plaintiff filed a motion for summary judgment on its that breach was of contract because of claim genuine against factual

Transcontinental disputes.

denied

(ECF No. 15, at 73-74).

At the close of discovery

Plaintiff filed a renewed motion for summary judgment on this claim (ECF No. 132) and also requested leave to file a second amended complaint. (ECF No. 131). Transcontinental opposes

Plaintiff also asserted two counts against Defendant Stone Surfaces MD, Inc. (counts V and VI). These claims are currently subject to an automatic bankruptcy stay. (See ECF No. 90).

1

6

both motions and is joined in its opposition to the motion for leave to amend by Defendant Passarelli. (ECF Nos. 136 and 138).

Defendant Passarelli also filed a motion for summary judgment on the claims of fraudulent conveyance and unjust enrichment.

(ECF No. 137).

Defendant Afsharjavan has not participated in or

responded to any of these motions. II. Plaintiff's Motion for Leave To File a Second Amended Complaint Plaintiff seeks leave to file a second amended complaint. (ECF No. 131). of contract The proposed amendments add a count for breach Defendant relating to Thomas the Passarelli, additional and an

against

factual

allegations

existing

counts,

allegation regarding the applicable law. Plaintiff within argues that its request is

(ECF No. 131, at 3). timely in and falls well

the

liberal

standard

outlined

Fed.R.Civ.P.

15(a).

Plaintiff maintains that the proposed amendments reflect facts learned during discovery and its purpose in seeking leave is to conform the complaint to the evidence. (Id.) Specifically

Plaintiff contends that the factual allegations prompting its request came to light primarily during the depositions of

Maurizio Bassi on March 17, 2010, and Thomas Passarelli on July 15, 2010. 16, 2010. (Id. at 5). Plaintiff's motion was filed on August

7

Defendants request. They

Transcontinental argue that the

and

Passarelli is

oppose

the

motion

untimely

because

pursuant to the November 28, 2008, Rule 16(b) scheduling order the deadline for amendments to the pleadings was January 8, 2009. They also argue that the amendments would be prejudicial Finally, would be

and that Plaintiff's motion is made in bad faith. Defendants futile argue that the granting Plaintiff's claim request Mr.

because

proposed

new

that

Passarelli

breached an oral contract is barred by the statute of frauds and the remaining new allegations are simply surplus facts that do not alter the legal analysis. Plaintiff's motion for (ECF No. 134, at 1-4). leave to amend its complaint

triggers both Federal Rule of Civil Procedure 15(a), governing amendments to pleadings, and Rule 16(b). satisfying these two rules are at odds. The standards for

Rule 15(a)(2) states in

pertinent part that "leave shall be freely given when justice so requires," while Rule 16(b)(4) states that "[a] schedule may be modified only for good cause and with the judge's consent." The

Fourth Circuit resolved this tension in Nourison Rug Corp. v. Parvisian, 535 F.3d 295, 298 (4th Cir. 2008): 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 8

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). Fed.R.Civ.P. Rule 16(b)'s "good cause" standard focuses on the timeliness submission. of the amendment a and the reasons for its "`is tardy not a

Because

court's

scheduling

order

frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril,'" Potomac Elec. Power Co. v. Elec. Motor Supply, Inc., 190 F.R.D. 372, 375 (D.Md. 1999) (quoting Gestetner v. Case Equip. Co., 108 F.R.D. 138, 141

(D.Me. 1985)), a movant must demonstrate that the reasons for the tardiness of its motion justify a departure from the rules set by the court in its Scheduling Order. The standard primary is the consideration movant's for Rule 16(b)'s of "good cause" and

diligence.

Lack

diligence

carelessness are the "hallmarks of failure to meet the good cause standard." W. Va. Hous. Dev. Fund v. Ocwen Tech. Xchange, "[T]he focus of the for the seeking inquiry

Inc., 200 F.R.D. 564, 567 (S.D.W.Va. 2001). inquiry is upon If the that moving party party's was not

reasons diligent,

modification.

9

should end." 1995).

Marcum v. Zimmer, 163 F.R.D. 250, 254 (S.D.W.Va.

Plaintiff insists that it need only satisfy the Rule 15 standard, but nevertheless maintains that it was diligent in moving for leave to amend because the facts relating to its new count and the other new factual allegations only came to light towards the close of discovery and its motion was filed shortly thereafter. (ECF No. 136, at 8). Defendants dispute

Plaintiff's contention that it learned of the facts recently. Defendants point out that the lynchpin of Plaintiff's new claim is that in 2007 Mr. Passarelli made an oral promise to

Plaintiff's president to pay the debt of Transcontinental and that this oral promise is binding under Italian law.

(ECF No. 134, at 4).

Defendants further argue that if this

allegation is true, Plaintiff should have been aware of the promise in 2007 when the promise allegedly was made and could not have learned of it for the first time at the deposition of Maurizio Bassi, Plaintiff's president, or from Defendants'

discovery responses. Given that the

(Id. at 8). scheduling order's deadline for seeking

leave to amend was almost a year and a half before the close of discovery, it is not unreasonable that Plaintiff may have

learned of new facts that would prompt it to seek leave to amend its complaint after the deadline. 10 What is unreasonable is

Plaintiff's attempt to argue that it learned of Mr. Passarelli's alleged personal guaranty through discovery or the implication that Plaintiff could not have added the claim for breach of this guaranty at an earlier stage of the litigation. Plaintiff's

decision to add this count could, and should, have been made much earlier in the litigation. Plaintiff has not established

good cause for the delay and will not be permitted to add this new count now. allegations scheduling It is more convincing that the other new factual uncovered deadline through for discovery, leave after to the

were order

seeking

amend.

Accordingly, Plaintiff could not have included them in his prior amendments and there is good cause for this portion of its

present request.

For these allegations, the court must consider

whether the Rule 15 requirements have been met. Under Rule 15(a) leave to amend "shall be freely given when justice so requires." Davis v. Piper Aircraft Corp., 615 F.2d Leave should be denied under Rule would be prejudicial to the

606, 613 (4th Cir. 1980). 15(a) "only when the

amendment

opposing party, there has been bad faith on the part of the moving party, or the amendment would have been futile." v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986). Defendants' prejudicial are arguments limited to that the the amendments count VII would claim be of Johnson

proposed

breach of contract against Mr. Passarelli that Plaintiff will 11

not be permitted to add. inclusion of the

Defendants do not argue that the factual allegations to support

additional

Plaintiff's other claims would prejudice them.

Defendants also

do not argue that Plaintiff's request to add these additional allegations is motivated by bad faith. Defendants do argue that the addition of the factual

allegations would be futile.

Defendants contend that they are

surplusage to the existing claims and in no way cure the defects in those claims which are subject to Defendant Passarelli's

separate motion to dismiss. The standard for futility is the same as a motion to

dismiss under Fed. R.Civ.P. 12(b)(6).

See Perkins v. United

States, 55 F.3d 910, 917 (4th Cir. 1995)(amendment is futile if the amended claim would fail to survive motion to dismiss). "Leave to amend should be denied on the ground of futility only when the proposed amendment is clearly insufficient or frivolous on its face." Cappetta v. GC Servs. Ltd. P'ship, No. 3:08CV288,

2009 WL 482474 at *4 (E.D.Va. Feb. 24, 2009)(citing Davis v. Piper Aircraft Corp., 615 F.2d 606, 613 (4th Cir. 1986); Oroweat Foods Co., 785 F.2d at 510)). Defendants have not satisfied this standard with respect to the new allegations in counts I, II, and IV. portions thereof, are not subject to These counts, or motion for

Defendant's

summary judgment and remain at issue in the case. 12

Count III,

however,

pertains

only

to

Defendant

Passarelli

and

is

the

subject of his pending motion for summary judgment.

The merits

of Plaintiff's amendments to this count will be discussed in the context of Defendant Passarelli's motion. III. Motions for Summary Judgment A. Preliminary Motion

Before addressing the merits of the parties' motions for summary judgment, there is a non-dispositive motion that must be addressed to determine the scope of materials that will be

considered in evaluating the merits of the dispositive motions. On September 29, 2010, Plaintiff filed a motion to amend the May 21, 2010 order and setting replies deadlines to the for summary the filing of its

opposition

judgment

motions.

(ECF No. 139).

Magistrate Judge Connelly's May 21, 2010 order

set October 1, 2010, as the deadline for Plaintiff to file its Reply to Transcontinental's Opposition, October 1, 2010, as the deadline for Plaintiff to file its opposition to Defendant

Passarelli's motion for summary judgment, and October 18, 2010, as the deadline for Defendant Passarelli to file his reply to Plaintiff's opposition. (ECF No. 119). Plaintiff sought to

extend the deadlines to October 4, 2010, October 15, 2010, and November 2, 2010, respectively. (ECF No. 139, at 1).

Defendants filed their joint opposition the following day, but the court was unable to rule 13 on the motion before the

substantive filings were submitted by Plaintiff on its proposed later deadlines. At this stage the court will consider Plaintiff's

submissions.

In the future, Plaintiff should endeavor to obtain

extensions sufficiently in advance of court deadlines to permit the court time to consider the merits of its requests. But

because there will be no prejudice to Defendants if the court considers Plaintiff's arguments, they will not be stricken. B. Standard of Review has of moved for summary 56. if judgment A there motion exists pursuant for no to

Plaintiff Federal judgment Rule

Civil be

Procedure only

summary genuine

shall

granted

dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a); Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). In other words, if there

clearly exist factual issues "that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," summary judgment is inappropriate.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); JKC Holding Co., LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to 14

the party opposing the motion.

See Scott v. Harris, 550 U.S. A party who bears the

372, 377 (2007); Emmett, 532 F.3d at 297.

burden of proof on a particular claim must factually support each element of his or her claim. at 323. Celotex Corp., 477 U.S.

"[A] complete failure of proof concerning an essential

element . . . necessarily renders all other facts immaterial." Id. Thus, on those issues on which the nonmoving party will

have the burden of proof, it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence in order to show the existence of a

genuine issue for trial. Corp., 477 U.S. at 324. will not suffice F.3d to 307,

See Anderson, 477 U.S. at 254; Celotex "A mere scintilla of proof, however, summary Cir. judgment." 2003). Peters must v. be

prevent 314

Jenney,

327

(4th

There

"sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249.

"If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." (citations omitted). C. Plaintiff's Renewed Motion for Summary Judgment Against Defendant Transcontinental Plaintiff has filed a renewed motion for summary judgment on its breach of contract claim against Defendant Id. at 249-50

15

Transcontinental.

(ECF No. 132).2

Plaintiff's primary argument

is that there are no genuine disputes of material facts and the record evidence demonstrates that Transcontinental owes

Plaintiff $484,599.41 for unpaid invoices from 2006 and 2007. Transcontinental argues in response that there are genuine

disputes of fact regarding the terms of the agreement between the parties and the amounts claimed due by Plaintiff.

Transcontinental also contends that Plaintiff's primary pieces of factual support, the declaration of Mauricio Bassi and the English translation of Bassi & Bellotti's statement of account, are inadmissible. There is (ECF No. 138, at 1-2). no had dispute an that Plaintiff whereby and Defendant supplied

Transcontinental

agreement

Plaintiff

granite to Transcontinental and Transcontinental paid Plaintiff for the granite. There is also no dispute that Transcontinental

has not paid Plaintiff for a substantial quantity of granite that Plaintiff provided during 2006 and 2007. The question to

Plaintiff's first motion for summary judgment against Defendant Transcontinental was filed on November 22, 2008. (ECF No. 15). Plaintiff's motion was denied in an order and accompanying memorandum opinion on August 11, 2009. (ECF Nos. 73 and 74). Summary judgment was denied because there were genuine disputes of material fact with respect to how much money Transcontinental had already paid to Plaintiff, whether Transcontinental was incorrectly charged for a shipment it rejected, and whether Transcontinental was entitled to a "setoff" for faulty shipments and size discrepancies in the granite slabs. (ECF No. 73, at 12). 16

2

be decided then is not whether Transcontinental is liable for a breach of the contract, but what damages Plaintiff is entitled to as a result of the breach. In support on and of the the its position, Plaintiff of by relies its almost

exclusively documents

English affidavit

translation submitted

accounting Bassi.

Maurizio

Defendant Transcontinental submits a competing affidavit from Mr. Passarelli that alleges oral agreements between the parties to alter the terms of ECF payment, No. 138-2 is debits, ¶ 6). and credits.

(ECF No. 138-1)(citing argues that

Transcontinental fails to

Plaintiff's

accounting

inadmissible,

credit Transcontinental properly for payments it made, fails to credit Transcontinental for its out-of-pocket costs for the

demurrage of several containers, and is otherwise replete with errors and inconsistent with the parties' agreement regarding billing. (ECF No. 138, at 1). Transcontinental also argues

that Plaintiff's accounting is incorrect because it does not include set-offs for improperly packed goods and delivery of the wrong goods. (Id. at 1-2).

Not all of the factual disputes raised by Transcontinental are material; the accuracy of Plaintiff's accounting records in 2001 and 2002, for example, do not seem to have any bearing on the amount Transcontinental owes for granite received in 2006 and 2007. A number of the 17 other disputed facts could

substantially

alter

the

sums

due,

and,

thus,

there

remain

genuine disputes of material fact which preclude a finding of summary judgment in Plaintiff's favor with respect to damages. For example, the conversation rate used and the time at which the invoices were converted from euros to dollars will affect the amount owed by Transcontinental. There is no

document explicitly stating when and how the conversion rate was to be applied. Plaintiff now asserts that the parties agreed to

use the exchange rate prevailing in the region of Milan, Italy, on the date of the invoice. (ECF No. 132-1 ¶ 6). But Plaintiff

earlier asserted that it was entitled to 364,543.65 converted to dollars at the time of the court's judgment. ¶ 17). Defendant contends that the conversion (ECF No. 50 rate to be

applied was the rate prevailing on the due date of the payment, as determined by the Federal Reserve Bank of New York.

(ECF No. 138-1, at 8).

On summary judgment the court cannot

weigh the credibility of either side's argument but must view the evidence in the light most favorable to Defendant

Transcontinental, the non-moving party. dispute, and because the conversion

Here there is a genuine rate was not consistent

during the relevant time period this dispute is material. Another significant factual dispute concerns the credits Transcontinental is due from the demurrage of several containers in early 2007 when Plaintiff failed 18 to ship the granite in

containers that complied with customs regulations. asserts credit that to the parties agreed in to settle sum this of

Plaintiff for a

claim

Transcontinental

the

$15,687.00.

(ECF No. 132-1, at 7). agreement was reached

Transcontinental contends that no such and argues that it incurred costs in

excess of that amount.

(ECF No. 138-1, at 16).

The documentary

evidence submitted by the parties leaves the issue unresolved. (See, e.g., ECF No. 132-5 and ECF No. 138-1, Attach. 10-26). Another material disputed fact is whether Defendant

Transcontinental is due credits on its account for damaged goods that were part of invoices 2.483 and 3.016. (ECF No. 138-1,

at 12-13)(citing ECF No. 138-2 ¶ 16 and Attach. 5; ECF No. 1329). All of these disputes affect the amount owed to Plaintiff

for granite shipped to Transcontinental in 2006 and 2007 and must be resolved by the fact finder. Because of the many factual disputes, Plaintiff's motion for summary judgment will be denied. D. Defendant Thomas Passarelli's Motion for Summary Judgment Defendant Thomas Passarelli's motion seeks summary judgment on counts II (fraudulent transfer) and III (unjust enrichment) of Plaintiff's complaint. (ECF No. 137). Defendant Passarelli

also argues that because he is only alleged to be liable with

19

respect to counts II and III, he should be dismissed from the case. (ECF No. 137, at 8). 1. Plaintiff opposes the motion.3

Fraudulent Transfer

Defendant Passarelli argues that summary judgment in his favor is appropriate with respect to count II because as a

Plaintiff filed a supplemental memorandum in opposition to Defendant Passarelli's motion for summary judgment, without leave of court, on November 26, 2010. (ECF No. 147). Plaintiff maintains that the evidence was timely pursuant to Local Rule 105.2.b. because no hearing had been set and because parties are permitted to submit new evidence in opposition to motions for summary judgment pursuant to Fed.R.Civ.P. 56(e). Plaintiff's arguments stretch the meaning of these rules too far. Prior to its recent amendment in December 2010, Fed.R.Civ.P. 56(e)(1) provided in part that "the court may permit an affidavit to be supplemented or opposed by depositions, answers to interrogatories, or additional affidavits." The rule did not state that the court must permit supplementation or that it must do so in disregard of scheduling deadlines elsewhere stated in the rules or imposed by the court. See Potter v. Shoney's, Inc., 108 F.Supp.2d 489, 498 (M.D.N.C. 1999)("Rule 56 clearly indicates that "[t]he court may [but does not have to] permit affidavits to be supplemented ... by ... further affidavits."). Likewise Local Rule 105.2.b does not provide widespread authorization to parties to continue to supplement their memoranda until two days before the hearing and is inapplicable where no hearing is deemed necessary. Local Rule 105.2.b. is a further limitation on the general filing deadlines stated in 105.2.a. which specifies that surreply are not permitted unless otherwise ordered by the court. Plaintiff's supplemental opposition is nothing but a surreply otherwise captioned, and Plaintiff has not properly sought leave to file a surreply as required by Local Rule 105.2.a. Nevertheless because Defendant Passarelli has had an opportunity to consider the supplemental opposition and prepared a reply, there will be no prejudice from the court's consideration of all the submitted materials. Accordingly Defendant's motion to strike will be denied, but its motion for leave to file a reply to Plaintiff's supplemental opposition will be granted. 20

3

matter of law Plaintiff is not entitled to a personal money judgment against him and because Plaintiff has failed to produce sufficient evidence to prove the elements of the claim.

(ECF No. 137, at 2).

Defendant's primary argument is that under

Maryland's fraudulent conveyance law, a remedy is only available against the transferee of the fraudulent conveyance, not the transferor and not a representative of the transferor. at 13). and (Id.

In response, Plaintiff shifts the focus of its claim that Defendant sole Passarelli he is was liable because for as a

argues

Transcontinental's

shareholder

responsible

series of transactions that rendered the corporation insolvent and deprived its creditor, Plaintiff, of money it was owed by the corporation. Plaintiff also contends that Defendant

Passarelli engaged in self-dealing for his own benefit after Transcontinental could no longer meet its existing obligations. Implicitly admitting that these allegations do not fit within the confines of the fraudulent conveyance claim, Plaintiff urges the court to "fashion a remedy which literally sets aside the transaction and requires a restitution of any income Passarelli generated in 2008 for the benefit of the Plaintiff."

(ECF No. 143-3, at 3). The applicable law for count II, as alleged in the amended complaint, is Maryland's Uniform Fraudulent Conveyance Act, Md. Ann. Code, Com. Law § 15-201, et seq. ("MUFCA"). 21 The statute

provides a remedy if a creditor demonstrates that a conveyance was made without fair consideration and either (1) was committed by a person or entity who is or will be rendered insolvent by the conveyance (§ 15-204), (2) was committed by a person or entity engaged or about to be engaged in a business or

transaction for which the property remaining in his hands after the conveyance is an unreasonably small capital (§ 15-205), or (3) was committed by a person or entity who intends to or

believes that he will incur debts beyond his ability to pay when he undertakes the conveyance (§ 15-206).4 MUFCA also imposes

Sections 15-204 and 15-205 and 15-206 provide: § 15-204 Conveyances by insolvent

4

of

the

MUFCA

Every conveyance made and every obligation incurred by a person who is or will be rendered insolvent by it is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without a fair consideration. § 15-205 Conveyances by persons in business Every conveyance made without fair consideration when the person who makes it is engaged or is about to engage in a business or transaction for which the property remaining in his hands after the conveyance is an unreasonably small capital, is fraudulent as to creditors and other persons who become creditors during the continuance of the business or transaction without regard to his actual intent. 22

liability for conveyances made with actual intent to hinder, delay, or defraud present or future creditors, regardless of whether there was fair consideration for the transfer in § 15207.5 The only remedies available under MUFCA are that the

creditor may seek to set aside the conveyance or levy or garnish the property transferred by the conveyance. See § 15-209;6 Frain

§ 15-206. Person about to incur debts. Every conveyance made and obligation incurred without fair consideration when the person who makes the conveyance or who enters into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.
5

Section 15-207 provides: § 15-207. Actual intent to defraud Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud present or future creditors, is fraudulent as to both present and future creditors.

6

Section 15-209 provides: 15-209. Creditors with matured claims (a) If a conveyance or obligation is fraudulent as to a creditor whose claim has matured, the creditor, as against any person except a purchaser for fair consideration without knowledge of the fraud at the time of the purchase or one who has derived title 23

v. Perry, 92 Md.App. 605, 620 n.7 ("Under Maryland law, once a conveyance is proven to be fraudulent, a creditor has the option of either having the conveyance set aside or attaching the

property conveyed."), cert. denied, 328 Md. 237 (1992).

Cases

interpreting the statute have expanded the realm of available remedies to include suits for money judgments against the

transferee where he or she "allows or causes the property to depreciate in value or parts with the property without

sufficient consideration or puts it beyond the reach of the court." Damazo v. Wahby, 269 Md. 252, 257 (Md. 1973). No case

has authorized a money judgment against the transferor, or an agent of the transferor, for violations of MUFCA. Starting Plaintiff with these basic facts principles to prove and the assuming elements that of a

could

present

fraudulent conveyance under §§ 15-204, 15-205, 15-206 or 15-207 as alleged in count II, Plaintiff would not be entitled to the relief he is seeking. Defendant Passarelli is not alleged to be

immediately or purchaser, may:

immediately

from

such

a

(1) Have the conveyance set aside or obligation annulled to the extent necessary to satisfy the claim; or (2) Levy on or garnish the property conveyed as if the conveyance were not made.

24

the transferee of any fraudulent conveyance nor has Plaintiff uncovered any evidence that he was the transferee throughout the course of discovery. The only alleged fraudulent transfer was Simply put could

between Defendants Transcontinental and Afsharjavan. on this claim there is no basis upon which

Plaintiff

recover money from Defendant Passarelli. Plaintiff seems to recognize the failings of its claim as pled and argues a different theory of recovery in its

opposition. sale of

Plaintiff now contends that by orchestrating the assets to Afsharjavan, duty No. he 143-3, Defendant owed at to 7).

Transcontinental's breached a

Passarelli

fiduciary (ECF

Transcontinental's

creditors.

Plaintiff's theory of recovery combines the principle espoused by several courts that corporate directors owe a fiduciary duty to creditors once the corporation has become insolvent or when it is in the zone of insolvency, (id.)(citing Lin, Shift of Fiduciary Duty Upon Corporate Insolvency: Proper Scope of

Directors' Duty to Creditors, 46 Vand.L.Rev. 1485, 1512 (1993); Fed. Deposit Ins. Corp. v. Sea Pines Co., 692 F.2d 973, 977 (4th Cir. 1982); Clarkson Co. v. Shaheen, 660 F.2d 506, 512

(2d Cir. 1981)), with a Supreme Court case from 1939 finding that a series of transactions made by the sole shareholder of a Virginia corporation were fraudulent where they had the effect of depriving one of the corporation's creditors of access to the 25

corporation's assets to satisfy debts owed. v. Litton, 308 U.S. 295 (1939)).

(Id.)(citing Pepper

Before reaching the merits of Plaintiff's new theory, there is the overarching problem that it is distinct and quite

different from any of the claims made in Plaintiff's amended complaint or even the second amended complaint which Plaintiff recently sought leave to file. A party cannot raise a new claim Sensormatic Sec. Corp. v. F.Supp.2d of Appeals 399, for 435 the (D.Md. Fourth

through argument on summary judgment. Sensormatic 2006). The Electronics United Corp., 455

States

Court

Circuit has made clear that the only way to raise new claims after discovery has begun is through amendment of the complaint. Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 617

(4th Cir. 2009)(citing Barclay White Skanska, Inc. v. Battelle Mem'l Inst., 262 Fed.Appx. 556, 563 (4th Cir.

2008)(unpublished)), cert. denied, 130 S.Ct. 1140 (2010); see also Tucker v. Union of Needletrades, Indus., & Textile Emps., 407 F.3d 784, 788 (6th Cir. 2005); Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1315 (11th Cir. 2004); Shanahan v. City of Chicago, 82 F.3d 776, 781 (7th Cir. 1996); Fisher v. Metro. Life Ins. Co., 895 F.2d 1073, 1078 (5th Cir. 1990). Defendant Passarelli need not prove that he is entitled to judgment as a matter of law on a claim not part of the case in order to succeed. Because Plaintiff 26 cannot recover against

Defendant Passarelli on the count of fraudulent conveyance that is pled, summary judgment will be awarded on this count. 2. Unjust Enrichment Claim Passarelli argues that summary judgment is

Defendant

appropriate on count III because there are no allegations in the complaint to establish the elements of a claim of unjust

enrichment against Defendant Passarelli; namely that Plaintiff conferred a benefit upon Defendant Passarelli, that Defendant Passarelli knew or appreciated any such benefit, or that he accepted or retained (ECF any No. such 137 at benefit 3). under Plaintiff inequitable argues in

circumstances.

response that the facts in the record show, or at least create a reasonable inference, that Defendant Passarelli received a

benefit from Plaintiff by way of the granite Plaintiff provided to Transcontinental because Defendant Passarelli was the

corporation's sole shareholder.

Plaintiff further argues that

it was unjust for Defendant Passarelli to retain this benefit without paying Plaintiff. (ECF No. 143-3, at 16-18).

In Maryland unjust enrichment consists of three elements: (1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its 27

value. (2007). `deprive

Hill v. Cross Country Settlements, LLC, 402 Md. 281, 295 "A the he successful defendant ought of unjust enrichment that even in claim equity he serves and may to good have

benefits to keep,

conscience

not

though

received those benefits quite honestly in the first instance, and even though the plaintiff may have suffered no demonstrable losses.'" Id. (quoting Dep't of Hous. & Cmty. Dev. v. Mullen,

165 Md.App. 624, 659 (2005), cert. denied, 391 Md. 579 (2006)). The alleged unjust enrichment identified by Plaintiff

consists of the "monies and properties [Defendant Passarelli] received in transferring the property of Transcontinental to

Defendant Afsharjavan . . . the value of the goods and products he received from the Plaintiff and . . . the business

opportunities Passarelli took for himself as Transcontinental became insolvent or was nearing insolvency." ¶ 39).7 (ECF No. 131-2

In its opposition to the motion for summary judgment Plaintiff

Plaintiff explains the contours of its claim thusly:

conferred a benefit on Defendant Passarelli by shipping granite to Transcontinental and because Defendant Passarelli was the

This is the claim as expressed in Plaintiff's second amended complaint. Plaintiff's first amended complaint, which governed at the time when Defendant Passarelli filed his motion for summary judgment did not include the portion of the claim dealing with business opportunities of Transcontinental. (See ECF No. 30 ¶ 26). 28

7

sole shareholder of Transcontinental he personally reaped the benefit of this inventory. (ECF No. 143-3, at 16). Defendant

Passarelli appreciated the benefit of the granite either through its sale by Transcontinental or in its fraudulent conveyance to Defendant Afsharjavan. (Id.). Plaintiff contends that because

there is no record for the sale of the granite it provided to Transcontinental the reasonable inference is that Defendant

Passarelli either fraudulently conveyed it to Afsharjavan or he sold it through his business in North Carolina under a different trade name and kept the profits for himself. Plaintiff argues that it would be unjust (Id. at 17). for Defendant

Passarelli to keep the benefit he received from the granite when Plaintiff received none and was unable to sell the granite to a another client that would have paid for it. (Id.).

Plaintiff's claim as presented does not state a claim for unjust enrichment against Defendant Passarelli. First,

Plaintiff has not conferred any benefit directly on Defendant Passarelli. Second, the transaction between Transcontinental

and Afsharjavan, the benefit of which Plaintiff argues flowed through respect to to Defendant the Passarelli because not of his status any with

corporation,

did

involve

granite

belonging to Plaintiff. all of Transcontinental

Plaintiff has repeatedly stated that or all of its assets were sold to

Afsharjavan, but Plaintiff has identified no evidence to show 29

that

the

sale

included

any

of

the

granite

it

provided

to

Transcontinental. the purchase and

Instead the record evidence, in the form of sale agreements between the two parties,

interrogatory responses from the Defendants, and the testimony of the Defendants, establishes that no granite was transferred to Afsharjavan. (ECF No. 137-1 ¶¶ 8, 10, 11, 16 and Attachs. 1 Plaintiff relies

and 2; ECF No. 137-2 ¶¶ 7, 9-10, and 14).

primarily on a Reuters news report from 2008 quoting Defendant Afsharjavan as saying (ECF No. that 137-1, his company 4a), purchased and the

Transcontinental

Attach.

declaration of a former Transcontinental employee, Jeff Hedreth, that the company reported the sale of all its assets north of the North Carolina border to a person named Artin.

(ECF No. 137-7).

Defendant Afsharjavan has refuted the scope of

the Reuters report and throughout discovery repeatedly responded that the sale was limited to the items listed in the purchase and sale agreements. (ECF No. 137). And Mr. Hedreth did not

provide any information or express any knowledge regarding what assets were transferred by Transcontinental. is no evidence to support Plaintiff's theory. For these reasons, summary judgment in favor of Defendant Passarelli is appropriate on count III and any amendments to this count in Plaintiff's proposed second amended complaint will not be permitted. 30 Simply put, there

IV.

Conclusion For the reasons stated above, Plaintiff's motion for leave

to amend will be granted in part and denied in part, Plaintiff's motion for summary judgment will be denied, Defendant Thomas R. Passarelli's motion for summary judgment will be granted, and Defendant Thomas R. Passarelli's motion to strike will be denied but his motion in the alternative for leave to file a reply will granted.

/s/ DEBORAH K. CHASANOW United States District Judge

31