Philips Lighting Co. v. Schneider

09-4144-cv(L), 10-3379-cv(Con)
Philips Lighting v. Schneider
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3 SUMMARY ORDER
4 RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
5 SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
6 BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE
7 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A
8 PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH
9 THE NOTATION "SUMMARY ORDER"). A PARTY CITING A SUMMARY ORDER MUST SERVE A
10 COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
11 At a stated term of the United States Court of Appeals for
12 the Second Circuit, held at the Daniel Patrick Moynihan United
13 States Courthouse, 500 Pearl Street, in the City of New York, on
14 the 12th day of October, two thousand ten.
15
16 PRESENT: ROBERT A. KATZMANN,
17 DENNY CHIN,
18 Circuit Judges,
19 EDWARD R. KORMAN,
20 District Judge.*
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22 PHILIPS LIGHTING COMPANY, a Division of
23 Philips Electronics North America Corp.,
24
25 Plaintiff-Appellee,
26
27 v. Nos. 09-4144-cv(L),
28 10-3379-cv(Con)
29 THEODORE SCHNEIDER,
30
31 Defendant,
32
33 BARRY A. SCHNEIDER,
34
35 Defendant-Appellant.
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*
The Honorable Edward R. Korman, United States District
Judge for the Eastern District of New York, sitting by
designation.
1 FOR PLAINTIFF-APPELLEE: DOUGLAS A. GOLDSTEIN (Brian D.
2 Spector, on the brief), Spector &
3 Ehrenworth, P.C., Florham Park, NJ
4
5 FOR DEFENDANT-APPELLANT: ALAN M. LEBENSFELD, Lebensfeld
6 Borker Sussman & Sharon LLP, Red
7 Bank, NJ
8
9 Appeal from the United States District Court for the
10 Eastern District of New York (Townes, J.).
11 ON CONSIDERATION WHEREOF, it is hereby ORDERED,
12 ADJUDGED, and DECREED that the order of the district court
13 entered September 8, 2009, is VACATED and the case is REMANDED.
14 Defendant-appellant Barry A. Schneider appeals from an order
15 of the United States District Court for the Eastern District of
16 New York, entered September 8, 2009, denying his motion under
17 Federal Rule of Civil Procedure 60 to vacate the judgment against
18 him. We assume the parties' familiarity with the facts,
19 procedural history, and specification of issues on appeal.
20 Schneider argues that he was entitled to relief under
21 Rule 60(b)(1), (3), or (6) or under Rule 60(d)(3). Relief under
22 Rule 60(b) and Rule 60(d) is equitable in nature. See Motorola
23 Credit Corp. v. Uzan, 561 F.3d 123, 125 (2d Cir. 2009);
24 Campaniello Imports, Ltd. v. Saporiti Italia S.p.A., 117 F.3d
25 655, 661-62 (2d Cir. 1997). "We review the district court's Rule
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1 60 decision for abuse of discretion." United Airlines, Inc. v.
2 Brien, 588 F.3d 158, 175 (2d Cir. 2009).
3 Rule 60(b)(1) allows the court to grant relief from a
4 final judgment on the grounds of "mistake, inadvertence,
5 surprise, or excusable neglect." Rule 60(b)(3) allows relief
6 from a final judgment on the ground of "fraud . . . ,
7 misrepresentation, or misconduct by an opposing party." See
8 Fleming v. New York Univ., 865 F.2d 478, 484 (2d Cir. 1989) ("[A]
9 Rule 60(b)(3) motion cannot be granted absent clear and
10 convincing evidence of material misrepresentations and cannot
11 serve as an attempt to relitigate the merits."). Rule 60(b)(6)
12 provides that the district court may grant relief from a final
13 judgment for "any other reason that justifies relief." See
14 Harris v. United States, 367 F.3d 74, 81 (2d Cir. 2004) ("[A]
15 proper case for Rule 60(b)(6) relief is only one of extraordinary
16 circumstances, or extreme hardship.") (citing United States v.
17 Cirami, 563 F.2d 26, 32 (2d Cir. 1977) (internal quotation marks
18 omitted)). Finally, Rule 60(d)(3) also authorizes a court to
19 grant relief for fraud, as it provides that the rule "does not
20 limit a court's power to . . . set aside a judgment for fraud on
21 the court."
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1 Schneider argues that he is entitled to relief for the
2 following reasons. First, he contends that his first attorney
3 disappeared during the proceedings below. Second, he argues that
4 the district court's decision to deny Rule 60 relief was based on
5 certain mistaken factual and legal conclusions. Third, he
6 contends that defendant-appellee Philips Lighting Company
7 ("Philips") and its attorneys withheld or otherwise failed to
8 disclose certain critical facts to the district court. In
9 particular, Schneider contends that Philips failed to apprise the
10 district court that Philips had entered into a stipulation with
11 the debtor, Eltron Supply, Ltd. ("Eltron"), in the bankruptcy
12 proceedings reducing the debt some $111,000 below the amount that
13 Philips sued Schneider for, and that Philips had received a cash
14 distribution of $56,236.21 from the bankruptcy trustee.
15 We do not reach the question whether the district court
16 abused its discretion in denying Schneider's motion to vacate the
17 judgment. Instead, we remand the case to the district court for
18 further proceedings, for the following reasons.
19 First, the district court concluded that the
20 disappearance of his lawyer did not prejudice Schneider because
21 the summary judgment motion was already fully briefed. Even
22 after the motion was briefed, however, Schneider still may have
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1 needed the services of a lawyer. For example, a lawyer could
2 have monitored the bankruptcy proceedings for developments that
3 could impact the case, such as settlement of claims or
4 distributions. Once the district court issued its summary
5 judgment decision, a lawyer could have assisted Schneider by
6 reviewing and evaluating the decision, considering whether to
7 file a motion for reconsideration and/or an appeal, and doing so.
8 Hence, the district court shall reconsider whether Schneider was
9 prejudiced by the disappearance of his lawyer in view of these
10 considerations.
11 Second, if the district court had reason to believe
12 that Schneider was no longer represented by counsel, it should
13 have taken steps to ensure that Schneider was included on any
14 communications from the court. For example, if the district
15 court was aware that Schneider was no longer represented by
16 counsel, it should have sent a copy of its decision to Schneider
17 directly. See Fed. R. Civ. P. 77(d)(1) ("Immediately after
18 entering an order or judgment, the clerk must serve notice of the
19 entry, as provided in Rule 5(b), on each party who is not in
20 default for failing to appear." (emphasis added)). As Philips's
21 lawyer conceded at oral argument, the only notification given to
22 Schneider was the ECF notification sent to his lawyer, who was
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1 missing by that point. Philips's argument that this was
2 sufficient notification to Schneider is disingenuous because
3 there was reason to believe that Brennan was no longer receiving
4 emails -- he had vacated his offices, his phone had been
5 disconnected, and his email address, which was provided by
6 Verizon, was likely associated with his telephone service. On
7 remand, the district court shall determine when Schneider first
8 received notice of the summary judgment decision, and it shall
9 consider whether the timing of the notice affected his rights in
10 any respect relevant to his Rule 60 motion.
11 Third, there is a lack of clarity in the record as to
12 certain facts that could bear on the district court's decision to
13 grant or deny Schneider's Rule 60 motion. As Philips's counsel
14 acknowledged at oral argument, the same law firm represented
15 Philips in the bankruptcy proceeding. Consequently, depending on
16 the timing, the lawyers knew or should have known about the
17 stipulation to reduce Eltron's debt and the cash distribution
18 from the bankruptcy trustee; yet, Philips and its counsel did not
19 bring these facts to the district court's attention. While it
20 may be that Philips has some legal argument as to why it was
21 entitled to a greater recovery from Schneider (as guarantor) than
22 it was owed from Eltron (as debtor), this issue was not raised
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1 with the district court. It is also unclear when (or if) Philips
2 received the cash distribution from the Eltron trustee, but
3 counsel for Philips conceded at oral argument that if Philips had
4 received a cash distribution from the Eltron trustee, the
5 distribution would have reduced the amount that Philips could
6 recover from Schneider. Although Schneider's new lawyer was able
7 to discover these facts later, it does not appear that Schneider
8 would have received notice at the time because he was not a
9 creditor or debtor in the bankruptcy proceedings.
10 At a minimum, questions exist as to whether the amount
11 of the judgment is based on mistakes or omissions. In addition,
12 it does not appear that the district court addressed Schneider's
13 argument that he was released in full because he had conveyed all
14 his interest in Eltron to his brother in 1998, in return for his
15 brother's assumption of all obligations. The district court also
16 concluded that Schneider failed to submit a timely claim in the
17 bankruptcy proceeding, but because Schneider was not a creditor,
18 it does not appear that he was obliged to submit a claim. On
19 remand, the district court should clarify these factual issues,
20 which may bear on its decision whether to vacate the judgment.
21 The district court may do so by conducting a hearing or directing
22 the parties to submit additional factual materials.
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1 It is true, as the district court noted in its denial
2 of the motion to vacate, that generally a litigant is not
3 entitled to relief from a final judgment based on the mistakes or
4 omissions of his attorney. See Nemaizer v. Baker, 793 F.2d 58,
5 62 (2d Cir. 1986). Here, however, more was involved than just
6 mistakes or omissions on the part of his counsel. Questions also
7 exist as to whether Philip's lawyers, as officers of the court,
8 had a duty to advise the district court of the adverse (or
9 potentially adverse) facts of which they had knowledge from the
10 bankruptcy proceedings. Accordingly, this situation is
11 distinguishable from the precedent cited by the district court.
12 Accordingly, we VACATE the district court's order
13 denying Schneider's Rule 60 motion and REMAND for the district
14 court to clarify the facts and to consider, in light of the
15 above, whether the judgment should be vacated under Rule 60(b)
16 and (d).
17 FOR THE COURT:
18 CATHERINE O’HAGAN WOLFE, Clerk of Court
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