     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.*
21   - - - - - - - - - - - - - - - - - - - - -
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.
36   - - - - - - - - - - - - - - - - - - - - -


           *
               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

                                    - 6 -
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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