Priestley v. Headminder, Inc., 647 F.3d 497

Background

Priestley loaned PanMedix $750,000 in 2001, with EkP as guarantor via Comrie, secured by note bearing 11.5% interest (rising to 13%).
PanMedix defaulted in 2002; Priestley refrained from enforcing due to bankruptcy risk and provided an $85,000 additional loan based on Comrie's assurances.
PanMedix again defaulted; Priestley issued a notice of default in November 2005 demanding full repayment with accrued interest.
Priestley filed suit February 23, 2007, alleging contract claims against PanMedix, EKP, and Headminder, plus derivative claims against PanMedix directors/officers.
District court granted summary judgment in August 2008 against PanMedix, EKP, Headminder, and the directors/officers; Headminder was included despite Priestley not moving against it.
Headminder sought Rule 60 relief in October 2009; the district court amended the judgment in October 2009, still including Headminder as liable.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether summary judgment against Headminder was proper	Priestley did not seek summary judgment against Headminder.	Headminder was improperly included based on Priestley’s contract claims against all corporate defendants.	No; the district court’s inclusion was error; judgment reversed as to Headminder.
Whether the amended judgment restarted the appeal period	Headminder argues amended judgment tolled or started a new appeal period.	Priestley contends amendment did not affect the appeal period and prior judgment stood.	Amended judgment triggered a new 30-day appeal period; jurisdiction to review the merits exists.
Whether the district court erred by granting summary judgment against Headminder sua sponte	Headminder contends it lacked notice and opportunity to present facts opposing summary judgment.	Priestley did not move against Headminder, and proper notice was not given.	Error; summary judgment should not have been entered against Headminder without notice or an opportunity to respond.
Whether de facto merger supports Headminder’s inclusion	Priestley asserts de facto merger between PanMedix and Headminder as basis for liability.	Headminder argues complaint lacks sufficient facts to establish de facto merger.	Insufficient facts; de facto merger not established; Headminder cannot be liable on that basis.
Whether default/untimely answer justifies liability	Priestley argues defaulted defendants could be liable under the default judgment.	Headminder contends no valid default basis exists due to lack of merger and improper inclusion.	Default theory does not validate Headminder’s inclusion; remand to strike Headminder.

Key Cases Cited

Rezzonico v. H&R Block, Inc., 182 F.3d 144 (2d Cir.1999) (scope of appeal after changes to judgment; new judgment may renew appeal period)
FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206 (1952) (tests for material change in judgments affecting appeal rights)
In re American Safety Indemnity Co., 502 F.3d 70 (2d Cir.2007) (amended judgments with substantive changes can create new appeal periods)
Keith v. Truck Stops Corp. of America, 909 F.2d 743 (3d Cir.1990) (order substantively changing a judgment creates a new appeal period)
Napoli v. Town of New Windsor, 600 F.3d 168 (2d Cir.2010) (explicitly supports new-judgment appeal-period rule following substantive change)
New York v. Nat'l Serv. Indus., Inc., 460 F.3d 201 (2d Cir.2006) (de facto merger factors; continuity of ownership essential)
Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61 (2d Cir.1981) (well-pleaded allegations must support the asserted merger theory)
Nat'l Serv. Indus., Inc. v. Nat'l Serv. Indus., Inc., 460 F.3d 201 (2d Cir.2006) (de facto merger framework and ownership continuity emphasis)
Ramsey v. Coughlin, 94 F.3d 71 (2d Cir.1996) (protections required before sua sponte summary judgment)
Loeffler v. Staten Island Univ. Hosp., 582 F.3d 268 (2d Cir.2009) (standard for review of summary judgment de novo)