The opinion of the court was delivered by: CARTER
The present action is the third in a series of suits by the same plaintiffs against various defendants.
In 1962 Mr. and Mrs. DiLallo (inasmuch as they initiated all actions to be discussed, no confusion will result from merely designating them "plaintiffs"), residents of New Jersey, brought a diversity action in this Court against Gregorio Medina, a New York citizen, and Dora Commaliato (62 Civ. 2622). Mrs. DiLallo was a passenger in a car, driven by Commaliato, when it collided with a car driven by Medina. She sued both for personal injuries on the grounds of negligence. Mr. DiLallo joined that suit claiming injury as a result of loss of services.
In April, 1966 the case was tried before a jury. The defendant Medina was represented by attorneys of the Fidelity and Casualty Company (the defendant in the case at bar), a New York corporation. The jury returned a verdict of $13,000.00 in favor of the plaintiffs against both defendants. Each defendant was assessed $6,500.00. In an endorsement dated June 9, 1966 to post trial motions submitted by the parties, Judge Cooper set aside the verdict on the grounds that the "jury's verdict does not comport with a proper determination based on the total evidence adduced and the law applicable thereto." Although the Court explicitly refused to grant judgment n.o.v. in favor of Commaliato releasing her from liability, it stated that the "verdict [as to Commaliato] is against the weight of the credible evidence."
Prior to the time of the second trial of this first action the plaintiffs' attorney contacted Medina's attorney and offered to discontinue the case as to Medina for a settlement of $10,000.00, the limit of Medina's insurance coverage. The offer was ignored. The offer was renewed at the second trial and again ignored. The jury returned a verdict against Medina alone, and judgment of $29,300.00 was entered on October 26, 1968. The insurance company paid $10,000.00, plus interest and costs (the limits of its coverage), leaving Medina responsible for the unsatisfied judgment of $19,300.00
Subsequently plaintiffs began an action against Medina and Fidelity as codefendants (68 Civ. 1012), alleging in substance that Medina had been damaged to the extent of his unpaid judgment by Fidelity's refusal to settle. Plaintiffs, as Medina's judgment creditors, claimed a beneficial interest in Medina's rights against Fidelity. The action was dismissed by Judge Murphy in a memorandum opinion and order dated May 14, 1969, for failure to state a proper cause of action.
Finally, the present action was commenced wherein plaintiffs, as Medina's assignees, now assert Medina's legal rights against the defendant. The defendant has moved to dismiss the case, pursuant to 28 U.S.C.A. § 1359, on the grounds that the assignment to plaintiffs is collusive and undertaken solely to invoke the jurisdiction of the federal courts. The defendant raises in his papers, although no formal motion was directed to this issue, the validity under state law of an assignment of a cause of action against a carrier for failure to settle. In the alternative the defendant asks for a protective order limiting the number of its employees which may be deposed by the plaintiffs.
The Claim of Collusion to Invoke Federal Jurisdiction
Defendant relies on 28 U.S.C.A. § 1359, which provides:
"A district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court."
The plaintiffs allege that prior to the initiation of this current lawsuit (and after the dismissal of the second action) they issued income execution against Medina's salary in an attempt to satisfy the judgment running against him in their favor. Medina's employer, an attorney, sought out the plaintiffs' lawyers and attempted to arrange a settlement satisfactory to Medina. It was finally agreed that in consideration of Medina's assignment of his rights against the defendant insurance company, the plaintiffs would not execute a levy on Medina's salary.
The United States Supreme Court in Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 89 S. Ct. 1487, 23 L. Ed. 2d 9 (1969), read 28 U.S.C. § 1359 as prohibiting an assignment executed for the purposes of creating diversity of citizenship and thereby bringing the case before the federal courts. Although the Court did not discuss at length the factors which would bring an assignment within the proscription of § 1359, it indicated that the fact that the assignee had no previous connection with the case and would return to the assignor 95% of any judgment recovered, Id. at 827, 89 S. Ct. 1487, where factors that led to its conclusion that the assignment was within the statute's ban.
Bailey v. Prudence Mutual Casualty Co., 429 F.2d 1388 (7th Cir. 1970) was decided upon facts almost identical with those here considered. In that case the judgment debtor (Medina's counterpart) assigned a cause of action against his insurance carrier after the ...