The opinion of the court was delivered by: Sand, District Judge.
By order of the New York County Surrogate's Court, defendant
Victor M. Castelazo, Sr. ("guardian") was appointed guardian of
the property of Victor M. Castelazo, III and Laura C.
Castelazo, his infant grandchildren ("infants"). Pursuant to
the Surrogate Court's order, all moneys and properties of the
infants were paid over and delivered to defendant Manufacturers
Hanover Trust Company ("MHT") as depository, and MHT was
directed to comply with the directions of the guardian as to
the investment or reinvestment of the property and the income
collected from that property. Plaintiff's complaint alleges
that defendant Haythe and Curley ("H & C") acted as counsel to
the guardian and the infants "at all relevant times." In August
1984, the guardian authorized MHT to follow the written
instructions of his financial advisor, Toni Vallen ("Vallen"),
to sell, deliver or exchange securities held in the custody
In or about October, 1987, the guardian, through Vallen,
opened two accounts with plaintiff Fahnestock & Co. Inc.
(formerly Edward A. Viner & Co., Inc.) through Pace Securities,
Inc., plaintiff's forwarding broker, for the purpose of
engaging in transactions involving the purchase and sale of
securities. Evidently, on October 8, 1987 oral instructions had
been issued to MHT by the guardian's son purportedly revoking
Vallen's authority to trade on behalf of the accounts. The
complaint alleges that on or about October 16, 1987 and October
27, 1987, the guardian through Vallen, directed that shares of
certain specific securities be purchased in the accounts. The
complaint also alleges that plaintiff purchased the shares and
that the guardian failed to pay plaintiff for the purchases.
Plaintiff commenced an action against Vallen alleging that
she was part of a conspiracy to manipulate the prices of
various securities, including those allegedly involved in the
transactions which form the basis for this action. The case,
Edward A. Viner & Company, Inc. v. Capital Shares, et al., 87
Civ. 7788 (LBS), is presently before this Court along with
eight other actions arising out of the same alleged conspiracy.
Plaintiff, through different counsel, commenced this action
on February 2, 1990 in the Supreme Court of the State of New
York, asserting causes of action against the guardian for
breach of contract, against MHT for breach of contract as a
third-party beneficiary, and against all the defendants for
negligence. The action was removed to this Court on March 1,
1990. Presently before the Court are plaintiff's motion to
remand the case to state court and the motions of defendants
MHT and H & C to dismiss or for summary judgment and for
Plaintiff contends that this action was improperly removed.
Specifically, plaintiff argues that its complaint does not
state a "separate and independent" claim against defendant
Castelazo, the one defendant with diverse citizenship to
plaintiff, of the type which would make this action properly
removable under 28 U.S.C. § 1441(c). We need not consider
plaintiff's argument concerning separateness, however, for we
find that there was no reasonable basis for predicting that
state law might impose liability against defendants MHT and H &
C, and we find that these defendants were joined in this action
for the sole purpose of defeating diversity. As a result, we
conclude that this action was properly removable under
28 U.S.C. § 1441(a) because without the improper joinder of MHT
and H & C, this action would have fallen within this Court's
We find no merit to plaintiff's argument that defendants did
not remove this action under Section 1441(a). The notice of
removal clearly states that removal is taken "[p]ursuant to
28 U.S.C. § 1441(a) and 1441(c)" and that the claims were
asserted "for the sole purpose of attempting to prevent or
defeat a removal of the Action to [federal] court." See Notice
of Removal at 1 & 4.
In order to show that the naming of non-diverse defendants
was a fraudulent joinder effected to defeat diversity
jurisdiction and that the action was therefore properly
removable under Section 1441(a), defendants must show bad faith
with sufficient certainty and that there is no "reasonable
basis for predicting that state law might impose liability on
the non-diverse defendant." American Mut. Liability Ins. Co. v.
Flintkote Co., 565 F. Supp. 843, 845 (S.D.N.Y. 1983); Green v.
Amerada Hess Corp., 707 F.2d 201, 205 (5th Cir. 1983), cert.
denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984);
Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir. 1983).
All factual and legal issues must be resolved in favor of the
plaintiff. S.A. Auto Lube, Inc. v. Jiffy Lube Int'l, Inc.,
842 F.2d 946, 950 (7th Cir. 1987). The Court must examine
plaintiff's claims to determine whether they have any merit and
thus preclude a finding that they were fraudulently asserted to
There is no basis in fact or under New York law for
plaintiff's contract claim against MHT. Under New York law,
only an intended beneficiary of a contract may assert a claim
as a third party. Port Chester Elec. Constr. Corp. v. Atlas,
40 N.Y.2d 652, 655, 389 N.Y.S.2d 327, 330, 357 N.E.2d 983 (1976).
An intended beneficiary is one whose "right to performance is
'appropriate to effectuate the intention of the parties'
to the contract and either the performance will satisfy a money
debt obligation of the promisee to the beneficiary or 'the
circumstances indicate that the promisee intends to give the
beneficiary the benefit of the promised performance.'" Lake
Placid Club Attached Lodges v. Elizabethtown Builders, Inc.,
131 A.D.2d 159, 521 N.Y.S.2d 165, 166 (3rd Dep't 1987) (quoting
Restatement Second of Contracts § 302(1)(a) & (b) (1979)). See
also Septembertide Publishing B. V. v. Stein and Day, Inc.,
884 F.2d 675, 679-80 (2d Cir. 1989); Fourth Ocean Putnam Corp. v.
Interstate Wrecking Co., Inc., 66 N.Y.2d 38, 45, 495 N.Y.S.2d
1, 5, 485 N.E.2d 208 (1985) (third party's right to enforce
contract generally upheld when no one other than third party
can recover or language of the contract "clearly evidences an
intent to permit enforcement by the third party").
Plaintiff argues that it is the intended third party
beneficiary of the written authorization given by the guardian
to MHT. This authorization letter reads in full:
You are authorized and requested at any time and
from time to time without further approval by the
undersigned to follow the written instructions of
Toni Vallen — Valcorp Management Inc. to sell,
deliver or exchange any securities or other
property at any time held in my Custody Account,
against receipt by you of such payment, securities
or other property, as shall be set forth in such
written instructions, and to follow such written
instructions to receive or purchase with and to the
extent of any cash to my credit with you as
Custodian or with your Banking Department, or
otherwise, and make payment therefor against
receipt of the securities or other property to be
acquired as set forth in such written instructions.
This authorization shall continue in full force and
effect until receipt by your Custody Department of
written notice from me of the revocation thereof.
Even if we assume that this letter somehow constituted a
contract, the clear purpose of the letter was for the guardian,
pursuant to his duty to make investment decisions on behalf of
the infants, to authorize the custodian of the accounts to
follow the instructions of a particular financial advisor. It
is entirely implausible that it was the intention of the
parties to confer some benefit on a clearing broker acting on
behalf of the brokerage firm where the ...