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RAPHAEL v. 18 RESTAURANT

June 17, 1996

REMY RAPHAEL, Plaintiff, against 18 RESTAURANT, INC d/b/a/ DUNKIN DONUTS, NATIONAL RESTAURANT MANAGEMENT, INC. d/b/a/ DUNKIN DONUTS, DUNKIN DONUTS INC., and HOBART CORPORATION, Defendants. HOBART CORPORATION, Third-Party Plaintiff, - against - 18 RESTAURANT, INC d/b/a/ DUNKIN DONUTS, NATIONAL RESTAURANT MANAGEMENT, INC. d/b/a/ THE RIESE OPERATION, d/b/a/ DUNKIN DONUTS, DUNKIN DONUTS INC., Third-Party Defendants.


The opinion of the court was delivered by: BARTELS

 Plaintiff Remy Raphael ("Raphael") filed the instant action in New York State Supreme Court, Kings County, on September 26, 1995, alleging that he sustained personal injuries due in part to the negligence of Defendants 18 Restaurant, Inc ( "18 Restaurant"), National Restaurant Management, Inc. ("National Restaurant"), and Dunkin Donuts Incorporated ("Dunkin Donuts") (collectively "employer-defendants"), and in part to a defective product manufactured by Defendant Hobart Corporation ( "Hobart"). On October 17, 1995, Hobart removed the case to this Court based on diversity jurisdiction. Raphael now moves to remand to state court, maintaining that removal was improper and diversity is lacking. For the reasons set forth below, Raphael's motion is granted.

 DISCUSSION

 The central issue before the Court is whether diversity jurisdiction exists and the matter therefore is properly before it, or on the other hand, whether diversity is lacking and the case must be remanded to state court. In order to resolve this issue, the Court must first determine when removal based upon diversity is possible. Second, if complete diversity is not present, the Court must determine whether federal jurisdiction is still proper under the principle of "fraudulent joinder", whereby parties which would otherwise defeat diversity do not, because the non-diverse parties are found to be nominal or sham parties. To determine whether parties are fraudulently joined, the Court must determine whether or not there is a viable theory under which Raphael may recover against the parties alleged to be fraudulently joined.

 Jurisdictional Standard

 A defendant may remove a case under 28 U.S.C. § 1441(a) from state to federal court if the federal district court has original jurisdiction. As Hobart here alleges diversity jurisdiction under 28 U.S.C. § 1332(a)(1) as the source of original jurisdiction, the amount in controversy must exceed $ 50,000 *fn1" and the parties must be citizens of different states. Removal is limited under 28 U.S.C. § 1441(b) to situations in which no defendant is a citizen of the forum state. Although generally all defendants must join the petition for removal, Fletcher v. Hamlet, 116 U.S. 408, 410, 29 L. Ed. 679, 6 S. Ct. 426; Bradford v. Harding, 284 F.2d 307, 309 (2d Cir. 1960); Rosendale v. Citibank, N.A., 1995 U.S. Dist. LEXIS 7453, Dkt. 94 Civ. 8591, 1995 WL 329296, at *2 (S.D.N.Y. June 1, 1995), nominal defendants need not consent to removal, Avon Prods., Inc. v. A/J Partnership, 1990 U.S. Dist. LEXIS 2186, No. 89 Civ. 3743, 8032, 1990 WL 422416, at *2 (S.D.N.Y. Mar. 1, 1990), and will not defeat diversity jurisdiction, WMW Machinery Co. v. Koerber A.G., 879 F. Supp. 16, 17 (S.D.N.Y. 1995). The party seeking removal squarely bears the burden of proving jurisdiction by competent proof. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 80 L. Ed. 1135, 56 S. Ct. 780 (1936); United Food & Commercial Workers Union, Local 919 v. CenterMark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir. 1994); R. G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir. 1979).

 Defeating Diversity

 In cases where there are multiple parties, complete diversity is necessary, Israel v. Carpenter, 1995 U.S. Dist. LEXIS 16007, No. 95 Civ. 2703, 1995 WL 640534, at *2 (S.D.N.Y. Oct. 31, 1995), although as noted above, citizenship of nominal parties is not considered. Pepsico v. Wendy's Int'l, 118 F.R.D. 38, 45 (S.D.N.Y. 1987).

 To determine whether a defendant is merely nominal or fraudulently joined and thus will not defeat diversity despite being a resident defendant, the inquiry focuses on whether the plaintiff truly intended to obtain a judgment against that defendant. New York Shipping Ass'n v. Int'l Longshoremen's Ass'n, 276 F. Supp. 51, 53 (S.D.N.Y. 1967)(citing 1 Moore's Federal Practice P 0.161[2]); see, Ford v. Elsbury, 32 F.3d 931, 935 (5th Cir. 1994). A defendant is clearly nominal if the plaintiff fails to state a cause of action against the resident defendant and the failure is obvious according to the settled rules of the state. American Mutual Services Corp. v. U.S. Liability Ins. Co., 293 F. Supp. 1082, 1084 (E.D.N.Y. 1968). Conversely, however, if there is a real possibility that the plaintiff has stated a cause of action, then the defendant is not nominal, and the case should be remanded. American Renaissance Lines, Inc. v. Saxis Steamship Co., 277 F. Supp. 731, 733-34 (E.D.N.Y. 1967). The movant bears a heavy burden of persuasion to show that a party is nominal. McKay v. Point Shipping Corp., 587 F. Supp. 41, 42-43 (S.D.N.Y. 1984); Ford, 32 F.3d at 935; B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir. 1981).

 Corporate Citizenship

 In order to find whether diversity jurisdiction is present, the citizenship of each party must be determined. A corporation finds itself a citizen of "any state by which it has been incorporated and of the state where it has its principal place of business." 28 U.S.C. § 1332(c)(1); see also, Wm. Passalacqua Builders v. Resnick Developers, 933 F.2d 131, 141 (2d Cir. 1991); In re Joint Eastern and Southern District Asbestos Litigation, No. 87- CV-0537, 1990 WL 129194, at *2 (E. & S.D.N.Y. Aug. 30, 1990).

 The principal place of business of a corporation is determined by one of two multi-factored judicial tests, the "nerve center test" or the "place of the activities/public impact test", depending upon whether the corporation's operations are spread across numerous states or centralized in a more local area. R. G. Barry Corp., 612 F.2d at 654-55; In re Asbestos Litigation at *2-3; Powers v. Fox Television Stations, 907 F. Supp. 719, 721-22 (S.D.N.Y. 1995).

 Citizenship of the Parties

 A. Raphael

 Mr. Raphael's citizenship is not in dispute. He is an individual who lives in Kings County, New York and thus is a citizen of New York for ...


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