United States District Court, S.D. New York
April 12, 2004.
BOSTON POST ROAD MEDICAL IMAGING, P.C., a/a/o MANUEL ACEVEDO and the other injured persons listed on the attached rider and MOSHE D. FULD, P.C., Plaintiffs, -against- ALLSTATE INSURANCE COMPANY, Defendant
The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge
OPINION AND ORDER
Plaintiff Boston Post Road Medical Imaging, P.C. ("Boston Post") is
suing in its capacity as assignee whereby forty-four patients (assignors)
assigned their no-fault insurance benefits to Boston Post in exchange for
medical services. Boston Post is a New York resident while defendant
Allstate Insurance Company ("Allstate") is a foreign corporation duly
licensed to conduct business in New York. Subject matter jurisdiction is
predicated on diversity of citizenship. Allstate moves to dismiss the
Complaint on the ground that subject matter jurisdiction is lacking
because: (1) Boston Post is not the real party in interest; and (2) the
assignments were collusive. For the following reasons, Allstate's motion
Boston Post seeks payment for radiological services provided to
forty-four patients who were injured in various motor vehicle accidents.
In exchange for these medical services, these forty-four patient-assignors assigned the
benefits they were entitled to under no-fault insurance policies issued
by Allstate. Each assignment was executed at the time services were
rendered. The assignments were executed so that each patient-assignor
could receive medical treatment without having to pay for it
out-of-pocket pursuant to the no-fault provisions of New York's Insurance
Law. See N.Y. Comp. Codes R. & Regs. tit. 11, § 65-3.11
(2001). The assignments released the patient-assignors from any and all
liability to Boston Post. Boston Post accepted the assignments and billed
Allstate accordingly. Allstate denied payment on each submitted claim for
separate and distinct reasons. This action followed.
II. LEGAL STANDARD
Federal subject matter jurisdiction exists where there is diversity of
citizenship under 28 U.S.C. § 1332. "Failure of subject matter
jurisdiction . . . is not waivable and may be raised at any time by a
party of by the court sua sponte." Oscar Gruss & Son, Inc.
v. Hollander, 337 F.3d 186 (2d Cir. 2003). The burden of proof
in establishing federal jurisdiction falls on the party seeking to invoke
that jurisdiction. See Linardos v. Fortuna, 157 F.3d 945,947 (2d
"In considering motions to dismiss for want of subject matter
jurisdiction, the Court must accept as true all material factual
allegations in the Complaint and refrain from drawing inferences in favor
of the party contesting jurisdiction." Serrano v. 900 5th
Ave. Corp., 4 F. Supp.2d 315, 316(S.D.N.Y. 1998) (citing
Atlantic Mut. Ins. Co. v. Balfor Machine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992)).
The Court is not confined to the four corners of the Complaint, however,
and may consider evidence outside the pleadings such as affidavits and
other documents. See Kamen v. American Tel & Tel. Co.,
791 F.2d 1006, 1011 (2d Cir. 1986).
A. Real Party in Interest
Allstate argues that Boston Post is suing in a representative capacity
and therefore not the real party in interest, relying primarily on
Airlines Reporting Corp. v. S and N Travel Inc., 58 F.3d 857 (2d
Cir. 1995). In Airlines, the plaintiff Airlines Reporting
Corporation ("ARC") brought a diversity action in its capacity as
representative of numerous air carriers seeking payment from travel
agencies that owed money to the carriers for the purchase of airline
tickets. See id. at 859. In its analysis of the real party in
interest, the Second Circuit noted that the Supreme Court "has
established that the `"citizens" upon whose diversity a plaintiff grounds
jurisdiction must be real and substantial parties to the
controversy.'" See id. at 861 (quoting Navarro Savings Ass'n v.
Lee, 446 U.S. 458, 460 (1980)). The court refused to consider ARC's
corporate citizenship as controlling for purposes of diversity where ARC
merely acted as an agent for the interests of the air carriers. See
id. at 862. Instead, the court held that the air carriers were the
real parties in interest and it was their citizenship that was
controlling. The court found it significant that ARC "did not seek to
protect any corporate interests of its own," did not suffer "any corporate
damages or pecuniary loss itself," nor did it "lay claim to any portion
of the potential recovery." Id. In sum, the Second Circuit held
that ARC was "a mere conduit for a remedy owing to others, advancing no
specific interests of its own." Id.
This case is far different from the situation addressed in
Airlines. Here, Boston Post is not suing in a representative
capacity. None of the patient-assignors are liable to Boston Post for the
services they received. Boston Post owns the claims in issue and if it is
not successful in this action, it will not be compensated for the
services it provided. Thus, it cannot be said that Boston Post is suing
as an agent on behalf of the patient-assignors who clearly do not have a
stake in this litigation. As an assignee, Boston Post is the only
plaintiff that has an interest in recovering monies allegedly owed by
Allstate. Therefore, Boston Post is the real party in interest for
purposes of determining diversity jurisdiction.
B. Collusiveness of Assignments
Allstate argues that the assignments were made improperly and/or
collusively in order to manufacture jurisdiction where none would
otherwise exist.*fn1 According to Allstate, "the purpose of the
assignment [is] to make it easier for the plaintiff to collect when the
insurer does not pay by filing a claim for litigation or arbitration under the applicable statutes and regulations of the
State of New York. The assignment authorizes the assign[ee] to sue for
the alleged money owed." Defendant's Memorandum in Support ("Def. Mem.")
at 13. Boston Post states that the reason for the assignments was to
allow it "to directly bill the defendant for medical services and allowed
each assignor to receive medical treatment without having to advance
payment for the treatment, pending reimbursement for the defendant."
Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to
Dismiss ("Pl. Mem.") at 8. Boston Post further states that "each
assignment was executed at the time the treatment was rendered, before
the plaintiff even had a cause of action against the defendant" and that
"the consideration given for each assignment was the medical services
that are in issue." Id. Allstate rejects this reason claiming
that "plaintiff's rationale is in fact pretextual, and is nothing more
than an attempt to mask the primary purpose of these assignments, namely
the vesting of the courts [sic] jurisdiction it formerly did not have.
The assignments are mad[e] in anticipation of collection and or
litigation." Def. Mem. at 13.
Here, again, Allstate relies principally on Airlines in
support of its argument. In Airlines, the court stated that
section 1359 is to be construed broadly "to bar any agreement whose
`primary aim' is to concoct federal diversity jurisdiction."
Airlines, 58 F.3d at 862. See also O'Brien v. AVCO
Corp., 425 F.2d 1033, 1034 (2d Cir. 1969) (holding that section 1359
bars "agreements whose primary aim was to vest the court with
jurisdiction it had not formerly enjoyed"). The court went on to state
that "[c]ertain kinds of diversity-creating assignments warrant particularly close
attention/' Airlines, 58 F.3d at 862.
[T]he burden falls on the party asserting
diversity to demonstrate that the reason given for
the assignment is legitimate, not pretextual.
See Prudential Oil v. Phillips Petroleum
Co., 546 F.2d  at 476 [(2d Cir. 1976)]
(assignee must "provide a basis for the inference
that a legitimate business reason, unconnected
with [the] acquisition of diversity jurisdiction,
existed for the assignment"); see also Nike,
Inc. v. Comercial Iberica de Exclusivas
Deportivas, S.A., 20 F.3d 987, 992 (9th Cir.
1994) (stating business reason asserted "must be
sufficiently compelling that the assignment would
have been made absent the purpose of gaining a
federal forum") (quotation omitted). Several
factors may be relevant in evaluating the reasons
given for an assignment, although no single one
will be dispositive. See generally 14
Charles A. Wright, Arthur R. Miller & Edward
H. Cooper, Federal Practice and Procedure
§ 3639 (detailing review of assignments under
28 U.S.C. § 1359).
Id. at 863. Among the relevant factors to consider are:
"the assignee's lack of a previous connection with the claim assigned;
the remittance by the assignee to the assignor of any recovery; whether
the assignor actually controls the conduct of the litigation; the timing
of the assignment; the lack of any meaningful consideration for the
assignment; and the underlying purpose of the assignment." Id.
Here, application of the above factors leads to the inescapable
conclusion that the assignments in issue were not made in anticipation of
litigation, nor were they made as a strategic decision to get the claims
before a federal court. As already stated, the assignors have no interest
in plaintiff's recovery, nor do they control any aspect of this
litigation. Moreover, the assignments were made at the time services were
rendered, well before the commencement of this litigation. Moreover, the consideration
for the assignments was the medical services provided. Finally, the
business purpose proffered by Boston Post that by accepting
assignments, its patients would not have to pay for medical services
out-of-pocket is reasonable and does not appear to be
pretextual. Therefore, the assignments in issue do not appear to have
been made solely to manufacture diversity jurisdiction.
The next question, then, is whether Boston Post can aggregate all of
its assigned claims to meet the jurisdictional amount in controversy.
Support for aggregation can be found in both case law and the Federal
Rules of Civil Procedure. Rule 18 provides that a party "may join, either
as independent or as alternate claims, as many claims, legal or
equitable, or maritime, as the party has against an opposing party." Fed.
R. Civ. P. 18(a). Furthermore, the district court in Airlines
stated that a "single plaintiff may aggregate claims, even if the
claims were assigned to the plaintiff by a third party, unless the
assignment was made collusively for the purpose of creating federal
jurisdiction." Airlines Reporting Corp. v. S and N Travel, Inc.,
857 F. Supp. 1043, 1049 (E.D.N.Y. 1994) (citations omitted, emphasis
added). This statement was not rejected by the Second Circuit which
merely found aggregation to be inappropriate in that case because ARC, as
an agent for the carriers, was not the real party in interest. See
Airlines, 58 F.3d at 864 ("Additionally, the claim-holding air
carriers cannot satisfy the amount in controversy requirement of the
diversity statute. See 28 U.S.C. § 1332. `When, as here, each of several plaintiff's in a single lawsuit is asserting
independent rights, each must independently plead the jurisdictional
amount.'") (quoting Cox v. Livingston, 407 F.2d 392, 393 (2d
Lending further support to aggregation here is the fact that joinder of
multiple claims is permitted under New York state law and aggregation of
claims is permitted under federal law within the context of subrogation.
In Hempstead Gen. Hosp, v. Liberty Mut. Ins. Co., 521 N.Y.S.2d 469
(2d Dep't 1987), the Second Department denied defendant's motion to
sever the twenty-nine claims brought by plaintiff's.
The Supreme Court did not abuse its discretion in
denying the defendant's request to sever the 29
claims. The joinder of the claims is proper under
CPLR 1002(a) since the claims arise out of a
uniform contract of insurance and involve the
interpretation of the same no-fault provisions of
the Insurance Law. While the claims involved
relate to separate accidents and individuals, it
has been held that multiple transactions by
multiple plaintiffs "do not lose their character
as a series of transactions because they occurred
at different places and times extending through
many months" (Akely v. Kinnicutt,
238 N.Y. 466,467, 144 N.E. 682). Since the issues herein
involve a common question of law, such joinder is
proper and severance was appropriately denied.
Id. at 470. But see Mount Sinai Hosp. v. Motor Vehicle
Accident Indemnification Corp., 738 N.Y.S.2d 247
(2d Dep't 2002)
("The Supreme Court providently exercised its discretion in severing the
remaining five causes of action, asserting claims on behalf of five
unrelated assignees, involved in accidents on five different dates, with
no common contract of insurance and no relation or similarity to each
other, other than the fact that the no-fault benefits were not paid."). Here, as in Hempstead
General, the claims involve a uniform contract of insurance.
See Pl Mem. at 12. The risk that this Court will have to hold
forty-four mini-trials is therefore remote and the rationale underlying
Mount Sinai does not apply.
Lastly, within the context of a civil RICO action, Senior District
Judge Jack B. Weinstein stated that: "[a]s subrogees, the plaintiff's
[medical provider plans and self-insured ERISA trust funds] were are real
parties in interest who possess their own substantive rights."
National Asbestos Workers Med. Fund v. Philip Morris, Inc.,
74 F. Supp.2d 221, 238 (E.D.N.Y. 1999). Judge Weinstein held that "a
subrogee may aggregate its own claims to meet the amount-in-controversy
requirement of diversity jurisdiction." Id. (citing Allstate
Ins. Co. v. Hechinger Co., 982 F. Supp. 1169, 1172 (E.D. Va. 1997) (
"[A]s real party in interest, the insurer-subrogee owns the substantive
rights on which it sues. Therefore, just as an individual can aggregate
the claims it owns to meet the jurisdictional amount, so, too, can a
subrogee aggregate the claims to which it is subrogated, and hence owns,
to meet the jurisdictional amount." (citations omitted)); Ministry of
Health v. Shiley Inc., 858 F. Supp. 1426, 1431 (C.D. Cal. 1994)
(allowing subrogee to aggregate its own claims, distinguishing between
class action context and aggregation by subrogee); Liberty Mut. Ins.
Co. v. Tel-Mor Garage Corp., 92 F. Supp. 445, 446 (S.D.N.Y. 1950)
("Combining the [subrogee's] three claims to constitute the required
jurisdictional amount was proper." (citations omitted)). Similar to that
of a subrogee, Boston Post, as assignee, also possesses its own
substantive rights as the real party in interest. Thus, there appears to
be no rational basis in which to permit aggregation within one context
and not the other.
For the reasons stated above, defendant's motion to dismiss the
Complaint is denied. A status conference is scheduled for April 22, 2004
at 2:00 p.m. The Clerk of the Court is directed to close this motion
(Document # 10).