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BOSTON POST ROAD MEDICAL IMAGING v. ALLSTATE INSURANCE CO.

April 30, 2004.

BOSTON POST ROAD MEDICAL IMAGING, P.C., etc., et ano., Plaintiffs, -against- ALLSTATE INSURANCE COMPANY, Defendant


The opinion of the court was delivered by: LEWIS KAPLAN, District Judge

MEMORANDUM OPINION

This motion presents the unedifying spectacle of a major insurance company seeking to vacate a default judgment because, it claims, it was too confused to file an answer or even to seek an extension of time. The excuse is incredible. The heavy preference for resolution of cases on the merits is insufficient to overcome such egregious behavior. Facts

  Plaintiff Boston Post Road Medical Imaging, P.C. ("BPRMI"). brought this diversity Action against Allstate Insurance Company ("Allstate") as alleged assignee of the rights of a number of its patients, it sought to recover $102,154.99 for medical services rendered to its assignors which Allstate allegedly was obliged to pay under the "no-fault benefit" clauses in policies of automobile insurance allegedly issued by it to the assignors. In a separate count. the professional corporation employing its attorney, Moshe D. Fuld, P.C., sought to recover legal fees under unspecified provisions of the New York Insurance Law and regulations.

  This action was commenced on August 14, 2003. and the summons and complaint were served on September 2, 2003. Allstate failed to answer or appear. A Rule 55(a) default, as distinguished from a default judgment, was entered on November 19, 2003.

  On December 4, 2003, Allstate's counsel wrote to the Court, albeit without any indication that a copy of the letter had been sent to his adversary. The letter advised that Allstate's time to answer had expired and sought a two week extension of time which, it noted, had been refused by plaintiff's counsel. In view of the ex parte nature of the communication, the Court denied the application "without prejudice to motion on notice" by order endorsed the same day. Nevertheless, Allstate made no such motion. A default judgment was entered on January 14, 2004 and me case closed.

  On February 17, 2004, Allstate moved to vacate the judgment, to dismiss the action for lack of subject matter jurisdiction, and for other relief. Its principal contention is that BPRMI can satisfy the minimum jurisdictional amount only by aggregating the individual claims of its assignors and that this is improper under Section 1359 of the Judicial Code,*fn1 which forecloses jurisdiction in cases in which a party improperly or collusively makes or joins in an assignment to invoke the jurisdiction of a district court.

  Discussion

  Is the Judgment Void?

  The core of Allstate's initial position, although it is not so stated, appears to be a simple syllogism. Rule 60(b)(4) permits a district court to vacate a judgment on the ground that it is void. As BPRMI joined in the assignments of its patients' claims for the purpose of invoking the jurisdiction of this Court. Section 1359 excludes this case from the diversity jurisdiction conferred by Congress. A judgment rendered in the absence of jurisdiction is void. Ergo, the Court should vacate the default judgment without consideration of the other factors usually considered on such motions. The matter, however, is not quite that clear.

  The complaint is silent concerning the circumstances of or the reasons for the assignments. While Allstate asserts that the assignments were made solely or primarily for the purpose of invoking the jurisdiction of this Court, its papers are devoid of any such evidence. And while the burden of persuading a district court that an assignment by which the plaintiff derives title to its claim was neither improper nor collusive rests on the plaintiff,*fn2 logic suggests the defendant has the initial burden of raising the question whether the assignments were improper or collusive.*fn3

  "[A] federal district court's erroneous exercise of subject matter jurisdiction is not subject to collateral attack."*fn4 Where a party "has had an opportunity to litigate the question of subject matter jurisdiction."*fn5 it may not reopen that issue in a collateral attack in the absence of "a clear usurpation of power by a district court." as distinguished from an error of law in determining the existence of jurisdiction.*fn6

  In this case, the complaint on its face alleged complete diversity of citizenship and, by virtue of the assignments, the presence of the requisite amount in controversy. Nothing in that pleading demonstrated that the assignments were improper or collusive, Allstate had the burden of going forward on that issue if it wished to do so. but it defaulted. Under the normal rules of claim preclusion, the default judgment barred all defenses that it might have raised, including the contention that jurisdiction was lacking because the assignments were collusive.*fn7 In consequence, it would be inappropriate to vacate the judgment under Rule 60(b)(4). But that is not the end of the Relief from the Judgment

  Allstate explains its failure to answer on time as follows:
"Defendant did not interpose an answer in this lawsuit due to confusion on their part. Plaintiff and plaintiff's counsel has [sic] started numerous lawsuits in federal court against this defendant. Defendant is having a difficult time determining what these lawsuits are and what claims they involve. As you can see from the caption of the case, the plaintiff is suing on numerous insurance contracts as an assignee. However none of those named contracts are listed in the caption except for one. Allstate has been sued numerous times and is having a difficult time correlating the papers to actual claims. Plaintiff has started numerous other lawsuits against the defendant involving hundreds of individual no-fault claims listing the assignors in riders to the complaints under docket number 03 CV 6154, 03 CV 6150 and 03 CV 3923 that the defendant is aware of. Allstate Insurance Company maintains multiple offices which handle no-fault claims depending were [sic] the insurance contract and or [sic] accident occurs [sic]. Plaintiff is randomly bunching claims together and is suing Allstate Insurance Company. By the time Allstate Insurance Company coordinates and figure [sic] out what the lawsuit is about, the time to answer expires."*fn8
Rule 60(b)(1) ...

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