United States District Court, W.D. New York
May 10, 2004.
PATRICK W. McALPIN, Plaintiff,
RLI INSURANCE COMPANY, et al., Defendants
The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District
DECISION AND ORDER
Plaintiff, Patrick W. McAlpin, commenced this action in New York
State Supreme Court, Ontario County, on February 10, 2004. The complaint
asserts a claim for declaratory relief against defendant RLI Insurance
Company ("RLI"), based on RLI's denial of insurance coverage to plaintiff
in connection with a personal injury action that has been brought against
plaintiff in state court by Orlando O'Neill ("O'Neill") and Lori Moose
("Moose"). The personal injury action arises out of an automobile
accident involving McAlpin, O'Neill, and Moose. O'Neill and Moose are
also named as defendants in the instant action, although the complaint
does not assert a claim against them or seek any relief from them
whatsoever. According to the complaint, plaintiff has insurance policies
with both RLI and another carrier, Progressive Insurance Company
("Progressive"). Progressive has agreed to indemnify him up to the limit
of his policy, but plaintiff seeks excess coverage from RLI. RLI removed McAlpin's action to this Court on March 30, 2004, based on
diversity of citizenship under 28 U.S.C. § 1332. The complaint,
however, alleges that plaintiff is a resident of New York, that RLI is a
Connecticut corporation with its principal place of business in New York,
and that O'Neill and Moose are residents of New York. Since, from the
face of the complaint, it appeared that complete diversity was lacking,
the Court, on April 6, 2004, issued an order directing the parties to
show cause why the action should not be remanded to state court for lack
of subject matter jurisdiction.
Having reviewed the parties' responses to the order to show cause, I
find that this Court does have subject matter jurisdiction, and that the
action should remain in this Court. O'Neill and Moose have little if any
interest in the outcome of this action, and to the extent that they do,
their interests are the same as plaintiff's.
It is a "`well settled' general principle . . . that diversity
jurisdiction must be based only on the citizenship of the real parties in
interest, ignoring the citizenship of merely nominal or formal parties."
National Ass'n of State Farm Agents, Inc. v. State Farm Mut. Auto.
Ins. Co., 201 F. Supp.2d 525, 529 (D.Md. 2002). Parties that are
considered nominal are those that have "no personal stake in the outcome
of the litigation" and who are "not necessary to an ultimate resolution."
Dempsey v. Transouth Mortgage Corp., 88 F. Supp.2d 482, 484
The removing party bears the burden of demonstrating that a nondiverse
defendant is a formal or nominal party whose citizenship may be ignored
for diversity purposes, see Dodson v. Spiliada Maritime Corp.,
951 F.2d 40, 42 (5th Cir. 1992). RLI has met that burden. As stated, the
complaint seeks no relief from O'Neill and Moose. Although plaintiff
states that they are proper party defendants "because any determination
made by the Court directly affects them and their interest in the underlying O'Neill action," Affidavit of
Gary H. Abelson (Docket #7) ¶ 5, he fails to explain how they would
or could be affected by any rulings or determinations made in this
The only conceivable way that O'Neill and Moose could have a stake in
the case at bar would be if they recover damages in their personal injury
action against McAlpin in excess of his coverage under his policy with
Progressive, and plaintiff is unable to pay the excess. In that event,
though, O'Neill and Moose would have the same interests as plaintiff:
requiring RLI to indemnify plaintiff.
The Supreme Court stated in Indianapolis v. Chase Nat'l Bank,
314 U.S. 63, 69-70 (1941), that
[d]iversity jurisdiction cannot be conferred upon
the federal courts by the parties' own
determination of who are plaintiffs and who
defendants. It is our duty . . . to "look beyond
the pleadings and arrange the parties according to
their sides in the dispute." . . . Litigation is
the pursuit of practical ends, not a game of
chess. Whether the necessary "collision of
interests," . . . exists is therefore not to be
determined by mechanical rules. It must be
ascertained from the "principal purpose of the
suit," . . . and the "primary and controlling
matter in dispute". . . .
See also Maryland Casualty v. W.R. Grace & Co.,
4 F.3d 155
, 160 (2d Cir. 1993) (adopting "collision of interests" test for
determining whether diversity exists and whether to realign parties
according to their true interests).
For purposes of deciding whether the Court has subject matter
jurisdiciton and whether removal was therefore proper, I will treat
O'Neill and Moose as plaintiffs, not defendants. I do harbor serious
doubts about whether they actually have any "standing" to bring a claim
against RLI for the relief sought by McAlpin, but I need not reach that
issue today. CONCLUSION
The Court finds that it has subject matter jurisdiction over this
action, and that the action was therefore properly removed pursuant to
28 U.S.C. § 1441, and plaintiffs' application to remand to Ontario
Supreme Court is denied.
IT IS SO ORDERED.
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