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United States District Court, S.D. New York

May 11, 2004.

750 Inc., et ano, Plaintiffs, -against- ADMIRAL INSURANCE CO. and JULIA FERNANDEZ, Defendants

The opinion of the court was delivered by: SIDNEY STEIN, District Judge


This action was removed from the Supreme Court of the State of New York and the Notice of Removal in this action states that diversity of citizenship is the basis for federal subject matter jurisdiction. However, the verified complaint sets forth that plaintiffs and defendant Julia Fernandez are citizens of the same state, New York. As a result, this Court signed an order to show cause on April 7, 2004 directing Admiral Insurance Co. to show why this action should not be remanded to the Supreme Court of the State of New York, Bronx County, pursuant to 28 U.S.C § 1447(c) for failure of all defendants to join in the petition for removal, as required by 28 U.S.C. § 1446(a) & (b), and for lack of complete diversity. The action is one for a declaratory judgment in which the landlords — plaintiffs here — are suing their insurance company for a declaration that that company must defend and indemnify the landlords in a New York State court action brought by a tenant — Julia Fernandez — against the landlords for negligence.

The question for resolution is whether Ms. Fernandez is a "nominal party," for if she is, her consent to remove is not required. See e.g., Smith v. Kinkhead, No. 03 Civ. 10283, 2004 WL 728542, at *2 (S.D.N.Y. Apr. 5, 2004) (citing Payne v. Overhead Door Corp., 172 F. Supp.2d 475, 477 (S.D.N.Y. 2001)); Ell v. S.E.T. Landscape Design. Inc., 34 F. Supp.2d 188, 194 (S.D.N.Y. 1999).

  Similarly, if she is a nominal party, her citizenship need not be diverse from plaintiffs' citizenship, because federal courts disregard the citizenship of nominal parties in assessing whether complete diversity exists for purposes of 28 U.S.C. § 1332(a)(1). See Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980) ("[A] federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.")(internal citations omitted); New York State Ins. Fund v. U.S. Liability Ins. Co., No. 03 Civ. 6652, 2004 WL 385033, at *3 (S.D.N.Y. Mar. 2, 2004) ("In determining whether complete diversity exists, nominal or formal parties who have no interest in the action will be ignored."); 13B Charles A. Wright, Arthur P. Miller & Edward H. Cooper, Federal Practice and Procedure, § 3606, at 409 (2ded. 1984 & Supp. 2004).

  The party that removed the action to federal court — here, Admiral — has a heavy burden of proving by clear and convincing evidence that a court should disregard the citizenship of a non-diverse party, by setting forth one of the following: (a) "that there has been outright fraud committed in the plaintiff's pleadings, or" (b) "that there is no possibility based on the pleadings [in the declaratory judgment action], that a plaintiff can state a cause of action against the non-diverse defendants in state court." See U.S. Liability, 2004 WL 385033 at *2 (citing Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459 (2d Cir. 1998)). Here, no outright fraud is alleged; in addition, it is Fernandez who has alleged a claim against her landlords in state court, and no plausible claim against plaintiffs in this declaratory judgment action is foreseen based on those pleadings, nor has one been asserted.

  In addition, there also must not be a possibility that the alleged nominal defendant could assert a cause of action against the plaintiff. See Saxe, Bacon & Bolan, P.C. v. Martindale-Hubbell Inc., 521 F. Supp. 1046, 1048 (S.D.N.Y 1981) ("A party to an action is nominal or formal if no cause of action or claim for relief is or could be stated against him or on his behalf as the case may be.") (emphasis added). The landlords contend here that N.Y. Insurance Law § 3420 gives Fernandez rights here, but that statute provides a cause of action to a tort victim against the tortfeasor's insurer only once that victim receives a judgment in her favor against the tortfeasor. See N.Y. Ins. Law § 3420(b) (2004); NAP, Inc. v. Shuttletex, Inc., 112 F. Supp.2d 369 (S.D.N.Y. 2000) (A tort victim cannot maintain an action even for declaratory judgment against an insurer pursuant to Section 3420 until, inter alia, that victim wins a judgment of liability against the tortfeasor.). Because Fernandez has yet to obtain a judgment against plaintiffs in state court, Fernandez cannot maintain an action against them in this declaratory judgment action. Accordingly, Fernandez is a nominal party and her lack of consent to removal, as well as her non-diverse citizenship, should be disregarded for purposes of determining whether removal is proper.

  For the reasons set forth above, defendant Admiral has shown cause why remand should not be directed. The parties shall appear at a pretrial conference on May 21 at 11:30 A.M. for purposes of establishing a discovery schedule.



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