United States District Court, S.D. New York
July 15, 2004.
DEAJESS MEDICAL IMAGING, P.C., as assignee of AGOSTINI BARRY and the other injured persons listed in attached rider and MOSHE D. FULD, P.C. Plaintiff,
GEICO GENERAL INSURANCE COMPANY, Defendant.
The opinion of the court was delivered by: DEBRA FREEMAN, Magistrate Judge
MEMORANDUM AND ORDER
In this diversity action, before me on consent pursuant to
28 U.S.C. § 636(c), plaintiff Deajess Medical Imaging, P.C.
("Deajess") asserts 49*fn1 claims against defendant, Geico
General Insurance Company ("Geico"). Geico has moved for
dismissal on the ground that the claims have been improperly
aggregated and, if disaggregated, would individually fail to
satisfy the jurisdictional requirement as to the amount in
For the reasons set forth below, Geico's motion to dismiss
Deajess's Complaint for lack of jurisdiction pursuant to
28 U.S.C. § 1332 is denied, but Geico is invited to make a motion to
This action is one of a series of similar actions filed by the
same counsel, on behalf of the same plaintiff or related
entities.*fn2 These cases, in which medical service
providers have received assignments of and then sought to
aggregate their patients' insurance claims, all appear to raise
the same issues whether the claims, which are individually
modest in size, have been properly aggregated so as to satisfy
the $75,000 jurisdictional requirement, and, if so, whether the
claims should nonetheless be severed so as not to overburden the
defendants and the Court with an unwieldy discovery process
This particular case has been brought by Deajess, a New York
provider of radiological services, to recover on the no-fault
automobile insurance claims of 49 patients who were allegedly
injured in automobile accidents, and who received radiological
procedures at Deajess's facility. (Complaint filed Sept. 22, 2003
("Compl.") (Dkt. 1) ¶¶ 2, 6-7, 9.) These patients all assigned
their insurance claims to Deajess, in exchange for being absolved
from personal liability for the medical services they received.
(Plaintiff's Memorandum of Law in Opposition to Defendant's
Motion to Dismiss, filed March 12, 2004 ("Pl. Opp. Mem.") (Dkt.
12) at 4.) According to the Complaint, the assignments, which
were made at the time the medical services were provided, are valid under the New York Motor Vehicle
No-Fault Insurance Law. (Id. at 5; Compl. at ¶ 10.)
Defendant Geico is an automobile insurance company with a
principal place of business in Maryland (Compl. ¶ 3.) Geico
refused to honor Deajess's claims for the services rendered to
the policyholders. (Id. ¶¶ 10-13.) Payments were denied for
various reasons including, inter alia, peer reviews, failure to
comply with fee schedules, denial by the policyholders of
involvement in the alleged losses, failure to submit certain
proofs, lack of medical necessity for the services rendered,
failure of the patients to file timely notices of their injuries,
and failure to demonstrate that certain claimed injuries were the
result of automobile accidents. (See Memorandum of Law in
Support of Defendant's Motion to Dismiss ("Def. Mot. to Dismiss")
filed Feb. 18, 2004 (Dkt. 10) at 5.)
On September 22, 2003, Deajess commenced this action to recover
the unpaid claims. The individual claims at issue in the case
range from about $900 to about $3,500. (See rider attached to
Compl.) Taken together, the claims total approximately $90,000.
(See id.) On February 18, 2004, Geico moved to dismiss the
action on the ground that the aggregation of Deajess's individual
claims was improper and that this Court therefore lacks subject
matter jurisdiction over the action. (Notice of Motion to Dismiss
filed Feb. 18, 2004 (Dkt. 9).)
A federal court has the power to entertain cases based on the
diversity of citizenship between the plaintiff and defendant,
provided that the amount in controversy exceeds $75,000.
28 U.S.C. § 1332. Under Rule 18 of the Federal Rules of Civil
Procedure, an individual plaintiff may join all claims that
he/she has against a single defendant. Fed.R.Civ.P. 18(a). To
the extent that such joinder is proper, the value of each individual
claim may be aggregated for the purpose of reaching the $75,000
threshold. See Wolde-Meskel v. Vocational Instruction Project
Cmty. Servs., 166 F.3d 59, 62 (2d Cir. 1999) (citing Snyder v.
Harris, 394 U.S. 332, 335 (1969)).
A district court, however, "shall not have jurisdiction of a
civil action in which any party, by assignment or otherwise, has
been improperly or collusively made or joined to invoke the
jurisdiction of such court." 28 U.S.C. § 1359. Thus, although a
single plaintiff may join and aggregate the value of claims
assigned to it by third parties, it may not do so where the
assignments were made collusively for the purpose of creating
federal jurisdiction. Airlines Reporting Corp. v. S & N Travel,
Inc., 58 F.3d 857, 862 (2d Cir. 1995); see also Prudential Oil
Corp. v. Phillips Petroleum Co., 546 F.2d 469, 475 (2d Cir.
1976) (noting that "Section 1359 should . . . be broadly
construed to bar any improper attempt to create federal diversity
jurisdiction"). The burden falls on the party asserting diversity
to demonstrate that the reason for the assignments are
legitimate, not pretextual. Airlines Reporting Corp., 58 F.3d
at 863. Indeed, where the assertion of diversity jurisdiction is
predicated on the assignment of a claim to a named plaintiff, the
plaintiff must assert a compelling business reason for the
assignment, "such that it is clear that the assignment would have
been made absent the purpose of gaining a federal forum." Kades
v. Organic, Inc., No. 00 Civ. 3671 (LTS) (RLE), 2003 WL 470331,
at * 5 (S.D.N.Y. Feb. 24, 2003) (citing Ferrara v. Philadelphia
Labs. Inc., 272 F. Supp. 1000, 1007-08, aff'd, 393 F.2d 934
(2d Cir. 1967)).
In a number of the virtually identical cases filed by
plaintiff's counsel in this Court (see n. 2, supra), several
judges have now examined the types of arguments raised here by
Geico. See Boston Post Rd. Med. Imaging v. Allstate Ins. Co.,
221 F.R.D. 410 (S.D.N.Y. 2004); Boston Post Rd. Med. Imaging v. Allstate Ins. Co., No. 03 Civ. 6150 (SAS),
2004 WL 830154 (S.D.N.Y. Apr. 13, 2004); Boston Post Rd. Med.
Imaging v. Allstate Ins. Co., 03 Civ. 3923 (RCC) (Apr. 19,
2004); Preferred Med. Imaging v. Geico Gen. Ins. Co., No. 03
Civ. 8726 (NRB) (Mar. 29, 2004); Deajess Med. Imaging v.
Travelers Prop. Cas. Ins. Co., 03 Civ. 6635 (NRB) (Mar. 11,
2004); Boston Post Rd. Med. Imaging v. State Farm Mut. Auto.
Ins. Co., 03 Civ. 6643 (AKH) (Mar. 9, 2004); Boston Post Rd.
Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6156 (HB)
(Feb. 21, 2004); Preferred Med. Imaging v. Allstate Ins. Co.,
03 Civ. 6638 (VM) (Feb. 17, 2004). In these cases, the Court has
considered the legitimacy of aggregating insurance claims to gain
diversity jurisdiction in either the context of a motion to
dismiss, see, e.g, Boston Post Rd. Med. Imaging, 2004 WL 830154
at *3; Boston Post Rd. Med. Imaging v. Allstate Ins. Co., 03
Civ. 3923 (RCC); Preferred Med. Imaging v. Geico Gen. Ins. Co.,
No. 03 Civ. 8726 (NRB); Preferred Med. Imaging v. Allstate Ins.
Co., 03 Civ. 6638 (VM), or in the context of a motion to sever
the claims, see, e.g., Deajess Med. Imaging v. Travelers Prop.
Cas. Ins. Co., 03 Civ. 6635 (NRB); Boston Post Rd. Med. Imaging
v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH); Boston
Post Rd. Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ.
At this point, Geico has only moved to dismiss the Complaint
based on the alleged impropriety of Deajess's aggregation of its
claims, which Geico argues was based on assignments made for the
sole purpose of obtaining federal jurisdiction. (Def. Mot to
Dismiss at 2.) Deajess, however, maintains that aggregation is
proper in this case because there were in fact legitimate
business reasons for executing the assignments. (Pl. Opp. Mem. at
The factors that may be used to evaluate the legitimacy of the
assignment of claims include: (1) whether the assignee had any
previous connection with the claim assigned, (2) whether the assignee will remit any recovery to the assignor,
(3) whether the assignor will actually control the conduct of the
litigation, (4) when the assignment was made, (5) whether there
was meaningful consideration for the assignment, and (6) the
underlying purpose of the assignment. See, e.g, Boston Post Rd.
Med. Imaging, 2004 WL 830154 at *3; see also Airlines Reporting
Corp., 58 F.3d at 863; Kades, 2003 WL 470331, at *5. Applying
these factors here supports the conclusion that the assignments
in this case were legitimate and that there was no collusive
effort to transfer rights solely to obtain federal jurisdiction.
See, e.g, Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3
(finding that the assignment of no-fault insurance benefits to
plaintiff in exchange for medical services was not a collusive
assignment made solely to create jurisdiction).
In determining a motion to dismiss for lack of subject matter
jurisdiction, the Court must accept the material factual
allegations in the complaint. Atlantic Mut. Ins. Co. v. Balfor
Maclaine 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). In this case,
there is no indication that Deajess and the patients who received
services from Deajess had any prior dealings that would suggest a
likelihood of collusion. The litigation arising out of these
claims is being controlled by Deajess, not by the patients who
assigned Deajess their claims and who no longer have any stake in
the outcome.*fn3 The assignments were apparently made at the time the services were rendered, which was
before coverage was denied and any claims accrued, making
collusion less likely. The patients received valid consideration
for their assignments of rights, in that, in exchange for
allowing Deajess to collect from Geico directly, the patients
received medical services without becoming personally liable for
their cost. Finally, the underlying purpose proffered by Deajess
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, and there is no evidence that
suggests that the assignments in question were made to invoke
federal jurisdiction. See Boston Post Rd. Med. Imaging, 2004 WL
830154 at *3 (analyzing an exactly analogous factual situation
and holding that aggregation to meet the jurisdictional amount
was proper); compare Airlines Reporting Corp., 58 F.3d at 864
(finding collusion in attempt to aggregate claims where the
assignments were executed only after jurisdiction was challenged,
no consideration was paid for the assignments, and there was an
admission that the assignments were motivated by a desire to
remain in federal court). In fact, it appears that the
assignments were made here so that Deajess could bill the
insurance company directly, instead of having to look to each
individual patient for payment, and that the assignments would
have been made absent the purpose of gaining a federal forum.
See Kades, 2003 WL 470331, at *5.
Thus, all of the relevant factors weigh in favor of a finding
that the assignments of insurance claims to Deajess were not made
improperly or collusively to invoke the jurisdiction of the
Court. Accordingly, the aggregation of claims is permissible to
meet the $75,000 jurisdictional amount, and Geico's motion to
dismiss the Complaint for lack of jurisdiction is denied. The Court also notes, however, that other judges of this Court,
upon reviewing similar cases, have determined that the individual
insurance claims should be severed pursuant to Fed.R.Civ.P.
21, on the grounds that the individual claims would require
independent findings of fact as to whether the medical procedure,
in each patient's case, was medically necessary, or whether there
were other individualized facts that affected the coverage
determinations. See, e.g., Deajess Med. Imaging v. Travelers
Prop. Cas. Ins. Co., 03 Civ. 6635 (NRB); Boston Post Rd. Med.
Imaging v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH).
At least one judge of the Court, however, has determined that the
best way to deal with the type of situation presented here is to
divide the claims into subgroups, based on the reasons for the
denial of the claims. See Boston Post Rd. Med. Imaging v.
Travelers Prop. Cas. Ins. Co., 03 Civ. 6156 (HB). Although a
court may sua sponte sever claims and then dismiss for lack of
jurisdiction, see, e.g, Preferred Med. Imaging v. Allstate Ins.
Co., 03 Civ. 6638 (VM), the Court declines to do so at this
time, because neither party has had the opportunity to address
the issues of particular relevance to severance.*fn4 This
Court will, however, entertain a motion to sever the claims, if
Geico wishes to make one. See, e.g., Boston Post Rd. Med.
Imaging v. Allstate Ins. Co., 03 Civ. 3923 (RCC). CONCLUSION
For all of the foregoing reasons, Geico's motion to dismiss for
lack of subject matter jurisdiction is denied. However,
notwithstanding the fact that this Court has jurisdiction over
the matter, the Court will entertain a motion to consider whether
the consolidated adjudication of all of Deajess's claims is
appropriate, or whether the claims should be severed. If Geico
wishes to proceed with such a motion, it should serve and file
its motion no later than September 3, 2004. Deajess shall respond
to any such motion no later than October 8, 2004, and Geico shall
file its reply, if any, no later than October 22, 2004.