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DEAJESS MEDICAL IMAGING PD v. ALLSTATE INSURANCE COMPANY

United States District Court, S.D. New York


July 22, 2004.

DEAJESS MEDICAL IMAGING PD A/A/O JENNIFER ANDINO and the other injured person listed in the attached rider and MOSHE D. FULD, PC., Plaintiffs,
v.
ALLSTATE INSURANCE COMPANY, Defendant.

The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant Allstate Insurance Company ("Allstate") has moved for summary judgment dismissing the complaint of Deajess Medical Imaging, P.C. ("Deajess" or "Plaintiff"), as assignee of Jennifer Andino and the other injured persons listed in a rider attached to the complaint and Moshe D. Fuld, P.C.,*fn1 pursuant to Fed.R.Civ.P. 12(b)(1) and 28 U.S.C. § 1332, on the grounds that this Court lacks subject matter jurisdiction. For the reasons set forth below, Allstate's motion is denied.

Prior Proceedings and Background

  Deajess filed the verified complaint (the "Complaint") in this action on May 29, 2003. According to the Complaint, Deajess is a "citizen of the State of New York." (Compl. at ¶ 2.) Allstate is alleged to be a foreign corporation, licensed to do business in the State of New York, with its state of incorporation and primary place of business in the State of Illinois. (See id. at ¶ 3.) Allstate is alleged to be in the business of issuing polices of insurance to owners of motor vehicles. (See id. at ¶ 5.) According to the Complaint, Deajess seeks to recover on sixty-four no-fault automobile insurance claims related to injuries allegedly sustained in a number of separate automobile accidents which occurred between March and September of 2002 and which arose out of the operation or use of vehicles purportedly insured by Allstate. (See Compl. at ¶¶ 6-7; Compl. Rider at 1-2.) Deajess allegedly rendered medical services to individuals involved in these accidents, accepted an assignment of benefits from each of the individuals as patient-assignors, and billed Allstate for payment of medical treatment. (See Compl. at ¶¶ 6, 9-11.) The values of the claims asserted range from $878.67 to $3,544.84. (See Compl. Rider at 1-2.)

  Allstate filed its answer to the Complaint on August 29, 2003, discovery proceeded, and the instant motion was filed on April 6, 2004. After briefing and an appearance by the parties, the motion was deemed fully submitted on April 28, 2004.

  Discussion

  Allstate argues that this Court lacks subject matter jurisdiction because Deajess, by combining sixty-four separate and distinct claims in one action, has improperly or collusively aggregated these claims in an effort to circumvent the federal courts' jurisdictional threshold of $75,000, in violation of 28 U.S.C. § 1332. Allstate also argues that Deajess is not the real party in interest and that each of the individual assignors is the real party in interest for the purposes of determining diversity jurisdiction.*fn2

  I. Applicable Legal Standards

  A. The Rule 12(b)(1) Standard

  The diversity statute, 28 U.S.C. § 1332, provides that the federal district courts shall have original jurisdiction with respect to "all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). A party seeking to challenge the existence of such jurisdiction may do so under Rule 12(b)(1) of the Federal Rules of Civil Procedure.

  Once subject matter jurisdiction is challenged, the burden of establishing jurisdiction rests with the party asserting that it exists. See Thomson v. Gaskill, 315 U.S. 442, 446 (1942). The party asserting subject matter jurisdiction must prove that the court has such jurisdiction by a preponderance of the evidence. See APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003); Lunney v. United States, 319 F.3d 550, 554 (2d Cir. 2003); Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000).

  On a motion to dismiss for lack of subject matter jurisdiction, the court must accept the material factual allegations contained in the complaint. See Atlantic Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992). Nonetheless, the court may resolve disputed jurisdictional factual issues by reference to evidence outside the pleadings. See Flores Southern Peru Copper Corp., 343 F.3d 140, 161 n. 30 (2d Cir. 2003); Luckett v. Bure, 290 F.3d 493, 496-97 (2d Cir. 2002). The court may decide the matter on the basis of affidavits or other evidence, see Filatech S.A. v. France Telecom S.A., 157 F.3d 922, 932 (2d Cir. 1998), but "argumentative inferences favorable to the party asserting jurisdiction should not be drawn." Atlantic Mut. Ins., 968 F.2d at 198. In other words, "jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it." Shipping Fin. Servs. Corp v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998).

  B. The Aggregation of Claims

  Pursuant to Rule 18, Fed.R. Civ. P., an individual plaintiff "may join, either as independent or as alternate claims, as many claims, legal, equitable, or maritime, as the party has against an opposing party." Fed.R.Civ.P. 18(a). Provided that such joinder is proper, the value of each individual claim may be aggregated for the purpose of satisfying the amount-in-controversy requirement of 28 U.S.C. § 1332. See Wolde-Meskel v. Vocational Instruction Project Cmty. Servs., 166 F.3d 59, 62 (2d Cir. 1999) (observing that "a plaintiff is permitted to aggregate claims in order to satisfy the amount in controversy requirement").

  Nonetheless, "[a] district court 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. Accordingly, where assignments have been made collusively for the purpose of creating federal jurisdiction, the party seeking to join claims and thereby aggregate the value of those claims shall not be permitted to proceed. See Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857, 862 (2d Cir. 1995); Prudential Oil Corp. v. Phillips Petroleum Co., 546 F.2d 469, 470 (2d Cir. 1976); see also O'Brien v. AVCO Corp., 425 F.2d 1030, 1034 (2d Cir. 1969) (stating that Section 1359 precludes "agreements whose primary aim was to vest the court with jurisdiction it had not formerly enjoyed"). On the other hand, where an assignment was made for a valid business purpose, jurisdiction is not destroyed by 28 U.S.C. § 1359. See Schiavone Const. Co. v. City of New York, 99 F.3d 546, 547 n. 1 (2d Cir. 1996); Airlines Reporting, 58 F.3d at 863; Drexel Burnham Lambert Group, Inc. v. Galadari, 777 F.2d 877, 881 (2d Cir. 1985). Once diversity jurisdiction is questioned, the party asserting the existence of such jurisdiction has the burden of proving the assignment was not collusive by demonstrating that the reason for the assignment was legitimate and not pretextual. See Airlines Reporting, 58 F.3d at 863; Prudential Oil, 546 F.2d at 476.

  C. Real Parties in Interest

  Rule 17, Fed.R. Civ. P., requires that "[e]very action shall be prosecuted in the name of the real party in interest." Fed.R.Civ.P. 17(a). "This means that an `action must be brought by the person who, according to the governing substantive law, is entitled to enforce the right.'" Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d Cir. 2003) (quoting 6A Charles Alan Wright, et al., Federal Practice & Procedure § 1543, at 334 (2d ed. 1990).

  While a party may be a "real party in interest," and, thus, the action properly may be maintained in its name, that party "must also establish that it is a `real and substantial party to the controversy' for the purpose of determining diversity jurisdiction." Oscar Gruss & Son, 337 F.3d at 193 (citing Navarro Sav. Ass'n v. Lee, 446 U.S. 458 (1980)); see also Airlines Reporting, 58 F.3d at 861 n. 4 (noting that real and substantial parties to the controversy "should not be confused with the `real party in interest' standard set forth in Fed.R.Civ.P. 17(a)"); Wilsey v. Eddingfield, 780 F.2d 614, 615 (7th Cir. 1985) ("a representative [under Rule 17(a)] is not necessarily the real party in interest for the purpose of determining diversity jurisdiction").

  "To establish whether a plaintiff is a `real and substantial party to the controversy,' a crucial distinction must be made between a plaintiff who sues solely in his capacity as an agent, on the one hand, and, on the other, a plaintiff who sues not only as an agent, but also as an individual who has his own stake in the litigation." Oscar Gruss & Son, 337 F.3d at 193 (noting that "where a plaintiff brings a suit solely in his representative capacity, the citizenship of the represented party, and not that of the representative, controls"). Where a party is not a "`mere conduit' but possesses a valid stake in the litigation sufficient to be considered a `real and substantial' party for diversity purposes" the citizenship of that party is determinative for purposes of establishing diversity jurisdiction. Id. at 194 (quoting Airlines Reporting, 58 F.3d at 862); compare Airlines Reporting, 58 F.3d at 862 (concluding that the citizenship of the represented individuals controlled for diversity purposes where a named plaintiff acted solely as an agent, "did not seek to protect any corporate interests of its own," did not suffer "any corporate damage or pecuniary loss itself," did not "lay claim to any portion of the potential recovery," and was, instead, "a mere conduit for a remedy owing to others, advancing no specific interests of its own").

  II. Allstate's Motion Is Denied

  As both parties acknowledge, the instant action is not the first brought by Plaintiff's counsel in this District wherein numerous assigned claims for no-fault insurance benefits are aggregated and no single claim is of sufficient magnitude to meet the jurisdictional threshold on its own. See generally Boston Post Rd. Med. Imaging, P.C. v. Allstate Ins. Co., No. 03 Civ. 3923 (RCC), 2004 WL 1586429, at *1 n. 2 (S.D.N.Y. July 15, 2004) (listing nearly thirty actions involving aggregated claims for no-fault insurance benefits filed by Plaintiff's counsel in the Southern District of New York between May 2002 and November 2003); Deajess Med. Imaging, P.C. v. Geico Gen. Ins. Co., No. 03 Civ. 7388 (DF), 2004 WL 1576536, at *1 n. 2 (S.D.N.Y. July 15, 2004) (noting that Plaintiff's counsel has filed some thirty similar cases in this District and that at least three of the plaintiffs in those actions share the same principal). In several of these actions, defendants have moved to dismiss for lack of subject matter jurisdiction on the same grounds invoked here.

  In Boston Post Road Medical Imaging, P.C. v. Allstate Insurance Co., No. 03 Civ. 6150 (SAS), 2004 WL 830154 (S.D.N.Y. Apr. 13, 2004), the defendant moved to dismiss the complaint, arguing that subject matter jurisdiction was lacking because the plaintiff medical imaging provider was not the real party in interest and the assignments were collusive. The Honorable Shira A. Scheindlin denied the defendant's motion, rejecting the defendant's argument that the plaintiff was suing in a representative capacity and holding that the plaintiff was the real party in interest for purposes of determining diversity jurisdiction. Distinguishing the case of Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857 (2d Cir. 1995), where the plaintiff was acting as the agent of various air carriers, the court concluded:

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.
Boston Post Rd. Med. Imaging, 2004 WL 830154, at *1-2.

  The court also rejected the defendant's argument that the assignments were collusive. See id. at *2-3. In evaluating the reasons given for an assignment, the court explained, certain factors are relevant, including "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. at *3 (quotation marks and citation omitted). The court explained that,

[The] 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.
Id.

  Similarly, in Deajess Medical Imaging, P.C. v. Geico General Insurance Co., No. 03 Civ. 7388 (DF), 2004 WL 1576536 (S.D.N.Y. July 15, 2004), the defendant moved to dismiss the complaint on the ground that the plaintiff's aggregation of claims was improper because the assignments were made with the sole purpose of obtaining federal jurisdiction. The Honorable Debra C. Freeman denied the defendant's motion, concluding that the assignments at issue were legitimate and that there was no collusive effort to assign rights solely to secure federal jurisdiction. See Deajess Med. Imaging, 2004 WL 1576536, at *3. Explaining the basis for its conclusion, the court stated that,

[T]here 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. 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.
Id. The court further noted that "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." Id. (distinguishing Airlines Reporting, 58 F.3d at 864, which found collusion where the assignments were executed after jurisdiction was challenged, no consideration was given for the assignments, and the assignments were admittedly motivated by a desire to maintain federal jurisdiction).

  Allstate's claim that Deajess is not the real party in interest for purposes of determining diversity jurisdiction fails for the reasons set forth by Judge Scheindlin in Boston Post Road Medical Imaging and because Allstate has offered neither legal authority nor other support for its contention that Deajess is suing here in a representative capacity or is otherwise acting as an agent rather than pursuing its own claims.

  Allstate's argument that Deajess improperly or collusively aggregated the claims at issue here is rejected for the reasons set forth by Judge Scheindlin in Boston Post Road Medical Imaging and Magistrate Judge Freeman in Deajess Medical Imaging. Here, as in those cases, each patient-assignor assigned his or her no-fault benefits to Plaintiff in consideration for medical services and each assignment was executed at the time the treatment was rendered. (See Deajess Opp. Mem. at 3; Affirmation of David Karp, dated Apr. 22, 2004 ("Karp Aff."), at ¶ 8.) The patients assigned their rights to payment to Deajess so that the Deajess could be paid directly by Allstate. (See Deajess Opp. Mem. at 3-4; Karp Aff., at ¶ 5.) As was true in the Deajess Medical Imaging case before Magistrate Judge Freeman, "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. . . ." Deajess Med. Imaging, 2004 WL 1576536, at *3. Accordingly, there appears to be a legitimate business purpose for the assignments at issue, which is corroborated by the timing and consideration identified. In light of this business purpose, aggregation of the claims at stake here to meet the amount-in-controversy threshold is not barred by 28 U.S.C. § 1359.

  Allstate's further contention that dismissal of this action is warranted based on the dismissals for lack of diversity jurisdiction in three similar actions filed by Plaintiff's counsel is similarly unavailing, as each of the cases cited by Allstate dismissed the complaints only after determining that the individual claims should be severed pursuant to Fed.R.Civ.P. 21. In Preferred Medical Imaging, PC v. Allstate Insurance Co., 303 F. Supp.2d 476 (S.D.N.Y. 2004), for instance, the Honorable Victor Marrero observed that the case involved numerous distinct automobile accidents and claims and noted that the complaint did not allege that the claims involved similar facts. As a result, the case was a "prime candidate for severance," and the court determined sua sponte that the case should be dismissed without prejudice, "so as to allow Preferred to re-file a complaint which sets forth some theory under which the Court has jurisdiction." Preferred Med. Imaging, 303 F. Supp.2d at 477. In Boston Post Road Medical Imaging v. State Farm Mutual Automobile Insurance Co., No. 03 Civ. 6643 (AKH), the Honorable Alvin K. Hellerstein granted the defendants' motion to sever the plaintiff's claims pursuant to Fed.R.Civ.P. 21 and, once severed, to dismiss the claims for failure to meet the amount-in-controversy requirement for federal diversity jurisdiction. (See Karp Aff., Exh. E.) By an order dated March 11, 2004, the Honorable Naomi Reice Buchwald granted a similar motion in Deajess Medical Imaging, P.C. v. Travelers Property Casualty Insurance Co., No. 03 Civ. 6635 (NRB). (See Karp Aff., Exh. F.)

  As Allstate has explicitly disclaimed that it is moving to sever Deajess's claims here (see Allstate Mem. at 9), its reliance on these holdings in the instant motion is misplaced.

  Conclusion

  For the reasons set forth above, Allstate's motion for summary judgment dismissing the Complaint for lack of subject matter jurisdiction is denied.

  It is so ordered.


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