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,
ALLSTATE INSURANCE COMPANY, Defendant.
The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge
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.
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
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.
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
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
"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
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
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
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
[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
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
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.
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.