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DUROVE v. FABIAN TRANSPORT INC.

December 10, 2004.

ZDENKO DUROVE, Plaintiff,
v.
FABIAN TRANSPORT INC., et al., Defendants.



The opinion of the court was delivered by: RICHARD HOLWELL, District Judge

Memorandum Opinion and Order

Plaintiff commenced this personal injury action on August 4, 2004 in the Supreme Court of the State of New York, Bronx County, alleging that he suffered burns, infections and scarring when a defective container of industrial cleaning product called "Zep Oven Brite" leaked onto his feet and lower extremities. The claim was brought against defendants Acuity Specialty Products Group, Inc. ("Acuity"), Zep Manufacturing Co. ("Zep"), Stacey Stewart-Keeler ("Stewart-Keeler") and Fabian Transport, Inc. ("Fabian"), seeking damages "in excess of the jurisdictional limits of the lower Courts of" New York State. (Compl. ¶ 81).*fn1

On August 30, 2004, defendants Zep and Stewart-Keeler filed a Notice of Removal pursuant to 28 U.S.C. §§ 1332(a)(1)*fn2 and 1441(a),*fn3 on the grounds that (i) Stewart-Keeler was fraudulently joined in order to defeat diversity jurisdiction and (ii) complete diversity exists with respect to plaintiff's remaining claims against the properly joined defendants. On September 15, 2004 plaintiff duly responded by moving to remand the proceedings to state court; in his moving papers, plaintiff both denies that Stewart-Keeler is fraudulently joined and argues that removal was improper under 28 U.S.C. § 1441(b)*fn4 because plaintiff, Stewart-Keeler and Zep are all citizens and residents of New York State. (See Affirmation in Support by Lisa Ruiz ¶¶ 2-3.). Thus, the sole issue before the Court is whether removal was proper.*fn5 For the reasons set forth below, the Court finds that removal was not proper, and therefore grants plaintiff's motion to remand [3-1]. Discussion

  Where, as here, removal is premised on the diversity of the parties to the action, federalism concerns are implicated by the jurisdictional analysis. In light of Congress' intent to limit the jurisdiction of federal courts, and recognizing the "importance of preserving the independence of state governments," Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir. 1994), reviewing courts should "construe the removal statute narrowly," Arseneault v. Congoleum, 2002 WL 472256 at *2 (S.D.N.Y. 2002), and resolve all doubts "in favor of remand." Miller v. First Security Investments, Inc., 30 F.Supp.2d 347, 350 (E.D.N.Y. 1998) (internal quotation marks omitted). For the same reasons, the party invoking removal jurisdiction bears the burden of establishing subject matter jurisdiction on a motion to remand. United Food & Commercial Workers Union, Local 919, AFL-CIO v. CenterMark Properties, 30 F.3d 298, 301 (2d Cir. 1994).

  Under 28 U.S.C. 1332(a)(2), this Court has original subject matter jurisdiction over a claim if the matter in controversy exceeds $75,000 and is between "citizens of different states." 28 U.S.C. § 1332(a)(2). In recognition of the federalism concerns identified above, subject matter jurisdiction under § 1332(a)(2) has been interpreted to require complete diversity, such that the citizenship of each plaintiff must be different from that of each defendant. Caterpillar Inc. v. Lewis, 519 U.S. 61, 75-78 (1996). Moreover, even if complete diversity is demonstrated, the action "shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought." 28 U.S.C. § 1441(b); Vasura v. Acands, 84 F.Supp.2d 531, 538 (S.D.N.Y. 2000). Defendants concede that, like plaintiff, individual defendant Stewart-Keeler is a citizen and resident of New York State,*fn6 but the parties disagree about the citizenship of corporate defendant Zep. Accordingly, plaintiff's motion to remand must be granted unless the Court finds (i) that Zep is not a citizen of New York for purposes of 28 U.S.C. 1332(a)(1) and (ii) that Stewart-Keeler was fraudulently joined. These requisites are addressed in turn.

  1. Defendant Zep

  In their opposition to plaintiff's motion to remand, defendants describe Zep as a "division of Acuity Specialty Products Group, Inc.," but characterize Zep as a "trade name" and contend that it is "not a separate legal entity from Acuity." (Def. Memo. of Law in Opp. to Pl.Mot. to Remand, p. 2 ("Def. Opp. Memo.")). Plaintiff concedes that Acuity is a Delaware corporation headquartered in Georgia, and therefore acknowledges that it cannot be considered a domiciliary of New York State for diversity purposes, but argues that Zep is a distinct entity, pointing out that it "maintains an office" and "derives substantial revenue" from business conducted in New York State. (Pl. Reply Memo. of Law, p. 1 ("Pl. Reply")). According to plaintiff, this is enough to make Zep a "domiciliary of New York State." (Id., p. 4).*fn7

  The citizenship of a corporation for diversity purposes is governed by 28 U.S.C. § 1332, which states in pertinent part: "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." 28 U.S.C. § 1332(c). While arguing that Zep is a distinct entity, plaintiff concedes that Zep is a "division" of Acuity, and is therefore not a separately incorporated entity. (Pl. Reply, p. 4). For the purpose of determining diversity, the state of citizenship of an unincorporated division of a corporation is the same as the corporation that owns the division, in this case Georgia and Delaware. Paper Corporation of the U.S. v. Benedetto, Inc., 1993 WL 378341 at *2 n. 1 (S.D.N.Y. Sept 20, 1993); Wisconsin KnifeWorks v. National Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986). Accordingly, despite the presence of a branch office in New York, Zep is a citizen of Georgia and Delaware for purposes of 28 U.S.C. § 1332(a), and is therefore a diverse party.

  2. Defendant Stewart-Keeler

  The doctrine of fraudulent joinder was created to prevent plaintiffs from abusing 28 U.S.C. § 1332(a) by joining non-diverse parties solely in an effort to defeat federal subject matter jurisdiction. Accordingly, district courts considering claims of fraudulent joinder must scrutinize a plaintiff's pleadings, and, as defendants suggest, are permitted to "overlook the presence of a non-diverse defendant if . . . there is no possibility that the claims against that defendant could be asserted in state court." Briarpatch Ltd., L.P v. Phoenix Pictures, Inc., 373 F.3d 296, 302 (2d Cir. 2004); Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 460-61 (2d Cir. 1998) ("[A] plaintiff may not defeat a federal court's diversity jurisdiction and a defendant's right of removal by merely joining as defendants parties with no real connection with the controversy.") (citations omitted).

  However, defendants seeking removal on grounds of fraudulent joinder face a "heavy burden," and must prove "by clear and convincing evidence" that either (i) "there has been outright fraud committed in the plaintiff's pleadings" or (ii) "that there is no possibility, based on the pleadings, that the plaintiff can state a cause of action against the non-diverse defendant in state court." 138 F.3d at 461. In recognition of the fact that federal courts should "scrupulously confine their own jurisdiction", Shamrock Oil & Gas Corp. v. Sheets, et al., 313 U.S. 100, 109 (1941) (citations and internal quotation marks omitted), all factual and legal ambiguities must be resolved in favor of the plaintiff. Id.

  Here, defendants argue that plaintiff cannot state a claim against Stewart-Keeler, even resolving all factual and legal ambiguities in plaintiff's favor. The Court reads plaintiff's complaint as containing three identifiable claims against Stewart-Keeler, the first two of which the Court will consider as a failure to warn claim, and the last of which sounds in contract law. Plaintiff alleges that Stewart-Keeler:
(i) "negligent[ly] . . . sold, distributed, warranted, transported, shipped, stacked, sorted and delivered Zep to plaintiff" (Compl., para. 40);
(ii) "fail[ed] to warn . . . [the] intended consumer of the . . . risks and consequences associated with the selling, delivery, transport, stacking, sorting and shipping of Zep." (Compl., para. 43); and
(iii) "breached an express warranty" that "Zep [Oven Brite was] safe for its intended use." (Compl., para. 70).
  The parties agree that New York law applies, so the only issue to be resolved is whether — construing plaintiff's allegations in the most favored light — there is "[any] possibility . . . that the plaintiff [has stated] a cause of action" under New York law. Pampillonia, 138 F.3d at 461. Courts in this Circuit have interpreted the Pampillonia language strictly. See, e.g., Stan Winston Creatures, Inc. v. Toys "R" Us, Inc., 2003 WL 1907978 at * 4 (S.D.N.Y. Apr.17, 2003) (concluding that defendants had not shown that it was "legally impossible" for nondiverse defendant to be liable under state law); Nemazee v. Premier, Inc., 232 F.Supp.2d 172, 178 (S.D.N.Y. 2002) (noting that fraudulent joinder "turns on whether recovery is per se precluded"; "[a]ny possibility, even if slim, militates against a finding of fraudulent joinder"). This Court will do the same.

  It is well-settled under New York law that manufacturers and sellers have a duty to warn users of foreseeable dangers inherent in their products of which they knew or should have known. Rastelli v. Goodyear Tire & Rubber Co., 79 N.Y.2d 289, 297 (1992); McLaughlin v. Mine Safety Appliances Co., 11 N.Y.2d 62, 68 (1962). It is also unquestionable that New York plaintiffs can bring a failure to warn claim on the basis of strict products liability or traditional negligence. Bukowski v. CooperVision, Inc., 185 A.D.2d 31, 33 (N.Y.App. Div. 1993). In this case, it is unclear whether plaintiff's failure to warn claim sounds in both negligence and strict products ...


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