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Nolan v. Olean General Hospital

United States District Court, Second Circuit

June 19, 2013

PEGGY NOLAN, on behalf of herself and all others similarly situated, Plaintiffs,


JEREMIAH J. McCARTHY, Magistrate Judge.

Plaintiff Peggy Nolan has moved to remand this action to State of New York Supreme Court, County of Cattaraugus or, in the alternative, for severance and partial remand [27].[1] That motion, being dispositive, [2] has been referred to me by Hon. Richard J. Arcara for a Report and Recommendation [18]. Oral argument was held on June 10, 2013 [33].

For the following reasons, I recommend that the motion for remand of the entire action be granted, and that the alternative request for severance and partial remand be denied.


Plaintiff commenced this action in State of New York Supreme Court, County of Cattaraugus on March 1, 2013, seeking relief pursuant to New York CPLR Article 9 "on behalf of herself and on behalf of all persons who were potentially exposed to HIV, Hepatitis C, and/or Hepatitis B through the re-use of insulin pens and cartridges on patients at OLEAN GENERAL HOSPITAL". Complaint [1-2], ¶2; Amended Complaint [26], ¶2. On April 3, 2013, defendant Eli Lilly and Company removed the action to this court, alleging that the court "has original jurisdiction over this action under 28 U.S.C. §1332 on the alternative grounds that (a) this action is removable under the Class Action Fairness Act (CAFA') and (b) complete diversity exists between plaintiff... and Defendants under 28 U.S.C. §1332(a) when the citizenship of dispensable and improperly joined defendants Olean General Hospital and Upper Allegheny Health System is disregarded". Notice of Removal [1], p. 1.

In moving to remand, plaintiff initially argues that, given the predominantly local nature of the dispute, the court must decline to exercise subject matter jurisdiction under CAFA, as required by 28 U.S.C. §§1332(d)(4)(A) and (B). Plaintiff's Memorandum of Law [27-1], Points I and II. Defendants Olean General Hospital and Allegheny Health System, Inc. (the "Hospital Defendants") "take[ ] no position" regarding that argument (Hospital Defendants' Memorandum of Law [29-1], pp. 2-3), and the remaining defendants (the "Insulin Pen Manufacturer Defendants") "agree that the Court should abstain from exercising jurisdiction under CAFA since the proposed class consists almost exclusively of New York residents and the [Hospital Defendants] are New York citizens too". Insulin Pen Manufacturer Defendants' Memorandum of Law [30], p. 2.

Plaintiff argues that the action should be remanded "in its entirety, or in the alternative, the action should be severed, remanding those portions against [the Hospital Defendants] to New York State Supreme Court, Cattaraugus County, and retaining those portions against the Insulin Pen Manufacturer defendants" in this court. Plaintiff's Memorandum of Law [27-1], p. 12. The Hospital Defendants contend that that there is no basis for severance, and argue that "should this Court find that it lacks subject-matter jurisdiction under CAFA, this entire action must be remanded... as complete diversity among the parties is wholly lacking". Hospital Defendants' Memorandum of Law [29-1], p. 12.

The Insulin Pen Manufacturer Defendants argue that "[t]he Hospital Defendants are dispensable parties under Fed.R.Civ.P. ["Rule"] 19, and the Court should therefore disregard their citizenship and sever the claims against them pursuant to [Rule] 21 in order to retain jurisdiction". Insulin Pen Manufacturer Defendants' Memorandum of Law [30], p. 5. They also "incorporate by reference the portion of their Notice of Removal pertaining to improper joinder". Id.


While this court technically has subject matter jurisdiction under the minimal diversity requirements of CAFA, the parties agree that in this case it is precluded from exercising that jurisdiction. 28 U.S.C. §1332(d)(4) "inherently recognizes [that] the district court has subject matter jurisdiction by directing the court to decline to exercise such jurisdiction when certain requirements are met.... Thus, the exceptions in §1332(d)(4) do not divest the district court of subject matter jurisdiction, but rather, operate as an abstention doctrine." Gold v. New York Life Ins. Co., 2012 WL 1674300, *2 (S.D.N.Y. 2012). Under these circumstances, "subject matter jurisdiction is present, but the district court may not hear the matter, assuming a timely motion to remand is filed". Calingo v. Meridian Resources Co. LLC, 2011 WL 3611319, *4 (S.D.N.Y. 2011).

Therefore, my analysis will proceed as though CAFA subject matter jurisdiction did not exist, and will focus instead on the alternative basis urged for removal, namely diversity of citizenship under 28 U.S.C. §1332(a)(1). It is "axiomatic... that diversity jurisdiction is available only when all adverse parties to a litigation are completely diverse in their citizenships". Herrick v. SCS Communications, Inc. , 251 F.3d 315, 322 (2d Cir. 2001). "That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff." Owen Equipment & Erection Co. v. Kroger , 437 U.S. 365, 373 (1978) (emphasis in original).

A. Have the Hospital Defendants Been Improperly Joined?

The Notice of Removal [1] alleges that the citizenship of the non-diverse Hospital Defendants should be disregarded because they were improperly joined, arguing that "[i]mproper joinder occurs when a plaintiff attempts to defeat removal by improperly joining unrelated claims against non-diverse parties (id., ¶31). "Fraudulent misjoinder occurs when a plaintiff purposefully attempts to defeat removal by joining together claims against two or more defendants where the presence of one would defeat removal and where in reality there is no sufficient factual nexus among the claims to satisfy the permissive joinder standard." Federal Insurance Co. v. Tyco International Ltd. , 422 F.Supp.2d 357, 378 (S.D.N.Y. 2006).

The "fraudulent misjoinder" doctrine originated with Tapscott v. MS Dealer Service Corp. , 77 F.3d 1353 (11th Cir. 1996). In Tapscott, the plaintiffs joined claims against automobile dealers for violations of service contracts in connection with the sale of automobiles with claims against Lowe's (a non-diverse party) and other merchants for violations of extended service contracts in connection with the sale of retail products (id. at 1355). Plaintiffs did not argue "that Lowe's was properly joined with any other non-diverse defendants" (id. at 1360), but instead "contend[ed] that while a court may disregard the citizenship of fraudulently joined parties, a misjoinder, no matter how egregious, is not fraudulent joinder". Id.

The court disagreed, noting that "the alleged transactions involved in the automobile' class are wholly distinct from the alleged transactions involved in the merchant' class.... Misjoinder may be just as fraudulent as the joinder of a resident defendant against whom a plaintiff has no possibility of a cause of action. A defendant's right of removal cannot be defeated by a fraudulent joinder of a resident defendant having no real connection with the controversy". Id . However, it cautioned that "[w]e do not hold that mere misjoinder is fraudulent joinder, but... Appellants' attempt to join these parties is so egregious as to constitute fraudulent joinder." Id.

Unlike Tapscott, in which there was no factual relationship between the claims against the diverse and non-diverse defendants, in this case the claims all arise from the use of insulin pens at Olean General Hospital. Whether or not those claims were properly joined - and I believe they were - they clearly were not "egregiously" ...

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