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Rosenfeld v. Lincoln Life Insurance Co.

United States District Court, E.D. New York

March 9, 2017

AVINOAM ROSENFELD, AS TRUSTEE OF THE MICHAEL BLUTH IRREVOCABLE LIFE INSURANCE TRUST, Plaintiff,
v.
THE LINCOLN LIFE INSURANCE COMPANY AND WILLIAM SEGAL, Defendants.

          LIPSIUS-BENHAIM LAW, LLP BY: IRA S. LIPSIUS, ESQ. DAVID BENHAIM, ESQ. PHILLIP MANELA, ESQ. Attorneys for Plaintiff

          SAUL EWING LLP BY: PAUL M. HUMMER, ESQ. VALERIE G. PENNACCHIO, ESQ. Attorneys for Defendant Lincoln Life Insurance Company

          ORDER

          Leonard D. Wexler United States District Judge

         Before the Court is Plaintiffs motion to remand this action, pursuant to 28 U.S.C. § 1447(c), on the grounds that the Court lacks subject matter jurisdiction over the action because there is not complete diversity. Defendant Lincoln Life Insurance Company ("Lincoln") opposes the motion, arguing that Defendant William Segal ("Segal"), whose presence in the action destroys diversity, was fraudulently joined by Plaintiff to prevent the Court from retaining jurisdiction over the matter. Segal takes no position with respect to the instant motion. For the following reasons, Plaintiffs motion is granted and this action is remanded to the state court from which it was removed.

         BACKGROUND

         This action arises out of the 2014 lapse of an insurance policy issued on the life of Michael Bluth for nonpayment of premium. Plaintiff, Avinoam Rosenfeld ("Rosenfeld"), is the Trustee of the Michael Bluth Irrevocable Life Insurance Trust, which owned the life insurance policy.

         On February 16, 2016, Plaintiff filed this action against Lincoln in New York Supreme Court, seeking reinstatement of the Bluth life insurance policy. The gravamen of Plaintiff s Complaint is that the life insurance policy should not have lapsed because Lincoln's grace notices did not comply with New York Insurance Law § 3211.

         On March 30, 2016, Lincoln timely removed the action to this Court on the basis that, at the time of removal, the parties to the action - Plaintiff and Lincoln - were diverse, conferring subject matter jurisdiction on this Court on the grounds of diversity jurisdiction. Following removal, Plaintiff, with the consent of Lincoln, filed an Amended Complaint, joining Segal, the insurance agent on the Bluth life insurance policy, as a defendant to this action. The Amended Complaint asserts a state law claim for misrepresentation against Segal. Segal filed his Answer to the Amended Complaint on December 29, 2016, which admits that he is a citizen and resident of New York.

         Plaintiff now seeks to remand this action to the state court from which it was removed on the grounds that diversity jurisdiction no longer exists since both Plaintiff and Segal are New York residents. Lincoln opposes remand on the grounds that Plaintiff fraudulently joined Segal to defeat jurisdiction.

         DISCUSSION

         I. 28 U.S.C. § 1447fc) vs. 28 U.S.C. § 1447(e)

         As a threshold matter, the parties dispute which section of the removal statute is applicable to this action. While Plaintiff brings his motion pursuant to Section 1447(c), Lincoln argues that Section 1447(e) should govern the resolution of the within motion.

         28 U.S.C. § 1447(c) provides that "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." Plaintiffs position is that, now that the Complaint has been amended to join Segal as a defendant, complete diversity no longer exists, thereby divesting the Court of subject matter jurisdiction. Accordingly, Section 1447(c) is applicable and remand is appropriate.

         Section 1447(e) establishes the standard for joinder of non-diverse parties after removal, providing that "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." Whether to permit joinder in such an action is a matter left to the Court's discretion. See McGee v. State Farm Mut. Auto. Ins. ...


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