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Romano v. American States Insurance Co.

United States District Court, W.D. New York

December 19, 2017

ALEXANDER ROMANO, KIM ROMANO, and TRAVELERS PERSONAL INSURANCE COMPANY, Plaintiffs,
v.
AMERICAN STATES INSURANCE COMPANY, JESSE W. PARKER, GARY W. PARKER, and AMY PARKER, Defendants.

          DECISION AND ORDER

          ELIZABETH A. WOLFORD UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         This litigation arises out of a single-car accident on August 8, 2015, where plaintiff Alexander Romano ("Alexander") was allegedly injured as the passenger in a vehicle driven by defendant Jesse W. Parker ("Jesse"). On or about April 21, 2017, plaintiffs Alexander, Kim Romano ("Kim"), and Travelers Personal Insurance Company ("Travelers") (collectively, "Plaintiffs") filed a complaint in New York State Supreme Court, Monroe County, against American States Insurance Company ("ASIC"), Jesse, Gary W. Parker ("Gary"), and Amy Parker ("Amy") (collectively, "Defendants"), seeking a declaratory judgment. (Dkt. 1 at 9-12). Specifically, Plaintiffs seek an order declaring that: (1) ASIC's disclaimer of liability coverage for Jesse is invalid; (2) ASIC cannot further disclaim liability coverage for Jesse; and (3) ASIC is required to indemnify Jesse for his liabilities associated with the alleged personal injuries caused to Alexander arising out of the single-car accident. (Id. at 12).

         On June 6, 2017, ASIC removed this action to federal court by filing a notice of removal. (Dkt. 1). Presently before the Court is Plaintiffs' motion to remand. (Dkt. 5). For the reasons set forth below, Plaintiffs' motion is denied.

         BACKGROUND[1]

         On or about August 8, 2015, Jesse was operating a 2005 Ford automobile-owned by Gary and/or Jesse-with Alexander riding as a passenger. (Dkt. 1 at 10-11). While operating the vehicle in the Town of Irondequoit, Monroe County, New York, Jesse and Alexander suffered a single-car accident, resulting in allegedly "serious injuries" to Alexander under section 5102(d) of the New York Insurance Law. (Id. at 10-11).

         On or about the same day, ASIC issued one or more insurance policies to Gary and Amy, which were effective from June 20, 2015, through June 20, 2016. (Id. at 11). Jesse was designated as an "insured" under one or more of these policies. (Id.). On February 19, 2016, ASIC disclaimed liability coverage for Jesse regarding Alexander's injuries arising from the accident. (Id.).

         On or about April 21, 2017, Plaintiffs filed a complaint in New York State Supreme Court, Monroe County, seeking an order declaring that: (1) ASIC's disclaimer of liability coverage is invalid; (2) ASIC cannot further disclaim liability coverage for Jesse; and (3) ASIC is required to indemnify Jesse for his liabilities related to Alexander's injuries arising out of the automobile accident. (Id. at 12). On June 6, 2017, ASIC removed this action to federal court by filing a notice of removal. (Dkt. 1). On June 30, 2017, Plaintiffs filed a motion to remand the case to state court, arguing that the jurisdictional requirement for complete diversity has not been satisfied. (Dkt. 5-1). ASIC opposed remand, arguing that diversity of citizenship exists because: (1) Defendants Gary, Amy, and Jesse have been fraudulently joined in this action; (2) Gary and Amy are only nominal parties; and (3) in the event the Court determines that Jesse has not been fraudulently joined, Jesse should be realigned as a plaintiff. (Dkt. 9).[2]

         DISCUSSION

         I. Subject Matter Jurisdiction

         "Diversity jurisdiction exists where the parties are citizens of different states and the amount in controversy exceeds $75, 000." Ceglia v. Zuckerberg, 772 F.Supp.2d 453, 455 (W.D.N.Y.2011). '"[C]itizens of different States' means that there must be complete diversity, i.e., that each plaintiffs citizenship must be different from the citizenship of each defendant." Hallingby v. Hallingby, 574 F.3d 51, 56 (2d Cir. 2009); see Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 445 (2d Cir. 1995) ("It is a long-settled rule that in order to invoke diversity jurisdiction, the petitioner must show 'complete diversity'-that is, that it does not share citizenship with any defendant."). "A person's citizenship for purposes of diversity is based upon his domicile." Ceglia, 772 F.Supp.2d at 455. "For purposes of determining diversity, 28 U.S.C. § 1332(c) provides that '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.'" Sty-Lite Co. v. Eminent Sportswear Inc., 115 F.Supp.2d 394, 398 (S.D.N.Y. 2000). A court will "generally evaluate a defendant's right to remove a case to federal court at the time the removal notice is filed." Vera v. Saks & Co., 335 F.3d 109, 119 n.2 (2d Cir. 2003).

         ASIC's notice of removal alleges that the amount in controversy exceeds $75, 000. (Dkt. 1 at 2). ASIC further alleges that plaintiffs Alexander and Kim are citizens of New York State for purposes of diversity jurisdiction, and that Travelers is incorporated under the laws of the State of Connecticut and maintains its principal place of business in that state; thus, Travelers is a citizen of the State of Connecticut for purposes of diversity jurisdiction. (Dkt. 1 at 2-3). ASIC has also alleged that it is incorporated under the laws of the State of Indiana and maintains its principal place of business in Massachusetts; thus, ASIC is a citizen of the States of Indiana and Massachusetts for purposes of diversity. (Id. at 3). Although Plaintiffs' complaint alleges that defendants Jesse, Gary, and Amy all reside in the State of New York, (id. at 10), ASIC alleges that the domiciles of Jesse, Gary, and Amy are immaterial because they are "nominal defendants, " and their inclusion in this action violates the doctrine of fraudulent joinder (id. at 3).

         A. Fraudulent Joinder

         "[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." Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 460-61 (2d Cir. 1998). "Fraudulent joinder is a legal term of art [used] to refer to the joinder of unnecessary or nominal parties in order to defeat federal jurisdiction." Kuperstein v. Hoffman-Laroche, Inc., 457 F.Supp.2d 467, 470 (S.D.N.Y. 2006).

In order to show that naming a non-diverse defendant is a "fraudulent joinder" effected to defeat diversity, the defendant must demonstrate, by clear and convincing evidence, either that there has been outright fraud committed in the plaintiffs pleadings, or that there is no possibility, based on the pleadings, that a plaintiff can state a cause of action against the non-diverse defendant in state court.

Pampillonia, 138 F.3d at 461.[3] "The question whether a non-diverse party has been joined improperly is one of federal law." In re Rezulin Prod. Liab. Litig.,133 F.Supp.2d 272, 279 (S.D.N.Y. 2001). "However, this only means that federal law governs the question of a how a court should determine whether joinder is fraudulent, but not that federal law determines whether there has been fraudulent joinder." Fed. Ins. Co. v. Tyco Int'l Ltd., 422 F.Supp." 2d 357, 381 (S.D.N.Y. 2006). "[T]he test of whether or not there has been fraudulent joinder is uniformly whether the plaintiff can establish a claim under state, not federal law." MBIA Ins. Corp. v. Royal Bank of Ca.,706 F.Supp.2d 380, 393 (S.D.N.Y. 2009) (quotations and citations omitted); see Audi of Smithtown, Inc. v. Volkswagen of Am., Inc., No. 08-CV-1773 (JFB) (AKT), 2009 WL 385541, at *5 n.2 (E.D.N.Y. Feb. 11, 2009) ("[W]here the issue is fraudulent joinder, the [c]ourt looks to state law in order to determine the nature of [the defendant's] interest in this litigation for jurisdictional purposes at the time of removal."). "The issue is ...


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