Summary
finding no collusion under § 1359, in an action where 44 patients had assigned their no-fault insurance benefits to the plaintiff medical facility in exchange for medical services, where, inter alia, the facility was not suing in a representative capacity, none of the patient/assignors were liable to the facility for the medical services they received, and the facility would not be compensated for the medical services it provided to the assignees if it was unsuccessful in the action
Summary of this case from Long & Foster Real Estate, Inc. v. NRT Mid-Atlantic, Inc.Opinion
03 Civ. 6150 (SAS)
April 12, 2004
Moshe D. Fuld, Esq. Moshe D. Fuld, P.C., New York, For Plaintiffs
Peter C. Merani, Esq., New York, For Defendant
MEMORANDUM OPINION AND ORDER
Plaintiff Boston Post Road Medical Imaging, P.C. ("Boston Post") is suing in its capacity as assignee whereby forty-four patients (assignors) assigned their no-fault insurance benefits to Boston Post in exchange for medical services. Boston Post is a New York resident while defendant Allstate Insurance Company ("Allstate") is a foreign corporation duly licensed to conduct business in New York. Subject matter jurisdiction is predicated on diversity of citizenship. Allstate moves to dismiss the Complaint on the ground that subject matter jurisdiction is lacking because: (1) Boston Post is not the real party in interest; and (2) the assignments were collusive. For the following reasons, Allstate's motion is denied.
I. FACTS
Boston Post seeks payment for radiological services provided to forty-four patients who were injured in various motor vehicle accidents. In exchange for these medical services, these forty-four patient-assignors assigned the benefits they were entitled to under no-fault insurance policies issued by Allstate. Each assignment was executed at the time services were rendered. The assignments were executed so that each patient-assignor could receive medical treatment without having to pay for it out-of-pocket pursuant to the no-fault provisions of New York's Insurance Law. See N.Y. Comp. Codes R. Regs. tit. 11, § 65-3.11 (2001). The assignments released the patient-assignors from any and all liability to Boston Post. Boston Post accepted the assignments and billed Allstate accordingly. Allstate denied payment on each submitted claim for separate and distinct reasons. This action followed.
II. LEGAL STANDARD
Federal subject matter jurisdiction exists where there is diversity of citizenship under 28 U.S.C. § 1332. "Failure of subject matter jurisdiction . . . is not waivable and may be raised at any time by a party of by the court sua sponte." Oscar Gruss Son, Inc. v. Hollander, 337 F.3d 186 (2d Cir. 2003). The burden of proof in establishing federal jurisdiction falls on the party seeking to invoke that jurisdiction. See Linardos v. Fortuna, 157 F.3d 945,947 (2d Cir. 1998).
"In considering motions to dismiss for want of subject matter jurisdiction, the Court must accept as true all material factual allegations in the Complaint and refrain from drawing inferences in favor of the party contesting jurisdiction." Serrano v. 900 5th Ave. Corp., 4 F. Supp.2d 315, 316(S.D.N.Y. 1998) (citing Atlantic Mut. Ins. Co. v. Balfor Machine Int'l Ltd., 968 F.2d 196, 198 (2d Cir. 1992)). The Court is not confined to the four corners of the Complaint, however, and may consider evidence outside the pleadings such as affidavits and other documents. See Kamen v. American Tel Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986).
III. DISCUSSION
A. Real Party in Interest
Allstate argues that Boston Post is suing in a representative capacity and therefore not the real party in interest, relying primarily on Airlines Reporting Corp. v. S and N Travel Inc., 58 F.3d 857 (2d Cir. 1995). In Airlines, the plaintiff Airlines Reporting Corporation ("ARC") brought a diversity action in its capacity as representative of numerous air carriers seeking payment from travel agencies that owed money to the carriers for the purchase of airline tickets. See id. at 859. In its analysis of the real party in interest, the Second Circuit noted that the Supreme Court "has established that the `"citizens" upon whose diversity a plaintiff grounds jurisdiction must be real and substantial parties to the controversy.'" See id. at 861 (quoting Navarro Savings Ass'n v. Lee, 446 U.S. 458, 460 (1980)). The court refused to consider ARC's corporate citizenship as controlling for purposes of diversity where ARC merely acted as an agent for the interests of the air carriers. See id. at 862. Instead, the court held that the air carriers were the real parties in interest and it was their citizenship that was controlling. The court found it significant that ARC "did not seek to protect any corporate interests of its own," did not suffer "any corporate damages or pecuniary loss itself," nor did it "lay claim to any portion of the potential recovery." Id. In sum, the Second Circuit held that ARC was "a mere conduit for a remedy owing to others, advancing no specific interests of its own." Id.
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 diversity jurisdiction.
B. Collusiveness of Assignments
Allstate argues that the assignments were made improperly and/or collusively in order to manufacture jurisdiction where none would otherwise exist. According to Allstate, "the purpose of the assignment [is] to make it easier for the plaintiff to collect when the insurer does not pay by filing a claim for litigation or arbitration under the applicable statutes and regulations of the State of New York. The assignment authorizes the assign[ee] to sue for the alleged money owed." Defendant's Memorandum in Support ("Def. Mem.") at 13. Boston Post states that the reason for the assignments was to allow it "to directly bill the defendant for medical services and allowed each assignor to receive medical treatment without having to advance payment for the treatment, pending reimbursement for the defendant." Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss ("Pl. Mem.") at 8. Boston Post further states that "each assignment was executed at the time the treatment was rendered, before the plaintiff even had a cause of action against the defendant" and that "the consideration given for each assignment was the medical services that are in issue." Id. Allstate rejects this reason claiming that "plaintiff's rationale is in fact pretextual, and is nothing more than an attempt to mask the primary purpose of these assignments, namely the vesting of the courts [sic] jurisdiction it formerly did not have. The assignments are mad[e] in anticipation of collection and or litigation." Def. Mem. at 13.
The statute relied upon reads as follows: "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.
Here, again, Allstate relies principally on Airlines in support of its argument. In Airlines, the court stated that section 1359 is to be construed broadly "to bar any agreement whose `primary aim' is to concoct federal diversity jurisdiction." Airlines, 58 F.3d at 862. See also O'Brien v. AVCO Corp., 425 F.2d 1033, 1034 (2d Cir. 1969) (holding that section 1359 bars "agreements whose primary aim was to vest the court with jurisdiction it had not formerly enjoyed"). The court went on to state that "[c]ertain kinds of diversity-creating assignments warrant particularly close attention/' Airlines, 58 F.3d at 862.
[T]he burden falls on the party asserting diversity to demonstrate that the reason given for the assignment is legitimate, not pretextual. See Prudential Oil v. Phillips Petroleum Co., 546 F.2d [469] at 476 [(2d Cir. 1976)] (assignee must "provide a basis for the inference that a legitimate business reason, unconnected with [the] acquisition of diversity jurisdiction, existed for the assignment"); see also Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 992 (9th Cir. 1994) (stating business reason asserted "must be sufficiently compelling that the assignment would have been made absent the purpose of gaining a federal forum") (quotation omitted). Several factors may be relevant in evaluating the reasons given for an assignment, although no single one will be dispositive. See generally 14 Charles A. Wright, Arthur R. Miller Edward H. Cooper, Federal Practice and Procedure § 3639 (detailing review of assignments under 28 U.S.C. § 1359).Id. at 863. Among the relevant factors to consider are: "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. (citations omitted).
Here, 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 diversity jurisdiction.
The next question, then, is whether Boston Post can aggregate all of its assigned claims to meet the jurisdictional amount in controversy. Support for aggregation can be found in both case law and the Federal Rules of Civil Procedure. Rule 18 provides that a party "may join, either as independent or as alternate claims, as many claims, legal or equitable, or maritime, as the party has against an opposing party." Fed.R.Civ.P. 18(a). Furthermore, the district court in Airlines stated that a "single plaintiff may aggregate claims, even if the claims were assigned to the plaintiff by a third party, unless the assignment was made collusively for the purpose of creating federal jurisdiction." Airlines Reporting Corp. v. S and N Travel, Inc., 857 F. Supp. 1043, 1049 (E.D.N.Y. 1994) (citations omitted, emphasis added). This statement was not rejected by the Second Circuit which merely found aggregation to be inappropriate in that case because ARC, as an agent for the carriers, was not the real party in interest. See Airlines, 58 F.3d at 864 ("Additionally, the claim-holding air carriers cannot satisfy the amount in controversy requirement of the diversity statute. See 28 U.S.C. § 1332. `When, as here, each of several plaintiff's in a single lawsuit is asserting independent rights, each must independently plead the jurisdictional amount.'") (quoting Cox v. Livingston, 407 F.2d 392, 393 (2d Cir. 1969)).
Lending further support to aggregation here is the fact that joinder of multiple claims is permitted under New York state law and aggregation of claims is permitted under federal law within the context of subrogation. In Hempstead Gen. Hosp, v. Liberty Mut. Ins. Co., 521 N.Y.S.2d 469 (2d Dep't 1987), the Second Department denied defendant's motion to sever the twenty-nine claims brought by plaintiff's.
The Supreme Court did not abuse its discretion in denying the defendant's request to sever the 29 claims. The joinder of the claims is proper under CPLR 1002(a) since the claims arise out of a uniform contract of insurance and involve the interpretation of the same no-fault provisions of the Insurance Law. While the claims involved relate to separate accidents and individuals, it has been held that multiple transactions by multiple plaintiffs "do not lose their character as a series of transactions because they occurred at different places and times extending through many months" (Akely v. Kinnicutt, 238 N.Y. 466,467, 144 N.E. 682). Since the issues herein involve a common question of law, such joinder is proper and severance was appropriately denied.Id. at 470. But see Mount Sinai Hosp. v. Motor Vehicle Accident Indemnification Corp., 738 N.Y.S.2d 247 (2d Dep't 2002) ("The Supreme Court providently exercised its discretion in severing the remaining five causes of action, asserting claims on behalf of five unrelated assignees, involved in accidents on five different dates, with no common contract of insurance and no relation or similarity to each other, other than the fact that the no-fault benefits were not paid."). Here, as in Hempstead General, the claims involve a uniform contract of insurance. See Pl Mem. at 12. The risk that this Court will have to hold forty-four mini-trials is therefore remote and the rationale underlying Mount Sinai does not apply.
Lastly, within the context of a civil RICO action, Senior District Judge Jack B. Weinstein stated that: "[a]s subrogees, the plaintiff's [medical provider plans and self-insured ERISA trust funds] were are real parties in interest who possess their own substantive rights." National Asbestos Workers Med. Fund v. Philip Morris, Inc., 74 F. Supp.2d 221, 238 (E.D.N.Y. 1999). Judge Weinstein held that "a subrogee may aggregate its own claims to meet the amount-in-controversy requirement of diversity jurisdiction." Id. (citing Allstate Ins. Co. v. Hechinger Co., 982 F. Supp. 1169, 1172 (E.D. Va. 1997) ( "[A]s real party in interest, the insurer-subrogee owns the substantive rights on which it sues. Therefore, just as an individual can aggregate the claims it owns to meet the jurisdictional amount, so, too, can a subrogee aggregate the claims to which it is subrogated, and hence owns, to meet the jurisdictional amount." (citations omitted)); Ministry of Health v. Shiley Inc., 858 F. Supp. 1426, 1431 (C.D. Cal. 1994) (allowing subrogee to aggregate its own claims, distinguishing between class action context and aggregation by subrogee); Liberty Mut. Ins. Co. v. Tel-Mor Garage Corp., 92 F. Supp. 445, 446 (S.D.N.Y. 1950) ("Combining the [subrogee's] three claims to constitute the required jurisdictional amount was proper." (citations omitted)). Similar to that of a subrogee, Boston Post, as assignee, also possesses its own substantive rights as the real party in interest. Thus, there appears to be no rational basis in which to permit aggregation within one context and not the other.
IV. CONCLUSION
For the reasons stated above, defendant's motion to dismiss the Complaint is denied. A status conference is scheduled for April 22, 2004 at 2:00 p.m. The Clerk of the Court is directed to close this motion (Document # 10).
SO ORDERED.