Opinion
No. 04 Civ. 1757 (SHS).
May 11, 2004
MEMORANDUM ORDER
This action was removed from the Supreme Court of the State of New York and the Notice of Removal in this action states that diversity of citizenship is the basis for federal subject matter jurisdiction. However, the verified complaint sets forth that plaintiff and defendants are citizens of the same state, New York. As a result, this Court signed an order to show cause on April 7, 2004 directing Admiral Insurance Co. to show why this action should not be remanded to the Supreme Court of the State of New York, Bronx County, pursuant to 28 U.S.C. § 1447(c) for failure of all defendants to join in the petition for removal, as required by 28 U.S.C. § 1446(a) (b), and for lack of complete diversity. The action is one for a declaratory judgment in which the landlord — a plaintiff here — is suing its insurance company for a declaration that that company must defend and indemnify the landlord in a New York State court action brought by a tenant and the Administratrix of his estate — Joel Bones and Nelly Bones (collectively "the Bones") — against the landlord for negligence.
The question for resolution is whether the Bones are "nominal parties," for if they are, their consent to remove is not required. See e.g., Smith v. Kinkhead, No. 03 Civ. 10283, 2004 WL 728542, at *2 (S.D.N.Y. Apr. 5, 2004) (citing Payne v. Overhead Door Corp., 172 F. Supp.2d 475, 477 (S.D.N.Y. 2001)); Ell v. S.E.T. Landscape Design, Inc.; 34 F. Supp.2d 188, 194 (S.D.N.Y. 1999).
Similarly, if they are nominal parties, their citizenship need not be diverse from plaintiff's citizenship, because federal courts disregard the citizenship of nominal parties in assessing whether complete diversity exists for purposes of 28 U.S.C. § 1332(a)(1). See Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980) ("[A] federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.") (internal citations omitted); New York State Ins. Fund v. U.S. Liability Ins. Co., No. 03 Civ. 6652, 2004 WL 385033, at *3 (S.D.N.Y. Mar. 2, 2004) ("In determining whether complete diversity exists, nominal or formal parties who have no interest in the action will be ignored."); 13B Charles A. Wright, Arthur P. Miller Edward H. Cooper,Federal Practice and Procedure, § 3606, at 409 (2d ed. 1984 Supp. 2004).
The party that removed the action to federal court — here, Admiral — has a heavy burden of proving by clear and convincing evidence that a court should disregard the citizenship of a non-diverse party, by setting forth one of the following: (a) "that there has been outright fraud committed in the plaintiff's pleadings, or" (b) "that there is no possibility based on the pleadings [in the declaratory judgment action], that a plaintiff can state a cause of action against the non-diverse defendants in state court." See U.S. Liability, 2004 WL 385033 at *2 (citing Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459 (2d Cir. 1998)). Here, no outright fraud is alleged; in addition, it is the Bones who have alleged a claim against their landlord in state court, and no plausible claim against plaintiff in this declaratory judgment action is foreseen based on those pleadings, nor has one been asserted.
In addition, there also must not be a possibility that the alleged nominal defendant could assert a cause of action against the plaintiff. See Saxe, Bacon Bolan, P.C. v. Martindale-Hubbell, Inc., 521 F. Supp. 1046, 1048 (S.D.N.Y 1981) ("A party to an action is nominal or formal if no cause of action or claim for relief is or could be stated against him or on his behalf as the case may be.") (emphasis added). The landlord contends here that N.Y. Insurance Law § 3420 gives the Bones rights here, but that statute provides a cause of action to a tort victim against the tortfeasor's insurer only once that victim receives a judgment in her favor against the tortfeasor.See N.Y. Ins. Law § 3420(b) (2004); NAP, Inc. v. Shuttletex, Inc., 112 F. Supp.2d 369 (S.D.N.Y. 2000) (A tort victim cannot maintain an action even for declaratory judgment against an insurer pursuant to Section 3420 until, inter alia, that victim wins a judgment of liability against the tortfeasor.). Because the Bones have yet to obtain a judgment against plaintiff in state court, the Bones cannot maintain an action against plaintiff in this declaratory judgment action. Accordingly, the Bones are nominal parties and their lack of consent to removal, as well as their non-diverse citizenship, can be disregarded for purposes of determining whether removal is proper.
For the reasons set forth above, defendant Admiral has shown cause why remand should not be directed. The parties shall appear at a pretrial conference on May 21 at 11:30 A.M. for purposes of establishing a discovery schedule.
SO ORDERED.