Stewart v. Atwood et al
Filing
21
REPORT AND RECOMMENDATIONS / DECISION AND ORDER. The action should be REMANDED to New York Supreme Court, Erie County, for lack of subject matter jurisdiction, and Movant's motion to intervene (Doc. No. 14) is DISMISSED as moot. Alternatively, Movant's motion to intervene (Doc. No. 14) is DENIED. Objections due fourteen days from receipt.,. Signed by Hon. Leslie G. Foschio on 10/27/2011. (SDW)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
GAYLE STEWART,
Plaintiff,
v.
MICHAEL ATWOOD and
BARRY BISTIS,
Defendants.
APPEARANCES:
REPORT
and
RECOMMENDATION
----------------------------DECISION
and
ORDER
10-CV-00848S(F)
FRIED & KLAWON
Attorneys for Plaintiff
WAYNE I. FREID, of Counsel
17 Beresford Court
Williamsville, New York 14221
RUBIN, FIORELLA & FRIEDMAN LLP
Attorneys for Defendant Atwood
JAMES E. MERCANTE, of Counsel
292 Madison Avenue
New York, New York 10017
McGEE & GELMAN
Attorneys for Defendant Bistis
F. BRENDAN BURKE, JR., of Counsel
200 Summer Street
Buffalo, New York 14222
WEBSTER SZANYI LLP
Attorneys for Movant Healthnow New York Inc.
DONALL GERARD O’CARROLL, of Counsel
1400 Liberty Building
Buffalo, New York 14202
JURISDICTION
This case was referred to the undersigned by Honorable William M. Skretny on
November 15, 2010, for pretrial nondispositive motions. The matter is presently before
the court on a motion filed April 4, 2011, by Healthnow New York Inc. to intervene1
(Doc. No.14).
BACKGROUND and FACTS2
On September 22, 2007, Plaintiff Gayle Stewart (“Plaintiff” or “Stewart”),
sustained personal injuries while a guest upon “Telos,” a boat owned and captained by
Defendant Michael Atwood (“Atwood”), the Telos lost steering capability, and another
boat, the “Watermark,” owned and captained by Defendant Michael Bistis (“Bistis”),
attempted to assist in towing the Telos (“the accident”). The accident occurred in Lake
Erie within the continental boundary of the United States. At all time relevant to this
action, Plaintiff has been a participant in a healthcare plan (“insurance policy”)
administered by HealthNow New York Inc. (“HealthNow” or “Movant”) pursuant to an
Employee Welfare Benefit Plan through Plaintiff’s employer, Ingram Micro Inc., a locally
headquartered software and computer technology reseller. Pursuant to the terms of the
insurance policy, HealthNow has paid in excess of $ 12,000 for certain medical, surgical
and other healthcare benefits Plaintiff received in treatment for Plaintiff’s injuries
sustained in the accident.
The insurance policy contains a “Rider for Subrogation Rights” (“Subrogation
1
Although m otions to intervene are considered non-dispositive, International Chemical
Corporation v. Nautilus Insurance Company, 2010 W L 3010101, at *1 n. 1 (W .D.N.Y. Aug. 3, 2010 (citing
cases), because the undersigned is recom m ending, sua sponte, rem anding the action for lack of federal
subject m atter jurisdiction, which is dispositive, W illiams v. Beemiller, Inc., 527 F.3d 259, 266 (2d Cir.
2008 (holding a m otion to rem and is dispositive under Fed.R.Civ.P. 72), both issues are addressed in a
com bined Report and Recom m endation and Decision and Order.
2
The Facts are taken from the pleadings and m otion papers filed in this action.
2
Rider”)3 providing, as relevant, that in the event the insured in injured in an accident for
which another party is responsible, and HealthNow has paid health insurance benefits
as a result of that injury, HealthNow “will be subrogated and succeed to the right of
recovery against the party responsible” for the injury to the extent of health insurance
benefits paid by HealthNow. Subrogation Rider ¶ 1. The Subrogation Rider further
provides HealthNow is entitled to be reimbursed for any health insurance benefits paid
by HealthNow, from any settlement or judgment funds received by the insured from the
party responsible for the insured’s injuries, provided the settlement or judgment
received “specifically identifies or allocates monetary sums directly attributable to
expenses for which we have paid benefits.” Id.
Plaintiff commenced this action in New York Supreme Court, Erie County, on
September 22, 2010, seeking to recover for personal injuries sustained in the
September 22, 2007 boating accident. Plaintiff and Atwood are both residents of New
York, whereas Bistis is a resident of South Carolina. In view of the absence of the
requisite complete diversity necessary for jurisdiction under 28 U.S.C. § 1332(a), on
October 26, 2010, Atwood removed the action to this court, asserting Plaintiff’s
allegations comprise a maritime claim within this court’s admiralty jurisdiction pursuant
to 28 U.S.C. § 1333. The Notice of Removal (Doc. No. 1) (“Removal Petition”), states
that Bistis consented to the removal. Removal Petition ¶ 6.4 Plaintiff did not challenge
the removal.
3
A copy of the Subrogation Rider is attached as Exhibit C to the m otion to intervene (Doc. No.
14).
4
The Rem oval Petition contains two paragraphs num bered “6.” The reference to Bistis’s consent
is to the first paragraph num bered “6.”
3
Atwood’s answer, filed November 15, 2010 (Doc. No. 2) (“Atwood’s Answer”),
asserts as his Fourth Affirmative Defense that Atwood is, pursuant to the Limitation of
Liability Act of 1851, 46 U.S.C. § 30501 et seq. (“Limitation of Liability Act” or “the Act”),
entitled to exoneration from or limitation of liability up to the value of the Telos, and
asserts a crossclaim against Bistis for indemnification and contribution. Similarly,
Bistis’s Answer, filed December 14, 2010 (Doc. No. 5) (“Bistis’s Answer”), asserts as
his Ninth Affirmative Defense, that Bistis also is, pursuant to the Act, entitled to
exoneration from or limitation of liability to the extent of the value of the Watermark, and
asserts a crossclaim against Bistis for indemnification and contribution.
On April 14, 2011, Movant HealthNow filed a motion to intervene in this action
(Doc. No. 14) (“motion to intervene”), supported by the attached Declaration of Donall
O’Carroll (“O’Carroll Declaration”), exhibits A through D (“Movant’s Exh(s). __”), and the
Memorandum of Law in Support of Motion to Intervene by HealthNow New York, Inc.
(“Movant’s Memorandum”). By Order filed April 22, 2011 (Doc. No. 15), the parties
were directed to file their responses to the motion to intervene by May 13, 2011, and
any replies were to be filed by May 20, 2011.
On May 24, 2011, Plaintiff and Bistis filed a Stipulation of Dismissal as to
Defendant Bistis (Doc. No. 16) (“Stipulation of Dismissal”), based on settlement. By
text order entered May 26, 2011 (Doc. No. 17), the Stipulation of Dismissal was “So
Ordered” by Chief District Judge Skretny.
By letter to the undersigned dated June 17, 2011 (Doc. No. 18) (“June 17, 2011
Letter”), Bistis advised that Judge Skretny’s approval of the Stipulation of Dismissal
rendered the pending motion to intervene moot as to Bistis. By letter to the
4
undersigned dated June 21, 2011 (Doc. No. 19) (“June 21, 2011 Letter”), Movant
disputed Bistis’s assertion that the motion to intervene was moot as to Bistis on the
ground that the motion to intervene was pending when the Stipulation of Dismissal,
which does not purport to dismiss HealthNow’s claims against Defendants, was filed,
and that HealthNow, which is not a party to this action, was not aware of any settlement
between Plaintiff and Bistis and thus was unable to secure its purported subrogation
claim against Bistis. June 21, 2011 Letter at 1. Movant further asserts that because an
insurer’s claims for amounts paid by it are divisible and independent of the insured’s
claim for uninsured losses, the fact that Bistis has settled with Pliantiff does not negate
Movant’s right to pursue its subrogation claims against Bistis as a tortfeasor. Id. at 2.
Oral argument was deemed unnecessary.
Based on the following, the action should be REMANDED to New York Supreme
Court, Erie County for lack of subject matter jurisdiction, and Movant’s motion to
intervene (Doc. No. 14), dismissed as moot. Alternatively, Movant’s motion to intervene
(Doc. No. 14) is DENIED.
DISCUSSION
1.
Jurisdiction
Defendants, in removing the instant action to this court, asserted that Plaintiff
has essentially alleged a maritime claim within this court’s admiralty jurisdiction under
28 U.S.C. § 1333. Plaintiff did not seek remand or otherwise challenge the removal,
and the 30 days in which to do so has now expired except for remand based on lack of
subject matter jurisdiction. 28 U.S.C. § 1447(c). Regardless of whether the issue is
5
raised by the parties, a district court is required to inquire into and determine whether
federal subject matter jurisdiction in a removed action exists. Mehlenbacher v. Akzo
Nobel Salt, Inc., 216 F.3d 291, 295-96 (2d Cir. 2000). See also College Standard
Magazine v. Student Association of State University of New York at Albany, 610 F.3d
33, 35 (2d Cir. 2010) (federal courts, including district courts, “‘have an independent
obligation to consider the presence or absence of subject matter jurisdiction sua
sponte.’” (quoting Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006))). Such obligation
equally applies to removal based on admiralty jurisdiction. See Transatlantic Marine
Claims Agency, Inc. v. Ace Shipping Corp, Division of Ace Young Inc., 109 F.3d 105,
108 (2d Cir. 1997) (remanding action to district court to determine whether admiralty
jurisdiction existed, despite absence of any challenge by parties to such jurisdiction).
Unlike personal jurisdiction, the lack of federal subject matter jurisdiction for a removed
action cannot be waived by either party, and may be raised at any time, either on
motion, or sua sponte by the court. Caterpillar Inc. v. Lewis, 519 U.S. 61, 69 (1996).5
5
Although the Rem oval Petition stated that all parties consented to rem oval, the record does not
support this assertion. Generally, the rule of unanim ity requires that all nam ed defendants upon whom
service of the sum m ons and com plaint has been m ade, consent to the rem oval of the action to federal
district court. Chicago R.I. & P.R. Co. v. Martin, 178 U.S. 245, 248 (1900). See also W isconsin
Department of Corrections v. Schacht, 524 U.S. 381, 393 (1998) (Kennedy, J., concurring) (“[r]em oval
requires the consent of all of the defendants” (citing Martin, 178 U.S. at 248)); Piacente v. State University
of New York at Buffalo, 362 F.Supp.2d 383, 384 n. 2 (W .D.N.Y. 2004) (noting the “rule of unanim ity”
requires all served defendants to consent to rem oval within the statutory 30-day period in which rem oval
m ay be m ade). Each nam ed defendant who is served m ust tim ely file with the court “‘som e form of
unam biguous written evidence of consent to rem oval.’” Id. (quoting Ricciardi v. Kone, Inc., 215 F.R.D.
455, 458 (E.D.N.Y. 2003). Here, Plaintiff has not challenged the rem oval based on the failure to Bistis to
separately file a statem ent indicating Bistis consents to the rem oval, nor is it clear from the record that
Bistis was served prior to the rem oval and, thus, required to indicate his consent by filing an unam biguous
writing indicating such consent. Nevertheless, 28 U.S.C. § 1447(c) requires that all m otions to rem and,
other than those challenging subject m atter jurisdiction, be m ade within 30 days of the filing of the notice
of rem oval. As such, the tim e in which to m ove for rem and based on the failure of all served defendant to
join in rem oval, has long since elapsed, and rem and m ay not be directed on that basis.
6
In removing the instant action to this court, Atwood asserts Plaintiff’s allegations
comprise a maritime claim within this court’s admiralty jurisdiction under 28 U.S.C. §
1333, pursuant to which “federal jurisdiction exists in ‘[a]ny civil case of admiralty or
maritime jurisdiction, saving to suitors in all cases all other remedies to which they are
otherwise entitled.’” Voytovich v. 1111 Fuhrman Boulevard, Inc., 2003 WL 21919461,
at * 1 (W.D.N.Y. July 25, 2003) (italics added and quoting 28 U.S.C. § 1333(1)). The
“saving to suitors” clause thus “permits plaintiffs to seek common law remedies to which
they may be entitled; plaintiffs are thus entitled to proceed in state court.” Id. (citing
Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 443-54 (2001)).6 A plaintiff injured
in a maritime accident thus may elect to bring a state common law claim in state court,
or a maritime claim in federal court pursuant to admiralty jurisdiction. J. Aron &
Company v. Chown, 894 F.Supp. 697, 698 (S.D.N.Y. 1995) (“‘plaintiffs with a common
law claim arising from a transaction over which a federal court would have admiralty
jurisdiction may either avail themselves of federal admiralty jurisdiction or sue at law in
state court.’” (quoting McAllister Brothers, Inc. v. Ocean Marine Indemnity Co., 742
F.Supp. 70, 75 (S.D.N.Y. 1989))). Further, the Second Circuit Court of Appeals has
specifically stated that
Common law maritime cases filed in state court are not removable to federal
court, due to 28 U.S.C. § 1333's “saving to suitors” clause. Dating back to the
6
There is no right to a jury trial in actions instituted in adm iralty. Fitzgerald v. United States Lines
Co., 374 U.S. 16, 20 (1963); In re Complaint of Dammers & Vanderheide & Scheepvaart Maats Christina
B.V., 836 F.2d 750, 755 (2d Cir. 1988); Fed.R.Civ.P. 38(e). As such, “‘[t]he privilege of prosecuting
m aritim e causes of action in nonadm iralty courts, conferred by the ‘saving to suitors’ clause, has always
been of particular im portance in personal injury and death actions in which the plaintiffs prefer to have the
dam ages assessed by a jury.’” Complaint of Great Lakes Dredge & Dock Company, 895 F.Supp. 604,
608-09 (S.D.N.Y. 1995) (quoting Grant Gilm ore & Charles L. Black, Jr., The Law of Admiralty §§ 1-13, 662 (2d ed. 1975).
7
Judiciary Act of 1789, this clause preserves a plaintiff’s right to a state court
forum in cases arising under the common law of the sea.
Pierpoint v. Barnes, 94 F.3d 813, 816 (2d Cir. 1996) (citing Romero v. International
Terminal Operating Co., 358 U.S. 354, 363 (1959) (“common-law remedies were, under
the saving clause, enforcible in the courts of the States and on the common-law side of
the lower federal courts when the diverse citizenship of the parties permitted”); and 14
Charles A. Wright, Arthur R. Miller and Mary Kay Kane, Federal Practice and
Procedure § 3673 (1985)).
Here, because the citizenship of the parties is not diverse, jurisdiction over the
action in this court would exist only in admiralty. Although Plaintiff could have chosen to
present her claims as maritime torts under admiralty jurisdiction in this court, she
elected to sue only pursuant to New York common law, negligence, in state court, as
permitted by the “saving to suitors” clause, thereby depriving this court of admiralty
jurisdiction and barring its removal. J. Aron & Company, 894 F.Supp. at 698 (holding
the effect of the plaintiff’s “irrevocable election to proceed at common law” by filing
breach of contract action in state court, pursuant to the saving to suitors clause, was to
deprive the district court of admiralty jurisdiction over the action, even though the action
could have been pleaded as a maritime claim and filed in district court pursuant to its
original admiralty jurisdiction). Accordingly, the instant action was not removable to this
court, which is otherwise without federal subject matter jurisdiction over the claims.
Nor is federal subject matter jurisdiction created by the fact that Atwood and
Bistis each asserted in their respective answers an affirmative defense pursuant to the
Limitation of Liability Act, entitling each to exoneration from or limitation of liability to the
value of, respectively, the Telos and the Watermark. The Act provides that “a vessel
owner faced with potentially large liability arising from a collision may apply to the
district court for a determination of whether exoneration or limitation is appropriate.”
8
Great Lakes Dredge & Dock Company, 895 F.Supp. at 608 (italics added and citing
Rule F of the Supplemental Rules for Certain Admiralty or Maritime Claims and Asset
Forfeiture Actions (“Rule F”)). Application for a determination of Rule F limitation on
liability may be obtained by filing a complaint in the appropriate district court “[n]ot later
than six months after receipt of a claim in writing. . . .” Rule F(2). Unfortunately for
Defendants, neither applied for such a determination pursuant to Rule F, and the sixmonth period in which such application may be made, i.e., triggered by receipt of the
written Complaint, has since elapsed.7
Nor has either Defendant, by pleading as an affirmative defense a limitation of
liability under the Limitation of Liability Act, created federal subject matter jurisdiction to
support the removal to this court. Rather, “[t]o remove a case as one falling within
federal-question jurisdiction, the federal question ordinarily must appear on the face of
a properly pleaded complaint; an anticipated or actual federal defense generally does
not qualify a case for removal.” Jefferson County, Alabama v. Acker, 527 U.S. 423,
430-31 (1999) (citing Louisville & Nashville R.R. Co. v. Motley, 211 U.S. 149, 152
(1908) (“a suit arises under the Constitution and laws of the United States only when
the plaintiff’s statement of his own cause of action shows that it is based upon those
laws of that Constitution. It is not enough that the plaintiff alleges some anticipated
defense to his cause of action . . . .”)).
Accordingly, the action should be REMANDED to New York Supreme Court, Erie
7
Although it is not clear from the record when either Defendant was served with the Com plaint,
the court notes that in both Atwood’s Answer, filed on Novem ber 15, 2010, and Bistis’s Answer, filed on
Decem ber 14, 2010, each allegation of the Com plaint is separately addressed, establishing that
Defendants were in receipt of the Com plaint when their respective answers were prepared and filed, i.e.,
well past the m andatory six-m onth period.
9
County, for lack of federal subject matter jurisdiction.
2.
Intervention
Should the District Judge disagree with the recommendation that this matter be
remanded to state court for lack of subject matter jurisdiction and the case therefore
remain lodged in this court, the undersigned, alternatively, and in the interest of
completeness, addresses the motion to intervene.
Movant HealthNow seeks to intervene to preserve its subrogation rights pursuant
to the insurance policy’s Subrogation Rider. HealthNow asserts it is entitled to
mandatory intervention, pursuant to Fed.R.Civ.P. 24(a), as well as permissive
intervention pursuant to Fed.R.Civ.P. 24(b). Neither Plaintiff nor Atwood filed any
response to the motion to intervene, although Bistis advised that Judge Skretny’s
approval of the Stipulation of Dismissal rendered the pending motion to intervene moot
as to Bistis. June 17, 2011 Letter. Movant disputes Bistis’s assertion that the
Stipulation of Dismissal has rendered the motion to intervene moot as to Bistis because
the motion to intervene was pending when the Stipulation of Dismissal was filed, that
HealthNow, who is not a party to this action, was not aware of any settlement between
Plaintiff and Bistis, June 21, 2011 Letter at 1, and the fact that Bistis has settled with
Plaintiff does not bar Movant’s right to pursue its subrogation claims against Bistis as a
tortfeasor. Id. at 2.
As relevant to the instant case, Rule 24(a) governs intervention as of right and
provides
(a) Intervention of Right. On timely motion, the court must permit anyone to
10
intervene who . . . (2) claims an interest relating to the property or transaction
that is the subject of the action, and is so situated that disposing of the action
may as a practical matter impair or impede the movant’s ability to protect its
interest, unless existing parties adequately represent that interest.
Fed.R.Civ.P. 24(a)(2) (italics added).
Alternatively, Rule 24(b), pertaining to permissive intervention provides in pertinent part
(b) Permissive Intervention.
(1) In General. On timely motion, the court may permit anyone to
intervene who . . . (B) has a claim or defense that shares with the
main action a common question of law or fact.
Fed.R.Civ.P. 24(b)(1) (italics added).
As stated, HealthNow moves to intervene to pursue a subrogation claim against the
parties to recover, through subrogation and reimbursement, for the health benefits
HealthNow has paid to Plaintiff for treatment of the injuries Plaintiff sustained as a
result of the accident, which is the subject of Plaintiff’s claim against Defendants in this
personal injury action.8
“‘Subrogation is the right one party has against a third party following payment, in
whole or in part, of a legal obligation that ought to have been met by the third party.’”
Allstate Insurance Co. v. Mazzola, 175 F.3d 255, 258 (2d Cir. 1999) (quoting 2 Allan D.
Windt, Insurance Claims and Disputes § 10.05 (1995)). “The doctrine of equitable
subrogation allows insurers to ‘stand in the shoes’ of their insured to seek
indemnification by pursuing any claims that the insured may have had against third
parties legally responsible for the loss.” Id. (citing Winkelmann v. Excelsior Insurance
8
W hile the court has recom m ended rem and for lack of subject m atter jurisdiction, regardless of
whether the case is rem anded pursuant to the saving to suitors clause, or rem ains in this court as a
diversity action for negligence, New York law will apply to Movant’s right to intervene based on the
grounds asserted by Movant in support of intervention.
11
Co., 650 N.E.2d 841, 843 (N.Y. 1995); and 16 George J. Couch et al., Couch on
Insurance 2d § 61:1 (2d rev. ed. 1983 & Supp. 1988)). “In short, one party known as
the subrogee is substituted for and succeeds to the rights of another party, known as
the sugrogor.” Id. Based upon principles of equity, the doctrine of subrogation “has a
dual objective as stated by New York courts:
It seeks, first, to prevent the insured from recovering twice for one harm, as it
might if it could recover from both insurer and from a third person who caused
the harm, and second, to require the party who has caused the damage to
reimburse the insurer for the payment the insurer has made.
Id. (quoting Winkelmann, 650 N.E.2d at 843 (citations omitted)).
It is so well settled as not to require discussion that an insurer who pays claims
against the insured for damages caused by the default or wrongdoing of a third
party is entitled to be subrogated to the rights which the insured would have had
against such third party for its default or wrongdoing . . . [and] to enforce these
rights by an action in its own name without joining the insured as a party. This
right of subrogation is based upon principles of equity and natural justice. We
recognize at once the fairness of the proposition that an insurer who has been
compelled by his contract to pay to or in behalf of the insured claims for
damages ought to be reimbursed by the party whose fault has caused such
damages. . . .”
Allstate Insurance Company v. Stein, 807 N.E.2d 268, 272 (N.Y. 2004) (quoting Ocean
Accident & Guarantee Corporation v. Hooker Electro-Chemical Co., 147 N.E. 351, 353
(N.Y. 1925)).
Because timeliness is required for both mandatory and permissive intervention, a
determination that the application to intervene is untimely dispenses with the need to
address the remaining three requirements. Associated Builders and Contractors, Inc.
v. Herman, 166 F.3d 1248, 1257 (D.C.Cir. 1999) (“If the motion was not timely, there is
no need for the court to address the other factors that enter into an intervention
analysis.”). Here, the subrogation claim HealthNow seeks to assert by intervention is
governed by the same three-year statute of limitations applicable to the personal injury
12
action Plaintiff commenced in state court against Defendants. See Stein, 807 N.E. at
271 & n. 1 (citing N.Y. C.P.L.R. 214(5) (imposing three-year statute of limitations for
most personal injury accidents, and observing a subrogation claim based on a personal
injury accident is subject to the same statute of limitations applicable to a claim based
on the incident giving rise to the subrogation claim). In other words, the statute of
limitations in a subrogation action by an insurance company, as subrogee of an insured
to whom the insurer had paid health insurance benefits for injuries sustained in an
accident, runs from the date of the accident rather than from the date the benefits were
first paid. Stein, 807 N.E.2d at 272. Moreover, “‘[a] motion to intervene filed after the
statute of limitations had run for the movant would not be timely.’” New Jersey
Carpenters Health Fund v. DLJ Mortgage Capital, Inc., 2010 WL 6508190, at * 1
(S.D.N.Y. Dec. 15, 2010) (quoting Ceribelli v. Elghanayan, 1994 WL 529853, at *3
(S.D.N.Y. Sept. 28, 1994)).
In the instant case, the accident for which Plaintiff sues occurred on September
22, 2007. Accordingly, the three-year period for the subrogation claim for which
HealthNow seeks to intervene to assert also accrued on September 22, 2007, and the
three year limitations period applicable to such claim expired on September 22, 2010,
more than six months before HealthNow filed its motion to intervene on April 14, 2011.
As such, the motion to intervene is not timely under either Rule 24(a) (intervention as of
right), or 24(b) (permissive intervention). Moreover, permitting intervention where, as
here, the statute of limitations on the subrogation claim would prevent it from being filed
as a separate action would be to allow the time-barred claim in through the ‘back door.’
See United States v. California, 507 U.S. 746, 758-59 (1993) (although United States
13
had subrogation right to contractor’s claims against the state, the federal government
was not subrogated to a right free of a preexisting infirmity, i.e., the passage of the
applicable statute of limitations which had run almost six years prior to filing subrogation
action).
Furthermore, insofar as the Subrogation Rider provides that HealthNow is
entitled to be reimbursed by Plaintiff, as the insured, for any benefits HealthNow paid
for treatment of Plaintiff’s injuries, from any funds in settlement or judgment Plaintiff
receives from the party responsible for her injuries, Subrogation Rider ¶ 1, such claim
would be in equity for constructive trust and would not yet be time-barred.9 “‘A
constructive trust is the formula through which the conscience of equity finds
expression. When property has been acquired in such circumstances that the holder of
the legal title may not in good conscience retain the beneficial interest, equity converts
him into a trustee.’” Dolmetta v. Uintah National Corporation, 712 F.2d 15, 18 (2d Cir.
1983) (quoting Beatty v. Gugenheim Exploration Co., 122 N.E.2d 378 (N.Y. 1919)).
“Since a cause of action for a constructive trust is one ‘for which no limitation is
specifically prescribed by law,’ it is governed by New York’s six-year statute of
limitations.” Dolmetta, 712 F.2d at 18 (quoting N.Y C.P.L.R. § 213[1] (McKinney 1972)).
Further, the accrual of a claim for constructive trust “runs from the occurrence of the
wrongful act or event which creates a duty of restitution.’” Id. (citing Scheuer v.
9
Furtherm ore, the Subrogation Rider lim its HealthNow’s ability to recover in equity from funds
received in settlem ent or judgm ent only if such settlem ent or judgm ent “specifically identifies or allocates
m onetary sum s directly attributable to expenses for which we have paid benefits.” Subrogation Rider ¶ 1.
Because no copy of the settlem ent agreem ent between Plaintiff and Bistis is in the record, the court is
unable to state whether a claim in equity for im position of a constructive trust against any settlem ent funds
Plaintiff received from Bistis would be viable.
14
Scheuer, 126 N.E.2d 555 (N.Y. 1955)). Because HealthNow’s construction trust claim
based on restitution must be sought from Plaintiff, HealthNow would have to assert a
claim for constructive trust against any funds that come into Plaintiff’s possession as a
result of Plaintiff’s personal injury action against Defendants. See Great-West Life &
Annuity Insurance Company v. Knudson, 534 U.S. 204, 213 (2002) (recognizing an
equitable restitution claim seeks to impose a constructive trust or equitable lien on
“particular funds or property in the defendant’s possession.” (citations omitted)); Nechis
v. Oxford Health Plans, Inc., 421 F.3d 96, 103 (2d Cir. 2005) (affirming district court’s
dismissal of plaintiffs’ claim seeking to impose constructive trust on funds, health care
insurance premiums paid by plaintiffs to defendant insurance company, which plaintiffs
maintained were in defendant’s possession only because defendant had wrongly
denied to pay plaintiffs’ insurance claims, because plaintiffs failed to establish such
funds could clearly be traced back to any particular funds in the defendant’s
possession).
In the instant case, HealthNow could not assert a cause of action for constructive
trust against Plaintiff until and unless Plaintiff receives money damages from either
Defendant through settlement, such as with Bistis, or as the result of a trial in Plaintiff’s
favor against Atwater, and then fails to reimburse HealthNow for the health insurance
benefits HealthNow has paid for treatment of Plaintiff’s injuries in accordance with the
insurance policy. See Dolmetta, 712 F.2d at 18 (cause of action for imposition of
constructive trust runs from occurrence of event or wrongful act creating duty of
restitution). Even if Plaintiff has already received a monetary sum from Bistis in
settlement of Plaintiff’s claims against Bistis, as anticipated in accordance with the
15
Stipulation of Discontinuance, given that less than six years have elapsed since the
Stipulation of Discontinuance was filed, HealthNow could yet pursue an action against
Plaintiff in state court10 to impose a constructive trust on such funds.
HealthNow’s motion to intervene is, therefore, DENIED.11
CONCLUSION
Based on the foregoing, the action should be REMANDED to New York
Supreme Court, Erie County, for lack of subject matter jurisdiction, and Movant’s motion
to intervene (Doc. No. 14) is DISMISSED as moot. Alternatively, Movant’s motion to
intervene (Doc. No. 14) is DENIED.
10
The court notes that, is such an action were pursued in this court, diversity jurisdiction would be
lacking. See Com plaint (attached to Rem oval Petition), ¶ 1 (“Plaintiff, Gayle K. Steward, is an individual
residing in the County of Erie and State of New York.”); Com plaint in Intervention (Movant’s Exh. A), ¶ 1
(“HealthNow is a corporation organized and exiting under the laws of the State of NewYork with its
principal place of business at 257 W est Genesee Street, Buffalo in the County of Erie, New York.).
11
HealthNow, in reply to the June 17, 2011 Letter in which Bistis advised the court that because
Bistis had settled with Plaintiff, the m otion to intervene is m oot as to Bistis, suggests Bistis m ay be relying
on New York’s “anti-subrogation law,” N.Y. Gen. Oblig. Law § 5-335 (McKinney 2009), in asserting that
Bistis’s settlem ent with Plaintiff has extinguished HealthNow’s subrogation rights against Bistis. June 21,
2011 Letter at 2. In opposition to such anticipated argum ent, HealthNow references another action filed in
this court, HealthNow New York Inc. v. State of New York, 10-CV-00345S, and then pending before the
Second Circuit Court of Appeals on appeal from the Chief District Judge’s order dism issing the action for
lack of subject m atter jurisdiction. June 21, 2011 Letter at 2. In particular, HealthNow advised that
although the im pact of the anti-subrogation law was not reached in that action, the issue was discussed in
legal m em oranda filed by the parties to that action, as well as by several amicus curiae. Id. HealthNow
specifically asserts that the subject insurance policy qualifies as a welfare benefit plan under the
Em ployee Retirem ent Incom e Security Act of 1974 (“ERISA”), which preem pts New York’s antisubrogation law, and requests perm ission to file in this action a m em orandum of law regarding the issue
should the court decide to address the viability of the anti-subrogation clause under ERISA. Id. The issue
of subrogation is, however, m oot either because, as recom m ended by the undersigned, the action should
be rem anded for lack of subject m atter jurisdiction or, alternatively, because any subrogation claim
HealthNow could assert is tim e-barred. Discussion, supra, at 12-14. As such, the anti-subrogation law,
which presupposes an enforcible claim based on subrogation, is not addressed.
16
RESPECTFULLY SUBMITTED, as to the
recommendation, sua sponte, that the action
be remanded to New York Supreme Court,
Erie County, for lack of subject matter
jurisdiction,
/s/ Leslie G. Foschio
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
SO ORDERED, as to the motion
to intervene.
/s/ Leslie G. Foschio
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
DATED:
October 27, 2011
Buffalo, New York
17
ORDERED that this Report and Recommendation be filed with the Clerk of the
Court.
ANY OBJECTIONS to this Report and Recommendation must be filed with the
Clerk of the Court within fourteen (14) days of service of this Report and
Recommendation in accordance with the above statute, Rules 72(b), 6(a) and 6(d) of
the Federal Rules of Civil Procedure and Local Rule 72.3.
Failure to file objections within the specified time or to request an
extension of such time waives the right to appeal the District Court's Order.
Thomas v. Arn, 474 U.S. 140 (1985); Small v. Secretary of Health and Human
Services, 892 F.2d 15 (2d Cir. 1989); Wesolek v. Canadair Limited, 838 F.2d 55 (2d
Cir. 1988).
Let the Clerk send a copy of this Report and Recommendation to the attorneys
for the Plaintiff and the Defendants.
SO ORDERED.
/s/ Leslie G. Foschio
LESLIE G. FOSCHIO
UNITED STATES MAGISTRATE JUDGE
DATED:
October 27, 2011
Buffalo, New York
18
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