Neubeck et al v. All America Insurance Company et al
DECISION AND ORDER: For the reasons stated in the decision, the plaintiffs' motion to remand, Docket Item 2 , is GRANTED. The case is REMANDED to New York State Supreme Court, Erie County. The Clerk of the Court shall close the case. SO ORDERED. Issued by Hon. Lawrence J. Vilardo on 1/17/2023. (DJ)Clerk to Follow up
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 1 of 16
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
KENT P. NEUBECK, et al.,
DECISION & ORDER
ALL AMERICA INSURANCE COMPANY,
On July 11, 2022, the plaintiffs, Kent P. Neubeck and Kemper Independence
Insurance Company (“Kemper”), commenced this action in New York State Supreme
Court, Erie County. Docket Item 1 at 1-2. They allege that defendants All America
Insurance Company (“All America”) and Central Mutual Insurance Company (“Central”)
have breached their duty to defend Neubeck in a series of lawsuits arising from a motor
vehicle accident in which Neubeck was driving a vehicle owned by defendant Paddock
Chevrolet, Inc. (“Paddock”). Id. at 2, 15. The plaintiffs seek a declaratory judgment as
well as money damages. Id. at 2.
On September 6, 2022, the defendants removed the action to this Court, Docket
Item 1, and ten days later, the plaintiffs moved to remand. Docket Item 2. The
defendants responded on October 12, 2022, and then amended their response the next
day. Docket Items 7 and 10. On October 18, 2022, the plaintiffs replied. Docket Item
This Court heard oral argument and ordered supplemental briefing on November
29, 2022. See Docket Item 15. On December 6, 2022, the plaintiffs submitted their
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 2 of 16
supplemental brief, Docket Items 16 and 17, and on January 6, 2023, the defendants
submitted their supplemental brief, Docket Item 27.
For the following reasons, the plaintiffs’ motion to remand is granted.
FACTUAL BACKGROUND 1
On December 30, 2019, Neubeck was test-driving a 2020 Chevrolet Trailblazer
owned by Paddock. Docket Item 2-2 at 5. He drove the vehicle with Paddock’s
permission, and he was accompanied by Hanna Mansour, a Paddock employee. Id. at
5-6. During the test-drive, the Trailblazer collided with a vehicle owned and driven by
Santino Lococo. Id. at 5. The occupants of both vehicles—Neubeck and Mansour in
the Trailblazer, and Santino and Dakota Lococo in the other vehicle—were injured in the
At the time of the accident, Neubeck had an insurance policy with Kemper (the
“Kemper Policy”). Id. at 6. That policy provided automobile liability coverage for
“[Neubeck]’s use of vehicles he did not own, with limits of $500,000 per accident” and
personal catastrophe liability coverage “with limits of $1,000,000 in excess over the
$500,000 primary automobile liability coverage limits.” Id. The Kemper Policy provided
When considering a motion to remand, courts “generally evaluate jurisdictional
facts . . . on the basis of the pleadings, viewed at the time when [the] defendant files the
notice of removal,” Blockbuster, Inc. v. Galeno, 472 F.3d 53, 56-57 (2d Cir. 2006) (citing
Vera v. Saks & Co., 335 F.3d 109, 116 n.2 (2d Cir. 2003) (per curiam)), and “assume
the truth of non-jurisdictional facts alleged in the complaint,” Guzman v. First Chinese
Presbyterian Cmty. Affs. Home Attendant Corp., 520 F. Supp. 3d 353, 356 (S.D.N.Y.
2021) (citations omitted). Courts also “may consider materials outside  the complaint,
such as documents attached to a notice of removal or a motion to remand that convey
information essential to the court’s jurisdictional analysis.” Id. (citations omitted). The
following facts are drawn from the complaint and the parties’ other filings.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 3 of 16
that its coverage “with respect to a vehicle [Neubeck does] not own shall be excess over
any other collectible insurance” and that if Neubeck “has other collectible insurance that
covers damages [that the personal catastrophe liability coverage] also covers, [the
personal catastrophe liability coverage] shall be excess to and will not contribute with
such other insurance.” Id. at 6-7.
At the same time, Paddock had insurance policies with All America and Central
(the “All America Policy” and the “Central Policy,” respectively). Id. at 7-9. The All
America Policy provided primary automobile liability coverage up to $1,000,000 per
accident. Id. at 7-9; Docket Item 1-1 at 3. The Central Policy provided umbrella liability
coverage up to $10,000,000. Docket Item 2-2 at 8-9; Docket Item 1-1 at 3. Paddock
was the named insured, and the Trailblazer was a “covered auto,” on both policies.
Docket Item 2-2 at 7-9.
In New York, an owner’s policy—such as the All America Policy—must include
as an insured “any . . . person using the motor vehicle with the permission of the named
insured[,] . . . provided his or her actual operation . . . is within the scope of such
permission.” Id. at 7-8 (citing N.Y. Comp. Codes R. & Regs. tit. 11, § 60-1.1 (2022)).
The plaintiffs argue that because Neubeck was operating the Trailblazer with the
permission of Paddock, the named insured under the All America Policy, Neubeck “was
an insured” under that policy and entitled to liability coverage up to $1,000,000 “for his
use of the [Trailblazer] at the time of the accident.” Id. at 8. Similarly, they argue that
because the Central Policy provided that any insured on any “underlying insurance”
policy—including the All America Policy—was also an insured under the Central Policy,
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 4 of 16
Neubeck was an insured entitled to up to $10,000,000 in umbrella liability coverage. Id.
When the accident resulted in four lawsuits, Neubeck sought coverage under the
All America Policy and the Central Policy. Id. at 9; Docket Item 2-10 at 7. All America
and Central responded that Neubeck was “not an ‘insured’” under their policies because
he was a Paddock customer who had his own liability coverage—through Kemper—
“which satisfies the New York financial responsibility law limits.” Docket Item 2-2 at 1011; 20. Since then, Kemper settled three of the four underlying suits. Docket Item 2-10
The plaintiffs—Neubeck and Neubeck’s insurance carrier, Kemper—now allege
that the All America Policy, “which purports to remove coverage for a customer who is a
permissive user,” violates New York regulations. Docket Item 2-2 at 11-12. They seek
a declaratory judgment that: 1) the provision of the All America Policy excluding
coverage for Paddock’s customers is void and unenforceable as a matter of public
policy, id. at 11-12; 2) Neubeck was an “insured” under the All America Policy, and
therefore the Central Policy, and All America has the primary obligation to defend and
indemnify him for claims arising from the accident, id.; and 3) the coverage under the
Kemper Policy “is excess over the coverage under the [All America] [P]olicy,” id. at 1314. Furthermore, to the extent that Neubeck’s liability in the underlying suits exceeds
the All America Policy limit of $1,000,000, the plaintiffs seek a judgment apportioning
any excess liability coverage between Kemper and Central. Id. at 14. Finally, Kemper
seeks reimbursement of “any amounts [that it paid] on behalf of [Neubeck] . . . in
connection with any and all claims arising out of the accident.” Id.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 5 of 16
After the plaintiffs commenced this action in New York State Supreme Court,
Docket Item 1 at 1-2, the defendants answered and asserted a counterclaim against
Kemper seeking reimbursement for any amounts All America paid to settle property
damage claims arising from the accident, id. at 2; Docket Item 1-1 at 20, 30-31. They
amended that answer on August 30, 2022. Docket Item 1 at 2.
With Central’s and Paddock’s consent, All America then removed the action to
this Court based on diversity of citizenship. Id. at 2, 4. In their removal papers, the
defendants argued that the case was subject to removal because “[t]here is complete
diversity of citizenship between Kemper, All America, and Central, the only parties
seeking relief in the action,” and the amount in controversy exceeds $75,000. Id. at 3-5.
And they asserted that removal was timely “because All America has not been properly
joined and served” and because Kemper first informed the defendants that the amount
in controversy exceeds $75,000 on August 25, 2022, less than two weeks before the
case was removed. Id. at 5-7.
The plaintiffs moved to remand the case to state court on three grounds. Docket
Item 2-10. First, they argued that there is no diversity of citizenship because both
Neubeck, a plaintiff, and Paddock, a defendant, are citizens of New York and neither is
a nominal party. Id. at 6-8. Second, they asserted that the notice of removal was
untimely because All America had been properly served more than thirty days before
the case was removed. Id. at 9-10. And finally, they argued that the case should be
remanded because the defendants “failed to comply with Local Rule [of Civil Procedure]
81, which requires a removing party to provide to the federal court a civil cover sheet,
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 6 of 16
an index identifying each document filed and/or served in the state court, and copies of
each document filed therein.” Id. at 5-6, 10.
As noted above, the parties have briefed the motion, Docket Items 2, 7, 10-11,
16-17, 27, and this Court has heard oral argument, see Docket Item 15.
“A defendant may remove an action originally filed in state court to federal court if
the case originally could have been filed in federal court.” Vera, 335 F.3d at 113 (citing
28 U.S.C. § 1441(a)). But a district court that lacks subject matter jurisdiction over a
removed case shall remand the case to state court. 28 U.S.C. § 1447(c); see Atanasio
v. O’Neill, 235 F. Supp. 3d 422, 424 (E.D.N.Y. 2017) (“[I]f a federal court lacks subject
matter jurisdiction over the removed action, the case must be remanded from whence
[sic] it came.”).
“In a case removed to federal court from state court, the removal statute is to be
interpreted narrowly, and the burden is on the removing party to show that subject
matter jurisdiction exists and that removal was timely and proper.” Winter v. Novartis
Pharm. Corp., 39 F. Supp. 3d 348, 350 (E.D.N.Y. 2014) (citing Lupo v. Hum. Affs. Int’l,
Inc., 28 F.3d 269, 274 (2d Cir. 1994)). “All doubts should be resolved against
removability.” Id. (citing Lupo, 28 F.3d at 274). Furthermore, “[o]n a motion to remand,
the party seeking to sustain the removal, not the party seeking remand, bears the
burden of demonstrating that removal was proper.” Meeks v. City of Rochester, 2022
WL 13789086, at *1 (W.D.N.Y. Oct. 24, 2022) (quoting Hodges v. Demchuk, 866 F.
Supp. 730, 732 (S.D.N.Y. 1994)).
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 7 of 16
As noted above, the plaintiffs assert three potential grounds for remand. First,
they argue that this Court does not have subject matter jurisdiction. Docket Item 2-10 at
6-8. Second, they argue that removal was untimely. Id. at 9-10. Finally, they argue
that the defendants’ notice of removal did not comply with the Local Rules. Id. at 10.
Because this Court agrees with the plaintiffs that this case should be remanded both
because the defendants failed to comply with Local Rule of Civil Procedure 81 and
because the Court does not have jurisdiction, it remands for those reasons and does
not reach the plaintiffs’ other argument.
FAILURE TO COMPLY WITH LOCAL RULE 81
A district court may remand a removed action “on the basis of any defect in the
removal procedure.” Polito v. Hanover Ins. Grp., Inc., 2018 WL 3598873, at *4
(W.D.N.Y. July 27, 2018) (quoting In re Vill. of Kiryas Joel, N.Y., 2012 WL 1059395, at
*2 (S.D.N.Y. Mar. 29, 2012)). Local Rule of Civil Procedure 81 requires a party
removing an action to this Court to submit, inter alia, “an index identifying each
document filed and/or served in the state court action” and a copy of each such
document tabbed and arranged in chronological order. Loc. R. Civ. P. 81; see also 28
U.S.C. § 1447(b) (“[A district court] may require the removing party to file . . . copies of
all records and proceedings in such [s]tate court.”).
The plaintiffs argue that the defendants’ notice of removal “is deficient [and] failed
to comply with Local Rule 81” because it did not include a copy of a motion for summary
judgment pending in state court. Docket Item 2-10 at 10. The defendants respond that
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 8 of 16
this is “at most a procedural and ministerial transgression and therefore not
appropriate grounds for remand.” Docket Item 10 at 10.
But courts in this district have remanded cases when a notice of removal violated
Local Rule 81. See, e.g., Polito, 2018 WL 3598873, at *5 (holding that removal was
“defective” because the defendant violated 28 U.S.C. § 1446(a) and Local Rule 81 by
failing to include in its removal petition “the exhibits attached to the state-court
complaint”); Bagnato v. The Home Depot, 2004 WL 625270, at *1-2 (W.D.N.Y. Jan. 15,
2004) (remanding an action because the notice of removal “failed to disclose [a]
pending motion” filed in state court). Because the right to removal must be “narrowly
construe[d],” this Court finds that the defendants’ notice of removal is deficient because
it did not include a copy of the pending motion for summary judgment as required by
Local Rule 81. See Bagnato, 2004 WL 625270, at *1.
This action therefore is remanded for that reason alone.
A civil action brought in state court may be removed to a federal district court if
the district court has original subject matter jurisdiction. 28 U.S.C. § 1441(a). Here, the
defendants based their removal on diversity jurisdiction. Docket Item 1 at ¶ 8.
A district court has diversity jurisdiction if 1) there is diversity of citizenship
between the parties on each side, and 2) the amount in controversy exceeds $75,000. 2
28 U.S.C. § 1332(a). Diversity of citizenship requires “complete diversity so that each
The plaintiffs do not dispute that the amount in controversy here exceeds
$75,000. See Docket Items 2-10 and 11.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 9 of 16
plaintiff’s citizenship [is] different from the citizenship of each defendant.” Briarpatch
Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 302 (2d Cir. 2004).
When assessing diversity jurisdiction, however, “a federal court must disregard
nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to
the controversy.” St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply, 409 F.3d
73, 80 (2d Cir. 2005) (quoting Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980));
see also People by Underwood v. LaRose Indus. LLC, 386 F. Supp. 3d 214, 217
(N.D.N.Y. 2019) (“[O]nly those [parties] with a real and substantial interest in the
controversy are considered” for purposes of diversity jurisdiction. (quoting State of New
York by Abrams v. Gen. Motors Corp., 547 F. Supp. 703, 704 (S.D.N.Y. 1982))).
“Nominal parties are those that have no personal stake in the outcome of the litigation
and who are not necessary to an ultimate resolution.” Johnson v. Cnty. of Suffolk, 280
F. Supp. 3d 356, 362 (E.D.N.Y. 2017) (citations and internal quotation marks omitted).
Here, both Neubeck, a plaintiff, and Paddock, a defendant, are citizens of New
York. Docket Item 1 at 4; Docket Item 2-10 at 8. 3 Ordinarily, that would defeat diversity
jurisdiction on its face. See Briarpatch, 373 F.3d at 302. But the defendants urge this
Defendants All America and Central are both citizens of Ohio. Docket Item 1 at
3; Docket Item 9. Plaintiff Kemper’s citizenship is unclear; the defendants have
provided a document listing Florida as Kemper’s principal place of business, Docket
Item 1-1 at 48, but Kemper’s corporate disclosure statement says that it “is an Illinois
entity that is also commercially domiciled in California,” Docket Item 3. Regardless,
Kemper’s citizenship is diverse from the other parties’ if it is a citizen of any of those
Mansour and Lococo, New York citizens, are also defendants in this action, but
both sides agree that they are nominal parties and that this Court should not consider
their citizenship for the purpose of diversity jurisdiction. See Docket Item 1 at 4; Docket
Item 2-10 at 8.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 10 of 16
Court to ignore both Neubeck’s and Paddock’s citizenship when assessing diversity
jurisdiction because both are nominal parties. Docket Item 1 at 3-4. Alternatively, they
argue that Paddock may be realigned as a plaintiff, thus preserving complete diversity.
Docket Item 10 at 8-9. The plaintiffs, on the other hand, argue that Neubeck and
Paddock are “real parties in interest”—not nominal parties—and that Paddock cannot
be realigned. Docket Item 2-10 at 6-8.
Neubeck’s status as a nominal party hinges on whether he has a “personal
stake” in the outcome of this action. See Johnson, 280 F. Supp. 3d at 362. The
defendants argue that Neubeck is a nominal party because “Kemper is the only party
seeking relief.” Docket Item 1 at 4. The plaintiffs counter that Neubeck is not a nominal
party because he “personally seeks $11,000,000 in coverage that was improperly
denied to him.” Docket Item 2-10 at 7; Docket Item 11 at 7. This Court agrees with the
Simply put, the amount of liability coverage available to Neubeck depends on the
outcome of this action. If the plaintiffs succeed, Neubeck will have $12,500,000 in
liability coverage for injuries resulting from the accident: $1,500,000 from the Kemper
Policy and $11,000,000 from the All America and Central Policies. Docket Item 2-10 at
7. But if this action is resolved in the defendants’ favor, Neubeck will have only the
$1,500,000 in coverage provided by the Kemper Policy. Id. That is a meaningful
difference, especially because the damages in the underlying suits may exceed the
Kemper Policy limits. See Docket Item 16 at 9 (noting that the plaintiff in one underlying
suit is seeking $2,750,000 in damages).
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 11 of 16
Admittedly, “[d]istrict courts around the country have held that ‘the insured need
not be joined in a declaratory-judgment action between [multiple] insurers to determine
their respective liability.” Liberty Mut. Ins. Co. v. Sterling Ins. Co., 2020 WL 6699872, at
*2 (E.D.N.Y. Nov. 12, 2020) (quoting Ins. v. Mid-Century Ins. Co., 2016 WL 4107690, at
*3 (D.N.J. July 29, 2016)). But this case involves more than simply deciding which
insurer is on the hook; it also involves how much protection Neubeck has available for
damages caused by his alleged negligence. And for that reason, Neubeck has a
personal stake—indeed, an $11,000,000 stake—in the outcome of this action. 4
Neubeck therefore is not a nominal party.
The defendants also argue that regardless of Neubeck’s status, this Court has
jurisdiction either because Paddock is a nominal party or because Paddock may be
realigned as a plaintiff to preserve complete diversity. Docket Item 10 at 7-9. But this
Court finds neither argument persuasive.
Nominal Party Status
District courts in this Circuit use the fraudulent joinder standard to evaluate
whether a defendant is a nominal party. See Romano v. Am. States Ins. Co., 295 F.
Supp. 3d 307, 312 (W.D.N.Y. 2017) (“Fraudulent joinder is a legal term of art [used] to
refer to the joinder of unnecessary or nominal parties in order to defeat federal
In fact, counsel for the defendants conceded that very fact “for purposes of this
argument” at oral argument. See Docket Item 21 at 8-9 (“THE COURT: . . . Are you
going to concede that Neubeck is not a nominal party because the amount of his
coverage hinges on this declaratory judgment action? [COUNSEL]: I’m willing to
concede that for purposes of this argument.”).
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 12 of 16
jurisdiction.” (alteration in original) (quoting Kuperstein v. Hoffman-Laroche, Inc., 457 F.
Supp. 2d 467, 470 (S.D.N.Y. 2006))); Fed. Ins. Co. v. Tyco Int’l Ltd., 422 F. Supp. 2d
357, 389 (S.D.N.Y. 2006) (“The question of whether a party is nominal appears to be
governed by essentially the same legal standard as whether a party is fraudulently
joined.” (citations omitted)). 5 Under this standard, “the defendant must demonstrate, by
clear and convincing evidence, either that there has been outright fraud committed in
the plaintiff’s 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.”
Romano, 295 F. Supp. 3d at 312 (quoting Pampillonia, 138 F.3d at 461); see also
McAlpin v. RLI Ins. Co., 320 F. Supp. 2d 42, 43 (W.D.N.Y. 2004) (“The removing party
bears the burden of demonstrating that a nondiverse defendant is a formal or nominal
party whose citizenship may be ignored for diversity purposes.” (citing Dodson v.
Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992))).
For this analysis, the relevant question is “whether the plaintiff can establish a
claim under state [law], not federal law.” Romano, 295 F. Supp. 3d at 312 (quoting
MBIA Ins. Corp. v. Royal Bank of Can., 706 F. Supp. 2d 380, 393 (S.D.N.Y. 2009)).
Furthermore, “[t]he issue is not whether the plaintiff is likely to prevail against the nondiverse defendant, but whether the pleading sets forth any possible claim under state
The fraudulent joinder standard typically is used to assess only a defendant’s
status. See, e.g., Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 460-61 (2d Cir.
1998) (“[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.” (emphasis added)). Here, this Court uses that test to
address only whether Paddock is a nominal party, although it could have used it to
address Neubeck’s status as well. And if it had, the result would have been the same
as that reached above.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 13 of 16
law.” Id. (emphasis added) (quoting Stewart v. Raymond Corp., 587 F. Supp. 2d 572,
575 (E.D.N.Y. 2008)). “[A] determination by [a court] as to whether a plaintiff could state
a viable claim [against a defendant] in state court is subject to a relaxed inquiry.” Id. at
313 (emphasis in original). “Indeed, whether the plaintiffs have presently asserted a
claim against the defendant is not determinative of improper joinder of a nominal party.”
Id. (alterations, citation, and internal quotation marks omitted).
The plaintiffs argue that Paddock is not a nominal party because “claims of
vicarious liability could potentially be raised against Paddock” under New York law. 6
Docket Item 16 at 12 (citing N.Y. Veh. & Traf. Law § 388(1), under which the owner of a
vehicle may be held vicariously liable for injuries resulting from a permissive user’s
operation of that vehicle). The defendants have not addressed this argument, see
Docket Item 27 at 6-7; see also Docket Item 10 at 7-9, let alone provided “clear and
convincing evidence . . . that there is no possibility” that the plaintiffs can state a claim
against Paddock in state court, see Romano, 295 F. Supp. 3d at 312. Especially
The plaintiffs also argue that “[i]n the specific context of an insurance coverage
action . . . where the plaintiff brings an action seeking a declaratory judgment that the
defendant owes a duty to defend and indemnify the driver of an automobile in the
underlying action,” both the insurer and the named insured are necessary parties.
Docket Item 2-10 at 6-8 (citing Bello v. Emps. Motor Corp., 240 A.D.2d 527, 659
N.Y.S.2d 64 (2d Dep’t 1997); White v. Nationwide Mut. Ins. Co., 228 A.D.2d 940, 644
N.Y.S.2d 590 (3d Dep’t 1996)). But the plaintiffs misread the case law.
In both White and Bello, the plaintiff seeking indemnification was the named
insured, and declaratory judgments were sought to determine whether the insurer owed
the named insured a duty to defend and indemnify. As a result, those named insureds
depended on the outcome of the action for insurance coverage, had their own assets at
stake, and therefore were necessary parties. Here, Paddock is the named insured, and
if All America and Central disclaimed liability as to Paddock, Paddock would certainly be
a necessary party. But that is not the case; All America’s and Central’s duties to
Paddock are not at issue here, and White and Bello are therefore inapposite.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 14 of 16
because “[a]ll doubts should be resolved against removability,” see Novartis, 39 F.
Supp. 3d at 350, this Court finds the plaintiffs’ reasoning persuasive.
The complaint does not ask for relief from Paddock, see Docket Item 1 at 25-26,
but “[i]t is . . . well established that when the question is subject matter jurisdiction, the
court is permitted to rely on information beyond the face of the complaint.” St. Paul, 409
F.3d at 80. And the plaintiffs note that under New York’s vicarious liability law, they—or
at least Neubeck—may well have a viable claim against Paddock. 7 Docket Item 16 at
12. At the very least, the defendants have not met their burden of showing that “there is
no possibility, based on the pleadings, that a plaintiff can state a cause of action against
[Paddock] in state court.” See Romano, 295 F. Supp. 3d at 312 (quoting Pampillonia,
138 F.3d at 461); Docket Item 27.
Given the “relaxed” standard for this inquiry, see Romano, 295 F. Supp. 3d at
313, and the fact that jurisdictional questions “should be resolved against removability,”
see Novartis, 39 F. Supp. 3d at 350, this Court concludes that Paddock’s status “raise[s]
serious doubts about th[is] Court’s jurisdiction,” see Tyco, 422 F. Supp. 2d at 391. And
the defendants’ argument that Paddock is a nominal party because the plaintiffs “ha[ve]
not asserted a cognizable cause of action against or sought relief from Paddock,” see
Docket item 27 at 7, does not quell those doubts, see Romano, 295 F. Supp. 3d at 313
(“[W]hether the plaintiffs have presently asserted a claim against the defendant is not
The plaintiffs provide several discrete examples of Paddock’s interest in the
outcome of this matter. For example, they say that Paddock does not want to share
coverage with Neubeck, Docket Item 2-10 at 8; Docket Item 11 at 8, and that Paddock
would lose its right to seek indemnity from Neubeck if both are co-insureds on the All
America and Central Policies, Docket Item 16 at 15. Because this Court finds that the
defendants have not met their burden, it need not—and does not—address those
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 15 of 16
determinative of improper joinder of a nominal party.” (alterations, citation, and internal
quotation marks omitted)). The question is not whether the plaintiffs have stated a claim
against Paddock; the question is whether they could. See id. at 315 (finding that a
defendant vehicle owner was not fraudulently joined even though “the allegations in the
complaint do not sufficiently state a claim for vicarious liability as written”).
For all those reasons, Paddock is more than a nominal defendant, and its
citizenship must be considered for diversity purposes.
“In assessing the alignment of the parties, diversity jurisdiction cannot be
conferred upon the federal courts by the parties’ own determination of who are plaintiffs
and who are defendants.” Id. (alterations and citation omitted). Instead, “[t]o determine
the proper alignment of the parties, the Second Circuit has adopted a ‘collision of
interests’ test.” Id. (citation omitted). This test requires “the existence of an actual,
substantial controversy” between the plaintiffs and the defendants. Md. Cas. Co. v.
W.R. Grace & Co., 23 F.3d 617, 622 (2d Cir. 1993).
The defendants argue that even if Paddock is not a nominal party, it may be
realigned as a plaintiff and therefore be on the same side of the ledger as Neubeck.
Docket Item 10 at 8-9. But this argument presupposes that Paddock is a nominal party
because Paddock has no interest adverse to Neubeck’s. See id. (“Since no claims are
made against Paddock in the [c]omplaint, and since Paddock is by definition a nominal
party who may be dismissed from this matter at the court’s discretion at any time,
whether Paddock is aligned as a plaintiff or defendant is for naught.”). And for the
reasons just stated, that is not the case.
Case 1:22-cv-00680-LJV Document 28 Filed 01/17/23 Page 16 of 16
Therefore, this Court cannot realign Paddock as a plaintiff because there well
may be an “actual, substantial controversy” between Paddock and Neubeck. See Md.
Cas. Co., 23 F.3d at 622. 8
In sum, the defendants’ notice of removal was deficient because it did not comply
with Local Rule 81. Additionally, neither Neubeck nor Paddock are nominal parties and
Paddock cannot be realigned as a plaintiff. Especially because this Court must resolve
all doubts against removability, it finds that it does not have subject matter jurisdiction.
For both those reasons, the plaintiffs’ motion to remand, Docket Item 2, is
GRANTED. The case is REMANDED to New York State Supreme Court, Erie County.
The Clerk of the Court shall close the case.
Dated: January 17, 2023
Buffalo, New York
/s/ Lawrence J. Vilardo
LAWRENCE J. VILARDO
UNITED STATES DISTRICT JUDGE
There are other, more practical reasons that make remand the best option. The
underlying litigation is pending in a New York State court, and issues of insurance
coverage dovetail with issues of liability in that case. Judicial efficiency therefore
counsels in favor of remand. What is more, the question of insurance coverage hinges
on New York law and regulations, which the New York State court is better suited to
address. Of course, neither of those reasons is sufficient for remand. But they lend
support to the principle that “all doubts should be resolved against removability” here.
See Novartis, 39 F. Supp. 3d at 350.
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