DEAJESS MEDICAL IMAGING v. GEICO GENERAL INSURANCE COMPANY

DEBRA FREEMAN, Magistrate Judge

In this diversity action, before me on consent pursuant to 28 U.S.C. § 636(c), plaintiff Deajess Medical Imaging, P.C. ("Deajess") asserts 49 claims against defendant, Geico General Insurance Company ("Geico"). Geico has moved for dismissal on the ground that the claims have been improperly aggregated and, if disaggregated, would individually fail to satisfy the jurisdictional requirement as to the amount in controversy.

Deajess initially asserted 58 claims, but subsequently withdrew nine of them. ( See Dkt. 8, 16.)

For the reasons set forth below, Geico's motion to dismiss Deajess's Complaint for lack of jurisdiction pursuant to 28 U.S.C. § 1332 is denied, but Geico is invited to make a motion to sever.

BACKGROUND

This action is one of a series of similar actions filed by the same counsel, on behalf of the same plaintiff or related entities. These cases, in which medical service providers have received assignments of and then sought to aggregate their patients' insurance claims, all appear to raise the same issues — whether the claims, which are individually modest in size, have been properly aggregated so as to satisfy the $75,000 jurisdictional requirement, and, if so, whether the claims should nonetheless be severed so as not to overburden the defendants and the Court with an unwieldy discovery process and/or trial.

At the Court's last review of the docket, it appeared that plaintiff's counsel had filed approximately 30 such cases within the past year. Further, it appears that at least three of the plaintiffs in these cases — Deajess, Preferred Medical Imaging, P.C. ("Preferred"), and Boston Post Road Medical Imaging, P.C. ("Boston Post Road") — share the same principal. ( See Dkt. 1 (Complaint verified by Robert Schepp, M.D., as principal of Deajess); Dkt. 1 in Preferred Med. Imaging v. Geico Gen. Ins., 03 Civ. 8516 (LAP) (DF) (Complaint verified by the same individual as principal of Preferred); http://www.dos.state.ny.us (New York State Department's Division of Corporations listing Dr. Schepp as the Chief Executive Officer of Boston Post Road).)

This particular case has been brought by Deajess, a New York provider of radiological services, to recover on the no-fault automobile insurance claims of 49 patients who were allegedly injured in automobile accidents, and who received radiological procedures at Deajess's facility. (Complaint filed Sept. 22, 2003 ("Compl.") (Dkt. 1) ¶¶ 2, 6-7, 9.) These patients all assigned their insurance claims to Deajess, in exchange for being absolved from personal liability for the medical services they received. (Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss, filed March 12, 2004 ("Pl. Opp. Mem.") (Dkt. 12) at 4.) According to the Complaint, the assignments, which were made at the time the medical services were provided, are valid under the New York Motor Vehicle No-Fault Insurance Law. ( Id. at 5; Compl. at ¶ 10.)

Defendant Geico is an automobile insurance company with a principal place of business in Maryland (Compl. ¶ 3.) Geico refused to honor Deajess's claims for the services rendered to the policyholders. ( Id. ¶¶ 10-13.) Payments were denied for various reasons including, inter alia, peer reviews, failure to comply with fee schedules, denial by the policyholders of involvement in the alleged losses, failure to submit certain proofs, lack of medical necessity for the services rendered, failure of the patients to file timely notices of their injuries, and failure to demonstrate that certain claimed injuries were the result of automobile accidents. ( See Memorandum of Law in Support of Defendant's Motion to Dismiss ("Def. Mot. to Dismiss") filed Feb. 18, 2004 (Dkt. 10) at 5.)

On September 22, 2003, Deajess commenced this action to recover the unpaid claims. The individual claims at issue in the case range from about $900 to about $3,500. ( See rider attached to Compl.) Taken together, the claims total approximately $90,000. ( See id.) On February 18, 2004, Geico moved to dismiss the action on the ground that the aggregation of Deajess's individual claims was improper and that this Court therefore lacks subject matter jurisdiction over the action. (Notice of Motion to Dismiss filed Feb. 18, 2004 (Dkt. 9).)

DISCUSSION

A federal court has the power to entertain cases based on the diversity of citizenship between the plaintiff and defendant, provided that the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Under Rule 18 of the Federal Rules of Civil Procedure, an individual plaintiff may join all claims that he/she has against a single defendant. Fed.R.Civ.P. 18(a). To the extent that such joinder is proper, the value of each individual claim may be aggregated for the purpose of reaching the $75,000 threshold. See Wolde-Meskel v. Vocational Instruction Project Cmty. Servs., 166 F.3d 59, 62 (2d Cir. 1999) (citing Snyder v. Harris, 394 U.S. 332, 335 (1969)).

A district court, however, "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. Thus, although a single plaintiff may join — and aggregate the value of — claims assigned to it by third parties, it may not do so where the assignments were made collusively for the purpose of creating federal jurisdiction. Airlines Reporting Corp. v. S N Travel, Inc., 58 F.3d 857, 862 (2d Cir. 1995); see also Prudential Oil Corp. v. Phillips Petroleum Co., 546 F.2d 469, 475 (2d Cir. 1976) (noting that "Section 1359 should . . . be broadly construed to bar any improper attempt to create federal diversity jurisdiction"). The burden falls on the party asserting diversity to demonstrate that the reason for the assignments are legitimate, not pretextual. Airlines Reporting Corp., 58 F.3d at 863. Indeed, where the assertion of diversity jurisdiction is predicated on the assignment of a claim to a named plaintiff, the plaintiff must assert a compelling business reason for the assignment, "such that it is clear that the assignment would have been made absent the purpose of gaining a federal forum." Kades v. Organic, Inc., No. 00 Civ. 3671 (LTS) (RLE), 2003 WL 470331, at * 5 (S.D.N.Y. Feb. 24, 2003) (citing Ferrara v. Philadelphia Labs. Inc., 272 F. Supp. 1000, 1007-08, aff'd, 393 F.2d 934 (2d Cir. 1967)).

In a number of the virtually identical cases filed by plaintiff's counsel in this Court ( see n. 2, supra), several judges have now examined the types of arguments raised here by Geico. See Boston Post Rd. Med. Imaging v. Allstate Ins. Co., 221 F.R.D. 410 (S.D.N.Y. 2004); Boston Post Rd. Med. Imaging v. Allstate Ins. Co., No. 03 Civ. 6150 (SAS), 2004 WL 830154 (S.D.N.Y. Apr. 13, 2004); Boston Post Rd. Med. Imaging v. Allstate Ins. Co., 03 Civ. 3923 (RCC) (Apr. 19, 2004); Preferred Med. Imaging v. Geico Gen. Ins. Co., No. 03 Civ. 8726 (NRB) (Mar. 29, 2004); Deajess Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6635 (NRB) (Mar. 11, 2004); Boston Post Rd. Med. Imaging v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH) (Mar. 9, 2004); Boston Post Rd. Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6156 (HB) (Feb. 21, 2004); Preferred Med. Imaging v. Allstate Ins. Co., 03 Civ. 6638 (VM) (Feb. 17, 2004). In these cases, the Court has considered the legitimacy of aggregating insurance claims to gain diversity jurisdiction in either the context of a motion to dismiss, see, e.g, Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3; Boston Post Rd. Med. Imaging v. Allstate Ins. Co., 03 Civ. 3923 (RCC); Preferred Med. Imaging v. Geico Gen. Ins. Co., No. 03 Civ. 8726 (NRB); Preferred Med. Imaging v. Allstate Ins. Co., 03 Civ. 6638 (VM), or in the context of a motion to sever the claims, see, e.g., Deajess Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6635 (NRB); Boston Post Rd. Med. Imaging v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH); Boston Post Rd. Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6156 (HB).

At this point, Geico has only moved to dismiss the Complaint based on the alleged impropriety of Deajess's aggregation of its claims, which Geico argues was based on assignments made for the sole purpose of obtaining federal jurisdiction. (Def. Mot to Dismiss at 2.) Deajess, however, maintains that aggregation is proper in this case because there were in fact legitimate business reasons for executing the assignments. (Pl. Opp. Mem. at 9.)

The factors that may be used to evaluate the legitimacy of the assignment of claims include: (1) whether the assignee had any previous connection with the claim assigned, (2) whether the assignee will remit any recovery to the assignor, (3) whether the assignor will actually control the conduct of the litigation, (4) when the assignment was made, (5) whether there was meaningful consideration for the assignment, and (6) the underlying purpose of the assignment. See, e.g, Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3; see also Airlines Reporting Corp., 58 F.3d at 863; Kades, 2003 WL 470331, at *5. Applying these factors here supports the conclusion that the assignments in this case were legitimate and that there was no collusive effort to transfer rights solely to obtain federal jurisdiction. See, e.g, Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3 (finding that the assignment of no-fault insurance benefits to plaintiff in exchange for medical services was not a collusive assignment made solely to create jurisdiction).

In determining a motion to dismiss for lack of subject matter jurisdiction, the Court must accept the material factual allegations in the complaint. Atlantic Mut. Ins. Co. v. Balfor Maclaine 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). In this case, there is no indication that Deajess and the patients who received services from Deajess had any prior dealings that would suggest a likelihood of collusion. The litigation arising out of these claims is being controlled by Deajess, not by the patients who assigned Deajess their claims and who no longer have any stake in the outcome. The assignments were apparently made at the time the services were rendered, which was before coverage was denied and any claims accrued, making collusion less likely. The patients received valid consideration for their assignments of rights, in that, in exchange for allowing Deajess to collect from Geico directly, the patients received medical services without becoming personally liable for their cost. Finally, the underlying purpose proffered by Deajess — 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, and there is no evidence that suggests that the assignments in question were made to invoke federal jurisdiction. See Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3 (analyzing an exactly analogous factual situation and holding that aggregation to meet the jurisdictional amount was proper); compare Airlines Reporting Corp., 58 F.3d at 864 (finding collusion in attempt to aggregate claims where the assignments were executed only after jurisdiction was challenged, no consideration was paid for the assignments, and there was an admission that the assignments were motivated by a desire to remain in federal court). In fact, it appears that the assignments were made here so that Deajess could bill the insurance company directly, instead of having to look to each individual patient for payment, and that the assignments would have been made absent the purpose of gaining a federal forum. See Kades, 2003 WL 470331, at *5.

There does not seem to be any dispute that Deajess is the real party in interest in this case. See, e.g., Boston Post Rd. Med. Imaging, 2004 WL 830154 at *3 (finding that the plaintiff was the real party in interest for purposes of determining diversity jurisdiction); Boston Post Rd. Med. Imaging v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH) (noting that "the assignment in this case is real").

Thus, all of the relevant factors weigh in favor of a finding that the assignments of insurance claims to Deajess were not made improperly or collusively to invoke the jurisdiction of the Court. Accordingly, the aggregation of claims is permissible to meet the $75,000 jurisdictional amount, and Geico's motion to dismiss the Complaint for lack of jurisdiction is denied.

The Court also notes, however, that other judges of this Court, upon reviewing similar cases, have determined that the individual insurance claims should be severed pursuant to Fed.R.Civ.P. 21, on the grounds that the individual claims would require independent findings of fact as to whether the medical procedure, in each patient's case, was medically necessary, or whether there were other individualized facts that affected the coverage determinations. See, e.g., Deajess Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6635 (NRB); Boston Post Rd. Med. Imaging v. State Farm Mut. Auto. Ins. Co., 03 Civ. 6643 (AKH). At least one judge of the Court, however, has determined that the best way to deal with the type of situation presented here is to divide the claims into subgroups, based on the reasons for the denial of the claims. See Boston Post Rd. Med. Imaging v. Travelers Prop. Cas. Ins. Co., 03 Civ. 6156 (HB). Although a court may sua sponte sever claims and then dismiss for lack of jurisdiction, see, e.g, Preferred Med. Imaging v. Allstate Ins. Co., 03 Civ. 6638 (VM), the Court declines to do so at this time, because neither party has had the opportunity to address the issues of particular relevance to severance. This Court will, however, entertain a motion to sever the claims, if Geico wishes to make one. See, e.g., Boston Post Rd. Med. Imaging v. Allstate Ins. Co., 03 Civ. 3923 (RCC).

In making a discretionary decision as to whether to sever claims, the Court should consider: (1) whether the claims arise out of the same transaction or occurrence; (2) whether the claims present common issues of law or fact; (3) whether settlement of the claims of judicial economy would be facilitated; (4) whether prejudice would be avoided if severance were granted; and (5) whether different witnesses and documentary proof are required for the separate claims." Preferred Med. Imaging v. Allstate Ins. Co., 03 Civ. 6638 (AKH) (quoting In re Merrill Lynch Co. Inc. Research Reports Secs. Litig., 214 F.R.D. 152, 154-55 (S.D.N.Y. 2003)).

CONCLUSION

For all of the foregoing reasons, Geico's motion to dismiss for lack of subject matter jurisdiction is denied. However, notwithstanding the fact that this Court has jurisdiction over the matter, the Court will entertain a motion to consider whether the consolidated adjudication of all of Deajess's claims is appropriate, or whether the claims should be severed. If Geico wishes to proceed with such a motion, it should serve and file its motion no later than September 3, 2004. Deajess shall respond to any such motion no later than October 8, 2004, and Geico shall file its reply, if any, no later than October 22, 2004.

SO ORDERED.