Raphael v. 18 Restaurant, Inc.

• Decision Date: 17 June 1996
• Docket Number: No. 95-CV-4228 (JRB).,95-CV-4228 (JRB).
• Citation: 954 F.Supp. 549
• Parties: Remy RAPHAEL, Plaintiff, v. 18 RESTAURANT, INC. d/b/a Dunkin Donuts, National Restaurant Management, Inc. d/b/a Dunkin Donuts, Dunkin Donuts Inc., and Hobart Corporation, Defendants. HOBART CORPORATION, Third-Party Plaintiff, v. 18 RESTAURANT, INC. d/b/a Dunkin Donuts, National Restaurant Management, Inc. d/b/a The Riese Operation, d/b/a Dunkin Donuts, Dunkin Donuts Inc., Third-Party Defendants.
• Court: U.S. District Court — Eastern District of New York

954 F.Supp. 549

Remy RAPHAEL, Plaintiff, v. 18 RESTAURANT, INC. d/b/a Dunkin Donuts, National Restaurant Management, Inc. d/b/a Dunkin Donuts, Dunkin Donuts Inc., and Hobart Corporation, Defendants.

HOBART CORPORATION, Third-Party Plaintiff, v. 18 RESTAURANT, INC. d/b/a Dunkin Donuts, National Restaurant Management, Inc. d/b/a The Riese Operation, d/b/a Dunkin Donuts, Dunkin Donuts Inc., Third-Party Defendants.

No. 95-CV-4228 (JRB).

United States District Court, E.D. New York.

June 17, 1996.

Christopher J. Smith, Davis & Smith, New York City, for Raphael.

Saul Wilensky, Lester Schwab Katz & Dwyer, New York City, for Hobart Corp.

Brian McCaffrey, Law Offices of Michael J. Ross, Esq., New York City, for 18 Restaurant, Inc.

Bruce A. Lawrence, Law Offices of Bruce A. Lawrence, Brooklyn, NY, for National Restaurants Management, Inc.

DECISION-MEMORANDUM AND ORDER

BARTELS, District Judge.

Plaintiff Remy Raphael ("Raphael") filed the instant action in New York State Supreme Court, Kings County, on September 26, 1995, alleging that he sustained personal injuries due in part to the negligence of Defendants 18 Restaurant, Inc. ("18 Restaurant"), National Restaurant Management, Inc. ("National Restaurant"), and Dunkin Donuts Incorporated ("Dunkin Donuts") (collectively "employer-defendants"), and in part to a defective product manufactured by Defendant Hobart Corporation ("Hobart"). On October 17, 1995, Hobart removed the case to this Court based on diversity jurisdiction. Raphael now moves to remand to state court, maintaining that removal was improper and diversity is lacking. For the reasons set forth below, Raphael's motion is granted.

DISCUSSION

The central issue before the Court is whether diversity jurisdiction exists and the matter therefore is properly before it, or on the other hand, whether diversity is lacking and the case must be remanded to state court. In order to resolve this issue, the Court must first determine when removal based upon diversity is possible. Second, if complete diversity is not present, the Court must determine whether federal jurisdiction is still proper under the principle of "fraudulent joinder", whereby parties which would otherwise defeat diversity do not, because the non-diverse parties are found to be nominal or sham parties. To determine whether parties are fraudulently joined, the Court must determine whether or not there is a viable theory under which Raphael may recover against the parties alleged to be fraudulently joined.

Jurisdictional Standard

A defendant may remove a case under 28 U.S.C. § 1441(a) from state to federal court if the federal district court has original jurisdiction. As Hobart here alleges diversity jurisdiction under 28 U.S.C. § 1332(a)(1) as the source of original jurisdiction, the amount in controversy must exceed $50,000¹ and the parties must be citizens of different states. Removal is limited under 28 U.S.C. § 1441(b) to situations in which no defendant is a citizen of the forum state. Although generally all defendants must join the petition for removal, Fletcher v. Hamlet, 116 U.S. 408, 410, 6 S.Ct. 426, 426-27, 29 L.Ed. 679; Bradford v. Harding, 284 F.2d 307, 309 (2d Cir.1960); Rosendale v. Citibank, N.A., Dkt. 94 Civ. 8591, 1995 WL 329296, at *2 (S.D.N.Y. June 1, 1995), nominal defendants need not consent to removal, Avon Prods., Inc. v. A/J Partnership, No. 89 Civ. 3743, 8032, 1990 WL 422416, at *2 (S.D.N.Y. Mar. 1, 1990), and will not defeat diversity jurisdiction, WMW Machinery Co. v. Koerber A.G., 879 F.Supp. 16, 17 (S.D.N.Y.1995). The party seeking removal squarely bears the burden of proving jurisdiction by competent proof. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); United Food & Commercial Workers Union, Local 919 v. CenterMark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994); R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir.1979).

Defeating Diversity

In cases where there are multiple parties, complete diversity is necessary, Israel v. Carpenter, No. 95 Civ. 2703, 1995 WL 640534, at *2 (S.D.N.Y. Oct. 31, 1995), although as noted above, citizenship of nominal parties is not considered. Pepsico v. Wendy's Int'l, 118 F.R.D. 38, 45 (S.D.N.Y.1987).

To determine whether a defendant is merely nominal or fraudulently joined and thus will not defeat diversity despite being a resident defendant, the inquiry focuses on whether the plaintiff truly intended to obtain a judgment against that defendant. New York Shipping Ass'n v. Int'l Longshoremen's Ass'n, 276 F.Supp. 51, 53 (S.D.N.Y.1967) (citing 1 Moore's Federal Practice ¶ 0.161[2]); see, Ford v. Elsbury, 32 F.3d 931, 935 (5th Cir.1994). A defendant is clearly nominal if the plaintiff fails to state a cause of action against the resident defendant and the failure is obvious according to the settled rules of the state. American Mutual Services Corp. v. U.S. Liability Ins. Co., 293 F.Supp. 1082, 1084 (E.D.N.Y.1968). Conversely, however, if there is a real possibility that the plaintiff has stated a cause of action, then the defendant is not nominal, and the case should be remanded. American Renaissance Lines, Inc. v. Saxis Steamship Co., 277 F.Supp. 731, 733-34 (E.D.N.Y.1967). The movant bears a heavy burden of persuasion to show that a party is nominal. McKay v. Point Shipping Corp., 587 F.Supp. 41, 42-43 (S.D.N.Y.1984); Ford, 32 F.3d at 935; B., Inc. v. Miller Brewing Co., 663 F.2d 545, 549 (5th Cir.1981).

Corporate Citizenship

In order to find whether diversity jurisdiction is present, the citizenship of each party must be determined. A corporation finds itself a citizen of "any state by which it has been incorporated and of the state where it has its principal place of business." 28 U.S.C. § 1332(c)(1); see also, Wm. Passalacqua Builders v. Resnick Developers, 933 F.2d 131, 141 (2d Cir.1991); In re Joint Eastern and Southern Districts Asbestos Litigation, No. 87-CV-0537, 1990 WL 129194, at *2 (E. & S.D.N.Y. Aug. 30, 1990).

The principal place of business of a corporation is determined by one of two multi-factored judicial tests, the "nerve center test" or the "place of the activities/public impact test", depending upon whether the corporation's operations are spread across numerous states or centralized in a more local area. R.G. Barry Corp., 612 F.2d at 654-55; In re Asbestos Litigation at *2-3; Powers v. Fox Television Stations, 907 F.Supp. 719, 721-22 (S.D.N.Y.1995).

Citizenship of the Parties

A. Raphael

Mr. Raphael's citizenship is not in dispute. He is an individual who lives in Kings County, New York and thus is a citizen of New York for diversity purposes. 28 U.S.C. § 1332(a)(1).

B. National Restaurant, Dunkin Donuts and Hobart

Very little evidence has been put forth regarding the citizenship of the above corporate defendants, although the parties seem only to dispute the citizenship of Hobart at this time.

In its papers accompanying the motion to remand, Raphael relies upon three documents bearing the letterhead of the New York Department of State to establish the citizenship of National Restaurant, Dunkin Donuts and Hobart. Each of these one page letters contains similar language, namely:

NATIONAL RESTAURANTS, INC. a DELAWARE corporation received authority to do business in New York State on 03/08/1962. Its principal location is NEW YORK County. (Motion to Remand, Ex. E).

Only the names of the corporations and the date authority to do business was granted vary. All three letters state that Delaware is the place of incorporation for each corporation and that the "principal location is NEW YORK County." Raphael offers this evidence as proof that the three corporations' principal place of business is New York, and that diversity is thus destroyed, mandating remand.

The Court finds this logic unpersuasive. Although a corporation's state of incorporation is subject to easy definition and therefore registration with the Department of State, the determination of the principal place of business results from the application of one of two multi-factored judicial tests. From the context of the letters, it is clear that the notation of New York County as each of the three corporations' "principal location" is meant only to indicate where, in New York, the corporations may be found. This conclusion is furthered by the fact that all of the letters include a "service of process address" in New York County, and that two of the letters include a "registered agent address" there as well. Thus, although the letters indicate the state of incorporation for National Restaurant, Dunkin Donuts and Hobart as Delaware, the Court does not have sufficient information before it to determine the principal place of business of each defendant at this time. To determine this question would normally require a hearing. In this case, however, because 18 Restaurant's citizenship defeats diversity singlehandedly, as will be discussed below, a hearing is not necessary to determine the complete citizenship of every party.²

C. 18 Restaurant

Although Raphael did not submit the Secretary of State's letter regarding 18 Restaurant, he does attach 18 Restaurant's certificate of incorporation which indisputably shows that it is incorporated pursuant to New York law. Thus, regardless of its principal place of business, it is a citizen of New York for diversity purposes and complete diversity between Raphael and the defendants is lacking because Raphael is also a New York citizen. Therefore, the Court must decide whether 18 Restaurant is a nominal defendant and has been fraudulently joined in the action and thus its citizenship should be disregarded for the purposes of deciding the remand motion.

Fraudulent Joinder

As noted above, a removal petition must be joined by all defendants unless some of those defendants are nominal parties, named only to defeat diversity, in which case those defendants will prevent...