STATE OF NY BY ABRAMS v. General Motors Corp.
Decision Date | 21 September 1982 |
Docket Number | No. 82 Civ. 2600 (GLG).,82 Civ. 2600 (GLG). |
Citation | 547 F. Supp. 703 |
Parties | STATE OF NEW YORK, by Robert ABRAMS, Attorney General of the State of New York, Plaintiff, v. GENERAL MOTORS CORPORATION, Defendant. |
Court | U.S. District Court — Southern District of New York |
Robert Abrams, Atty. Gen. of N. Y., New York City , for plaintiff.
Simpson Thacher & Bartlett, New York City (Roy L. Reardon, Bruce D. Angiolillo, Michael J. Chepiga, New York City, of counsel), and Otis M. Smith, Gen. Counsel, Detroit, Mich. (Louis H. Lindeman, Jr., Detroit, Mich., of counsel), for defendant.
This action arises from consumer complaints about alleged defects in the General Motors (GM) Turbo Hydra-Matic 200 automatic transmission (THM 200). Suing under section 63(12) of the New York Executive Law,1 the State of New York, by its Attorney General, alleges that GM has engaged in "repeated and persistent fraudulent and illegal business practices in connection with its sale, warranting, and repair of automobiles equipped with the THM 200." Complaint ¶ 3. It seeks restitution for aggrieved consumers and various forms of injunctive relief.
The State originally commenced this action in New York State Supreme Court on March 24, 1982.2 Shortly thereafter, GM removed the case to this Court on the basis of diversity of citizenship. Before this Court is the State's motion to remand the case on the ground that diversity jurisdiction does not exist. See 28 U.S.C. § 1447(c) (1976).
It is well established that a state is not a citizen for diversity purposes. Moor v. County of Alameda, 411 U.S. 693, 717, 93 S.Ct. 1785, 1799, 36 L.Ed.2d 596 (1973); Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493, 498 n. 3, 91 S.Ct. 1005, 1009 n. 3, 28 L.Ed.2d 256 (1971). It is equally well established, however, that the citizenship of a nominal or formal party is disregarded in determining the existence of diversity; only those with a real and substantial interest in the controversy are considered. Navarro Savings Association v. Lee, 446 U.S. 458, 460-61, 100 S.Ct. 1779, 1781-82, 64 L.Ed.2d 425 (1980); see 6 C. Wright & A. Miller, Federal Practice and Procedure § 1556 (1971). This is the principle underlying the removal from state court. GM argues that the State of New York is merely a nominal party representing the interests of New York consumers who allegedly have been defrauded by GM's actions concerning the THM 200. Thus, according to GM, diversity exists because the real plaintiffs are citizens of New York and the defendant, GM, is a citizen of Delaware and Michigan. The State, on the other hand, argues that it has a real interest in this controversy, and thus, that a remand is warranted because the Court does not have diversity jurisdiction.3 An examination of the nature and effect of this lawsuit leads this Court to agree with the State.
As noted above, the State brought this action in response to numerous complaints about the THM 200. Essentially, it seeks three types of relief.4 First, it seeks redress for those who have already purchased automobiles equipped with the THM 200. Second, it seeks to protect prospective purchasers of automobiles equipped with the THM 200 by requiring full disclosure, prior to purchase, of the defects in and problems with the THM 200. Finally, it seeks to protect prospective purchasers of all GM vehicles by requiring disclosure of all known defects in or problems with vehicles as well as the existence of any significant new part, component, or system design. The purpose of seeking this wide-ranging relief is not merely to vindicate the interests of a few private parties. Rather, it is to take a step toward eliminating fraudulent and deceptive business practices in the marketplace. Indeed, the State believes that imposition of the requested sanctions would have the effect of requiring all manufacturers to inform prospective purchasers of known defects in or problems with a part or design. Memorandum of Law in Support of the State's Motion to Remand at 6 ( ). This would enhance the economic well-being of all, not merely a few, New York consumers.
The State's goal of securing an honest marketplace in which to transact business is a quasi-sovereign interest.5Kelley v. Carr, 442 F.Supp. 346, 356-57 (W.D.Mich.1977) (). See generally Ohralik v. Ohio State Bar Association, 436 U.S. 447, 462, 98 S.Ct. 1912, 1921, 56 L.Ed.2d 444 (1978) ( ). As such, it is sufficient to preclude characterizing the state as a nominal party without a real interest in the outcome of this lawsuit. In Eure v. NVF Co., 481 F.Supp. 639 (E.D.N.C. 1979), for example, the court held that the state was a real party in interest in a suit by the North Carolina Secretary of State to compel compliance with the North Carolina Tender Offer Disclosure Act. Rejecting the defendants' argument that the state was merely a representative of the management of the target company, the court noted that the state had an independent interest in, inter alia, ensuring "aboveboard dealings in the purchase of stock." Id. at 642; accord, Illinois ex rel. Scott v. Hunt International Resources Corp., 481 F.Supp. 71 (N.D.Ill. 1979) ( ); see also Glenmede Trust Co. v. Dow Chemical Co., 384 F.Supp. 423, 430-32 (E.D.Pa. 1974). But see Louisiana ex rel. Guste v. Fedders Corp., 524 F.Supp. 552 (M.D.La. 1981) ( ); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cavicchia, 311 F.Supp. 149 (S.D.N.Y.1970) ( ).6
This conclusion is not altered by the State's decision to seek restitutionary relief and damages on behalf of those who allegedly have been defrauded by GM. Recovery of damages for aggrieved consumers is but one aspect of the case. The focus is on obtaining wide-ranging injunctive relief designed to vindicate the State's quasi-sovereign interest in securing an honest marketplace for all consumers. That recovery on behalf of an identifiable group is also sought should not require this Court to ignore the primary purpose of the action and to characterize it as one brought solely for the benefit of a few private parties. See Illinois ex rel. Scott v. Hunt International Resources Corp., supra.7
This is, in all respects, the State's action. It is the State's quasi-sovereign interest that is being protected in this action. It is the State, not the purchasers of GM automobiles equipped with the THM 200, that controls this action. See 6 C. Wright & A. Miller, supra, § 1556, at 713 ( ). It is the State that will be bound by the results of this action. It is, therefore, logical to conclude that the State is not merely a nominal party. Accordingly, the State's motion to remand this case to the New York Supreme Court, New York County, is granted. The Clerk will enter the appropriate remand order.
SO ORDERED.
1 New York Executive Law § 63(12) provides, in part, that
whenever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages and, in an appropriate case, cancelling any certificate filed under and by virtue of the provisions of section four hundred forty of the former penal law or section one hundred thirty of the general business law, and the court may award the relief applied for or so much thereof as it may deem proper.
2 All actions brought pursuant to New York Executive Law § 63(12) must be commenced in New York State Supreme Court. N.Y. Exec.Law § 63(12) (McKinney 1982); see note 1 supra.
3 Alternatively, the State argues that, even if it is not a real party in interest, diversity is lacking because the alleged real parties in interest (consumers who bought cars equipped with the THM 200 in New York) include citizens of Michigan and Delaware, the states of GM's citizenship. The State also argues that, if the individual consumers are the only real parties in interest, the amount in controversy requirement for diversity jurisdiction has not been met because each individual claim...
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