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Batoff v. State Farm Insurance Co.

argued: October 6, 1992.

STEPHEN B. BATOFF, PH.D., APPELLANT
v.
STATE FARM INSURANCE COMPANY, LEONARD M. PAUL, ED.D.



On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civ. No. 90-6420)

Before: Greenberg, Cowen, and Weis, Circuit Judges

Author: Greenberg

Opinion OF THE COURT

GREENBERG, Circuit Judge.

Stephen B. Batoff appeals from two orders in this action which he initiated in state court but which was removed to the district court. The first order, entered on January 15, 1992, dismissed the non-diverse defendant, appellee Leonard M. Paul, and denied Batoff's motion to remand the case to the state court for lack of complete diversity. The second order, entered on March 23, 1992, granted the motion of the remaining defendant, appellee State Farm Insurance Company, to dismiss under Fed. R. Civ. P. 12(b)(6). We find that the district court should not have dismissed Paul as a defendant and that it thus lacked subject matter jurisdiction. Accordingly, we will reverse the order of January 15, 1992, vacate the order of March 23, 1992, and remand the case to the district court with instructions in turn to remand the case to the state court in which it was originated.

I.

BACKGROUND

Batoff, a Pennsylvania citizen, is a licensed psychologist who treats individuals injured in motor vehicle accidents. A number of Batoff's patients are insured under automobile insurance policies with medical payment provisions issued by State Farm and have assigned to him their rights under their policies to be reimbursed for medical expenses. While Batoff has submitted his bills to State Farm under these provisions, State Farm has refused to pay some of them. State Farm, at least in part, has based its refusal on reports written by Paul, a psychologist in private practice, who is retained by State Farm to address questions relating to the appropriateness, necessity, and cost of psychological services rendered to State Farm insureds.

This refusal led Batoff to file a suit in the Court of Common Pleas of Philadelphia County, Pennsylvania, against State Farm, a citizen of Illinois, and against Paul, a citizen of Pennsylvania. In Count I of the complaint, Batoff contends that State Farm owes him $107,744 as assignee of his patients' rights to payment for medical expenses, and in this count he seeks compensation, costs, attorneys' fees, and punitive damages from State Farm. In Count II, Batoff seeks compensatory and punitive damages, costs, and attorneys' fees from State Farm and Paul for their alleged civil conspiracy to (1) deprive him of money due, (2) disparage and ruin his reputation, and (3) cause others to refrain from referring patients to him.*fn1

In Count III, Batoff alleges that State Farm breached its duty of fair dealing owed to him and its insureds, by (1) arbitrarily determining in advance not to pay his bills, (2) "employing as an expert Dr. Paul who is not competent, fair or unbiased," (3) "directing Dr. Paul to prepare" the misleading reports, and (4) distributing the reports to third persons with the intent to damage Batoff's reputation and injure his business. In this count, in which he seeks damages only from Paul, Batoff alleges:

Dr. Paul, by producing reports he knew to be

inaccurate find that he knew State Farm would use to justify its refusal to pay Dr. Batoff's bills and distribute to third persons with the intent to damage Dr. Batoff's reputation and injure his business breached the duty he owed to Dr. Batoff. [sic]

App. at 36.

On October 5, 1990, State Farm filed a notice removing the case to the United States District Court for the Eastern District of Pennsylvania. State Farm alleged in the notice that Paul is immune from suit and was joined by Batoff to defeat the diversity jurisdiction which the district court otherwise could exercise under 28 U.S.C. § 1332(a)(1).*fn2 On October 15, 1990, State Farm filed a motion in the district court to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief could be granted. In response, on October 23, 1990, Batoff filed a petition to remand the case to ...


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