The plaintiffs in Durow v. General Motors Corp., 2008 U.S. Dist. LEXIS 31965 (W.D.N.Y. April 17, 2008), sued GM and a New York GM dealer in state court for injuries suffered when the driver side airbag deployed for no reason while one of the plaintiffs was driving. The defendants removed claiming that the dealer was fraudulently joined because the only claim asserted against it was spoliation, a claim that the New York Court of Appeals has expressly rejected (see Ortega v. City of New York, 2007 NY Slip Op 7741; 2007 N.Y. LEXIS 2715 (Ct. App. Oct. 16, 2007) (discussed in our post of October 19, 2007). The Court applied the Second Circuit standard for fraudulent joinder: "In order to show that naming a non-diverse defendant is a 'fraudulent joinder' effected to defeat diversity, 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 the plaintiff can state a cause of action against the non-diverse defendant in state court" ( quoting Whitaker v. American Telecasting, Inc., 261 F.3d 196, 207 (2d Cir. 2001)). Because, however, it was the plaintiffs’ vehicle that was allegedly spoliated by the dealer, the Court held that the defendants had not shown there was no possibility that the plaintiffs could state a cause of action for conversion:

[C]onversion in New York ... is defined as "the 'unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights.'" Vigilant Insurance Company of America v. Housing Authority of the City of El Paso, Texas, 660 N.E.2d 1121, 1126 (N.Y. 1995) (quoting Employers' Fire Ins. Co. v. Cotten, 156 N.E. 629, 630 (N.Y. 1927)). "Two key elements of conversion are (1) plaintiff's possessory right or interest in the property and (2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights." Colavito v. New York Organ Donor Network, Inc., 860 N.E.2d 713, 717 (N.Y. 2006) (citing cases). Further, when the defendant's original possession of the alleged converted property is lawful, conversion does not occur until the defendant refuses to return the property upon demand, or disposes of the property, in which case no demand is necessary. Johnson v. Gumer, 464 N.Y.S.2d 318, 319 (4th Dep't 1983) (citing MacDonnell v. Buffalo, Loan, Trust & Safe Deposit Co., 85 N.E. 801, 803 (1908)). Here, the allegations of the Complaint, construed in favor of Plaintiffs ... fail establish that there is no possibility that Plaintiffs have stated a cause of action for conversion against Hartley, the non-diverse defendant, in state court.

The Court separately held that the apparent failure to serve the non-diverse defendant precluded removal absent a showing that the unserved defendant was fraudulently joined:

Nor does the fact that the record fails to establish that Hartley [the non-diverse dealer] was ever served support removal based on diversity jurisdiction. Although removal by a diverse defendant is not precluded by the fact that other defendants, also diverse, have yet to be served, where, as here, the unserved defendant is nondiverse, removal by the diverse defendant is not permitted absent a showing that the unserved and nondiverse defendant was fraudulently joined. Pullman Co. v. Jenkins, 305 U.S. 534, 540-41 (1939).