{"id":2520,"date":"2025-11-04T09:37:10","date_gmt":"2025-11-04T13:37:10","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=2520"},"modified":"2025-11-04T09:37:10","modified_gmt":"2025-11-04T13:37:10","slug":"new-york-state-court-of-mind-new-york-federal-court-remands-allstate-data-breach-case-to-state-court-for-lack-of-federal-question-jurisdiction","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2025\/11\/04\/new-york-state-court-of-mind-new-york-federal-court-remands-allstate-data-breach-case-to-state-court-for-lack-of-federal-question-jurisdiction\/","title":{"rendered":"New York State (Court) Of Mind: New York Federal Court Remands Allstate Data Breach Case To State Court For Lack Of Federal Question Jurisdiction"},"content":{"rendered":"
\n
\"\"<\/a><\/figure>\n<\/div>\n\n\n

By Gerald L. Maatman, Jr., Ryan T. Garippo, and Elizabeth G. Underwood<\/strong><\/p>\n\n\n\n

Duane Morris Takeaways:<\/em><\/strong> On October 28, 2025, Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York granted <\/a>the People of the State of New York\u2019s (the \u201cState\u201d) motion to remand in New York v. Nat\u2019l Gen. Holdings Corp., No. 25 Civ. 03608, 2025 U.S. Dist. LEXIS 212731 (S.D.N.Y. Oct. 28, 2025).\u00a0 The State alleged that National General Holdings Corporation violated various state laws related to data protection programs and notifications to affected individuals when data breaches in 2020 and 2021 exposed the corporation\u2019s customer information.\u00a0 This case reinforces the concept that a plaintiff is indeed the master of the complaint and can strategically craft their complaint to ensure that a case is litigated in state court.<\/em><\/p>\n\n\n\n

Case Background<\/strong><\/p>\n\n\n\n

The State sued Allstate Insurance Company when one of its units, National General Holdings Corporation (the \u201cDefendants\u201d), was involved in two data breaches in 2020 and 2021, exposing nearly 200,000 consumers\u2019 drivers\u2019 license numbers to hackers.  The State alleged that the Defendants failed to protect customers\u2019 sensitive information and did not inform customers that their data was stolen.<\/p>\n\n\n\n

Importantly, the complaint did not assert any cause of action under federal law.  Instead, the complaint alleged that the Defendants violated three federal statutes, including the Gramm-Leach-Bliley Act (\u201cGLBA\u201d), the Health Insurance Portability and Accountability Act (\u201cHIPAA\u201d), and the Health Information Technology for Economic and Clinical Health Act (\u201cHITECH\u201d).  The State brought the action against the defendants pursuant to New York State General Business Law (\u201cGBL\u201d) \u00a7\u00a7 349, 350, 899-aa, and 899-bb, and New York Executive Law \u00a7 63(12).<\/p>\n\n\n\n

Based on the inclusion of allegations that they violated federal law, the Defendants removed the action to the U.S. District Court for the Southern District of New York pursuant to 28 U.S.C. \u00a7\u00a7 1331 and 1441, invoking the Court\u2019s ability to decide a federal question.  The State, however, moved to remand the case and for attorney\u2019s fees incurred due to the removal.<\/p>\n\n\n\n

Magistrate Judge Robert Lehrburger concluded in a report and recommendation that the Court lacked federal subject matter jurisdiction to hear the case because the causes of action (1) were not created by federal law and (2) did not satisfy the standard set forth in Gunn v. Minton<\/em>, 568 U.S. 251 (2013), and Grable & Songs Metal Products, Inc. v. Darue Engineering & Manufacturing<\/em>, 545 U.S. 308 (2005) (the \u201cGunn-Grable<\/em>\u201d test).  ECF 55.  Under the Gunn-Grable<\/em> test, federal question jurisdiction exists only when a federal issue is \u201c(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.\u201d  Gunn<\/em>, 568 U.S. at 258.<\/p>\n\n\n\n

In his report and recommendation, Magistrate Judge Lehrburger determined that the third element as to whether a federal issue was \u201csubstantial\u201d was not satisfied.  This inquiry looks to \u201cthe importance of the issue to the federal system as a whole,\u201d not just the issues of one case.  Id.<\/em> at 260.  In this case, the Defendants argued that the substantiality requirement was met because of the substantial federal interests in data privacy and national security; however, Magistrate Judge Lehrburger found these arguments were unpersuasive and recommended that the Court remand the case but not award attorney\u2019s fees to the State.<\/p>\n\n\n\n

The Court\u2019s Opinion<\/strong><\/p>\n\n\n\n

In an opinion written by Judge Lewis Kaplan, the Court agreed with Magistrate Judge Lehrburger\u2019s reasoning and held that the case did not pass the Gunn-Grable<\/em> test.<\/p>\n\n\n\n

The Court determined that Magistrate Judge Lehrburger correctly rejected the Defendants\u2019 argument that the State\u2019s claims satisfy the Gunn-Grable<\/em> test as to the \u201csubstantiality\u201d element.  First, the Court found that the Defendants\u2019 argument as to whether the New York State Attorney General had the authority to enforce the federal GLBA was \u201centirely inapt\u201d because the complaint did not allege any GLBA claims.  Nat\u2019l Gen. Holdings Corp., <\/em>2025 U.S. Dist. LEXIS 212731, at *3.  Second, the Court held that the federal government\u2019s interest in data privacy was insufficient to meet the Gunn-Grable<\/em> test.  Third, the Court determined that the federal law questions implicated by the state law claims, including whether defendants are insulated from liability under state law if the defendants\u2019 data protection programs and data breach notification procedures were in compliance with federal law, \u201care inherently fact-intensive and therefore likely would not provide guidance in future cases.\u201d  Id. <\/em>at *4.<\/p>\n\n\n\n

Moreover, the Court also rejected the Defendants\u2019 argument that whether the GLBA preempts the New York Attorney General from bringing the state law claims is a substantial federal question, reasoning that the question was not \u201cnecessarily raised\u201d and that preemption is an affirmative defense that may not serve as the basis for subject-matter jurisdiction.  Id.<\/em> at 4\u20135.  Finally, the Court held that none of the three exceptions to the well-pleaded complaint rule applied because the Defendants did not assert the first two exceptions, and the third exception would have had to pass the Gunn-Grable<\/em> test, which it did not.<\/p>\n\n\n\n

Implications For Companies<\/strong><\/p>\n\n\n\n

Nat\u2019l Gen. Holdings Corp. <\/em>serves as a cautionary reminder of the uphill battles that corporate defendants often face to remove to and then keep bet-the-company litigation in federal court.<\/p>\n\n\n\n

Although it is not uncommon for a corporation to prefer \u201cfederal courts because it fears a corporate defendant . . . will not get a fair trial in state court,\u201d the road to get there is not always guaranteed.  See, e.g., Hosein v. CDL West 45th Street, LLC<\/em>, No. 12 Civ. 06903, 2013 WL 4780051, at *3 (S.D.N.Y. June 12, 2013).  As on display here, the Nat\u2019l Gen. Holdings Corp. <\/em>opinion shows that corporate defendants may not even get to litigate in a federal forum even when there are allegations that they violated federal law.<\/p>\n\n\n\n

As a result, corporate counsel should be aware that relying on a state law claim involving an embedded federal issue, as the basis for federal subject-matter jurisdiction, may not be successful in 100% of cases, but it may be worth a chance to attempt to remove the case to federal court if it is the company\u2019s only opportunity to obtain a fair trial.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr., Ryan T. Garippo, and Elizabeth G. Underwood Duane Morris Takeaways: On October 28, 2025, Judge Lewis A. Kaplan of the U.S. District Court for the Southern District of New York granted the People of the State of New York\u2019s (the \u201cState\u201d) motion to remand in New York v. Nat\u2019l Gen. … <\/p>\n

Continue reading “New York State (Court) Of Mind: New York Federal Court Remands Allstate Data Breach Case To State Court For Lack Of Federal Question Jurisdiction”<\/span><\/a><\/p>\n","protected":false},"author":575,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[91],"tags":[],"ppma_author":[7,127,149],"class_list":["post-2520","post","type-post","status-publish","format-standard","hentry","category-data-breach-class-actions"],"authors":[{"term_id":7,"user_id":575,"is_guest":0,"slug":"gmaatman","display_name":"Gerald L. Maatman, Jr.","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/maatmangerald-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":127,"user_id":692,"is_guest":0,"slug":"rgarippo","display_name":"Ryan Garippo","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2024\/09\/garipporyan-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":149,"user_id":744,"is_guest":0,"slug":"eunderwood","display_name":"Elizabeth Underwood","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2025\/10\/underwoodelizabeth-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/2520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/575"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=2520"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/2520\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=2520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=2520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=2520"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=2520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}