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United States District Court, Middle District of Pennsylvania

March 15, 1991


The opinion of the court was delivered by: McCLURE, District Judge.



Plaintiff Pennsylvania House, Inc. ("Pennsylvania House") filed this diversity action*fn1 against defendants Nola Barrett, Edward Barrett and Laura Cruickshank to recover sums owed for furniture which it supplied to a retail furniture store, Heritage House Interiors, Inc., d/b/a Heritage House ("Heritage House"). Heritage House was owned and managed by the Barretts and had its principal place of business in Tampa, Florida.*fn2 The furniture was supplied pursuant to a "Gallery Agreement" executed by Pennsylvania House and Heritage House on February 1, 1989.*fn3

All three defendants signed indemnity agreements (and addenda thereto) personally agreeing to indemnify Pennsylvania House against any loss as a consequence of default or failure to pay by Heritage House. Both the indemnity agreement executed by the Barretts and the one executed by Cruickshank contain a forum selection clause which reads:

    This Agreement shall be construed under and in
  accordance with the law of the Commonwealth of
  Pennsylvania and in the event of default of any of
  the parties,

  it is agreed that should either party deem it
  necessary to enforce this Agreement or exercise
  rights under this Agreement through legal remedies,
  that venue will lie in Union County, Pennsylvania.

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis supplied.)

  The indemnity agreement signed by Cruickshank on September
15, 1988 recites her obligations as follows:

  d/b/a Heritage House, AND THE PARTY OF THE FIRST
  HOUSE BY REASONS OR ACTS OF Heritage House Intrs.
  d/b/a Heritage House.

    The PARTY OF THE FIRST PART [Cruickshank] hereby
  understands and agrees that Heritage House Intrs.
  d/b/a Heritage House obligation shall become
  effective upon the happening of any of the

    1.1 Upon default in payment of the whole debt
  hereby secured or any part thereof, as the same
  shall become due and payable.

. . . . [Paragraphs 1.2 and 1.3 omitted.]

    The entire debt then secure by this Indemnity
  Agreement shall at the option of PENNSYLVANIA
  HOUSE become immediately due and payable and the
  PARTY OF THE FIRST PART shall henceforth make
  immediate payment upon demand by PENNSYLVANIA

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis original.) Directly beneath Cruickshank's signature, the indemnity agreement further states: "THIS AGREEMENT SHALL BE IN EFFECT UNTIL THE GALLERY FINANCING DEBT OBLIGATION, INCLUDING INTEREST, HAS BEEN PAID IN FULL." (Plaintiff's complaint, filed June 4, 1990, Exhibit "C". Emphasis original.)

  The addendum to the indemnity agreement, also signed by
Cruickshank on September 15, 1988, states in relevant part:

      . . This Indemnity Agreement does constitute
  my personal guaranty for payment to Pennsylvania
  House. This guaranty will become effective upon
  the happening of any of the following:

    1. Default of any payment of any obligations by
  Heritage House Intrs. d/b/a Heritage House to
  Pennsylvania House.

    2. The breach of any contract by Heritage House
  Intrs. d/b/a Heritage House with Pennsylvania

. . . . [Paragraph 3 omitted.]

    4. Or for any of the terms or conditions as set
  forth in the Indemnity Agreement.

    We/I further understand that Pennsylvania House
  can require payment in full, from me/us personally
  and/or attach my/our personal assets in order to
  satisfy any obligations due Pennsylvania House by
  Heritage House Intrs. d/b/a Heritage House.

(Plaintiff's complaint, filed June 4, 1990, Exhibit "C".)

Heritage House subsequently defaulted on its payments and filed bankruptcy proceedings. Pennsylvania House then filed this action against all three indemnors to recover an outstanding balance of $426,505.78. The Barretts did not respond to the complaint, and default judgment was entered against them on December 7, 1990.

Before the court are two motions filed by the sole remaining defendant Laura Cruickshank: (1) a Rule 12(b) motion to dismiss plaintiff's complaint against her for lack of personal jurisdiction, lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted; and (2) a motion to quash service of process against her for lack of personal jurisdiction.


  A.  Rule 12(b)(2) motion to dismiss for lack of personal

Cruickshank argues that this court lacks personal jurisdiction over her. She states that she is currently a resident of Cincinnati, Ohio and has no contacts with Pennsylvania. She concedes the existence of a forum selection clause in the indemnity agreement designating Union County, Pennsylvania as the jurisdiction where venue lies, but argues that the clause is unenforceable on two grounds: (1) it refers only to venue, not in personam jurisdiction; and (2) ownership of Pennsylvania House was transferred after Cruickshank executed the indemnity agreement on September 15, 1988, and it now brings this action as "Pennsylvania House, a subsidiary of Ladd Furniture, Inc. ("Ladd"), a North Carolina corporation," and not in the capacity in which it executed the indemnity agreement, i.e. Pennsylvania House, a division of Chicago Pacific Corp. ("Chicago Pacific"). Pennsylvania House disputes both contentions and submits an affidavit from Robin Strauser, Credit Manager for Pennsylvania House, which states that the transfer of ownership "made absolutely no difference" in the relationship between Pennsylvania House and gallery dealers, such as Heritage House, and did not "otherwise materially" change the risk which Cruickshank assumed under the terms of the indemnity agreement.

Generally, if a non-resident defendant challenges in personam jurisdiction, the plaintiff bears the burden of proving that the defendant has the requisite minimum contacts*fn4 with the forum state. Compagnie des Bauxites de Guinee v. L'Union, 723 F.2d 357, 362 (3d Cir. 1983) and McKnight v. Civiletti, 497 F. Supp. 657 (E.D.Pa. 1980). "In actions involving forum selection clauses, however, analysis of the contacts with the forum state is inappropriate. Instead, the Court must consider the validity and effect of the forum selection clause in order to determine if there has been consent to in personam jurisdiction." Mutual Fire, Marine and Inland Insurance Company v. Barry, 646 F. Supp. 831, 833 (E.D.Pa. 1986) (applying Pennsylvania law). With some exceptions not applicable here,*fn5 the Third Circuit considers the interpretation of forum selection clauses to be governed by state law.*fn6 In re Diaz Contracting, Inc., 817 F.2d 1047, 1050 (3d Cir. 1987) (Higginbotham, J.) and General Engineering Corp. v. Martin Marietta Alumina, 783 F.2d 352, 356-57 (3d Cir. 1986).

Generally, in diversity cases, such as the case sub judice, a federal district court must apply the choice of law rules of the forum state to determine which state's choice of law rules apply. Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). However, if the parties have agreed on the law which governs interpretation of the contract, no analysis under the choice of law principles is required. Their agreement is controlling in the absence of fraud or some other circumstance which invalidates it. Snavely's Mill, Inc. v. Officine Roncaglia, S.P.A., 678 F. Supp. 1126, 1129 n. 3 (E.D.Pa. 1987) ("The enforceability of the forum selection clause is governed by the law which controls construction of the contract."). No such circumstance has been alleged here, so the parties' agreement that Pennsylvania law will govern*fn7 is controlling.

Under Pennsylvania law, forum selection clauses are prima facie enforceable and are negated only if the party challenging enforcement can show that operation of the clause will impose unreasonable restraints or burdens, or that it was not entered into freely. Mutual Fire, supra, 646 F. Supp. at 833 and Central Contracting Co. v. C.E. Youngdahl & Co., 418 Pa. 122, 133, 209 A.2d 810, 816 (1965). Operation of the clause is unreasonable only if litigating the action in the designated forum will seriously impede the objecting party's ability to fully and fairly pursue or defend the cause of action. A showing that the objecting party will have to tolerate some lesser inconvenience or annoyance (e.g. by incurring additional expenses) will not suffice. Something more than "mere inconvenience" must be demonstrated to negate the clause as unreasonable. Mutual Fire, supra, 646 F. Supp. at 833; Central Contracting, supra, 209 A.2d at 816; and Continental Bank v. Brodsky, 225 Pa. Super. 426, 311 A.2d 676 (1973). Cf. Churchill Corp. v. Third Century, Inc., 396 Pa. Super. 314, 578 A.2d 532, 536 (1990), (Pennsylvania Superior Court refused to interpret a "boilerplate" forum selection clause in office equipment lease agreements between Pennsylvania lessees and a Missouri corporation as divesting Pennsylvania courts of jurisdiction over a dispute between the lessees and the lessor, because, inter alia: requiring Pennsylvania lessees to litigate the dispute in the Missouri courts would "seriously impair" their ability to defend their interests — "Where it is more expensive to defend a cause of action than to pay a default judgment solely because of the location in which the matter is being adjudicated, litigation in the foreign forum is no longer a matter of mere inconvenience or additional expense; rather it rises to the level of serious impairment of the parties' ability to defend against the action.")

Cruickshank objects to enforcement of the forum selection clause on the basis that ownership of Pennsylvania House was transferred after she executed the agreement. She is arguing, essentially, that the change of ownership vitiated the agreement, although she phrases her argument in somewhat different terms.

Although the Pennsylvania appellate courts have not ruled on this precise issue, other courts which have done so have found, based on the application of general principles governing guaranty contracts, that a change of ownership of the creditor does not vitiate the guaranty, unless the change materially affects the risk assumed by the guarantor. Conversely, the guarantor is not liable if the underlying agreement is materially altered without his or her consent. A material alteration of the underlying obligation without the guarantor's consent operates as a discharge of his or her obligation.*fn8 United States Shoe Corp. v. Hackett, 793 F.2d 161 (7th Cir. 1986) (applying Wisconsin law); and Essex International, Inc. v. Clamage, 440 F.2d 547 (7th Cir. 1971) (applying Illinois law). Cf. Gritz Harvestore v. A. O. Smith Harvestore Products, 769 F.2d 1225, 1231 (7th Cir. 1985) (applying Wisconsin law) ("[A] compensated guarantor is not discharged unless there was a material alteration in the terms of the principal's obligation and unless that alteration works to the detriment of the guarantor; an uncompensated guarantor, on the other hand, may be discharged by any alteration in the principal's obligation regardless of whether he is prejudiced by the change.").

Essex, supra, is directly on point. Defendant Earl A. Clamage personally guaranteed payment of any balances owed for materials supplied by Greater Louisville Industries, Inc. ("Greater Louisville") to Monarch Products Corporation ("Monarch"). Clamage was the sole shareholder and chief executive officer of Monarch and signed a guaranty stating in relevant part:

    In consideration of Greater Louisville
  Industries having extended credit for materials
  that have been sold to or hereafter may be sold to
  Monarch. . . . I do hereby agree to personally
  guarantee and to pay on demand any sum or sums due
  or to become due Greater Louisville Industries,
  which remain unpaid after the due date thereof.

Essex, supra, 440 F.2d at 549. Greater Louisville subsequently sold its assets to Essex International, Inc. ("Essex") and thereafter, when Essex attempted to enforce the guaranty agreement, Clamage objected on the ground that it was not assignable. The district court disagreed and entered summary judgment against Clamage.

On appeal, the Seventh Circuit affirmed, refusing to "mechanically apply" the general rule of nonassignability of guarantees and stating that the "critical issue" was whether "the creditor-guarantee has attempted to impose on the guarantor an obligation which differs materially from that which he undertook to perform." Essex, supra, 440 F.2d at 551. If the assignment does not "materially alter" the risk undertaken by the guarantor, the court held, there is no reason to discharge the guarantor. The court explained:

    The rationale for the rule that a special
  guaranty is not assignable without the consent of
  the guarantor stems from the general contract
  principle that a man may be held only to the
  precise obligation he undertook. Variation between
  the terms of the guarantor's undertaking the
  dealings between the debtor and creditor-guarantee
  generally results in the discharge of the
  guarantor's obligation. . . .

    Illinois recognizes the general rule of
  nonassignability of guarantees. . . . (Citation
  omitted.). . . . However, the Illinois courts have
  refused to apply the rule mechanically; rather
  they examine the factual setting of each case to
  determine whether the policy underlying the rule
  is applicable. The result is that the guarantor is
  not discharged unless the 'essentials of the
  original contract have . . . been changed and the
  performance required of the principal is . . .
  materially different from the first contemplated .
  . .' (Citation omitted.) . . . An obvious example
  is presented where the only variation from the
  terms of the guaranty contract is a change in the
  name of the debtor corporation. . . . We think
  that the same result would clearly be reached if
  the creditor corporation changed its name. Cf.
  Glassine Paper Company v. Shannon, 238 F.2d 765 (2d
  Cir. 1956).

    A potentially more substantial variation from
  the precise terms of a guaranty is presented when
  the creditor-guarantee named in the instrument is
  involved in a merger or consolidation under
  statute. In that event the surviving corporation
  takes over the rights and obligations of the
  merging corporation by operation of law. But a
  merger or consolidation involving the creditor
  corporation does not necessarily discharge a
  guarantor any more than a mere change in corporate
  name does. Unless there is some material change in
  the business dealings between the debtor and the
  creditor-guarantee and some increase in the risk
  undertaken by the guarantor, the obligation of the
  guarantor is not discharged.

Essex, supra, 440 F.2d at 549-551.

Applying these concepts to the case before it, the court found that Essex' purchase of Greater Louisville's assets

  in no way altered the obligation which Clamage had
  undertaken. Greater Louisville remained a distinct
  business entity after the sale and carried on its
  business in substantially the same manner. The
  Fetters remained in charge in Greater Louisville
  and Clamage continued

  to deal with them personally. In fact, Clamage
  even continued to use the name 'Greater
  Louisville' in his purchase orders. Clamage was
  aware of the sale of Greater Louisville's assets
  shortly after it took place and he admits that he
  did not notice any change in Greater Louisville's
  business dealings with him.

Essex, supra, 440 F.2d at 549-551. See also: Continental Ozark, Inc. v. Lair, 29 Ark. App. 25, 779 S.W.2d 187, 189 (1989) ("[T]he sale of an interest or change in ownership of a corporation does not in and of itself operate to extinguish the guarantor's obligation. . . . [T]he question of whether the guarantor has been discharged is dependent on the facts, and whether there has been a material alteration of the surety contract.") and Anstalt v. F.I.A. Insurance Co., 749 F.2d 175, 180 (3d Cir. 1984), (applying New Jersey law) (The issue was whether a surety which guaranteed the performance of a seller of goods issuing a bond for the benefit of the buyer remained liable when the parties to the underlying contract substituted a different buyer. There were no New Jersey cases on point, but the Third Circuit predicted that the Supreme Court of New Jersey would hold that a compensated surety would not be discharged from its obligation because of an alteration in the underlying contract that was not material and did not increase the surety's risk or otherwise cause it to suffer harm, and that New Jersey law would permit the obligee to assign a surety's bond if the assignment did not prejudice the surety.)

Although there are no Pennsylvania cases addressing the issue of whether a guaranty remains enforceable if the structure or legal status of the creditor changes, there is case law supporting the proposition that changes in the underlying agreement do not vitiate a guaranty agreement unless they are material and are made without the guarantor's consent. In Massey-Ferguson, Inc. v. Finocchiaro Equipment Co., Inc., 496 F. Supp. 655 (E.D.Pa. 1980), (applying Pennsylvania law), aff'd without a published opinion, 649 F.2d 859 (3d Cir. 1981), the court was confronted with a scenario in which after the defendant/guarantor signed a guaranty agreement — acknowledging personal responsibility for the debts of a sole proprietorship operated by her husband, her husband converted the business from a sole proprietorship to a corporation. The court rejected the wife's argument that this change automatically vitiated her guaranty agreement, stating:

  Despite the change in the structure of the
  enterprise from sole proprietorship to
  corporation, the equipment company always remained
  completely identifiable with Finocchiaro. . . . I
  perceive no manifest injustice to Marion
  Finocchiaro in holding that her guaranty extended
  to the debts of the corporation under the
  circumstances presented here. . . . Because the
  sole proprietorship had already begun expanded
  operations, the incorporation of the equipment
  company did not materially change the nature of
  Finocchiaro's enterprise. Similarly, the simple
  expedient of incorporation did not automatically
  release Marion Finocchiaro from liability on her
  guaranty because the change in the nature of the
  business entity did not work a material change in
  the nature of her undertaking on the guaranty.

The district court rejected the reasoning of cases compelling a different result in which the court failed "to look beyond the formal change in the principal debtor as effecting a release of the guarantor"*fn9 as elevating "form over substance" Massey-Ferguson, supra, 496 F. Supp. at 662.

  Applying these principles to the case before us, we find that
plaintiff has sufficiently demonstrated that the changes in
corporate ownership of Pennsylvania House*fn10 did not
materially alter its guaranty

agreement with Cruickshank or increase the risk she assumed
thereunder. In opposition to Cruickshank's motion to dismiss
for lack of personal jurisdiction, Pennsylvania House submitted
an affidavit by its credit manager, Robin Strauser. Strauser
attests to the following facts.*fn11

    . . The legal structure of Pennsylvania House's
  ownership . . . has made absolutely no difference
  in the manufacture and sale of the Pennsylvania
  House line of traditional furniture, the
  relationship between Pennsylvania House and its
  gallery dealers, and the criterion or terms and
  conditions upon which it accepts a retailer as
  gallery dealer and extends credit to the gallery
  dealers. During my entire association with
  Pennsylvania House (division or corporation),
  Pennsylvania House has operated as an autonomous

    The operations of Pennsylvania House as it
  existed when Pennsylvania House was a division of
  Chicago Pacific were not changed upon transfer of
  those operations of Maytag Corporation or upon
  transfer of those operations to Pennsylvania
  House, Inc. The decision to allow Heritage House
  to become a gallery and to obtain Pennsylvania
  House furniture on credit has been based on the
  same criterion at all times since the Gallery
  Agreement and the Indemnity agreements were
  presented to and accepted by Pennsylvania House.
  Nothing has occurred in the relationship between
  Pennsylvania House and Heritage House subsequent to
  the assignment of the Pennsylvania House operations
  to Maytag Corporation and to Pennsylvania House,
  Inc. which has materially changed the terms and
  conditions upon which furniture was made available
  to Heritage House or otherwise materially changed
  the risk of Defendant Cruickshank of her guaranty
  of the indebtedness incurred by Heritage House.

(Plaintiff's brief, filed November 9, 1990, Exhibit "A". Emphasis supplied.)

Strauser also states that she had "continuous contact" with Cruickshank regarding the operation of Heritage House before it declared bankruptcy, and further, that during negotiations, i.e. before she signed the indemnity agreement, Cruickshank was advised of the anticipated expenses involved in operating a Pennsylvania House furniture gallery and purchasing the inventory. Specifically, Strauser states:

    Before Heritage House went into bankruptcy, I
  was advised that Defendant Cruickshank was a
  stockholder of Heritage House and had continuous
  contact with her regarding the operation of
  Heritage House. On August 25, 1989, Defendant
  Cruickshank through her attorney Paul C. Davis,
  notified Pennsylvania House that she revoked her
  continuing guarantee as it pertained to the credit
  extended to Heritage House in the future.

(Plaintiff's brief, filed November 9, 1990, Exhibit "A".) Strauser further states in her affidavit:

    During the process of discussions regarding the
  Indemnity Agreement, Defendant Cruickshank was
  advised of the costs associated with purchasing
  the necessary furniture to establish a
  Pennsylvania House gallery and other costs which
  Heritage House could anticipate. Following these
  discussions, the following language was added to
  the Indemnity Agreement on behalf of Cruickshank's



    Heritage House was accepted as a Pennsylvania
  House gallery dealer on February 1, 1989, at which
  time Pennsylvania House was a division of Maytag.
  . . . The Indemnity Agreements executed by
  Defendants Barrett and Cruickshank were part of
  the bargain upon which Heritage House was granted
  a Pennsylvania House gallery dealership with
  exclusive rights to sell Pennsylvania House
  trademarked furniture in the Tampa, Florida area
  and upon which Heritage House was furnished
  Pennsylvania House furniture and accessories.

    Pursuant to the Pennsylvania House Gallery
  Agreement, Pennsylvania House furniture and
  related products were sold to Heritage House to
  establish the gallery displays, and financed by
  the execution of a Gallery Note and an Accessory
  Note. Thereafter, in the ordinary course of
  business, other Pennsylvania House furniture was
  ordered [sic] by Heritage House and sold on open
  account. At the time this suit was commenced,
  $240,889.60 was owed on the Gallery Note,
  $18,392.08 was owed on the Accessory Note, and
  $167,224.10 was owned [sic] on open account.

(Plaintiff's brief, filed November 9, 1990, Exhibit "A".) Cruickshank has not filed any counter-affidavits or other evidence which controverts any of these representations. Based on the principles of guaranty law discussed above and plaintiff's uncontroverted representations that the changes in corporate ownership did not alter Cruickshank's risk as guarantor, we conclude that those changes did not vitiate the guaranty agreement.*fn12

Cruickshank's second jurisdictional argument is that the clause in the indemnity agreement refers only to venue, not jurisdiction, and that it therefore cannot be interpreted as a consent to jurisdiction of the Pennsylvania courts.*fn13 We disagree. Venue selection clauses contain an implied consent to in personam jurisdiction. Mutual Fire, supra, 646 F. Supp. 833 -34. There would otherwise be no reason for their existence, since consent to venue would be meaningless if in personam jurisdiction was lacking. See, e.g., Northwestern National Insurance Co. v. Donovan, 916 F.2d 372, 377 (7th Cir. 1990).

B.  Motion to quash service of process

Laura Cruickshank's motion to quash service of process against her is grounded in the same objection as her motion to dismiss for lack of personal jurisdiction: she contends that she lacks the requisite minimum contacts with Pennsylvania. For the same reasons that her arguments against enforcement of the clause did not persuade us to vitiate the clause, this argument likewise fails. The forum selection clause is enforceable against her, and renders her amenable to service of process for actions filed in this district. See generally: Waterspring, S.A. v. Trans Marketing Houston, Inc., 717 F. Supp. 181, 186 (S.D.N. Y. 1989), citing, inter alia, Hamilton Life Insurance Company v. Republic National Life Insurance Company, 408 F.2d 606, 613 (2d Cir. 1969), ("An agreement to arbitrate in New York constitutes a consent to submit to the personal jurisdiction of the courts of New York and such consent 'includes consent to service by any method consistent with due process.'")

  C.  Rule 12(b)(1) motion to dismiss for lack of subject
      matter jurisdiction

Cruickshank's motion to dismiss for lack of subject matter jurisdiction is based on plaintiff's failure to allege that she is a citizen of Ohio, or some other state. The complaint alleges that only she is a resident, not a domiciliary, of Ohio, and Cruickshank argues that this is insufficient to establish diversity of citizenship under 28 U.S.C. § 1332.

Cruickshank is correct. Pennsylvania House alleges only that she is a U.S. citizen and is "currently residing" at Cincinnati, Ohio. The plaintiff bears the burden of proving that diversity of citizenship exists on the date that the complaint is filed. Ratner v. Lucisano Brothers, 505 F. Supp. 124, 126 (E.D.Pa. 1981). Citizenship and residency or domicile are not synonymous for purposes of establishing diversity. Although a party's residence is prima facie evidence of domicile, residency alone is insufficient to establish jurisdiction on the basis of diversity: two elements are necessary to establish domicile, residency coupled with an intent to continue to remain at that location. Because Pennsylvania House fails to allege Cruickshank's domicile, its complaint fails to establish diversity. Krasnov v. Dinan, 465 F.2d 1298, 1300 (3d Cir. 1972); Shiffler v. Equitable Life Assurance Society of the United States, 663 F. Supp. 155, 163 (E.D.Pa. 1986), aff'd 838 F.2d 78, 82 n. 5 (3d Cir. 1988), (Allegations that plaintiff resides in Pennsylvania and that defendant is an insurance carrier with its principal place of business in New York are insufficient to establish diversity, since neither of these allegations establishes the citizenship of the parties.); Coggins v. Carpenter, 468 F. Supp. 270, 276-77 (E.D.Pa. 1979) and Reynolds v. Ranta, 362 F. Supp. 333, 334 (W.D.Pa. 1973).

Although Pennsylvania House states in its "Counterstatement of Facts" included in its opposing brief (filed November 9, 1990) that Cruickshank is a citizen of Ohio, this is not sufficient. Cruickshank's citizenship is crucial to this court's right to exercise subject matter jurisdiction over this controversy, and it should be alleged in the pleadings so that she has an opportunity to admit or deny it. We will grant Pennsylvania House leave to file an amended complaint. See generally: In re Asbestos School Litigation, 107 F.R.D. 369 (1985) (If subject matter jurisdiction is challenged, it is incumbent on the plaintiff to establish that jurisdiction is proper — and its efforts toward that end may be aided by discovery.)

  D.  Rule 12(b)(6) motion to dismiss for failure to state
      a cause of action

The standards for ruling on a Rule 12(b)(6) motion are well-established. A complaint may not be dismissed for failure to state a claim upon which relief can be granted unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which could entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The court must accept all material allegations in the complaint as true and construe them in the light most favorable to the party opposing the motion. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Johnsrud v. Carter, 620 F.2d 29 (3d Cir. 1980); and Truhe v. Rupell, 641 F. Supp. 57, 58 (M.D.Pa. 1985) (Rambo, J.). Although the complaint is to be liberally construed in favor of the plaintiff (See: Fed.R.Civ. 8(f)), the court does not have to accept every allegation it contains as true. Conclusory allegations of law, unsupported conclusions and unwarranted inferences need not be accepted as true. Conley, supra, 355 U.S. at 45-46, 78 S.Ct. at 102.

Cruickshank argues that Pennsylvania House fails to state a cause of action against her because it does not allege the existence of a contractual relationship between them. She relies on the same contention that she asserted against enforcement of the forum selection clause, i.e. that the change of ownership of Pennsylvania House negated the guaranty agreement. This claim is untenable. Based on averments of plaintiff's complaint and the legal principles discussed above, it is not at all clear that Pennsylvania House "can prove no set of facts" in support of its claim which could entitle it to relief. Conley, supra, 355 U.S. at 45-46, 78 S.Ct. at 102. To the contrary, the plaintiff has alleged sufficient facts to indicate that it does have a viable claim against Cruickshank.


For all of the reasons stated in the accompanying memorandum, it is ORDERED that:

1. Defendant Laura Cruickshank's Rule 12(b) motion is granted in part and denied in part. Her motion to dismiss for lack of in personam jurisdiction is denied. Her motion to dismiss for failure to state a cause of action is denied. Her motion to dismiss for lack of subject matter jurisdiction is granted to the extent of the relief provided in this order.

2. Plaintiff is directed to file an amended complaint within twenty (20) days from the date of this order setting forth the basis for this court's exercise of diversity jurisdiction, specifically, alleging the state where Cruickshank is domiciled.

3. Defendant Cruickshank's motion to quash service of process is denied.

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