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ARDREY v. FEDERAL KEMPER INS. CO.

April 14, 1992

James W. Ardrey d/b/a Ardrey Insurance Agency, Inc., Bryce McLerran d/b/a Bryce & Associates Insurance, and Phil Carlin d/b/a Phil Carlin Agency, individually and on behalf of all others similarly situated, Plaintiffs,
v.
Federal Kemper Insurance Company, Defendant.



The opinion of the court was delivered by: DANIEL H. HUYETT, 3RD

 HUYETT, J.

 April 14, 1992

 I. INTRODUCTION

 Plaintiffs initiated this action on December 14, 1990. In their complaint, plaintiffs allege that Kemper attempted to rewrite the compensation provisions of its contracts with insurance agents and agencies in Pennsylvania. Plaintiffs contend that Kemper's modification in the compensation system breached each of the approximate two hundred (200) agency agreements Kemper is party to in Pennsylvania. Defendant Kemper responds by arguing that its agreement with agents allows Kemper to unilaterally change the commission rates Kemper pays its Pennsylvania agents.

 Plaintiffs state that prior to November 1, 1990, Kemper paid its agents a percentage of premium produced regardless of profitability. In other words, the Kemper agents were compensated based on a straight percentage of insurance premiums paid by the insured. In addition, Kemper awarded a profit sharing bonus for those agents with low loss ratios. *fn1" In reaction to Pennsylvania's adoption of "Act 6," 75 Pa.C.S.A. §§ 1791-1799.7, Kemper redesigned its compensation system. In short, Kemper eliminated the previous profit sharing bonus and introduced loss ratios into the schedule of commissions. *fn2" Essentially, this change in Kemper's compensation system allowed Kemper to tie its compensation more closely to the profits generated by its individual agents.

 Plaintiffs allege two other objectives to be implicit in Kemper's change in compensation. First, plaintiffs contend that by forcing unpalatable agreements upon agents who cannot survive the loss in income resulting from the new compensation system, Kemper is able to circumvent the requirements of "Act 143," 40 P.S. § 241 et seq., which restricts the at-will termination of insurance agreements in the Commonwealth of Pennsylvania. Second, plaintiffs argue that Kemper's use of loss ratios in calculating base compensation will create incentives for agents to eliminate business with adverse experience by circumventing Pennsylvania laws designed to limit the grounds upon which an insurer may cancel automobile insurance.

 Kemper replies by contending that it acted within its contractual rights when it instituted the change in agent compensation. Further, Kemper denies the existence of any pretextual motives underlying its challenged action.

 Plaintiffs subsequently moved pursuant to Fed. R. Civ. P. 23(b)(2) to maintain this litigation as a class action. By Memorandum and Order of March 4, 1992, the Court granted in part and denied in part plaintiffs' motion to maintain this litigation as a class action. Pursuant to the March 4 Memorandum and Order, the Court permitted plaintiffs to maintain a class action pursuant to Fed. R. Civ. P. 23(b)(3). In the March 4 Memorandum and Order, the Court recognized, however, that Kemper had stated its intention to move to dismiss the claims of those class members who failed to meet the amount in controversy requirement for actions based on diversity of jurisdiction. See Memorandum and Order of March 4, 1992 at 16, n.13.

 Kemper now moves to dismiss this action for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). The essence of Kemper's motion to dismiss is that the members of the plaintiff class fail to meet the amount in controversy requirement of 28 U.S.C. § 1332(a). Plaintiffs oppose defendant's motion to dismiss on several grounds.

 II. DISCUSSION.

 A. Legal Standards Applicable To Rule 12(b)(1) Motions.

 The Court will ordinarily accept plaintiffs' well-plead allegation that the amount in controversy exceeds the jurisdictional threshold. Hamilton v. Hartford Accident & Indemnity Co., 425 F.Supp. 224 (E.D. Pa. 1977). It is established, however, that the complaint must allege facts sufficient to determine whether the jurisdictional amount has been satisfied and not plead solely to obtain federal court jurisdiction. Id. at 226. In a class action where the class members assert separate and distinct claims, *fn3" each class member's claim must exceed the jurisdictional minimum. In other words, plaintiffs must allege facts sufficient to establish that ...


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