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NATIONWIDE INS. CO. v. AGWAY INS. CO.

February 15, 1994

NATIONWIDE INSURANCE CO., CAROLYN M. KONDASH and ROBERT A. KONDASH, Plaintiffs
v.
AGWAY INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: JAMES F. MCCLURE, JR.

 BACKGROUND:

 On July 29, 1993, plaintiffs Nationwide Insurance Co. ("Nationwide"), Carolyn M. Kondash and Robert A. Kondash (collectively, "the Kondashes") initiated this action against defendant Agway Insurance Co. ("defendant" or "Agway"), seeking a declaratory judgment and damages due under a policy of insurance issued by defendant to Charles S. Lilley, Jr. ("Lilley," also referring to the estate of Charles S. Lilley, Jr., deceased). Plaintiffs allege that defendant acted in bad faith toward its insured in failing to defend and indemnify the insured for claims raised by plaintiffs.

 Before the court is defendant's motion to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(1), (6), and (7).

 STANDARD OF REVIEW:

 1. Lack of Subject Matter Jurisdiction

 A complaint must be dismissed under Fed. R. Civ. P. 12(b)(1) if the court lacks jurisdiction over the subject matter. Subject matter jurisdiction is the "power of a particular court to hear the type of case that is then before it," Black's Law Dictionary 854 (6th ed. 1990), as distinguished from in personam and in rem jurisdiction.

 Subject to certain congressional restrictions, the subject matter of a federal district court may extend

 
to all Cases, in law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority; --to all Cases affecting Ambassadors, other public Ministers and Consuls; --to all Cases of admiralty and maritime Jurisdiction; --to Controversies to which the United States shall be a Party; --to Controversies between two or more States; --between a State and Citizens of another State; *fn1" -- between Citizens of different States; --between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

 U.S. Const. art. III, § 2, cl. 1 (emphasis added). Federal district courts have jurisdiction over suits between citizens of different states when the amount in controversy exceeds $ 50,000.00. 28 U.S.C. § 1332 (a). Diversity must be complete, i.e. no plaintiff may be a resident of the same state as any defendant. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373, 57 L. Ed. 2d 274, 98 S. Ct. 2396 (1978).

 A complaint should not be dismissed for lack of jurisdiction if it reveals any grounds for assertion of jurisdiction. Doran v. Lee, 287 F. Supp. 807, 813 (W.D. Pa. 1968). It is improper to dismiss a claim under Rule 12(b)(1) merely because the theories of recovery alleged probably are false. Lunderstadt v. Colafella, 885 F.2d 66, 70 (3d Cir. 1989)(citation omitted).

 2. Dismissal for Failure to State a Claim

 A motion to dismiss under Fed. R. Civ. P. 12(b)(6) admits the well-pleaded allegations of the complaint, but denies their legal sufficiency. Hospital Building Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740, 48 L. Ed. 2d 338, 96 S. Ct. 1848 (1976). "It is the settled rule that 'a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Leone v Aetna Cas. & Sur. Co., 599 F.2d 566, 567 (3rd Cir. 1979) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)). The complaint must be read in a light most favorable to the plaintiff with every doubt resolved in plaintiff's favor. In Re Arthur Treacher's Franchisee Litigation, 92 F.R.D. 398, 422 (E.D.Pa. 1981).

 3. Failure to Join a Party under Rule 19

 Under Fed. R. Civ. P. 12(b)(7), dismissal of a claim or complaint is warranted when the plaintiff fails to join a party who is indispensable as defined under Fed. R. Civ. P. 19. If a party falls into either of the two categories set forth in Rule 19(a), "the court must determine under Rule 19(b) whether 'in equity and good conscience' the action should proceed without the absent party or whether the absent party is indispensable and the action should be dismissed . . ." Steel Valley Authority v. Union Switch & Signal Division, 809 F.2d 1006, 1013 (3d Cir. ...


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