The opinion of the court was delivered by: Joyner, District Judge.
This consolidated civil action has been brought before the
Court on Motions of Defendants Provident Mutual Insurance
Company, Robert W. Kloss, Diane M. Koken, Commissioner of the
Insurance Department of Pennsylvania and the Insurance Department
of Pennsylvania to abstain and/or dismiss the action(s) against
them. For the reasons which follow, the motions shall be granted.
Plaintiffs, Hilary Butler, Duncan and Michelle Henderson,
Jonathan and Doreen Oswaks, Mark Podlas, Douglas Prevost,
Reverend Michael Shea, Phillip Hartley Smith, Reverend Paul Terry
and Ira Rubenstein are members and policyholders of the Provident
Mutual Insurance Company who brought this lawsuit "on behalf of
themselves and others similarly situated." By these suits,
Plaintiffs seek to have Provident Mutual's proposed plan of
conversion from a mutual insurance company to a stock insurance
company and Section 917-A(3) of the Pennsylvania Insurance
Company Mutual-to-Stock Conversion Act, 40 P.S. §§ 911-A to 928-A
("the Act") declared unconstitutional. Plaintiffs also seek to
enjoin the Insurance Commissioner from approving the proposed
conversion and Provident Mutual from converting to a stock
company. Essentially, plaintiffs assert that the proposed
conversion and the provisions of the Act under which the Board of
Directors of Provident Mutual are proceeding are unlawful and
unconstitutional in that the conversion would operate and the Act
would permit the taking of plaintiffs' property without just
compensation and without first affording them due process of law
because the Act effectively delegates the Commissioner's task of
protecting the rights and interests of the class members to the
management of Provident Mutual.
Defendants move to stay or dismiss this consolidated action
arguing that: (1) The court should abstain from adjudicating this
case under the doctrines of Burford v. Sun Oil Co.,
319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943) and Railroad Comm'n of
Texas v. Pullman, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971
(1941); (2) Plaintiffs' claims are not ripe for disposition; (3)
There is no state action to sustain the constitutional claims,
there has been no violation of plaintiffs' rights to procedural
due process, no impairment of plaintiffs' contract rights, no
improper delegation of authority to the insurance commissioner
and no conflict of interest.
Standards for Fed.R.Civ.P. 12(b)(6) Motions
In reviewing a motion to dismiss for failure to state a claim
upon which relief can be granted under Fed.R.Civ.P. 12(b)(6), the
Court must accept as true the facts alleged in the complaint and
all reasonable inferences that can be drawn after construing them
in the light most favorable to the non-movant. Pearson v.
Miller, 988 F. Supp. 848, 852
(M.D.Pa. 1997) (citing Jordan v. Fox, Rothschild, O'Brien, and
Frankel, Inc., 20 F.3d 1250, 1261 (3rd Cir. 1994)). Dismissal is
limited to those instances where it is certain that no relief
could be granted under any set of facts that could be proved.
Alexander v. Whitman, 114 F.3d 1392, 1398 (3d Cir. 1997).
Defendants first assert that this Court should abstain from
adjudicating this matter (1) under Pullman because there are
uncertain issues of state law underlying plaintiffs'
constitutional claims which could be avoided or narrowed
depending upon how the state statute governing the Provident
conversion is interpreted; and (2) under Burford in deference
to the Commonwealth's administrative procedures for approving
plans of conversion.
Prior decisional law has long supported the general proposition
that federal courts lack the authority to abstain from the
exercise of jurisdiction that has been conferred. New Orleans
Public Service, Inc. v. Council of New Orleans, 491 U.S. 350,
358, 109 S.Ct. 2506, 2513, 105 L.Ed.2d 298 (1989). There are,
however, some classes of cases in which the withholding of
authorized relief because of undue interference with state
proceedings is appropriate, but the courts have carefully defined
the areas in which such "abstention" is permissible. Id., 491
U.S. at 359, 109 S.Ct. 2506. Abstention thus remains the
exception, not the rule. Hawaii Housing Authority v. Midkiff,
467 U.S. 229, 236, 104 S.Ct. 2321, 2327, 81 L.Ed.2d 186 (1984).
In Burford v. Sun Oil Co., supra, the plaintiffs sought to
challenge the reasonableness of the Texas Railroad Commission's
grant of an oil drilling permit under the Fourteenth Amendment.
Noting that the constitutional challenge was of minimal federal
importance in that the primary issue presented was whether the
commission had properly applied Texas' complex oil and gas
regulations, the Supreme Court concluded that "a sound respect
for the independence of state action required the federal equity
court to stay its hand." 319 U.S. at 334, 63 S.Ct. at 1107.
This decision, along with several others, (see, e.g. Alabama
Pub. Serv. Comm'n v. Southern R. Co., 341 U.S. 341, 71 S.Ct.
762, 95 L.Ed. 1002 (1951)) was eventually distilled into the
"Burford" doctrine. Under this principle of abstention, where
timely and adequate state court review is available, a federal
court sitting in equity must decline to interfere with the
proceedings or orders of state administrative agencies: (1) when
there are "difficult questions of state law bearing on policy
problems of substantial public import whose importance transcends
the result in the case then at bar"; or (2) where the "exercise
of federal review of the question in a case and in similar cases
would be disruptive of state efforts to establish a coherent
policy with respect to a matter of substantial public concern."
New Orleans Public Service, Inc., 109 S.Ct. at 2514 citing
Colorado River Water Conservation, District v. United States,
424 U.S. 800, 814, 96 S.Ct. 1236, 1245, 47 L.Ed.2d 483 (1976).
The Pullman abstention doctrine is slightly different in that
it may be invoked when a federal court is presented with both a
federal constitutional issue and an unsettled issue of state law
whose resolution might narrow or eliminate the federal
constitutional question, thus avoiding needless friction with
state policies. Presbytery of New Jersey of the Orthodox
Presbyterian Church v. Whitman, 99 F.3d 101, 106 (3rd Cir.
1996). In the absence of a showing that a definitive ruling in
the state courts cannot be pursued with full protection of the
constitutional claim, a district court should exercise its wise
discretion by staying its hands. Pullman, 312 U.S. at 501, 61
S.Ct. at 645-646.*fn2
Under federal jurisprudence, a district court must make three
findings in order to justify the Pullman exception to the
general rule that federal courts must hear cases properly brought
within their jurisdiction. Artway v. Attorney General of State
of New Jersey, 81 F.3d 1235, 1270 (3rd Cir. 1996). Specifically,
the Court must determine whether: (1) there are uncertain issues
of state law underlying the federal constitutional claims brought
in federal court; (2) there are state law issues amenable to a
state court interpretation that would obviate the need for, or
substantially narrow, the scope of adjudication of the
constitutional claims; (3) a federal court's erroneous
construction of state law would be disruptive of important state
policies. Chez Sez III Corp. v. Township of Union,
945 F.2d 628, 631 (3rd Cir. 1991). If all three factors are present, the
federal court must then consider whether ...