The opinion of the court was delivered by: Marovitz, District Judge.
Plaintiffs' Motion for Preliminary Injunction and for
Convention of a Three-Judge Court
Defendant's Motion for Judgment on the Pleadings
This is a purported class action, brought by a group of
policyholders of the Multi-State Inter-Insurance Exchange
(Multi-State), a reciprocal automobile insurance company,
against John F. Bolton, Director of the Department of Insurance
of the State of Illinois. Defendant is a state officer charged
under Illinois law with the regulation and supervision of
insurance companies organized and/or doing business in the
State. Ch. 73, § 204.1 et seq., Ill.Rev.Stat.
On September 11, 1964, pursuant to Ch. 73, § 800, Ill.Rev.Stat.
defendant was appointed Liquidator of Multi-State in a Cook
County Circuit Court proceeding (hereinafter known as the
Liquidation Proceeding).*fn1 Thereupon, he immediately
became vested with the title to all property, contracts and
rights of action of the company. Ch. 73, § 803, Ill.Rev.Stat.
Under their policies, plaintiffs were subject to an assessable
contingent several liability equivalent to their annual
premiums. Pursuant to Ch. 73, § 819, Ill.Rev.Stat., defendant
sought and won an order from the court in the Liquidation
Proceeding, dated August 31, 1966, authorizing and directing
him to levy an assessment against all persons who had been
policyholders of Multi-State during the 12 month period ending
November 30, 1963. Section 819 provides: (in pertinent part)
(1) In the event of the entry of an order directing the
Director to rehabilitate or liquidate any company which has
issued assessable policies or contracts of insurance, the
Director may, with leave of court, at any time during the
pendency of the proceeding, levy such assessment or assessments
against the members or subscribers of the company, as may be
necessary to pay all allowed claims in full, to the same extent
* * * that such assessment or assessments might have been
levied by the board of directors, attorney-infact, or other
governing body of the company.
Pursuant to the above order, defendant drew up a list of
assessable policyholders containing names, last known
addresses, and the amount of assessment due from each listed
person. The levy of assessments was approved, ratified and
spread of record by the Court by order of September 13, 1966.
Plaintiffs assert that they were given no notice of the
Petition for leave to levy an assessment, that none is required
by Section 819; and, consequently, since they had no notice of
the Liquidation Proceeding or of the request for authority to
assess they were deprived of their rights without due process
of law, in violation of the 14th Amendment. They seek
injunctive relief declaring Section 819 to be unconstitutional,
and voiding the Circuit Court orders of August 31 and September
13, 1966, and request a preliminary injunction to restrain
defendant from seeking to enforce the pending assessment order
pending the completion of this suit. Also, under Title
28 U.S.C. § 2281 et seq., they request the convention of a
three-judge court to hear their complaint. Jurisdiction is
posited upon the Civil Right Statutes, 28 U.S.C. § 1343, and
42 U.S.C. § 1983, and upon the general federal question
jurisdictional grant, 28 U.S.C. § 1331.
The plaintiffs purport to represent a class of 34,816
policyholders subject to assessment, and claim that the action
is proper under recently amended Rule 23(a) and 23(b)(1)(B)
of the Federal Rules of Civil Procedure.
Defendant moves for judgment on the pleadings. He alleges that
none of the cited statutes support jurisdiction, and that the
Court lacks jurisdiction of the subject matter. In this opinion
we will consider both defendant's motion and plaintiffs'
application for a three-judge court.
Initially, we believe the motion for judgment on the pleadings,
pursuant to Rule 12(c), must be treated as a motion to dismiss
for lack of subject matter jurisdiction. It raises only
jurisdictional issues. A district judge to whom an application
for a three-judge court is presented, of course, has authority
to determine only jurisdictional questions, and may examine the
merits solely to determine whether a substantial federal
question is presented. Idlewild Bon Voyage Liquor Corp. v.
Epstein, 370 U.S. 713, 715, 82 S.Ct. 1294, 8 L.Ed.2d 794
(1962); Keyishian v. Board of Regents etc., 345 F.2d 236, 238
(2d Cir. 1965); Robinette v. Chicago Land Clearance Commission,
115 F. Supp. 669, 671 (N.D.Ill. 1951).
It is settled that a motion for a judgment on the pleadings is
a motion for a judgment on the merits. 2A Moore, Federal
Practice, ¶ 12.15; Roemhild v. Jones, 239 F.2d 492 (8th Cir.
1957). Since defendant alleges only jurisdictional grounds for
dismissal, the proper course is to consider the motion as one
to dismiss for lack of subject matter jurisdiction.
Plaintiffs assert that jurisdiction is proper under § 1331
which provides: (in pertinent part)
"(a) The district courts shall have original jurisdiction of
all civil actions wherein the matter in controversy exceeds the
sum or value of $10,000, exclusive of interest and costs, and
arises under the Constitution, laws or treaties of the United
On its face, the complaint undoubtedly alleges a claim based
upon the Constitution of the United States. In passing upon the
propriety of § 1331 as a basis for jurisdiction the issues to
consider are whether the matter in controversy exceeds $10,000,
and whether it arises under the Constitution or some federal
law. If the complaint does not meet these tests, it must be
dismissed for lack of subject matter jurisdiction. We will
explore the substantiality of the federal question raised,
infra, in considering whether to invoke a three-judge court. At
this point, we will consider defendant's
contention that the $10,000 jurisdictional minimum is not
Defendant argues that plaintiffs' contingent liability under
their policies is several rather than joint or common. Since
each policy's contingent liability is only a small fraction of
$10,000, and since each policyholder essentially contests the
procedure utilized in serving the assessment against him,
defendant argues that the claims may not be aggregated to
satisfy the jurisdictional requisite. Plaintiffs contrarily
argue that in a class action under the new Rule 23, aggregation
Under the old Rule 23, aggregation was permitted in "true"
class actions where the asserted claim was "joint" or "common"
and concerned the interests of the plaintiffs as a body, rather
than the interests of the individual plaintiffs. Brown v.
Trousdale, 138 U.S. 389, 11 S. Ct. 308, 34 L.Ed. 987 (1891).
But where the parties asserted "hybrid" or "spurious" class
actions, where the claims were in reality only those relating
separately to individual members of the "class", aggregation
was disallowed. Troup v. McCart, 238 F.2d 289 (5th Cir. 1956);
Andrews v. Equitable Life Assurance Society, 124 F.2d 788 (7th
Cir. 1941); Scott v. Frazier, 253 U.S. 243, 40 S.Ct. 503, 64
L.Ed. 883 (1920). 3 Moore, Federal Practice, ¶¶ 23.08-.10. The
language of the insurance contracts at bar makes clear that
each policyholder's liability is several, rather than joint or
common. Hence, under the pre-amendment Rule 23 these claims
would have constituted a "spurious" class action, ...