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FEDERAL INS. CO. v. MAY DEPT. STORES CO.

December 9, 1992

FEDERAL INSURANCE COMPANY, Plaintiff,
v.
THE MAY DEPARTMENT STORES COMPANY, Defendant.


McKENNA


The opinion of the court was delivered by: LAWRENCE M. MCKENNA

MEMORANDUM AND ORDER

McKENNA, D.J.

 By this Order, the Court decides a motion by defendant The May Department Stores Company ("Defendant" or "May") to dismiss plaintiff Federal Insurance Company's ("Plaintiff" or "Federal") declaratory judgment action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff opposes Defendant's motion. For the reasons that appear below, Defendant's motion is granted.

 Background

 In February 1990, Plaintiff *fn1" issued to Defendant a Crime Insurance Policy, number 8085 69 85 H (the "Policy"). (Compl. P 5.) "Included among the Insureds [under the Policy] was Lord & Taylor . . . a division of the defendant." (Compl. P 6.) Lord & Taylor was acquired by May in October 1986; previously Lord & Taylor had been a division of Associated Dry Goods Corporation. (Id.)

 "On or about May 1, 1991, defendant submitted a proof of loss with documentation allegedly in support thereof, which was supplemented on or about November 14, 1991 and on or about February 10, 1992 making claim under the Policy." (Compl. P 7.) May claims to have sustained losses of approximately $ 12 million due to a direct loss caused by theft by an employee, James Ricci ("Ricci"). May contends that Ricci accepted bribes from certain of Lord & Taylor's vendors

 (Compl. P 8.) Ricci's employment with Lord & Taylor allegedly ceased in early 1989.

 "By letter dated April 20, 1992, May advised Federal that May planned to file suit by May 15, 1992 if Federal did not pay the claim." (Def.'s Mem. at 1.) "By letter dated May 8, 1992, Federal declined May's claim." (Mait Aff. P 3.) Federal, then, commenced this declaratory judgment action on May 11, 1992.

 Discussion

 Rule 12(b)(6) of the Federal Rules of Civil Procedure entitles a defendant to a judgment of dismissal where a complaint fails to state a claim upon which relief can be granted. The standard of review on a motion to dismiss is heavily weighted in favor of a plaintiff. The Court is required to read a complaint generously, drawing all reasonable inferences from the complainant's allegations. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 515, 30 L. Ed. 2d 642, 92 S. Ct. 609 (1972). "In ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the court is required to accept the material facts alleged in the complaint as true." Frasier v. General Electric Co., 930 F.2d 1004, 1007 (2d Cir. 1991). A defendant is entitled to dismissal pursuant to Rule 12 (b)(6) only when the Court finds that "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)

 The Declaratory Judgment Act provides that a court of the United States "may" declare the rights and other legal relations of any interested party seeking such a declaration. 28 U.S.C. § 2201(a) (1988). In Brillhart v. Excess Insurance Co. of America, 316 U.S. 491, 494, 86 L. Ed. 1620, 62 S. Ct. 1173 (1942) (citation omitted), the Supreme Court stated that "although the District Court had jurisdiction of the suit under the Federal Declaratory Judgment Act, it was under no compulsion to exercise that jurisdiction." See also Great American Insurance Co. v. Houston General Insurance Co., 735 F. Supp. 581, 584 (S.D.N.Y. 1990). In that case, the Court noted that:

 Where the law provides district courts with discretionary powers, the district courts should exercise that statutory authority with the same care and concern as they apply the principles of equity. The Court, thus, must look at more than just the mechanical application of the declaratory judgment standard. The Court must look at the litigation situation as a whole in determining whether it is appropriate for the Court to exercise its jurisdiction over the declaratory judgment action before it.

 Id. at 585 (citation omitted). Considering the litigation situation as a whole, in light of the principles of equity, the Court concludes that it should not exercise its discretion to entertain Plaintiff's action for a ...


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