Ohio Casualty Insurance Company v. Campbell's Siding & Windows et al

Filing 17

MEMORANDUM DECISION AND ORDER The motion for Preliminary Injunction (Dkt. 3 ) is DENIED. Signed by Judge Edward J. Lodge. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jp)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

OHIO CASUALTY INSURANCE
COMPANY,
Plaintiff,

Case No. 1:15-CV-00255-EJL
MEMORANDUM DECISION AND
ORDER

v.
CAMPBELL’S SIDING & WINDOWS,
et al,
Defendants.

INTRODUCTION
Pending before the Court in the above-entitled matter is Plaintiff’s Motion for
Preliminary Injunction. (Dkt. 3.) The named Defendants have been served with a copy of
the Complaint in this matter as well as the Motion for Preliminary Injunction. (Dkts. 5, 79.) One Defendant has filed a notice of appearance but there has been no response filed to
the Motion. (Dkt. 6.) The time for any response has passed and the Motion is ripe for the
Court’s consideration.
Having fully reviewed the record herein, the Court finds that the facts and legal
arguments are adequately presented in the briefs and record. Accordingly, in the interest
of avoiding further delay, and because the Court conclusively finds that the decisional
process would not be significantly aided by oral argument, this Motion shall be decided
on the record before this Court without oral argument.
MEMORANDUM DECISION AND ORDER- 1

STANDARD OF LAW
A preliminary injunction is not a preliminary adjudication on the merits, but a
device for preserving the status quo and preventing the irreparable loss of rights before
judgment. Textile Unlimited, Inc. v. A..BMH Co., Inc., 240 F.3d 781 (9th Cir. 2001)
(citing Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1422 (9th Cir.
1984). They are governed by Federal Rule of Civil Procedure 65(a).While courts are
given considerable discretion in deciding whether a preliminary injunction should enter,
injunctive relief is not obtained as a matter of right and it is considered to be an
extraordinary remedy that should not be granted unless the movant, by a clear showing,
carries the burden of persuasion. See Sampson v. Murray, 415 U.S. 61 (1974);
Brotherhood of Locomotive Engineers v. Missouri-Kansas-Texas R. Co., 363 U.S. 528
(1960); and Stanley v. Univ. of Southern California, 13 F.3d 1313 (9th Cir. 1994).
The standard for a preliminary injunction requires a plaintiff to show four
elements: “[1] that he is likely to succeed on the merits, [2] that he is likely to suffer
irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips
in his favor, and [4] that an injunction is in the public interest.” Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008) (citations omitted). The Ninth Circuit has
recognized the applicability of the Winter decision in this Circuit. See American Trucking
Ass’ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir 2009) (quoting Winter,
129 S.Ct. at 374).

MEMORANDUM DECISION AND ORDER- 2

The Ninth Circuit considers all of the elements, except for irreparable injury, using
a sliding scale approach where “the elements of the preliminary injunction test are
balanced, so that a stronger showing of one element may offset a weaker showing of
another.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011).
Irreparable injury is not, however, subject to such balancing. To satisfy the irreparable
injury element, the moving party must “demonstrate that irreparable injury is likely in the
absence of an injunction.” Winter, 555 U.S. at 23 (emphasis in original). The plaintiff
must demonstrate that irreparable harm is real, imminent and significant—not merely
speculative or potential—with admissible evidence and a clear likelihood of success.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff, Ohio Casualty Insurance Company (OCIC), issued payment and
performance bonds for the Defendant, Campbell’s Siding & Windows (Campbell’s) in the
amount of $398,110 (Bond No. 67S201542). The bonds guaranteed Campbell’s payments
and performance on “The Terraces of Boise” construction project. Campbell’s and each of
the individually named Defendants executed an Indemnity Agreement dated September 24,
2012 in favor of OCIC.
The Complaint alleges that Campbell’s failed to perform its obligations under the
construction contract. As a result, claims have been made on the bonds and OCIC anticipates
payments under both the performance and payment bonds. OCIC has demanded the
Defendants indemnify and hold OCIC harmless from any loss, costs, and expenses it incurs
as a result. The Defendants have failed and/or refused to respond to OCIC’s demand. As a
MEMORANDUM DECISION AND ORDER- 3

result, OCIC has brought this action by filing the Complaint which raises claims against the
Defendants for specific enforcement and breach of contract relating to the Indemnity
Agreement. (Dkt. 1.) In particular, OCIC alleges the Defendants have failed and/or refused
to comply with the terms of the Indemnity Agreement by not providing any books or records,
posting the demanded collateral security, or otherwise indemnifying OCIC. In addition,
OCIC filed the instant Motion for Preliminary Injunction which the Court now takes up.
(Dkt. 3.)
DISCUSSION
Plaintiff’s Motion seeks entry of a preliminary injunction in this matter requiring the
Defendants to deposit collateral security in the amount of $870,220. (Dkt. 3.) Attached to the
Motion is a Declaration of OCIC’s investigator for the claim, Nina Durante, which includes
a copy of the Indemnity Agreement, the bonds, and OCIC’s demand made to the Defendants.
(Dkt. 3-2.)
The Court has reviewed the record in this case including the materials attached to the
Durante Declaration. Having done so, the Court finds that OCIC has shown a likelihood of
success on the merits of their claims based on the terms of the Indemnity Agreement and the
allegations in the Complaint. “Sureties are ordinarily entitled to specific performance of
collateral security clauses.” Safeco Ins. Co. of America v. Schwab, 739 F.2d 431, 433 (9th
Cir. 1984). “[W]here [a surety knows it will] have liability claims filed against it but [does]
not know the amount of those claims, the legal remedy of money damages [is] not adequate”
and the equitable remedy of specific performance may be awarded. Milwaukie Constr. Co.
MEMORANDUM DECISION AND ORDER- 4

v. Glenn Falls Ins. Co., 367 F.2d 964, 966 (9th Cir. 1966). Thus, the claims and the equitable
remedy of specific performance are available to the OCIC in this case. Moreover, OCIC has
alleged facts in the Complaint which, when coupled with the language of the Indemnity
Agreement, appear to make it likely that it will prevail on the merits of their claims.
Defendants have not responded or disputed the allegations or arguments of OCIC. The Court
finds his element has been met.
The Court also finds the balance of equities tips in OCIC’s favor and that an
injunction would be in the public’s interest. These elements both favor upholding the terms
of a written contract. Absent any response or objection to the contrary, the documents and
the factual allegations in the Complaint appear to support OCIC’s claims that they are
entitled to relief under the Indemnity Agreement.
As to irreparable injury, however, the Court finds OCIC has not satisfied this element.
The injury complained of in the Motion for Preliminary Injunction is economic. In its
Motion, OCIC seeks an injunction ordering the Defendants to deposit collateral security in
the amount of $870,220. (Dkt. 3.) Such relief is economic and does not establish irreparable
injury that cannot be remedied later. See Cal. Pharmacists Ass'n v. Maxwell–Jolly, 563 F.3d
847, 852 (9th Cir. 2009) (“Economic damages are not traditionally considered irreparable
because the injury can later be remedied by a monetary award.”); Rent–A–Center, Inc. v.
Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) (Economic
injury alone “does not support a finding of irreparable harm, because such injury can be
remedied by a damage award.”). At this stage, the injury alleged in the Motion is that OCIC
MEMORANDUM DECISION AND ORDER- 5

will have to pay the bond claims before receiving the collateral. That is an economic injury
and does not establish irreparable harm for purposes of granting an injunction.
OCIC argues it need not show irreparable harm as a surety bringing a claim for
specific enforcement of an indemnity agreement and, alternatively, that it has shown
irreparable injury. (Dkt. 3 at 3.) The Court disagrees. While a surety need not sustain a loss
from its own pocket before it can raise a claim demanding specific enforcement of an
indemnity agreement, Safeco, 739 F.2d at 433, the fact that the claim exists does not establish
irreparable injury for purposes of injunctive relief. See Travelers Cas. & Sur. Co. of America
v. W.P. Rowland Constructors Corp., No. CV-12-0390-PHX-FJM, 2012 WL 1718630, at *3
(D. Ariz. May 15, 2012) (denying injunctive relief to a surety of collateralization pursuant
the equitable doctrine of quia timet); Hudson Insur. Co. v. Simmons Constr., LLC, No.
CV12–407–PHX–GMS, 2012 WL 869383, at *4 (D. Ariz. March 14, 2012) (finding no
authority in Ninth Circuit for preliminary injunctive relief for collateralization); Hanover Ins.
Co. v. TLC Investing, LLC, No. 2:11-CV-00711-JCM-LRL, 2011 WL 3841299, at *1 (D.
Nev. Aug. 26, 2011) (denying motion for reconsideration of denial of preliminary injunction
because authority supporting classifying harm suffered by a surety as irreparable was not
binding on the court).
Again, OCIC’s Motion seeks only enforcement of the specific enforcement provision
of the Indemnity Agreement that requires payment of the collateral security. (Dkt. 3.) Such
relief is an economic injury recoverable by monetary damages at a later time. It is possible
that other forms of relief not sought in the Motion could be shown to be irreparable. For
MEMORANDUM DECISION AND ORDER- 6

instance, OCIC has not alleged the Defendants are insolvent and sought to freeze their assets
or asked that Defendants be ordered to preserve and/or produce their records as required
under the Indemnity Agreement.1 Similarly, OCIC has not shown that it cannot pay the bond
claims prior to receiving the collateral from the Defendants or that it will otherwise suffer
irreparable injury as a result of the Defendants’ failure to deposit the collateral security that
cannot be compensated at a later time with money damages. Travelers, 2012 WL 1718630,
at *3. Instead, OCIC’s Motion only seeks injunctive relief to require the payment of
collateral security which is an economic injury and not irreparable. Therefore, the Motion
is denied.
In so ruling, the Court does not diminish the value of OCIC’s claims or its rights under
the Indemnity Agreement. Just the opposite, as the record currently stands it appears that
OCIC will prevail on its claims.2 The denial of the Motion here is based entirely on the
requirements applicable to an injunction and the need to show irreparable injury is likely in
the absence of an injunction.

1

OCIC has not asked the Court to issue an injunction freezing assets which could be available
where a plaintiff can establish that money damages will be an inadequate remedy due to impending
insolvency of the defendant or that defendant has engaged in a pattern of secreting or dissipating
assets to avoid judgment. See In re Estate of Ferdinand Marcos, 25 F.3d 1467, 1480 (9th Cir. 1994);
see also Hendricks v. Bank of America, N .A., 408 F.3d 1127, 1141 (9th Cir. 2005) (recognizing that
it was a matter of the district court's discretion to determine whether preliminary injunction was
warranted to prevent insolvency); Travelers Cas. and Sur. Co. of America v. Highland Partnership,
Inc., No. 10cv2503 AJB (DHB), 2012 WL 3307203 (S.D. Cal. Aug. 10, 2012).
2

In Travelers Cas. & Sur. Co. of America v. W.P. Rowland Constructors Corp., a case
substantially similar to this one, the court denied preliminary injunction but later granted the surety’s
motion for summary judgment and ordered specific performance in the form of payment of collateral
under the indemnity agreement. Travelers, 2013 WL 2285204 (D. Ariz. May 22, 2013).
MEMORANDUM DECISION AND ORDER- 7

ORDER
NOW THEREFORE IT IS HEREBY ORDERED that the Motion for Preliminary
Injunction (Dkt. 3) is DENIED.
DATED: November 4, 2015

Honorable Edward J. Lodge
U. S. District Judge

MEMORANDUM DECISION AND ORDER- 8