RLI Insurance Company v. Nexus Services, Inc.

Filing 488

MEMORANDUM OPINION. Signed by Chief Judge Michael F. Urbanski on 7/3/20. (mka) (Main Document 488 replaced on 7/3/2020 with flattened .pdf) (mka).

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
HARRISONBURG DIVISION
RLI INSURANCE COMPANY,
Plaintiff,
Counterclaim Defendant,
v.
NEXUS SERVICES INC, et al.,
Defendants,
Counterclaim Plaintiffs.

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Civil Action No. 5:18cv66
By: Michael F. Urbanski
Chief United States District Judge

MEMORANDUM OPINION
This breach of contract case concerns the relatively straightforward obligations of a
bond surety, RLI Insurance Company
1,

, and an indemnitor, Nexus Services, Inc.

under the terms of a standard Commercial Surety General Indemnity Agreement
See Ex. A to Compl., ECF No. 1-2. This case is before the court

on cross motions for summary judgment. See

argument on the cross motions for summary judgment on April 10, 2020.
Unlike the familiar bond dispute in the construction or other commercial context in
which the surety and principal relationship is relatively easy to quantify and define, the wrinkle
in this case is that it involves nearly 2,500 immigration bonds concerning individual immigrant
detainees. As such, this is not a case about a handful of bonds and bond principals as to which

Although it took some time to sort out, Nexus Services, Inc. has acknowledged a unity of interest with two
other entities, Libre by Nexus, Inc.
and Homes by Nexus, Inc.
Dep. of Richard Moore,
ECF No. 428-1, at 65-66. These entities are referred collectively herein as Nexus.
1

1

breach and liability are readily ascertainable. Rather, this case involves thousands of individual
bonds issued to secure the appearance of individual immigrant detainees at Department of

Indemnity Agreement to indemnify RLI for losses it sustains associated with breaches of
those bonds by the individual principals and to provide collateral security to protect RLI
against claims and exposure on those bonds. 2
There are four sets of issues the court must address at summary judgment. First, the
court must address issues of contract interpretation, principally concerning
obligations to provide collateral security. Second, the court must determine whether there is

the court must address the l
for breach of the implied covenant of good faith and fair dealing. Fourth, the court must assess

In summary fashion, the court concludes that RLI has established that Nexus materially
breached the Indemnity Agreement and that it
affirmative defense and counterclaim as to the implied covenant of good faith and fair dealing
do not meet the rigorous standard required by Illinois law; and an evidentiary hearing is
necessary to permit the court to order specific performance. 3 For specific performance

This line of surety business is termed miscellaneous or transactional, involving bonds with lower penalty
value and high in transaction count. See RLI Rule 30(b)(6) deposition of Greg B. Chilson, ECF No. 422-8, at
2

characterizes the business would be volumes of transactions, numbers of obligations, individual bonds. So a
No. 422-7, at 13.
3 Because the court finds the terms of the Indemnity Agreement to be plain and unambiguous, extrinsic
evidence is unnecessary. As such, the court need not address the dueling expert witness motions file by RLI

2

purposes, an evidentiary hearing is necessary to quantify the reasonable amount of collateral
security to be deposited under ¶ 3.d. and the reasonable amount to be paid RLI for losses
under ¶ 2.a.(i) and claims under ¶ 2.a.(ii) of the Indemnity Agreement.
Accordingly, the court GRANTS in part and DENIES in part

s motions

for summary judgment. ECF Nos. 422 and 423.
As detailed herein, the court GRANTS RLI

summary judgment

on its breach of contract claim and specific performance of ¶¶ 2.a.(i), 2.a.(ii),
and 3.c. of the Indemnity Agreement. The court will determine the reasonable

evidentiary hearing.4
As regards ¶ 3.d. of the Indemnity Agreement, the court GRANTS RLI specific
performance of ¶ 3.d. of the Indemnity Agreement for collateral security
sufficient to cover its exposure for the immigration bonds issued for
participants in the Nexus program in a reasonable amount to be determined at
the evidentiary hearing. The court DENIES RLI s request to order the deposit
of $10 million in collateral security as the court cannot conclude, based on the
record developed to date, that such an amount is reasonable.

and Nexus, which are DENIED as moot. See
Motion to S
Responsive Expert Reports
and Testimonies, ECF No. 414;
Motion for Order to Show Cause W
Responsive Expert
Reports Should Not Be S
Motion to Strike the Expert Report and Testimony of
Robert E. Frankel, Esq., ECF No. 446.
4 Because specific performance of the Indemnity Agreement is ordered, the preliminary injunctions issued in
this case, ECF Nos. 60, 139 and 215, will be dissolved by order following the evidentiary hearing.
pending motion for sanctions, ECF No. 452, will be addressed at the evidentiary hearing.

3

The court GRANTS
ECF No. 240, which is dismissed.
I.

FACTUAL AND PROCEDURAL BACKGROUND

This is a breach of contract dispute over an Indemnity Agreement concerning
immigration bonds. Immigration bonds are provided to the United States government,
through the DHS, as security for the release of a detained alien from custody. Each
immigration bond typically guarantees that the alien will be delivered to DHS custody upon
demand.
of individual immigrant principals. As surety, RLI was the obligor on the bonds to the obligee,
DHS, assuring the delivery of the bond principal to DHS. Should a bond principal fail to
appear as noticed, RLI was required to pay DHS a penal sum, averaging around $10,000 per
bond. RLI had no prior experience with immigration bonds 5 and it contends that it took on

immigrant bond principals. In particular, RLI asserts that Nexus represented that it had a bond
failure rate of less than 2 percent, and that it employed proven tools to mitigate the risk of
breach, including GPS monitoring and highly selective screening and scoring of bond
applicants. See RLI June 5, 2015, June 26, 2015, Nov. 6, 2015 and Feb. 11, 2016 emails, ECF
Nos. 428-22, 428-23, 428-25 and 428-24. In all, RLI issued 2,486 bonds for Nexus program
participants, with approximately 1,769 bonds still in force. ECF No. 423, at 4. The aggregate
penal sum of the bonds issued exceeded $30 million, $22 million of which remains extant. Id.

5

David Sandoz,

-6, at 75.

4

As consideration for the issuance of these bonds, Nexus paid RLI roughly $2.6 million
in premiums, and RLI required Nexus to indemnify if from all loss associated with the bonds.
Nexus and RLI executed both the Indemnity Agreement and a Collateral Agreement on
January 20, 2016.6

obligations to provide access to its books and records, indemnify its losses and deposit
collateral security. The relevant provisions of the Indemnity Agreement are as follows:
2. INDEMNITY
a. Indemnitor(s) agree to pay Surety upon demand:
(i) all losses
whatever kind or nature which arise by reason of, or in
consequence of, the Surety having executed any Bond on behalf
of the Principal, or in enforcing this agreement against any of the
Indemnitor(s) or in procuring or attempting to procure its release
from liability or a settlement under any Bond.
(ii) an amount sufficient to discharge any claim made against
Surety on any Bond. This sum may be used by Surety to pay such
claim or be held by Surety as collateral security against loss on
any Bond.
3. GENERAL PROVISIONS
c. Until Surety has been furnished with conclusive evidence of its
discharge without loss from any Bonds, and until Surety has been
otherwise fully indemnified as hereunder provided, Surety shall
have the right of access to the books, records and accounts of the
Indemnitor(s) for the purpose of examining and copying them.
The Indemnitor(s) hereby authorize third parties, including but
not limited to depositories of funds of the Indemnitor(s), to
Although a significant aspect of this case concerns
inter
alia, of the collateral security provisions of the Indemnity Agreement, rather than the ancillary Collateral
Agreement and Receipt. See ECF No. 428-27.
6

5

furnish to Surety any information requested by Surety in
connection with any transaction. Surety may furnish any
information, which it now has or may hereafter acquire
concerning the Indemnitor(s), to other persons, firms or entities
for the purpose of procuring co-suretyship or reinsurance or of
advising such persons, firms, or entities as it may deem
appropriate.
d. Surety shall have every right, defense, and remedy allowed by
law including the rights of exoneration and subrogation.
Indemnitor(s) will, upon the request of the Surety, procure the
discharge of Surety from any Bond and all liability by reason
thereof. If such discharge is unattainable, Indemnitor(s) will, if
requested by Surety, either deposit collateral with Surety,
acceptable to Surety, sufficient to cover all exposure under such
Bonds or Bonds, or make provisions acceptable to Surety for the
funding of the bonded obligations(s).
ECF No. 1-2, at 2-3. The Indemnity Agreement provides that it is governed by Illinois
law. Id. at 3.
While the parties differ as to what the Indemnity Agreement requires, the facts

the time RLI and Nexus entered into the Indemnity Agreement, they signed a separate
Collateral Agreement and Receipt. Chilson Dep., ECF No. 422-8, at 20; see ECF No. 428-27.
Initially, Nexus agreed to deposit $500,000 in collateral in five monthly installments under the
Collateral Agreement. Id. On June 20, 2015

installments of 100k over the course of five months. We would also like to revisit the terms
after twelve months and at that time would ask if we could regain 250k of the 500k collateral
-14.
6

David Sandoz, the RLI Vice President responsible for the underwriting of the Nexus
program, testified that the initial reque
lack of familiarity with issuing immigration bonds, not based on underwriting risk specific to
the Nexus program. Sandoz Dep., ECF No. 422-6, at 31-32, 148. Sandoz considered the initial
requests for collateral to be leverage over Nexus until RLI got comfortable with its operations.
Nexus did not make the agreed-upon collateral installment payments. 7 In fact, Sandoz did not
d RLI began issuing
bonds for Nexus program participants before it received any collateral. Id.
I
had collateral to use and I could have discontinued the program and used that collateral for
Id. at 165-66. Eventually, a reduction in the initial amount of collateral to
be deposited was negotiated. Sandoz Dep., ECF No. 422-6, at 110, 164.
RLI began issuing immigration bonds for Nexus program participants shortly after the
Indemnity Agreement was signed. While RLI expected that the bonds issued for Nexus
program participants would be short-lived (six months or less), by the end of 2016, only 19
had been discharged. See Sandoz Dec. 7, 2016 email to Donovan, ECF No. 428-84.

RLI claims that Sandoz made repeated requests for installment payments of collateral under the Collateral
Agreement. See, e.g., Sandoz-Nagel emails of March 23 and 28, 2016, ECF No. 428-40. On February 10,
2016,
processed the first installment of
ECF No. 428-37, although none was sent. Nexus claims that RLI relaxed its initial collateral
7

ECF No. 428Id.
Id. at
181. While there is a dispute over the deposit of initial collateral under the Collateral Agreement, this does not
affect the summary judgment ruling as RLI claims breach of the indemnification and collateral security
provisions of the Indemnity Agreement, rather than the separate Collateral Agreement.

7

By the summer of 2016, RLI began receiving notices from DHS of breached
immigration bonds. See ECF Nos. 428-46 through 428-48. In particular, DHS issued invoices
for three breached bonds in August and September, 2016, see ECF Nos. 428-49 through 42850, which eventually became past due when they remained unpaid by the invoice deadline. See
ECF Nos. 428at RLI. Throughout December 2016 and January 2017, the email correspondence between
RLI and Nexus leaves no dispute that RLI was increasingly

re

to meet its obligations under the Indemnity Agreement by paying these invoices. See ECF
Nos. 428-53 through 428-67.
By late 2016, RLI also became dissatisfied with the Nexus program because bond
obligations were taking too long to clear. In December 2016, RLI sought to transition the
Nexus program to a new surety, and requested $1.25 million in collateral, amounting to five
per cent of the estimated $22 million penal value of the outstanding bonds, during the
transition. Id. at 208-213. In his December
position as follows.
When we initially agreed to underwrite the program we thought
each bond term would be much shorter in length than currently
realized. We are a company which prefers the majority of our
business in transactional surety to be short tail obligations. Since
we had no prior knowledge of this line of surety business we
initially started the program asking for $500k in collateral and
later revised the requirement in a subsequent meeting since we
were soon coming to the point where we wanted to assess the
program as a whole to determine our future involvement. It looks
like the average length of exposure runs more than 1 year as our
records show only 19 bonds exonerated to date. Due to the
length the average bond remains in force we will need more
collateral than the $500,000 initially anticipated to remain on the
program through the first few months of 2017. We are going to
8

need collateral amounting to 5% of the total exposure RLI has
outstanding at any point in time which will be reviewed
the collateral requirement that must be met is $1,250,000. . . . We
know that it takes time to replace the program and we assume
the more preferable route so the goal we have set is to have
the program moved to a better fit for you by 2-28-17 and if the
program is replaced by that date it is not necessary to provide the
collateral we will just hold back the contingency/cancellation
money that you will earn if you qualify for contingency. If it takes
a bit longer to replace the program the collateral is due by that
date.
ECF No. 428-84.
On December 12, 2016, the stakes rose for RLI when it received a letter from DHS
stating that payment on the three breached bonds was overdue. The letter warned:
If payment is not made on these past due invoices by January
2012. [sic] FinOps-Burlington may refer the debt to the
Department of the Treasury (Treasury) for further collection
efforts. Because this invoice was issued for a validly-breached
bond, when the debt is over 120 days past due, we are required
to refer this delinquent debt to the Department of the Treasury
for centralized debt collection pursuant to the Debt Collection
Improvement Act of 1996 (DCIA), Pub. L. No. 104-134.
ECF No. 428-9, at 2. Throughout the last two weeks of December 2016, RLI sought
confirmation from Nexus that these invoices were being paid by Nexus. See ECF Nos. 42853 and 428-54.
When no payment had been made by Nexus on these three past due bonds by the end of the

Sorry, Erik, but I have to make sure that everyone knows that
have been called (demands made and date to pay has past) and
9

there is no more time to argue each case. If you have had any
success in working with the oblige (we have tried to help too!) or
been granted more time to resolve any of the bonds, please send
us evidence of your success for our files. If not, Mike, you have
to let RLI know your intentions on paying the amounts
demanded with checks going out no later than January 4 to clear
these three bonds so RLI is not in danger of losing their
relationship, if not more, with the federal government. Just
LI has to make
these payments early next week.
ECF No. 428-57. On
confirmed that the checks were cut and sent. I am having o[u]r finance team pull copies of the
-60. Ten
days later, RLI still had not received copies of the three checks Nexus claims it had mailed
DHS. On January 20, 2017, Nexus sent RLI copies of three checks, dated January 5, 2017,
made payable to DHS. By January 27, 2017, however, DHS still had not received payment.
See ECF Nos. 428-64, 428-65 and 428-66.8
in a timely manner was

because DHS had not received

payment, RLI would pay DHS the penalty on the

three past due bonds itself
would no longer issue bonds for the Nexus program.
Because Nexus has not paid these claims as agreed and contrary
to your email to me on January 10 (copy attached titled Nexus
Payments), RLI will be forced to do so tomorrow. As a result of
your failure to meet your obligations under the program and the
Indemnity Agreement you executed with RLI on January 20,
The delay was due to the fact that Nexus had not mailed at least two of the checks to DHS until January 30,
See
ECF No. 428-68 (showing January 30, 2017 postmark on Nexus envelopes to DHS).
8

10

2016 to guarantee, I will be suspending your authority to execute
any further bonds on behalf of RLI effective 2/1/2017. All of
the actions can be stopped with your providing the information
requested in the email below.
ECF No. 428-67.
Over the next six weeks, despite the increasing incidence of bond breaches, RLI heard
little from Nexus. See ECF Nos. 428-70 and 428-71. On March 3, 2017,
Vice President, Surety Claims,
concerning the RLI immigration bonds and expressing the following concerns:
One particular cause for concern arises from our recent receipt,
including two since our discussion, of several past due notices
from the United States Department of Homeland Security
ate immigration bonds that RLI issued at
and good standing with the federal government is critical to our
business. To that end, RLI considers a timely response to any
immigration bond demand or invoice to be essential.
exposure. As such, it is imperative, going forward, that Nexus
copy RLI on all responses to any and all bond demands, whether
by payment or appeal, contemporaneously
submission thereof to the government.
Relatedly, as we also discussed, RLI has a broader concern with
delays and deficiencies
specific records and information. For instance, RLI has
encountered difficulties in obtaining complete and timely
responses from Nexus to standard requests for copies of specific
appeal submissions and records
timely receipt of appeals and bond payments. RLI cannot
adequately protect its interests and evaluate its exposure without
prompt access to such and other reasonably requested records, in
General Indemnity Agreement that Nexus executed on behalf of

11

Ira Sussman,

See ECF No. 1-4. On March 6, 2017, Sussman emailed Donovan, enclosing his March 3 letter,
noted the still increasing number of breached bond claims filed, and stated
communication from your group with our claims folks is non-

-5.

Nexus
After enduring the payment failures on the first three breached bonds in December
and January, encountering radio silence from Nexus for the next six weeks, and ultimately
receiving
issued, on March 13, 2017, the gloves came off. RLI wrote Nexus on March 13, 2017,
demanding that Nexus discharge it from liability on the immigration bonds it had issued for
the Nexus program or provide $10 million in collateral security, which it claimed represented
the outstanding immigration bonds estimated to
exceed $29,000,000. ECF No. 1-6, at 2. The March 13, 2017 letter explained:
[T]he foregoing demand follows a series of events that have
on the outstanding immigration bonds. Significantly in this
regard, RLI has received no response to its above-referenced
correspondence, requesting, among other things, the opportunity
3.c of the GIA, and related available meeting dates. As Nexus was
previously advised, RLI cannot adequately protect its interests
and precisely determine the full extent of its exposure without
immediate access to the requested records and information.
obligations under the GIA, for which RLI stands to suffer
irreparable harm.
Id. at 3.
Nexus eventually agreed to provide access to certain documents, but RLI was not
satisfied with the level of access permitted. Nexus agreed to provide access to more records,
12

contingent on the execution of a confidentiality agreement. Without conceding that such an
agreement was required or permitted under the Indemnity Agreement, RLI agreed to negotiate
one. However, a failure to agree to terms resulted in Nexus continuing to deny access to the
documents RLI requested.
Over the course of the next year, RLI grew increasingly concerned about its ability to

Bonds. DHS continued to invoice RLI for bond breaches and issue past due notices, which
RLI relayed to Nexus for payment pursuant to the Indemnity Agreement. When Nexus did
not respond, RLI was forced to pay DHS itself. For example, on March 30, 2018, RLI paid
Treasury $83,874.14 for Nexus program breached bonds. Nexus disagrees that RLI should
have made payments to DHS, stating that bond payments foreclose the ability of bonded
principals to appeal their immigration cases.
RLI brought suit against Nexus on April 12, 2018, seeking injunctive relief, specific
performance, and breach of the Indemnity Agreement. On the same day, RLI moved for a
preliminary injunction on the grounds that Nexus breached the Indemnity Agreement s
collateral security, indemnification, and right to access provisions, claiming irreparable harm
to RLI s financial position and its status as a Treasury certified surety. At the time, RLI
requested that the court require Nexus to provide immediate access to its records but reserved
the right to pursue collateral security later.
The court held a hearing on the motion for preliminary injunction on April 27, 2018.
During the hearing, Nexus agreed that RLI had a right of access to at least some of the financial
documents requested under the Indemnity Agreement, and the court took the motion under
13

advisement for ten days to allow the parties to negotiate access to records and applicable
confidentiality agreements. On May 9, 2018, the parties jointly moved the court to hold its
preliminary injunction order in abeyance pending further negotiations. The court granted the
request through May 17, 2018. On the night of May 17, the parties notified the court that no
agreement had been reached.
RLI claimed that Nexus had provided no financial records as of 4:00 p.m. on May 17,
2018 beyond documents Nexus had previously received from RLI. Nexus responded that it
had provided more than 9,000 documents; nearly 7,000 pages of immigration records were
produced on May 14, 2018 and more than 2,000 pages were produced after 4:00 p.m. on May
17, including asset lists, receipts, invoices, general ledgers, payroll account and salary
information, profit and loss documents, vendor balance detail, and its 2016 federal tax return.
Upon reviewing the letters from the parties, the court directed the parties to engage in
mediation with Magistrate Judge Joel C. Hoppe. The parties were unable to reach a resolution.
After the unsuccessful mediation, Nexus filed a motion for leave to file a counterclaim
and amended answer alleging breach of contract based on the implied duty of good faith and
fair dealing. Nexus contended that RLI s demands to inspect documents, to be discharged
from issued bonds, and to receive collateral in the amount of $10 million were made in bad
faith. The court granted Nexus s motion for leave to amend, over RLI s argument that the
claim was futile.
The court held an evidentiary hearing on June 7, 2018 to address the extent to which
documents had been produced since the last hearing, to resolve the question of whether RLI
had in fact incurred any losses on breached bonds, to ascertain the extent to which RLI s
14

reputation was at risk as a surety based on Nexus s claimed nonperformance, and to determine
an appropriate amount for an injunction bond. RLI contended that its irreparable harm was
born out of Nexus s failure to pay already breached bonds, but to a greater extent, its potential
insolvency as a business, raising the specter of default on all outstanding bonds.
After hearing argument, the court granted in part RLI s request for a preliminary
injunction, requiring Nexus to provide full access to its books, records, and accounts, but
noted that the injunction did not extend to other Nexus-related entities. In its order, the
court also appointed a Special Master to ensure compliance with the order. From July 2018 to
February 2019, the Special Master presided over Nexus s production of more than 170,000
documents to RLI. See Sixth Status Report by Special Master 1 3, ECF No. 191. During this
time, the parties raised several discovery disputes related to the reach of RLI s right to
disclosure. See, e.g., Order to Provide Access to Quickbooks, ECF No. 79; Order Granting in
Part Denying in Part Motion to Quash Subpoenas to 12 Banks, ECF No. 98.
On October 30, 2018, the court denied a motion to intervene filed by five immigration
bond principals concerned over the privacy of their data. The court denied the motion to
intervene in light of the protective orders issued to limit disclosure of

documents

produced.
On the same day, supported by documents produced pursuant to the first preliminary
injunction, RLI filed a motion seeking a second preliminary injunction for indemnification of
current losses on breached bonds and collateral security to guard against future losses. ECF
No. 106. Specifically, RLI contended that at the time of filing, the penal sum it faced on
outstanding bonds for which DHS had issued an invoice had grown to $709,789.37, and it
15

again sought $10 million in collateral security. 9 After an evidentiary hearing on November 28,
2018, the court granted in part a second preliminary injunction, ordering that Nexus indemnify
RLI for the $226,666.28 RLI had paid DHS; that Nexus pay RLI

$484,854.03,

exposure for bonds as to which Treasury referral was imminent; and that
Nexus pay RLI each month until trial bond penalties invoiced by DHS to prevent their referral
to Treasury for collection. The court denied the request for $10 million in collateral as
speculative.
In March 2019, Nexus requested that the court clarify the terms of its second
preliminary injunction. RLI argued that its surety obligations to DHS were triggered by the
issuance of an invoice, and that Nexus should indemnify RLI accordingly. Nexus argued that
DHS invoices are not final dispositions, as they are subject to appeal, and therefore it should
only be required to pay invoices for which Treasury referral is imminent. In support, it argued
that requiring Nexus to pay all breached bonds precludes bonded principals from challenging
their deportation under Pereira v. Sessions, 138 S.Ct. 2105 (2018). The court agreed with
Nexus, amending Paragraph 4 of the second preliminary injunction to require Nexus make
monthly payments only on bonds referred to Treasury for collection. Order, April 11, 2019,
ECF No. 215.
As written discovery ensued, Nexus s books and records obligations under the
Indemnity Agreement became interwoven with the parties discovery activities. Principally, the
parties disagreed about whether this litigation could reach Nexus-related entities Libre and

According to Donald J. Driscoll, RLI Vice President of Claims and Rule 30(b)(6) deponent, at the time RLI
made its October 30, 2018 demand for $10 million in collateral security, it had only established a loss reserve
of approximately $711,000. Driscoll Dep., ECF NO. 422-4, at 18.
9

16

Homes. Based on disclosures made pursuant to the first preliminary injunction and discovery
orders, RLI filed a motion to amend the complaint, join new party defendants, amend the
scheduling order, and continue the trial. Concurrently, Nexus challenged discovery attempts
to reach Libre and Homes.
By memorandum opinion and order dated April 26, 2019, Magistrate Judge Hoppe
granted RLI leave to amend the complaint and add Libre and Homes as parties to the suit,
finding compelling evidence of RLI s suspicion that the entities serve as alter egos for Nexus
and are potentially subject to the terms of the Indemnity Agreement. Accordingly, RLI filed
an amended complaint bringing claims against all three entities. Nexus responded with a
counterclaim, alleging RLI breached the implied covenant of good faith and fair dealing in
exercising its discretion under the contract. Libre and Homes answered the amended
complaint as well, denying that they were alter egos of Nexus.
The new defendants gave rise to a litany of discovery issues around required disclosures
and appropriate confidentiality protections. On September 30, 2019, while the discovery
disputes were being litigated, RLI filed a motion to enforce the terms of the second preliminary
injunction, as amended by the April 11, 2019 Order, and to again order the payment of $10
million in collateral security. Nexus sought a modification of the second preliminary injunction
to prohibit RLI from paying a breached bond within 120 days of its invoice by DHS to
preserve Nexus s ability to appeal or dispute the bond on behalf of the principal. The court
heard argument on January 22, 2020. The court granted RLI s request to require Nexus to
indemnify all breached bonds RLI had paid. The court denied RLI s request to require Nexus
to make immediate payment on all bond breaches invoiced by DHS, restating that the April
17

11, 2019 Order only requires payment on bonds for which Treasury referral was imminent.
The court further amended the April 11, 2019 Order to require Nexus to make monthly
payments on all breached bonds within 120 days of their date of invoice. The court denied
Nexus s request to prohibit RLI from making payments on breached bonds within those 120
days. The court again denied RLI s request for $10 million in collateral security.
After the resolution of additional discovery disputes and objections, discovery
concluded on March 20, 2020. The pending motions followed.
II.

APPLICABLE LAW

Currently before the court are cross motions for summary judgment on RLI s claims
for breach of the Indemnity Agreement and Nexus s counterclaim alleging breach of RLI s
implied covenant of good faith and fair dealing.
A. SUMMARY JUDGMENT STANDARD
Pursuant to Rule 56(a), the court must grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);
Glynn v. EDO Corp., 710 F.3d 209, 213 (4th Cir. 2013). When making this determination, the
court should consider the pleadings, depositions, answers to interrogatories, and admissions
on file, together with

[any] affidavits filed by the parties. Celotex, 477 U.S. at 322. Whether

a fact is material depends on the relevant substantive law. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). Only disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary judgment. Factual
disputes that are irrelevant or unnecessary will not be counted. Id. (citation omitted).
18

The moving party bears the initial burden of demonstrating the absence of a genuine
issue of material fact. Celotex, 477 U.S. at 323. If that burden has been met, the non-moving
party must then come forward and establish the specific material facts in dispute to survive
summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 87
(1986). In determining whether a genuine issue of material fact exists, the court views the facts
and draws all reasonable inferences in the light most favorable to the non-moving party.
Glynn, 710 F.3d at 213 (citing Bonds v. Leavitt, 629 F.3d 369, 380 (4th Cir. 2011)). Indeed,
[i]t is an axiom that in ruling on a motion for summary judgment, the evidence of the
nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.
McAirlaids, Inc. v. Kimberly Clark Corp., 756 F.3d 307, 310 (4th Cir. 2014) (internal alteration
omitted) (citing Tolan v. Cotton, 562 U.S. 651 (2014) (per curiam)).
Moreover, [c]redibility determinations, the weighing of the evidence, and the drawing
of legitimate inferences from the facts are jury functions, not those of a judge. Anderson, 477
U.S. at 255. The non-moving party must, however, set forth specific facts that go beyond the
mere existence of a scintilla of evidence.

Glynn, 710 F.3d at 213 (quoting Anderson, 477

U.S. at 252). The nonmoving party must show that there is sufficient evidence favoring the
nonmoving party for a jury to return a verdict for that party. Res. Bankshares Corp. v. St.
Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (quoting Anderson, 477 U.S. at 249).
In other words, to grant summary judgment the [c]ourt must determine that no reasonable
jury could find for the nonmoving party on the evidence before it. Moss v. Parks Corp., 985
F.2d 736, 738 (4th Cir. 1993) (quoting Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124
(4th Cir. 1990)). Even when facts are not in dispute, the court cannot grant summary judgment
19

unless there is no genuine issue as to the inferences to be drawn from those facts. WorldWide Rights Ltd. P ship v. Combe Inc., 955 F.2d 242, 244 (4th Cir. 1992).
B. CHOICE OF LAW
A federal court sitting in diversity must apply the choice of law rules of the forum state.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941); Erie R.R. Co. v. Tompkins, 304
U.S. 64, 79 (1938). Because this action was filed in Virginia, the court looks to Virginia state
law to determine which body of substantive law governs the claims at hand. The contract at
issue includes a choice of law provision applying Illinois law, and neither party disputes its
applicability. Virginia law looks favorably upon choice of law clauses in a contract, giving
them full effect except in unusual circumstances, none of which exist here. Colgan Air, Inc.
v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007). The court will apply Illinois
substantive law.
C. PRINCIPLES OF CONTRACT INTERPRETATION
An indemnity agreement is a contract and is subject to the rules for interpreting
contracts. Hanover Ins. Co. v. Smith, 538 N.E.2d 710 (Ill. App. Ct. 1989),

, 561 N.E.2d

14 (Ill. 1990). Contract interpretation is intended to give effect to the intent of the contracting
parties. Gallagher v. Lenart, 874 N.E.2d 43, 58 (Ill. 2007).
or uncertain, its meaning must be determined from the words or language used, and the court
cannot place a construction on the contract which is contrary to or different from the plain
Brown v. Miller, 360 N.E.2d 585, 587 (Ill. App. Ct.
1977).

20

A preliminary question of law a court must answer is whether the contract is clear and
unambiguous. Szilagyi v. Chicago Am. Mfg., LLC (In re Lakewood Eng. & Mfg. Co., Inc,),
459 B.R. 306, 328-29 (Bankr. N.D. Ill. 2011), aff d sub. nom. Sunbeam Prod., Inc. v. Chicago
Am. Mfg., LLC, 686 F. 3d 372 (7th Cir.), cert. denied, 568 U.S. 1076 (2012). Illinois contract
law applies the four corners rule, which presumes that a written agreement speaks the
intention for the parties and the intention with which it was executed must be determined
from the language used . . . not to be changed by extrinsic evidence. Air Safety, Inc. v.
Teachers Realty Corp., 706 N.E.2d 882, 884 (Ill. 1999); see also Lease Mgmt. Equip. Corp. v.
DFO P ship, 910 N.E.2d 709, 715 (Ill. App. Ct. 2009).
In applying this rule, a court initially looks to the language of a contract alone. If the
language of the contract is facially unambiguous, then the contract is interpreted by the trial
court as a matter of law without the use of parol evidence. Air Safety, 706 N.E.2d at 884
(citations omitted). See Minn. Life Ins. Co. v. Kagan, 724 F. 3rd 843, 849 (7th Cir. 2013) ( A
court must initially look to the language of a contract alone, as the language, given its plain
and ordinary meaning, is the best indication of the parties intent. ) (quotation and emphasis
omitted). An ambiguous contract is one whose terms are reasonably or fairly susceptible to
more than one construction. Tishman Midwest Mgmt. Corp. v. Wayne Jarvis, Ltd., 500 N.E.
2d 431, 434 (Ill. App. Ct.1986). If the contract is ambiguous, then the court can consider parol
evidence to resolve the ambiguity. State Bank of Toulon v. Covey (In re Duckworth), 776 F.
3d 453, 456 (7th Cir. 2014). A contract s silence on a central term can create ambiguity, but
the general presumption is that the rights of the parties are limited to the terms expressed in

21

the contract. Consolidated Bearings Co. v. Ehret-Krohn Corp., 913 F.2d 1224, 1233 (7th Cir.
1990) (quotation omitted).
Under Illinois law
to every provision thereof, if possible, since it will be presumed that everything in the contract
Martindell v. Lake Shore Nat. Bank, 154 N.E.2d
683, 89 (Ill. 1958
of a contract or from any clause or provisions standing by itself, but each part of the
Id.
construction that, if possible, effect must be given to all of the language so that provisions
In re
Halas, 470 N.E.2d 960, 964 (Ill. 1984). T
Stone v. Signode Industrial
Group, LLC, 943 F.3d 381, 387 (7th Cir. 2019) (quoting Barnett v. Ameren Corp., 436 F.3d
830, 833 (7th Cir.

in a way that would nullify
Smith v. Burkitt, 795

N.E.2d 385, 389 (Ill. App. Ct. 2003).
The court must first determine whether the four corners of the contract are
unambiguous such that extrinsic evidence is not needed to interpret its terms. In so doing, the

terms. That the parties disagree as to the interpretation of terms does not render the contract
ambiguous. Continental Mobile Tel Co. v. Chicago SMSA Ltd. P ship, 587 N.E.2d 1169, 1173
(Ill. App. Ct. 1992). The court will first look to the plain language of the contract to assess the
22

reasonabl
the extent it encounters any ambiguities, will strictly construe such language against RLI.
Travelers Cas. & Sur. Co. v. A.G. Carlson, Inc., 858 N.E. 2d 491, 500 (Ill. App. Ct. 2006), aff d
in part, vacated in part sub nom. Travelers Cas. & Sur. Co. v. Bowman, 893 N.E.2d 583 (Ill.
2008).
Courts have found that summary judgment is an appropriate method of resolving
disputes concerning indemnification agreements. Hanover Ins. Co. v. Clark, No. 05 C 2162,
2006 WL 2375428, at *3 (N.D. Ill. Aug. 15, 2006) (granting summary judgment for breach of
an indemnification agreement involving a surety arrangement and ordering specific
performance pursuant to a collateral security provision); see also Advanced Ground Sys.
Eng g, Inc. v. RTW Indus., 388 F.3d 1036, 1038 (7th Cir. 2004) (affirming summary judgment
for plaintiff after finding that defendant had a duty to defend and indemnify plaintiff against
tort claims). This case is no different. The unambiguous terms of the Indemnity Agreement
and the lack of any genuine issue of disputed material fact requires resolution of the case on
the pending summary judgment motions.
III.

INTERPRETATION OF THE INDEMNITY AGREEMENT

A. Books and Records Provision
unambiguous books and records provision

has been furnished with conclusive evidence of its discharge without loss from any Bonds,
and until Surety has been otherwise fully indemnified as hereunder provided, Surety shall have

23

the right of access to the books, records and accounts the Indemnitor(s) for the purpose of

The parties disagree as to what, if anything, triggers the right of access and which
documents are within scope of its reach. RLI claims that its right to access is evergreen,
m each of the 2,486
bonds issued. RLI also argues that the plain language of the agreement places no limitation on

records and claims the right is triggered only if Nexus both fails to prove RLI is discharged
from a bond and fails to indemnify RLI against loss. The court held in its first order for
preliminary injunction that RLI had met its burden of demonstrating likelihood to succeed on
a breach of contract claim c
records. However, it notes the substantial difference between the posture of a court evaluating

analysis at the close of discovery. Accordingly, the court addresses the issue anew.
The court continues to believe that a plain reading of the contract supports an

access

Surety has been furnished with conclusive evidence of its discharge

without loss from any Bonds, AND

Surety has been otherwise fully indemnified.

Indemnity Agreement, ¶ 3.c.

access.

The conditions precedent both involve the continued existence of

liability or exposure

under the contract, which suggests that until RLI is fully absolved of any risk of loss pursuant
his further suggests a broad reading
24

Hanover Ins. Grp. v. Singles Roofing Co., No. 10 C 611, 2012 WL 2368328, at *11 (N.D. Ill.
June 21, 2012) (ordering specif

repeatedly failed to provide requested
inception, conditioning access on execution of a confidentiality agreement not required by the
Indemnity Agreement. Further, Nexus maintained a fictitious narrative throughout discovery
that its related entities, Libre and Homes, operated independently such that access to their
books and records was unnecessary. In doing so, it materially breached its contractual

breach of ¶ 3.c. of the Indemnity Agreement and awards specific performance. 10 Unless and
until RLI is discharged, or otherwise indemnified, without loss from any immigration bonds
issued for participants in the Nexus program, RLI shall have full and unfettered access to the
books, records, and accounts of Nexus, for the period of January 20, 2016 to the present,
bearing on its financial condition and ability to satisfy its obligations under the Indemnity
Agreement, the immigration bonds themselves, and any and all documents relating to
performance, discharge, breach, cancellation, forfeiture or penalties associated with those
bonds

10

the following elements: (1) the existence of a valid, binding, and enforceable contract; (2) compliance by the
plaintiff with the terms of the contract, or proof that the plaintiff is ready, willing, and able to perform the
Hoxha v. LaSalle
Nat. Bank, 847 N.E.2d 725, 729 (Ill. App. Ct. 2006).

25

compliance with the Indemnity Agreement. RLI may not disclose information concerning the
bonded principals or any third parties to any other party, including government agencies or

with the breach of ¶ 3.c. will be addressed at the evidentiary hearing.
B. Collateral Security Provisions
Each side seeks summary judgment on the issue of collateral security required by the
Indemnity Agreement.11 Nexus concedes that it is required to provide some measure of
collateral security under ¶ 3.d. of the Indemnity Agreement, but disagrees that

ability to

demand collateral is unlimited. In seeking $10 million, RLI contends that it has sole discretion
to determine when and how much collateral security Nexus must pay. RLI argues that the
sufficient to cover all exposure language in ¶ 3.d. means it has the right to demand collateral
up to the full amount of the penal sum owing for breach of outstanding bonds, at present
approximating $22 million. Nexus asserts that the language sufficient to cover all exposure
under ¶ 3.d. must be limited to some already established risk of liability
3.d. keys off of those terms. Nexus claims RLI s right to demand collateral security is triggered
by the government filing a claim on a bond and the amount of collateral owed is capped by
the total value of bonds for which DHS has made claims. Alternatively, Nexus argues that it
is obliged to

11

under a bond,

At argument, the parties referenced the ancient equitable doctrine of quia timet, translated from Latin as

surety to use general equitable principles to obtain rights
Fidelity and Deposit Co. of Md.v.
Edward E. Gillen Co., 926 F.3d 318, 326 (7th Cir. 2019).

26

which it argues only arises after an immigrant principal breaches a bond by failing to appear
as noticed by DHS.
On March 3, 2017, RLI demanded that Nexus provide access to its books and records
by March 10 under ¶ 3.c. of the Indemnity Agreement. Nexus failed to respond to this request,
and ten days later, on March 13, 2017, RLI wrote Nexus asserting material breach of the
Indemnity Agreement and demanding discharge without loss from all immigration bonds
the deposit of $10
million

with RLI to cover a portion of its estimated exposure under the
-6.12
The Indemnity Agreement contains two provisions directly bearing on the deposit of

collateral security. First, ¶ 2.a.(ii) provides that RLI may hold any monies paid by Nexus on
unpaid

.d. provides that

by reason thereof. If such discharge is unattainable, Indemnitor(s) will, if requested by Surety,
either deposit collateral with Surety, acceptable to Surety, sufficient to cover all exposure under
¶
3.d. merely restates the same obligations iterated in ¶ 2.a.(ii) or whether ¶ 3.d. imposes broader
obligations.

12

The demand for $10 million in collateral security on March 13, 2017, following closely upon the transitional

breached the implied covenant of good faith and fair dealing. As Nexu
new home for your program. We find a new home for the program, your client turns around and sends us a
de
428-3, at 287-288.

27

In interpreting the collateral security provisions of the Indemnity Agreement, the court
first notes the general purpose of surety agreements. Fundamentally, a surety guarantees that
an individual to whom a duty is owed will be recompensed in the event that a principal fails
to perform. In the immigration context, the surety bond allows immigrant detainees to be
guarantee that DHS will be paid the penal sum of the bond in the
event a bonded principal does not appear when summonsed. In turn, an indemnifier, here
Nexus, promises to make the surety whole in the event that the bonded principal does not
perform. Simply put, while the bonds issued by RLI obligate it to pay DHS a penal sum in the
event a bonded principal fails to appear as noticed, the Indemnity Agreement obligates Nexus
to reimburse RLI for its loss. Under this agreement, RLI serves as secondary obligor to DHS,
the obligee, for performance by the bonded principal, while Nexus undertakes the ultimate
risk of loss should a bonded principal fail to perform. Thus, the contract represents a risk
sharing agreement, and the court must honor the parties intentions in its interpretation.
In this light, the court considers the arguments each side makes as to the nature of the
obligations imposed by

3.d. Each side advances an extreme position, neither of which are

reasonable or consistent with the whole of the Indemnity Agreement. For instance, RLI posits
that there is no limit on the amount of collateral security it may demand at any time. This is

are either redundant of those in ¶ 2.a.(ii) or only arise when a principal actually fails to appear.

First, to interpret ¶ 3.d. as granting RLI the right to demand, at its sole discretion, an
amount of collateral security up to the total amount owed on all outstanding bonds runs
28

permit it to demand as collateral the total value of issued bonds immediately after executing
the agreement, offloading entirely its risk under the contract to Nexus, and depriving Nexus
of one benefit of its bargain for which it paid approximately $2.6 million in premiums. Nor
does the plain language of the contract support such a broad interpretation. RLI specifically
in ¶ 3.b., reserving the right to issue, cancel, or decline
the execution of any Bond. But this language is not found in ¶ 3.d. The court is required to
give meaning to the words chosen by the parties in the contract, and attributes significance to
the fa
Further, ¶ 3.d. only requires Nexus to deposit collateral security for those bonds as to
t

rincipal when
demanded by DHS. Under its interpretation of ¶ 3.d., RLI believes that it has the right to
require Nexus to deposit collateral security equal to the penal sum for every bond issued. But
that argument makes little sense when applied to a bond for a principal as to whom DHS has
not issued a notice to deliver. As to such a principal, discharge by performance is not
but rather the request for discharge is simply not ripe. As such, the court
cannot agree that RLI

uire Nexus to deposit collateral security is boundless.

At the same time, however, standard tenets of contract interpretation compel the court
to reject

¶ 3.d. merely reiterates rights granted to RLI in ¶ 2.a.(ii). A
29

foundational principle of contract interpretation is that a court must construe a contract as a

intentions. River Plaza Homeowner s Ass n v. Healey, 904 N.E.2d 1102, 1109 (Ill. App. Ct.
2009). See Stone v. Signode Indus. Group, LLC, 943 F.3d 381, 387 (7th Cir. 2019) (quoting
Barnett v. Ameren Corp.
Grinnell Mut. Reins. Co. v.
LaForge
the clause is redundant and thus offends the well-settled principle of contract construction
that the provisions of a contract shall not be interpreted in a way that renders other provisions

Moreover, courts addressing contracts with similar collateral security provisions, one

to cover al

See e.g., Hudson Ins. Co. v.

Simmons Const., LLC, No. CV-12-0407-PHX-DGC, 2012 WL 5381487, at *3 (D. Ariz. Nov.
2, 2012) (interpreting a request for $3,900,000 to cover liability arising out of unresolved claims

indemnification for claims provision); In re E-Z Serve Convenience Stores, Inc., 377 B.R.
491, 494 (Bankr. M.D.N.C. 2007) (finding that the indemnity agreement contemplates two
scenarios under which plaintiff could request collateral, for claims made against surety and if
defendant is unable to attain discharge for surety from a bond); Ohio Cas. Ins. Co. v.
Fratarcangelo, 7 F. Supp. 3d 206, 213 (D. Conn. 2014) (distinguishing contractual rights to
collateralization between claims brought against surety and liabilities arising out of a future
30

Accordingly, the

security under ¶ 3.d. is bounded by claims made by DHS.

appear as noticed by DHS, consistent with the entirety of the Indemnity Agreement. No such
limiting language appears in ¶ 3.d., and such
under that section

of its books and records under ¶ 3.c. reveals an impending financial collapse, RLI would not
be able to protect its bargained-for secured position by requiring collateral security to cover
its exposure. Rather, Nexus argues, the collateral security would be limited to the penal sums
of the bonds actually breached. Such a crabbed reading renders meaningless the books and
records provision of ¶ 3.c. Further, such a reading conflicts with ¶ 3.e., which allows RLI to
llateral security on any or all Bonds

Nexus to deposit collateral security is limited to bonds already in breach, it makes no sense
that RLI can use such collateral for any bond under the Nexus program, including future
bonds not yet issued, as reflected by the language in ¶ 3.e.
In contrast to the strained litigation positions taken by the parties, the court finds the
obligations of RLI and Nexus under ¶¶ 2.a. and 3.d. of the Indemnity Agreement to be plain
and unambiguous, each addressing a different category of liability to the surety and
concomitant obligation of the indemnitor. In the context of this Indemnity Agreement
31

concerning immigration bonds, there are three distinct categories of risk facing RLI, and those
risks are addressed by the rights granted it under ¶¶ 2.a.(i), 2.a.(ii), and 3.d.
First, ¶ 2.a.(i) concerns losses
costs, damages, attorneys fees and e

losses,
sustained by reason of its

execution of the immigration bonds or in enforcing the Indemnity Agreement.
This includes, at a minimum, payments made by RLI to DHS for invoiced
breached bonds.
Second, ¶ 2.a.(ii) concerns claims,
unpaid
immigration bond. RLI may use such payments to pay a bond claim or hold the
money as collateral security against loss on any bond. This provision does not
apply to bonds for which RLI has made a payment to DHS, as these are losses
covered under ¶ 2.a.(i).
exposure
sufficien

ke

This provision more expansively provides RLI protection from exposure, or
future liability, in the form of payment, assets, or other provisions to be held in
trust.
There is no material dispute in this case as to
of ¶¶ 2.a.(i) and 2.a.(ii). Nexus agrees that the Indemnity Agreement requires it to pay RLI for
any losses it has sustained on any immigration bond and discharge RLI for claims made on
32

breached bonds.
to indemnify RLI related to final claims, payment of the bonds that RLI has paid for
o. 428-

ing is that if I pay

a bond, that I am required to stand in front of the principal. And so I am either required to
pay a bond when it is a final claim when it is breached and I am required to pay that or the
surety can demand collateral at a time when a br

Id. at 440. While there is no

dispute that Nexus is obliged to make these payments, the parties vigorously disagree as to
when these obligations arise in the context of DHS immigration proceedings. Further, Nexus
disputes the amount of RLI
Agreement.
judgment, concerns the third category of risk contemplated in ¶ 3.d.
Illinois courts and other jurisdictions have routinely granted motions for summary
judgment in favor of a surety for specific performance of the collateral security obligation of
Hanover Ins. Co. v. Clark, No. 05 C 2162, 2006 WL 2375428, *5
(N.D. Ill. Aug. 15, 2006). See United States Fidelity & Guaranty Ins. Co. v. Cler Constr. Servs.,
Inc., No. 03 C1405, 2003 WL 1873926 (N.D. Ill. Apr. 11, 2003) (granting preliminary
an show that debts are due, the
principal refuses to pay them, and that, if they refuse to pay or perform, the surety will become
Mountbatten Sur. Co. v. Szabo Contracting, Inc., 812 N.E.2d 90, 101 (Ill. App. Ct.
2004) ( Defendants did not dispute that plaintiff received claims under the bonds. Under the

under the bond. Therefore, the undisputed evidence in the record shows that plaintiff was
33

to liability on a bond, and this validly triggered

ations under the

Both RLI and Nexus urge the court to apply the holdings of the Eastern District of
New York and the Second Circuit Court of Appeals in the multiple Safeco v. Hirani decisions
to this case. The indemnity agreement in Safeco was substantially the same as the one at hand:
INDEMNITY TO SURETY: Undersigned agree to pay to
Surety upon demand:
¶ 1. All loss, costs and expenses of whatever kind and
nature, including court costs, reasonable attorney fees . . . and any
other losses, costs or expenses incurred by Surety by reason of
¶ 2. An amount sufficient to discharge any claim made
against Surety on any Bond. This sum may be used by Surety to
pay such claim or be held by Surety as collateral security against
¶ 5. The undersigned will, on request of Surety, procure
the discharge of Surety from any Bond and all liability by reason
thereof. If such discharge is unattainable, the Undersigned will, if
requested by Surety, either deposit collateral with Surety,
acceptable to Surety, sufficient to cover all exposure under such
bond or bonds, or make provisions acceptable to Surety for the
funding of the bonded obligation(s).
Safeco Ins. Co. of Am. v. M.E.S., Inc., No. 09CV3312ARRALC, 2010 WL 11627203, at *13
(E.D.N.Y. May 19, 2010).
In the series of Safeco decisions, the district court was called upon to interpret nearly
identical indemnification and collateral security provisions found in the RLI-Nexus Indemnity
34

Agreement. At the outset, the Safeco

indemnification right, from claims yet to be paid or anticipated, which are included in the
Safeco, 2010 WL 3928606 at *1.

of ¶¶ 2.a.(i) and 2.a.(ii) of the Indemnity Agreement in this case, the Eastern District of New
York noted the salient difference between these provisions as follows:
actual loss, such as a payment already made, which would require
would entitle the Surety to collect collateral security in that
amount to be used to pay the claim.
Id. at *2.
Concerning the same two collateral security provisions at issue in this case, the Safeco

provision is available for losses under a bond that are uncertain but anticipated at some point

Id. at *3.
The Safeco
from those of ¶ 3.d. of the RLIParagraph 5 of the General Provisions provides that, upon
demand, the defendants are required to post collateral security
that discharge is unat
defined in the agreement, but that does not render the term
ambiguous. Whether a contract is clear or ambiguous is a
question of law.
35

Id. at *2. The Safeco

payments for

Here, as discussed above, one of the two provisions dealing with
collateral security, Paragraph 2 of the Indemnity to Surety
section, clearly specifies that collateral security is to be provided
by the indemnitor for unpaid claims, not for existing losses
already incurred. In light of this clarity, the subsequent use of the
aph 5 of the General Provisions
section introduces no ambiguity in to the agreement concerning
wholly consistent with the intent of the parties as expressed in
refers to the risk of loss or future loss faced by Safeco, not to the
reasonable, is to be ascertained in calculating collateral security.
Id. at *3.
In Safeco, the Second Circuit affirmed that ¶ 5, parallel to ¶ 3.d. in this case, should be
unambiguously interpreted to require collateral sufficient to cover potential losses. Safeco Ins.
Co. of Am. v. Hirani/MES, JV, 480 F. App x 606, 608 (2d Cir. 2012). Acknowledging that it
is impossible to determine ex ante the precise amount of future losses, the court focused on
whether, in light of the circumstances of the case and the supporting documentation submitted
by the parties, the amount requested was reasonable. Safeco Ins. Co. of Am. v. M.E.S., Inc.,
No. 09-CV-3312 ARR ALC, 2010 WL 4828103, at *4 (E.D.N.Y. Nov. 22, 2010), aff d sub
nom. Safeco Ins. Co. of Am. v. Hirani/MES, JV, 480 F. App x 606 (2d Cir. 2012).
In determining the amount of collateral security to be ordered deposited by specific
performance, the Safeco

36

with relative equality of b

Safeco Ins. Co. of Am. v. M.E.S., Inc., No.

09CV3312ARRALC, 2010 WL 11627203, at *13. There is no suggestion of inequality of
bargaining power in this case.
Following Safeco, the court agrees with RLI that its right to demand collateral security
is not limited to claims actually made by DHS to RLI or bond principals who have failed to
appear but for whom no claim has yet been filed. The court agrees as well with the holding in
Safeco that the amount of the collateral to be deposited must be reasonable. RLI argues that
its demand for $10 million in collateral security is reasonable because it is at risk for $22
million, representing the total penal sum of the outstanding immigration bonds indemnified
by Nexus, and the fact that the bond breach rate has outpaced expectations. On the other
hand, however, while RLI demanded in October 2018 that Nexus deposit $10 million in
collateral security, its established loss reserves only approximated $711,000. Earlier, RLI had
sought amounts of collateral far less than $10 million in varying amounts, from $500,000,
$250,000 and $1.25 million, suggesting a lack of reasonable basis for the $10 million request.
Moreover, although a number of Nexus indemnified bonds have been breached, Nexus asserts
that it has paid RLI for all bond breaches to date, suggesting that a multimillion dollar deposit
of collateral security is unreasonable.
In short, the court rejects the interpretations of ¶ 3.d. offered by both parties and
adopts the approach taken by the Eastern District of New York and Second Circuit in Safeco.
Under ¶ 3.d., RLI may require Nexus to deposit a reasonable amount of collateral security to
issued to Nexus program participants
right to require Nexus to deposit collateral security is not limited by claims made by DHS or
37

the value of bonds as to which bonded principals have already failed to appear. Nor may it be
whatever amount RLI demands. Rather, it must be reasonable. At a minimum, Nexus must
deposit collateral with RLI for unpaid breached bonds, but it must also make provisions

demonstrating the amount of this exposure in a detailed, itemized format and will be required
to substantiate each alleged source of risk as well as the reasonable likelihood of future loss.
In so doing, RLI may look beyond performance on bonds to information gleaned from

things.
As in Safeco, the court has insufficient evidence to ascertain a reasonable amount of

costs in meeting its obligations under the bonds or its anticipated exposure. . . . Accordingly,

agreement, I reserve judgment on the amount of collateral security until the plaintiff provides
Safeco Ins. Co. of Am. v. M.E.S., Inc., No.
09CV3312ARRALC, 2010 WL 11627203, at *13. The court takes the same approach in this
case. In order to arrive at a reasonable amount of collateral security to be enforced by specific
performance, the court will set

.

C. Indemnification Provisions
In ¶¶ 2.a.(i) and 2.a.(ii), Nexus agrees to indemnify RLI against both loss and liability
for claims. An indemnity contract may indemnify against either (1) loss or damage, or (2)
liability, or (3) both. See Diaz v. Diaz, 403 N.E.2d 1219, 1220 (Ill. App. Ct. 1980)). In a
38

contract of indemnity against loss or damage, the indemnitee cannot recover until he has made
payment or otherwise suffered an actual loss; the mere legal liability to pay is insufficient. In a
contract of indemnity against liability, the cause of action accrues as soon as the liability of the
indemnitee has become fixed, such as by a judgment against him, even though the indemnitee
had not sustained any actual loss or paid the judgment. Id. (citing 42 C.J.S. Indemnity § 23
(2006)). The plain language of the Indemnity Agreement in the instant case creates a right to
indemnity against loss under ¶
losses, costs, damages, attorneys fees and expenses of

As to indemnity against loss, the parties appear to agree that to date Nexus has
reimbursed RLI for any payments RLI has made to DHS for breached bonds. Nevertheless,

Agreement. See Declaration of Itemized Statement of Unreimbursed Losses and Expenses,

As to indemnity against liability, ¶
Surety upon demand an amount sufficient to discharge any claim made against Surety on any

on breached bonds, the parties historically have sparred as to when the obligation to pay bond
claims arises.
As mentioned in connection with the issue of collateral security, there is no genuine
issue of material fact that RLI is entitled to specific performance of ¶¶ 2.a.(i) and 2.a.(ii) of the
39

Indemnity Agreement. While RLI claims that Nexus has failed to timely pay RLI, Nexus

-3, at 196. Donovan
explained:
So my understanding is that I can exonerate when a claim is
made, which means when a bond is breached, then a claim is
made. When that claim is made, I can exonerate RLI by paying it
at that time or I can indemnify RLI by paying it if you pay it. I
in these three cases
Id. at 338. As required by the second preliminary injunction, as amended, Nexus has been
paying certain of these obligations as ordered by the court. 13 Indeed, because of the sheer
number of individual bond principals involved in the Nexus program,
RLI for payments it has made to DHS for breached bonds and for claims made by DHS for
breached bonds under ¶¶ 2.a.(i) and 2.a.(ii) has been a moving target. 14 It is time, however, to
narrow our sights and determine, as of the date of the evidentiary hearing, the following: (1)
Whether, and if so, to what extent, RLI is out of pocket for any unreimbursed losses for bond
breaches already paid DHS; and (2) Whether, and if so, to what extent, RLI is obligated on
claims, reflected in a DHS invoice, which remain unpaid. As there is no dispute that Nexus is
obligated to RLI for its bond losses and claims under ¶¶ 2.a.(i) and 2.a.(ii), the court will order
specific performance of those provisions, and, if applicable, enter judgment for RLI in a sum
certain as of the date of evidentiary hearing.

13

obligations under the second preliminary injunction. This issue will be addressed at the evidentiary hearing.
14

million. Donovan Rule 30(b)(6) Dep., ECF No. 428-4, at 48, 57.

40

IV.

NEXUS S EQUITABLE DEFENSE/COUNTERCLAIM

Nexus raises equitable defenses to RLI s breach of contract claim, seeking to excuse its
alleged nonperformance on the grounds that RLI breached an implied covenant of good faith
and fair dealing under the contract in (1) demanding discharge without loss from all
immigration bonds or $10 million in collateral security; (2) refusing to execute a confidentiality
)
efforts to appeal bond breach claims by insisting on payment of DHS invoices. See Donovan
Dep., ECF No. 428-3, at 287-288, 379; Donovan Rule 30(b)(6) Dep., ECF No. 428-4, at 385,
390-392, 110, 119-120, and 194-195.
Illinois law treats surety contracts as contracts of insurance. Windowmaster Corp. v.
Morse/Diesel, Inc., 722 F.Supp. 1532, 1534 (N.D. Ill.1988); Fisher v. Fidelity & Deposit Co.
of Md., 466 N.E.2d 332, 339 (Ill. App. Ct. 1984). Illinois law imputes a heightened duty of
fair treatment on the insurer once the insurer s conduct creates a risk that the insured will
bear some of the loss under the contract. Windowmaster Corp., 722 F. Supp. at 1534 (citing
Cernocky v. Indemnity Ins. Co. of N. Am., 216 N.E.2d 198, 204 (Ill. App. Ct. 1966)). In surety
contracts, the indemnitor ultimately bears the risk of loss incurred by the surety, so in
determining whether the indemnitor has defaulted, the surety must act in good faith. Id. In
exercising discretion in invoking rights under the contract, the surety must give the interests
of the insured equal consideration with its own interests and it must in all respects deal fairly
with the insured. Id.
To prove that RLI failed its duty of good faith, Nexus must show that it exercised its
discretion unreasonably, arbitrarily, capriciously, or in a manner inconsistent with the
41

reasonable expectations of the parties at the time of contracting. Safeco Ins. Co. v. Siciliano,
Inc., No. 06-3162, 2009 WL 212081, at *14 (C.D. Ill. Jan. 29, 2009) (citing Continental Mobile
Telephone Co., Inc. v. Chicago SMSA Ltd., 587 N.E.2d 1169, 1174 (Ill. App. Ct.1992); see
also Kham & Nate s Shoes No. 2, Inc. v. First Bank of Whiting, 908 F.2d 1351, 1357 (7th
Cir.1990) ( Good faith is a compact reference to an implied undertaking not to take
opportunistic advantage in a way that could not have been contemplated at the time of
drafting, and which therefore was not resolved explicitly by the parties. ). The issue of good
faith discretion is a question of fact. Siciliano, 2009 WL 212081, at *14. See e.g. Windowmaster
Corp., 722 F. Supp. at 1535; Progressive Ins. Co. v. Universal Cas. Co., 807 N.E.2d 577, 58990 (Ill. App. Ct. 2004); Powell v. Prudence Mut. Cas. Co., 232 N.E.2d 155, 158 (Ill. App. Ct.
1967). Thus, if Nexus can establish a genuine dispute of material fact as to RLI s alleged bad
faith, the court cannot grant summary judgment and the claim must proceed to trial. Id.

Illinois contract law as a standalone cause

While all Illinois contracts contain an

implied obligation to act in good faith, this obligation does not provide a person with a
separate, independent cause of action. Hickman v. Wells Fargo Bank N.A., 683 F. Supp. 2d
779, 793 (N.D. Ill. 2010) (citing LaScola v. U.S. Sprint Communications, 946 F.2d 559, 565
(7th Cir. 1991). The Illinois Supreme Court has held that a party may bring a standalone bad
faith claim based on this implied covenant only in the narrow context of cases involving an
insurer's obligation to settle with a third party who has sued the policy holder

APS Sports

Collectibles, Inc. v. Sports Time, Inc., 299 F.3d 624, 628 (7th Cir. 2002) (citing Voyles v. Sandia
Mortg. Corp., 751 N.E.2d 1126, 1131 (Ill. 2001)). Otherwise, alleging breach of the implied
42

covenant of good faith and fair dealing must be brought as a component of a separate breach
of contract claim. Vician v. Wells Fargo Home Mortg., No. 2:05-CV-144, 2006 WL 694740,
at *8 (N.D. Ind. 2006) (dismissing plaintiff's claim for breach of Illinois implied covenant of
good faith and fair dealing where claim was pled as an independent claim and not as part of
the breach of contract count

The covenant is only an aid to interpretation, not a source of

contractual duties or liability under Illinois law. Zeidler v. A & W Restaurants, Inc., 301 F.3d
572, 575 (7th Cir. 2002).
Considering, therefore,

as a breach of contract claim, as opposed

to a standalone bad faith claim, such counterclaim fails because of the time-honored principle
that a party who materially breaches a contract cannot seek to enforce its terms. The thrust of
Nexus s counterclaim is that, in light of the circumstances at the time, RLI s demand for
discharge or $10 million in collateral was so unreasonable as to amount to bad faith. Nexus
contends that when RLI demanded collateral security pursuant to ¶ 3.d. on March 13, 2017, it
did so in bad faith because it was attempting to cease its involvement in the immigration
bond surety business but still wanted to keep its $2.6 million up front, fully paid premiums.
Nexus Counterclaim, ECF No. 240, at ¶ 148.
that RLI breached the implied covenant of good faith and fair dealing fail at the outset because
Nexus was in material breach of the Indemnity Agreement at the time RLI requested discharge
of the bonds or deposit of $10 million in collateral. In December 2016 and January 2017,
Nexus failed to timely pay DHS past due invoices for three breached bonds, totaling $52,500,
risking referral to Treasury for collection in clear breach of ¶ 2.a.(ii) of the Indemnity
Agreement. When breached bond claims increased in late 2016 and early 2017, Nexus ignored
43

Agreement. As to these breaches, there are no genuine issues of material fact in dispute
requiring resolution by a jury.
contract provision by one party may be grounds for releasing the other party from his
Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85, 95 (Ill. 2007).
See James v. Lifeline Mobile Medics, 792 N.E.2d 461, 464 (Ill. App. Ct. 2003)
Goldstein v. Lustig, 507 N.E.2d 164,
w prohibiting a party who has breached a contract

InsureOne Indep. Ins. Agency, LLC v. Hallberg, 976 N.E.2d 1014, 1025 (Ill. App. Ct. 2012).
See James
advantage of the terms of the contract that benefit him, nor can he recover damages from the
other party
justify non-performance by the other party. Whether a breach is material, however, is a
Israel v. National Canada Corp.,

the agreement, or whether failure to perform renders performance of the rest of the contract
different in substance from the original agreement. The breach must be so material and
Radiant
Star Enterprises, LLC v. Metropolis Condominium Assoc., 107 N.E.3d 877, 893 (Ill. App. Ct.
44

2018). See
remaining duties to render performances to be exchanged under an exchange of promises that
there be no uncured material failure by the other party to render any such performance due at

motion, Nexus
materially breached the terms of the Indemnity Agreement by failing to timely pay the claims

more than a year and a preliminary injunction order from the court to force Nexus to comply
with its obligations under this provision. Because of N

cannot

raise a claim that
the implied covenant of good faith and fair dealing.
Nor does

otherwise survive. Again, the principal point raised

by Nexus is that RLI acted in bad faith when it demanded bond discharge or, failing that, the
deposit of $10 million in collateral, after the relationship cratered in March 2017. In so arguing,
Nexus fails to appreciate the high bar for demonstrating bad faith, namely, demonstrating a
close connection between an alleged improper motive and the unreasonable behavior. Under
Illinois law, this standard requires a party to present evidence from which a jury could conclude
that a surety both intended to and did actually attempt to contravene the purpose of the
agreement. For example, in Siciliano, the contractor and construction bond obligor
evidence from which a jury could conclude that Safeco convinced it to enter into the Joint
Trust Account Agreement and pre-sign the default letters in exchange for financial assistance,
when it always intended to cut off financial assistance and thereby effect defaults on the
45

bonded projects. If Safeco did mislead Siciliano into providing it the means to obtain control
Siciliano, 2009 WL 212081, at *15 (permitting a
bad faith defense when defendant provided evidence that surety had procured pre-signed
default letters from indemnitor and subsequently issued those letters unbeknownst to
indemnitor). Here, there is no such evidence that RLI acted for an improper motive or in
contravention of the purposes of the Indemnity Agreement. It issued the immigration bonds
at Nexus s request, and when the wheels began to come off of the Nexus program, sought to
assure that it would be indemnified for bond losses under the Indemnity
Agreement. Rather than act in contravention of the Indemnity Agreement,
consistent with its purpose to place the ultimate risk of loss for these bonds on Nexus and
protect RLI from exposure on the bonds.
The court finds no evidence to support Nexus s claim that RLI engaged in bad faith
by demanding indemnification, discharge, or the deposit of collateral security.
repeated request for $10 million in collateral security appears steep, it does not rise to the level
of bad faith. This is particularly true because any collateral requested merely represents funds
held in trust for Nexus, and not for

profit. The court does not agree with

argument that collateral held in trust, per the terms of a collateral agreement, would allow
RLI to reap one hundred percent of the benefit of the fully paid up front premiums
without any risk of proof of loss and
require Nexus to find and pay a second premium to another surety to guarantee the
Immigration Bonds. Nexus Counterclaim, ECF No. 240, at ¶ 100. Nor can RLI s request for
discharge from all bond obligations be seen as being in bad faith as it is specifically anticipated
46

by the contract s terms. ECF No. 340, at 18. See Indemnity Agreement, ECF No. 1-2, at ¶
3(b) ( Surety shall have the right at its option and in its sole discretion to issue or cancel or
decline the execution of any Bond, or renewal thereof. ); Id. at ¶ 3(d) ( Indemnitor(s) will,
). A party does
not act in bad faith when it reasonably exercises its contractual right to discharge or request
the deposit of collateral to secure against an anticipated risk. See L.A.P.D., Inc. v. General
Elec. Corp., 132 F.3d 402, 403-04 (7th Cir. 1997) (holding that because parties are entitled to
enforce the terms of their contracts as written, [l]itigants may not seek to litigate issues of
good faith in lieu of abiding by explicit provisions of contracts. ).
Nexus further alleges RLI invoked its right to access books and records, including its
demand of the personal information of Principals in the hands of non-parties to the
Agreement, in bad faith. Again, Nexus offers no evidence approaching bad faith. As noted
previously, RLI appropriately exercised its contractual rights in demanding access to books
and records to assess its risk exposure. See First Preliminary Injunction, ECF No. 59. Further,
given the nature of the immigration bonds at issue, personal information about principals in
Nexus s possession is relevant to RLI s risk assessment, placing it squarely within the terms of
the books and records provision. Nexus claims that RLI acted in bad faith by refusing to

47

books and records while its immigration bonds remained in force, it did not act in bad faith.

efforts to appeal breached bonds by paying DHS invoices fails. Paragraph 2.b.(1) of the
Indemnity Agreement provides that as regards claims made against RLI,

shall have the

exclusive right for itself and the Indemnitor(s) to determine whether any claim or suit upon
any Bond shall on the basis of liability, expediency or otherwise, be paid, compromised,
under the Indemnity Agreement to
determine whether to pay or appeal bond claims, its decision to pay, rather than appeal bond
claims, falls within its express contractual rights and cannot constitute a breach of the implied
covenant of good faith and fair dealing.
The
considered in light of its rights under the Indemnity Agreement, do not meet the high standard
required under Illinois law to constitute a breach of the implied covenant of good faith and
fair dealing. Because the court finds Nexus s allegations of bad faith to be without merit, its
affirmative defense and counterclaim fail as a matter of law.
V.

S REQUEST FOR DAMAGES

The court turns to RLI s demand for actual losses arising out of Nexus s breach of
contract in the amount of $2,790,443.64 pursuant to ¶ 2.a.(i), which provides that Nexus must
pay RLI upon demand:
all losses, costs, damages, attorney

fees, and expenses of

enforcing this agreement against any of the Indemnitor(s) or in
48

procuring or attempting to procure its release from liability or a
settlement under any Bond.
Indemnity Agreement, ECF No. 1-2. In support, RLI proffers the itemized statement of David
Grycz, an officer of RLI, cursorily listing its losses pursuant to ¶ 2.b.(iii) of the Indemnity
Agreement. ¶ 2.b.(iii) provides:
In any claim or suit h
and expenses, sworn to by an officer of the Surety or the
vouchers or other evidence of disbursement by the Surety shall
be prima facie evidence of the fact and extent of the liability
hereunder of the Indemnitor(s).
Id. Illinois courts have upheld prima facie evidence provisions of indemnity agreements. See,
e.g., Amwest Surety Ins. Co. v. Szabo, 2003 WL 21789033, at *4-5 (N.D. Ill. July 23, 2003);
U.S. Fidelity and Guar. Co. v. Klein Corp., 558 N.E.2d 1047, 1052 (Ill. App. Ct. 1989).
Nexus challenges the sufficiency of the officer statement. A party may establish the
inaccuracy of prima facie evidence provision with counter affidavits, or other evidence. U.S.
Fidelity and Guar. Co., 558 N.E.2d at 258. Nexus argues that RLI fails to adequately itemize
the expenses and therefore fails to offer evidence sufficient to identify losses attributed to an
actual breach by the Defendant.

ECF No.

456, at 14. Nexus also posits that if its interpretation of the Indemnity Agreement prevails,
then all of RLI s alleged fees and cost associated with pursuing ten million dollars

including

all fees and cost regarding RLI s dogged pursuit of Nexus s financial stability

should be

deemed nonrecoverable. Id.
The court agrees with Nexus that RLI s officer statement is insufficiently itemized to
determine RLI s loss arising out of execution of the immigration bonds for Nexus program

49

participants or in enforcing the Indemnity Agreement against Nexus. This is especially true
where the vast bulk of the damages claimed are sizeable
this lawsuit.
Accordingly, the court will convene an evidentiary hearing to address the issue of
claimed damages. See e.g., Safeco Ins. Co. of Am. v. M.E.S., Inc., No. 09CV3312PKCVMS,
2017 WL 1194730, at *24 (E.D.N.Y. Mar. 30, 2017), aff d, 910 F.3d 705 (2d Cir. 2018). Given
that the lion s share of losses claimed are litigation expenses, the court urges the parties to
anticipate a rigorous evaluation as to the reasonableness of the claimed attorneys fees. The
party seeking reimbursement of attorneys fees bears the burden of establishing entitlement
to an award and documenting the appropriate hours expended and hourly rates. Safeco Ins.
Co. of Am. v. M.E.S., Inc., 790 F. App x 289, 291 92 (2d Cir. 2019) (quoting Hensley v.
Eckerhart, 461 U.S. 424, 437 (1983)). See also Safeco Ins. Co. of Am. v. M.E.S., Inc., No.
09CV3312PKCVMS, 2018 WL 2766139, at *12 (E.D.N.Y. June 8, 2018), aff d, 790 F. App x
289 (2d Cir. 2019) (engaging in an exhaustive review of claimed costs arising from contract
enforcement, categorizing legal fees by claim, by hearing, by motion; and evaluating the
reasonableness of the fee charge, time claimed, and degree of success achieved).
VI.

SUMMARY

After review of the motions, exhibits, and relevant case law, the court resolves the legal
disputes regarding the terms of the Indemnity Agreement central to this case. As detailed
herein, the court GRANTS in part and DENIES in part each side s motions for summary
judgment. ECF Nos. 422 and 423.

50

The court GRANTS
claim as to ¶¶ 2.a.(i), 2.a.(ii), and 3.c. of the Indemnity Agreement, finding it to be factually
claims upon
demand and to provide access to books and records. The court GRANTS RLI specific
performance of ¶¶ 2.a.(i), 2.a.(ii), and 3.c. of the Indemnity Agreement. The court will

under ¶ 2.a.(i) at the upcoming evidentiary hearing.
The court GRANTS in part and DENIES in part
judgment as regards ¶ 3.d. of the Indemnity Agreement. The court GRANTS RLI specific
performance of ¶ 3.d. of the Indemnity Agreement for collateral security sufficient to cover
its exposure for the immigration bonds issued for participants in the Nexus program in a
reasonable amount to be determined at the evidentiary hearing. The court DENIES RLI s
request to order the deposit of $10 million in collateral security as the court cannot conclude,
based on the record developed to date, that such an amount is reasonable.
The court GRANTS RLI s motion for summary judgment on Nexus s equitable
defense and counterclaim, finding no basis for the claim of breach of the implied covenant of
good faith and fair dealing.
The court DENIES as moot

as they are

unnecessary to the resolution of the legal issues in this case.
As the court has resolved the legal
Indemnity Agreement and granted RLI specific performance of its terms, the first and second
preliminary injunctions issued in this case, ECF Nos. 60, 139 and 215, will be dissolved by
51

order following the evidentiary hearing. The pending motion for sanctions, ECF No. 452, also
will be addressed at the evidentiary hearing.
The parties are DIRECTED to contact the Clerk to set up an evidentiary hearing15 at
which the court will determine:
a. The reasonable amount of collateral security to be deposited by Nexus

b.
incurred

; and

c. Resolution of the pending sanctions motion.
An appropriate Order will be entered.
Entered: July 3, 2020

Michael F. Urbanski
Chief United States District Judge

The Clerk is directed to schedule a two-day evidentiary hearing. If required by the COVID-19 pandemic, such
evidentiary hearing may proceed by Zoom.gov.
15

52