United States District Court, D. Nebraska
MEMORANDUM AND ORDER
F. BATAILLON SENIOR UNITED STATES DISTRICT JUDGE.
matter is before the court on the plaintiff Allied World
Specialty Insurance Company's (“Allied”)
motion for a preliminary injunction, Filing No. 2.
This is an action on an indemnity agreement. Jurisdiction is
based on diversity of citizenship under 28 U.S.C. §
complaint, Allied asserts claims for breach of contract,
specific performance, and exoneration and quia
timet. It seeks specific performance of the
Indemnitors' (ALC's) obligation to deposit collateral
security in an amount sufficient to discharge the claims that
have been asserted against Allied on a payment and
performance surety bond. Defendants Abat Lerew Construction,
LLC, Abat Lerew, LLC, Michael R. Ford, and Noel A. Ford
(collectively, “ALC”) generally deny the
plaintiff's allegations and assert equitable defenses of
estoppel and unclean hands. ALC also affirmatively alleges
that Allied has breached its obligation of good faith and
fair dealing. Further, it alleges that portions of the
Indemnity Agreement are void as against public policy or
otherwise legally unenforceable.
a general contractor. It entered into ten public construction
contracts to perform general contracting services for various
projects and obtained payment and performance surety bonds
from Allied. Eight of the ten projects have been completed
and two are temporarily shut down due to seasonal conditions.
ALC and Allied also entered into an indemnity agreement.
complaint, Allied states that, in accordance with the law and
contracts for the projects, it issued, as surety, Payment
Bond and Performance Bond No. S001-2203 in the maximum penal
sum of $1, 677, 772 on behalf of ALC, as principal, and
naming the United States of America as the Obligee (the
“Bond”). Filing No. 1, Complaint at 2-3.
It alleges it has received bond claims for over $300, 000.
Id. at 4. On November 15, 2016, it demanded that ALC
provide $400, 000 in collateral security pursuant to the
Agreement of Indemnity. Id. The indemnity agreement
to indemnify and to hold the Surety harmless from and against
any and all liability for any and all Loss, and in such
connection, Indemnitors will pay the Surety for all Losses
specified or otherwise described in Surety's notice, no
later than close of business on the Due Date with respect to
such notice, whether or not the Surety has actually made any
payment thereon as of such Due Date.
Filing No. 1-1, Complaint, Ex. A, Indemnity
Agreement at 3. The Indemnity Agreement further requires ALC
“to deposit with [Allied] as collateral, by the Due
Date and after receipt of [Allied's] written demand, the
sum equal to an amount determined by [Allied], to cover
liability for Loss . . . as determined by [Allied].”
Filing No. 1-1, Complaint, Ex. A.
seeks an injunction ordering ALC to post collateral security
with Allied World in the amount of $400, 000, enjoining and
restraining ALC from selling, transferring, disposing of or
liening their assets and property, granting a lien on
ALC's property until such collateral is deposited,
requiring ALC to indemnify and exonerate Allied for all
liabilities, losses, and expenses incurred by Allied World as
a result of Allied World having executed the Bonds, and
providing Allied access to ALC's books and records. It
also seeks an order requiring ALC to pay Allied's
reasonable attorneys' fees and costs.
support of its motion, Allied submits the bond, the indemnity
agreement, its demand for collateral, and the affidavit of
James A. Keating, Assistant Vice President of Surety Claims
for Allied (“Keating Aff.”). Filing No.
4, Index of Evid., Exs. 1-4. Keating states that Allied
has received claims on the bond and is investigating them in
order to discharge its obligations. Filing No. 4-4,
Keating Aff. at 5. He also states Allied has incurred and
continues to incur attorney fees, costs, and expenses
associated with the investigation and litigation of the Bond
Claims. Id. at 6 Further, he states that Allied has
made a demand on ALC for collateral security under the
indemnity agreement, but “the Indemnitors have failed,
despite [Allied's] demand, to fully and satisfactorily
respond to and resolve the pending Bond claims, indemnify or
exonerate [Allied], and post collateral.” Id.
response to Allied's motion for a preliminary injunction,
ALC challenges at least one of the bond claims as wholly
without merit and asserts that it has not received final
payment on one of the projects because Allied has wrongfully
refused to provide its consent. Filing No. 25-1,
Declaration of Michael D. Ford at 2-3. Ford states ALC is
making every effort to resolve the bond claims in order to
fully perform its legitimate obligations under the indemnity
agreement. Id. at 3-4. Ford contends Allied has not
paid on the bond claims and any harm to Allied is speculative
at this point. Id. at 4. Further, Ford states that
the defendants are not absconding with money or transferring,
disposing of, or dissipating assets to avoid paying the bond
claims or to avoid obligations under the indemnity agreement.
Id. at 3.
brief, ALC does not dispute that it has a duty under the
agreement to indemnify Allied for legitimate losses, but
contends the relief requested-specific performance with
respect to providing collateral security-is excessive and
does not correspond with the actual potential liability from
the bond claims. Also, it argues that Allied has failed to
show a probability of success on the merits because ALC has
raised the legitimate defenses of unclean hands and equitable
evaluating whether to grant the extraordinary relief of a
preliminary injunction, a district court should consider four
factors: (1) the threat of irreparable harm to the movant;
(2) the state of the balance between this harm and the injury
that granting the injunction will inflict on other parties;
(3) the probability that the movant will succeed on the
merits; and (4) the public interest. Dataphase Sys., Inc.
v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en
banc); Roudachevski v. All-American Care Centers,
Inc., 648 F.3d 701, 705 (8th Cir. 2011). A preliminary
injunction is an extraordinary remedy and the burden of
establishing the propriety of an injunction is on the movant.
Roudachevski, 648 F.3d at 701, 705 (8th Cir. 2011).
The burden on a movant to demonstrate that a preliminary
injunction is warranted is heavier ...