Phila. Indem. Ins. Co. v. Ohana Control Sys., Inc.

289 F. Supp. 3d 1141
CourtDistrict Court, D. Hawaii
DecidedJanuary 30, 2018
DocketCiv. No. 17–00435 SOM/KSC
StatusPublished
Cited by1 cases

This text of 289 F. Supp. 3d 1141 (Phila. Indem. Ins. Co. v. Ohana Control Sys., Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Hawaii primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phila. Indem. Ins. Co. v. Ohana Control Sys., Inc., 289 F. Supp. 3d 1141 (D. Haw. 2018).

Opinion

Susan Oki Mollway, United States District Judge

I. INTRODUCTION.

Defendant Ohana Control Systems, Inc., contracted with the State of Hawaii Department *1143of Education ("DOE" or "State") to install fire safety equipment in four public schools. To protect against Ohana's possible failure to complete the work, the State required Ohana to obtain construction performance bonds. Plaintiff Philadelphia Indemnity Insurance Company provided the bonds, requiring Ohana and its principals, Defendants Amir Borochov and Linda Kinjo, to execute a General Indemnity Agreement. Under the General Indemnity Agreement, Ohana, Borochov, and Kinjo agreed to indemnify Philadelphia for claims made against the bonds and to post collateral in an amount sufficient to secure any claims made against the bonds.

Philadelphia's Complaint alleges that the State made claims under the construction performance bonds, and that Defendants have breached their obligations under the General Indemnity Agreement. Defendants have filed a Counterclaim, which Philadelphia seeks to dismiss for failure to state a claim upon which relief can be granted. The court grants Philadelphia's motion to dismiss the Counterclaim.

II. BACKGROUND.

In 2013, Ohana, a Hawaii corporation, contracted with the DOE to install or upgrade fire safety equipment at four schools on Oahu, Hawaii. See ECF No. 16, PageID # s 134, 139, 145, 148 (Counterclaim ¶¶ 11 (Puuhale Elementary School contract), 55 (Mililani Middle School contract), 92 (Benjamin Parker Elementary School contract), and 112 (Dole Middle School contract) ). There is no dispute that Hawaii law required Ohana to obtain performance bonds to secure performance of the DOE fire safety equipment contracts. See Haw. Rev. Stat. § 103D-324 ; ECF 19, PageID # 170; ECF No. 27, PageID # 216. Philadelphia, a Pennsylvania corporation, agreed to issue the requisite bonds on behalf of Ohana. ECF No. 16, PageID # 133 (Counterclaim ¶ 9).

Copies of the bonds were attached to the Complaint in this matter. See ECF Nos. 1-2 (Puuhale Elementary School Performance Bond), 1-3 (Dole Middle School Performance Bond), 1-4 (Mililani Middle School Performance Bond), and 1-5 (Benjamin Parker Elementary School Performance Bond). The bonds required Philadelphia, in the event of Ohana's default on its obligations under the fire safety equipment contracts, to "remedy the Default, or take over the work to be performed ... and complete such work, or pay moneys to [the DOE] in satisfaction of [Philadelphia's] performance obligation." ECF No. 1-2, PageID # 34; ECF No. 1-3, PageID # 38; ECF No. 1-4, PageID# 42; ECF No. 1-5, PageID # 46.

In return for Philadelphia's issuance of the performance bonds, Defendants Ohana, Borochov, and Kinjo agreed to indemnify Philadelphia for any claim made on the bonds. See ECF 1-1, PageID # 20. The General Indemnity Agreement provided, in relevant part:

Indemnitors [Ohana Control, Borochov, and Kinjo] agree to indemnify and hold harmless Surety [Philadelphia] from and against any Loss sustained or incurred: (a) by reason of having executed or being requested to execute any and all Bonds; (b) by failure of Indemnitors or Principals to perform or comply with any of the covenants or conditions of this Agreement or any other agreement; and (c) in enforcing any of the covenants or conditions of this Agreement or any other agreement.

Id. The General Indemnity Agreement also required Defendants to deposit collateral with Philadelphia in the event DOE made a claim against the performance bonds:

*1144Indemnitors agree to deposit immediately upon demand by Surety an amount equal to the greater of: (a) the amount of any reserve established by Surety in its sole discretion to cover any actual or potential liability for any Loss or potential Loss for which Indemnitors would be obliged to indemnify Surety hereunder; or (b) the amount of any Loss or potential Loss (including legal, professional, consulting and expert fees and expenses) in relation to any claim or claims or other liabilities asserted against Surety as a result of issuing any Bond, as determined by the Surety in its sole discretion.

Id. at PageID # 21.

On August 29, 2017, Philadelphia filed the Complaint in this action, alleging that the DOE had made claims on the performance bonds and that Defendants are therefore liable to Philadelphia under the General Indemnity Agreement. See ECF No. 1, PageID # s 3, 10-11. The Complaint further alleges that Defendants have failed to deposit collateral at Philadelphia's request in the amount of $341,724, in violation of the General Indemnity Agreement. See id. at PageID # 11.

On October 31, 2017, Defendants filed an Answer and a Counterclaim. See ECF 16. The Counterclaim's factual allegations largely pertain to conduct of the DOE, which is not a party to this lawsuit. See id. at PageID # s 134-50. According to the Counterclaim, Defendants have filed a lawsuit in Hawaii state court against the DOE and State of Hawaii. See ECF No. 16 at PageID # 139.

The Counterclaim alleges that the DOE acted improperly by, among other things, falsely alleging that Ohana failed to meet its obligations under the fire safety equipment contracts. See id. at PageID # s 137-38 (Counterclaim ¶¶ 36, 50). The Counterclaim further alleges that the DOE is "using" these false allegations "to make a false claim against Ohana's performance bond with Plaintiff Philadelphia Insurance." Id. ¶¶ 52, 90, PageID # s 139, 145.

Of the Counterclaim's 124 paragraphs of general factual allegations, only two of them describe conduct by Philadelphia:

9. Philadelphia induced Defendants to enter into the surety agreement and general indemnity agreement with Philadelphia with assurances that such documents were simple requirements necessary for Defendants to move forward with their construction contracts with the Department of Education (DOE), State of Hawaii.
10. Philadelphia's misrepresentations regarding the nature and meaning of the general indemnity agreement and surety agreement induced Defendants to enter into the agreements based on the promises of the potential for successful business.

Id. , PageID # s 133-34. On the basis of these allegations, the Counterclaim asserts eight claims against Philadelphia: Count I (Complete or Pro Tanto Discharge), Count II (Breach of Contract), Count III (Breach of Implied Covenant of Good Faith and Fair Dealing), Count IV (Misrepresentation), Count V (Unjust Enrichment), Count VI (Breach of Duty to Investigate and Defend), Count VII (Declaratory Relief), and Count VIII (Punitive Damages). See id. at PageID # s 150-55.

III. Rule 12(b)(6) Standard.

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289 F. Supp. 3d 1141, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phila-indem-ins-co-v-ohana-control-sys-inc-hid-2018.