Philadelphia Indemnity Insurance Company v. Swan Engineering, et al.

• Court: District Court, E.D. California
• Decided: October 22, 2025
• Docket: 2:24-cv-00797
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 PHILADELPHIA INDEMNITY No. 2:24-cv-00797-DJC-SCR INSURANCE COMPANY, 12

13 Plaintiff, ORDER 14 v. 15 SWAN ENGINEERING, et al., 16 Defendants. 17 18 This case is about the duties owed under an indemnity agreement. Plaintiff 19 Philadelphia Insurance Company filed suit alleging Defendants Swan Engineering, 20 Liberty Pipeline Solutions, Brooke Swanson, and Justin Robert Swanson breached 21 their duty to indemnify Philadelphia after Philadelphia settled two lawsuits on their 22 behalf. Plaintiff now moves for summary judgment, or, in the alternative, summary 23 adjudication on its claims against Defendants. (MSJ (ECF No. 30)). For the reasons 24 explained below, the Court grants the Motion in part and denies it in part. 25 //// 26 //// 27 //// 28 //// 1 PROCEDURAL HISTORY 2 On March 15, 2024, Plaintiff filed a Complaint alleging that Defendants Swan 3 Engineering, Liberty Pipeline Solutions, Brooke Swanson, and Justin Robert Swanson 4 (collectively “Defendants”) breached their duty to indemnify Plaintiff in accordance 5 with the terms of an indemnity agreement after Plaintiff settled claims involving 6 certain bonded projects on their behalf. (Compl. (ECF No. 1).) In the Complaint, 7 Plaintiff asserted three claims for relief: one, express indemnity/breach of contract; 8 two, statutory reimbursement pursuant to California Civil Code section 2847; and 9 three, declaratory relief. (Id.) On August 26, 2025, Plaintiff moved for summary 10 judgment, or, in the alternative, summary adjudication on all three claims. (See 11 generally MSJ.) The motion is fully briefed. (Opp’n (ECF No. 31); Reply (ECF 12 No. 32).) 13 In the moving papers, Plaintiff provides a memorandum of points and 14 authorities (see generally MSJ), a separate statement of undisputed facts (“PSUF” 15 (ECF No. 30-1)), a compendium of evidence (Exs. 1–15 (ECF No. 30-4)), the 16 declaration of Shashauna Szczechowicz (Decl. of Szczechowicz (ECF No. 30-3)), and 17 the declaration of Vincent Romeo (Decl. of Romeo (ECF No. 30-2)). With their 18 opposition brief, Defendants provide a response to Plaintiff’s separate statement 19 (“DSUF” (ECF No. 31-1)), and the declaration of Justin Swanson (Decl. of Swanson 20 (ECF No. 31-2)) with a supporting exhibit. Plaintiff filed a timely reply. On 21 October 15, 2025, Plaintiff filed objections to Defendants’ opposition to the motion 22 for summary judgment. (Pl.’s Objs. (ECF No. 34).)1 23 24 25

26 1 Per the undersigned’s standing order for civil cases, “the moving party may not file a reply to the nonmoving party’s response to the Statement of Undisputed Facts.” (DJC’s Standing Order in Civil 27 Cases at 3.) Here, Plaintiff has filed a document presenting evidentiary objections to Defendants’ Response to Plaintiff’s Separate Statement of Uncontroverted Facts, but the Court will not consider this 28 additional filing in ruling on the Motion. 1 Because the Court finds this matter suitable for resolution on the papers 2 pursuant to its authority under Local Rule 230(g), the October 16, 2025, hearing on 3 the motion was vacated. (ECF No. 33.) 4 LEGAL STANDARD 5 Summary judgment is appropriate where “there is no genuine dispute as to 6 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. 7 Civ. P. 56(a). A dispute is “genuine” if “a reasonable jury could return a verdict for the 8 nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is 9 “material” if it “might affect the outcome of the suit under the governing law.” Id. 10 The moving party bears the initial burden of informing the court of the basis 11 for the motion and identifying the portion of the record “which it believes 12 demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. 13 Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the opposing party to 14 “establish that there is a genuine issue of material fact . . . .” Matsushita Elec. Indus. 15 Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 (1986). The parties must “(A) cit[e] to 16 particular parts of materials in the record . . . or (B) show[ ] that the materials cited do 17 not establish the absence or presence of a genuine dispute, or that an adverse party 18 cannot produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). 19 When determining a motion for summary judgment, “the inferences to be drawn 20 from the underlying facts must be viewed in the light most favorable to the party 21 opposing the motion.” Matsushita Elec. Indus. Co., 475 U.S. at 587 (cleaned up and 22 citation omitted). Ultimately, for the moving party to succeed, the Court must 23 conclude that no rational trier of fact could find for the opposing party. See id. 24 A court may consider evidence as long as it is “admissible at trial.” Fraser v. 25 Goodale, 342 F.3d 1032, 1036 (9th Cir. 2003). “Admissibility at trial” depends not on 26 the evidence's form, but its content. Block v. City of L.A., 253 F.3d 410, 418–19 (9th 27 Cir. 2001) (citation omitted). The party seeking admission of evidence “bears the 28 burden of proof of admissibility.” Pfingston v. Ronan Eng'g Co., 284 F.3d 999, 1004 1 (9th Cir. 2002). If the opposing party objects to the proposed evidence, the party 2 seeking admission must direct the court to “authenticating documents, deposition 3 testimony bearing on attribution, hearsay exceptions and exemptions, or other 4 evidentiary principles under which the evidence in question could be deemed 5 admissible . . . .” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 385–86 (9th Cir. 2010). 6 But if evidence falls short of the formalities of Rule 56, a district court still may 7 exercise its discretion “to be somewhat lenient.” Sch. Dist. No. 1J, Multnomah Cnty., 8 Or. v. ACandS, Inc., 5 F.3d 1255, 1261 (9th Cir. 1993) (collecting cases). 9 DISCUSSION 10 I. Undisputed Facts2 11 Plaintiff is a California corporation authorized to engage in the surety business. 12 (DSUF ¶ 2.) On April 10, 2019, Defendants executed a general indemnity agreement 13 (“GIA”) in favor of Plaintiff. (Id. ¶ 3.) 14 A. The GIA Agreement 15 The GIA requires Defendants to indemnify Plaintiff against certain defined 16 losses. (Pl.’s Ex. 1 (ECF No. 30-4) at 2.)3 The indemnity provision provides that:

17 Indemnitors agree to indemnify and hold harmless Surety from and against any Loss sustained or incurred: (a) by 18 reason of having executed or being requested to execute any and all Bonds; (b) by failure of Indemnitors or Principals 19 to perform or comply with any of the covenants or conditions of this Agreement or any other agreement; and 20 (c) in enforcing any of the covenants or conditions of this Agreement or any other agreement. The Indemnitors' 21 obligation to indemnify the Surety shall also apply to any Bond renewals, continuations or substitutes therefore. In 22 the event of payments by Surety, Indemnitors agree to accept vouchers, a sworn itemization, or other evidence of 23 such payments as prima facie evidence of the fact and extent of the liability of Indemnitors to Surety in any 24 demand, claim or suit by Surety against Indemnitors.

25 2 Defendants raise evidentiary and some factual objections to certain facts presented by Plaintiff. 26 Except where noted, the facts recounted below are considered undisputed for purposes of the summary judgment motion. Fed. R. Civ. P. 56(e)(2). 27 3 Because Plaintiff’s exhibits are all part of the same filed document, the Court will cite to the Bates 28 numbers for each exhibit rather than the numbering provided by ECF. 1 Separate suits may be brought under this Agreement as causes of action accrue, and the pendency or termination 2 of any such suit shall not bar any subsequent action by Surety. The Surety may, but shall not be obligated to, join 3 any or all of the Indemnitors or Principals as parties to any action relating to any Bonds or this Agreement, and Surety 4 shall have no obligation to exhaust any remedies against any person or entity prior to pursuing any such action 5 against one or more Indemnitors or Principals. All Principals and Indemnitors waive and subordinate all rights 6 of indemnity, subrogation, and contribution against each other until all obligations due to the Surety under this 7 Agreement, at law, or at equity have been fully satisfied. The Surety shall be entitled to intervene in any action 8 between one or more Principals or Indemnitors in order to enforce this provision. 9 (Pl.’s Ex. 1 at 2.) The GIA also defines “Loss” as follows: 10 Any and all liability, losses, costs, expenses, and fees of 11 whatever kind or nature that Surety may sustain or incur as a result of executing any Bond, or as a result of the failure 12 of Principal or Indemnitors to perform or comply with this Agreement. Loss includes but is not limited to: (i) sums 13 posted by Surety as a reserve for the payment of potential losses and/or expenses; (ii) all costs and expenses incurred 14 in connection with investigating, paying or litigating any claim, and/or enforcing this Agreement, including but not 15 limited to legal fees and expenses, professional and consulting fees, technical and expert witness fees and 16 expenses; (iii) all accrued and unpaid premiums owing to Surety for the issuance, continuation or renewal of any 17 Bonds or for any policy of insurance issued by Surety for the Principal or Indemnitors; (iv) funds loaned or advanced by 18 Surety to the Principal; and (v) all other amounts payable to Surety according to the terms and conditions of this 19 Agreement or any other agreement between Surety and Principal or Indemnitors. 20 (Id.) The GIA also requires Defendants to post collateral upon Plaintiff’s demand in 21 certain circumstances: 22 Indemnitors agree to deposit immediately upon demand 23 by Surety an amount equal to the greater of: (a) the amount of any reserve established by Surety in its sole discretion to 24 cover any actual or potential liability for any Loss or potential Loss for which Indemnitors would be obliged to 25 indemnify Surety hereunder; or (b) the amount of any Loss or potential Loss (including legal, professional, consulting, 26 and expert fees and expenses) in relation to any claim or claims or other liabilities asserted against Surety as a result 27 of issuing any Bond, as determined by the Surety in its sole discretion. Surety may, in its sole discretion, either retain 28 or use any part or all of the collateral in settlement or 1 payment of any claim made under any Bond, as reimbursement for any actual Loss already incurred, as 2 reserve to cover the amount of any potential Loss, or for any other purpose related to any Loss, liability, or expense for 3 which the Indemnitors would be required to reimburse Surety under the terms of this Agreement. The Principals 4 and Indemnitors shall be obligated to deposit the amount of collateral demanded by Surety regardless of whether 5 they dispute their liability for any Loss or potential Loss or assert any defenses to the validity or enforcement of this 6 Agreement. In the event that Surety demands collateral from more than one Principals or Indemnitors, Surety shall 7 be entitled, in its sole discretion, to apportion the amount of collateral required to be deposited by each Principal or 8 Indemnitor. If Surety permits the Indemnitors to deposit less than the full amount of either (a) or (b) herein, Surety 9 may, from time to time, require the Indemnitors to increase the amount of the collateral by any amount Surety deems 10 appropriate, in its sole discretion, up to an amount equal to the greater of (a) or (b) herein. In the event that the 11 Indemnitors fail to deposit the amount of cash collateral required under this provision, Surety may, in its sole 12 discretion, direct the Indemnitors to deposit alternate forms of collateral security acceptable to Surety. Surety 13 agrees to refund any unused portion of the deposit, without any interest or other damages for loss of use of such funds, 14 upon the termination of all liability of Surety on all Bonds and the full performance of all of the Principals and 15 Indemnitors of all obligations under this Agreement. 16 (Pl.’s Ex. 1 at 3.) 17 B. The Bonds 18 On April 12, 2019, Performance Bond No. CE11510701367 (“Tuscan Bond”) in 19 the amount of $494,193.00 was issued on behalf of principal Swan for the installation 20 of storage ponds at Tuscan Ridge Base Camp in Paradise, California. (DSUF ¶ 9.) On 21 June 28, 2018, Public Works Faithful Performance Bond No. CE11510711332 22 (“Shadowbrook Bond”) in the amount of $291,078.00 was issued on behalf of 23 principal Swan in connection with the Shadowbrook Lift Station and Forcemain Phase 24 2 project. (DSUF ¶ 10.) 25 C. The Underlying Lawsuits Against the Bonded Projects 26 On March 5, 2020, certain individuals filed a complaint (“Hart Case”) against 27 Swan and other defendants alleging wage claims in Placer County Superior Court. 28 (DSUF ¶ 11.) On March 25, 2020, different individuals filed a complaint (“Hinojosa 1 Case”) against Swan and other defendants alleging wage claims in Placer County 2 Superior Court. (DSUF ¶ 12.) Both cases were subsequently consolidated into one 3 action. (DSUF ¶ 13.) Philadelphia Indemnity Insurance Company was named as Doe 4 Defendant No. 152 to the consolidated action. (DSUF ¶ 14.) Both cases arise out of 5 claims for unpaid wages in connection with the Tuscan and Shadowbrook bonded 6 projects. (DSUF ¶ 15.) On October 18, 2023, Plaintiff paid $240,000.00 to settle the 7 consolidated action. (DSUF ¶ 16.) $110,000.00 was paid from the Shadowbrook 8 Bond to pay the claims involving the Shadowbrook project and $130,000.00 was paid 9 from the Tuscan Bond to pay the claims involving the Tuscan project. (Id.) Plaintiff 10 issued certain checks to settle the consolidated action. (DSUF ¶ 17.) Check 11 No. 3000955126 in the amount of $130,000.00 was drawn against the Tuscan Bond, 12 and check No. 3000955127 in the amount of $110,000.00 was drawn against the 13 Shadowbrook Bond. (DSUF ¶ 17.) Both checks are dated November 13, 2023. (Id.) 14 D. The I-5 Rentals Claim Against the Tuscan Bond 15 On September 23, 2019, Plaintiff asserts it received a claim on the Tuscan 16 Bond in the amount of $354,523.31 by I-5 Rentals and that it investigated I-5’s claim. 17 (PSUF ¶ 18.) Plaintiff paid the I-5 claim by check on December 23, 2019.4 (Id.; Ex. 4 18 at 30.) 19 E. Philadelphia’s Requests for Indemnification 20 On August 1, 2022, Philadelphia demanded that Defendants indemnify 21 Philadelphia for the $354,523.31 paid to I-5 Rentals and provide collateral to 22 Philadelphia as required by the Indemnity Agreement. (DSUF ¶ 19.) Defendants did 23 not indemnify Philadelphia for its losses or provide collateral.5 (PSUF ¶ 20.)

24 4 While Plaintiff does not provide any evidence reflecting the original claim demand from I-5 Rentals, 25 Defendants do not provide any evidence to dispute the fact of the claim. To the extent Defendants provide evidentiary objections that Philadelphia’s check to I-5 is hearsay, it is not. The payment of a 26 check is not hearsay if offered as evidence of legally operative verbal conduct—it is a verbal act. United States v. Pang, 362 F.3d 1187, 1193 (9th Cir. 2004). 27 5 Although Defendants assert that Plaintiff overpaid to settle the underlying wage claims, they do not 28 dispute that they did not indemnify Plaintiff or provide collateral. 1 On December 28, 2023, Plaintiff made a second demand for indemnity for the 2 I-5 payment and settlement payment for the consolidated action. (DSUF ¶ 21.) 3 Plaintiff additionally requested payment of attorneys’ fees and costs incurred in 4 defending the consolidated action. (Id.) 5 Plaintiff asserts it has incurred a loss of not less than $873,556.31. (PSUF ¶ 22.) 6 This figure includes $594,523.31 in principal damages; $244,221.05 in prejudgment 7 interest pursuant to the terms of the GIA; and certain attorneys’ fees and costs. (PSUF 8 ¶¶ 22–25.) 9 II. Evidentiary Objections 10 Defendants raise various evidentiary objections to particular facts in Plaintiff’s 11 separate statement. (See DSUF ¶¶ 4–8, 18, 20–25.) Under the summary judgment 12 standard, “[a] party may object that the material cited to support or dispute a fact 13 cannot be presented in a form that would be admissible in evidence.” Fed. R. Civ. P. 14 56(c)(2). Defendants have not shown these facts cannot be introduced in an 15 admissible form at trial. See McCarthy v. R.J. Reynolds Tobacco Co., No. 2:09-cv- 16 02495-WBS-DAD, 2011 WL 13405571, at *1 (E.D. Cal. Mar. 31, 2011) (explaining that 17 federal rule 56 “implicitly limits objections to those that could not be cured at trial”) 18 (citation omitted). Accordingly, Defendants’ evidentiary objections are overruled. To 19 the extent Defendants provide a factual reason for the objections, such as Plaintiff 20 overpaid to settle the underlying litigation or overpaid its attorneys (see DSUF ¶¶ 20, 21 25), they do not support these assertions with evidence sufficient to create a genuine 22 dispute of material fact. 23 III. Analysis 24 A. Motion for Summary Judgment 25 Plaintiff brings three causes of action: one, express indemnity/breach of 26 contract; two, statutory reimbursement under California Civil Code section 2847; and 27 three, a request for declaratory relief. The Court addresses each in turn. 28 1 1. Breach of Contract 2 California law has long recognized the right of a surety, such as Plaintiff, to 3 indemnification under the terms of a written indemnity agreement. See, e.g., Fid. & 4 Deposit Co. of Md. v. Whitson, 187 Cal. App. 2d 751, 756 (1960). “An indemnity 5 agreement is to be interpreted according to the language and contents of the 6 contract as well as the intention of the parties as indicated by the contract.” Myers 7 Bldg. Indus., Ltd. v. Interface Tech., Inc., 13 Cal. App. 4th 949, 968 (1993) (citation 8 omitted). To establish a valid claim for breach of an indemnity agreement under 9 California law, Philadelphia must demonstrate the existence of an indemnity 10 agreement, Philadelphia's performance under the agreement, breach of the 11 agreement, and damages. See Reichert v. Gen. Ins. Co. of Am., 68 Cal. 2d 822, 830 12 (1968). 13 It is undisputed the parties executed an indemnity agreement. (DSUF ¶¶ 1–3.) 14 It is also undisputed that Philadelphia incurred losses under the agreement by paying 15 the claims arising out of the bonds. (DSUF ¶ 17.) In relevant part, the GIA provides 16 that losses include “[a]ny and all liability, losses, costs, expenses, and fees of whatever 17 kind or nature that [Plaintiff] may sustain or incur as a result of executing any Bond, or 18 as a result of the failure of Principal or Indemnitors to perform or comply with this 19 Agreement.” (Pl.’s Ex. 1 at 2.) Additionally, “[l]oss includes but is not limited to . . . all 20 costs and expenses incurred in connection with investigating, paying or litigating any 21 claim, and/or enforcing this Agreement . . . .” (Id.) Here, because Plaintiff’s 22 settlement payments were incurred in connection with litigation regarding the 23 Shadowbrook and Tuscan bonded projects, they constitute a loss. In addition, the I-5 24 Rentals claim relates to the Tuscan bonded project, which Plaintiff also paid and 25 which constitutes another loss. 26 The GIA provides that, once a surety like Plaintiff makes such a payment, 27 Defendants “agree to accept vouchers, a sworn itemization, or other evidence of such 28 payments as prima facie evidence of the fact and extent of the liability” of Defendants 1 in any “demand, claim, or suit” by Plaintiff. (Id.) It is undisputed that Plaintiff provided 2 Defendants with demand letters detailing their financial exposure and settlement 3 payments. (See Pl.’s Exs. 7–8.) Moreover, Plaintiff has provided the sworn declaration 4 of an employee, Shashauna Szczechowicz, along with copies of the payments made 5 on Plaintiff’s behalf in connection with the bonded projects and indemnity litigation. 6 (Pl.’s Exs. 4, 6.) Plaintiff has also provided billing records for its attorneys’ fees and 7 costs related to the bonded projects. (Pl.’s Exs. 13–15.) Accordingly, Plaintiff has 8 provided sufficient evidence of the losses it sustained under the GIA. 9 “Once the moving party shows that the indemnity agreement contains such a 10 prima facie evidence clause, the burden shifts to the non-moving side to show that 11 the amount claimed is incorrect or that Philadelphia acted in bad faith in making such 12 payments.” Travelers Cas. & Sur. Co. of Am. v. Coyle/Reno Joint Venture, No. 3:17-cv- 13 03141-JSC, 2018 WL 3344661, at *5 (N.D. Cal. Jul. 9, 2018) (citation omitted) 14 (“Coyle”). Defendants have failed to provide any evidence showing that Philadelphia 15 acted in bad faith or that the amounts claimed are incorrect. While Defendants 16 provide the declaration by defendant Justin Swanson asserting that the settlement 17 amounts for the underlying litigation were “grossly excessive,” in reference to an 18 expert’s report in the state court litigation indicating Defendants had minimal 19 damages exposure, this is not evidence of Plaintiff’s bad faith but rather a 20 disagreement between Defendants and Plaintiff about the value of settlement.6 (See 21 generally Swanson Decl.) The GIA does not condition the duty to indemnify or post 22 collateral on Defendants’ agreement with Plaintiff’s decisions. Indeed, the GIA 23 specifies that Defendants “shall be obligated to deposit the amount of collateral 24 demanded by [Plaintiff] regardless of whether they dispute their liability for any Loss 25

26 6 In Pickern v. Pier 1 Imports (U.S.), Inc., 457 F.3d 963, 969 n.5 (9th Cir. 2006), the Ninth Circuit held that it was not an abuse of discretion for the district court to exclude the testimony of an undisclosed 27 expert. Here, Defendants did not disclose this expert report by the scheduling deadline, instead informing the Court that they “decided to not retain or disclose any experts at this time.” (ECF No. 29.) 28 Accordingly, Defendants’ expert report is excluded. 1 or potential Loss or assert any defenses to the validity or enforcement of this 2 Agreement.” (Pl.’s Ex. 1 at 3.) See Coyle, 2018 WL 3344661, at *5 (rejecting 3 argument that principal’s mere disagreement with surety’s settlement decisions 4 constitutes bad faith or objective unreasonableness). 5 Moreover, Defendants’ contention that the expert’s report was ignored and 6 that the settlement was reached without their knowledge or participation is not 7 supported by any evidence. The record reflects that Swan Engineering was named in 8 the underlying litigation as early as March 2020 and remained a defendant after the 9 matters were consolidated. (Pl.’s Ex. 9 at 92; Pl.’s Ex. 10 at 122.) The settlement 10 agreement entered into by Plaintiff also expressly provides that Plaintiff “reserves all 11 rights, whether arising contractually, statutorily, or in equity against SWAN and any 12 and all personal indemnitors.” (Pl.’s Ex. 5 at 34.) 13 Accordingly, because Defendants have not carried their burden to rebut 14 Plaintiff’s prima facie showing of liability and there is no genuine dispute of material 15 fact, summary judgment on the breach of contract claim is granted. 16 2. Statutory Reimbursement under Cal. Civ. Code § 2847 17 Plaintiff seeks summary judgment as to the second cause of action, for 18 reimbursement pursuant to Cal. Civ. Code § 2847. That statute provides:

19 If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the 20 principal is bound to reimburse what he has disbursed, including necessary costs and expenses . . . 21 22 Id. “A surety . . . is one who promises to answer for the debt, default, or miscarriage 23 of another.” Cal. Civ. Code § 2787. When the parties signed the GIA, Plaintiff 24 became the surety for Defendants. The GIA provides Plaintiff with the authority to 25 settle “any claim or claims or other liabilities asserted against [Plaintiff] as a result of 26 issuing any Bond, as determined by [Plaintiff] in its sole discretion.” (Pl.’s Ex. 1 at 3.) It 27 is undisputed that Plaintiff settled claims arising out of the bonds it issued, first in 28 settling the consolidated action, and second in paying the I-5 Rentals claim brought 1 against the Tuscan bond and Plaintiff has also incurred damages in the form of 2 certain attorneys’ fees and costs. In resolving these claims, Plaintiff acted within its 3 discretion, and Defendants are obligated to reimburse for these incurred costs. 4 As there is no genuine dispute of material fact and Plaintiff is entitled to 5 judgment as a matter of law, the motion for summary judgment as to claim two is 6 granted. 7 3. Declaratory Relief 8 Plaintiff also seeks summary judgment on its third claim for declaratory relief 9 pursuant to Cal. Code Civ. Proc. § 1060. 10 Federal courts sitting in diversity apply the substantive law of the forum state. 11 See Clark v. Allstate Ins. Co., 106 F. Supp. 2d 1016, 1018 (S.D. Cal. 2000) (“It is well 12 established that federal courts sitting in diversity must apply state substantive law and 13 federal procedural rules.”) (citations omitted). Accordingly, federal courts 14 consistently apply California’s Civil Code section 1060 rather than the federal 15 Declaratory Judgment Act when sitting in diversity. See Schwartz v. U.S. Bank, Nat’l 16 Ass’n, No. 2:11-cv-08754-MMM-JCG, 2012 WL 10423214, at *15 (C.D. Cal. Aug. 3, 17 2012) (collecting cases). Thus, the Court applies California law. 18 Plaintiff’s declaratory relief claim is based on Defendants’ breach of the 19 indemnity agreement, on which the Court has already granted summary judgment. 20 “A declaratory judgment is not a corrective action, and therefore, it should not be 21 used to remedy past wrongs.” John M. Floyd & Assocs., Inc. v. First Imperial Credit 22 Union, 2017 WL 4810223, at *5 (S.D. Cal. Oct. 25, 2017). Accordingly, “where there 23 is an accrued cause of action for an actual breach of contract or other wrongful act, 24 declaratory relief may be denied.” Id. (citation omitted). “The purpose of declaratory 25 relief is to enable the parties to shape their conduct so as to avoid a breach.” Britz 26 Fertilizers, Inc. v. Bayer Corp., 665 F. Supp. 2d 1142, 1173 (E.D. Cal. 2009) (internal 27 quotation marks omitted). As Plaintiff’s request for declaratory relief is based on 28 1 Defendants’ past breach of the GIA, it is not a proper basis for declaratory relief. The 2 motion for summary judgment is denied as to the third claim. 3 4. Liability, Prejudgment Interest, Attorneys’ Fees and Costs 4 Plaintiff has provided undisputed evidence of Defendants’ liability for the 5 claims arising out of the GIA, which includes $594,523.31 in principal damages. 6 Plaintiff also requests $244,221.05 in prejudgment interest, postjudgment interest, 7 and certain attorneys’ fees and costs. As explained below, Plaintiff is entitled to 8 recover these sums. 9 i. Prejudgment Interest 10 “Prejudgment interest is a substantive aspect of a plaintiff’s claim, rather than a 11 merely procedural mechanism.” Oak Harbor Freight Lines, Inc. v. Sears Roebuck, & 12 Co., 513 F.3d 949, 961 (9th Cir. 2008) (citation omitted). Moreover, “[s]tate law 13 generally governs awards of prejudgment interest in diversity actions . . . .” Id. As 14 Plaintiff’s claims arise under state law, the Court applies California law. The 15 applicable Civil Code section provides, “If a contract entered into after January 1, 16 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a 17 rate of 10 percent per annum after a breach.” Cal. Civ. Code § 3289(b). Here, the 18 GIA specifies that the legal rate of interest is 10 percent, (Pl.’s Ex. 1 ¶ 20), which is 19 consistent with California law. 20 “Under California Civil Code § 3287, prejudgment interest is recoverable in 21 any action in which damages are certain or capable of being made certain by 22 calculation . . . where there is essentially no dispute between the parties concerning 23 the basis of computation damages if any are recoverable but where their dispute 24 centers on the issue of liability giving rise to damage.” Diamondstar Ent. Holdings, 25 LLC v. THH, LLC, 641 F. Supp. 3d 849, 870 (C.D. Cal. 2022) (cleaned up and citation 26 omitted). Thus, the test for recovery of prejudgment interest “is whether defendant 27 actually know[s] the amount owed or from reasonably available information could the 28 defendant have computed that amount.” Duale v. Mercedes-Benz USA, LLC, 148 Cal. 1 App. 4th 718, 729 (2007) (italics and citation omitted). Here, the principal dispute 2 between the parties is whether Defendants are liable, not whether they would be 3 able to calculate the damages. Consequently, “prejudgment interest under section 4 3287(a) becomes available as of the day the amount at issue becomes 5 calculable . . . mechanically, on the basis of uncontested and conceded evidence, 6 and it is available as a matter of right, rather than at the discretion of the court.” Diaz 7 v. Kubler Corp., 785 F.3d 1326, 1329 (9th Cir. 2015) (surveying California law in 8 breach of contract appeal) (cleaned up and citation omitted). 9 Plaintiff requests prejudgment interest from the date of breach for each claim 10 up until the date of judgment in the amount of $162.88 per day. (DSUF ¶¶ 23–24.) 11 The Court makes the following modifications to account for the differing 12 prejudgment time periods between the claims: 13 14 Prejudgment Interest 15 Payment Interest (Payment Date of Date of Total Owed 16 Rate x .10)/365 Accrual Judgm 17 days ent 18 Settlement $240,000 10% $65.75 Nov. 13, Oct. 22, $46,619.18 19 Claim per day 2023 2025 20 I-5 Rentals $354,523.21 10% $97.13 Dec. 23, Oct. 22, $206,886.15 21 Claim per day 2019 2025 22 23 Having reviewed the calculations, the Court grants Plaintiff’s request for 24 prejudgment interest in full. 25 ii. Postjudgment Interest 26 “Under 28 U.S.C. § 1961, the award of post judgment interest on a district 27 court judgment is mandatory.” Barnard v. Theobald, 721 F.3d 1069, 1078 (9th Cir. 28 2013). In diversity actions, “state law determines the rate of prejudgment interest, 1 and postjudgment interest is governed by federal law.” Citicorp Real Est., Inc. v. 2 Smith, 155 F.3d 1097, 1107 (9th Cir. 1998) (citation omitted). Parties may contract 3 around the rate specified in 28 U.S.C. § 1961(a), but they must do so explicitly. See 4 id. at 1108. Here, per the terms of the GIA, the parties agreed to “an annual rate of 5 10%, or the maximum rate permitted by applicable law if less than 10%.” (Pl.’s Ex. 1 6 ¶ 20.) This is not a clear unambiguous waiver. Instead, the Court will apply the lower 7 federal rate required by section 1961(a), which “requires application of a single 8 interest rate for the entire accrual period based on the weekly average one-year 9 Treasury constant maturity for the calendar week preceding the date of judgment.” 10 Lasheen v. Loomis Co., No. 2:01-cv-00227-KJM-EFB, 2016 WL 4161119, at *5 (E.D. 11 Cal. Aug. 4, 2016) (citation omitted). That rate may be located at the Federal Reserve 12 Board’s website, which is updated daily. Selected Interest Rates (Daily) – H.15, Board 13 of Governors of the Federal Reserve System (Oct. 20, 2025, 3:10 p.m.), 14 https://www.federalreserve.gov/releases/h15/. 15 In summary, Plaintiff is entitled to postjudgment interest and may seek it by 16 appropriate motion. 17 iii. Attorneys’ Fees 18 As to Plaintiff’s attorneys’ fees request of $34,811.95, this sum is spread across 19 three actions. (DSUF ¶ 25.) There are minor typos in the separate statement for 20 undisputed fact number 25, but the Court has reviewed Plaintiff’s billing exhibits and 21 confirms the correct sums listed below. (See generally Pl.’s Exs. 13–15.). 22 23 Case Attorneys’ Fees Costs Total 24 Hart $16,866.50 $793.90 $17,660.40 25 Hinojosa $672.50 $11.95 $684.45 26 Indemnity Action $14,837.50 $1,629.60 $16,467.10 27 Total Amount $34,811.45 28 1 While Plaintiff is entitled to the damages incurred related to the Hart and 2 | Hinojosa actions and may recover fees and costs expended thereto as part of the 3 | judgment, Plaintiff shall seek attorneys’ fees for the instant action by motion pursuant 4 | to Federal Rule of Civil Procedure 54(d)(2). A motion to tax costs may be filed 5 || pursuant to Federal Rule of Civil Procedure 54(d)(1). 6 ORDER 7 For the foregoing reasons, IT IS HEREBY ORDERED THAT: 8 1. Defendants’ Motion for Summary Judgment (ECF {] 30) is GRANTED IN 9 PART and DENIED IN PART as follows: 10 a. Summary judgment is GRANTED as to Claim One for breach of contract; 11 b. Summary judgment is GRANTED as to Claim Two for statutory 12 reimbursement; 13 c. Summary judgment is DENIED as to Claim Three for declaratory relief. 14 2. The Clerk of Court is directed to enter judgment for Plaintiff Philadelphia 15 Indemnity Insurance Company in the amount of $866,373.49: 16 a. $594,523.31 in principal damages; 17 b. $253,505.30 in prejudgment interest: 18 i. $46,619.18 for the settlement of the consolidated action; 19 ii. $206,886.15 for the I-5 Rentals payment; 20 c. $17,660.40 in attorneys’ fees and costs for the Hart action; and 21 d. $684.45 in attorneys’ fees and costs for the Hinojosa action. 22 3. Pursuant to Local Rule 293 and Federal Rule of Civil Procedure 54, Plaintiff 23 shall seek attorneys’ fees and costs for the instant action by appropriate 24 motion. Plaintiff may also seek postjudgment interest pursuant to 28 U.S.C. 25 § 1961. 26 . 57 | Dated: October 22, 2025 Banh Ss Codabratto— THE HONORAQYE DANIEL J. CALABRETTA 26 UNITED STATES DISTRICT JUDGE 424