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Insurance Co. of West v. Afford-A-Home, Inc.

United States District Court, W.D. Washington, Tacoma

September 23, 2014

INSURANCE COMPANY OF THE WEST, Plaintiff,
v.
AFFORD-A-HOME, INC., et al., Defendants.

ORDER RESERVING RULING AND REQUESTING ADDITIONAL BRIEFING ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

BENJAMIN H. SETTLE, District Judge.

This matter comes before the Court on Plaintiff Insurance Company of the West's ("ICW") motion for summary judgment (Dkt. 12). The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby (1) denies Defendants' request to dismiss this case for lack of subject matter jurisdiction, (2) reserves ruling on ICW's motion, and (3) requests additional briefing as discussed herein.

I. PROCEDURAL HISTORY

On April 29, 2014, ICW filed an indemnification action against Defendants Afford-A-Home, Inc., Harold Janaszak, and Donna Janaszak ("Defendants"). Dkt. 1. ICW alleges that Defendants breached their Indemnity Agreement with ICW by failing to indemnify ICW for payments made on a performance bond. Id. at 3.

On July 1, 2014, ICW moved for summary judgment. Dkt. 12. On July 28, 2014, Defendants responded. Dkt. 17. On August 1, 2014, ICW replied. Dkt. 20.

II. FACTUAL BACKGROUND

ICW is a California corporation authorized to post surety bonds in Washington. Dkt. 1 at 1. Defendant Afford-A-Home is a Washington corporation. Id. Defendants Harold and Donna Janaszak are Washington residents. Id.

In 2007, ICW posted two surety bonds-a performance bond and a maintenance bond-to the City of Buckley for the construction of a subdivision. Dkt. 1 at 2. The performance bond guaranteed the construction of the subdivision in the amount of $541, 296.25. Dkt. 14, Declaration of Leonard Huseby ("Huseby Dec."), Ex. 2. The maintenance bond guaranteed the replacement or correction of items constructed in the subdivision in the amount of $486, 521.05.[1] Id.

In consideration for posting these bonds, Defendants executed an Indemnity Agreement in favor of ICW. Huseby Dec., Ex. 1. Under the Indemnity Agreement, Defendants agreed to indemnify and hold ICW harmless from all losses resulting from posting the bonds. Id. at 1. Defendants also agreed that if claims were made against the bonds they would, upon demand, deposit funds with ICW sufficient to indemnify ICW from all anticipated claims. Id. at 1-2.

III. DISCUSSION

ICW moves for summary judgment, arguing that Defendants breached the Indemnity Agreement by failing to post the requested collateral and by failing to indemnify ICW. Dkt. 12 at 5. ICW seeks summary judgment requiring Defendants to indemnify ICW for claims paid and expenses incurred, as well as a judgment specifically enforcing Defendants' obligations under the Indemnity Agreement. Id. at 2. In response, Defendants argue that the Court lacks subject matter jurisdiction, ICW breached its fiduciary duty of good faith, and ICW is not entitled to damages or specific performance. Dkt. 17.

A. Subject Matter Jurisdiction

Defendants argue that the Court lacks subject matter jurisdiction. Dkt. 17 at 5-6. According to Defendants, the performance bond requires resolution of this case in Washington state courts. Id. Defendants therefore argue that the Court must dismiss this case. Id. at 6.

Defendants focus on the language of the bond rather than the Indemnity Agreement. The Indemnity Agreement, however, is the contract at issue in this case. Defendants fail to cite any authority or provision of the Indemnity Agreement that divests the Court of diversity jurisdiction under 28 U.S.C. ยง 1332(a). ...


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