RLI Insurance Company v. Nexus Services, Inc., No. 5:2018cv00066 - Document 80 (W.D. Va. 2018)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Michael F. Urbanski on 8/25/2018. (jv)
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CLERK'S OFFICE U.S.DISX COURT AT O ANOKE,VA FILED IN T H E U N ITED STATES D ISTM CT CO U RT FO R TH E W E STE RN D IST RICT O F W RGIN IA Ats 2 7,2212 H ARRISO N BU RG D W ISIO N B JUL c, DtEy . Y; 1V 1IN SURAN CE COM PAN Y, Plaintiffy CivilAction N o.5:18-CV-00066 N EX'US SE RW CE S,IN C., By: D efendant, M ichaelF.U rbansld ChiefUnited StatesDistrictJudge JUAN VALOY,eta1., Intervenors. M EM O RAN D U M O PIN IO N '. s.g)u Tllismk' tvrisbeforethecoplt'tondefendantNexusServices,Inc.'srWexus'')motion ,. .. ,.,$SstTrit . forleaveto Sle a coui'ercbim and am ended answer.ECF N o.43.Them atterhasbeen 6llly briefed.Thecourtdispenseswit. h oralarpxm entbecausethelegalcontenéonsare adequately presented in them aterialsbefote the courtand atgum entw ould notaid the decisional process.Forthefollowing reasons,N exus'm oéon forleave to filecounterchim and RLI Insurance Company v. Nexus Services, Inc. am ended answerisGR AN TED . Doc. 80 RT,IlnstuanceCompany(<fRT,I') and Nexusenteredinto an indemnityagreementon January20,2016 rflndemnityAgreement'')asconsideraéon forRT,I'sagreementtoissue im m igration bonds.A sdetailed in thecoutt'sopinion on the extensively M gated prelim inary Dockets.Justia.com injuncdon,IILIallegesthatNexusbreachedtheIndemnityAgteementforavarietyof reasons,inclucling failure to provide accessto N exus'books,zecordsand accounts.The courtgrantedRI,lapmliminaryinjuncdonthatrequiredNexustogiveaccesstoaselection ofitsbooks,recordsand accounts.ECF N o.60. Dutingthecourseofbriefingandatgumentforthepreliminaryitjuncdon,Nexus m oved to am end itsanswerand add a cotm tercl/im .ECF N o.43.The countercbim , broughtunder170th Vitginiaand Illinoislaw,aiegesILLIbreached the lndem nityAgteem ent underthe im plied duty ofgood faith and fairdenlitng through itsdem and to accessN exus' books,recordsand accountsand itsrequestthatN exusdischatge allbondsissued or,itzthe alternaéve,furnish RI,1with collateralseclntity suficientto secure againstanécipated loss and expostue underthebonds. N exusarguesthatFederalRule ofCivilProcedure 15 suppot'tsam endm entbecause Tfthecourtsholzldfreelygiveleavewhenjusdcesorequies.''ECFNo.44,at2.Accordingto Nexus,noneofthefactorsthatsupportdenialofleavetoamend- prejudicetotheopposing party,bad faith,orfutility- apply,and thusleave should begranted.TtialissetforM ay20, 2019,discoveryhasnotcommenced$utforthedisclosuresnow orderedbythepreliminary itjuncéon),andNexusclnimsRT,Icannotbesurpdsedbythecounterclnim'sallegadonsas they 0. Fe from the sam e transacéon and occurrence.Addidonally,the countércbim ism ade in good faith and sepatatelidgadon ofthiscllim w ould bea wasteoftim e and resources. RI,I,foritspart,objectsto theamendmentand alternativelymovesto dismissthe counterclnim underFederalRuleofCivilProcedure129$(6).ECFNo.53.RT,Iatguesthat N exusfailsto allege ltLIbreached a dutyestablished by the lndem nityAgreem entorthatan 2 itjtzryzesulted.InRI, I'sview,theIndemnityAgreementdoesnotconferrkhtsuponNexus norim pose obligadonsupon RT,I,and thusthere isno im plied dutyto actwith good faith underthese circllm stances.RT,If'uttherarguesthatN exushasno groundsfordam ages,as theIndem nityAgreem entdoesnotprovide forattorney'sfeesto N exusorconferarightto clisputtbondclnimstoNexus,andthezeisnopzovimatecausebetweenNexus'itjM esand RT-1'salleged breach. II. FederalRuleofCivilProcedtue15(a)providesthatffga)partymayamenditspleacling once asam attezofcoursewithin 21 daysafterserdng it....In allothetcases,aparty m ay am end itspleacling only wit.h the opposing party'swritten consentorthe cotut'sleave.''Rule 15allowscourtsto freelygrantleaveto amend apleacling ffwhen justice sorequires.''ld.;see alsoJohnsonv.OroweatFoodsCo.,785F.2d503,511(4th Cir.1986).<<Iftheunderlying factsorcitcumstancesrelieduponbyapbinéffmaybeapropetsubjectofzelief,heought to be afforded an opportunityto testhiscbim on the m erits.''Fom an v.D avis,371 U .S. 178,182(1962).Thegtantordenialofleaveliesinthesounddiscredonofthedistdctcourt. SeeGambelliv.United States,904 F.Supp.494,497(E.D.Va.1995),aff'd,87 F.3d 1308 (4th Ciz.1996).Denialofleaveto amend consdtutesabuseofdiscredonwithoutsufûcient teason,such asfutility ofam endm ent,undue delay,bad faith,dilatorym odve,undue prejudice,otrepeated failtzreto ctuedecienciesbypreviousamendments.SeeFoman,371 U .S.at182. ffunlessaproposed am endm entm ay clearly be seen to be fulilebecause of substanéveorproceduralconsiderations,conjectureaboutthemeritsoftheM gation should 3 notenterinto the decision w hetherto allow am enclm ent.''D avisv.Pi et AitcraftCo .,615 F.2d606,613(4thCir.1980)(internalcitadonsandquotationsornitted).A ptoposed am endm entisfut' tlew hen itwould notsutvive am odon to dism iss.See United Statesex. Rel.Wilsonv.Kello Brown & Root Inc.,525F.3d 370,376(4th Cir.2008).A disttict cout'tTfdeterminesfutilityunderthestandardofFed.R.Civ.P.124$.::Chat'te Int'lInc.v. JoLida,Inc.,No.:0 Q-10-2236,2011R 4527337,at*3@ .Md.Sep.27,2011).<TTo sutvivea(Rule129$(6))moéontodismiss,acomplaintmustcontainsufficientfact'ual m atter,accepted astmae,to fstatea cllim to reliefthatisplausible op itsface.'''A shcroftv. tqb-tl,556U.S.662,700(2009)(quotingBellAtl.Co .v.Twombl,550U.S.544,597 . (2007)).A cbim isplausibleon itsfaceffwhentheplaindffpleadsfactazalcontentthatallows the couttto draw the reasonableinfetencethatthe defendantisliable forthenaisconduct alleged.''1d.Therefore,a m odon to nm end pleaHingsisf'utileifitdoesnotstatea clnim to reliefthatisplausible on its face. 111. Couttsfavorably zeview m odonsto am end with few excepdons:futility of amendment,unduedelay,badfaith,dilatorymotive,unduepêejudice,oêrepeatedfailureto cure deûcienciesby previousam endm ents.SeeFom an,371 U .S.at182.RI,Iprim arily conteststheam endmenton futititygtounds.M l'sargumentsfailtopersuadethecourtto clivergefrom thegenetallyaccepted path ofpermitfingamendmentearlyinlitkation. A. RI,Iftrstcontendsthatlllinoisand Virginia1aw do notprovide foran independent clsim based in theim plied duty ofgood faith and fairdealing,and even ifthey did,N exus 4 failsto allege factssupporting such acbim .lAtthisstage ofthe litigadon and accepdng the factsaspled,tlaecouztfindsthatN exussuffkiently allegesthatRI, Idem anded discharge of thebondsorcollateralnotin good faith aspartofabreach ofcontractclnim . 1. Illinoisdoesnotrecognize an independentcauseofacdon forbreach oftheim plied dutyofgood faith and fairdealing.See e..,Brookl n Ba elBo s lnc.v.Earth rains Refrierated Dou hProds.Inc.,212F.3d373,381 (7th Cir.1000)9Vo lesv.SandiaMort . C.P. IP. 196I1l.2d288,256111.Dec.289,751N.E.2d 1126,1130-31(2001).However,lllinois . cout'tshaverecognized an acdon forbreach oftheimplied dutyw hen itisbased itlabreach ofcontractclnim .SeeLasalleBus.Credit Inc.v.La ides,N o.00 C 8145,2003 W L 722237, at*15(N.D.111.Mat.3,2003)(citingLasalleBankNat'lAssocv.ParsmontPro erties,588 F.Supp.2d 840,857 (N.D;111.2008))94536N.Sheridan CondoAss'nv.Maduff,2016IL App(1st)152006-U,!(30(<fThedutyofgoodfaithandfairdealingisalimitadononthe exercise ofoneparty'sbroad discretion in perfo= ing itsobligationsunderthe contract.lt requites'thatpartyto exercise the discteéon reasonably and with properm odve,not arbittqtily,capriciously,orin am annerinconsistentw1t. 1, 1thepao es'reasonableexpectaéons underthecontract.''(internalcitationomittedll;g. fxEnvisionHealthcare,Inc.v.Fed. De ositIns.Co .,No.11CV 6933,2014R 6819991,at*9 (N.D.111.Dec.3,2014) rfEnvision hasnotplqaded itsduty-of-good-faiththeory(Count111)aspartofitsbreach-of- 1R1.Iarguesthatlllinois1aw appliestotheproposed cbim becausetheparûesdo notdisputethatthelndem nity Agzeementisgovemedbythelawsoflllinois.Asdiscussedinthepreliminaryinjlmcdonopinion,thepatdeshgvenot 6111y briefed choice oflaw issuesin tlzisacdon.M em .Op.,ECF N o.59,at10 n.2.Forptuposesofthism odon,atzd at tllisstage oflidpadon,the cotutneed notdecidethe applicable1aw because the resultisthe sam e. 5 contractcllim (Count1),asitwasreq'lited to do.'').Asexplainedin Gorev.IndianaIns. Co.,376111.App.3d282,286,876N.E.2d 156,161(2007), Itiswellestablished thatthe duty ofgood faith and faitdealing isim plied in every contract.Itspum oseisto enstue thatpnteies do not take advantage of each other in a way that could not have been contem plated atthe tim e the contractw as drafted or do anything thatwilldestroy theotherpartfsrightto receive the beneik of the contract.Disputes involving the exercise of good faith atise when one patty is given broad disctedon in perfo= ingitsoblkaéonsunderthecontract.Thedutyofgood faith and fait dealing is a lim itadon on the exercise of that discretion,req'niting the partyvested wit .h cliscredon to exercise it reasonably and with proper m odve, not atbitrntily, capriciously, oz in a m anner inconsistent with the paG es' reasonable expectadons. H ow ever, in general, it is not an independentsource ofdudesforcontracdng patées. J-I. L(ciéngDaanv.M cDonald'sCo .,125111.App.3d972,990-91,81111.Dec.156,466 N.E.2d958,971-72(1984);Cramerv.InsutanceExchangeAgency,174ll1.2d513,525,221 111.Dec.473,675N.E.2d897,903(1996)). fT roblem srelating to good faith petfozm ance typically arisewhere onepartyto the contractisgiven broad discredon in perfozm ance.The dependentpartym ustthen rely on theparty in controlto exercisethatdiscredon fairlp''D a an,125 111.App.3d at990,466 N .E.2d at971.Specifically,ffgwjhereapartyactgw1t.11impropermotive,beitadesiteto extdcatehim selffrom acontracm alobligadon by refusing to bring abouta condition precedentoradesire to deprivean employeeofreasonably andcipated benehtsthrough tetminadon,thatpartyisexercising conttactazaldiscredon in am annetinconsistentwith the reasonableexpectadonsofthepardesand thereforeisactingin bad faith.''ld.at991,466 N .E.2d at972.The m otivaling concern wherea partywithholdsa condition precedentis 6 thatTfthecontrolling party could have avoided incurling any contracm alobligadon by refusing to bring abouttherelevantcondidon.''Id. A lthough courtsrecognize an im plied duty ofgood faith and faitdeaEng,it(fdoesnot create an enforceablelegalduty to be niceorto behave decently in a generalway''and only ffreqlliregsjgaparty)to exezcisethediscreion afforded toitbythe...agreementinamanner consistentwith thereasonableexpectadonsofthe pardes.''Berahav.BaxterH ealth Care C.. l)zP. 956F.2d1436,1445l/thCir.1992)(internalcitaionandquotadonmarksomittedl). . Cotutscannotsim ply ffdecidewhetheronepartyoughtto have exercised privilegesexpressly resew ed in the docllm ent.Rather fgood faith'isacom pactreference to an im plied undertaking notto takeopportunistic advantagein away thatcould nothavebeen contemplated attheémeofdtaftinp''ParamontPro erdes,588F.Supp.2d at857 (ciéng La ides 2003WL 722237,at*15(quodngKham & Nate'sShoesNo.2,lnc.v.FirstBank ofW 11111t1 908F.2d1351,1357(7tl'1Cir.1990)).Moreover,whereadefendantisnotalleged to violate aspecifk obligadon,theim plied duty asatoolofcons% cdon isnotrelevant becauseitdoesnotpetnaitenfotcem entofan obligadon notpresentin the contract.See Cushm an & W akeEeld,Inc.v.lllinoisN at'lIns.Co.,N o.14 C 8725,2015W L 2259647,at *8(N.D.111.May11,2015)rfcushmandoesnotargtzethatACE violatedaspecihc obligadon im posed by theA CE PoEcy,and thusitisunclearwhy theim plied duty asatool ofconstrtzcéon isrelevanttothecourt'sanalysis.');Envision Healthcate,2014R 6819991, at*9 rfEnvision hasnotadequately explainedhow thegood-faith dutyeven comesintoplay asanecessarytoolofconstnlcdon in thiscase.''(internalcitation omittedl). 7 In pracdce,cotutshave allowed cbim sto m ove forward whetepatdesdid notteceive thebenefh ofthe batgain they reasonably expected.SeeG rabianskiv.Ball TotalFitness Holdin Co .,169F.Supp.3d785,793-94(N.D.111.2015)(<<(A jurycouldconcludethat Bally'sconductdeprived plnindffsofthebenefitofthebargain they reasonably expected when theypaid a pzem ium to obtain zenewable,Ptem ierozPzemierPlusplansgranting them accessp allflocaland nadonwide'Ballyc1ubs.'');Nathan v.Mor an Stanle RenewableDev. Fund,LLC,No.11C 2231,2012WL 1886440,at*13(N.D.111.M ay22,2012)(<<Here, Nathan hasallegedthatT' PW Tfailed to award him anydiscreéonarybonusin 2010 gand thatj '1*PW 'Sfailtzreto evaluate the award ofany discredonarybonusin good faith consém tesa breach oftheConttact.'Thisissuffkientto state aclnim upon wllich reliefm ay begranted.'' (intetnalcitation omittedl).Courtshavedismissed clsimsotdenied amendmentswherethe alleged obligadonsw ezeprecontractualteptesentadons,seeRlamick v.Liberty M ut.Ins.Co., No.17 C 2403,2018WL 3740645,at*5 (N.D.111.Aug.6,2018),orwhereexpress contractualprovisionsdid notprovide fordiscretion.SeeResoludon Tr.Co .v.H oltzm an, 248111.App.3d105,112-13,618N.E.2d418,424(1993)rfExpresscovenantsabrogatethe operadon ofim plied covenantsso courtswillnotpermitim plied agreem entsto overrule oz m odifytheexpresscontractofthepsl'ties.'pl.Relevantly,thecouttin Sm artM kt .G .lnc. v.Publicaéonslnt'l,Ltd.,No.04 C 0146,2008R 4287704,at*9 (N.D.111.Sept.11,2008), held thatan im plied dutyofgood faith and fairdealing wasnecessarywhereapartyhas broad discredon in tet-minaling aconttactand thecontractdid notincludealistofpotendal acdviéesthatcould triggertet-minadon.Asthecourtexplnined,fflsjuch abroadgrantof cliscretion demandsthesafeguardsoftheimplied covenantofgood faith to ensurethatgthe 8 defendantjexercisesthedisctedon affotded toitby gthecontractjin amannerconsistent with thereasonableexpectadonsofthepardes.''Id.(internalquotaéonmarksomitted). H ere,N exussuffkiently allegesabreach ofim plied duty ofgood faith and fair dealing underIllinoisconttact1aw forptuposesofam odon to am end.Theteisno dispute thatthelndem nityAgteem entcreated acontracm alrelaéonship between RLIand N exus. The issueiswhetherRT,1fairly exercised itsdiscredon in perfo= ing underthe Indem nity Agreem ent,and did so ffwith properm odve,notarbitratily,capriciously,orin am anner inconsistentwith theparées'reasonable expectadons.':G ore,876 N .E.2d at161-62;seealso D a an,125 111.App.3d at990,466 N .E.2d at971.N exusallegesthatRT,Ihad discredon itl exercising itsdghtsunderthe Indem nityA greem entpursuantto itsobligadon to issue im m igzadon bonds.Thepzoposed am ended counterclnim alleges: A fter receiving its prernbxm s in f'u11, RT. I Instuance Com pany m ade dem ands that were not in good faith or fai. r dealing, including but not lim ited to im m ediate access to all books, records and accounts ofN exus aswellas entdesnotpatdes to the Agreem ent; dem and discharge of all im m igration bonds issued;and addidonalcollateralin an amountof$10million. Ptoposed Countercl.,ECF No.43-1,at!(156.Despitepaying$2.6millioninprembnms, N exusallegesthatIII,ldem anded,withoutagood faith basis,discharge withoutlossfrom all bondsissued on thesam eday,ora$10million depositforcollateralsecurity;RT,Ibarred N exusfrom dispudng invoicesdespiteN exus'successin appealing othetinvoicesand RT,l's alleged promiseto considerappealson acase-by-case basis;and RI,1requested itlfot-madon unessenéalto evaluation ofitsexposurefrom enééesotherthan N exusServices,Inc.as pretextforenflingitsreladonship witlaN exusand mnintainingitsmillionsin premiums.J. da at15 41-42,49-78,90-95,97-114. 9 Although N exuspointsto a num berofacdonsallegedly taken notin good faith,the courtfocuseson R' Ll'sdem and fora dischatge from the im m igradon bondswithoutlossor adepositof$10millionin collateralseçutity,eitheronthesamedayofthedemand otwithin . am atterofdays.W hile RT, Idisagreeswith thefacm alacctzracy ofthe Tfsam e-day''aspectof the dem and,N exus'factsasalleged show thatkT, Ihad som e discredon in how itsought dischatgeorcollateral.I. daat!(!J97-102.TheIndemnityAgreementgavediscredon to IU=I aboutwhen,how ,orwhy it'could assertitsrightsto dem and collatezaland seek dischargeof bonds.G iven thatN exusallegesIII,Idem anded dischatge ofalloftheim m igradon bonds, orcollateralequaling approxim ately a thitd oftherisk thatRT,1assessed fottheissued bondsyzwithin am atterofdays,N exuspresentsaplausible cbim thatthese dem andswete notm adein good faith.Asthecotutreadsthecotmterclnim ,N exusallegesthatR' Ll's decisionsabouthow itexercised these rightsunderthe Indem nity Agreem entled to its decision to no longeradm inisterbondsforN exusand . thusled to the alleged breach of contract.These allegadonstrack the concernsofothercasesinvolving theim plied duty of good faith and faitdealing,wherepardesused theitdisctedon to avoid ornllllifytheir obligadons.Accepdng the factsaspled,N exusplausibly allegesthatRT, I soughtdischatge or m illionsin collateralwitllin a shortperiod ofHm e to excuse itselffrom itsduéesto issue or adm inisterim m igtadon bonds. RT,1pointsoutthatthecase1aw largely focuseson tlaeuse ofdiscredon in performing oblkadons,andthatthelndemnityAgreementfocuseson R' Ll'srights. 2AtthepreliminaryitjtmcdonheatingheldonApzil27,2018,cotmselforRTIrepeatedlyrepresentedthatR1, Ifaceda riskinexcessof$29million.See enerall Prel.Inj.Hzg.Tr.efhecourtnotesthattheproposedcounterclnim sufsciently statesacbim withoutreferencetothepreliminaryitjuncdonhearing,buttheargt zmentofRT, 1'scounselatthe prelimiqaryitjuncéonheae gft zrthersuppoMstheplausibilityofNexus'cbim. 10 H owever,RT. 1'srightsto dem and collateraland seek discharge arebound up with its 'A obligation to issueim m igm tion bondson behalfofN exus.Thepnttiesenteted into the Indem nityA greem entaspartofM l'sobligadon to issueim m igradon bonds.See Ex.A to Compl.ECF No.1-2,at2 rfT11isCommercialSuretyGenerallndemrlityAgreemçnt (hezeinafterAgteement),madeandenteredintothis20thdayofJanuary,2016,isexecutedby theIndemnitorts)gndemnitorisdefmedhereunder)forthepurposeofindemnifyingRT, l InsuranceCompany,asSurety(hereinafterSuretylfrom alllossesand costsofanyldnd incurredbySurety,inconnectionwithanyBond(Bondisdefmedhçreunder)forwhichit now othereaftetbecomesStuetyforanyofthefollowing asPHncipal....?').RT,I'sdghtsto dem and coEateraland seek discharge ofbondswerepartand parcelofitsperform anceofits Mbligadon to issuebonds,and theIndem nityAgreem entgave greatdisczedon to RT-Iabout when orw hy itcould asseztthesetights. U ltim ately,thiscaseinvolvesasouting businessreladonsllip,and forpum osesofthe m odon to am end,N exushasalleged thatRLIhad discredon in acting pursuantto the Indem nityAgreem entand thatthediscredon w asnotused in good faith.Tlliscourtm ust allow am endm entunlessthe am endm entisclearly futile.SeeD avis,615 F.2d at613.The case1aw surrounding theim plied duty ofgood faith and fairdeslitng doesnotsetclear boundsforwhen aparty hasdiscreéon orunfairly usesthatdiscredon,and N exushas alleged thatRT-Iused itsdiscredon tm dertheIndem nity Agreem entto effecdvely term inate theirbusinessrelaéonsllip.Therefore,atthisstage oftheliégadon,N exushassufikiently alleged abreach oftheim plied duty ofgood faith and fairdenling underIllinoislaw . 2. The sam eresultoccursunderVirgl 'rlt 'a law.Vitginia case law doesnotpresenta clear picture ofthe availability ofan im plied covenantofgood faith and fairdealing.TheVizginia Suprem eCourthasrecognized such a covenantin com m on law conttactsin the em ploym entcontext.See Catezco Inc.v.Catedn Conce ts Inc.,246 Va.22,28-29,431 S.E.2d277,282 (1993).FederalcourtssimilarlyhavetecognizedeverycontractinVitginia containsan im plied covenantofgood faith and fairdealing.SeeW aitesv.W ellsFargo Bank, l N.A.,No.2:2015cv00353,2016R 659084,at*9 (E.D.Va.Feb.16,2016)9seealsoW olfv. Fed.Nat.Mort.Ass'n,512Fed.App'x336,345(4thCir.2013)(unpublished)rflnVizgitlia, everycontractcontainsan implied covenantofgood faith and fairdealinp''(internal quotation rharksomittedll);Jonesv.Fulton Bank,N.A.,No.3:13-CV-126,2013WL 3788428,at*7 (E.D.Va.July18,2013)(emphasisomitted)rr nderVirginialaw,evety contractcontainsan im plied covenantofgood faith and fairdeoling;how ever,abreach of thosedudesonlygivesrisetoabreach ofcontractcbim,notaseparatecauseofacdon.'); SunTrustM ort .lnc.v.U nited G uat.ResidendalIns.Co.ofN orth Catolina,806 F.Supp. 2d 872,893-95 (E.D.Va.2011)(exnmining how stateand federalcolzrtsinVirginiahave acknowledged an im plied dutyofgood faith and faitdealingin contractualtelaéonsilips,and fm ding no reason to differendatebetween conttactsfalling undertheU niform Comm ercial Codeandthecommon law);Land & M arineRemediadon lnc.v.BASF Co .,2:11CV239, 2012W . L2415552(E.D.Va.June26,2012)(recognizingthedutyinconttactsregatding leases).ButseeHarrisonv.U.S.BankNat.Ass'n,3:12-CV-00224,2012W L 2366163(E.D. Va.June20,2012)rYirgirziag)doesnotrecognizean implied covenantofgood faith and faitdealingin contactsoutsideofthosegovernedbytheUnifot. m CommezcialCode.''). M ostcourtszeviewingV irgml ' 'alaw regarcling theimplied covenantrecognize thatabreach ofthatcovenantcan existaspaztofabreach ofconttactclmim butnotasan independent acdon.3SeeVancev.W ellsFat o Bank N.A.,291F.Supp.3d 769,774-75(W .D.Va.2018). A lthough abreach ofcontractacdon can be sustained based on an im plied covenant ofgood faith and fairdealing,courtshaverecognized theacdon in lim ited circlxm stances.In general,ffwhenpaldestoacontractcreatevalidandbindingrkhts,animpliedcovenantof good faith and fairdealing isinapplicableto thoserights.''W ard'sE ui . Inc.v.N ew HollandN.Am.,254Va.379,493S.E.2d516,520(Va.1997).Case1aw hasrecognized bteachesofcontractbased on theim plied covenantunderywo circum stances. First,f<apartydoesnotbreach the(dlutybyacéngatbitrntilyifthepartyisexercising aclearcontractdght....gflqowever,thatarbitratyconductmaybeabreach ofthe gdluty when the partyisexercising conttacm alclisctetion.''Stone Glen LLC v.S.Bank & Tr.Co., No.2:13CV8-HCM -LRI,,2013W L 4539736,at*1(E.D.Va.Aug.27,2013)(intetnal citadonsomitted)(citingCharlesE.BtauetCo.,lnc.v.NadonsBankofVa.,N.A.,251Va. 28,35,466S.E.2d 382,386 (1996));.Vir 'niaVermiculite Ltd.v.W .R.Grace& Co.-conn., 156F.3d 535,542 (4t.h Cir.1998)).Exerciseofdiscredon can lead to abreach ifitis exercisedinbadfaith.SeeVit'niaVet-miculite,156F.3dat542(<fgAjpartymaynotexercise conttactazaldzkcrehhnin bad faith,evenwhen such cliscredonisvested solelyin thatpa. rty.''l; Fam v.BankofAm..N.A.,No.117CV319AJTJFA,2017W . L 5139262,at*5(E.D.Va.Oct. 3Adclidonally,f'tlzeFollt' th Cizctlitand thisCourthavebeen clearon the duty existingitlallcontracts,and absentan inteweningVirginiadecisionwhich repudiatestheFollrfllCircuitand thisCourt'sitztetw etadon ofVirginia1aw on the applied duty,the Courtwillapply thatintem retation.''Stone Glen LLC v.S.Bank & Tr.Co.,944 F.Supp.2d 460,469 (E. D .Va.2013),clarihedondenialofreconsideraéon,No.2:13CV8-HCM-T, RT. ,2013WL4539736(E.D.Va.Aug.27, 2013). 13 6,2017),aff'dsubnom.Fam v.BankofAm.(USA),No.17-2298,2018W L 3546873(4th Cit.Jtzly24,2018).Second,ffthedutymay alsobebreachedinrelatbn to an express contractualrightifapattyemploysdishonestyintheexerciseofthatcontracmalrkht.'' Norman v.W ellsFat o Bank N.A.,No.3:17-CV-585-HEH,2018WL 1037048,at*3 (E.D. Va.Feb.23,2018)(citingStone Glen LLC,944F.supp.zdat466)9seealsoHeroldv. MerrillL nch Pierce Fenn' er& Smith Inc.,No.3:17-CV-00395-JAG,2018W L 1950641,at *4(E.D.Va.Apr.25,2018)(<% bteachoftheimpliedcovenantofgoodfaithandfair dealing occurswhere a defendantactsdishonestly or exerciseshisdiscredon atbittatily or unfairlyin acontracttzalreladonship.'). The casem ostinsttucdveforthisaction isStone G len LLC v.S.Bank & Tt.Co., 944F.Supp.2d460,467-69(E.D.Va.2013),cladhed on denialofteconsideradon,No. Z:I3CV8-HCM-LRL,2013W L 4539736(E.D.Va.Aug.27,2013).ln Stone Glen,the conttactrequired plaindffsto produce fm ancialstatem entsforthe defendant'sreview and petm itted the defendantto te= inate thecontractifthedefendant'sreview 1ed to the dete= inadon ordiscovvrythatthe statem entsfrcontained a m aterialnnisrepresentation or omission....7'Li at*1.Thecourtheld thatthedefendantwasrequired toundertakethat review in good faith and thatffthereview ofthe Enancialstatem entsinvolved som e degree ofdiscretion w hereby arbitrarily declating a M ancialstatem entfalsewithoutany realreview wotzld be abzeach oftheD utp''JCL -. U nderVirginialaw,N exusagain suffkiently allegesabreach ofim plied dutyofgood faith and fairdealingundera breach ofcontractacéon forpurposesofam oéon to am end. SeeStone Glen,944 F.Supp.2d at464-66 (explnining thatacllim forbreach ofan implied covenantofgoodfaithandfairdealingisallegediftheteis(1)acontracmalreladonsllip betweenthepardes,and (2)abreachoftheimpliedcovenant).Asexplainedabove,the pnteiesdo notdispute the existence ofacontract'ualreladonship and N exusallegesa breach ofthatreladonslzip based on RT,1notexetcising itsdiscredon in good faith.RI,1allegedly did notadm inisteritsbondsin good faith through unfairrequestsfordischatge ofbondsor collateral.Forthereasonsexplained above,andbased on thealkgationsoftheproposed counterclnim ,N exushassuffkiently alleged abreach oftheimplied duty ofgood faith and faitdealing undetVitginialaw, B. ILLInextcontçndsthatN exushasno groundsfordam agesbecausetlae Indem nity Agreem entdoesnotptovide forattorney's feesto N exusand doesnotconferarightto dispute bond clnim sto N exus.RT-Ialso arguesthatN exushasnotshow n proxim ate cause betweenitsinjuriesand RT, I'sazegedbreach.Nexusdoesnotspecifkally addresswhetherit hassufficiently alleged dnm agesin itsreply brief,butarguesthatitproperly statesaclnim for breach ofcontractoh thew hole. Underlnoth Illinoisand Virgirzialaw,dam agesare anecessary elem entforalleging breachofcontract.SeeFilakv.George,267Va.612,619,594S.E.2d610,614(2004)rfl' he elementsofabreach ofcontractaction are (1)alegally enforceableobligation ofadefendant to aplnintiff;(2)thedefendant'sviolation orbreach ofthatobligation;and (3)injuryor damageto theplnindffcaused bythebreach ofobligadon.');Feldstein v.Glxinan,499 N.E.2d535,537 (111.App.Ct.1986)r%n adequatecomplaintbasedupon breach ofconttact mustallegetheexistenceofdamagesasaconsequenceofthebteach.').In itscountetclnim, N exusseeksdam agesfotattorney'sfeesincurred responding to breachesofgood faith, inclucling thislaw suit;am ountspaid on invoicesbecause ofRI,I'srefusalto cooperate or disputeinvoices;and additionalprenablm sthatm ay beincutred to discharge RT, I's immigtationbonds,incluclingthe$2.6 million alteadypaid.Proposed Countercl.,ECF No. 43-1,at!157. In assessing whetherN exussufikiently allegesdam ages,the courtagain focuseson RT.I'srequestforfulldischarge ofthebondsorm illionsin coEateralsecutity.ln Count11of itscomplaint,RT,IasksthecotzrttoTfordergqN exusto immediatelydischatgeRI, Iftom any Bond and allliabilityincutred by reason ofRT,1'sissuance ofany BondsatN exus'request orders,and ifsuch discharge isunattninable,to imm ediately provideRT.Iwith cozatetal secuzityin the am ountthatRT,1hereafterdetetminesto be suffkientto coverallexposure underthe Bonds.''Com pl.,ECF N o.1,at17.Both priorto lidgation and aspartofthis litigadon,RT,1hasdem anded discharge orcollateralin am annerthatN exusclnim sisnotin good faith. N exussuffkientlyallegesdamagesof$2.6millioninpaid premblmsresultingfrom thesedem andsforpum oses ofthem odon to am end.Proposed Countercl.,ECF N o.43-1, at!! 152,157.To besure,Nexusdescribesitsdamagesfrom theseprernillmsin aninartful manner:f' fgalnyaddidonalpremimnsitisrequited topayto dischargeanyR1,Ilnstuance . Company-issued immigtadonsbondsincluclingbutnotlimitedto the$2.6 million paid to RLIInsutanceCompanp''J-I . L at!(157.Althoughptemiumsitmayneed topayin thefuture arespeclzladve,the$2.6million in prembnm salreadypaid aresuffkientlyallegedasdamages. In the proposed counterclsim ,N exuseffecdvely allegesthatitdid notreasonably expectto receivedemandsforfulldischatgeormillionsin collateralseclatityafterpayingthis$2.6 m illion in prem blm s.Therefore,sim ilarto othercaseswheteimplied duty cllim sare advanced,N exusassettsthatitdid notreceivethebenefh ofthe bargain thatitreasonably expected due to R1,I'sacdonsnottaken in good faith.Cf.Grabianski,169 F.Supp.3d at 793-94.To the degree RT, Iazguesthattheseprem ium sw ete considezation fozissuance of the bondsand were notaffected by N exus'allegadons,the courtcannotconsiderthose facts asthey extend beyond the scopeofthispzoposed pleading;thoseargum entsare televantto a laterstageoflitkadon.Discoveryinthisdisputeultimatelymayleadtoafinclingthatthereis no proxim ate causebetween the alleged breach and dam ages.H owever,asalleged by N exus, RT,I'sdiscredonary decisionswere nottaken in good faith and led to som e m onetary loss thtough paid pzem ium s. l Thetefore,N exushas suffkiently alleged dam agesthrough itspternb'm paym entsto RLI.The courtneed notdecidethe availability ofthetem aining dam agesatthisstageofthe liégaéon. C. The collttfindsthatleaveto om end the countercbim isappropriate.RT, 1prim arily arguesthatam endm entw ould be futile.W hile thereulHm ately m ay be no m eritto N exus' counterclnim ,theallegadonsin the proposed countercl/im are suflkientto surdvethisstage 1 ofliégadon.RT,IdoesnotarguethatN exusbringsthiscounterclaim forptuposesofundue delay,bad faith,ordilatorymodve,and doesnotarguethatRT,Iwould faceundueprejudice. SeeFom an,371U .S.at182.There hasbeen no substandve m odon work otherthan on the preliminaryinjuncdon,and discoveryhasnotyetcommencedbeyond thatrequiredbythe injuncdverelief.ThereisnoevidenceofNexusintendingtodelaythisacdonormoveswith bad faith ordilatorym odve.Therefote,N exusffoughtto be afforded an opportunityto test gits)cloim onthem edts.''Id. IV . Forthese reasons,thecourtwillGRAN T N exus'm oion forleaveto flle counterclnim and am ended answer.N exusshallFILE itsam ended countercloim and answer withinten (10)daysofthedateofthisopinion. An appropriate Ordetwillbe entered. .,. . Entered: /w/ ag.a -- ' . -r2. r.W . M ichaplF. rbansld - . p.0 (SA -, yj..Zr ,. ,,' ,t x. ChiefUnitedStatesDistdctludge 18
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