United States District Court, E.D. California
matter is before the court on the motion for partial summary
judgment brought by plaintiff Arch Insurance Company (Arch),
on its breach of contract claim against defendant Sierra
Equipment Rental, Inc. (Sierra). Mot., ECF No. 154. The
motion is unopposed, as Sierra is without
counsel. The court held a hearing on May 6, 2016,
and neither party appeared. The court subsequently ordered
the parties to show cause as to why they should not be
sanctioned for failing to appear. ECF No. 170. Arch
responded, indicating it did not appear at the hearing due to
a calendaring error compounded with the confusion over
Sierra’s lack of representation. ECF No. 171. For
reasons explained below, the court GRANTS Arch’s motion
for partial summary judgment and DISCHARGES the order to show
cause as to Arch. Sierra’s OSC is also DISCHARGED,
given that nothing before the court indicates it could
enforce any monetary sanctions ordered, and in light of the
adverse decision by the court against Sierra in the
resolution of this motion.
2012, Sierra was a corporate entity in good standing with
rights to conduct business in California. Stmt. of Undisputed
Material Facts (SUMF) No. 23, ECF No. 155. Previously, on
August 12, 2005, Sierra and others, including Melvin Weir and
Carolyn Scarola (collectively, “Indemnitors”),
executed a General Indemnity Agreement (GIA) as partial
consideration for Arch’s issuance of bonds covering
Sierra’s construction contracts for the two projects at
issue here: the Lake County and Shasta County Projects.
See SUMF Nos. 1, 2, 8; Pearce Decl., Ex. A, ECF No.
157 at 12. In consideration of Arch’s issuance
of the payment and performance bonds, the GIA requires Sierra
to indemnify and hold Arch harmless for any
“loss” as defined in the GIA, which includes
Any and all liability, losses, costs, expenses, and fees of
whatever kind or nature, that [Arch] may sustain or incur as
a result of executing any [b]ond or as a result of the
failure of [Sierra] or Indemnitors to perform or comply with
[the GIA]. Loss includes but is not limited to: (a.) sums
posted by [Arch] as a reserve for the payment of potential
losses and / or expenses, (b.) all costs and expenses
incurred in connection with investigating, paying or
litigating any claim, and / or enforcing [the GIA], including
but not limited to legal fees and expenses, professional and
consulting fees, technical and expert witness fees and
expenses, (c.) all accrued and unpaid premiums owing to
[Arch] for the issuance, continuation or renewal of any
[b]onds or for any policy of insurance issued by [Arch] for
[Sierra] or Indemnitors, (d.) funds advanced by [Arch] to
[Sierra] in connection with a Bonded Contract, and (e.) all
other amounts payable to [Arch] according to the terms and
conditions of [the GIA] . . . .
SUMF No. 4; Pearson Decl., Ex. A at 9.
also requires the following:
4. Posting of Collateral - Indemnitors agree to deposit with
[Arch], immediately upon demand by [Arch], an amount equal to
the greater of (a.) the amount of any reserve established by
[Arch] to cover any actual or potential Loss, or (b.) the
amount of any claim or claims or other liabilities asserted
against [Arch] as a result of issuing any [b]ond . . . .
. . .
8. Discharge of Surety - Upon the request of [Arch], [Sierra]
and Indemnitors will procure the discharge of [Arch] from any
[b]ond, and all liability arising therefrom, and provide
evidence to [Arch] regarding the same.
9. Access to Books & Records - [Arch], including its
designated agents, shall, at any and all times, have
unrestricted access upon reasonable notice to review all
books and records of [Sierra] and Indemnitors . . . .
SUMF Nos. 4, 5, 6; Pearson Decl., Ex. A at 9-10. Lastly, the
GIA also provides that Sierra and the Indemnitors agree to
accept vouchers or other evidence of payments made by Arch
for any Loss sustained or incurred by reason of having
executed any Bond. SUMF No. 26; Pearson Decl., Ex. A at 9.
reliance on Sierra and Indemnitors’ representations in
the GIA, Arch issued bonds guaranteeing Sierra’s
performance of two contracts, and Sierra’s payments to
subcontractors and suppliers in connection with those
contracts: (1) Sierra’s contract with the California
Department of Transportation (CalTrans) for construction on
Route 53 in Lake County (the Lake County Project) (payment
and performance bonds, with penal sums of $11, 311, 521.95
and $5, 655, 768.98, respectively to cover alternative
performance of the contract if needed); and (2)
Sierra’s subcontract with Tutor-Saliba Corporation
(Tutor) for construction on Antler’s Bridge located in
Shasta County (the Shasta County Project) (payment and
performance bonds, with a penal sum of $6, 532, 874.00 to
cover alternative performance of the subcontract if needed).
SUMF Nos. 8-9. The bonds are collectively referred to as the
“Bonds” in this order.
January 2012, Sierra had failed to pay a number of
subcontractors on the Lake County Project, resulting in
numerous claims on the Bonds for that project. SUMF No. 10.
At the same time, Sierra requested financial assistance from
Arch. SUMF No. 11. In mid-February 2012, Arch demanded that
Sierra fulfill its obligations under the GIA, including
exonerating Arch from potential liabilities, indemnifying
Arch, and providing collateral in the amount of $1, 461,
918.83, the total amount in claims asserted against
Arch’s Bonds at the time. SUMF No. 15. However, by the
end of February 2012, Sierra defaulted not only on its
contract for the Lake County Project but also for the Shasta
County Project contract, resulting in claims against both
Projects’ Bonds by the Project owners, CalTrans and
Tutor, and $6, 737, 855.98 in losses to Arch as of January
12, 2016. SUMF No. 10-13; Pearce Decl. ¶ 9, Ex. E.
Tutor, with whom Sierra subcontracted for the Shasta County
Project, filed a civil action against both Sierra and Arch as
a result of the default, alleging damages in excess of $6,
532, 874.00. Id. at 13-14. At the time Arch filed
its motion, the civil action was pending in Los Angeles
Superior Court. Id.
2012 Arch has made numerous requests to inspect
Sierra’s books and records. SUMF No. 25. Sierra has
refused, and Arch retained legal counsel to gain access.
Id. Arch has recovered $2, 821, 915.45 in credits
against its losses under the Bonds. SUMF No. 27. As of
January 12, 2016, Sierra’s corporate status with the
California Secretary of State was forfeited, meaning Sierra
has not filed its franchise tax return or paid the tax due
thereunder. SUMF No. 28; Van Ornum Decl. ¶ 5 & Ex.
B, ECF No. 156; see also Business Search - Field
Descriptions and Status Definition, California Secretary
of State web page, available at
(last visited May 2, 2016 16:17GMT). Arch’s counsel has
attempted to secure a stipulated judgment from Sierra but has