United States District Court, D. Hawaii
PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania corporation, Plaintiff,
OHANA CONTROL SYSTEMS, INC., a Hawaii corporation; AMIR BOROCHOV; and LINDA KINJO, Defendants.
ORDER GRANTING PLAINTIFF PHILADELPHIA INDEMNITY
INSURANCE COMPANY'S MOTION TO DISMISS DEFENDANTS OHANA
CONTROL SYSTEMS, INC., AMIR BOROCHOV, AND LINDA KINJO'S
OKI MOLLWAY UNITED STATES DISTRICT JUDGE.
Ohana Control Systems, Inc., contracted with the State of
Hawaii Department of 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.
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.
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).
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.
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
Id. The General Indemnity Agreement also required
Defendants to deposit collateral with Philadelphia in the
event DOE made a claim against the performance bonds:
Indemnitors 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
Id. at PageID # 21.
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.
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.
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.
Counterclaim's 124 paragraphs of general factual
allegations, only two of them describe conduct by
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
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.
Rule 12(b)(6) Standard.
moves to dismiss the Counterclaim under Rule 12(b)(6) of the
Federal Rules of Civil Procedure. Dismissal under Rule
12(b)(6) may be based on either: (1) lack of a cognizable
legal theory, or (2) insufficient facts under a cognizable
legal theory. Balistreri v. Pacifica Police Dept.,
901 F.2d 696, 699 (9th Cir. 1988) (citing
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d
530, 533-34 (9th Cir. 1984)).
survive a Rule 12(b)(6) motion to dismiss, the factual
allegations in a counterclaim “must be enough to raise
a right to relief above the speculative level, on the
assumption that all the allegations . . . are true (even if
doubtful in fact).” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (citation omitted);
accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(“[T]he pleading standard Rule 8 announces does not
require ‘detailed factual allegations, ' but it
demands more than an unadorned,
the-defendant-unlawfully-harmed-me accusation.”). The
court takes all allegations of material fact as true and
construes them in the light most favorable to the nonmoving
party, and then evaluates whether the counterclaim
“state[s] a claim to relief that is plausible on its
face.” Twombly, 550 U.S. at 570; Sprewell
v. Golden State Warriors, 266 F.3d 979, 988
(9th Cir. 2001); Syntex Corp. Sec.
Litig., 95 F.3d 922, 926 (9th Cir. 1996).
“A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678.
Conclusory allegations of law, unwarranted deductions of
fact, and unreasonable inferences are insufficient to defeat
a motion to dismiss. Sprewell, 266 F.3d at 988;
Syntex Corp. Sec. Litig., 95 F.3d at 926.
Rule 12(b)(6) motion, the court's review is generally
limited to the contents of the counterclaim.
Sprewell, 266 F.3d at 988; Campanelli v.
Bockrath, 100 F.3d 1476, 1479 (9th Cir.
1996). If matters outside the pleadings are considered, the
Rule 12(b)(6) motion is treated as one for summary judgment.
See Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44,
46 (9th Cir. 1997); Anderson v. Angelone,
86 F.3d 932, 934 (9th Cir. 1996). The court may
“consider certain materials--documents attached to the
[counterclaim], documents incorporated by reference in the
[counterclaim], or matters of judicial notice--without
converting the motion to dismiss into a motion for summary
judgment.” United States v. Ritchie, 342 F.3d
903, 908 (9th Cir. 2003). This court here ignores
the declaration and other evidence submitted with the
Opposition and focuses instead on whether the allegations
within the four corners of the Counterclaim adequately state
DEFENDANTS' CLAIMS ARE DISMISSED.
argues that all counts fail to state a claim upon which
relief can be granted. ECF No. 18. This court ...