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Nan, Inc. v. Aim Steel International Corp.

United States District Court, D. Hawaii

August 6, 2019

NAN, INC., Plaintiff,
v.
AIM STEEL INTERNATIONAL CORP., et al., Defendants.

          ORDER DENYING DEFENDANT TALISMAN CASUALTY INSURANCE COMPANY'S MOTION TO DISMISS

          Derrick K. Watson United States District Judge.

         Defendant Talisman Casualty Insurance Company seeks dismissal of the claims against it for three principal reasons: (1) Plaintiff Nan, Inc. did not provide the contractually mandated pre-suit notice of the claims asserted here; (2) the claims related to Talisman's bond are time-barred; and (2) a claim of bad faith conduct is not allowed under Hawai'i law. All of these arguments, however, require this Court to make factual determinations that are improper at this stage of the proceedings. As a result, the motion to dismiss, Dkt. No. 26, is DENIED.

         BACKGROUND

         I. The Complaint

         Nan's February 26, 2019 Complaint asserts claims against AIM Steel International, Omar Ali, and Talisman. In essence, [1] the Complaint alleges that Nan, a licensed general contractor, entered into a purchase order contract with AIM Steel International Corp. (ASIC) under which ASIC was meant to deliver certain materials to Nan. In connection with the purchase order, a supply contract bond, dated May 17, 2016, was issued, with ASIC as the principal, Talisman as the surety, and Nan as the obligee (“the Bond”). The Bond obliges ASIC and Talisman to pay Nan up to the amount of $3, 836, 891.02 should ASIC fail to perform under the purchase order contract.

         According to the Complaint, ASIC failed to deliver the materials as required by the purchase order contract. After demands for ASIC to fulfill its obligations were unsuccessful, Nan terminated the purchase order contract by letter dated October 20, 2017 (“the termination letter”). This letter was addressed to Ali and cc'd to, inter alia, Talisman. On the same date, another letter was sent to Talisman, informing it of ASIC's termination and Nan's intention to file a claim on the Bond (“the first claim letter”).

         Thereafter, the Complaint alleges that Talisman refused to take a “formal position” on completing ASIC's work and refused to provide an accounting of a fund set up to ensure the continued supply of materials. Talisman also refused to allow the delivery of materials for which Nan had already paid, misrepresented its obligations under the Bond, and denied that the Bond was a surety bond. Nan sent letters making a claim on the Bond in December 2017 (“the second claim letter”) and November 2018 (“the third claim letter”).

         As against Talisman, the Complaint asserts a claim for breach of the Bond (Claim Three) and bad faith (Claim Four).

         II. The Motion to Dismiss

         The motion to dismiss seeks dismissal of both claims asserted against Talisman pursuant to Federal Rule of Civil Procedure 12(b)(6). Talisman makes three principal arguments for dismissal: (1) Nan provided insufficient notice of ASIC's default; (2) Nan failed to bring suit within the later of one year of final payment under the purchase order contract or one year following the expiration of any express warranty period provided for in the purchase order contract; and (3) Hawai'i courts have not recognized a bad faith claim against a surety.

         After a response in opposition and a reply in support of the motion to dismiss were filed, the Court held a hearing with respect to the same on August 1, 2019.

         STANDARD OF REVIEW

         Rule 12(b)(6) authorizes the Court to dismiss a complaint that fails “to state a claim upon which relief can be granted.” Pursuant to Ashcroft v. Iqbal, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In addition, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Id. Accordingly, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Rather, “[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 ...


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