334 F. Supp. 3d 764
M.D. La.2018Background
- PASI (subcontractor) performed blasting/painting on a NASA restoration project; Western Surety issued performance and payment bonds for PASI after indemnitors (PASI, related entities and individuals) signed a General Agreement of Indemnity requiring collateral on demand.
- HPA (general contractor) terminated PASI for alleged lead-contamination/default in Jan–Feb 2015 and demanded performance from Western under the bond. Dispute over causation, mitigation, and replacement bids followed.
- Western investigated, denied HPA’s bond claim in Oct 2015, demanded $2.5M collateral from indemnitors the same day, but indemnitors refused. Western later settled HPA’s suit for $1.3M and reserved rights against PASI.
- An arbitration between HPA and PASI found HPA wrongfully terminated PASI and awarded PASI approximately $2.276M (Jan 2017 award paid into PASI’s account).
- Western sued indemnitors and moved for a preliminary injunction to compel deposit of collateral and to restrain transfer of arbitration proceeds; the court held an evidentiary hearing and considered delay and irreparable-harm arguments.
Issues
| Issue | Plaintiff's Argument (Western) | Defendant's Argument (PASI) | Held |
|---|---|---|---|
| Whether Western is entitled to a preliminary injunction compelling indemnitors to post collateral under the Indemnity Agreement | Western: contractual right to prejudgment collateral; denial will cause irreparable harm and specific performance is warranted to preserve security | PASI: requested relief is monetary; no showing of insolvency or asset dissipation; Western delayed and has adequate remedy at law | Denied — Western failed to show irreparable harm and unreasonably delayed seeking injunctive relief |
| Whether a surety automatically shows irreparable harm when indemnitors refuse collateral | Western: many courts enforce collateral clauses without separate irreparable-harm proof | PASI: majority of federal courts require concrete showing of heightened collection risk (insolvency, secreting assets) | Court: Rule 65 requires a clear showing of irreparable harm; state-law rule for automatic specific performance conflicts with Federal Rule 65 and cannot control; Western did not meet Rule 65 standard |
| Whether Western’s delay in seeking injunctive relief undermines equitable relief | Western: moved for injunction soon after settling HPA and sought expedited consideration | PASI: Western waited years after demand and had long gaps of inactivity; delay prejudiced PASI | Court: delay unreasonable and prejudicial; it undercuts claim of urgency and irreparable injury |
| Whether factual issues (causation, bad faith) preclude interim relief | Western: losses asserted include attorneys’ fees and settlement costs under Indemnity Agreement | PASI: disputes causation and alleges Western’s conduct contributed to losses; bad-faith defenses exist | Court: factual disputes (causation, bad faith) and incomplete record weigh against granting extraordinary relief at preliminary stage |
Key Cases Cited
- Bluefield Water Ass'n, Inc. v. City of Starkville, Miss., 577 F.3d 250 (5th Cir. 2009) (preliminary-injunction standards; movant must clearly carry burden on all elements)
- Passmore v. Baylor Health Care Sys., 823 F.3d 292 (5th Cir. 2016) (federal rules preempt state rules that directly collide with them)
- Sierra Club, Lone Star Chapter v. F.D.I.C., 992 F.2d 545 (5th Cir. 1993) (courts may rely on affidavits and depositions at preliminary-injunction stage)
- Holland America Ins. Co. v. Succession of Roy, 777 F.2d 992 (5th Cir. 1985) (injunctive relief is extraordinary and requires clear showing)
- Daily Instruments Corp. v. Heidt, 998 F. Supp. 2d 553 (S.D. Tex. 2014) (delay in seeking injunction relevant; diligence and prejudice analyzed)