Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02962/USCOURTS-casd-3_13-cv-02962-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

TRAVELERS CASUALTY AND

SURETY COMPANY OF AMERICA,

Plaintiff,

v.

R.J. LANTHIER COMPANY, INC., a

California corporation; BRENT L.

BOYD, an individual; NANCY K.

BOYD, an individual; RICHARD

RACETTE, an individual;

KATHLEEN SUE RACETTE, an

individual; BOYD FAMILY TRUST;

G.I. BECHTHOLD CORPORATION,

a California corporation; DONNA

BECHTHOLD, an individual; GLENN

BECHTHOLD, an individual,

Defendants.

 

RICHARD RACETTE, an individual,

and KATHLEEN SUE RACETTE, an

individual,

Counter-claimants,

v.

TRAVELERS CASUALTY AND

SURETY COMPANY OF AMERICA;

G.I. BECHTHOLD CORPORATION, 

a California corporation ; DONNA

BECHTHOLD , an individual;

GLENN BECHTHOLD, an individual

Counter-defendants.

 

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Case No. 13cv2962 JM(WVG)

ORDER GRANTING THE

“BOYDS’” MOTION FOR LEAVE

TO AMEND; GRANTING THE

“RACETTES’” MOTION FOR

LEAVE TO AMEND: and

GRANTING THE

“BECHTHOLDS’” MOTION FOR

LEAVE TO AMEND 

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Case 3:13-cv-02962-JM-JLB Document 69 Filed 11/20/14 Page 1 of 8
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R.J. LANTHIER COMPANY, INC., a

California corporation; BOYD

FAMILY TRUST; BRENT L. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST; NANCY K. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST,

Counter-claimants,

v.

TRAVELERS CASUALTY AND

SURETY COMPANY OF AMERICA,

a Connecticut corporation, 

Counter-defendant.

 

R.J. LANTHIER COMPANY, INC., a

California corporation; BOYD

FAMILY TRUST; BRENT L. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST; NANCY K. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST,

Cross-claimants,

v.

G.I. BECHTHOLD CORPORATION,

a California corporation; DONNA

BECHTHOLD, an individual; and

GLENN BECHTHOLD, an individual,

Cross-defendants.

 

G.I. BECHTHOLD CORPORATION,

a California corporation; DONNA

BECHTHOLD, an individual; and

GLENN BECHTHOLD, an individual,

Counter-claimants,

v.

TRAVELERS CASUALTY AND

SURETY COMPANY OF AMERICA,

a Connecticut corporation, 

Counter-defendant.

 

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G.I. BECHTHOLD CORPORATION,

a California corporation; DONNA

BECHTHOLD, an individual; and

GLENN BECHTHOLD, an individual,

Cross-claimants,

v.

R.J. LANTHIER COMPANY, INC., a

California corporation; BOYD

FAMILY TRUST; BRENT L. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST; NANCY K. BOYD,

an individual and trustee of the BOYD

FAMILY TRUST; RICHARD RACETTE,

an individual; KATHLEEN SUE

RACETTE, an individual; and DOES 1

through 10, inclusive,

Cross-defendants.

 

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Defendants and third party plaintiffs The Boyd Family Trust, Brent L. Boyd, and

Nancy K. Boyd (collectively the “Boyds”) move for leave to file a Third Party Complaint. 

(Ct. Dkt. 54). Defendants, counter-claimants, cross-claimants, and third party plaintiffs

Richard Racette and Kathleen Sue Racette (collectively the “Racettes”) also move for leave

to file an amended counter-claim, cross-claim and third party complaint. (Ct. Dkt. 57). 

Defendants, counter-claimants, cross-complainants, and cross-defendants G.I. Bechthold

Corporation, Donna Bechthold and Glenn Bechthold (collectively the “Bechtholds”) also

move for leave to file an amended counter-claim, cross-claim, and third party complaint. 

(Ct. Dkt. 53). Plaintiff Travelers Casualty and Surety Company of America (“Travelers”)

does not oppose the Boyds’ or the Racettes’ motions but does oppose the Bechtholds’

motion. Pursuant to Local Rule 7.1(d)(1), the court finds the matters presented appropriate

for decision without oral argument. The court grants the Boyds’ and Racettes’ motions to

amend based upon Travelers’ non-opposition to the motions and for the reasons set forth in

the court’s September 2, 2014 Order Granting in Part and Denying in part Motions to

Dismiss and Granting Leave to Amend (“Order”). (Ct. Dkt. 56). For reasons set forth

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below, the court grantsthe Bechtholds’ motion for leave to amend. The partiesshall file the

amended pleadings within 15 days of entry of this order.

BACKGROUND

The Complaint1

On December 10, 2013, Travelers commenced this diversity action alleging five

claims for relief: (1) Statutory Indemnity, (2) Breach of Contract, (3) Quia Timet,

(4) DeclaratoryRelief; and (5) Specific Performance. On October 3, 2001, Defendants RJL

and the Boyds executed an indemnity agreement promising Travelers “to exonerate,

indemnify and save [Travelers] harmless from and against every claim, loss, damage,

demand” arising from the execution of certain construction bonds issued on behalf of

Lanthier as the bond principal (the “RJL Bonds”). (Compl. ¶16). On March 1, 2010,

Defendants RJL, the Boyds, and the Racettes executed the General Agreement of Indemnity

(“GAI”) at issue. Under the GAI, Defendants are obligated to “exonerate, indemnify, and

save [Travelers] from and against all Loss.” (Compl. ¶17, Exh. B). Also, on or about March

1, 2010, Defendants Bechthold Corporation, Donna Bechthold, and Glenn Bechthold

(collectively the “Bechtholds”) executed a General Agreement of Indemnity Additional

Indemnitor Rider (“GAIR”). The GAIR also provided that the Bechtholds would

“exonerate, indemnify, and save [Travelers] from and against all Loss.” (Compl. 18, Exh.

B). At the heart of Travelers’ complaint is the allegation that, following RJL’s default on

the bonded projects, it paid about $6,751,915.58 on its surety obligations. (Compl. ¶21).

On November 21, 2013, Travelers sent a demand letter to the Defendants seeking

$6,751,915.58 to recover Travelers’ anticipated losses on the RJL Bonds. Defendants “have

failed to comply with Travelers’ demands.” (Compl. ¶23).

Racettes’ Counter and Cross Claims

On March 5, 2014, the Racettes filed an answer and counter-claim against Travelers. 

(Ct. Dkts. 14, 15). The answer generally denies the complaint’s allegations. In their

counter-claim, the Racettes allege that in early 2013, RJL experienced cash-flow problems

 The Background section is taken directly from the Order. 1

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and needed additional financing to help the company cover overhead expenses such as

payroll. (Counter-claim “CC” ¶16). On January 17, 2013, Richard Racette, a 2% owner of

RJL, and Brent Boyd met with Travelers and discussed the possibility of Travelers

providing RJL with cash flow assistance. After several conversations with Travelers, the

Racettes allegeTravelersindicated a willingnessto provide financial assistance and required

50% collateral for any loan. (CC ¶22). The parties discussed financial assistance in the

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range of $750,000 to $1,00,000.

On February 15, 2013, Brent Boyd believed that Travelers was willing to reduce the

collateral requirements and provide RJL with overhead assistance. On February 19, 2013,

Travelers “informed RJL that it required a minimum of $500,000 collateral to provide

overhead assistance on bonded projects only.” (CC ¶24). The Racettes allege that “had

Travelers been more upfront in its collateral requests, RJL and Counter-Claimants would

have been able to refocus its efforts into seeking alternative sources of funding, keep the

projects going and the bonding intact.” (CC ¶26). Thereafter, Travelers allegedly refused

to issue bonds on new projects or to issue bonds on future projects without RJL providing

additional capital or a substantial security deposit. 

The Racettes allege that “[w]ithout the capability to obtain bonds on future projects,

RJL was unable to obtain and complete work” on existing projects, thereby defaulting on

existing projects. (CC ¶27). After RJL defaulted on the bonded projects, on November 29,

2013, Travelers demanded payment in the amount of $6,751,915.58. At some unidentified

point in time, Travelers cancelled three issued bonds. Id.

Based upon the above generally described conduct, the Racettes allege four counterclaims for (1) breach of the covenant of good faith and fair dealing; (2) breach of contract;

(3) negligent misrepresentation; and (4) contribution against all cross-defendants. The court

notes that the only cross-defendants identified in the CC are the Bechtholds. 

 Travelers also allegedly performed an analysis of RJL’s financial condition and determined that 2

RJL would experience a $1.6 million shortfall. 

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RJL and the Boyds’ Counter and Cross-Claims

On March 7, 2014, RJL and the Boyds filed an answer to the complaint, a counterclaimagainst Travelers, and a cross-claimagainst the Bechtholds. RJL and the Boyds assert

the same counter-claims against Travelers asthe Racettes, in addition to a declaratory relief

claim based upon the same general allegations as the Racettes. In addition, RJL and the

Boyds seek contribution from the Bechthold cross-defendants.

Bechtholds’ Counter and Cross-Claims

On March 8, 2014, the Bechtholds filed an answer and eight counter-claims and

cross-claims for (1) reformation of contract; (2) express indemnity; (3) compel performance

of indemnity agreements; (4) quia timet; (5) equitable indemnity; (6) contribution; (7)

implied contractual indemnity; and (8) declaratory relief. In broad brush, the Bechtholds

allege that Travelers, the Racettes, RJL, and the Boyds “are in some manner legally

responsible for the acts and omissions alleged.” (CC ¶12). The reformation counter-claim

seeks to reform the March 2010, GAIR between Travelers and the Bechtholds to reflect the

alleged original intent of the parties that only G. I. Bechthold Corporation would be bound

by the GAIR. (CC ¶21). The second cross-claim seeks indemnity from RJL to indemnify

the Bechtholds against any and all losses arising fromthe underlying transactions. The third

claim seeks to compel performance of the indemnity agreement against RJL. The fourth

claim for quia timet alleges that RJL is wrongfully using funds for purposes other than to

hold the Bechtholds harmless from Travelers’ claims. The fifth claim seeks indemnity

against all cross-defendants, the sixth claimseeks contribution against all cross-defendants,

the seventh claim seeks implied contractual indemnity against all cross-defendants, and the

eighth claim seeks a declaration that the Bechtholds are not obligated to indemnify

Travelers.

Procedural History

In the court’s September 12, 2014 Order, the court granted Travelers’ motion to

dismiss the breach of the covenant of good faith and fair dealing counter-claim and the

breach of contract counter-claim brought by Counter-claimants RJL, the Boyds, and the

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Racettes. The court also denied Travelers’ motion to dismiss the declaratory relief claim

and deferred ruling on this claimuntil the Counter-claimantsfiled amended counter-claims,

if any. The court also granted RJL, the Boyds, and the Racettes 15 days leave to amend

from the date of entry of the Order. 

DISCUSSION

Legal Standards

Fed.R.Civ.P. 15(a)

Federal Rule of Civil Procedure 15(a), provides that “leave shall be freely granted

when justice so desires.” Leave to amend should be granted unless the opposing party

demonstrates undue prejudice, bad faith, or dilatory motive on part of the moving party. 

Foman v. Davis, 371 U.S. 178, 182 (1962). 

Fed.R.Civ.P. 14

Federal Rule of Civil Procedure14 provides that a “defending party may, as thirdparty plaintiff, serve a summons and complaint on a nonparty who is or may be liable to it

for all or part of the claim against it.” Fed.R.Civ.P. 14(a)(1). “The purpose of this rule is

to promote judicial efficiency by eliminating the necessity for the defendant to bring a

separate action against a third individual who may be secondarily or derivatively liable to

the defendant for all or part of the plaintiff’s original claim.” Southwest Administrators,

Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir. 1986). “The decision whether to

implead a third party defendant is within the sound discretion of the district court.” Id.

Courts consider the following factors when ruling on a motion for leave to file a third-party

complaint: (a) prejudice to the original plaintiff; (b) complication of issues at trial;

(c) likelihood of trial delay; and (d) timeliness of the motion to implead. See Irwin v.

Mascott, 94 F. Supp. 2d 1052, 1056 (N.D. Cal. 2000).

The Bechtholds’ Motion

Pursuant to Federal Rules of Civil Procedure 14 and 15(a), the Bechtholds seek leave

of court fo file an amended Counter-claim, Cross-claim, and Third-Party Complaint. In the

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ordinary course, the court grants the motion for leave to amend absent a showing of

prejudice or futility. 

While Travelers contends that the amendments are futile, as determined by reference

to several documents attached to the complaint, the necessary determinations are more

appropriately determined on an evidentiary motion after the parties have had an opportunity

to conduct discovery. The court notes that Travelers presents strong arguments in support

of its position that the proposed amendments counter representations made by the

Bechtholds in the Additional Indemnitor Rider and the subcontracts. However, the ultimate

determinations sought by Travelers are better determined on a motion for summary

judgment.

In sum, all motions to amend are granted. The Boyds, Racettes, and Bechtholds are

instructed to file the amended pleadings within 15 days of entry of this order.

IT IS SO ORDERED.

DATED: November 20, 2014

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All parties

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