NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GUARANTEE COMPANY OF NORTH 

AMERICA USA, a Michigan corporation, 

Plaintiff-Appellee, 

 v. 

FALCONE BROTHERS & ASSOCIATES, 

INC., an Arizona corporation; et al., 

Defendants-Appellants.

No. 20-15317 

D.C. No. 4:18-cv-00157-FRZ 

MEMORANDUM*

Appeal from the United States District Court

for the District of Arizona

Frank R. Zapata, District Judge, Presiding

Submitted February 4, 2021**

Phoenix, Arizona

Before: W. FLETCHER, MILLER, and HUNSAKER, Circuit Judges.

In this diversity action, Falcone Brothers & Associates, Inc. and related 

entities (collectively, Falcone) appeal the district court’s order granting summary 

judgment to plaintiff Guarantee Company of North America USA (GCNA). 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

** The panel unanimously concludes this case is suitable for decision 

without oral argument. See Fed. R. App. P. 34(a)(2).

FILED

FEB 22 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
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GCNA issued surety bonds to help Falcone secure public construction projects

with the city of Tucson, Arizona. When Falcone failed to pay its suppliers, GCNA

became liable to pay them, and GCNA sought reimbursement from Falcone under 

an indemnity provision in their contract. See A.R.S. § 34-222(A)(2). The district 

court awarded GCNA its full costs and attorney’s fees associated with paying the 

suppliers and defending related lawsuits, including one brought by Cemex 

Construction Materials South, LLC. We have jurisdiction under 28 U.S.C. § 1291, 

and we affirm. 

1. The district court correctly awarded GCNA its costs and fees. Falcone 

admits that it is liable to GCNA but argues that because the indemnity provision is 

“general” and not “specific” under Arizona law, GCNA may not recover losses 

caused by its “active” negligence. Pioneer Roofing Co. v. Mardian Constr. Co., 

733 P.2d 652, 671–72 (Ariz. Ct. App. 1986). We need not decide whether the 

provision is general or specific because Falcone has not presented material facts 

showing that GCNA committed any active negligence.

Falcone’s first theory is that GCNA was actively negligent when it provided 

its certification to Tucson to release the final payment to Falcone, even though 

GCNA knew about Cemex’s pending claim. But Falcone points to no authority 

showing that GCNA had a duty to refrain from providing that certification, or that 

the certification was a representation that the project was claim-free. The statute 
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that requires Arizona municipalities to withhold a retention pending project

completion, A.R.S. § 34-221(C), says nothing of the sort. GCNA’s certification 

also does not say the project is claim-free; it simply indicates that Falcone should 

receive its final payment. And Falcone does not claim that it failed to fully perform 

under its contract with Tucson, such that the certification might have been false.

Falcone points only to a declaration from its president to show that it relied 

on GCNA’s certification as an assurance that there were no outstanding claims.

However, that declaration does not show that GCNA had a duty to refrain from 

providing the certification and therefore breached that duty. Falcone invokes a 

surety’s duty to act in good faith towards its principal, see Dodge v. Fid. & Deposit 

Co., 778 P.2d 1240, 1242–43 (Ariz. 1989) (in banc), but it would be anomalous for 

that duty to require GCNA to take actions to prevent Falcone from being paid for 

its work. The contract between the parties, which “significantly influences” the 

extent of GCNA’s duty, Diaz v. Phoenix Lubrication Serv., Inc., 230 P.3d 718, 722

(Ariz. Ct. App. 2010), contains no such indication.

Even if Falcone could establish a duty, it cannot show that GCNA’s 

certification caused GCNA’s losses. Falcone says that it relied on GCNA’s 

certification that there were no pending claims, but as Falcone concedes, it knew 

about Cemex’s claim—it just believed it had a defense to that claim. Falcone says 

that if GCNA had not provided its certification, the “retention would not have been 
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released by the City of Tucson and a fund would exist from which Cemex could 

recover if it proved the validity of its claim.” But a fund did exist—Falcone 

possessed it. Last, Falcone says that “GCNA was convinced that Cemex’s claim 

was invalid and participated in the Cemex Litigation,” and thereby accrued years 

of costs. But the premise of Falcone’s defense in that lawsuit—Falcone’s lack of 

notice—had nothing to do with GCNA, which tendered its defense to Falcone. See

Cemex Constr. Materials S., LLC v. Falcone Bros. & Assocs., Inc., 2017 WL 

5054218 (Ariz. Ct. App. Nov. 3, 2017) (unpublished). No evidence suggests that 

the certification is what legally caused GCNA’s losses.

Falcone’s second theory is that GCNA should have unilaterally paid off the 

Cemex claim instead of allowing it to go to litigation. But as with its first theory, 

Falcone provides no evidence that GCNA had any obligation to do so, or that this 

decision legally caused the relevant losses. Falcone had equal authority to settle the 

claim: It initially owed the amount due; it contrived the legal theory that ultimately 

lost; and it conducted the litigation throughout those six years. Even if GCNA’s 

decision not to intercede in Falcone’s legal defense could be considered negligent, 

it would be only “passive” negligence tantamount to a “failure to discover a 

dangerous condition” or “take adequate precautions” against the prospect that 

Cemex would prevail. See Estes Co. v. Aztec Constr., Inc., 677 P.2d 939, 942

(Ariz. Ct. App. 1983). GCNA is entitled to full recovery. 
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2. The district court did not abuse its discretion in awarding GCNA its 

full attorney’s fees. See Charles I. Friedman, P.C. v. Microsoft Corp., 141 P.3d 

824, 830 (Ariz. Ct. App. 2006). Under Arizona law, if a surety incurs an expense, 

“the only way in which it can be attacked by the indemnitor is through a plea and 

proof of bad faith in the payment.” J.D. Halstead Lumber Co. v. Hartford Accident

& Indem. Co., 298 P. 925, 928 (Ariz. 1931). Falcone does not allege bad faith in 

connection with GCNA’s attorney’s fees, nor does it dispute that GCNA is entitled 

to recover them. Rather, without contesting the validity of any specific payments, 

Falcone argues that GCNA’s fees are generally unreasonable because GCNA

tendered its defense in the Cemex litigation to Falcone. 

“The general rule is that attorney’s fees and costs are recoverable as part of 

the indemnification.” Schweber Elecs. v. Nat’l Semiconductor Corp., 850 P.2d 119, 

125 (Ariz. Ct. App. 1992). While the district court had discretion to limit any such 

award to a reasonable amount, Geller v. Lesk, 285 P.3d 972, 976 (Ariz. Ct. App. 

2012), as amended (Sept. 26, 2012), abrogated in part on other grounds by 

American Power Prods., Inc. v. CSK Auto, Inc., 396 P.3d 600, 604 (Ariz. 2017),

Falcone has failed to prove that GCNA’s fees were unreasonable. Just because 

GCNA tendered its defense to Falcone does not mean that GCNA could not 

represent its interests in a lawsuit in which it was a named defendant. Given that 

the litigation lasted more than six years and included two trials, two appeals, and a 
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petition for certiorari, we discern nothing clearly excessive about GCNA’s total 

fees, especially considering the adversarial aspects of GCNA and Falcone’s joint 

defense. 

AFFIRMED.