PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 20-2253

RLI INSURANCE COMPANY,

Plaintiff - Appellee,

v.

NEXUS SERVICES, INC.; LIBRE BY NEXUS, INC.; HOMES BY NEXUS, INC.,

Defendants - Appellants.

Appeal from the United States District Court for the Western District of Virginia, at 

Harrisonburg. Michael F. Urbanski, Chief District Judge. (5:18-cv-00066-MFU-JCH)

Argued: October 28, 2021 Decided: January 27, 2022

Before GREGORY, Chief Judge, QUATTLEBAUM, Circuit Judge, and FLOYD, Senior 

Circuit Judge.

Affirmed by published opinion. Senior Judge Floyd wrote the opinion in which Judge 

Gregory joined. Judge Quattlebaum wrote an opinion concurring in parts I, II, III, V, and 

VI and in the judgment.

ARGUED: Carl August Anderson, ROCK SPRING LAW GROUP, PLLC, Washington, 

D.C., for Appellants. Vivian Katsantonis, WATT, TIEDER, HOFFAR & FITZGERALD, 

LLP, McLean, Virginia, for Appellee. ON BRIEF: Mario B. Williams, NDH LLC, 

Atlanta, Georgia; John M. Shoreman, MCFADDEN & SHOREMAN, Washington, D.C., 

for Appellants.
2

FLOYD, Senior Circuit Judge:

This case concerns relatively straightforward obligations of a bond surety, RLI 

Insurance Company (RLI), and its indemnitor, Nexus Services, Inc. (Nexus), under a 

standard Commercial Surety General Indemnity Agreement (the Agreement). Because 

surety is a zero-loss industry, the Agreement contains several clauses designed to keep RLI 

whole. One obligates Nexus to provide collateral sufficient to cover all of RLI’s exposure, 

and the parties task us with resolving what kinds of risk “exposure” means to capture. What 

makes our task unique is that, unlike the familiar commercial or construction relationships 

that typically contemplate only a handful of guarantees, this Agreement involves nearly 

2,500 bonds RLI issued to the U.S. government on behalf of individual immigrant 

detainees. Nexus insists that we must nonetheless measure RLI’s exposure on each bond

individually and that RLI is not actually “exposed” to any risk—and Nexus 

correspondingly does not need to deposit collateral—until the parties have reason to 

believe that RLI will have to pay out that particular bond. The first tangible evidence of 

that, Nexus continues, comes about when an immigrant fails to appear in court on the 

designated date, breaching the bond. In short, Nexus suggests it should deposit collateral 

only up to the sum of the already-breached bonds. RLI objects the Agreement is not so 

limited. Although we do not know which particular immigrant will breach, we can be 

certain some will. It follows that the Agreement must secure against aggregate risk—that 

is, the likelihood Nexus will be able to (timely) indemnify RLI for all future breached 

bonds. Because Nexus’s financial condition, its willingness to indemnify RLI so far, and 

historical rate of bonds breached all bear on that likelihood, they should likewise inform 
3

the collateral calculus. The district court sided with RLI, and after reviewing the plain 

terms of the Agreement, we agree. We also affirm the district court’s calculation of the

collateral amount as a sound exercise of its discretion to order equitable relief. 

I.

An immigration bond, much like a criminal bond, allows the release of a detained 

individual from custody based on a surety’s contractual undertaking to the United States to 

either deliver the individual as demanded or forfeit the penal sum specified in the bond. 

Nexus runs the bonds program: It screens the immigrants likely to keep their promise to 

appear in court and maintains contact with them throughout their release. But Nexus lacks 

the Department of Treasury’s commercial-surety certification, and so needs another surety

to take on the liability to the government. RLI agreed to perform that function in exchange 

for a set fee upfront, and Nexus agreed to indemnify RLI for all losses. Specifically, Nexus 

agreed to pay upon demand:

2(a)(i) all losses, costs, damages, attorneys’ fees and expenses of whatever 

kind or nature which arise by reason of, or in consequence of, the 

Surety having executed any Bond on behalf of the Principal, or in 

enforcing this agreement against any of the Indemnitor(s) . . . .

2(a)(ii) an amount sufficient to discharge any claim made against Surety 

on any Bond. This sum may be used by Surety to pay such claim 

or be held by Surety as collateral security against loss on any Bond.

J.A. 53. Nexus also agreed that:

3(c) [u]ntil Surety has been furnished with conclusive evidence of its 

discharge without loss from any Bonds, and until Surety has been 

otherwise fully indemnified . . . , Surety shall have the right of access 

to the books, records and accounts of the Indemnitor(s) . . . . 
4

3(d) Surety shall have every right, defense, and remedy allowed by law 

including the rights of exoneration and subrogation. Indemnitor(s) 

will, upon the request of the Surety, procure the discharge of Surety 

from any Bond and all liability by reason thereof. If such discharge is 

unattainable, Indemnitor(s) will, if requested by Surety, either deposit 

collateral with Surety, acceptable to Surety, sufficient to cover all 

exposure under such Bonds or Bonds, or make provisions acceptable 

to Surety for the funding of the bonded obligations[ ].

Id. at 54. Illinois law governs the Agreement. Id.

While the parties have always differed as to what the Agreement requires, they have 

never disputed the basic facts of how their relationship progressed. See RLI Ins. Co. v. 

Nexus Servs. Inc., 470 F. Supp. 3d 564, 571 (W.D. Va. 2020). Between February 2016 and 

February 2017, RLI issued 2,486 immigration bonds totaling $30 million at Nexus’s 

request. From the start, RLI insisted on collateral, and Nexus agreed to deposit $500,000. 

But it never did. Over the course of the year, Nexus’s performance only continued to 

deteriorate. It repeatedly allowed several invoices from the government to become past

due, forcing RLI to pay hundreds of thousands of dollars from its own pocket to avert 

referral to the Departments of Treasury and Justice. At one point, the unpaid invoices 

totaled $709,789.37. When RLI reached out to Nexus to resolve this crisis, Nexus refused 

to answer for weeks at a time, denied access to most of its financial records, misrepresented 

when checks were sent to the government, and failed to indemnify RLI until RLI brought 

several enforcement actions—which Nexus protracted by “cloak[ing] two of its affiliate 

companies” and obstructing discovery. RLI Ins. Co. v. Nexus Servs. Inc., No. 5:18CV66, 

2020 WL 6262967, at *12 (W.D. Va. Oct. 23, 2020).
5

Nexus also misrepresented the risk RLI was undertaking. During contract 

negotiations, it assured RLI that its proactive screening and tracking techniques would 

result in only about 2% of the bonds being breached. By the start of this suit, however, 

immigrants had breached about 48% of the discharged bonds.

1 Meanwhile, Nexus has 

been investigated by states, the federal government, and insurance companies. And has 

had several liens placed on its assets for failing to satisfy creditors. All of this led RLI to 

finally invoke ¶ 3(d) of the Agreement and request Nexus to discharge its liability on all 

outstanding bonds or deposit $10 million in collateral. Nexus refused to do either, and RLI 

turned to the courts. Nexus counterclaimed that RLI requested the $10 million in bad faith. 

Before the district court, RLI argued it has absolute discretion to request any amount 

of collateral up to its then-current liability, $20 million. Nexus countered that ¶ 3(d) 

secures only existing government claims or, at most, the penal value of the alreadybreached bonds, even if the government has yet to send a final claim. The district court 

rejected all of those readings as inconsistent with the plain text of ¶ 3(d). RLI Ins., 470 F. 

Supp. 3d at 583–84. The clause, it reasoned, mentions neither the sole discretion RLI 

seeks, nor the specific limitations Nexus proposes. Id. Rather, “exposure” encompasses

all sources of risk. Some of that risk stems from the number of bonds breached, yes; but 

that is not the only consideration. Nexus’s poor accounting and questionable financial 

1 Discharged bonds refer to finally resolved bonds. Some bonds are resolved when an

immigrant appears in court as directed, is granted legal status, or is deported—all of which 

result in the bond’s cancellation. Alternatively, RLI may resolve a bond by satisfying the 

government claim on a breached bond. So RLI calculates the 48% rate as 

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6

health endanger RLI, too, and the amount of collateral must account for those 

shortcomings. The court also rejected Nexus’s bad-faith counterclaim, holding that RLI 

merely sought to enforce the Agreement as RLI understood it. 

The court then held a separate evidentiary hearing to determine the amount of 

collateral that reasonably reflects RLI’s anticipated losses, ultimately directing Nexus to 

deposit only $2.4 million. And it awarded RLI $3.4 million for litigation costs as damages 

Nexus must indemnify under ¶ 2(a)(i).

Nexus now appeals. It has walked back its most extreme position as to the meaning 

of “exposure”—that ¶ 3(d) encompasses only final claims—but maintains that collateral is 

appropriate only up to the value of the already-breached bonds. Alternatively, Nexus 

contends it did not have to deposit collateral at all because RLI did not fulfill the condition 

precedent of requesting it in good faith. Puzzlingly, Nexus does not appeal the district 

court’s on-point finding that RLI acted in good faith; it asks instead that we take the district 

court’s paring down of the collateral to $2.4 million to imply the court found RLI’s original 

demand for $10 million “unreasonable as a matter of law.” Opening Br. 36. Nexus finally

disputes the district court’s method of calculating the collateral and cursorily requests we 

reconsider the district court’s costs determination. RLI defends the district court’s 

judgment; it does not argue for its original interpretation of “exposure” or seek a higher 

deposit.2

 We take these arguments in turn.

2 Apart from requesting collateral, RLI sought several injunctions to compel Nexus to 

indemnify its payments on past-due bonds, pay for future invoices as they arise, and open 

its books and records for inspection. Those requests led, in turn, to protracted discovery 

(Continued)
7

II.

We begin with the district court’s ruling that “exposure” reaches all sources of risk, 

not just risk associated with a particular breached bond. Because this decision comes to us 

on summary judgment, we review de novo and draw all inferences in in the light most 

favorable to Nexus, Denzler v. Questech, Inc., 80 F.3d 97, 101 (4th Cir. 1996). 

To affirm, we must agree not only that the Agreement conveys the meaning 

espoused by the district court but that the Agreement does so unambiguously, for 

“questions of contractual ambiguity” in Illinois must be “given to the trier of fact.” Cont’l 

Cas. Co. v. Nw. Nat. Ins. Co., 427 F.3d 1038, 1041 (7th Cir. 2005) (citation omitted). We 

agree and affirm.

A.

In Illinois, as elsewhere, indemnity agreements are governed by the usual principles 

of contract interpretation. Hanover Ins. Co v. Smith, 538 N.E.2d 710, 796 (Ill. App. Ct. 

1989), aff’d, 561 N.E.2d 14 (Ill. 1990). We thus begin by looking “to the language of [the] 

contract” because it provides “the best indication of the parties’ intent.” Minn. Life Ins. 

Co. v. Kagan, 724 F.3d 843, 849 (7th Cir. 2013) (quotation marks and emphasis omitted). 

Recall that ¶ 3(d) obligates Nexus, “upon the request of the Surety, [to] procure the 

discharge of Surety from any Bond and all liability by reason thereof.” J.A. 54 ¶ 3(d). And 

if “such discharge is unattainable,” Nexus must “either deposit collateral with Surety, 

disputes and litigation over what companies should be considered Nexus’s alter egos. The 

parties do not appeal the district court’s decisions on any of those issues.
8

acceptable to Surety, sufficient to cover all exposure under such Bonds or Bonds or make 

provisions acceptable to Surety for the funding of the bonded obligations.” Id. The clause

does not define “exposure,” but Black’s Law Dictionary instructs the term refers to “[t]he 

amount of liability or other risk to which a person is subject.” Exposure, Black’s Law 

Dictionary (11th ed. 2019). Commonly understood, then, “exposure” broadly comprises

all sources of risk that open RLI up to liability. 

The surrounding text of ¶ 3(d) further confirms this common understanding. Again, 

¶ 3(d) directs Nexus to secure collateral “sufficient to cover all exposure under such Bonds 

or Bonds.” J.A. 54. We take “such Bonds” to refer to the bonds mentioned earlier in the 

provision—bonds that RLI specifically requested Nexus to discharge. The second, 

unqualified “Bonds” must then reference bonds generally as defined in ¶ 1 of the 

Agreement: “Any contractual obligation, and any modification(s) or amendment(s) 

thereto, undertaken by Surety for Principal, before or after the date of this Agreement and 

any renewal or extension of said obligation.” Id. at 53. Read together, ¶¶ 1 and 3(d) thus 

mandate Nexus to provide collateral “sufficient to cover all exposure under” “[a]ny 

contractual obligation . . . undertaken by” RLI to the U.S. government. Id. at 53–54 

(emphases added). That language is as broad as it can be. It does not limit exposure in 

time or scope. It does not condition the obligation on occurrence of any triggering event. 

It makes no mention whatever of breached bonds, non-appearance, or non-performance. 

Our interpretation does not change if we focus only on “such Bonds,” as Nexus asks 

us to do, because RLI indeed requested Nexus to discharge all outstanding bonds. Either 
9

way, Nexus must still secure collateral “sufficient to cover all exposure under [all 

outstanding] Bonds.” Id. at 54.

Had the parties intended to narrow the scope of exposure solely to breached bonds, 

they had many tools in their belt. They could have limited RLI to collateral on a specific 

bond and only after an immigrant fails to attend court. They could have tethered the 

amount of collateral to the penal sum of currently breached bonds. Or even condition 

collateral on receipt of some sort of notice from the Department of Homeland Security. 

Compare Am. Motorists Ins. Co. v. United Furnace Co., 876 F.2d 293, 301 (2d Cir. 1989) 

(discussing a “collateral security provision,” which “provided that the triggering event 

would be . . . the making of a ‘demand’ by the United States against” a surety); Hanover 

Ins. Co. v. Clark, No. 05-C-2162, 2006 WL 2375428, at *6 (N.D. Ill. Aug. 15, 2006) 

(interpreting an agreement that required payments “as soon as liability exists or is asserted 

against the Surety”). The parties did none of that.

The neighboring provisions point in the same direction. As the district court 

observed, ¶ 2(a)(ii) already directs Nexus to pay “an amount sufficient to discharge any 

claim made against Surety on any Bond.” RLI Ins., 470 F. Supp. 3d at 585. Cabining 

¶ 3(d) to breached bonds would “nullify” and “render . . . meaningless” that claim-based 

obligation in violation of the basic tenets of contractual interpretation. See Smith v. Burkitt, 

795 N.E.2d 385, 389 (Ill. App. Ct. 2003). Nexus maintains that “claim” differs from “an 

initial determination that the bond has been breached” because “the bond obligor(s) . . . 

have the right to appeal” that determination. Opening Br. 24. But the district court did not 

mean to imply that every initial determination will necessarily result in a final claim. It 
10

merely reasoned that, if Nexus provided collateral for each and every breached bond in the 

amount of the full penal sum upon initial notice, there would be nothing left for Nexus to 

pay when the final claim arrives. So ¶ 3(d) must contemplate a different kind of risk. 

Paragraph 2(a)(ii) helps elucidate the parties’ intentions in yet another way. 

Because it calls for “an amount sufficient to discharge any claim,” J.A. 53, it confirms the 

parties understood how to draft a provision that chains payments to a specific bond. Had 

they intended to condition ¶ 3(d)’s “exposure” solely on breached bonds, they could have 

easily mirrored ¶ 2(a)(ii) to require collateral in the “amount sufficient to discharge any 

[breached Bond].” Instead, Nexus agreed to deposit collateral “sufficient to cover all 

exposure.” Id. at 54.

That is also why Nexus agreed, in ¶ 3(c), to furnish RLI with books, records, and 

accounts “until [RLI] has been otherwise fully indemnified.” Id. RLI would have no need 

for this extended financial information had ¶ 3(d) reached only breached bonds. And ¶ 3(e) 

further decouples collateral from specific bonds by allowing RLI to use “all collateral 

deposited” as “security on any or all Bonds.” Id. In the end, surety bonds are not insurance; 

they aim to prevent all loss, not allocate risk. Absent any indication that the parties sought 

to narrow collateral obligations, ¶ 3(d) plainly and unambiguously reaches all risk, whether 

it stems from the number of bonds currently in breach, Nexus’s historic unwillingness to 

pay, or Nexus’s troubling financial records. 

And that is exactly what other courts have concluded when interpreting similar 

contractual provisions on motions for summary judgment. Of particular interest is Safeco 

Ins. Co. of Am. v. M.E.S. Inc., No. 09-CV-3312, 2010 WL 3928606 (E.D.N.Y. Oct. 4, 
11

2010), a case both parties urged the district court to consider because it involved a virtually 

identical indemnity agreement, obligating the indemnitor, “on request of Surety, [to] 

procure discharge of Surety from any Bond” and, “[i]f such discharge is unattainable,” to 

“deposit collateral with Surety, acceptable to Surety, sufficient to cover all exposure under 

such bond or bonds.” Id. at *2. As here, the Safeco agreement did not define “exposure.” 

Id. But the court did not think that lack of definition “render[ed] the term ambiguous” 

because there was “no reasonable basis for a difference of opinion”; the agreement plainly 

entitled Safeco to “specific performance to enforce a collateral security provision” for all

“losses under a bond that are uncertain but anticipated at some point in the future.” Id. at 

*2–3. And when the Safeco court came back to ascertain the amount of collateral 

appropriate, it required the indemnitor to deposit $875,000 to cover projected legal and 

consulting fees based on the parties’ history of protracted enforcement litigation—risk 

arising from the surety arrangement generally, not any bond in particular. Safeco Ins. Co. 

of Am. v. M.E.S., Inc., No. 09-CV-3312 ARR ALC, 2010 WL 4828103, at *9 (E.D.N.Y. 

Nov. 22, 2010), aff’d sub nom. Safeco Ins. Co. of Am. v. Hirani/MES, JV, 480 F. App’x 

606 (2d Cir. 2012). 

Reading ¶ 3(d) to condition collateral on an immigrant’s non-appearance would also 

create an unwritten condition precedent to Nexus’s obligations. But Illinois law generally 

disfavors conditions precedent and requires them to be expressly spelled out in the contract. 

See Liu v. T&H Mach., Inc., 191 F.3d 790, 798 (7th Cir. 1999) (“A condition precedent 

must be stated expressly and unambiguously.”); Premier Elec. Const. Co. v. Am. Nat. Bank 
12

of Chic., 658 N.E.2d 877, 885 (Ill. App. Ct. 1995) (“conditions precedent are not generally 

favored”). We decline to imply one here.

At bottom, the text and context of ¶ 3(d) agree that Nexus must deposit sufficient 

collateral to secure RLI against all anticipated losses, not just losses on the alreadybreached bonds. 

B.

Nexus acknowledges that, generally speaking, “exposure” encompasses anticipated 

losses, but insists that, in the immigration industry, losses become anticipated only when 

an immigrant fails to appear. Nexus accordingly urges us to consider trade-usage evidence 

in determining the scope of “exposure” under the Agreement. RLI strenuously objects, 

contending Illinois follows the four-corner contract interpretation principle. RLI is correct 

in that Illinois will not consider subjective evidence like “the testimony of the parties 

themselves as to what they believe the contract means” when a contract is unambiguous on 

its face. AM Int’l, Inc. v. Graphic Mgmt. Assoc., Inc., 44 F.3d 572, 574–75 (7th Cir. 1995) 

(discussing Illinois law). But as Judge Posner prudently observed, “an ordinary reader of 

English would not know about . . . special trade usage, and so [could mistakenly] suppose 

the contract unambiguous.” Id. There must therefore exist “a means by which the law 

allows these surfaces to be penetrated.” Id. That is why “objective” evidence, like that 

“there was more than one ship called Peerless,” “is admissible to demonstrate that 

apparently clear contract language means something different from what it seems to mean.” 

Id.
13

That Illinois law permits us to look at trade usage, however, does not help Nexus

here. For one, the Agreement was RLI’s first foray into immigration bonds, so we decline 

to ascribe to it any immigration-specific knowledge of “exposure.” More fundamentally, 

Nexus did not (and still does not) offer any evidence of trade usage. Nexus leans on just 

one expert who testified that “[t]here is no risk of financial loss on these bonds absent a 

nonappearance notice.” J.A. 2523 (emphasis added). Setting aside any admissibility 

issues—for the expert was a lawyer with only one prior surety contracts experience—that 

testimony merely reiterates Nexus’s arguments about this Agreement and these bonds. The 

expert does not survey, for example, how other industry agreements use the term 

“exposure” or what kinds of losses other agreements deem anticipated. He does not offer 

any industry dictionaries or templates. He does not cite any court cases. Yet that is what 

Illinois law requires: For a term to be “established as part of contract by custom and usage,” 

it “must be well-settled and uniformly acted upon, and must be established by several 

witnesses”; “it must have existed for a sufficient length of time to become generally 

known.” Gord Indus. Plastics, Inc. v. Aubrey Mfg., Inc., 469 N.E.2d 389, 392 (Ill. App. 

Ct. 1984) (citation omitted).

3

 The expert opinion therefore adds nothing for us to consider 

3 The expert opinion is wrong even on its terms. Like Nexus, the expert believes collateral 

obligations reach only “bonds on which nonappearance notices have been received” 

because ¶ 3(d) “does not say all bonds, but expressly limits collateral security to exposure 

under ‘such’ bonds under which discharge is unattainable.” Opening Br. 15 (quoting J.A. 

2523). As explained, that reading ignores ¶ 3(d)’s plain text, which requires collateral 

“sufficient to cover all exposure under such Bonds or Bonds,” meaning ¶ 3(d) encompasses 

all bonds RLI has issued on Nexus’s behalf. J.A. 54 (emphasis added); see supra pp. 8–9.
14

on top of the arguments Nexus already made about the structure and purpose of the 

Agreement.

But even had we recognized some limited value in the expert opinion, Nexus gives 

the game away when it insists that “[g]eneral knowledge further confirms this trade 

interpretation of exposure.” Opening Br. 16; see id. at 17, 33–34. By definition, tradeusage evidence can alter the interpretation of an agreement only when it “give[s] particular 

meaning to” or “qualif[ies] terms of an agreement.” 810 Ill. Comp. Stat. § 5/1-303(d). But 

where the trade meaning does no work, where it merely recites what lay persons can already 

learn from the text, we have no reason to examine trade usage at all; we can determine 

whether an agreement is ambiguous on its face. 

That Nexus does not muster any evidence of a different meaning in the trade is no 

surprise. Nexus props its argument—that there can be no risk to RLI until an immigrant 

defaults—on the unique structure of immigration bonds. Unlike in other industries, Nexus 

reasons, RLI does not deposit any money when it “issues” a bond, it merely promises to 

pay if the immigrant fails to appear. But that difference in structure does not translate into 

a difference of risk. Even though RLI’s money is not tied up in a government account

today, RLI must eventually pay for all breached bonds just the same. 

If anything, the immigration context confirms the parties intended to evaluate risks 

more broadly. Unlike in a typical construction or commercial surety agreement, RLI here 

issued thousands of bonds. So while RLI cannot predict that a particular immigrant will 

breach a particular bond, there is no question some immigrants will default and RLI will 

have to pay those claims. Nexus’s collateral must therefore secure against that future 
15

aggregate loss. Consider a simple scenario where RLI issues ten bonds. A month in, two 

immigrants default and Nexus considers filing for bankruptcy. Fast forward another 

month, Nexus files for bankruptcy and four more immigrants default. On Nexus’s view, 

RLI’s only risk at the end of the first month flows from the two defaulted bonds. RLI can 

consequently request collateral only on those two bonds and must wait to request further 

collateral until the four other immigrants default. But by the time they do, RLI may receive 

nothing at all, or at best may need to wait months for bankruptcy proceedings to conclude. 

That defeats the very point of collateral: to secure RLI’s obligations before it incurs them. 

Nexus itself appears to realize that exposure “is a function of total coverage.” Opening Br. 

17. Yet it fails to carry that principle to its logical conclusion: financial resources and 

ability to pay bear directly on RLI’s exposure. 

That Nexus must secure RLI against the loss on all outstanding bonds of course does 

not mean Nexus must deposit collateral totaling the penal sum on all those bonds. In that 

sense, Nexus is correct that we must measure collateral against some anticipated loss, and 

the district court appropriately rejected RLI’s initial position that it could demand collateral 

up to $20 million. But we see no principled reason to hold that losses do not become 

anticipated until an immigrant fails to appear. We hold instead that “exposure” comprises 

all risks, such as Nexus’s poor financial records and its historical failure to timely 

indemnify RLI. 
16

III.

Apart from challenging the district court’s interpretation of “exposure,” Nexus also 

argues the district court erred in ordering Nexus to deposit collateral when RLI had not 

properly requested it. See J.A. 54 (directing Nexus, in ¶ 3(d), to deposit collateral “if 

requested by Surety”). To be sure, Nexus does not contest that RLI asked it to pay—RLI’s 

$10 million demand is the reason the parties have come before this Court. Rather, Nexus 

maintains that RLI requested $10 million in bad faith and so did not fulfill a condition 

precedent to Nexus’s collateral obligations. As proof, Nexus observes the district court 

ruled the amount of collateral must be reasonable and then disallowed RLI’s demand for 

$10 million as unreasonable, directing Nexus to deposit $2.4 million instead. 

Unreasonableness is not “the test of good faith” in Illinois, Original Great Am. 

Chocolate Chip Cookie Co. v. River Valley Cookies, Ltd., 970 F.2d 273, 280 (7th Cir. 

1992), and this case helps understand why. After several rounds of briefing, and with the 

help of multiple experts, the district court concluded, in hindsight, that $10 million was 

unreasonably high. But RLI did not have the benefit of that guidance when it made its 

initial request, for Nexus repeatedly refused to disclose its books, carry on a meaningful 

dialogue, or propose a lower amount. In those circumstances, there was nothing sinister 

about requesting $10 million to secure a $20 million liability. Indeed, while the district 

court disapproved of the precise figure RLI requested, it rejected Nexus’s bad faith 

counterclaim because Nexus failed to show that RLI “both intended to and did actually 

attempt to contravene the purpose of the agreement”—especially “because any collateral 

requested merely represents funds held in trust for Nexus, and not for RLI’s profit.” RLI 
17

Ins., 470 F. Supp. 3d at 592–93. RLI, the district court concluded, merely sought to enforce 

the Agreement as it understood it. Id. And Nexus’s failure to appeal the district court’s

good-faith ruling may alone foreclose this argument. 

But Nexus also misapprehends the nature of this action. This is not a breach-ofcontract claim, where RLI seeks to collect damages for Nexus’s failure to provide collateral 

and Nexus defends by demonstrating RLI did not fulfill the condition precedent. This is a 

request for an equitable remedy. The only consequence of RLI’s unreasonable request is 

that the district court must adjust the collateral amount consistent with equitable principles, 

as the court did here. 

IV.

That brings us to Nexus’s objections over the process the district court used to arrive 

at $2.4 million. Nexus contends the district court performed “an incredibly specific 

calculation” inappropriate for summary judgment and that “any determination of 

reasonableness” should instead “have been reserved for a trier of fact.” Opening Br. 37–

38. Nexus also resists the court’s authority to impose any reasonable collateral when the 

Agreement called for an “objective” measure by tying collateral to RLI’s exposure. Id. at 

31–32. 

A.

Here, too, Nexus confuses actions for breach of contract with requests for specific 

performance. Because Nexus failed to provide any collateral, it breached the Agreement. 
18

But RLI did not sue for damages flowing from that breach, such as compensation for some 

“certain” losses it suffered in paying past-due bonds out of its own pocket. Safeco, 2010 

WL 3928606, at *3. Instead, RLI requested a specific-performance decree obligating 

Nexus to provide collateral going forward. In making that request, RLI had “no legal 

remedy,” only “an equitable” one. Am. Motorists Ins. Co. v. United Furnace Co., 876 F.2d 

293, 300 (2d Cir. 1989), cited with approval in, Hanover, 2006 WL 2375428, at *5; accord

Eakin v. Cont’l Ill. Nat. Bank & Tr. Co. of Chi., 121 F.R.D. 363, 366 (N.D. Ill. 1988) 

(explaining that collateral decrees comprise equitable remedies because “to date, there 

simply are no damages to award”), aff’d, 875 F.2d 114 (7th Cir. 1989); cf. Com. Ins. Co. 

of Newark v. Pac.-Peru Constr. Corp., 558 F.2d 948, 954 (9th Cir. 1977) (holding specific 

performance “not available” when a plaintiff has “an adequate remedy at law”). 

Like any grant of specific performance, then, the district court’s order to deposit 

collateral constitutes “a matter of sound judicial discretion controlled by established 

principles of equity and exercised upon a consideration of all the facts and circumstances 

of a particular case.” Schwinder v. Austin Bank of Chi., 809 N.E.2d 180, 196 (Ill. App. Ct. 

2004) (citation omitted). In that capacity, Illinois courts “balance the equities between the 

parties” and “may refuse to grant specific performance where the remedy would cause a 

peculiar hardship or inequitable result.” Id. (citation omitted). Outside Illinois, courts, too,

uniformly understand their “function” in such actions as “determin[ing], in light of the 

circumstances of the case and the supporting documentation submitted by the parties, 

whether [a surety]’s demand is a reasonable estimate of its anticipated losses.” Safeco, 

2010 WL 4828103, at *4; accord Am. Motorists, 876 F.2d at 303 (“leav[ing] to the district 
19

court the question of how much collateral security [the indemnitor] is obligated to 

provide”); Travelers Cas. & Sur. Co. of Am. v. Sw. Contracting, Inc., No. 4:05CV99-DJS, 

2006 WL 276942, at *3 (E.D. Mo. Feb. 2, 2006) (granting specific performance where 

collateral sought was “reasonable and not excessive”); U.S. Fid. & Guar. Co. v. J. United 

Elec. Contracting Corp., 62 F. Supp. 2d 915, 922 (E.D.N.Y. 1999) (“a collateral security 

clause is enforceable as long as the amount demanded by a surety is reasonable”); U.S. Fid. 

& Guar. Co. v. Feibus, 15 F. Supp. 2d 579, 588 (M.D. Pa. 1998), aff’d, 185 F.3d 864 (3d 

Cir. 1999) (same, because “there is no windfall for the surety”). What courts do not do is 

assess “demand[s] for collateral security” “under the summary judgment standard.” 

Safeco, 2010 WL 4828103, at *4.

Disputed facts and conflicting assessments of risk therefore do not defeat the district 

court’s authority to order specific performance. After all, “[i]f it were a prerequisite for 

the surety and indemnitors to agree upon all the material facts pertaining to future 

payments,” “no surety would ever succeed in enforcing its interim right to collateral.” Id.

(internal quotation marks and citation omitted). And, if taken seriously, the logic of 

Nexus’s argument would require us to send any factual disputes inherent in requests for 

injunctions or restraining orders to the jury. We decline to so undermine the very 

foundation of the law-equity divide and instead hold that the district court correctly 

approached the task before it by scrutinizing the reasonableness of the collateral amount.
20

B.

Because the district court applied the principles of equity, we review its 

determination of the collateral amount for abuse of discretion. Klein v. PepsiCo, Inc., 845 

F.2d 76, 78 (4th Cir. 1988). Finding no abuse, we affirm.

After ruling on the contractual-interpretation question above, the district court 

dedicated a separate round of briefing to ascertaining the appropriate amount of collateral. 

It then held a two-day hearing, where both parties had an opportunity to present fact and 

expert witnesses. RLI called an actuary with experience in the surety industry, a forensic 

accountant, and a more general expert on surety and insurance contracts. The actuary 

identified four characteristics predictive of bond breach: bond amount, date of the 

immigrant’s last contact with Nexus, the immigrant’s last payment to Nexus, and the 

immigrant’s country of origin. RLI Ins., 2020 WL 6262967, at *3 & n.5. Based on those 

characteristics, she calculated a future breach risk to RLI on the outstanding bonds to 

constitute approximately $10 million—the amount RLI first requested as collateral. Id. 

The forensic accountant identified several areas of Nexus’s financial records which caused 

him concern, such as multiple six- and seven-figure debts, hundreds of thousands of dollars 

in bounced checks, and repeated failures to conform financial records to standard industry 

practice—most troublingly, underreporting liabilities. Id. at *4–5. Building upon that 

testimony, RLI’s industry expert explained that often times, when “the books are a mess 

and they are inaccurate,” “that is a sure sign that . . . down the road, . . . the indemnitors 

lose their ability to pay.” Id. at *6. That means even a zero-loss situation can quickly turn 
21

into losses on “some 80 percent of the claims.” Id. So the appropriate amount of collateral 

must account for “what the losses could be in the future.” Id. at *7 (emphasis added). 

RLI also offered a factual witness, its Assistant Vice President of Claims. He began 

by outlining the basic facts about the bonds. RLI, he explained, has issued a total of 2,486 

bonds on Nexus’s behalf. Id. at *3. By the date of the hearing, 393 of those bonds had

been breached, causing RLI to pay $4,460,000 to the U.S. government.4

 Id. Comparing 

that figure to the 424 bonds that have been cancelled—bonds for immigrants who appeared 

in court or have been deported, relieving RLI of liability—yields a historic breach rate of 

about 48%. Id. And 48% of the current outstanding bond amount again yields about $10 

million. Id.

The same witness also reviewed Nexus’s financial and operating documents and 

identified eight risk factors flowing from Nexus’s financial decisions that affect its ability 

to pay, including Nexus’s historic failure to timely indemnify RLI for breached bonds, its 

unreliable and inconsistent financial records, a recent—and unrecorded—real estate selloff, and ongoing investigations and enforcement actions. Id. 

Nexus called no expert witnesses during this evidentiary hearing. Its Vice President 

of Operations conceded that “its books and records were a mess” but proffered that Nexus

“was taking affirmative steps to bringing them in order.” Id. at *6. He also admitted to 

various investigations and lawsuits, offering only that there was no “money Nexus owed 

4 As discussed, the parties do not contest that Nexus eventually reimbursed RLI the full 

sum of the breached bonds. 
22

on other ongoing investigations.” Id. at *7. Nexus’s Vice President of Risk Management 

testified that Nexus “made efforts to contact its RLI-bonded program participants during 

the past few weeks and obtained declarations from 219 participants stating that they fully 

intended to appear.” Id. But Nexus’s CEO conceded that Nexus no longer uses GPS 

monitoring because the GPS company terminated its services in light of Nexus’s $7 million 

debt. Id. at *5. Nexus’s only quarrel with RLI’s testimony was the formula used to 

calculate the historic breach rate—and the end result of 48%. Rather than compare 

breached bonds to bonds cancelled so far, Nexus insisted that the court should compare 

breached bonds to all pending bonds because “RLI faces no risk” on “bonds for which 

principals have demonstrated a history of compliance.” Id. at *3. That analysis would 

yield a breach rate of roughly 5%. Id.

The district court carefully considered this testimony in a 13-page opinion, 

ultimately ordering Nexus to deposit just $2.4 million, a quarter of RLI’s originallyrequested $10 million. Id. at *9. The court explained that it based that sum on the amount 

of outstanding bonds, Nexus’s “historic failure to timely pay breached bonds,” Nexus’s 

continued refusal “[t]o this day . . . to make available accurate financial records,” and 

Nexus’s deteriorating financial condition, evidenced by “the myriad investigations into 

[its] business practices by various state attorneys general and bureaus of insurance, claims 

made by large creditors, its recent sell-off of real estate[,] and diminished cash flow.” Id. 

We find no abuse in that detailed, well-reasoned order. 
23

C.

Nexus tries one last argument. It observes ¶ 3(d) does not leave collateral amount 

to RLI’s sole discretion but ties collateral to RLI’s “exposure.” That language, Nexus 

insists, invites “objective” assessments of collateral due, precluding the kind of open-ended 

reasonableness evaluations the court conducted below. Opening Br. 32. And because the 

only “objective” measure happens to be the penal sums on the bonds breached, the district 

court should have limited collateral to that amount. As discussed, that is simply not how 

courts approach requests for collateral—courts uniformly apply a reasonableness standard, 

including in contracts identical to the one here that tie collateral to a surety’s “exposure.” 

See Safeco, 2010 WL 4828103, at *4; see supra pp. 17–19. And with good reason: RLI 

will not retain the $2.4 million “as its property” but will hold it “in trust” for Nexus. Am. 

Motorists, 876 F.2d at 300. If Nexus’s “misgivings regarding the amount of money held 

in collateral prove to be correct, [it] will be entitled to have [its] money returned.” 

Hanover, 2006 WL 2375428, at *6 (internal quotation marks omitted). 

Cases that calculate damages for breach of contract are thus beside the point. See 

Opening Br. 31 (citing Boyd v. Tornier, Inc., No. 07-cv-0751-MJR, 2009 WL 1657900, at 

*7 (S.D. Ill. June 12, 2009), which refused to calculate quotas under a “reasonability” 

principle because the contract provided specific guidelines for quota calculations). Same 

with cases that decline to imply a duty of good faith and fair dealing to override express 

contractual language. See id. at 31–32 (citing Fields v. Thompson Printing Co., 363 F.3d 

259, 271 (3d Cir. 2004); Paulus Sokolowski & Sartor, LLC v. Cont’l Cas. Co., No. Civ.A. 

12-7172 MASTJ, 2013 WL 11084770, at *7 (D.N.J. Aug. 30, 2013)). Those cases apply 
24

to courts sitting in law, deciding damages for breach of contract on summary judgment. 

Sitting in equity, the court below was not only permitted but obligated to conduct a 

reasonableness inquiry, so as to ensure that its grant of specific performance would not 

“cause a peculiar hardship or inequitable result.” Schwinder, 809 N.E.2d at 196 (citation 

omitted). 

That is presumably why RLI does not appeal the district court’s winnowing of the 

collateral to $2.4 million, even though ¶ 3(d) directs Nexus to “deposit collateral with 

Surety, acceptable to Surety, sufficient to cover all exposure.” J.A. 54 (emphasis added). 

Even sureties that contractually have “sole discretion” over the amount of the collateral

must, at day’s end, satisfy the courts “the sum demanded is reasonable.” BIB Constr. Co., 

Inc., v. Fireman’s Ins. Co. of Newark, 214 A.D.2d 521, 523 (N.Y. App. Div. 1995). That 

is, a surety can sue for damages when an indemnitor breaches its contractual obligation to 

deposit the amount the parties have agreed to—here, an amount “acceptable to” RLI. J.A. 

54. But, when it comes to specific performance, courts can no more order an indemnitor 

to deposit an unreasonable amount of collateral than order an employee to stay in a job she 

wishes to leave. 

Even setting those foundational principles aside, Nexus’s argument proves too 

much. That the Agreement anchors the collateral amount in RLI’s “exposure” rather than 

allow RLI to singlehandedly name the price does suggest some objective evaluation of how 

much risk RLI faces. But it does not follow that the only objective measure of that risk is 

the value of breached bonds. Outside experts’ evaluations, financial documents, and 

historic rate of default offer objective gauges, as well. Nothing in such a reasonableness 
25

analysis requires—or allows—the court to take RLI at its word. We accordingly decline 

Nexus’s invitation to circumscribe the court’s traditional equity function, affirm the district 

court’s interpretation of the contract as a matter of law, and affirm its collateral decree as 

a sound exercise of discretion.

V.

Nexus finally asks us to reconsider the district court’s award of litigation costs 

“assuming that Nexus’s interpretation of its obligations under the Indemnity Agreement 

prevails before this court, or if the District Court’s summary judgment rulings are 

remanded for further proceedings.” Opening Br. 39. Because we affirm, we have no need 

to reach this question.5

 

VI.

For the foregoing reasons, the district court’s judgment is 

AFFIRMED.

5 We clarify, however, that where an indemnitor expressly agrees to compensate for “all 

losses, costs, damages, attorneys’ fees and expenses of whatever kind or nature which arise 

. . . in enforcing this agreement,” J.A. 53, the award of costs and fees constitutes direct 

damages under the agreement, not fee shifting. E.g., Lamp, Inc. v. Int’l Fid. Ins. Co., 493 

N.E.2d 146,149 (Ill. App. Ct. 1986). So we would ask whether RLI incurred its costs and 

fees “in enforcing this agreement,” J.A. 53—not whether RLI is entitled to them as a 

prevailing party. See Hanover Ins. Co. v. Smith, 561 N.E.2d 14, 18 (Ill. 1990) (assessing 

whether a surety sustained attorney’s fees “in consequence” of the execution of a bond 

agreement); Fid. & Deposit Co. of Md. v. Rosenmutter, 614 F. Supp. 348, 352 (N.D. Ill. 

1985) (declining to indemnify litigation expenses where an action “was unnecessary to 

enforce the contract”). 
26

QUATTLEBAUM, Circuit Judge concurring:

I am pleased to join in sections I, II, III, V and VI of Judge Floyd’s excellent opinion. 

I write separately only concerning section IV. 

There, the majority concludes the district court did not err in examining the amount 

of collateral RLI requests from Nexus for “reasonableness.” According to the majority, 

RLI sought equitable relief which the district court is afforded discretion to provide. I agree 

that, in equity, a court has discretion in fashioning an appropriate remedy. But that 

discretion does not include remedies that are inconsistent with the express terms of the 

contract. “Courts have traditionally analyzed the plain language of the indemnity 

agreement to determine a surety’s right to obtain specific performance of collateral 

security.” Hanover Ins. Co. v. Clark, No. 05 C 2162, 2006 WL 2375428, at *5 (N.D. Ill. 

Aug. 15, 2006).

Here, the express terms allowed RLI to seek collateral “acceptable to [RLI].” Given 

that language, I would not have imposed an objective standard of reasonableness. To me, 

that judicially modifies a term on which the parties agreed and reduced to writing. Words 

have meaning and, as I understand Illinois law, that meaning does not evaporate just 

because a party brings a claim in equity. Butler v. Kent, 655 N.E.2d 1120, 1127 (Ill. App. 

Ct. 1995) (“The province of a court in a specific performance action is to enforce the 

contract which the parties have made.”); Snyder v. Spaulding, 57 Ill. 480, 484 (1870) 

(“Equity does not propose to relieve against the express contract of parties.”). 

For those reasons, I agree with Nexus that the district court erred in imposing a 

reasonableness standard to the amount of collateral RLI could request when the contract 
27

permitted collateral “acceptable to [RLI].” However, despite my agreement with Nexus on 

this point, the relief Nexus seeks for this error—as ably explained by the majority in section 

II of its opinion—contravenes the plain language of the contract. Ironically, the party 

prejudiced by the district court’s imposition of a non-contractual objective standard of 

reasonableness was RLI, not Nexus. But RLI did not appeal the district court’s 

reasonableness inquiry and finding. Therefore, I concur in the majority’s ultimate 

conclusion that Nexus’ arguments on appeal must be rejected.