Filed 1/25/24 FEI Enterprises v. Massachusetts Bay Ins. Co. CA2/2

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

FEI ENTERPRISES, INC. et 

al.,

Plaintiffs and 

Appellants,

v.

MASSACHUSETTS BAY 

INSURANCE COMPANY,

Defendant and 

Respondent.

 B323740

 (Los Angeles County

 Super. Ct. No. 

19STCV03238)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Laura A. Seigle and Thomas D. Long, Judges. 

Affirmed.
2

Law Office of Robert G. Klein and Robert G. Klein for

Plaintiffs and Appellants.

Lewis Brisbois Bisgaard & Smith, Rebecca R. Weinreich, 

Jordon E. Harriman, Jeffry A. Miller and Brittany B. Sutton for

Defendant and Respondent. 

* * * * * *

A school district sued an electrical contractor over the 

contractor’s shoddy work on the construction of a middle school. 

After the contractor settled with the district for $1.35 million, the 

contractor sued the surety that had issued it a performance bond 

covering the work, alleging that the surety had breached its 

contractual obligations to the contractor in refusing to loan the 

contractor $150,000 as part of a $400,000 settlement offer the 

contractor wanted to make to the district in an earlier stage of 

the district’s lawsuit. The trial court granted summary judgment 

for the surety because the undisputed facts showed that the 

district never would have accepted a $400,000 offer, such that the 

surety’s refusal to make a loan did not cause the contractor any 

damages. Because we independently agree with that ruling, we 

affirm. 

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. FEI completes electrical work for a school 

district

In July 2010, Torrance Unified School District (the District) 

solicited bids from contractors for the construction of a new 

middle school (the project). FEI Enterprises, Inc. (FEI) won the 

bid on a package of “Electrical, Low Voltage, Audio Visual” work 
3

for the project, for a total contract price of $2,298,000. FEI’s 

president is Gabriel Fedida (Gabriel) and Gabriel’s son, Tomer 

Fedida (Tomer), is an attorney who assists in representing FEI.

1 

As required for all public works projects, FEI was required 

to post a performance bond guaranteeing its performance of the 

contract. (Pub. Contract Code, § 10224.) Massachusetts Bay 

Insurance Company (the surety)2 issued a $2,298,000 bond in 

favor of the District. In exchange, FEI (1) paid the surety a 

premium and (2) executed an indemnity agreement in the 

surety’s favor. As pertinent here, the indemnity agreement 

vested the surety with the “sole discretion[]” to make “advances 

or loans” on the bond as well as the “absolute right” to cease 

making any advances or loans “at any time and without notice to” 

FEI. 

The project was completed in July 2012. 

B. The District sues FEI and the surety over FEI’s 

work on the project

In August 2015, the District sued FEI and the surety, 

asserting claims for breach of contract, breach of warranty, and 

enforcement of the performance bond (the District action). The 

District alleged that FEI provided labor, equipment, materials, 

and supplies that were “defective,” that FEI’s electrical work was 

not completed in a “workmanlike manner” or “in accordance 

with” the contract for the project, and that FEI “concealed its 

1 Because the father and son share the same surname, we 

use their first names to avoid confusion; we mean no disrespect.

2 Massachusetts Bay is a subsidiary of The Hanover

Insurance Company (Hanover). FEI subsequently sued Hanover 

as part of the underlying lawsuit in this case, but the trial court 

dismissed Hanover, so it is not a party to this appeal.
4

defective work” so it was not apparent during inspections. 

Although the District in its complaint alleged damages totaling 

approximately $2 million, the District subsequently released a 

more detailed assessment of damages that totaled $3,033,635.42; 

of that amount, $534,721.16 was for FEI’s alleged failure to 

address electrical issues with respect to a methane containment 

system beneath the project site.

After the District filed suit, the surety demanded that FEI 

post collateral for the full amount of the $2,298,000 performance 

bond. When FEI refused, the surety sued FEI in federal court. 

That lawsuit quickly settled, pursuant to which FEI executed a 

collateral security agreement with (1) Gabriel granting the surety 

a deed of trust in property he owned, and (2) FEI promising to 

repay the surety any amount the surety expended to resolve the 

District action in either a “lump sum” or in monthly payments of 

at least $10,000 per month.

C. FEI negotiates and settles the District action 

In November 2016, FEI, the surety, and the District

participated in a mediation. During that mediation, the District’s 

lowest demand to resolve the action was $500,000, and FEI never 

made a $400,000 offer during the mediation.

In January 2017, FEI made a $300,000 settlement offer to 

the District.

Just a few days later, and while the $300,000 settlement 

offer was still pending, Tomer orally informed the District that he 

was trying to put together a $400,000 settlement offer, which 

Tomer hoped to finance with $250,000 from FEI’s liability insurer 

and $150,000 from the surety. The District’s attorney “urged” 

Tomer to make that $400,000 offer, and orally told Tomer that he 

would “recommend” that the District accept any such offer. 
5

However, the District’s attorney lacked the authority to accept a 

$400,000 offer without further consultation with the District, and 

the District would never have settled for $400,000 because its 

damages “far exceeded” that amount. Because the surety refused 

to loan FEI the $150,000, FEI never made a formal $400,000 offer 

in January 2017. 

The District subsequently rejected FEI’s still-outstanding 

$300,000 offer.

In early March 2017, FEI made a $400,000 settlement offer 

using funding from other sources. The District rejected that 

offer. In its email doing so, the District pointed out that its 

“lowest number” at “the mediation” had been $500,000, and that 

since the November 2016 mediation, the District “ha[d] incurred 

significant costs.” The District made a counteroffer of $650,000.

Nearly two years later, in December 2018, the District 

action settled for $1.35 million, with FEI contributing $300,000; 

FEI’s liability insurer contributing $400,000; and the surety 

contributing $650,000.

II. Procedural Background

A. The early complaints and first summary 

judgment motion

Six weeks after settling the District action, FEI, Gabriel

(individually, and as trustee of two trusts), and his wife3 sued the 

surety for breach of the covenant of good faith and fair dealing, 

3 For sake of simplicity, we hereafter refer to FEI, Gabriel, 

and his wife collectively as FEI. 
6

breach of contract, and promissory fraud.

4 Specifically, FEI 

alleged that the surety breached the covenant by refusing to loan 

FEI $150,000 back in January 2017. FEI alleged that this breach 

caused it damages because, if the surety had loaned FEI 

$150,000, then (1) FEI could have made a $400,000 settlement 

offer in January 2017, (2) the District action would have settled 

for $400,000 instead of $1.35 million, and (3) FEI would not have 

suffered an additional $950,000 in damages.

By June 2021, the operative complaint was the third 

amended complaint, and the surety moved for summary 

judgment on that complaint. Specifically, the surety argued that 

FEI’s sole claim against it in that complaint for breach of the 

covenant of good faith and fair dealing failed as a matter of law 

because the surety had the “sole” discretion under the indemnity 

agreement whether to loan FEI any money, such that it could not 

act in bad faith for refusing to do so during negotiations of the 

District action. At no point in its motion did the surety argue 

that its failure to loan FEI $150,000 was not the source of FEI’s 

damages; to the contrary, the motion at one point explicitly 

assumed the surety was responsible, but argued that it still could 

not be liable.

After further briefing and a hearing, the trial court denied 

the surety’s motion. The court reasoned that the surety failed “to 

4 FEI also sued the attorney and law firm who represented it 

during the negotiations with the District, but settled with those 

parties for an undisclosed amount.

FEI’s lawsuit spawned a cross-complaint by the surety for 

FEI’s alleged breach of the collateral security agreement for 

making insufficient monthly payments. The surety dismissed 

this cross-complaint after prevailing on summary judgment on 

FEI’s operative complaint.
7

address the correct law” establishing that it must exercise its 

discretion in good faith and did “not satisfy its initial burden” of 

showing that FEI cannot establish a lack of good faith. The court 

went on to note that there were disputes of fact over whether the 

District action could have settled for $400,000.

B. The fourth amended complaint and second 

summary judgment motion

In response to a comment by the trial court in its summary 

judgment ruling that FEI could not rely on unpled facts 

regarding the surety’s prior conduct of loaning FEI money for 

settlement offers on an unrelated project to establish its 

expectations regarding the surety’s exercise of discretion, FEI 

filed the operative fourth amended complaint in November 2021 

that added a cause of action for breach of implied-in-fact contract. 

As to this new claim and the prior claim for breach of the 

covenant of good faith and fair dealing, FEI alleged that, if the 

surety had loaned it $150,000 in January 2017, (1) FEI could 

have made a $400,000 settlement offer to the District in January 

2017, (2) the District “would have accepted the $400,000 

settlement offer,” and (3) FEI would not have had to settle for the 

higher amount of $1.35 million.

The surety filed a second summary judgment motion, but 

this motion was based solely on FEI’s inability to establish 

damages. After further briefing and two hearings,5 the trial 

5 FEI argued at the first hearing that it had additional facts 

to allege regarding another instance in which the surety refused 

to contribute to a settlement offer. The trial court continued its 

ruling on the summary judgment motion so FEI could file a 

motion for leave to file a fifth amended complaint. When the 

court ruled that it would only be allowing FEI to add five 
8

court granted the surety’s motion. The court ruled that the 

surety had met its initial burden of showing the absence of any

causal link between its failure to loan FEI $150,000 in January 

2017 and FEI’s alleged damages because the evidence showed 

that, even if the surety had made that loan and thereby enabled 

FEI to make the $400,000 settlement offer in January 2017, the 

District would have rejected that offer. The court also ruled that 

FEI had not raised a disputed issue of material fact on this issue

because the evidence FEI cited “[a]t most . . . establish[ed] that 

[the District’s attorney] would have recommended [that the 

District accept] the $400,000 offer [at that time],” “[b]ut FEI did 

not show disputed facts concerning whether the District would 

have accepted a $400,000 offer at any time.”

C. Appeal

Following entry of judgment for the surety, FEI timely filed 

this appeal. 

DISCUSSION

FEI argues that the trial court erred in granting summary 

judgment to the surety. 

Summary judgment is appropriately granted “where ‘all the 

papers submitted show that there is no triable issue as to any 

material fact and that the moving party is entitled to judgment 

as a matter of law.’” (Hartford Casualty Ins. Co. v. Swift 

Distribution, Inc. (2014) 59 Cal.4th 277, 286, quoting Code Civ. 

Proc., § 437c, subd. (c).) “Summary judgment is appropriate, and 

the moving party (typically, the defendant) is entitled to 

judgment as a matter of law, where (1) the defendant carries its 

initial burden of showing either the nonexistence of one or more 

paragraphs of its new allegations, FEI abandoned the proposed 

amended complaint.
9

elements of the plaintiff's claim or the existence of an affirmative 

defense, and (2) the plaintiff thereafter fails to show the 

‘existence of a triable issue of material fact’ as to those elements 

or affirmative defense.” (Pereda v. Atos Jiu Jitsu LLC (2022) 85 

Cal.App.5th 759, 767; Patterson v. Domino’s Pizza, LLC (2014) 60 

Cal.4th 474, 500; Code Civ. Proc., § 437c, subds. (a), (c), (o)(1) & 

(2), (p)(2).) “‘“‘We review the trial court’s decision [granting 

summary judgment] de novo, considering all the evidence set 

forth in the moving and opposing papers except that to which 

objections were made and sustained.’” [Citation.] We liberally 

construe the evidence in support of the party opposing summary 

judgment and resolve doubts concerning the evidence in favor of 

that party.’” (Hartford Casualty, at p. 286.) 

The elements of FEI’s claims for breach of the implied 

covenant of good faith and fair dealing and breach of an impliedin-fact contract are largely identical; both claims require FEI to 

prove damages proximately caused by the breach. (Bennett v. 

Ohio National Life Assurance Corp. (2023) 92 Cal.App.5th 723, 

729 [noting “damages element” of claim for “breach of the implied 

covenant”]; Aton Center, Inc. v. United Healthcare Ins. Co. (2023) 

93 Cal.App.5th 1214, 1230 [noting elements of claim for breach of 

implied-in-fact contract are the same as the element of claim for 

breach of express contract]; Oasis West Realty, LLC v. Goldman 

(2011) 51 Cal.4th 811, 821 [breach of express contract requires 

proof of damages resulting from breach].)

Applying these general principles, the surety is entitled to 

summary judgment if there is no dispute of material fact as to 

whether the surety’s refusal to loan FEI $150,000 in January 

2017 caused FEI any damages.
10

I. Analysis

In general, a plaintiff can recover for breach of contract 

only if its damages are “clearly ascertainable in both their nature 

and their origin.” (Civ. Code, § 3301; Copenbarger v. Morris 

Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 11.) 

Damages are “clearly ascertainable” from a breach only if the 

plaintiff “show[s] . . . that [it] has suffered damages by reason of 

the wrongful act of defendant” to a “legal certainty.” (Stott v. 

Johnston (1951) 36 Cal.2d 864, 875 [connection between breach 

and damages must be established “with reasonable certainty”]; 

Agnew v. Parks (1959) 172 Cal.App.2d 756, 768; Filbin v. 

Fitzgerald (2012) 211 Cal.App.4th 154, 165-166 (Filbin); Marshak 

v. Ballesteros (1999) 72 Cal.App.4th 1514, 1518 (Marshak); 

Thompson v. Halvonik (1995) 36 Cal.App.4th 657, 663; Sukoff v. 

Lemkin (1988) 202 Cal.App.3d 740, 746-747.) Where, as here, a 

plaintiff’s damages turn on a comparison of what did happen

after an alleged breach (here, FEI settled for $1.35 million) to 

what might have happened in the absence of the alleged breach

(here, FEI could have settled for $400,000), damages are 

established to a “legal certainty” only if the plaintiff shows that 

“it is more likely than not” that the second, “better outcome” 

would have happened. (Viner v. Sweet (2003) 30 Cal.4th 1232, 

1244 (Viner); Namikas v. Miller (2014) 225 Cal.App.4th 1574, 

1582 [plaintiff must show it “‘would certainly have’” received 

better outcome].) It is not enough to show that the better 

outcome could have happened; time and again, courts have 

rejected the position that the “‘“possibility”’” or “‘“mere 

probability”’” of the better outcome is sufficient. (Marshak, at pp. 

1518-1519; Barnard v. Langer (2003) 109 Cal.App.4th 1453, 

1461-1462; McGregor v. Wright (1931) 117 Cal.App. 186, 197.) 
11

We independently agree with the trial court that there is no 

triable issue of material fact as to whether the surety’s failure to 

loan FEI $150,000 in January 2017 caused FEI’s alleged 

damages. That is because the undisputed facts show that, even if 

the surety had made that loan and FEI had made a $400,000 

settlement offer to the District in January 2017, it is not “more 

likely than not” that the District would have accepted that offer. 

It is undisputed that the District’s initial settlement demand two 

months earlier (during the November 2016 mediation) had been 

for $500,000, and its costs had only increased since that point in 

time. It is undisputed that the District rejected the $400,000 

settlement offer FEI made in March 2017, and that the District 

countered with a demand for $650,000. And it is undisputed that 

the District’s decision maker—the only one with the authority to 

accept or reject settlement offers—unequivocally stated that the 

District would never have accepted a $400,000 settlement offer 

given the damages it sustained as a result of FEI’s substandard 

work. To be sure, FEI introduced evidence that the District’s 

attorney said in January 2017 that he would “recommend” that 

the District accept a potential $400,000 offer from FEI. But it is 

undisputed that the attorney himself did not have the authority 

to accept such an offer, and, as noted above, the District’s 

decision maker stated he would not have accepted such an offer 

(and hence would have rejected his attorney’s recommendation). 

Thus, this proffered evidence does not even create a possibility of 

a $400,000 settlement in January 2017—let alone create a 

disputed issue of fact as to whether the District would have more 

likely than not entered into a settlement for that amount at that 

time.
12

Although causation is typically a question of fact for the 

jury, it may be decided as a matter of law on summary judgment 

where, as here, “the evidence is not in dispute” or “permits of only 

one conclusion.” (Filbin, supra, 211 Cal.App.4th at p. 172.) So it 

is here.

II. FEI’s Counter-Arguments

FEI resists our analysis with five arguments.

First, FEI argues that the surety’s second summary 

judgment motion was procedurally improper because “[a] party 

shall not move for summary judgment based on issues asserted in 

a prior motion for summary adjudication and denied by the court” 

unless the second motion rests on “newly discovered facts or 

circumstances or a change of law.” (Code Civ. Proc., § 437c, subd. 

(f)(2), italics added.) We reject this argument for two reasons. To 

begin, this statutory bar on successive motions for summary 

adjudication or judgment explicitly turns on what the movant 

asserted in its prior motion. In its first motion, the surety’s 

asserted ground for summary judgment was that its refusal to 

loan FEI $150,000 could not have breached the indemnity 

agreement because that agreement vested the surety with “sole 

discretion” whether to loan money to FEI; this was an argument 

about duty and breach, not causation and damages. Although 

the trial court made findings about whether there were disputed 

issues of fact as to causation and damages, we do not read the 

surety’s motion as presenting the issue of the causal link between 

breach and damages; the trial court’s sua sponte ruling does not 

retroactively mean that the surety asserted something in its first 

motion that the motion did not, in actuality, assert. Further, this 

procedural objection is, in any event, irrelevant because the trial 

court retained the power to revisit its prior ruling on the issue of 
13

causation and damages. (Le Francois v. Goel (2005) 35 Cal.4th

1094, 1105, 1109.)

Second, FEI argues that we are applying the wrong legal 

test because, in its view, “[t]his case is not about whether [FEI] 

can establish damages by showing [that the District] ‘would have’ 

accepted a $400,000 settlement.” As explained above, that is 

precisely what this case is about. FEI’s view is simply wrong on 

the law.

Third, FEI asserts that we should, as a matter of public 

policy, relieve FEI of the burden of having to prove that the 

surety’s breach caused damages. Instead, FEI continues, the 

surety should bear the burden of proving the absence of a causal 

link because (1) courts sometimes shift the burden of proof when 

a party engages in wrongdoing that makes it “practically 

impossible for the plaintiff to prove its case” (Williams v. Russ 

(2008) 167 Cal.App.4th 1215, 1226 (Williams)); and (2) the surety 

engaged in wrongdoing by not loaning FEI $150,000, and it is 

more “difficult” to prove causation in a case like this one where 

causation turns on an examination of what was and what might 

have been. 

Admittedly, the legal premise of FEI’s argument is valid: 

Courts do have the inherent power to shift the burden of 

persuasion as to a particular fact for public policy reasons, 

typically when “‘the defendant’s wrongdoing makes it practically 

impossible for the plaintiff to prove the wrongdoing,’” and the 

decision whether to shift the burden turns on a balancing of (1) 

“‘“the knowledge of the parties concerning the particular fact, 

[(2)] the availability of the evidence to the parties, [(3)] the most 

desirable result in terms of public policy in the absence of proof of 

the particular fact, and [(4)] the probability of the existence or 
14

nonexistence of the fact.”’” (Williams, supra, 167 Cal.App.4th at 

p. 1226; Galanek v. Wismar (1999) 68 Cal.App.4th 1417, 1426 

(Galanek); National Council Against Health Fraud, Inc. v. King 

Bio Pharmaceuticals, Inc. (2003) 107 Cal.App.4th 1336, 1346

(National Council); Masellis v. Law Office of Leslie F. Jensen

(2020) 50 Cal.App.5th 1077, 1087-1090.)

We nevertheless decline to shift the burden of proof as to 

causation in this case for two reasons. 

For starters, and as noted above, this doctrine has been 

limited to instances in which a party has destroyed or limited 

access to evidence. Here, the surety has not blocked any access to 

evidence; FEI is just as free as the surety to obtain discovery 

from the District or other third parties about what might have 

happened if FEI had made a $400,000 settlement offer in 

January 2017. What makes causation more difficult here is not 

any conduct by the surety blocking access to evidence; it is simply 

the fact that it is inherently more difficult to prove causation 

where causation turns on a comparison between the outcome that 

did happen and outcomes that did not happen. Also, courts have 

shifted the burden only when the party has engaged in 

“wrongdoing” separate and apart from the “wrongdoing” alleged 

in the underlying litigation, such as when a party destroys or 

otherwise limits access to evidence during discovery. (Williams, 

supra, 167 Cal.App.4th at pp. 1225-1228 [discovery misconduct]; 

Galanek, supra, 68 Cal.App.4th at p. 1426 [spoliation]; National 

Council, supra, 107 Cal.App.4th at p. 1346 [collecting cases 

regarding spoliation]; cf. National Council, at pp. 1346-1347 

[noting application in negligence per se and design defect cases].) 

The sole wrongdoing FEI uses as the justification for shifting the 

burden of proof is the surety’s conduct in not loaning it $150,000, 
15

which is exactly the same conduct FEI alleges as the breach 

underlying its lawsuit. This is not an adequate basis for shifting 

the burden of proof. (National Council, at p. 1347 [“We are aware 

of no cases in which the burden of proof shifts to the defendant 

upon the filing of the complaint”].) Indeed, our Supreme Court 

has held that the plaintiff retains the burden of proving 

causation in “settle and sue” cases where causation turns on the 

very same comparison of outcomes that did and did not happen. 

(Viner, supra, 30 Cal.4th at p. 1244.)

Additionally, and more fundamentally, the net effect of 

FEI’s argument would be to eliminate the causation element from 

FEI’s claims. As the party moving for summary judgment, the 

surety already bore the burden of producing evidence, and it 

carried that burden by showing the District would not have 

accepted a $400,000 settlement offer had one been made in 

January 2017. FEI did not introduce substantial evidence to 

rebut that showing. If all we did was shift the burden of 

persuasion, the surety would still prevail on this record. Thus, 

what FEI is really requesting is that we relieve it of the burden of 

even having to rebut the surety’s showing—in other words, that 

we excuse FEI from having to make any showing at all regarding 

causation. This we decline to do, because we would be effectively 

treating evidence satisfying the element of breach as also

satisfying the element of causation, thereby eliminating the 

element of causation entirely. (See, e.g., People v. Jeffers (1987) 

43 Cal.3d 984, 991-992 [declining to render element 

superfluous].)

Fourth, FEI at oral argument asserted that it had “no 

liability” at all to the District, such that the District surely would 

have accepted a $400,000 settlement offer from FEI in January 
16

2017. We reject this argument because it contradicts the 

undisputed evidence that the District’s lowest settlement offer at 

any point in time in that case was $500,000. FEI’s assessment in 

this litigation that the District’s claims had no value is obviously 

different from the District’s view, and it is the District’s view that 

matters as to whether the District would have accepted a 

$400,000 offer from FEI in January 2017. Indeed, the ultimate 

settlement of the District action for $1.35 million tends to 

undermine entirely FEI’s current assessment that the District 

litigation had no value.

Fifth and lastly, FEI argues that there are triable issues of 

fact as to whether the surety breached its duty to make loans. 

Given that FEI already prevailed on this issue in the first 

summary judgment motion and that it was not at issue in the 

second summary judgment motion, this argument is irrelevant to 

the motion we are reviewing in this appeal.
17

DISPOSITION

The judgment is affirmed. The surety is entitled to its costs 

on appeal. 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

______________________, J.

HOFFSTADT

We concur:

_________________________, P. J.

LUI

_________________________, J.

ASHMANN-GERST