Zurich American Insurance Company et al v. L.P.C.&D., Inc. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
ZURICH AMERICAN INSURANCE
COMPANY, et al
Plaintiffs,
v.
L.P.C.&D., INC., et al
Defendants.
CIVIL NO.: 24-1538 (RAM)
REPORT AND RECOMMENDATION
I. PROCEDURAL BACKGROUND
On November 19, 2024, Plaintiffs Zurich American Insurance Company (“Zurich”),
Fidelity and Deposit Company of Maryland (“F&D”), XL Specialty Insurance Company (“XLS”)
and XL Reinsurance America, Inc. (“XLR”) (collectively, “Plaintiffs” or “Sureties”) filed suit
against Defendants L.P.C.&D., Inc. (“LPCD”), Las Piedras Construction Corp. (“Las Piedras”),
Tejo, Inc. (“Tejo”), Equipment Depot, Inc. (“EDI”), Kane Caribbean, Inc. (“KCI”), Piezas Extras,
Inc. (“PEI”), Equipos de Boquerón, Inc. (“EBI”), Caribbean Raceway Park, Inc. (“CRP”),
Hacienda Cuco, Inc. (“HCI”), and Pedro Feliciano Benítez (“Feliciano”) (collectively,
“Defendants” or “Indemnitors”). Plaintiffs bring forth six causes of action against Indemnitors,
including breach of contract, specific performance, indemnity pursuant to the Puerto Rico Civil
Code of 1930, 31 L.P.R.A. §§ 4911, 4916, and 3023, exoneration, and quia timet, as well as
common law indemnity against LPCD. ECF No. 1. This lawsuit arises out of two indemnity
agreements that Defendants executed with Plaintiffs, in order to secure payment and performance
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bonds for a construction project in Puerto Rico. ECF No. 1. Upon LPCD’s failure to pay one of its
subcontractors, Soletanche, Inc., the latter filed suit (the “Soletanche Litigation”) in the Court of
First Instance, San Juan Part (“CFI”) against LPCD, the Sureties, and the Puerto Rico Aqueduct
and Sewer Authority (“PRASA”). ECF No. 49 at ¶ 17. Judgment, modifying the CFI Judgment,
was eventually entered by the Court of Appeals of Puerto Rico against LPCD and the Sureties for
$2,676,471.31, excluding interests and other amounts not yet calculated in the litigation. Exhibit
9-t.
Before the Court now is Plaintiffs’ motion to compel (ECF No. 2), whereby they request
that the Court grant injunctive relief against Defendants, order them to deposit collateral with
Zurich in the amount of five million six hundred thousand dollars ($5,600,000.00) and give
Plaintiffs access to Defendants’ books, records, and accounts. ECF No. 2.1 Also before the Court
are Defendants’ opposition and motion in compliance (ECF Nos. 25 and 26)2, alleging Colorado
River abstention, and Plaintiffs’ corresponding reply (ECF No. 29), as well as Defendants’ motion
to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1) (“Rule 12(b)(1)”)
(ECF No. 48) and Plaintiffs’ opposition thereto. ECF No. 51. An evidentiary hearing regarding the
request for injunctive relief was held on August 20, 2025. ECF No. 58. For the following reasons,
Defendants’ motion to dismiss for lack of subject matter jurisdiction should be DENIED,
Defendants’ request for the Court to abstain under Colorado River should also be DENIED, and
Plaintiffs’ motion to compel should likewise be DENIED.
1 Plaintiffs have steadfastly maintained their position that at this moment they are not seeking from the Sureties
payment or indemnification, but rather collateralization.
2 Despite being docketed under different titles, both the motion filed at ECF No. 25 and the motion filed at ECF No.
26 are alike. This being the case, the Court will simply refer to the motions them jointly as Defendants’ opposition.
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II. FINDINGS OF FACT3
LPCD is a general contractor that required surety performance and payment bonds on
various construction projects. ECF No. 49 at ¶ 1. Zurich and XLS are surety companies in the
business of providing performance and payment bonds to companies for various projects,
including construction projects. ECF No. 1 at p. 3, ¶ 17; ECF No. 58, Evid. Hrg., Aug. 20, 2025,
at 29:49-29:55, 2:03:24-2:03:39. F&D and XLR are wholly owned subsidiaries of Zurich and XLS,
respectively. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 28:25-28:42, 2:01:58-2:02:11. On May
24, 2004, the Indemnitors each executed a General Agreement of Indemnity with Zurich and F&D
(the “Zurich GAI”), and on June 18, 2004, the Indemnitors each executed a General Agreement of
Indemnity with XLS and XLR (the “XL GAI”) (collectively, the “Indemnity Agreements”). ECF
No. 49 at ¶ 2. Per the Zurich GAI, Defendants agreed, in relevant part, to the following:
The Contractor and Indemnitors shall exonerate, indemnify, and keep indemnified
the Surety from and against any and all liability for losses and/or expenses of
whatsoever kind or nature (including, but not limited to, interests, court costs and
counsel fees) and from and against any and all such losses and/or expenses which
the Surety may sustain and incur: (1) By reason of having executed or procured the
execution of the Bonds, (2) By reason of the failure of the Contractor or Indemnitors
to perform or comply with the covenants and conditions of this Agreement or (3)
In enforcing any of the covenants and conditions of this Agreement. Payment by
reason of the aforesaid causes shall be made to the Surety by the Contractor and
Indemnitors as soon as liability exists or is asserted against the Surety, whether or
not the Surety shall have made any payment therefor. Such payment shall be equal
to the amount of the reserve set by the Surety. In the event of any payment by the
Surety, the Contractor and Indemnitors further agree that in any accounting
between the Surety and Contractor, or between the Surety and the Indemnitors, or
either or both of them, the Surety shall be entitled to charge for any and all
disbursements made by it in good faith in and about the matters herein contemplated
by this Agreement under the belief that it is or was liable for the sums and amounts
so disbursed, or that it was necessary or expedient to make such disbursements,
whether or not such liability, necessity or expediency existed; and that the vouchers
3 The following findings of fact were obtained from the parties’ joint “Motion Submitting Uncontested Material Facts”
(ECF No. 49) as well as from the testimony and exhibits presented at the evidentiary hearing held on August 20, 2025.
ECF No. 58.
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or other evidence of any such payments made by the Surety shall be prima facie
evidence of the fact and amount of the liability to the Surety.
Exhibit 4 at p. 1, cl.2; ECF No. 49 at ¶¶ 3-5. Defendants also agreed that: “[a]t any time, and until
such time as the liability of the Surety under any and all said Bonds is terminated, the Surety shall
have the right to reasonable access to the books, records, and accounts of the Contractor, and
Indemnitors. . . .” Exhibit 4 at p. 3, cl. 9; ECF No. 49 at ¶ 6.
Similarly, the parties in the XL GAI agreed that the indemnity agreement “shall be liberally
construed so as to protect, exonerate, hold harmless, and indemnify” XLS and XLR. Exhibit 10 at
p. 1, cl. II(E); ECF No. 49 at ¶ 7. Much like the Zurich GAI, the XL GAI binds the Indemnitors to
various terms, including the following:4
(A) UNDERSIGNED shall exonerate, hold harmless, indemnify, and keep
indemnified SURETY from and against any and all losses, claims, liabilities,
damages, demands for payment or performance, expenses and costs of whatsoever
kind or nature including, but not limited to, interest, court costs, document
reproduction and storage charges, investigative expenses and costs, adjusting
expert and attorney fees imposed upon, sustained, or incurred by SURETY by
reason of: (1) SURETY having executed, provided or procured BOND(S) in behalf
of PRINCIPAL; (2) UNDERSIGNED’s failure to perform or comply with any of
the provisions of this AGREEMENT; (3) SURETY enforcing any of the covenants
or conditions of this AGREEMENT; (4) SURETY conducting any investigation,
obtaining or attempting to obtain a release, or recovering or attempting to recover
loss or unpaid premium in connection with any BOND(S); and/or (5) SURETY
prosecuting or defending any action or claim in connection with any BOND(S)
executed provided or procured in behalf of PRINCIPAL, whether SURETY at its
sole option elects to employ its own counsel, or permits or requires
UNDERSIGNED to make arrangements for SURETY’S legal representation.
(B) In order to exonerate, hold harmless and indemnify SURETY,
UNDERSIGNED shall upon demand of SURETY deposit funds with SURETY
before SURETY makes any payment; such funds shall be, at the SURETY’S
option, money or property or liens on security interest in property. The amount of
such money or property or the value of the property to become subject to liens or
security interests shall, at the option of the SURETY, equal (1) the sum of all
pending claims asserted against SURETY on BOND(S), whether such claims are
4 The term UNDERSIGNED used in the XL GAI’s language refers to Indemnitors, as defined in page 1 of this Report
and Recommendation, whereas the term PRINCIPAL refers to LPCD, also as defined in page 1 of this Report and
Recommendation.
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contested or not or whether or not liability has been established with respect to such
claims, plus the amount of costs and expenses which the SURETY, at its sole
discretion, estimates may be incurred as a result of the assertion of such claims, or
(2) the reserve established by SURETY as consequence of having issued BOND(S)
in behalf of PRINCIPAL. SURETY shall have no obligation to invest or provide a
return on the funds deposited.
Exhibit 10 at p. 2, cl. V(A)&(B); ECF No. 49 at ¶¶ 8-9. The last sentence of subsection (B) of this
clause, expressly states:
UNDERSIGNED acknowledge that failure of UNDERSIGNED to deposit funds
with SURETY in accordance with this section in the amounts and at the time
demanded by SURETY shall cause irreparable harm for which SURETY has no
adequate remedy at law. UNDERSIGNED agree that SURETY shall be entitled to
injunctive relief for specific performance of UNDERSIGNED’S obligation to
deposit funds with SURETY in accordance with this section.
Exhibit 10 at p. 2, cl. V(B); ECF No. 49 at ¶ 14. Regarding liability, the XL GAI states, in part:
(B) The liability of UNDERSIGNED under this AGREEMENT shall extend to and
include all amounts paid by SURETY in GOOD FAITH under the belief that: (1)
SURETY is or was liable for the sums and amounts so disbursed, or that it was
necessary or expedient to make such disbursements, whether or not such liability,
necessity or expediency existed; or (2) such payments were necessary or advisable
to protect any of SURETY’S rights or to avoid or lessen SURETY’S liability or
alleged liability.
. . .
(D) The voucher(s) or other evidence of such payment(s) or an itemized statement
of payment(s) sworn to by an officer of SURETY shall be prima facie evidence of
the fact and the extent of the liability of UNDERSIGNED to SURETY.
Exhibit 10 at p. 2, cl. VI(B)&(D); ECF No. 49 at ¶ 10. The XL GAI likewise provides that both
XLS and XLR “shall have access to the books, records, . . . and accounts of UNDERSIGNED. . .”
Exhibit 10 at p. 4, cl. XVI; ECF No. 49 at ¶ 11. Moreover, both the Zurich GAI and the XL GAI
contain provisions that benefit any co-sureties who also issue bonds in favor of Indemnitors.5
5 The Zurich GAI provision states:
In the event the Surety procures the execution of the Bonds by other sureties, or executes the Bonds
with co-sureties, or reinsures any portion of said Bonds with reinsuring sureties, then all the terms
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On December 14, 2004, relying on the Indemnity Agreements and the Indemnitors’
promises contained therein, and at the request of one or more of the Indemnitors, the Sureties
issued payment and performance bonds naming LPCD as principal and PRASA as the obligee (the
“Bonds”). ECF No. 49 at ¶ 16. These Bonds guaranteed LPCD’s work pursuant to its contract with
PRASA for the construction project known as Embalse del Río Naguabo, Puerto Rico (the
“Project”), as per the award letter dated November 10, 2004, and guaranteed LPCD’s obligations
for payment to:
[A]ll persons, firms, corporations who or which may furnish labor, or who furnish
materials to perform as described under the [C]ontract and to their successors and
assigns in the total aggregate penal sum of One Hundred Three Million Six Hundred
Thirty-Two Thousand Two Hundred Seventy and 00/100 Dollars
($103,632,270.00) . . . .
Exhibit 3 at p. 1; ECF No. 49 at ¶ 16.
On December 26, 2006, Soletanche, Inc., one of LPCD’s subcontractors on the Project,
filed a claim against LPCD, the Sureties, PRASA, and others in the Court of First Instance in San
Juan, Puerto Rico, implicating the Bonds issued for the Project. ECF No. 49 at ¶ 17. Following
over 12 years of litigation,6 on May 6, 2019, the CFI entered judgment in the Soletanche Litigation
against LPCD and the Sureties (the “CFI Judgment”). ECF No. 49 at ¶ 18. After multiple appeals
were filed challenging the CFI Judgment, on June 30, 2023, the Court of Appeals of Puerto Rico
and conditions of this Agreement shall inure to the benefit of such other sureties, co-sureties and
reinsuring sureties, as their interests may appear.
Exhibit 4 at p. 3, cl. 14; ECF No. 49 at ¶ 12. By the same token, the XL GAI provision states:
(D) This AGREEMENT inures to the benefit of any co-surety or reinsurer of SURETY on
BOND(S), and in the event the SURETY procures the execution of BOND(S) by other sureties, this
AGREEMENT shall inure to the benefit of such other sureties.
Exhibit 10 at p. 1, cl. II(D); ECF No. 49 at ¶ 13.
6 During the course of the Soletanche Litigation, three of the Defendants were dissolved: EBI, PEI, and CRP. Exhibits
A, B, and C.
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entered the following judgment (the “Appellate Judgment”), modifying the CFI Judgment in favor
of Soletanche, Inc., and against LPCD and the Sureties:
Soletanche will receive the following compensation from LPC&D and its sureties:
payment of the value of the columns within the work platform built and not paid,
$770,241.08, change of criteria in the installation, maximum amperage
$1,249,630.00 and for the stoppage for incorrectly rejecting the compacted sand in
the stone columns $314,777.50 for a total of $2,334,648.58. The CFI will determine
the payment of interest in accordance with the subcontract signed by Soletanche
and LPC&D.
Exhibit 5-t at pp. 69-70; ECF No. 49 at ¶¶ 19-20.
On March 8, 2024, the Supreme Court of Puerto Rico entered a resolution affirming the
Appellate Judgment. Exhibit 6-t; ECF No. 49 at ¶ 21. Thus, the case was remanded to the CFI to
determine the interest applicable and to adjudicate the final liability of LPCD and the Sureties.
ECF No. 49 at ¶ 22. The Sureties subsequently sent Defendants a demand letter on July 1, 2024,
whereby they demanded that the Indemnitors indemnify, exonerate, and collateralize the Sureties.
ECF No. 49 at ¶ 23; Exhibit 1. Almost three months later, on September 26, 2024, Soletanche, Inc.
filed a motion for writ of execution of judgment, seeking that the CFI (1) set a schedule for the
determination of interests and entry of final judgment, and (2) immediately enter judgment against
the Sureties in the amount of $2,676,471.31, exclusive of interest and additional amounts that are
pending determination by the CFI. ECF No. 49 at ¶ 24; Exhibit 8-t. The CFI granted Soletanche,
Inc.’s motion on June 23, 2025, giving Soletanche, Inc. five days to tender a draft order for
execution of judgment and a writ of mandamus. Exhibit 9-t.7
7 On December 5, 2025, Plaintiffs informed the Court that on September 19, 2025, Soletanche Inc. filed a motion in
the CFI notifying that on August 21, 2025, it had tendered a proposed order and writ of execution. ECF No. 61 at 2, ¶
3-4. However, as of the filing of this Report and Recommendation, the parties have not brought to the Court’s attention
whether the CFI has issued any order and writ of execution of judgment.
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III. RULE 12(B)(1) MOTION (ECF NO. 48)
A. Legal Standard
A motion to dismiss pursuant to Rule 12(b)(1) requires the Court to “construe the
[c]omplaint liberally and treat all well-pleaded facts as true, according the plaintiff the benefit of
all reasonable inferences.” Murphy v. U.S., 45 F.3d 520, 522 (1st Cir. 1995) (citing K.W. Thompson
Tool Co. v. United States, 836 F.2d 721, 726 (1st Cir. 1988)) (emphasis in the original). However,
the court may also “consider materials outside the pleadings” when analyzing Rule 12(b)(1)
motions. González v. U.S., 284 F.3d 281, 288 (1st Cir. 2002 (citing Heinrich v. Sweet, 44 F.Supp.2d
408, 412 (D. Mass. 1999); White v. Comm’r of Internal Revenue, 899 F.Supp. 767, 771 (D. Mass
1995)); see also Fernández Molinary v. Industrias La Famosa, Inc., 203 F.Supp.2d 111, 114
(D.P.R. 2002) (“[U]nder Rule 12(b)(1) the Court is not restricted to the face of the pleadings but
may consider extra-pleading materials, such as affidavits and testimony to resolve factual disputes
concerning the existence of jurisdiction.”) (citations omitted).
Challenges to a court’s federal subject matter jurisdiction pursuant to Rule 12 (b)(1) include
issues such as “sovereign immunity, mootness, [and] ripeness . . . .” González-Camacho v. Banco
Popular de Puerto Rico, 318 F.Supp.3d 461, 469 (D.P.R. 2018) (citing Valentín v. Hospital Bella
Vista, 254 F.3d 358, 362-63 (1st Cir. 2001)). Though the burden of proving jurisdiction rests with
the plaintiff, dismissal is not warranted under 12(b)(1), “unless it is clear that plaintiff will be
unable to prove any set of facts which would entitle [it] to recovery.” Great River Indus., Inc. v.
Public Serv. Com’n of Puerto Rico, 131 F.Supp.2d 265, 268 (D.P.R. 2001) (collecting cases).
“Federal jurisdiction is never presumed. Instead, the proponent—here, the plaintiff[]—must carry
the burden of demonstrating the existence of federal jurisdiction.” Viqueira v. First Bank, 140 F.3d
12, 16 (1st Cir. 1998) (citing Aversa v. United States, 99 F.3d 1200, 129 (1st Cir. 1996); Murphy,
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45 F.3d at 522 (1st Cir. 1995)). The plaintiff “may not rest merely on ‘unsupported conclusions
or interpretations of law.’” Great River Ind., Inc., 131 F.Supp.2d at 269 (quoting Washington
Legal Found. v. Mass. Bar Found., 993 F.2d 962, 971 (1st Cir. 1993)). “Subjective
characterizations or conclusory descriptions of a general scenario which could be dominated by
unpleaded facts’ will not defeat a motion to dismiss.” Murphy, 45 F.3d at 522 (quoting Coyne v.
City of Somerville, 972 F.2d 440, 444 (1st Cir. 1992)).
B. Analysis
In their motion to dismiss, Defendants contend that Plaintiffs’ request for preliminary
injunction should be dismissed for lack of subject matter jurisdiction under Rule 12(b)(1). ECF
No. 48 at 5.8 Specifically, Defendants claim that Plaintiffs’ case is unripe because the Soletanche
Litigation Appellate Judgment amount does not include the total amount of attorney fees, penalties
nor interest owed. Id; ECF No. 2-4 at 70; Exhibit 5-t at 70. As such, Defendants claim that the
Soletanche Litigation has not ended, therefore depriving this Court from asserting subject matter
jurisdiction over the federal case. Id. at 7. Plaintiffs oppose this contention, arguing that the
existence of “not only a judicial demand for payment against the Sureties but [also] a Court
judgment ordering [LPCD] and the Sureties to make payments on a claim made by a subcontractor
of [LPCD]” entitles Plaintiffs, under Puerto Rico law, to demand collateral agreed upon in their
Indemnity Agreements. ECF No. 51 at 9. Plaintiffs’ position is correct.
For starters, and unlike Defendants state in their motion to dismiss (ECF No. 48 at 6), “[t]he
ripeness of indemnification claims is a question of federal law.” Kelly v. Riverside Partners, LLC,
8 Defendants also base their motion to dismiss on Plaintiffs’ failure to comply with Local Rule 65. Local Rule 65
states that “[a]ny motion for a temporary restraining order or preliminary injunction shall be accompanied by a
proposed order.” Plaintiffs did not include any such proposed order with their motion to compel. ECF No. 2. While,
it is important that the parties comply with the strictures of the local rules and they ignore these rules at their own
peril, Nieves Ayala v. Johnson & Johnson, Inc., 208 F.Supp.2d 195, 198 (D.P.R. 2002), dismissal on this ground alone
would be too drastic a measure.
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964 F.3d 107, 115 (1st Cir. 2020)). The ripeness doctrine “‘has roots in both the Article III case or
controversy requirement and in prudential considerations.’” Sindicato Puertorriqueño de
Trabajadores v. Fortuño, 699 F.3d 1, 8 (1st Cir. 2012) (quoting Mangual v. Rotger-Sabat, 317
F.3d 45, 59 (1st Cir. 2003)). A court deciding the ripeness issue under Rule 12(b)(1), “must take
the complaint’s well-pleaded facts as true and indulge all reasonable inferences in its favor.”
Project Veritas Action Fund v. Conley, 270 F.Supp.3d 337, 340 (D. Mass. 2017). Determining the
ripeness analysis necessarily turns on “two factors: ‘the fitness of the issues for judicial decision
and the hardship to the parties of withholding court consideration.’” Sindicato Puertorriqueño,
699 F.3d at 8 (quoting Abbott Labs. Gardner, 387 U.S. 136, 149 (1967), abrogated on other
grounds by Califano v. Sanders, 430 U.S. 99 (1977)); see also Reddy v. Foster, 845 F.3d 493, 500
(1st Cir. 2017) (“Ripeness analysis has two prongs: ‘fitness’ and ‘hardship.’”) (quoting Texas v.
U.S., 523 U.S. 296, 300-01 (1998)).
The first prong of the ripeness analysis, that is the fitness prong, involves “both
jurisdictional and prudential components.” Reddy, 845 F.3d at 501 (quoting Roman Catholic
Bishop of Springfield v. City of Springfield, 724 F.3d 78, 89 (1st Cir. 2013)). “The jurisdictional
component of the fitness prong concerns ‘whether there is a sufficiently live case or controversy,
at the time of the proceedings, to create jurisdiction in the federal courts.’” Id. On the other hand,
“[t]he prudential component of the fitness prong concerns ‘whether resolution of the dispute should
be postponed in the name of judicial restraint from unnecessary decision of constitutional issues.’”
Id. (internal citations and quotations omitted). Thus, “if elements of the case are uncertain, delay
may see the dissipation of the legal dispute without need for decision.” Mangual, 317 F.3d at 59.
As for the hardship prong, this prong is “‘wholly prudential.’” Id. (citing 1 L. Tribe,
American Constitutional Law § 3d ed. 2000)). It “requires a court to consider ‘whether the
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challenged action creates a direct and immediate dilemma for the parties.’” Sindicato
Puertorriqueño, 699 F.3d at 9 (quoting Verizon New Eng., Inc. v. Int’l Bhd. of Elec. Workers,
Local No. 2322, 651 F.3d 176, 188 (1st Cir. 2011)) (internal citations and quotations omitted). In
this regard, the “‘mere possibility of future injury, unless it is the cause of some present detriment,
does not constitute hardship.’” Id. (quoting Simmonds v. INS, 326 F.3d 351, 360 (2d Cir. 2003)).
Here, the jurisdictional component of the fitness prong is met. The merits of the Soletanche
Litigation have been adjudicated and liability has already been attributed to LPCD and the Sureties
in the amount of $2,676,471.31, excluding the interest, attorney fees, and penalties which have yet
to be calculated. ECF No. 2-4 at 69-70; Exhibit 5-t at 69-70. What is more, Soletanche, Inc. has
already requested, and the CFI has granted, the issuance of a writ of execution of this judgment,9
and Soletanche, Inc. has tendered a proposed order and writ of execution, which is pending before
the CFI. ECF No. 61.
Defendants agreed that, “[p]ayment . . . shall be made to the Surety by the Contractor and
Indemnitors as soon as liability exists or is asserted against the Surety, whether or not the Surety
shall have made any payment therefor.” ECF No. 2-1 at p. 1, cl. 2; Exhibit 4 at p. 1, cl. 2.
Defendants also agreed that “[i]n order to exonerate, hold harmless and indemnify [Sureties],
[Indemnitors] shall upon demand of [Sureties] deposit funds with [Sureties] before [Sureties]
make[] any payment . . . .” Id; see also ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 1:50:57-1:51:30.
Accordingly, Plaintiffs’ request for preliminary injunctive relief is premised upon Defendants’
failure to comply with their agreed-upon obligations to inter alia collateralize Plaintiffs in view of
the over two-million-dollar judgment amount Sureties are liable for in the Soletanche Litigation.
ECF No. 2 at 10, 24. In other words, Plaintiffs are not bringing forth a hypothetical claim, but
9 Exhibit 9-t.
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rather a live claim where the facts clearly show that liability has been adjudicated and payment is
not a speculative concern. See 31 L.P.R.A. § 4916 (1930) (“The surety, even before paying, may
proceed against the principal debtor: (1) [w]hen he is sued for the payment. . . .”); see also Am.
Motorists Ins. Co. v. United Furnace Co., Inc., 876 F.2d 293, 301 (2d Cir. 1989) (“In assessing
whether [the surety’s] cause of action for collateral security is ripe, the relevant question is not
whether [the surety] actually paid . . . or whether [its] liability . . . is established with finality or
certainty. Rather, the relevant question . . . is whether the ‘demands’ . . . have been made.”); cf.
Reddy v. Foster, 845 F.3d at 505 (finding that the case was not ripe because, among other things,
the court had before it “‘only hypothetical . . . claims, the details of which are not known.’”)
(quoting Labor Relations Div. of Constr. Indus. of Mass., Inc. v. Healey, 844 F.3d 318, 328 (1st
Cir. 2016)).
The prudential component of the fitness prong is likewise met. The final dollar amount that
LPCD and the Sureties will have to pay once interest, penalties, and attorney fees have been taken
into account will not “significantly affect” Plaintiffs’ claims, as the legal issues in this case are
predicated on Defendants’ alleged failure to comply with the terms of the Indemnity Agreements,
not the determination of the liability amount. See Algonquin Gas Transmission, LLC v. Weymouth,
Mass., 919 F.3d 54, 62 (1st Cir. 2019) (“The prudential component of the fitness test asks whether
the resolution of the case turns on ‘legal issues not likely to be significantly affected by further
factual development.’”) (citing Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d 530, 536
(1st Cir. 1995)). In the same vein, Defendants’ alleged noncompliance with the Indemnity
Agreements’ terms indeed presents a “direct and immediate dilemma,” to the Plaintiffs that
satisfies the hardship prong. Roman Catholic Bishop of Springfield, 724 F.3d at 92-93. Plaintiffs
face the imminent threat of execution of judgment in the Soletanche Litigation, which in turn,
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would obligate them to tap into their own coffers to pay no less than the Appellate Judgment
amount, contrary to the terms of the Indemnity Agreements.
Accordingly, Defendants’ motion to dismiss under Rule 12(b)(1) should be DENIED. ECF
No. 48.
IV. COLORADO RIVER ABSTENTION DOCTRINE (ECF NO S. 25-26)
A. Applicable Legal Standard
The Colorado River abstention doctrine has its genesis in Colorado River Water
Conservation District v. United States, 424 U.S. 800 (1976), a water rights case wherein the district
court dismissed the case, stating that the doctrine of abstention precluded it from entertaining the
federal proceeding due to the existence of a parallel state court proceeding. Id. at 806. In reversing
the lower court, the Supreme Court explained that “[a]bstention from the exercise of federal
jurisdiction is the exception, not the rule.” Id. at 813. It further explained that “[t]he doctrine of
abstention, under the which a District Court may decline to exercise or postpone the exercise of its
jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate
a controversy properly before it.” Id.
The First Circuit, in recognizing the exceptional quality of Colorado River abstention, has
consistently held that its applicability is quite limited. Río Grande Comty. Health Center, Inc. v.
Rullán, 397 F.3d 56, 71 (1st Cir. 2005) (quoting Colorado River, 424 U.S. at 818); see also Jiménez
v. Rodríguez-Pagán, 597 F.3d 18, 27 (1st Cir. 2010) (“The crevice in federal jurisdiction that
Colorado River carved is a narrow one. Of all the abstention doctrines, it is to be approached with
the most caution, with “[o]nly the clearest of justifications” warranting dismissal.”) (citing
Colorado River, 424 U.S. at 819); Currie v. Group Ins. Com’n, 290 F.3d 1, 9 (1st Cir. 2002)
(“‘[T]he circumstances permitting the dismissal of a federal suit due to the presence of a concurrent
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state proceeding for reasons of wise judicial administration are considerably more limited that the
circumstances appropriate for abstention’ and should be ‘exceptional’ to justify deferral to the state
court.”) (quoting Colorado River, 424 U.S. at 818).
To this end, the First Circuit has extrapolated a non-exclusive list of factors, known as the
“exceptional-circumstances test,” in order to determine whether Colorado River abstention is
warranted, to wit:
(1) whether either court has assumed jurisdiction over a res; (2) the [geographical]
inconvenience of the federal forum; (3) the desirability of avoiding piecemeal
litigation; (4) the order in which the forums obtained jurisdiction; (5) whether state
or federal law controls; (6) the adequacy of the state forum to protect the parties’
interests; (7) the vexatious or contrived nature of the federal claim; and (8) respect
for the principles underlying removal jurisdiction.
KPS & Assoc., Inc. v. Designs By FMC, Inc., 318 F.3d 1, 10 (1st Cir. 2003) (citing Burns v. Watler,
931 F.2d 140, 146 (1st Cir. 1991)); Jiménez, 597 F.3d at 27-28 (quoting Río Grande Cmty. Health
Center, Inc., 397 F.3d at 71-72). “No one factor is meant to be determinative, but rather courts
must make a ‘carefully considered judgment taking into account both the obligation to exercise
jurisdiction and the combination of factors counselling against that exercise.’” Río Grande Cmty.
Health Center, Inc., 397 F.3d at 72 (quoting Colorado River, 424 U.S. at 818; Moses H. Cone
Mem’l. Hosp., 460 U.S. at 16; KPS & Assoc., 318 F.3d at 10). Moreover, “‘district court[s] must
approach [their] decision ‘with the balance heavily weighted in favor of the exercise of
jurisdiction.’” Villa Marina Yacht Sales, Inc. v. Hatteras Yachts, 915 F.2d 7, 12 (1st Cir. 1990)
(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983)).
B. Analysis
In their opposition to Plaintiffs’ motion to compel, Defendants argue that the Court should
not grant Plaintiffs’ request for injunctive relief because the Soletanche Litigation, which was filed
in state court prior to the birth of this case, constitutes parallel litigation that activates the Colorado
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River abstention doctrine. ECF No. 25 and 26. In Defendants’ view, “there is a clear identical
involvement of the same matter [because] both the state court’s litigation and this case are about
the the [sic] bonds for the ‘Project.’” Id. at 4. Focusing specifically on two of the factors courts
must consider under the doctrine—that is “the desirability of avoiding piecemeal litigation” and
“the order in which the forums obtained jurisdiction”—Defendants request that the Court defer
jurisdiction to the proceedings in the CFI and dismiss Plaintiffs’ motion to compel in its entirety.
Id. Plaintiffs’ replied, arguing that Colorado River does not apply to this case because the state
and federal cases are not parallel, as each case involves different claims and the federal case
involves a potentially broader scope of relief. ECF No. 29 at 3-4. Plaintiffs also argue that were
the Court to find that the cases are parallel, abstention is still inappropriate as there exist no
exceptional circumstances that warrant abstention. Id. at 5-11.
As previously stated, Colorado River abstention necessarily requires the Court to first
determine whether the state court proceeding and the federal proceeding are parallel. Alexandrino
v. Jardín de Oro, Inc., 573 F.Supp.2d 465, 473 (D.P.R. 2008) (citing Pastor-Ginorio v. R&G
Mortg. Corp., 371 F.Supp.2d 89, 95 (D.P.R. 2005)). Only after this determination does the Court
then go on to “perform a balance of interests considering [the six factors listed above] in order to
determine whether there exist ‘exceptional circumstances’ to justify abstention.” Id. at 474. Cases
are considered parallel “if they involve the same parties and ‘substantially identical claims,’ raising
‘nearly identical allegations and issues.’” Id. at 473-74 (quoting Timoney v. Upper Merion Twp.,
66 Fed.Appx. 403 (3rd Cir. 2003)).
In this case, the first part of the analysis militates against abstention, as the parties and the
issues are not parallel. The state court case involves Soletanche, Inc., a subcontractor of LPCD,
who sued PRASA, LPCD, the Sureties, and others for LPCD’s and PRASA’s failure to pay for
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Soletanche, Inc.’s services rendered in the Project. Exhibit 5-t at 3-4; ECF No. 58, Evid. Hrg.,
Aug. 20, 2025, at 53:38-54:41. The case currently before the Court, however, involves different
parties, as neither Soletanche, Inc. nor PRASA are parties in the federal litigation. Moreover, it is
true that the federal case is related to the state case inasmuch as it was filed after the state court
found LPCD and the Sureties liable to Soletanche, Inc. for over two million dollars. Id. at 69-70.
Nevertheless, stating that the cases are parallel because both cases “are about the the [sic] bonds
for the Project” is an oversimplification of the issues at hand. ECF No. 25 at 4. In the state court
case, the issues involve breach of contract and money collection for services rendered, whereas
the issues in federal case revolve around a different type of breach of contract, that is, the
Indemnitors’ failure to comply with their obligations to provide collateral, access to books and
records, and indemnification to the Sureties per the terms of the Indemnity Agreements. In sum,
because the state and federal proceedings are not parallel, the Colorado River abstention doctrine
is inapplicable. Consequently, the request for the Court to abstain should be DENIED.
V. PRELIMINARY INJUNCTION (ECF NO. 2)
A. Applicable Legal Standard
Federal Rule of Civil Procedure 65 provides that “[t]he court may issue a preliminary
injunction only on notice to the adverse party.” Fed. R. Civ. P. 65(a)(1). A court may grant a
preliminary injunction in order “‘to preserve the status quo, freezing an existing situation so as to
permit the trial court, upon full adjudication of the case’s merits, more effectively to remedy
discerned wrongs.’” Matos ex rel. Matos v. Clinton School Dist., 367 F.3d 68, 72 (1st Cir. 2004)
(quoting CMM Cable Rep., Inc. v. Ocean Coast Props., Inc., 48 F.3d 618, 620 (1st Cir. 1995)). “A
preliminary injunction is a potent weapon that should be used only when necessary to safeguard a
litigant’s legitimate interests.” Charlesbank Equity Fund II v. Blinds To Go, Inc., 370 F.3d 151,
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163 (1st Cir. 2004) As such, this remedy is extraordinary in nature and should never be awarded
“as of right.” Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 24 (2008) (citing
Munaf v. Geren, 553 U.S. 674, 689-90 (2008)); see also People Federal Sav. Bank v. People’s
United Bank, 672 F.3d 1, 8-9 (1st Cir. 2012) (“A preliminary injunction is an extraordinary and
drastic remedy that is never awarded as of right.”) (quoting Voice of Arab World, Inc. v. MDTV
Medical News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011)). Thus, “‘[i]n exercising their sound
discretion, courts of equity should pay particular regard for the public consequences in employing
the extraordinary remedy of injunction.’” Winter, 555 U.S. at 24 (quoting Weinberger v. Romero-
Barceló, 456 U.S. 305, 312 (1982); Railroad Comm’n of Tex. v. Pullman Co., 312 U.S. 496, 500
(1941)).
A district court considering whether to grant a preliminary injunction must weigh four
different elements, to wit: “(1) the probability of the movant’s success on the merits;” (2) “the
prospect of irreparable harm absent the injunction;” (3) “the balance of the relevant equities
(focusing upon the hardship to the movant if an injunction does not issue as contrasted with the
hardship to the nonmovant if it does);” and (4) “the effect of the court’s action on the public
interest.” Matos ex rel. Matos, 367 F.3d at 73 (citing Ross-Simons of Warwick, Inc. v. Baccarat,
Inc., 102 F.3d 12, 15 (1st Cir. 1996); Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.
1991)). The First Circuit has often held that the likelihood of success and irreparable harm factors
carry the most weight in this analysis. See New Comm Wireless Services, Inc. v. SprintCom, Inc.,
287 F.3d 1, 9 (1st Cir. 2002) (“The sine qua non of this four-part inquiry is likelihood of success
on the merits: if the moving party cannot demonstrate that he is likely to succeed in his quest, the
remaining factors become matters for idle curiosity.”) (citing Weaver v. Henderson, 984 F.2d 11,
12 (1st Cir. 1993)); Charlesbank Equity Fund II, 370 F.3d at 162 (“In most cases . . . irreparable
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harm constitutes a necessary threshold showing for an award of preliminary injunctive relief.”)
(citing Matos ex rel. Matos, 367 F.3d at 73).
B. Collateralization
1. Likelihood of Success on the Merits
Plaintiffs in this case contend they have a likelihood of success on the merits because, in
addition to Defendants being bound by the terms in the Indemnity Agreements, Puerto Rico law
supports “the enforcement of clear and unambiguous provisions of an indemnity agreement
between a surety and its indemnitors. . . .” ECF No. 2 at p. 12. Defendants, however, are silent in
this regard.
It is uncontested that the terms of the Zurich GAI obligates Defendants to “exonerate,
indemnify,10 and keep indemnified [Sureties]” against any losses or expenses incurred by
Indemnitors, and state that “[p]ayment . . . shall be made to the Surety by the Contractor and
Indemnitors as soon as liability exists or is asserted against the Surety, whether or not the Surety
shall have made any payment therefor.” See Exhibit 4 at p. 1, cl. 2. Similarly, the XL GAI states:
In order to exonerate, hold harmless, and indemnify [Sureties], [the Indemnitors]
shall upon demand of [Sureties] deposit funds with [Sureties] before [Sureties]
make[] any payment; such funds shall be, at [Sureties’] option, money, or property
or liens on or security interests in property. The amount of such money or property
or the value of the property to become subject to liens or security interests shall, at
the option of the [Sureties], equal (1) the sum of all pending claims asserted against
[Sureties] on [bonds], whether, such claims are contested or not or whether or not
liability has been established with respect to such claims, plus the amount of costs
or expenses which the [Sureties], in [their] sole discretion, estimate[] may be
incurred as a result of the assertion of such claims, or (2) the reserve established by
[Sureties] as consequence of having issued [bonds] in behalf of [LPCD].
See Exhibit 10 at p. 2, cl. V(B).
10 The Zurich GAI and the XL GAI both contain co-surety beneficiary provisions. See Exhibit 4 at p. 3, cl. 14; Exhibit
10 at p. 1, cl. II(D).
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Thus, Defendants are contractually bound to deposit funds with Plaintiffs as soon as it is
demanded. See P.R. Laws Ann. tit. 31, § 4916 (1930) (“The surety, even before paying, may
proceed against the principal debtor: (1) [w]hen he is sued for the payment. . . .”); see also P.R.
Laws Ann. tit. 31, § 2994 (1930) (“Obligations arising from contracts have legal force between
the contracting parties, and must be fulfilled in accordance with their stipulations.”).11 On June 30,
2023, the Appellate Judgment was entered, and liability asserted against LPCD and the Sureties.
Exhibit 5-t. As a result of the judgment in the Soletanche Litigation, Plaintiffs sent Defendants a
demand letter on July 1, 2024 (Exhibit 1), requesting they deposit collateral in the amount of five
million six hundred thousand dollars ($5,600,000.00) and provide Plaintiffs reasonable access to
their books and records, which Defendants answered on August 2, 2024, but did not comply with.
Exhibit 2. To this date, Defendants have yet to deposit the requested collateral or access to their
books and records, thereby failing to meet the terms of the Indemnity Agreements.12 With this
framework in mind, Plaintiffs will likely succeed in the merits of their claim. Thus, the first prong
weighs in their favor.
2. Irreparable Harm
Similar to likelihood of success on the merits, irreparable harm is also given much weight
when analyzing whether to award preliminary injunctive relief. Charlesbank Equity Fund II, 370
F.3d at 162 (citing Matos ex rel. Matos, 367 F.3d at 73). “The burden of demonstrating that a
denial of interim relief is likely to cause irreparable harm rests squarely upon the movant.” Id.
(citing Ross-Simons of Warwick, Inc., 102 F.3d at 15). This prong of the injunctive relief standard
11 The Puerto Rico Civil Code of 1930 was repealed by the new Puerto Rico Civil Code of 2020, which came into
effect on November 28, 2020. However, because the events of this case occurred prior to this date, the applicable Civil
Code is the now repealed Puerto Rico Civil Code of 1930. See Díaz-Morales v. Universidad de Puerto Rico, Civil No.
20-1630 (RAM), 2023 WL 3177792, at *2 (D.P.R. May 1, 2023) (“It is well established that if the events of a case
occurred before the implementation of the newest Civil Code, then the Puerto Rico Civil Code of 1930 should be
applied instead.”) (citations omitted).
12 No informative motion has been filed advising the contrary.
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requires the movant to show that they are at risk of suffering harm that cannot be remedied through
monetary relief. See Matos ex rel. Matos, 367 F.3d at 73 (“A preliminary injunction should not
issue except to prevent a real threat of harm.”) (citing Ross-Simons of Warwick, Inc., 102 F.3d at
19; 11A Charles Alan Wright, Arthur R Miller, & Mary Kay Kane, Federal Practice & Procedure
§ 2948.1, at 153-54 (2d ed. 1995)). Given that injunctive relief is extraordinary in nature, the
general consensus amongst the circuits, including the First Circuit, when considering the
irreparable harm prong is that if the harm can be remedied by money, it is not irreparable. See
Foxboro Co. v. Arabian American Oil Co., 805 F.2d 34, 36 (1st Cir. 1986) (“We do not find
irreparable injury where only money is at stake and where the plaintiff has a satisfactory remedy
at law to recover the money at issue.”) (citing Itek Corp. v. First Nat’l Bank, 730 F.2d 19, 22 (1st
Cir. 1984)).13
Per witness testimony, Plaintiffs here acknowledge that the relief they seek is economic in
nature. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 2:43:40-2:44:27. Plaintiffs’ position is instead
that they are not required to show the existence of irreparable harm because the contractual
language of the indemnity clause in the XL GAI is enough,14 by itself, to satisfy this requirement.
ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:19:33-3:19:53.15 Plaintiffs also insist that they are not
13 See also, e.g., Clevinger v. Advocacy Holdings, Inc., 134 F.4th 1230, 1234 (D.C. Cir. 2025) (“‘Mere injuries,
however substantial, in terms of money, time and energy necessarily expended in the absence of a’ preliminary
injunction ‘are not enough.’”) (quoting Virginia Petroleum Jobbers Ass’n v. Federal Power Comm’n, 259 F.2d 921,
925 (D.C. Cir. 1958)); Checker-Cab of Philadelphia Inc. v. Uber Techs., Inc., 643 F.App’x 229, 232 (3d Cir. 2016)
(“[The Third Circuit] has ‘long held that an injury measured in solely monetary terms cannot constitute irreparable
harm.’”) (quoting Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 562 F.3d 553, 557 (3d Cir. 2009)); Rent-A-Center,
Inc. v. Canyon Television and Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991) (“It is true that economic
injury alone does not support a finding of irreparable harm, because such injury can be remedied by a damage award.”)
(citing Los Angeles Mem’l Coliseum Comm’n v. Nat’l Football League, 634 F.2d 1197, 1202 (9th Cir. 1980)).
14 See Exhibit 10 at p. 2, cl. V(B) (“[Indemnitors] acknowledge that failure of [Indemnitors] to deposit funds with
[Sureties] in accordance with this section in the amounts and at the time demanded by [Sureties] shall cause irreparable
harm for which [Sureties] ha[ve] no adequate remedy at law.”).
15 “Our position is that, to the extent that as a condition for the issuance of the bonds, the defendants agreed that they
had to sign this agreement, and in this agreement they consented that this situation precisely where we are right now
constitutes irreparable harm, that element of the claim of irreparable harm does not have to be proven at this point in
the case.”
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seeking indemnification at this stage of the proceedings, but rather collateralization. ECF No. 58,
Evid. Hrg., Aug. 20, 2025, at 3:13:03-3:15:29. To this end, and citing to Travelers Cas. and Sur.
Co. of America v. Indus. Com. Structures, Inc., No. 6:12-cv-1994-Orl-28DAB, 2012 WL 4792906,
(M.D. Fla. Oct. 9 2012) and to Philadelphia Indem. Ins. Co. v. Therma Seal Roof Sys., LLC, 21-
80306-CIV-MARRA, 2022 WL 1664183 (S.D. Fla March 9, 2022), Plaintiffs further argue that
Defendants’ failure to provide collateral would harm them because it would put their security
interest at risk and effectively turn them into general unsecured creditors, a risk they did not
bargain for. ECF No. 2 at p. 19; ECF No. 58, Evid. Hrg, Aug. 20, 2025, at 3:35-56-3:37:48. In
their view, they are only required to demonstrate that Defendants have failed to deposit the
requested collateral and this, by the terms of the XL GAI, is enough to constitute irreparable harm.
ECF No. 2 at p. 17; ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:13:14-3:13:42, 3:18:04-3:18:20.
Defendants, on the other hand, maintain that Plaintiffs have failed to make a showing of
irreparable harm, as is required by the traditional four-prong test, contending that Plaintiffs’
alleged irreparable harm is monetary in nature. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 4:06:51-
4:07:05. In particular, Defendants argue that a contractual clause such as the one at issue here,
alleging irreparable harm, is not enough by itself to meet the preliminary injunction standard; an
actual showing of irreparable harm is still required. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at
3:52:33-3:52:43, 4:02:19-4:02:41. Therefore, they posit that the Court should deny injunctive
relief, as the Plaintiffs failed to meet the irreparable harm prong of the preliminary injunction
standard. Id.
The issue at hand boils down to whether a clause in an indemnity contract—wherein the
parties agree that failure to abide by the terms of said clause (including collateralization)
constitutes irreparable harm and entitles the sureties to injunctive relief for inter alia specific
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performance—is enough by itself to meet the irreparable harm prong of the preliminary injunction
standard. As already stated, when the remedy sought is purely economic in nature, the irreparable
harm prong of the preliminary injunction standard is generally not met. Foxboro Co., 805 F.2d at
36. In the same vein, various circuits have rejected the notion that the irreparable harm prong is
met or may be satisfied by simply including language to that effect in a contractual agreement. See
e.g., Dominion Video Satellite, Inc. v. Echostar Satellite Corp., 356 F.3d 1256, 1266 (10th Cir.
2004) (“While courts have given weight to parties’ contractual statements regarding the nature of
harm and attendant remedies that will arise as a result of a breach of a contract, they nonetheless
characteristically hold that such statements alone are insufficient to support a finding of irreparable
harm and an award for injunctive relief.”) (collecting cases); Baker’s Aid, a Div. of M. Raubvogel
Co., Inc. v. Hussmann Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1982) (“[C]ontractual language
declaring money damages inadequate in the event of a breach does not control the question whether
preliminary injunctive relief is appropriate.”); Smith, Bucklin & Assoc., Inc. v. Sonntag, 83 F.3d
476, 481 (D.C. Cir. 1996) (“[A] contractual provision that states that the company has suffered
irreparable harm if the employee breaches the covenant and that the employee agrees to be
preliminarily enjoined, [] by itself is an insufficient prop.”) (citation omitted). This
notwithstanding, when the contractual agreement involves a surety, the answer is not so cut and
dry. There is a lack of consensus as to whether, in the context of sureties, clauses in indemnity
agreements with “irreparable harm” language—like the language in the XL GAI—are enough on
their own to meet the irreparable harm prong of the preliminary injunction standard, and neither
the United States Court of Appeals for the First Circuit nor the United States Supreme Court have
yet ruled on this particular issue.
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As Plaintiffs contend, some courts find that a surety suffers irreparable harm when an
indemnitor fails to provide collateral per the terms of an indemnity agreement that contains such
“irreparable harm” language. One is example is Philadelphia Indem. Co. v. DB Booneville, LLC,
where the court granted the surety’s request for preliminary injunction, finding that “[t]he
protection provided by a collateral security provision would be impaired if the surety had to suffer
even a temporary loss after a principal’s failure to perform.” 4:24-cv-00029-SMR-WPK, 2024 WL
4016373, at *6 (S.D. Iowa July 12, 2024) (citing Safeco Ins. Co. of Am. v. Lake Asphalt Paving &
Co., 807 F.Supp.2d 820, 827 (E.D. Mo. 2011); Travelers Cas. & Surety Co. v. Ockerland, No. 04-
C-3963, 2004 WL 1794915, at *5 (N.D. Ill. Aug. 6, 2004)). In so finding, the Philadelphia court
stated that sureties would not only face economic harm but would also be put in a position where
they run the risk of becoming general unsecured creditors, thereby losing the security interest they
bargained for. Id. (“Without specific performance of a collateral-security clause, it becomes a
nullity that cannot be adequately remedied through money damages. . . . [T]he purpose of [these]
provision[s] (and the benefits derived from its bargain) is that a surety will not have to compete
with other unsecured creditors . . . .”) (citations omitted) (internal quotations omitted). The court
further explained that the very nature of the surety business, and of indemnity contracts, is to
prevent being exposed to such a risk. Id. (“‘[T]he entire purpose of a contract is to provide security
to a surety in the event of a third party’s claim for damages, the lack of security cannot be
adequately remedied by a money judgment months or years down the road.’”) (quoting Merch.
Bonding Co. (Mutual) v. Arkansas Constr. Sol., LLC, No. 5:18-CV-05078, 2019 WL 452767, at
*5 (W.D. Ark. Feb. 5, 2019) (emphasis in original).
Other courts have also displayed similar reasoning. See, e.g., XL Specialty Ins. Co. v.
Bighorn Constr. & Reclamation, LLC., et al., Civil. No. 31-3068-BAH, 2022 WL 2105925, at * 9
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(D. Md. June 10, 2022) (“[T]he nature of the injury is not simply monetary, . . . [but rather], the
harm amounts instead to the failure . . . to perfect a security interest . . . . In this critical respect, a
surety’s loss of its right to collateralization cannot be adequately remedied through money
damages.”) (citations omitted) (internal quotations omitted); Great Am. Ins. Co. v. SRS, Inc., Civil
No. 3:11-cv-00970, 2011 WL 6754072, at *8 (M.D. Tenn. Dec. 23, 2011) (“[C]ourts have
routinely found that sureties suffer immediate, irreparable harm if they are denied receipt of
collateral after liability has been asserted against them.”) (collecting cases); XL Specialty Ins. Co.
v. Truland, No. 1:14-cv-1058 (JCC/JFA), 2014 WL 4230388, at *4 (E.D. Va. Aug 21, 2014)
(“Absent enforcement of the collateral security obligation, Plaintiffs [sureties] would be in the
same position as any other unsecured creditor of the Defendants [indemnitors].”) (citing Int’l Fid.
Ins. Co. v. Anchor Env’t, Inc., No. 07-04750, 2008 WL 1931004, at *7 (E.D. Pa. May 1, 2008)).
Therefore, the reasoning behind finding that a surety suffers irreparable harm if an
indemnitor fails to post collateral lies in the risk it faces of becoming an unsecured creditor in the
event that the indemnitor become insolvent. Truland, 2014 WL 4230388, at *4. According to this
line of cases, this sort of risk to a surety’s security interest is not something that may be remedied
with monetary relief, thereby making it a harm for which there is no adequate remedy at law.
Bighorn Constr. & Reclamation, LLC., et al., 2022 WL 2105925, at * 9. At first glance, these cases
seem to support Plaintiffs’ request for preliminary injunction insofar as, were Defendants to
become insolvent, Plaintiffs run the risk of facing those circumstances as unsecured creditors.
However, during the redirect examination of Plaintiffs’ witness Allison Sacks (the representative
for XLS and XLR), the following exchange ensued:
Q: You have stated on [sic] your testimony that, under the agreement of indemnity,
the defendants agreed that the surety would stand to suffer irreparable in the event
that the surety faces a potential loss on a claim, correct?
A: Yes.
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Q: And to question asked by sister counsel here you have stated that that irreparable
harm includes a potential economic loss, correct?
A: Yes.
Q: Is there anything else that is included as part of the irreparable harm, that the
sureties stand to suffer?
A: I don’t believe so.
ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 2:43:40-2:44:27. Although Ms. Sacks states throughout
her testimony that Plaintiffs’ request for collateralization stems from their desire to become
secured creditors,16 in the end and as the quoted text states, she nonetheless acknowledges that the
harm Plaintiffs stand to suffer is economic in nature.
Conversely, the reasoning in Travelers Cas. & Sur. Co. of America v. W.P. Rowland
Constructors Corp., No. CV-12-00390-PHX-FJM, 2012 WL 1718630, at *3 (D. Ariz. May 15,
2012) is much better suited to the case at hand.17 In W.P. Rowland, the surety issued the
indemnitors two bonds for the indemnitors’ construction projects. 2012 WL 1718630, at *1. As
part of the general agreement of indemnity signed by the parties to issue those bonds, the
indemnitors agreed to deposit collateral with the surety upon the surety’s demand. Id. The
collateral deposit clause in that agreement contained similar irreparable harm language to the one
in the XL GAI currently before the Court.18 In denying the surety’s request for a preliminary
injunction, the court explained its reasoning as follows:
[T]o obtain collateralization as preliminary injunctive relief, plaintiff must show
that it will likely suffer irreparable harm. Hudson Ins. Co. v. Simmons Constr., LLC,
CV-12-407-PHX-GMS, 2012 WL 869383, at *3 (D. Ariz. Mar. 14, 2012).
Defendants argue that plaintiff has not met its burden. We agree. Plaintiff points to
the Agreement’s language, arguing that defendants agreed that plaintiff “would
suffer irreparable damage and would not have an adequate remedy at law.” [. . .]
16 See, e.g., ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 2:38:37-2:38:58, 2:43:39-2:46:28.
17 See also Gray Cas. & Sur. Co. v. 3i Contracting, LLC, Civil No. 3:23-CV-2511-L, 2024 WL 1121800, (N.D. Tex.
March 13, 2024), where the court denies injunctive relief despite the language of the indemnity agreement. In so
ruling, the court in Gray Cas. & Sur. Co. held that it “disagrees that the inclusion of the contractual provision in the
Indemnity Agreement . . . relieves Plaintiff of its burden to establish each requirement for a preliminary injunction, or
the irreparable harm requirement.” Id. at *9.
18 See W.P. Rowland, 2012 WL 1718360, at *1 (“The Indemnitors also agreed that plaintiff ‘would suffer irreparable
damage and would not have an adequate remedy at law’ if they failed to comply.”).
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But this contractual language, without more, does not show a likelihood of
irreparable harm. See Id. at *4 (fact that surety agreement used term “irreparable
harm” did not in itself “support the extraordinary remedy” of a temporary
restraining order). Plaintiff has not shown that it is likely to incur any damages other
than the economic cost of paying the bond claims prior to receiving collateral.
Economic injury alone, however, “does not support a finding irreparable harm,
because such injury can be remedied by a damage award.” Rent-A-Center, Inc., 944
F.2d at 603. . . . Plaintiff has not shown that extreme or very serious damage will
result if the collateral is not provided. It has not, for example, established that it
does not possess sufficient funds to pay the bond claims. And it has not shown that
the injury sustained by defendants’ failure to provide collateral is incapable of being
compensated with money damages. See Marlyn Nutraceuticals, Inc. v. Mucos
Pharma GmbH & Co., 571 F.3d 873, 878 (9th Cir. 2009). Because plaintiff has not
shown it is likely to suffer irreparable harm or that a mandatory injunction is
warranted, it is not entitled to preliminary injunctive relief requiring defendants to
provide collateral security.
Id. at *3.
Much like the surety in W.P. Rowland, Plaintiffs claim that, per the terms of the indemnity
clause, they would suffer irreparable harm if Defendants fail to collateralize them in the amount
requested. They have not, however, shown that they are going to suffer any other injury, except
for the economic risk of having to tap into their own coffers to pay the Soletanche Litigation
judgment amount. Furthermore, even this risk cannot constitute irreparable harm, as Plaintiffs’ use
of its own funds would not make them insolvent, a fact they admit during cross examination. ECF
No. 58, Evid. Hrg., Aug. 20, 2025, at 2:52:44-2:53:33.19 Irreparable harm requires more than just
an agreement between the parties to that effect; rather, it requires the movant to show the harm is
19 Q: If the sureties were not to recover the collateral from the indemnitors, would it put XL out of business?
. . .
A: It would not put us out of business, but I don’t think that’s relevant to the contract that was executed between XL,
Zurich, and the Indemnitors.
Q: And when you say that it wouldn’t put XL out of business, it means that XL would not become insolvent. Is that
correct?
A: That’s correct.
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truly irreparable.20 Simply put, Plaintiffs’ own admissions militate against finding irreparable
harm.
Though Puerto Rico law favors enforcing the terms of the contracts executed between the
parties,21 it is no less true that a preliminary injunction is extraordinary in nature and should be
granted sparingly.22 Moreover, Plaintiffs’ fear that denying injunctive relief for collateral would
essentially nullify the clause of their agreement is not entirely true, as Plaintiffs are not without
recourse. It has already been established that Plaintiffs have a strong likelihood of success on the
merits of their claim for collateralization. This being the case, nothing precludes them from filing
a partial motion for summary judgment (which does not require a showing of irreparable harm)
and obtaining collateralization that way, should they prevail in persuading the Court that there are
no material facts in controversy.
To this end, as a matter of persuasive and not binding authority, there is precedent in other
jurisdictions in which courts have found that sureties filing a motion for summary judgment to
enforce a collateral security clause in an indemnity agreement with such irreparable harm language
are entitled to specific performance. Arch Ins. Co. v. Centerplan Constr. Co., 386 F.Supp.3d 350
(D. Conn. 2019) and Great Am. Ins. Co. v. RDA Constr. Corp., Civ. No. 13-11593-DJC, 2015 WL
5163043 (D. Mass. Sept. 3, 2015) both present this situation. In granting the surety’s partial motion
20 Other cases where sureties seek to enjoin indemnitors for specific performance of their collateral security provisions,
though admittedly without the “irreparable harm” language, have echoed this sentiment. See, e.g., Fireman’s Ins. Co.
of Newark, N.J. v. Keating, 753 F.Supp. 1146, 1154 (S.D.N.Y. 1990) (“[I]t is clear that the parties to a contract cannot,
by including certain language in that contract, create a right to injunctive relief where it would otherwise be
inappropriate.”); Great Am. Ins. Co. v. Fountain Eng’g, Inc., No. 15-CIV-10068-JLK, 2015 WL 6395283, at *4 (S.D.
Fla. Oct. 22, 2015) (“[T]o imbue fundamentally meaningless contractual language with legal meaning, simply because
it is otherwise meaningless, is circular at best. Indeed, the parties to a contract cannot, by including certain language
with that contract, create a right to injunctive relief where it would otherwise be inappropriate.”) (collecting cases)
(internal quotations omitted).
21 P.R. Laws Ann. tit. 31, §§ 2994, 3471, 3451 (1930).
22 See Winter, 555 U.S. at 24 (“A preliminary injunction is an extraordinary remedy never awarded as of right.”)
(citation omitted); Charlesbank Equity Fund II, 370 F.3d at 163 (“A preliminary injunction is a potent weapon that
should be used only when necessary to safeguard a litigant’s legitimate interests.”).
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for summary judgment, the court in Arch Ins. Co. explained that “[a] surety must [] be able to
recover under specific performance because, as a creditor, it must ‘have the security position for
which it bargained . . . .” 386 F.Supp.3d at 383 (quoting Ohio Cas. Ins. Co. v. Fratarcangelo, 7
F.Supp.3d 206, 214 (D. Conn. 2014)). The court further elaborated that ‘[t]he rationale behind
granting specific performance in these situations, when the surety is essentially seeking only
money damages, is that the surety has specifically bargained for prejudgment collateralization and
a judgment for money damages alone would deprive the surety of prejudgment relief to which it
is contractually entitled.” Id.
Similarly, in RDA Constr. Corp., wherein the surety’s motion for summary judgment was
also granted, the court articulated that “a surety may sue for specific performance for deposit of
security to cover the surety’s reserve if such a provision is found in the indemnity agreement.”
2015 WL 5163043, at *8 (quoting Employers Ins. of Wausau v. Bond, No. 90-cv-1139-JRH, 1991
WL 8431, at *3 (D. Md. Jan. 25, 1991)). It reiterated that “‘[c]ollateral security clauses have
routinely been upheld’ and ‘[i]f a creditor is to have the security position for which he bargained,
the promise to maintain the security must be specifically enforced.’” Id. (quoting I.S. Fid. & Guar.
Co. v. Feibus, 15 F.Supp.2d 579, 588 (M.D. Pa. 1998); Safeco Ins. Co. of Am. v. Schwab, 739 F.2d
431, 433 (9th Cir. 1984)).23 Thus, as these cases show, a surety seeking specific performance of
collateralization per the terms of the indemnity agreement at the summary judgment stage, with
the proper uncontested material evidence, could have its bargained-for right upheld.24
23 Another example of this is Am. Motorists Ins. Co. v. United Furnace Co., Inc., 876 F.2d 293 (2d Cir. 1989), where
the surety (AMICO) sued the indemnitor (United) seeking indemnification and collateral security under the indemnity
agreement signed by the parties, though it did not contain irreparable harm language. United filed a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6) on ripeness grounds, which the district court granted, and AMICO
filed a cross-motion for summary judgment, which the district court denied. Id. at 294. The Second Circuit, in reversing
the district court’s decision, found the case was ripe for review and that, under the indemnity agreement signed by the
parties, AMICO was entitled to collateral security. Id. at 302.
24 See also U.S. Fidelity and Guar. Co. v. Díaz-Matos, Civil No. 05-1851 (PG), 2007 WL 878571, at *7 (D.P.R. March
21, 2007) (Despite denying the request for injunctive relief, which involved an agreement that did not contain the
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In sum, considering the persuasive authority on both ends of the legal query outlined above,
a surety cannot rely solely on the “irreparable harm” language in its indemnity agreement to avoid
making a showing to that effect. See Fountain Eng’g, Inc., 2015 WL 6395283, at *4 (“Indeed, the
parties to a contract cannot, by including certain language in the contract, create a right to
injunctive relief where it would otherwise be inappropriate. . . . It would represent an extraordinary
variance from this basic principle for a court to recognize that the parties to a suit at equity have
contracted around one of the fundamental elements.”) (quotations omitted) (citations omitted). As
already stated, harm that can be remedied by monetary relief, with nothing more, is not irreparable.
Thus, having relied solely on the “irreparable harm” language of the XL GAI to support their
argument for this prong, ECF No. 2 at p. 17; ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:13:14-
3:13:42, 3:18:04-3:18:20, Plaintiffs have failed to show their will suffer irreparable harm. Based
on the foregoing analysis, the irreparable harm prong weighs against them.
3. Balance of the Equities
In analyzing this third prong of the preliminary injunction standard, “courts ‘must balance
the competing claims of injury and must consider the effect on each party of the granting or
withholding of the requested relief.’” Winter, 555 U.S. at 24 (quoting Amoco Prod. Co. v. Gambell,
480 U.S. 531, 542 (1982). Plaintiffs’ argument is that this prong is inapplicable because, per the
terms of the Indemnity Agreements, the Sureties should not be made to suffer any hardship
whatsoever. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:20:36-3:24:26. They maintain that “there
is no balancing act [here] to be done, [but rather] it’s [an issue of] compliance with the terms of
the agreement signed by the parties.” ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:23:59-3:24:05;
ECF No. 2 at p. 22. As to the hardship the Defendants would suffer, Plaintiffs state they would
irreparable harm clause, the court ultimately granted partial summary judgment in favor of the surety, finding that the
surety showed it was entitled to specific performance of collateral.).
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likewise suffer no hardship because by signing the Indemnity Agreements “they agreed to provide
and post the collateral . . . .” ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:24:26-3:24:42.
However, the burden is on Plaintiffs to show that it will suffer a greater hardship than the
Defendants. See Esso Standard Oil (Puerto Rico) v. Monroig-Zayas, 445 F.3d 13, 18 (“The party
seeking the preliminary injunction bears the burden of establishing that the[] four factors weigh in
its favor.”) (citing Nieves-Márquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003)). They have
not done so. Rather, they say this prong does not even apply because it was contractually agreed
to that they would be entitled to injunctive relief. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at
3:24:26-3:24:42; Exhibit 10 at p. 2, cl. V(B). Yet, Plaintiffs have already acknowledged that their
harm is monetary in nature, and that they would not become insolvent if collateral is not deposited.
ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 2:52:44-2:53:33.
As for Defendants, neither they nor Plaintiffs have presented any evidence that shows
whether Defendants would suffer harm, such as insolvency. One should not overlook the fact that
three of the Defendants—EBI, PEI, and CRP—have been dissolved since 2019, a fact that
Defendants knew approximately three months before the evidentiary hearing but neglected to tell
Plaintiffs about until the eve of the evidentiary hearing. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at
3:34:28-3:34:38, 3:41:50-3:41:57, 3:42:33-3:42:50. However, the reason behind the dissolution of
these entities is unknown, and it would be unwise to speculate. Hence, given that neither side has
brought forth convincing evidence one way or another as to this prong, the race in this regard is
inconclusive at best.
4. Public Interest
Plaintiffs’ position is that the public interest favors “the enforcement of contracts according
to the intent of the parties, [as it] is an essential function of courts of justice.” ECF No. 2 at 22; see
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also ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:13:15-3:13:44 (“[W]hen parties sign an
agreement, there is a public policy under Puerto Rico law that parties need to abide by the four
corners of the agreement they sign. . . .”).25 Defendants, once again, are silent on this front. As
previously stated, the Puerto Rico Civil Code of 1930 states that “[o]bligations arising from
contracts have legal force between the contracting parties, and must be fulfilled in accordance with
their stipulations.” P.R. Laws Ann. tit. 31, § 2994 (1930). It also states that “[c]ontracts shall be
binding, whatever may be the form in which they may have been executed, provided the essential
conditions required for their validity exist.” P.R. Laws Ann. tit. 31, § 3451 (1930).
In this regard, the Supreme Court of Puerto Rico has explained that “‘[t]he courts of justice
cannot release a party from complying with what it bound itself to do by contract when said contract
is legal and valid and has no defect whatsoever.” Cevercería Corona v. Commonwealth Ins. Co.,
115 D.P.R. 345, 351, 15 P.R. Offic. Trans. 455, 463 (1984) (quoting Olazábal v. US Fidelity, etc.,
103 D.P.R. 448, 462 (1975)); see also Selosse v. Fund. Educ. Ana G. Méndez, 122 D.P.R. 534, 549,
22 P.R. Offic. Trans. 498, 514 (1988) (citing Cevercería Corona, 115 D.P.R. at 351; López de
Victoria v. Rodríguez, 113 D.P.R. 265 (1982); Olazábal, 130 D.P.R. at 488; Matricardi v.
Peñagarícano, Adm’r, 94 P.R.R. 1, 4 (1967)). Thus, as Plaintiffs point out, the public interest factor
weighs in their favor.
In sum, Plaintiffs have failed to meet the “irreparable harm” prong of the preliminary
injunction standard. Considering the irreparable harm prong constitutes a sine qua non requirement
for granting injunctive relief, Plaintiffs’ request for specific performance of collateralization should
be DENIED.
25 See also ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:20:17-3:20:36 (“There is a strong public interest for parties
who sign agreements to meet the obligations that they agreed to when they signed the agreement. That is well
established under Puerto Rico law.”).
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C. The Books and Records Provisions
1. Likelihood of Success on the Merits
Plaintiffs claim that the Indemnity Agreements “clearly and unequivocally provide that the
Sureties have the right to reasonable access to the Indemnitor’s books, records, and accounts.”
ECF No. 2 at p. 16. Citing to Puerto Rico law upholding the enforcement of contracts when their
terms are clear and unambiguous, as well as persuasive authority wherein other districts granted
such access, Plaintiffs argue that the clear terms of the Indemnity Agreements to which Defendants
bound themselves should be honored, and access to books and records be granted. Id. at pp. 12-
16. Defendants are silent as to Plaintiffs’ likelihood of success on the merits in this regard.
As Plaintiffs contend, Puerto Rico law categorically supports the enforcement of
contractual agreements between the parties when the terms are clear and unambiguous. See P.R.
Laws Ann. tit. 31, § 3451 (“Contracts shall be binding, whatever may be the form in which they
may have been executed, provided the essential conditions required for their validity exist.”); P.R.
Laws Ann. tit. 31, § 3471 (“If the terms of a contract are clear and leave no doubt as to the
intentions of the contracting parties, the literal sense of its stipulations shall be observed. If the
words should appear contrary to the evident intention of the contracting parties, the intention shall
prevail.”). To this end, it is uncontested that both of the Indemnity Agreements contain provisions
that clearly state Defendants are obliged to provide Plaintiffs with reasonable access to their books
and records (the “Books and Records clauses”). Specifically, the Zurich GAI states:
NINTH: At any time, and until such time as the liability of the Surety under any
and all said Bonds is terminated, the Surety shall have the right to reasonable access
to the books, records, and accounts of the Contractor, and Indemnitors; and any
bank, depository, materialman, supply house, or other person, firm, or corporation
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when requested by the Surety is hereby authorized to furnish the Surety any
information requested including, but not limited to, the status of the work under
contracts being performed by the Contractor, the condition of the performance of
such contracts and payments of accounts.
Exhibit 4 at p. 3, cl. 9. By the same token, the XL GAI provides:
(A) At any time during business hours and until such time as the liability of
SURETY under BOND(S) is terminated and SURETY is fully reimbursed for all
of its losses, costs and expenses as a result of having executed, provided or procured
BOND(S) on behalf of PRINCIPAL, SURETY shall have access to the books,
records, software, data bases, computer stored information, contract documents,
drawings, and accounts of UNDERSIGNED, wherever located, for the purpose of
inspection, copying and reproduction.
(B) UNDERSIGNED authorize SURETY or its designee to investigate the
financial condition of UNDERSIGNED, the status of work under contracts being
performed by UNDERSIGNED, the condition of the performance of such
contracts, the status of payment of accounts of UNDERSIGNED and all other
matters, deemed appropriate by SURETY for the purpose of determining whether
or not to execute BOND(S) on PRINCIPAL’S behalf or in investigating claims
made against BOND(S) or in investigating SURETY’S exposure to loss generally.
When requested by SURETY, banks, depositories, accountants, attorneys, obligees
on BOND(S), architects, materialmen, subcontractors, supply houses, prior and
subsequent sureties, joint venture(s), and other PERSON(S) are hereby authorized
by UNDERSIGNED to furnish SURETY any information requested with respect
to UNDERSIGNED. SURETY shall have no liability for receipt or disclosure of
any information respecting UNDERSIGNED which is obtained or utilized pursuant
hereto.
Exhibit 10 at p. 4, cl. XVI. Once the Soletanche Litigation resulted in liability against LPCD and
the Sureties,26 Plaintiffs demanded that Defendants provide inter alia reasonable access to their
books and records so that they may assess the financial situation of the Defendants, as per the
terms of the Books and Records clauses. Exhibit 1. Defendants, to date, have not provided such
access. Considering these facts and the applicable Puerto Rico law provisions, Plaintiffs have a
likelihood of success on the merits of their request to access Defendants’ books and records. Thus,
this prong weighs in Plaintiffs’ favor.
26 See Exhibit 5-t.
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2. Irreparable Harm
Unlike their collateralization argument, Plaintiffs admit that they must show irreparable
harm exists if they do not obtain access to Defendants’ books and records. ECF No. 58, Evid. Hrg.,
Aug. 20, 2025, at 3:31:45-3:32:28. To this end, Plaintiffs argue that irreparable harm exists
because, by not knowing Defendants’ financial situation, they are unaware of whether Defendants
are or may become insolvent. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:32:29-3:33:25.27 They,
thus, run the risk of becoming general unsecured creditors were Defendants to file for bankruptcy,
a harm that has no adequate remedy at law. Id. To highlight this fact, they point to the dissolution
of defendants EBI, PEI, and CRP, which Defendants did not mention until the day before the
evidentiary hearing. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:34:28-3:34:38, 3:41:50-3:41:57,
3:42:33-3:42:50; Exhibits A, B, and C. Plaintiffs further argue that because the interest continues
accruing in the Soletanche Litigation, the liability they face in state court may be more than the
loss reserve they currently have. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:33:25-3:35:39.
Defendants, on the other hand, provide little in the way of opposition. Their general
position throughout the hearing remains that Plaintiffs have not suffered irreparable harm and that
the existence of an agreement does not mean that they have the right to injunctive relief. ECF No.
58, Evid. Hrg., Aug. 20, 2025, at 3:52:33-3:52:43 (“Our defense in the context of this hearing is
27 Q: And what evidence have I heard here today that failure to give access to the books and records would rise to the
level of irreparable harm?
A: Well, again, we go back to the four corners of the agreement between the parties. If no access to books and records
have [sic] been granted, as has been the case, the sureties have the uncertainty of not knowing what is the financial
condition of the indemnitors and whether they can comply or meet the obligations under the state court judgment.
That puts the surety in the position of: if it has to pay for that claim and tomorrow LPC&D files for bankruptcy, they
become general unsecured creditor[s], which is not . . . the bargain that they agreed to with the agreement of indemnity,
and that constitutes irreparable harm.
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that there is no irreparable damage whatsoever, and the mechanism selected by the plaintiffs is
incorrect, according to the law.”); Id. at 4:02:19-4:02:41 (“[O]ur position is: simply because there
is an argument does not mean that they are suffering irreparable harm and that they have a right to
injunctive relief. There is no caselaw in Puerto Rico that establishes that that type of contractual
agreement has been permitted or that is has been recognized in our jurisdiction.”). 28
As a general rule, “[a] finding of irreparable harm must be grounded on something more
than conjecture, surmise, or a party’s unsubstantiated fears of what the future may have in store.”
Charlesbank Equity Fund II, 370 F.3d at 162 (citing Regan v. Vinick & Young (In re Rare Coin
Galleries of Am., Inc.), 862 F.2d 869, 902 (1st Cir. 1988)). “Irreparable harm most often exists
where a party has no adequate remedy at law.” Id. (citing Rosario-Urdaz v. Rivera-Hernández,
350 F.3d 219, 221 (1st Cir. 2003)). In this regard, Plaintiffs once again fail to meet this threshold
prong.
First, the “irreparable harm” language in the XL GAI does not cover access to books and
records, only collateralization. Exhibit 10 at p. 2, cl. V(B). Second, their argument for access to
Defendants’ books and records is similar to their argument for collateralization. Having provided
no reason other than the risks of becoming unsecured creditors and having to use their own coin
to pay for the Appellate Judgment, Plaintiffs have not shown that failure to access Defendants’
28 During the hearing, Defendants inquired about the fact that PRASA deposited a four million three hundred thousand-
dollar ($4,300,000.00) retainage amount in the state court for its liability in the Soletanche Litigation, which Plaintiffs
did not consider during the calculations for their loss reserve. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 1:40:39-
1:41:58. Defendants attempted to argue that Plaintiffs should have considered this deposit when calculating their
reserves as it would impact the exposure risk Plaintiffs are facing. 3:45:46-3:46:17, 3:46:40-3:47:25. However,
Defendants failed to explain why the retainage amount PRASA deposited to cover its liability in the Soletanche
Litigation should have been considered by Plaintiffs when calculating their exposure risk, when the Appellate
Judgment clearly separates the liability amount PRASA faces from the liability amount LPCD and the Sureties face.
Exhibit 5-t at p. 69. In fact, neither party elaborated this point during the hearing, nor have they provided information,
written or otherwise, of the impact, if any, it has on Plaintiffs’ exposure risk. ECF No. 58, Evid. Hrg., Aug. 20, 2025,
at 3:47:31-3:47:46, 3:47:55-3:48:02, 3:48:55-3:49:09. With this limited information, a determination cannot be made
in this regard.
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books and records is anything other than economic in nature. Third, Plaintiffs’ can request and
obtain access to Defendants’ books and records during the normal course of discovery. See First
Nat. Ins. Co. of America v. Sappah Bros., Inc., 771 F.Supp.2d 569, 575 (E.D.N.C. 2011) (denying
access to defendants’ books and records because plaintiff did not make a clear showing that it
would suffer “irreparable harm if it is not allowed to immediately inspect the records rather than
at some later date, such as in the normal course of discovery.”).29 Fourth, though Defendants’
failure to notify Plaintiffs of the three dissolved companies until the eve of the hearing is
unjustified, the fact of the matter is that it has been approximately six years since EBI and PEI
were dissolved, and almost nine years since CRP was dissolved. Exhibits A, B, and C. Plaintiffs
have presented no evidence that the remaining Defendants are suffering or will soon suffer
financial instability. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at 3:43:14-3:43:23. For these reasons,
the irreparable harm prong weighs against Plaintiffs.
3. Balance of the Equities
Plaintiffs’ argument as to this prong is much the same as its irreparable harm argument.
That is, they proffer that access Defendants’ books and records constitutes irreparable harm insofar
as the risk of becoming general unsecured creditors, if Defendants were to become insolvent, is
not something that could be remedied through money damages. Defendants, on the other hand,
make no argument as to how the access to books and records would constitute undue hardship.
When asked during the evidentiary hearing why they have not complied with the Books and
Records clauses, Defendants could not provide a clear answer. ECF No. 58, Evid. Hrg., Aug. 20,
2025, at 3:58:02-3:58:55. That is, they did not furnish any reason as to why it would be a hardship
29 But cf. Travelers Cas. & Sur. Co. of Am. v Padron, No. 5:15-CV-200-DAE, 2015 WL 1981563, at *7 (W.D. Tex.
May 1, 2015) (denying collateralization but granting the surety access to the indemnitors’ books and records based on
a combined analysis of the irreparable harm and balance of the equities prongs, whereby the court found indemnitors
failed to argue that such access causes them irreparable harm).
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for them to provide this access. However, they affirm that they remain financially solvent and
capable of paying the state court judgment amount. ECF No. 58, Evid. Hrg., Aug. 20, 2025, at
3:43:14-3:43:23. Despite arguing that they had made Plaintiffs offers to provide access to their
books and records, Defendants admitted that such offers were contingent upon various conditions
which are unknown and which they could not elaborate on. ECF No. 58, Evid. Hrg., Aug. 20,
2025, at 4:07:51-4:08:49. Further, Defendants’ failed to promptly notify Plaintiffs of the three
dissolved companies until the eleventh hour of the hearing.30 Hence, this prong tilts towards
Plaintiffs’ favor.
4. Public Interest
As was explained when analyzing this prong as to Plaintiffs’ collateralization request,
Puerto Rico law has a strong public policy favoring the enforcement of contracts. P.R. Laws Ann.
tit. 31, §§ 2994, 3451, and 3471 (1930). This public policy has routinely been upheld by the
Supreme Court of Puerto Rico. See Cevercería Corona, 115 D.P.R. at 351, 15 P.R. Offic. Trans.
at 463; Selosse, 122 D.P.R. at 549, 22 P.R. Offic. Trans. at 514. Plaintiffs highlight this point both
in their motion and during the evidentiary hearing. ECF No. 2 at 22; ECF No. 58, Evid. Hrg., Aug.
20, 2025, at 3:13:15-3:13:44; 3:20:17-3:20:36. Defendants do not refute Plaintiffs’ position in this
regard. Therefore, the public interest weighs in Plaintiffs’ favor.
In sum, as to their request for access to Defendants’ books and records, Plaintiffs have met
the likelihood of success, balance of the equities, and public interest prongs of the preliminary
injunction analysis. However, Plaintiffs have not met the irreparable harm prong, which is a
threshold requirement to grant injunctive relief. Accordingly, Plaintiffs’ request that Defendants
30 Exhibits A, B, and C.
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be compelled to provide them with access to Defendants’ books and records should also be
DENIED, as it is something that can be dealt with during the discovery phase.
VI. CONCLUSION
For the aforementioned reasons, it is recommended that Plaintiffs’ motion to compel (ECF
No. 2) be DENIED. It is also recommended that both Defendants’ request that the Court abstain
under Colorado River (ECF Nos. 25 and 26), as well as their motion to dismiss on Rule 12(b)(1)
grounds (ECF No. 48) be DENIED.
The parties have fourteen (14) days to file any objections to this report and
recommendation unless otherwise ordered by the Court. Failure to file the same within the
specified time waives the right to object to this report and recommendation. Fed. R. Civ. P.
72(b)(2); Fed. R. Civ. P. 6(c)(1)(B); D.P.R. Civ. R. 72(d); see also 28 U.S.C. § 636(b)(1); Henley
Drilling Co. v. McGee, 36 F.3d 143, 150–51 (1st Cir. 1994); United States v. Valencia, 792 F.2d
4 (1st Cir. 1986).
IT IS SO RECOMMENDED.
In San Juan, Puerto Rico, this 12th day of December, 2025.
s/Marcos E. López
U.S. Magistrate Judge
Case 3:24-cv-01538-RAM Document 63 Filed 12/12/25 Page 38 of 38