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)
OPINION AND ORDER
This matter comes before the Court on Magistrate Judge Marcos
E. Lopez’s December 12, 2025 Report and Recommendation (“R & R”),
(Docket No. 63), and parties’ objections thereto (Docket Nos. 70,
71, 	72). 	After 	presiding 	over 	an 	evidentiary 	hearing, 	the
Magistrate 	Judge 	issued 	an 	R 	& 	R 	recommending 	that 	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”)’s Motion to Compel at Docket No. 2 be
denied, 	on 	the 	grounds 	that 	the 	Sureties 	fail 	to 	demonstrate 	the
irreparable harm necessary for preliminary injunctive relief. Id.
at 38.
In addition, the Magistrate Judge recommends that Defendants
L.P.C.&D., 	Inc. 	(“LPCD”), 	Las 	Piedras 	Construction 	Corp. 	(“Las
Piedras”), 	Tejo, 	Inc. 	(“Tejo”), 	Equipment 	Depot, 	Inc. 	(“EDI”),
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Civil No. 24-1538(RAM) 	2
Kane Caribbean, Inc. (“KCI”), Piezas Extra, Inc. (“PEI”), Equipos
de 	Boquerón, 	Inc. 	(“EBI”), 	Caribbean 	Raceway 	Park, 	Inc. 	(“CRP”),
Hacienda 	Cuco, 	Inc. 	(“HCI”), 	and 	Pedro 	Feliciano 	Benítez
(“Benítez”) (collectively, “Defendants” or “Indemnitors”)’s Motion
to 	Dismiss 	at 	Docket 	No. 	48 	be 	denied, 	on 	the 	grounds 	that 	the
Sureties’ 	claims 	are 	ripe. 	Id. 	Lastly, 	the 	Magistrate 	Judge
recommends that the Indemnitors’ requests at Docket Nos. 25 and 26
for 	the 	Court 	to 	abstain 	under 	Colorado 	River 	be 	denied, 	because
the related proceedings in the Puerto Rico Court of First Instance
are not parallel to those in this Court. Id. The Sureties and the
Indemnitors 	each 	filed 	timely 	objections 	to 	the 	R 	& 	R. 	(Docket
Nos. 70 and 71). The Sureties also filed a Response in Opposition
to the Indemnitors’ objection. (Docket No. 72).
Having reviewed the record de novo, the Court ADOPTS IN PART
and REJECTS IN PART the R & R.
I. 	STANDARD OF REVIEW
Pursuant to Fed. R. Civ. P. 72, a district court may refer a
pending 	motion 	to 	a 	magistrate 	judge 	for 	a 	report 	and
recommendation regarding the same. See also L. Civ. R. 72(b). Once
the 	magistrate 	judge 	has 	issued 	their 	report, 	the 	parties 	are
permitted to file written objections within fourteen (14) days of
being 	served 	a 	copy 	of 	the 	report. 	See 	Fed. 	R. 	Civ. 	P. 	72(a). 	A
party that timely objects to a report and recommendation is granted
a 	“de 	novo 	determination 	of 	those 	portions 	of 	the 	report 	or
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Civil No. 24-1538(RAM) 	3
specified 	proposed 	findings 	or 	recommendations 	to 	which 	specific
objection 	is 	made.” 	United 	States 	v. 	Villa-Guillen, 	2019 	WL
3290774, at *1 (D.P.R. 2019) (quotation omitted). A district court
may choose “to accept, reject, or modify, in whole or in part, the
findings made” by the magistrate judge. 28 U.S.C. § 636(a)(b)(1).
The 	First 	Circuit 	stated 	in 	Santos-Santos 	v. 	Torres-Centeno
that 	when 	no 	objection 	to 	a 	report 	and 	recommendation 	has 	been
presented, a district court may assume that “[the affected party]
agree[s] 	with 	the 	magistrate 	judge’s 	recommendation.” 	842 	F.3d
163, 	166 	(1st 	Cir. 	2016) 	(quoting 	Santos–Santos 	v. 	P. 	R. 	Police
Dep’t., 	63 	F.Supp.3d 	181, 	184 	(D.P.R. 	2014)). 	Thus, 	the 	district
court 	only 	needs 	to 	determine 	“that 	there 	is 	no 	‘plain 	error’ 	on
the 	face 	of 	the 	record” 	for 	unopposed 	portions 	of 	a 	report 	and
recommendation. Vazquez-Garcia v. Hacienda Madrigal, Inc., 2019 WL
4739324, 	at 	*1 	(D.P.R. 	2019) 	(citing 	López-Mulero 	v. 	VelezColon,
490 F.Supp.2d 214, 218 (D.P.R. 2007)).
II. 	ANALYSIS
A. The Court’s adoption of portions of the R & R
a. Procedural background and factual findings
While 	the 	Sureties 	and 	the 	Indemnitors 	each 	filed 	timely
objections 	to 	the 	R 	& 	R, 	(Docket 	Nos. 	70 	and 	71), 	and 	while 	the
Sureties 	also 	filed 	a 	Response 	to 	the 	Indemnitors’ 	objection,
(Docket No. 72), neither object to the Magistrate Judge’s account
of 	the 	Procedural 	Background 	or 	Findings 	of 	Fact. 	(Docket 	No. 	63
at 1-7). The latter are drawn in part from the parties’ own joint
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Civil No. 24-1538(RAM) 	4
Motion Submitting Uncontested Material Facts. (Docket Nos. 49, 63
at 3 n.1). The Sureties briefly argue that the Magistrate does not
give 	sufficient 	weight 	to 	stipulated 	facts 	regarding 	the
dissolution 	of 	some 	Indemnitors; 	but 	they 	do 	not 	object 	to 	the
substance of the Magistrate’s factual findings. (Docket No. 70 at
22-23).
As 	a 	result, 	the 	Court 	reviews 	the 	R 	& 	R’s 	unobjected-to
Procedural 	Background 	and 	Findings 	of 	Fact 	sections 	for 	plain
error, 	and 	finds 	none. 	“Where, 	as 	here, 	a 	[Magistrate 	Judge] 	has
produced 	a 	first-rate 	work 	product, 	a 	reviewing 	tribunal 	should
hesitate 	to 	wax 	longiloquent 	simply 	to 	hear 	its 	own 	words
resonate.” Bing Feng Chen v. I.N.S., 87 F.3d 5, 7 (1st Cir. 1996)
(quotation 	omitted). 	The 	Court 	hereby 	ACCEPTS, 	ADOPTS, 	and
INCORPORATES 	by 	reference 	the 	Magistrate 	Judge’s 	unchallenged
procedural background and findings of fact sections in toto.
b. Ripeness
For 	the 	Magistrate, 	both 	the 	jurisdictional 	and 	prudential
aspects of the ripeness analysis indicate that this case is a live
controversy for the following reasons: liability has already been
adjudicated 	in 	the 	ongoing 	Commonwealth 	court 	litigation; 	the
contractual trigger for the Indemnitors to pay the Sureties is “as
soon 	as 	liability 	exists 	or 	is 	asserted” 	as 	opposed 	to 	a 	final
judgment; 	waiting 	for 	a 	more 	final 	number 	would 	not 	materially
alter 	the 	legal 	issue 	presented; 	and 	the 	imminent 	threat 	of 	the
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Civil No. 24-1538(RAM) 	5
execution 	of 	judgment 	in 	the 	Commonwealth 	court 	exposes 	the
Sureties 	to 	hardship. 	(Docket 	No. 	63 	at 	11-12). 	As 	a 	result, 	the
R 	& 	R 	concludes 	that 	the 	case 	is 	ripe 	for 	adjudication 	and
recommends that the Indemnitors’ Motion to Dismiss be denied. Id.
at 	13. 	In 	reply, 	the 	Indemnitors 	argue 	that 	the 	Sureties’ 	claims
remain 	premature 	in 	federal 	court 	because 	the 	underlying
Commonwealth proceedings have yet to fully compute the total amount
owed--comprehensive 	of 	attorneys’ 	fees, 	interest, 	and 	yet-
uncalculated penalties. (Docket No. 71 at 3-6).
Upon 	de 	novo 	review, 	the 	Court 	agrees 	with 	the 	Magistrate.
(Docket 	No. 	48). 	The 	Court 	finds 	that 	liability 	has 	already 	been
adjudicated 	in 	Commonwealth 	proceedings. 	(Docket 	No. 	63-12).
Moreover, 	the 	contractual 	promises 	between 	the 	Sureties 	and 	the
Indemnitors 	obligate 	the 	latter 	to 	pay 	the 	former 	“as 	soon 	as
liability 	exists 	or 	is 	asserted”--not 	after 	a 	fully 	quantified
judgment. (Docket No. 2-1 at 1). Lastly, the possibility of later
amendments 	to 	the 	amount 	owed 	by 	the 	Indemnitors 	does 	not 	render
the present action unripe, as this case centers around whether the
Indemnitors’ alleged contractual breaches give rise to enforceable
relief 	for 	the 	Sureties. 	Such 	obligations 	will 	continue 	to 	exist
even 	if 	the 	amount 	owed 	later 	increases. 	Hence, 	the 	Court 	hereby
ACCEPTS, 	ADOPTS, 	and 	INCORPORATES 	by 	reference 	the 	Magistrate
Judge’s 	ruling 	on 	Indemnitors’ 	Motion 	to 	Dismiss. 	(Docket 	No. 	63
at 8-13). Indemnitors’ Motion to Dismiss is DENIED.
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Civil No. 24-1538(RAM) 	6
c. Colorado River abstention
The 	Magistrate 	Judge 	recommends 	that 	the 	Court 	not 	abstain
under Colorado River because the precedent Puerto Rico court case
is not “parallel” to this one and does not deal with “substantially
identical claims.” Id. at 13-16. He reasons that the Commonwealth
litigation centers around the Sureties and Indemnitors’ failure to
pay 	Soletanche, 	Inc. 	(“Soletanche”), 	a 	subcontractor 	of 	LPCD--a
legal and factual issue distinct from the Indemnitors’ failure to
pay the Sureties. Id. Moreover, the Magistrate points to the fact
that the antecedent Commonwealth lawsuit implicates parties absent
in this case, as the instant litigation does not involve Soletanche
or 	the 	Puerto 	Rico 	Aqueduct 	and 	Sewer 	Authority 	(“PRASA”). 	Id.
Hence, 	he 	concludes 	that 	the 	Indemnitors 	have 	not 	made 	the
threshold showing of parallelism and thus Colorado River does not
apply. 	Id. 	In 	reply, 	the 	Indemnitors 	largely 	reiterate 	their
earlier 	arguments 	that 	the 	claims 	here 	are 	“nearly 	identical” 	to
the 	Puerto 	Rico 	court 	litigation. 	(Docket 	No. 	71 	at 	7). 	As 	the
Sureties point out, these arguments are little more than a “rehash”
of the Indemnitors’ previous assertions. (Docket No. 72 at 1).
Upon de novo review, the Court concurs with the Magistrate’s
rejection 	of 	Colorado 	River 	abstention. 	“Generally, 	as 	between
state 	and 	federal 	courts, 	the 	rule 	is 	that 	‘the 	pendency 	of 	an
action in the state court is no bar to proceedings concerning the
same 	matter 	in 	the 	Federal 	court 	having 	jurisdiction’...[because
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Civil No. 24-1538(RAM) 	7
of] 	the 	virtually 	unflagging 	obligation 	of 	the 	federal 	courts 	to
exercise 	the 	jurisdiction 	given 	them.” 	Colorado 	River 	Water
Conservation 	Dist. 	v. 	United 	States, 	424 	U.S. 	800, 	817 	(1976)
(internal citations omitted). Colorado River recognizes that only
exceptional circumstances warrant the exercise of abstention. Id.
at 818.
No 	such 	circumstances 	are 	present 	here. 	While 	the 	two
proceedings 	may 	share 	a 	roughly 	common 	factual 	universe, 	they 	do
not 	encompass 	substantially 	identical 	parties 	or 	issues. 	Rather,
as 	the 	Magistrate 	aptly 	notes, 	the 	case 	at 	bar 	concerns 	distinct
contractual 	obligations 	owed 	by 	the 	Indemnitors 	to 	the 	Sureties—
namely, 	duties 	arising 	under 	indemnity 	agreements 	to 	deposit
collateral 	upon 	demand, 	provide 	access 	to 	books 	and 	records, 	and
indemnify the Sureties. (Docket No. 63 at 15-16). These obligations
are not coextensive with the merits of the Commonwealth litigation
involving 	Soletanche. 	On 	the 	contrary, 	the 	question 	before 	this
Court 	is 	altogether 	different: 	whether 	the 	Indemnitors 	breached
their 	separate 	contractual 	promises 	to 	the 	Sureties 	and 	whether
the Sureties are able to enforce those promises in this forum now.
The presence in the Puerto Rico court litigation of subcontractors
not 	involved 	in 	the 	agreements 	between 	the 	Indemnitors 	and 	the
Sureties further underscores the lack of parallelism here. See id.
at 15. Thus, the Court hereby ACCEPTS, ADOPTS, and INCORPORATES by
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Civil No. 24-1538(RAM) 	8
reference 	the 	Magistrate 	Judge’s 	recommendation 	to 	not 	invoke
Colorado River abstention (Docket No. 63 at 13-16).
B. The Court’s rejection of portions of the R & R
However, 	the 	Court 	diverges 	from 	the 	Magistrate 	on 	the
questions 	of 	law 	as 	to 	the 	irreparable 	harm 	caused 	by: 	(a) 	the
Indemnitors’ failure to deposit collateral with the Sureties, and
(b) 	the 	Indemnitors’ 	continued 	refusal 	to 	provide 	the 	Sureties
reasonable access to books, records, and accounts. (Docket No. 63
at 19-29, 34-36).
A 	party 	seeking 	a 	preliminary 	injunction 	must 	make 	a 	clear
showing that: (1) they have a substantial likelihood of success on
the merits; (2) they face a significant potential for irreparable
harm if their request is denied; (3) the issuance of an injunction
will not impose more of a burden on the nonmovant than its absence
will 	impose 	on 	the 	movant; 	and 	(4) 	the 	granting 	of 	prompt
injunctive 	relief 	will 	promote 	(or, 	at 	least, 	not 	denigrate) 	the
public 	interest. 	McGuire 	v. 	Reilly, 	260 	F.3d 	36, 	42 	(1st 	Cir.
2001); see also Charlesbank Equity Fund II v. Blinds To Go, Inc.,
370 F.3d 151, 162 (1st Cir. 2004).
This Court agrees with the Magistrate’s unopposed restatement
of 	the 	applicable 	legal 	standard 	for 	preliminary 	injunctions.
(Docket 	No. 	63 	at 	16-18). 	Moreover, 	except 	for 	the 	Sureties’
complaint that the R & R “misbalances” the preliminary injunction
factors 	by 	not 	considering 	First 	Circuit 	“sliding 	scale”
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Civil No. 24-1538(RAM) 	9
principles, (Docket No. 70 at 23-24), neither the Sureties nor the
Indemnitors 	meaningfully 	object 	to 	the 	Magistrate’s 	analysis 	of
the 	likelihood 	of 	success 	on 	the 	merits 	and 	the 	public 	interest.
(Docket 	No. 	63 	at 	18-19, 	30-33, 	37). 	Because 	the 	R 	& 	R’s
recommendations 	as 	to 	those 	two 	factors 	for 	the 	Indemnitors’ 	(a)
failure 	to 	deposit 	collateral, 	and 	(b) 	refusal 	to 	provide 	access
to books and records are unobjected-to and the Court finds no clear
error, 	it 	hereby 	ACCEPTS, 	ADOPTS, 	and 	INCORPORATES 	them. 	After
ruling 	on 	the 	irreparable 	harm 	and 	the 	balance 	of 	the 	equities
factors 	de 	novo 	below, 	the 	Court 	conducts 	its 	own 	balancing 	test
for 	the 	Indemnitors’ 	(a) 	failure 	to 	deposit 	collateral, 	and 	(b)
refusal to provide access to books and records.
1. The 	Indemnitors’ 	failure 	to 	deposit 	collateral 	with
the Sureties
Neither the Supreme Court nor the First Circuit have squarely
decided 	whether 	an 	indemnitor’s 	failure 	to 	furnish 	collateral
irreparably 	harms 	a 	surety. 	This 	question 	is 	particularly
prominent when indemnitors and sureties have previously stipulated
that failure to collateralize will constitute irreparable harm to
the surety and deprive it of an adequate remedy at law. As detailed
below, district courts across the country have arrived at divergent
answers, 	but 	the 	case 	law 	has 	trended 	in 	favor 	of 	finding
irreparable harm.
The 	Magistrate 	believes 	that, 	irrespective 	of 	contractual
terms, 	the 	harm 	suffered 	by 	the 	Sureties 	because 	of 	non-
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Civil No. 24-1538(RAM) 	10
collateralization remains fundamentally monetary because it arises
from the risk that the Sureties will be required “to tap into their
own coffers to pay.” (Docket No. 63 at 12-13). He reasons that the
presence 	of 	the 	contractual 	irreparable 	harm 	clause 	does 	not
relieve the Sureties of the obligation to demonstrate irreparable
harm 	for 	preliminary 	injunctive 	relief 	and 	concludes 	that 	they
fail to allege more than economic harm. Id. at 26-29. Accordingly,
he recommends that the request for collateralization be denied for
lack of irreparable harm. Id.
The 	Sureties 	object 	that 	the 	Magistrate 	Judge’s
recommendation 	is 	contrary 	to 	the 	weight 	of 	the 	persuasive
authorities from across the country, which often counsel in favor
of 	enforcing 	collateral-security 	provisions 	in 	surety 	indemnity
agreements. (Docket No. 70 at 16-23). The Sureties argue that they
suffer 	many 	harms 	in 	addition 	to 	economic 	damages 	when 	denied
immediate 	access 	to 	collateral, 	including 	the 	loss 	of 	what 	they
specifically 	bargained 	for, 	exposure 	to 	increased 	risk, 	and
involuntary reduction to general unsecured creditor status. Id. at
14-19.
This Court agrees with the Sureties. The Sureties’ injury is
not 	limited 	to 	future 	dollars 	paid--rather, 	it 	includes 	both 	the
infliction 	of 	an 	unbargained-for 	risk 	of 	loss 	as 	well 	as 	the
annulment 	of 	the 	contractual 	right 	to 	immediate 	collateral 	that
the Sureties did acquire. The Court’s view accords with the law of
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Civil No. 24-1538(RAM) 	11
suretyship and the advice of the Restatement (Third) of Suretyship
and Guaranty. RESTATEMENT (THIRD) OF SURETYSHIP AND GUARANTY § 21.
The 	Restatement 	recognizes 	that 	when 	a 	surety 	is 	forced 	to
effectively 	become 	the 	principal 	on 	account 	of 	the 	principal’s
failure 	to 	uphold 	its 	end 	of 	the 	bargain, 	“it 	is 	inequitable 	for
the 	[surety] 	to 	be 	compelled 	to 	suffer 	the 	inconvenience 	and
temporary 	loss 	that 	performance 	of 	the 	secondary 	obligation 	will
entail. 	Thus, 	if 	the 	[principal] 	has 	no 	defense 	to 	its 	duty 	of
performance, 	the 	[surety] 	is 	entitled 	to 	appropriate 	relief
protecting 	its 	interests. 	The 	right 	to 	such 	relief 	is 	sometimes
called the right of exoneration.” Id. at cmt. i. Hence, under the
Restatement’s 	logic, 	the 	Court 	must 	prevent 	the 	Sureties 	from
suffering even the temporary exposure to risk that comes from not
having collateral.
When the principal so fails to perform, the Restatement frames
judicial 	intervention 	not 	as 	“anticipatory 	relief 	for 	a 	future
breach of the duty to perform or the duty to reimburse,” but rather
as “a present remedy for the current breach of the duty to refrain
from conduct impairing the [surety]’s expectation.” Id. at cmt. j.
In 	the 	same 	vein, 	the 	Sureties 	in 	the 	instant 	case 	are 	currently
being harmed by the Indemnitors’ failure to satisfy the Sureties’
expectation that they would collateralize.
Lastly, 	the 	Restatement 	recommends 	the 	same 	forms 	of 	relief
as 	requested 	by 	the 	Sureties, 	namely 	that 	the 	court 	“direct
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Civil No. 24-1538(RAM) 	12
performance 	by 	the 	[principal]” 	or 	“require 	that 	the 	principal
obligor 	give 	the 	[surety] 	adequate 	security 	for 	its 	ultimate
reimbursement.” 	Id. 	at 	cmt. 	k. 	Hence, 	the 	Restatement 	suggests
that 	the 	Indemnitors 	in 	the 	case 	at 	bar 	should 	be 	required 	to
provide the Sureties with security in the form of collateral. See
id.
As 	the 	Magistrate 	Judge 	notes, 	the 	district 	court 	case 	law
concerning irreparable harm to sureties deprived of collateral is
split.1 (Docket No. 63 at 22) (“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”).
However, 	the 	dominant 	trend 	in 	the 	case 	law 	favors 	the 	path 	this
Court 	has 	charted. 	See, 	e.g., 	Safeco 	Ins. 	Co. 	of 	Am. 	v. 	Schwab,
1 The Sureties themselves direct the Court’s attention to one unpublished case
from the District of Puerto Rico from 2007, in which the court briefly analyzed
a surety’s equitable theory for quia timet relief and concluded within the space
of 	a 	few 	sentences 	that 	there 	was 	only 	monetary 	harm 	and, 	therefore, 	no
irreparable harm. United States Fid. & Guar. Co. v. Diaz-Matos, 2007 WL 878571,
*20 (D.P.R. 2007). It is inapposite. That case dealt with a sweeping quia timet
request, far broader than the relief sought here, and its cursory irreparable
harm discussion provides no evidence for its assertion that the surety’s injury
was solely economic. To the extent Diaz-Matos can be read as requiring a showing
of insolvency or the secretion of assets before a court may order injunctive
relief, this Court simply disagrees. Nevertheless, even the Diaz-Matos court
ordered the indemnitor to post collateral security at the summary judgment stage
on account of the unambiguous collateral security provisions in the relevant
indemnity agreement. Id. at *21-*22.
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Civil No. 24-1538(RAM) 	13
739 	F.2d 	431, 	433 	(9th 	Cir. 	1984) 	(“Sureties 	are 	ordinarily
entitled to specific performance of collateral security clauses”);
Merchs. 	Bonding 	Co. 	(Mut.) 	v. 	Ark. 	Constr. 	Sols., 	LLC, 	2019 	WL
452767, *4 (W.D. Ark. 2019) (“In the Court’s view, there are more
district 	courts 	that 	come 	down 	squarely 	on 	the 	side 	of 	granting
preliminary injunctive relief in indemnity agreement cases”).
District courts surveying the case law from across the country
have observed that an “an overwhelming majority of district courts”
have 	sided 	with 	sureties 	in 	ordering 	indemnitors 	to 	furnish
collateral. 	Argonaut 	Ins. 	Co. 	v. 	Summit 	Concrete, 	Inc., 	647 	F.
Supp. 	3d 	1228, 	1233 	(N.D. 	Ala. 	2022) 	(collateralization 	“is
necessary 	to 	protect...the 	bargained-for 	benefit 	of 	collateral
security, 	avoidance 	of 	present 	exposure 	to 	liability 	during
pending 	litigation 	against 	indemnitors, 	and 	avoidance 	of 	risk
that...the surety will be left as a general unsecured creditor”).
Other courts’ review of the precedent has remarked that “case law
nationwide 	has 	recognized 	the 	right 	of 	a 	surety 	to 	use 	the
equitable 	remedy 	of 	specific 	enforcement 	to 	secure
collateralization.” Auto-Owners Ins. Co. v. Randy B. Terry, Inc.,
2013 WL 6583959, at *6 (N.D. Ala. 2013). Similarly, other districts
have 	noted 	that 	courts 	“routinely” 	find 	that 	“sureties 	suffer
immediate, 	irreparable 	harm 	if 	they 	are 	denied 	receipt 	of
collateral,” 	and 	“generally” 	grant 	“specific 	performance 	to
enforce 	collateral 	security 	clauses 	based 	on 	the 	premise 	[that]
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Civil No. 24-1538(RAM) 	14
such 	remedy 	is 	required 	to 	protect 	the 	surety’s 	bargain.” 	Great
Am. 	Ins. 	Co. 	v. 	SRS, 	Inc., 	2011 	WL 	6754072, 	at 	*8 	(M.D. 	Tenn.
2011); 	Liberty 	Mut. 	Ins. 	Co. 	v. 	Nat’l 	Pers. 	of 	Texas, 	Inc., 	2004
WL 583531, at *2 (N.D. Tex. 2004).
The 	sophisticated 	parties 	on 	the 	two 	sides 	of 	the 	case 	at
hand entered into indemnity agreements under which the Indemnitors
agreed 	to 	deposit 	collateral 	with 	the 	Sureties 	“as 	soon 	as
liability exists or is asserted.” (Docket No. 2-1 at 1). “It is no
appropriate part of judicial business to rewrite contracts freely
entered 	into 	between 	sophisticated 	business 	entities.” 	RCI 	Ne.
Servs. Div. v. Bos. Edison Co., 822 F.2d 199, 205 (1st Cir. 1987).
As in the cases outlined above, this Court is of the view that the
overarching 	purpose 	of 	these 	indemnity 	agreements’ 	collateral
security 	clauses 	was 	to 	protect 	the 	Sureties 	from 	even 	temporary
risk 	of 	loss, 	and 	that 	“no 	amount 	of future damages 	[would]
provide[] 	an 	adequate 	remedy 	to 	harm 	resulting
from present exposure.” 	Int’l 	Fid. 	Ins. 	Co. 	v. 	Talbot 	Constr.,
Inc., 	2016 	WL 	8814367, 	at 	*7 	(N.D. 	Ga. 	2016); 	see 	also 	Ohio 	Cas.
Ins. Co. v. Fratarcangelo, 7 F. Supp. 3d 206, 214 (D. Conn. 2014)
(“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”) 	(internal 	citations 	and 	quotations
omitted); Hanover Ins. Group v. Singles Roofing Co., Inc., 2012 WL
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Civil No. 24-1538(RAM) 	15
2368328, 	at 	*38-39 	(N.D. 	Ill. 	2012) 	(“prevailing 	case 	law 	in
Illinois 	[holds] 	that 	contracts 	that 	specifically 	require 	the
posting 	of 	collateral 	upon 	assertion 	of 	a 	claim 	are 	designed 	to
prevent the squirreling of assets by a defendant in order to avoid
ultimate 	performance 	on 	the 	terms 	of 	the 	contract”). 	Hence, 	in
addition 	to 	suffering 	the 	obvious 	prospect 	of 	possible 	economic
harm in the future, the Sureties are presently harmed by the loss
of 	the 	collateral 	right 	for 	which 	they 	entered 	into 	an 	indemnity
agreement. 	This 	frustrates 	the 	suretyship 	entirely, 	as 	it 	forces
the 	Sureties 	into 	the 	posture 	of 	general 	unsecured 	creditors. 	No
belated money judgment can bandage this harm.
Accordingly, 	this 	Court 	declines 	to 	view 	the 	loss 	suffered
by 	the 	Sureties 	as 	“merely” 	economic 	or 	redressable 	by 	money
damages. Consistent with the Restatement (Third) of Suretyship and
Guaranty 	and 	the 	great 	majority 	of 	the 	case 	law 	from 	across 	the
nation, 	this 	Court 	concludes 	that 	the 	Sureties 	have 	shown
irreparable 	harm 	and 	so 	respectfully 	rejects 	the 	Magistrate’s
recommendation.
With this finding of irreparable harm in hand, the preliminary
injunction 	balancing 	test 	weighs 	heavily 	in 	favor 	of 	granting
relief. 	See 	McGuire, 	260 	F.3d 	at 	42 	(requiring 	consideration 	of
likelihood of success on the merits, irreparable harm, burdens on
the 	movants 	and 	nonmovants, 	and 	the 	public 	interest). 	As 	the
Magistrate 	correctly 	notes, 	the 	Sureties 	have 	shown 	a 	strong
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Civil No. 24-1538(RAM) 	16
likelihood of success on the merits on account of the unambiguous
collateral provisions in the indemnity agreements. (Docket No. 63
at 18-19). Once it is resolved that Plaintiffs suffer present harm
in 	addition 	to 	monetary 	damages, 	the 	Magistrate 	Judge’s 	analysis
of 	the 	balance 	of 	the 	equities 	also 	tips 	in 	the 	Sureties’ 	favor.
Id. 	at 	29-30. 	So 	too 	does 	the 	public 	interest 	factor, 	since 	the
enforcement 	of 	indemnity 	agreements 	is 	in 	the 	interest 	of 	the
public. Id. at 30-31. Accordingly, with the likelihood of success,
irreparable harm, balance of equities, and public interest factors
all 	in 	the 	Sureties’ 	favor, 	the 	Court 	concludes 	that 	preliminary
injunctive relief is appropriate.
The 	total 	amount 	of 	the 	currently 	resolved 	penalty 	in 	the
Commonwealth courts is $2,676,471.31. (Docket No. 63-12 at 2). In
their 	Motion 	to 	Compel, 	the 	Sureties 	request 	a 	court 	order
“compelling 	the 	Indemnitors, 	jointly 	and 	severally, 	to 	deposit
$5,600,000.00 	in 	cash 	with 	Zurich, 	on 	behalf 	of 	the 	Sureties, 	as
security 	against 	anticipated 	losses 	to 	be 	incurred 	by 	the
Sureties.” 	(Docket 	No. 	2 	at 	24). 	The 	Sureties 	justify 	this
discrepancy 	based 	on 	loss 	reserves 	they 	have 	each 	calculated 	“in
good 	faith” 	to 	represent 	their 	exposure, 	but 	do 	not 	otherwise
substantiate why the Court should grant them an extra $2,923,528.69
in collateral. (Docket No. 2 at 10). No exhibits are referenced to
back 	up 	these 	reserve 	calculations 	or 	indicate 	how 	they 	were
computed. 	Id. 	While 	it 	is 	true 	that 	both 	sides 	anticipate
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Civil No. 24-1538(RAM) 	17
forthcoming 	additions 	of 	attorneys’ 	fees, 	interest, 	and 	yet-
uncalculated 	penalties 	to 	the 	amount 	computed 	by 	the 	Puerto 	Rico
courts, 	the 	Sureties 	do 	not 	show 	that 	these 	figures 	add 	up 	to
nearly 	$3 	million. 	See 	(Docket 	No. 	71 	at 	3-6). 	Courts 	faced 	with
similar 	circumstances 	elsewhere 	have 	issued 	preliminary
injunctions 	ordering 	indemnitors 	to 	deposit 	collateral 	equal 	to
the calculated liability while simultaneously clarifying that the
sureties 	“will 	be 	entitled 	to 	an 	additional 	payment 	of 	[their]
reasonable 	fees, 	costs, 	and 	expenses 	incurred 	in 	litig[ation].”
See, e.g., Merchs. Bonding Co., 2019 WL 452767 at *4. Accordingly,
this 	Court 	orders 	the 	Indemnitors 	to 	post 	collateral 	with 	Zurich
in 	the 	amount 	of 	$2,676,471.31. 	As 	proceedings 	are 	still 	at 	the
stage 	of 	preliminary 	relief, 	the 	Sureties 	have 	ample 	opportunity
to petition for an adjustment to the court-ordered collateral.
2. The Indemnitors’ failure to provide the Sureties with
reasonable 	access 	to 	their 	books, 	records, 	and
accounts.
The Magistrate offers four brief justifications for reasoning
that the Sureties have not demonstrated irreparable harm stemming
from 	the 	Indemnitors’ 	failure 	to 	provide 	them 	access 	to 	their
books, 	records, 	and 	accounts. 	(Docket 	No. 	63 	at 	35-36). 	They 	are
as 	follows: 	(1) 	the 	contractual 	irreparable 	harm 	clause 	does 	not
cover access to books, records, and accounts; (2) in the same way
that 	the 	Sureties 	only 	suffer 	economic 	harm 	when 	deprived 	of
collateral, 	the 	Sureties’ 	inability 	to 	access 	the 	Indemnitors’
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Civil No. 24-1538(RAM) 	18
books 	only 	exposes 	them 	to 	money 	damages; 	(3) 	access 	to 	the
Indemnitors’ books can be acquired through discovery; and (4) while
some of the Indemnitors have been dissolved, the Sureties have not
presented 	evidence 	that 	others 	are 	financially 	unstable. 	Id. 	at
35-36. The Sureties admit the first point but argue that the lack
of 	a 	contractual 	irreparable 	harm 	clause 	is 	not 	dispositive 	when
the 	Court 	is 	independently 	evaluating 	a 	petition 	for 	preliminary
injunction. 	(Docket 	No. 	70 	at 	19-20). 	They 	then 	gesture 	toward
extensive 	district 	court 	case 	law 	indicating 	that 	sureties 	are
irreparably 	harmed 	absent 	immediate 	access 	to 	their 	indemnitors’
books 	and 	insist 	that 	such 	irreparable 	harm 	may 	occur 	before
discovery. 	Id. 	at 	20-22. 	The 	Sureties 	assert 	that 	the 	Magistrate
Judge does not give sufficient weight to stipulated facts regarding
the dissolution of some Indemnitors. Id. at 22-23.
As with the earlier issue of the Indemnitors’ failure to post
collateral, 	this 	Court 	largely 	concurs 	with 	the 	Sureties 	and
disagrees 	with 	the 	Magistrate 	on 	irreparable 	harm. 	Numerous
district 	courts 	have 	observed 	that 	denying 	a 	surety 	access 	to 	an
indemnitor’s financial records leaves the surety “in the dark” as
to whether the indemnity agreement will be fulfilled, not capable
of 	determining 	whether 	the 	surety 	is 	fulfilling 	its 	own
obligations, 	powerless 	to 	ascertain 	and 	mitigate 	further 	loss
exposure, 	unfit 	in 	evaluating 	bond 	claims 	from 	subcontractors,
unable 	to 	determine 	when 	to 	move 	for 	further 	injunctive 	relief,
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Civil No. 24-1538(RAM) 	19
and 	clueless 	as 	to 	whether 	the 	indemnitors 	continue 	to 	possess
necessary 	assets. 	See, 	e.g., 	RLI 	Ins. 	Co. 	v. 	Nexus 	Servs., 	Inc.,
2018 	WL 	3244413, 	at 	*9 	(W.D. 	Va. 	2018) 	(“The 	persuasive 	case 	law
from 	several 	federal 	jurisdictions...convinces 	the 	court 	that 	a
loss 	of 	right 	to 	review 	books, 	records 	and 	accounts 	connotes
irreparable harm”); Hanover, 2012 WL 2368328 at *14; XL Specialty
Ins. Co. v. Truland, 2014 WL 4230388, at *4 (E.D. Va. 2014); Great
Am. 	Ins. 	Co. 	v. 	Glob. 	Team 	Elec., 	LLC, 	2020 	WL 	2527034, 	at 	*7
(W.D.N.C. 	2020); 	Frankenmuth 	Mut. 	Ins. 	Co. 	v. 	Nat’l 	Bridge
Builders, 	LLC, 	2023 	WL 	3589690, 	at 	*15 	(W.D.N.C. 	2023);
Philadelphia 	Indem. 	Ins. 	Co. 	v. 	DB 	Booneville, 	LLC, 	2024 	WL
4016373, 	at 	*6 	(S.D. 	Iowa 	2024); 	W. 	Sur. 	Co. 	v. 	Futurenet 	Grp.,
Inc., 	2016 	WL 	3180188, 	at 	*7 	(E.D. 	Mich. 	2016). 	This 	is 	the 	all
the 	truer 	when, 	as 	here, 	such 	access 	has 	been 	enshrined 	in 	the
indemnity 	agreement. 	See 	(Docket 	No. 	63-4 	at 	3) 	(“[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”). 	Courts
typically hold that the protections proffered by immediate access
to 	books 	and 	records 	cannot 	be 	replaced 	by 	money 	damages 	in 	the
future. 	RLI 	Ins. 	Co., 	2018 	WL 	3244413 	at 	*9; 	see 	also 	Hanover,
2012 WL 2368328 at *14.
In 	the 	case 	at 	bar, 	the 	Sureties 	presently 	suffer 	the 	same
harms detailed by the aforementioned persuasive authorities, above
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Civil No. 24-1538(RAM) 	20
and 	beyond 	the 	obvious 	prospect 	of 	possible 	economic 	harm 	in 	the
future. 	The 	irreparable 	harm 	caused 	by 	the 	Sureties’ 	current
inability to access the Indemnitors’ books and records thus cannot
be 	remedied 	by 	later 	monetary 	relief. 	Granting 	the 	Sureties
preliminary 	injunctive 	relief 	with 	respect 	to 	access 	to 	the
Indemnitors’ books and records has the added benefit of concurring
with 	the 	bargained-for 	terms 	of 	the 	indemnity 	agreement. 	See
(Docket 	No. 	63-4 	at 	3). 	Thus, 	this 	Court 	rules 	that 	the 	Sureties
have 	shown 	irreparable 	harm 	and 	so 	rejects 	the 	Magistrate’s
recommendation.
Once more, the Court’s finding of irreparable harm weighs the
balancing 	test 	heavily 	in 	favor 	of 	granting 	relief. 	See 	McGuire,
260 	F.3d 	at 	42 	(requiring 	consideration 	of 	likelihood 	of 	success
on 	the 	merits, 	irreparable 	harm, 	burdens 	on 	the 	movants 	and
nonmovants, 	and 	the 	public 	interest). 	The 	Magistrate 	correctly
finds 	that 	the 	indemnity 	agreements 	“contain 	provisions 	that
clearly 	state 	Defendants 	are 	obliged 	to 	provide 	Plaintiffs 	with
reasonable 	access 	to 	their 	books 	and 	records,” 	and 	so 	the
likelihood 	of 	success 	on 	the 	merits 	is 	in 	the 	Sureties’ 	favor.
(Docket Nos. 63 at 32-33, 63-4 at 3). The Magistrate also correctly
discerns 	that 	the 	balance 	of 	the 	equities 	favors 	the 	Sureties,
since 	the 	Indemnitors 	have 	been 	unable 	to 	articulate 	any 	burden
they 	suffer 	from 	providing 	reasonable 	access 	to 	their 	books 	and
records. 	(Docket 	No. 	63 	at 	37). 	Lastly, 	as 	was 	the 	case 	for 	the
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Civil No. 24-1538(RAM) 	21
collateralization 	analysis, 	the 	public 	interest 	factor 	is 	in 	the
Sureties’ 	favor 	since 	the 	enforcement 	of 	indemnity 	agreements 	is
in the interest of the public. Id. at 30-31, 37. Accordingly, with
the likelihood of success, irreparable harm, balance of equities,
and public interest factors all in the Sureties’ favor, the Court
concludes 	that 	preliminary 	injunctive 	relief 	is 	appropriate. 	The
Indemnitors are ordered to provide the Sureties with the reasonable
access 	to 	books, 	records, 	and 	accounts 	that 	is 	demanded 	by 	the
parties’ indemnity agreements.
III. CONCLUSION
The 	Court 	hereby 	ADOPTS 	IN 	PART 	and 	REJECTS 	IN 	PART 	the
Magistrate 	Judge’s 	recommendation 	(Docket 	No. 	63). 	The 	Court
hereby 	ACCEPTS, 	ADOPTS, 	and 	INCORPORATES 	by 	reference 	the
Magistrate Judge’s sections on Procedural Background, Findings of
Fact, 	the 	Indemnitors’ 	Motion 	to 	Dismiss, 	the 	Indemnitors’
arguments based on Colorado River abstention, and analysis of the
likelihood 	of 	success 	on 	the 	merits 	and 	the 	public 	interest 	for
the Indemnitors’ (a) failure to deposit collateral, and (b) refusal
to provide access to books and records. (Docket No. 63). The Court
respectfully 	REJECTS 	the 	Magistrate 	Judge’s 	analysis 	as 	to
irreparable 	harm 	for 	the 	Indemnitors’ 	(a) 	failure 	to 	deposit
collateral, and (b) refusal to provide access to books and records.
Accordingly, 	the 	Indemnitors’ 	Motion 	to 	Dismiss 	is 	DENIED.
(Docket No. 48). The Sureties’ Motion to Compel is GRANTED IN PART
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Civil No. 24-1538(RAM) 	22
and the Indemnitors are instructed to (1) deposit collateral with
Zurich, on behalf of the Sureties, in the amount of $2,676,471.31,
and (2) provide the Sureties with the reasonable access to books,
records, 	and 	accounts 	that 	is 	demanded 	by 	the 	parties’ 	indemnity
agreements.
IT IS SO ORDERED.
In San Juan Puerto Rico, this 2 nd day of February 2026.
S/ RAÚL M. ARIAS-MARXUACH
United States District Judge
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