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1 DISTRICT COURT OF THE VIRGIN ISLANDS 1 DIVISION OF ST. CROIX 2 3 GEC, LLC Plaintiff, -v.- ARGONAUT INSURANCE COMPANY Defendant. 1:18-cv-58-CAK OPINION AND ORDER 4 AMENDED MEMORANDUM OPINION AND ORDER 5 CHERYL ANN KRAUSE, Circuit Judge, sitting by designation. 6 THIS MATTER comes before the Court on Defendant’s Motion to Dismiss (Dkt. 7 No. 26) the Plaintiff’s First Amended Complaint (Dkt. No. 18). For the reasons set forth 8 below, the Court will DENY Defendant’s Motion to Dismiss. 9 FACTUAL BACKGROUND1 10 This case arises out of a contract dispute relating to the construction of an affordable 11 housing development on St. Croix. First Amended Compl. (FAC) ¶ 5. Plaintiff GEC, LLC 12 (“GEC”), the general contractor for the project, retained Alpha Technologies Services, Inc. 13 (“Alpha”) to design and construct an electrical generation system (the “Microgrid”) to 14 “provide off-the-grid continuous electrical service” to the development. Id. ¶¶ 6–8, 11. 15 1 In ruling on Defendant’s Motion to Dismiss, we accept Plaintiff’s well-pleaded factual allegations as true and draw all reasonable inferences in its favor. See Sherwin- Williams Co. v. Cnty. of Delaware, 968 F.3d 264, 269 (3d Cir. 2020), cert. denied, 141 S. Ct. 2565 (2021); Fischbein v. Olson Rsch. Grp., Inc., 959 F.3d 559, 561 (3d Cir. 2020). Thus, these facts are taken from Plaintiff’s First Amended Complaint. Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 1 of 14 2 Defendant Argonaut Insurance Company (“Argonaut”) issued a Performance Bond in the 16 penal sum of $1.652 million as surety for Alpha’s performance. Id. ¶ 21. Construction of 17 the Microgrid apparently did not go as planned, see id. ¶¶ 24, 30, and Alpha’s alleged 18 failure to timely deliver an operational Microgrid is the subject of ongoing litigation before 19 this Court. See Alpha Energy v. GEC, LLC, No. 1:17-cv-00015-CAK-EAH (filed Mar. 20, 20 2017). In response to Alpha’s alleged failures, GEC connected the development to the 21 local utility’s power grid and paid for commercial electrical service instead. Id. ¶ 31. 22 In light of these challenges, GEC told Argonaut that it was considering a declaration 23 of default on January 27, 2017, id. ¶ 32, and then issued a notice of default and termination 24 on July 23, 2018, id. ¶ 33. But Argonaut responded with a letter (the “denial letter”) 25 denying any liability under the Performance Bond and refusing to pay GEC. See id. ¶ 35; 26 Dkt. No. 28-2. This lawsuit followed. 27 PROCEDURAL HISTORY 28 GEC initiated this action on November 21, 2018, Dkt. No. 1, and filed the operative 29 First Amended Complaint on February 8, 2019, Dkt. No. 18. In that single-count 30 complaint, it claims that Argonaut violated the implied covenant of good faith and fair 31 dealing when it refused to pay under the performance bond. FAC ¶ 36. Argonaut has 32 moved to dismiss the First Amended Complaint for failure to state a claim under Federal 33 Rule of Civil Procedure 12(b)(6). Dkt. No. 26. It attached as Exhibit B to its motion the 34 denial letter. Dkt. No. 28-2. 35 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 2 of 14 3 DISCUSSION2 36 A. Applicable Law 37 1. Motion to Dismiss 38 In evaluating Argonaut’s Motion to Dismiss, this Court must determine whether the 39 First Amended Complaint states a claim for relief under Rule 8(a). It does so “when the 40 plaintiff pleads factual content that allows the court to draw the reasonable inference that 41 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 42 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). 43 2. Converting a Motion to Dismiss into a Motion for Summary Judgment 44 To resolve a Rule 12(b)(6) motion, a court “must consider only the complaint, 45 exhibits attached to the complaint, matters of public record, as well as undisputedly 46 authentic documents if the complainant’s claims are based upon these documents.” Mayer 47 v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010) (citation omitted). Federal Rule of Civil 48 Procedure 12(d) requires a district court to convert a motion to dismiss into a motion for 49 summary judgment if “matters outside the pleadings are presented to and not excluded by 50 the court.” Fed. R. Civ. P. 12(d). In that instance, “[a]ll parties must be given a reasonable 51 opportunity to present all the material that is pertinent to the motion.” Id. 52 2 The Court has diversity jurisdiction under 28 U.S.C. § 1332. According to GEC’s First Amended Complaint, there is complete diversity between the parties. GEC is a limited liability company organized under the laws of the Virgin Islands, where it has its principal place of business and where all of its members reside. FAC ¶ 2. Alpha is a corporation organized under Nevada law with its principal place of business in Washington, id. ¶ 3, and Argonaut is a corporation organized under Illinois law with its principal place of business in Texas, id. at ¶ 4. Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 3 of 14 4 Conversion therefore is unnecessary when documents submitted in support of or 53 opposition to a motion to dismiss are “integral to or explicitly relied upon in the complaint.” 54 In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (citation 55 omitted). The rationale for this exception is that “the primary problem raised by looking 56 to documents outside of the complaint—lack of notice to the plaintiff—is dissipated where 57 the plaintiff has actual notice . . . and has relied upon these documents in framing the 58 complaint.” Id. (quotation omitted). 59 3. Implied Covenant of Good Faith and Fair Dealing 60 Under Virgin Islands law, a claim for breach of the implied covenant of good faith 61 and fair dealing has three elements: “that ‘(1) a valid contract exists between the parties, 62 and (2) acts committed by the [defendant] amount to fraud or deceit or an unreasonable 63 contravention of the parties’ reasonable expectations under the contract;’ and (3) that 64 ‘damages suffered as a result.’” Dukes v. Fay Servicing, LLC, No. 3:18-cv-0064, 2022 WL 65 16855409, at *4 (D.V.I. Nov. 10, 2022) (quoting Arvidson v. Buchar, 71 V.I. 277, 336 66 (Super. Ct. 2019)). The implied covenant of good faith and fair dealing is present in every 67 contract governed by Virgin Islands law. In the Virgin Islands, “no special [contractual] 68 language is required as it is well established . . . that the duty of good faith implicitly arises 69 from the creation of a contract.” Id. (citation omitted). 70 B. Analysis 71 1. Conversion to a Motion for Summary Judgment Is Unnecessary 72 73 In its opposition to the Motion to Dismiss, GEC suggests that because Argonaut’s 74 denial letter was not incorporated by reference into the First Amended Complaint, the 75 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 4 of 14 5 Court must treat the motion as a motion for summary judgment. Opp. at 3. However, that 76 is not necessary if the letter is an indisputably authentic3 document that is “integral to . . . 77 the complaint.” In re Burlington Coat Factory, 114 F.3d at 1426; see supra Section A.2. 78 To be integral, a document need not be cited in the complaint; “what is critical is 79 whether the claims in the complaint are ‘based’ on [the] extrinsic document.” In re 80 Burlington Coat Factory, 114 F.3d at 1426 (citations omitted). So long as the court is 81 considering the fact of the document and not, when contested, “the truth of facts in” it, 82 there is no need to convert the motion into a motion for summary judgment. Doe v. 83 Princeton Univ., 30 F.4th 335, 342 (3d Cir. 2022). Thus, in a case alleging sex 84 discrimination by a college in the application of its sexual misconduct policy, the school 85 investigator’s report on the underlying alleged misconduct was integral to the complaint. 86 Doe v. Univ. of Scis., 961 F.3d 203, 208 (3d Cir. 2020). On the other hand, a company’s 87 updates and press releases describing its sale of certain assets were not integral to a 88 complaint alleging that those transactions violated federal securities laws because the suit 89 was ultimately based on the allegedly-fraudulent transactions, not the updates or press 90 releases themselves. See Schmidt v. Skolas, 770 F.3d 241, 249–50 (3d Cir. 2014). 91 Here, although the First Amended Complaint does not mention the means Argonaut 92 used to communicate it, its claims are premised on the allegation that Argonaut 93 “wrongfully denied any liability to GEC under the Performance Bond,” FAC ¶ 35, and the 94 denial letter is simply the document through which Argonaut communicated that decision 95 3 GEC does not object to the denial letter’s authenticity. See Opp. 2–3. Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 5 of 14 6 to GEC. That the denial letter is not incorporated by reference is thus beside the point, see 96 Opp. 3; the question is whether the denial letter is integral to GEC’s claim, which it clearly 97 is. There is also no unfair surprise to GEC, which plainly was on notice of the letter. See 98 In re Burlington Coat Factory, 114 F.3d at 1426. GEC contends that Argonaut “makes a 99 factual argument based on the contents of the [denial] letter,” Opp. 3, because “even a 100 cursory review of [the denial letter and the Performance Bond] indicates that” it did not 101 breach, Mot. 6. But to the extent that the Court is considering the letter at all at this stage, 102 it is for the fact of the denial, not for the truth of its contents. See Doe, 30 F.4th at 342. 103 Accordingly, there is no need to convert Argonaut’s Motion to Dismiss into a motion for 104 summary judgment. 105 2. GEC May State a Claim for Breach of the Implied Covenant of Good 106 Faith and Fair Dealing Under the Performance Bond 107 108 Having confirmed that Federal Rule of Civil Procedure 12 still governs Argonaut’s 109 motion, the Court now turns to the merits of its arguments. 110 Argonaut first asserts that, due to the differences between suretyship and insurance, 111 there is no bad faith claim available. Mot. 7–8. In support of that view, Argonaut points 112 the Court to various cases in which district courts declined to recognize claims for the tort 113 of bad faith against sureties. See, e.g., Intercon Constr., Inc. v. Williamsport Mun. Water 114 Auth., No. 4:07-CV-1360, 2008 WL 239554, at *3 (M.D. Pa. Jan. 28, 2008) (holding that 115 plaintiffs could not assert a cause of action against a surety for bad faith breach of an 116 insurance obligation under a Pennsylvania statute, which sounded in tort); U.S. ex. rel. 117 SimplexGrinnell, LP v. Aegis Ins. Co., No. 1:08-CV-01728, 2009 WL 90233, at *3–5 (M.D. 118 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 6 of 14 7 Pa. Jan. 14, 2009) (same); Deluxe Bldg. Sys., Inc. v. Constructamax, Inc., Civ. No. 06– 119 2996 (GEB), 2011 WL 322385, at *3 (D.N.J. Jan. 31, 2011) (holding that “New Jersey law 120 does not . . . recognize a cause of action for ‘bad faith’ breach of a surety bond”). 121 That argument, however, misapprehends the gravamen of GEC’s First Amended 122 Complaint. GEC does not assert the bad-faith tort claim that these cases declined to 123 recognize in the surety context. Instead, GEC raises a contract claim. That is, it alleges 124 that “Argonaut wrongfully denied any liability to GEC under the Performance Bond,” see 125 FAC ¶ 35, that this breach was “deliberate[],” “intentional[],” and “dishonest,” and that 126 Argonaut violated the “implied covenant of good faith and fair dealing,” id. ¶ 36.4 Unlike 127 a tort action for “bad faith breach of an insurance policy,” Deluxe Bldg. Sys., 2011 WL 128 322385, at *3, breach of the implied covenant of good faith and fair dealing sounds in 129 contract. Even the Pennsylvania and New Jersey courts on which Argonaut relies 130 acknowledge that distinction. See VSI Sales, LLC v. Int’l Fid. Ins. Co., Civ. Action No. 131 15-507-GMS, 2015 WL 5568623, at *2 n.1 (D. Del. Sept. 22, 2015) (observing that 132 Pennsylvania does not recognize either the tort of bad faith or breach of the implied 133 covenant of good faith and fair dealing against sureties, but that Delaware would); Alden 134 Leeds, Inc. v. QBE Specialty Ins. Co., No. A-2034-14T1, 2015 WL 4507151, at *10 (N.J. 135 Super. Ct. App. Div. July 27, 2015) (“We note that Leeds’s bad faith claim [against its 136 4 This confusion may have arisen from how GEC amended its complaint. The original Complaint alleged that Argonaut’s refusal to pay “was a breach . . . and was in bad faith,” without making clear that bad faith alleged related to the contractual claim of breach of the implied covenant of good faith and fair dealing. Compl. ¶ 36. The First Amended Complaint, on the other hand, plainly alleges a breach of the Performance Bond’s implied covenant. FAC ¶ 36. Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 7 of 14 8 insurer] is couched in terms of a claim for breach of the implied covenant of good faith and 137 fair dealing, rather than the tort of bad faith denial.”). And tellingly, Argonaut points to no 138 cases holding that a contractual claim for breach of the implied covenant of good faith and 139 fair dealing, when brought against a surety, is not cognizable. 140 This Court predicts that the Virgin Islands Supreme Court would recognize this 141 claim. Under Virgin Islands law, “[e]very contract imposes upon each party a duty of good 142 faith and fair dealing in its performance and its enforcement,” Chapman v. Cornwall, 58 143 V.I. 431, 441 (2013) (quoting Restatement (Second) of Contracts § 205 (Am. L. Inst. 144 1981)),5 and “claims arising from the duty . . . sound . . . in contract.” Mendez v. Coastal 145 Sys. Dev., Inc., Civil No. 2005-0165, 2008 WL 2149373, at *6 (D.V.I. May 20, 2008); see 146 also Jo-Ann’s Launder Ctr., Inc. v. Chase Manhattan Bank, N.A., 854 F. Supp. 387, 390 147 (D.V.I. 1994) (recognizing a cause of action under contract law, per the Restatement, “for 148 breach of the implied duty of good faith and fair dealing in a loan contract between a lender 149 and a borrower”). This implied duty “limits the parties’ ability to act unreasonably in 150 contravention of the other party’s reasonable expectations,” Chapman, 58 V.I. at 441 151 (citations omitted), and remedies a breach with contract damages, Mendez, 2008 WL 152 2149373, at *15.6 We see no reason to think the Virgin Islands Supreme Court would 153 5 Because of this authority from the Virgin Islands, a Banks analysis to determine how the Virgin Islands Supreme Court would likely rule on the question is unnecessary. Banks v. Int’l Rental & Leasing Corp., 55 V.I. 967 (2011). 6 Because tort damages are not at issue, it is irrelevant for purposes of this claim whether there is a fiduciary or other special relationship between Argonaut and GEC. Mendez, 2008 WL 2149373, at *5–6 (requiring a “special or fiduciary relationship” only in the “narrow exception for tort recovery in a good faith and fair dealing claim”). Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 8 of 14 9 exempt sureties alone from this limitation. 154 In sum, because the Performance Bond is a contract governed by Virgin Islands law, 155 a claim for breach of the implied covenant in the performance of that contract is cognizable, 156 and the Court will not dismiss GEC’s complaint on this ground. 157 3. GEC’s First Amended Complaint States a Claim for Breach of the 158 Implied Covenant of Good Faith and Fair Dealing 159 160 We next consider whether GEC sufficiently pleaded its claim. To state a claim for 161 breach of the implied covenant, GEC must plausibly allege (1) that there was a valid 162 contract with Argonaut, (2) that Argonaut committed “fraud or deceit or an unreasonable 163 contravention of the parties’ reasonable expectations,” and (3) that GEC incurred damages 164 as a result. Dukes, 2022 WL 16855409, at *4 (citation omitted). 165 The first and last of these requirements are not at issue here. The parties do not 166 dispute the existence of a valid contract under the Performance Bond. Compare FAC ¶ 21 167 (noting Argonaut issued the Performance Bond), and Opp. 6 (“The existence of the contract 168 is not disputed.”), with Mot. 14–15 (contesting whether the First Amended Complaint 169 alleges fraudulent conduct but never disputing the Performance Bond’s validity). And 170 GEC’s First Amended Complaint plainly alleges, by way of damages, that Argonaut has 171 wrongfully retained $1.652 million owed to GEC. FAC ¶ 21. The only real dispute, then, 172 is whether Argonaut’s alleged conduct rises to the level of “fraud or deceit or an 173 unreasonable contravention of the parties’ reasonable expectations” under the Performance 174 Bond contract. Dukes, 2022 WL 16855409, at *4 (citation omitted). 175 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 9 of 14 10 The allegations in the First Amended Complaint easily meet that standard. See FAC 176 ¶¶ 35–36. According to GEC, Alpha failed to build a properly permitted Microgrid on 177 time, see id. ¶ 24, causing GEC to have to perform much of the work at its own expense, 178 id. ¶¶ 25, 30–31, and GEC complied with the notice provisions in the Performance Bond, 179 see id. ¶¶ 32–34. Yet Argonaut—having “deliberately failed to adequately investigate 180 GEC’s claim” and “lack[ing] any reasonable or arguable basis” for denying it, id. ¶ 36— 181 refused to pay. Contrary to Argonaut’s suggestion, see Reply Br. 10, these allegations are 182 sufficiently specific to survive a motion to dismiss, see Restatement (Second) of Contracts 183 § 205 cmt. d (Am. L. Inst. 1981) (defining bad-faith performance as, among other things, 184 “lack of diligence and slacking off”); cf. Walsh Constr. Co. II, LLC v. U.S. Sur. Co., 334 185 F. Supp. 3d 282, 299 (D.D.C. 2018) (dismissing a breach of implied covenant in the 186 absence of an allegation that funds were “withheld . . . for any improper purpose”). 187 4. Consequential Damages Are Available. 188 189 Finally, Argonaut argues that even if GEC’s claim can proceed, it cannot claim 190 consequential damages because of any breach. See Mot. 16–17. The Court is not 191 persuaded. I reach this conclusion in reliance on the following Banks analysis to determine 192 the soundest rule of law for the Virgin Islands. Banks, 55 V.I. at 981–84. To conduct this 193 analysis, I must (1) research whether Virgin Islands courts have articulated an on-point 194 rule, (2) analyze what the majority of other courts do, and then (3) determine “most 195 importantly, which approach represents the soundest rule for the Virgin Islands.” Simon v. 196 Joseph, 59 V.I. 611, 623 (V.I. 2013). 197 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 10 of 14 11 First, this Court has not identified, and the parties have not proffered, binding Virgin 198 Islands authority on the availability of consequential damages in cases alleging breach of 199 a performance bond that lacks any language addressing the issue. 200 Second, while courts are split on the question, the majority appear to allow such 201 claims to proceed where, as here, the contract in question does not by its terms deprive 202 either party of the right to consequential damages. As summarized in the Second 203 Restatement of Contracts, under ordinary contract law, when such damages are not 204 expressly excluded, a party in breach (including in breach of the implied covenant of good 205 faith and fair dealing) may be required to compensate the counterparty for such losses to 206 the extent they are foreseeable. See Restatement (Second) of Contracts § 347 cmt. a (Am. 207 L. Inst. 1981) (“The measure of damages . . . is subject to the agreement of the parties, as 208 where they provide for liquidated damages . . . or exclude liability for consequential 209 damages.”); id. § 351 cmt. b (“Loss that results from a breach in the ordinary course of 210 events is foreseeable as the probable result of the breach.”). 211 Argonaut urges the mirror-opposite default rule, noting that some cases applying 212 Pennsylvania law have said that sureties will be liable for consequential damages only to 213 the extent the bond itself expressly provides for them. See Mot. 16 (citing Wise Invs., Inc. 214 v. Bracy Contracting, Inc., 232 F. Supp. 2d 390, 403 (E.D. Pa. 2002) (holding that the 215 surety was “obligated to pay only the costs of performance as provided by the Bond, not 216 all claims [the obligee under the bond] may have against [the bond’s principal] such as 217 liquidated damages and attorneys’ fees”)). But the performance bond at issue there 218 contained language that expressly limited the sureties’ financial obligations to, at most, the 219 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 11 of 14 12 contract price “including other costs and damages for which the Surety may be liable 220 hereunder.” Downingtown Area Sch. Dist. v. Int’l Fid. Ins. Co., 671 A.2d 782, 786 (Pa. 221 Commw. Ct. 2001) (emphasis removed); see also Wise, 232 F. Supp. 2d at 403 (noting that 222 the performance bond there was “materially the same” as in Downingtown). The 223 Performance Bond here did no such thing. 224 Moreover, many other jurisdictions follow the Restatement’s rule. See, e.g., 225 Associated Constr./AP Constr., LLC v. Hanover Ins. Co., No. 3:15-cv-1600 (MPS), 2018 226 WL 3998968, at *14 (D. Conn. Aug. 21, 2018) (“[A] surety’s liability for the breach of a 227 contract[], i.e., a surety’s exposure when the bond is triggered and the surety performs its 228 obligations under the bond, is distinct from a surety’s liability when it breaches the terms 229 of the bond.”); In re New Bern Riverfront Dev., LLC, 521 B.R. 718, 723 (E.D.N.C. 2014) 230 (“Unlike a surety’s liability for breach of its derivative obligations, absent express or 231 implied language in the bond, a surety’s liability for breach of its non-derivative, direct 232 obligations may not be limited to the terms of the bond.”); Marshall Contractors, Inc. v. 233 Peerless Ins. Co., 827 F. Supp. 91, 95 (D.R.I. 1993) (identifying jurisdictions following 234 this rule and noting that a surety was not necessarily relieved “from liability for 235 consequential damages attributable to its own alleged breach of [its] performance bond” 236 where the “bond ma[de] no provision for consequential damages”); Hunt v. Bankers and 237 Shippers Ins. Co. of N.Y., 73 A.D.2d 797, 798 (N.Y. App. Div. 1979) (“[T]he primary 238 obligation under a performance bond is the surety’s promise to be bound to the owner . . . 239 and where the surety fails to perform, it is liable for loss of use of the premises.”); Cont’l 240 Realty Corp. v. Andrew J. Crevolin Co., 380 F. Supp. 246, 252 (S.D.W. Va. 1974) (holding 241 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 12 of 14 13 that a surety could be “found liable for a sum in excess of the penal sum of the bond . . . by 242 virtue of its own misconduct”). Based on the above survey, I conclude that the majority of 243 jurisdictions follow the Restatement’s rule and allow for consequential damages for breach 244 of a performance bond where the parties have not bargained to exclude them. 245 Finally, I conclude that the soundest rule of law for the Virgin Islands is the 246 Restatement’s rule. As a general matter, Virgin Islands courts have allowed parties to 247 recover damages for “consequential loss [] caused by [a contract] breach.” Creative Minds, 248 LLC v. Reef Broad., Inc., No. ST-11-CV-131, 2014 WL 4908588, at *7 n.36 (V.I. Super. 249 Sept. 24, 2014) (citation omitted); see also Four Winds Plaza Corp. v. Caribbean Fire & 250 Assocs., Inc., 48 V.I. 899, 915 (D.V.I. 2007) (“General, special, and consequential damages 251 all qualify as compensatory damages.”). Argonaut has not identified any Virgin Islands 252 authority articulating a different rule for sureties. Thus, the soundest rule of law for the 253 Virgin Islands holds that, where the parties have not bargained for an alternate 254 arrangement, even if “a performance bond is not intended to compensate for indirect 255 losses,” a surety’s “own alleged breach of the performance bond” can give rise to liability 256 beyond the bond’s penal sum. Marshall Contractors, 827 F. Supp. at 95; see also In re 257 New Bern, 521 B.R. at 725 (“[A]ny limitation on the recovery of consequential damages 258 arising from a surety’s direct liability must be found in the bond itself.”). 259 In sum, because the Performance Bond did not preclude recovery of consequential 260 damages, they are available here. 261 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 13 of 14 14 CONCLUSION 262 For the reasons discussed above, the Court DENIES Defendant’s Motion to 263 Dismiss. 264 SO ORDERED. 265 Dated: August 28, 2023 /s CHERYL ANN KRAUSE United States Circuit Judge 266 Case: 1:18-cv-00058-CAK-EAH Document #: 131 Filed: 08/28/23 Page 14 of 14