In re Commercial Money Center, Inc. (603 F. Supp. 2d 1095, 2009)

MEMORANDUM AND ORDER

KATHLEEN McDONALD O’MALLEY, District Judge.

The dispute in these actions centers around the Sureties’ liability on various surety bonds issued in connection with certain transactions between the Banks and Commercial Money Center, Inc. (“CMC”). CMC’s business purportedly involved the leasing of equipment and vehicles to numerous lessees in exchange for lease payments. CMC then pooled the leases and sold them to institutional investors. Apparently, the majority of CMC’s leasing business was a sham, and the Banks claim millions of dollars in losses from these transactions. The Banks now sue the Sureties to recover on the surety bonds associated with the transactions. ■ The Sureties raise CMC’s fraud as a defense to the Banks’ claims and seek to rescind the surety bond transactions based on fraud in the inducement.

These actions are before the Court upon the following motions for partial summary judgment:

1. Safeco Motion for Summary Judgment (02-16000, Doc. 2150)

Safeco Insurance Company of America (“Safeco”) has moved for partial summary judgment against J.P. Morgan Chase Bank, N.A. (“Chase”); The Provident Bank (“Provident”); Federal Deposit Insurance Corporation (“FDIC”), as Receiver for NetBank FSB; CadleRock Joint Venture, L.P. (“CadleRock”); and certain Guardian/Diversity Entities (“Guardian Entities”) (collectively, the “Banks,” except where individual reference is intended), on the following grounds:

(a) Safeco seeks summary judgment on the Banks’ claims for bad faith/ breach of the covenant of good faith and fair dealing. Safeco argues that California law bars a tort claim for bad faith in the context of a commercial surety contract.

(b) Safeco also seeks summary judgment on CadleRock’s claims for punitive damages. Safeco argues that CadleRock acquired its rights in this litigation by assignment and that, under California law, claims for punitive damages are not assignable.

2. Royal Motion for Summary Judgment (02-16000, Doc. 2154)

Royal Indemnity Company (“Royal”) moves for partial summary judgment against CadleRock on , the following grounds:

(a) Royal seeks summary judgment on CadleRock’s claims for bad faith/ breach of the covenant of good faith and fair dealing, for the same reasons set forth above relating to Safe-co’s motion for summary judgment.

(b) Royal seeks summary judgment as to CadleRock’s claims for punitive damages, for the same reasons set forth above relating to Safeco’s motion for summary judgment.

(c) Royal seeks summary judgment as to all of CadleRock’s claims premised upon the Sale and Servicing Agreements (“SSAs”). Royal argues that, when CadleRock purchased its interests in three CMC lease pools from Sky Bank (“Sky”), the rights that CadleRock obtained did not include any rights under the SSAs.

3. AMICO Motion for Summary Judgment (02-16024, Doc. 52)

American Motorists Insurance Company (“AMICO”) moves for partial summary judgment on the supplemental counterclaim of United Security Bank (“USB”), based on bad faith/breach of the covenant of good faith and fair dealing. As set forth above with respect to the summary judgment motions filed by Safeco and Royal, AMICO argues that California law does not recognize a tort claim for bad faith in the context of a commercial surety bond.

I. BACKGROUND

On September 12, 2006, the Court issued an Amended Revised Case Management Plan (02-16000, Doc. 1861), which set forth the procedure applicable to the filing of dispositive motions in these cases. The Amended Revised Case Management Plan provided that each party wishing to file a dispositive motion should file a Notification of Intent and Request for Leave to File Summary Judgment Motion (“Notification”). Pursuant to the Amended Revised Case Management Plan, each of the Sureties filed a Notification on November 17, 2006 seeking leave to file summary judgment motions on multiple issues. On December 19, 2007, the Court issued a ruling (Doc. 2138) disposing of various Notifications and granting the Sureties leave to file the summary judgment motions described above. The motions set forth above were filed on February 15, 2008, and are ripe for ruling.

For the reasons set forth herein, the motions of Safeco, Royal and AMICO (the “Sureties”) for summary judgment are granted in part and denied in part. Safe-co’s motion for summary judgment against the Banks (Doc. 2150) is determined as follows:

(a) Safeco’s motion for summary judgment on the Banks’ claims for bad faith/breach of the covenant of good faith and fair dealing is granted as to all Banks except NetBank, and denied as to NetBank.

(b) Safeco’s motion for summary judgment on CadleRock’s claims for punitive damages is granted.

Royal’s motion for summary judgment against CadleRock (Doc. 2154) is granted in its entirety, as follows:

(a) Royal’s motion for summary judgment against CadleRock on CadleR-oek’s claims for bad faith/breach of the covenant of good faith and fair dealing is granted.

(b) Royal’s motion for summary judgment on CadleRock’s claims for punitive damages is granted.

(c) Royal’s motion for summary judg: ment as to CadleRock’s claims premised upon the SSAs is granted.

AMICO’s motion for summary judgment against USB (02-16024, Doc. 52) as to USB’s claims based on bad faith/breach of the covenant of good faith and fair dealing is granted.

II. DISCUSSION

These cases have arisen in various jurisdictions, under a variety of procedural circumstances. Since the Sureties’ summary judgment motions are grounded primarily on principles of California law, the Court must first determine the applicability of those principles to the cases under consideration. First, the Court examines the procedural posture of each group of cases to determine the applicable state choice of law rules. Second, the Court applies the relevant choice of law rules to determine the governing law for the bad faith claims asserted in each group of cases. Finally, the Court analyzes the relevant substantive law in order to determine the merits of the Sureties’ motions.

A. Procedural Background

The motions currently before the Court relate to thirteen of the cases in this multi-district litigation. These thirteen cases break down categorically by motion (i.e., each case relates only to one of the three pending summary judgment motions) and by jurisdiction of original filing.

In deciding conflict of law questions in diversity of citizenship cases, a federal court generally follows the choice of law rules of the state in which it sits. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Where venue has been transferred to a federal court sitting in a different state, however, such a transfer does not change the state substantive law applicable in a diversity case. “[W]here the defendants seek transfer, the transferee district court must be obligated to apply the state law that would have been applied if there had been no change of venue. A change of venue ... generally should be, with respect to state law, but a change of courtrooms.... ” Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964).

This rule also applies where a case is transferred for pretrial purposes pursuant to 28 U.S.C. § 1407. See SG Metals Indus. v. New Eng. Life Ins. Co. (In re New Eng. Mut. Life Ins. Co. Sales Practices Litig.), 236 F.Supp.2d 69, 74 (D.Mass.2002). Accordingly, prior to determining the law applicable in each of the cases under consideration, the Court must consider the state of initial filing.

This inquiry is relatively simple with respect to the cases encompassed by the Royal and AMICO motions. The motion for summary judgment filed by AMICO (02-16024, Doc. 52) concerns only one case—02CV16024. That case was filed by AMICO in the Southern District of California and remained in the Southern District of California until its consolidation in this Court for pretrial purposes pursuant to 28 U.S.C. § 1407. With respect to AM-ICO’s summary judgment motion, therefore, the Court will apply California choice of law rules to determine the governing substantive law.

Royal’s summary judgment motion (02-16000, Doc. 2154) relates to three cases— 02CV16012, 02CV16019, and 02CV16022. The first of these cases, 02-16012, was filed by CadleRock’s predecessor in interest in the Northern District of Ohio. Cases 02-16019 and 02-16022 were filed in Ohio state court by CadleRock’s predecessors in interest and removed by Royal to the Northern District of Ohio. Ohio choice of law rules apply to determine the governing substantive law for each of these three cases.

With respect to the summary judgment motion filed by Safeco (02-16000, Doc. 2150), the inquiry is more complex. Safe-co’s summary judgment motion relates to nine cases in this consolidated litigation— 02CV16010, 02CV16014, 02CV16020, 02CV16021, 03CV16002, 03CV16003, 03CV16004, 03CV16005, and 03CV16006. Two of these actions were filed in Ohio state court and removed to the Northern District of Ohio. This includes 02-16020 (filed in state court by FirstMerit Bank, N.A., CadleRock’s predecessor in interest), and 02-16021 (filed in state court by Provident). Additionally, six actions were filed directly in the Northern District of Ohio— including 02CV16014 (filed by Bank One, N.A., Chase’s predecessor in interest), and 03CV16002 through 03CV16006 (filed by various Guardian Entities). With respect to these eight actions, therefore, Ohio choice of law rules apply.

The remaining case encompassed by Safeco’s summary judgment motion is 02CV16010. That case was filed in Georgia state court by NetBank, FSB, and removed by the defendants to the Northern District of Georgia. Subsequently, the case was transferred to the District of Nevada by stipulation of the parties. The parties apparently agree that this procedural posture requires the application of Georgia choice of law rules, and the Court also finds this result to be consistent with the applicable law.

Accordingly, in determining the substantive law applicable to the Sureties’ motions, the Court must apply the choice of law rules of three jurisdictions — California, Ohio and Georgia. The Court sets forth its choice of law analysis pursuant to these rules below.

B. Choice of Law

In determining the substantive law applicable to the bad faith claims asserted in each group of cases, the Court will examine the relevant choice of law rules on a state-by-state basis. In each case, the Court must first classify the claims in question, and apply the local choice of law rules governing those claims.

1. California Choice of Law

As noted above, Case No. 02CV16024 was filed in the Southern District of California, and California choice of law rules govern the Court’s choice of law inquiry for that case.

California law employs distinct choice of law analyses for claims sounding in contract and tort. Accordingly, the first step is to classify the claims for bad faith/ breach of covenant of good faith and fair dealing. In California, a claim for bad faith/breach of covenant of good faith and fair dealing sounds in both contract and tort. See Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 573, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973); Kilroy Industries v. United Pacific Ins. Co., 608 F.Supp. 847, 859 (C.D.Cal.1985). For choice of law purposes, however, when considering claims for bad faith/breach of the covenant of good faith and fair dealing, California courts have applied tort choice of law principles. See, e.g., Kilroy, 608 F.Supp. at 858, n. 5.

In tort cases, California courts engage in a three-step “governmental interest” analysis. See Hurtado v. Superior Court of Sacramento County, 11 Cal.3d 574, 579-80, 114 Cal.Rptr. 106, 522 P.2d 666 (1974); Frontier Oil Corp. v. RLI Ins. Co., 153 Cal.App.4th 1436, 1455, 63 Cal.Rptr.3d 816 (2d Dist.2007). First, the Court must decide whether the laws of the affected states differ in any way. See Kilroy, 608 F.Supp. at 858. If so, the Court must assess each state’s interest in having its respective laws applied. See id. Finally, if the Court determines that the interests of the affected states conflict, “the Court must determine which state’s interest would be impaired to the greater degree if its law were not applied....” Id.

Although AMICO has erroneously cited the California choice of law principles applicable in contract cases, AMICO argues here that California law should apply to the Banks’ bad faith claims because (1) the bonds provide that “jurisdiction shall rest in the state of the obligee,” and CMC (the initial obligee), as well as USB, are located in California; (2) the bonds were prepared, requested and issued in California by the sureties’ broker, Michael Anthony, and CMC; (3) USB, a California corporation, corresponded with CMC’s Escondido, California office regarding the sale of the leases and bonds; and (4) both AMICO and USB filed lawsuits relating to this dispute in California courts. Accordingly, AMICO argues that California has the most substantial connection to the dispute between AMICO and USB.

USB argues, confusingly, that California law does not apply to the dispute between these parties, and that there is no controlling authority governing this dispute. USB correctly notes that the “governmental interest test” applies as the relevant choice of law analysis for tort claims. USB asserts that the states potentially affected in this matter are California and Nevada, since (1) USB is a California Bank; (2) AMICO did business in California; (3) surety broker Michael Anthony operated out of California; (4) CMC had a Las Vegas, Nevada office; and (5) the SSA contained a Nevada choice of law provision.

USB continues its argument, however, by asserting that the laws of California and Nevada are the same regarding bad faith, since neither state has any controlling law regarding whether a bad faith claim may be asserted against a surety under these precise circumstances. According to USB, neither state has addressed a situation similar to that presented here, in which a surety assumed fiduciary responsibilities and made affirmative representations to its obligee in connection with a lease bond.

USB focuses on case law relating to circumstances where the governing law of two affected states is identical. USB notes that both Nevada and California recognize claims for bad faith in the context of an insurer’s unreasonable handling of a claim. See Pemberton v. Farmers Ins. Exch., 109 Nev. 789, 792-93, 858 P.2d 380 (1993); Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 818, 169 Cal.Rptr. 691, 620 P.2d 141 (1979). Accordingly, USB asserts that California law does not control, and that this Court should consider “any state’s law” as to the issue of whether AMICO is subject to a bad faith claim in the circumstances present here.

Despite USB’s puzzling contention that the law of “any state” is relevant, the vast majority of USB’s briefing is based on California cases recognizing a bad faith claim in the context of an insurer’s failure to properly investigate or settle a claim. USB relies heavily on its interpretation of public policy — including its description of the lease bonds as an adhesive contract— to argue that AMICO should be charged with a good faith obligation in the circumstances presented here.

In its reply memorandum of law, AMI-CO disputes many of the facts asserted by USB, including the representations allegedly made to USB by AMICO and USB’s asserted lack of bargaining power. In any event, however, AMICO argues that the facts relied on by USB are irrelevant to the choice of law inquiry, and that the dispute between these parties is clearly controlled by California law.

The Court agrees that, in the context of Case 02-16024, a dispute between two parties doing business in California, which involves lease bonds requested and issued in California, California law should control. Although USB references Nevada law, USB does not argue that Nevada law applies to this case, nor does USB provide detailed analysis as to how Nevada law would apply to this precise situation. Even assuming, however, that Nevada law differs from California law, the Court is convinced that California provides the proper rule of decision here.

The parties’ arguments and the record in this case demonstrate that Nevada has no material interest in this case to be protected through application of Nevada law. Although USB references the location of CMC’s Nevada headquarters, CMC also maintained a California office, through which CMC communicated with USB and the Sureties, and procured the lease bonds at issue here. AMICO, through its attorney in fact, Michael Anthony, issued the lease bonds in question in California. Further, while the SSAs contain a Nevada choice of law provision, such a provision would govern only contractual disputes arising from the terms of the SSAs. It could not govern a tort claim arising from the business relationship of California parties engaged in a California transaction.

The Court is mindful that the claims at issue here arise not from the terms of the lease bonds or SSAs, but from AMICO’s allegedly bad faith handling of USB’s claims. Although the parties’ briefs do not discuss the issue of where AMICO conducted its claims handling process, there is no evidence that AMICO would have handled such claims in Nevada. The Court presumes, rather, that AMICO would have conducted its claims handling process primarily at its headquarters, located in Illinois. Neither party has argued for the application of Illinois law. The Court finds that, where the claimant is a California entity, which submitted claims and communicated with AMICO from its California office, and allegedly suffered injury to its business interests in California, California has a far more substantial interest in this matter than does Illinois.

Accordingly, with respect to Case 02-16024, the Court finds that its analysis of USB’s bad faith claim will be governed by California law.

2. Ohio Choice of Law

As noted above, the Court uses Ohio choice of law rules to determine the governing law for the bad faith claims asserted in eleven of the cases relating to the instant summary judgment motions— including the three cases encompassed by Royal’s summary judgment motion (02— 16012, 02-16019 and 02-16022), and eight of the cases encompassed by Safeco’s summary judgment motion (02-16014, 02-16020, 02-16021, and 03-16002 through 03-16006). As set forth above, the first step in conducting an appropriate choice of law analysis involves classification of the underlying claims. See Restatement of the Law, 2d, Conflict of Laws, § 7, Comment b (choice of law rules depend on the “classification of a given factual situation under the appropriate legal categories and specific rules of law ...”); see also Hagberg v. Delphi Auto. Sys., 268 F.Supp.2d 855, 860 (N.D.Ohio 2002) (choice of law analysis differs under Ohio law for contract and tort claims); Chase v. Humrichouser, 214 F.Supp.2d 799, 805 (N.D.Ohio 2002) (same). Once the claims at issue have been classified appropriately, the Court then can apply the relevant choice of law principles to determine the applicable substantive law.

Royal argues, in connection with its summary judgment motion, that California law should be applied to CadleRock’s bad faith claims based on this Court’s earlier ruling, in connection with the Banks’ motions for judgment on the pleadings, that California law applies to the analysis of the Banks’ contractual claims. (02-16000, Doc. 1708, at 14-15). Royal asserts that, at the time CadleRoek acquired its rights by assignment and became a party to this litigation, CadleRoek was aware of the Court’s prior decision regarding choice of law. Royal contends, further, that based on Ohio choice of law principles, including an analysis of the Restatement factors, California law should apply to the bad faith claims.

Royal asserts that California has a “more significant relationship” to the litigation than does Ohio, because (1) the bonds were issued by Michael Anthony in California; (2) CMC assigned the lease bonds to the Guardian Entities in California; and (3) Royal had no contact with any of the Banks in Ohio. Royal argues that it did not act in Ohio, and had no expectation that Ohio law could apply in litigation against it. Accordingly, Royal asserts that the Court should protect its “justified expectations,” Restatement of the Law, 2d, ConfliCt of Laws, § 6(2)(d), and apply California law.

CadleRoek, although it does not conduct any explicit choice of law analysis, bases nearly the entirety of its opposition memorandum on Ohio law. CadleRock states that “Royal offers no explanation why California law is applicable to bonds issued for the protection of Ohio residents. Sky Bank filed suit in Ohio and this Court is required to apply the law of the forum .... ” (Doc. 2174, at 24). CadleRock asserts that, as a general rule, tort claims are subject to the law of the place where the tort occurred, see Sarmiento v. Grange Mut. Cas. Co., 106 Ohio St.3d 403, 835 N.E.2d 692 (2005), and that CadleRock’s bad faith claim is based upon Royal’s refusal to pay contractual benefits in Ohio to an Ohio resident. According to CadleR-ock, Royal has not met its burden of demonstrating that any other state has an interest outweighing that of Ohio.

With respect to Safeco’s motion for summary judgment, Safeco acknowledges that Ohio choice of law rules apply in determining the relevant substantive law for these cases. Safeco argues, however, that the Banks’ bad faith claim should be treated as a contract claim and analyzed pursuant to Ohio’s contractual choice of law rules. Safeco bases this conclusion on its assertion that Ohio courts have not considered a claim for bad faith/breach of the covenant of good faith and fair dealing as it relates to a commercial surety bond, and thus that the courts have not made a determination as to the nature of such a claim.

Safeco argues that cases such as Suver v. Personal Service Ins. Co., 11 Ohio St.3d 6, 8, 462 N.E.2d 415 (1984), which found that a bad faith claim against the issuer of a financial responsibility bond sounds in tort, are inapplicable to evaluating the nature of a bad faith claim against a commercial surety. Safeco argues that, unlike a financial responsibility bond, a commercial surety bond is issued to guaranty an underlying contract. Accordingly, Safeco contends, a breach of the duty of good faith in connection with a commercial surety bond is best analyzed as a contractual claim.

Safeco further argues that, even under Ohio’s choice of law provisions governing tort claims, California substantive law has the most significant relationship to the relevant issues and should apply to determine the viability of the Banks’ claims. Safeco contends that (1) CMC’s operations, including CMC’s equipment leasing program, were centered in Escondido, California; (2) most of CMC’s employees were located in California, and most leases were issued from that office; (3) most of CMC’s communications with lessees, Sureties and Banks originated from the California office; (4) all lease servicing was performed in the California office, and all lease payments were received there; (5) misrepresentations were made to Safeco by CMC personnel at CMC’s office in California; and (6) Anthony & Morgan, the broker firm for the Sureties, was physically located in California and issued the lease bonds there.

In response to Safeco’s summary judgment motion, the Banks argue that Ohio law applies to this Court’s evaluation of their bad faith claims. The Banks maintain, first, that a bad faith claim against a commercial surety sounds in tort, as does a bad faith claim relating to an insurance policy or a financial responsibility bond. See, e.g., Suver, 11 Ohio St.3d at 8, 462 N.E.2d 415. The Banks argue that, pursuant to the application of Ohio tort choice of law rules, there is a presumption that a tort claim is subject to the law of the place where the injury occurred. See Sarmiento v. Grange Mut. Cas. Co., 106 Ohio St.3d 403, 835 N.E.2d 692 (2005). See also SKY Tech. Partners, LLC v. Midwest Research Inst., 125 F.Supp.2d 286, 297 (S.D.Ohio 2000) (a tort claim arises “where the loss is suffered .... That loss is deemed to be suffered where its economic impact is felt, normally the plaintiffs residence.... ”). Accordingly, the Banks assert that Ohio law governs the Banks’ bad faith claims.

Alternatively, even to the extent that the Court should choose to apply a contractual choice of law analysis to the Banks’ bad faith claims, the Banks maintain that Ohio law should govern. As noted by Safeco, Section 194 of the Restatement provides that a contractual claim against a surety should be governed by the law applicable to the principal obligation. See Restatement of the Law, 2d, ConfliCT of Laws, § 194. According to the Banks, however, Safeco improperly presumes that the underlying obligation is the leases, and ignores the parties’ vigorous dispute regarding the nature of that underlying obligation. The Banks assert that Safeco has failed to submit evidence establishing that the principal obligations secured by the bonds are governed by California law. In any event, the Banks argue that, pursuant to § 194, the law governing the principal obligations controls only where there is no other state with a more significant relationship to the issues in question. Here, the Banks argue that the significant relationship that Ohio bears to this litigation outweighs the presumption in favor of applying the state law governing the principal obligation.

The Banks assert that they maintain their headquarters in Ohio, that the Guardian Entities secured credit in Ohio, and that all Banks suffered harm in Ohio when Safeco failed to honor its obligations under the lease bonds. Accordingly, the Banks contend that they extended credit to the principal in Ohio, and their injury occurred in Ohio. The Banks argue, therefore, that pursuant to the Restatement’s choice of law provisions for either contractual or tort claims, Ohio law must apply unless Safeco can overcome the presumption that Ohio bears the most significant relationship to the bad faith claims.

According to the Banks, Safeco’s suggested choice of law analysis relies on disputed facts, and improperly emphasizes actions and occurrences that are only marginally relevant to the Banks’ bad faith claims. For example, the Banks argue, Safeco assumes that the only obligation secured by the lease bonds is payment by the lessees to CMC, the purported obligee. As the Banks observe, Safeco’s asserted facts relating to CMC’s obligee status and the nature of the obligations secured by the lease bonds are vigorously disputed by the Banks, and the Court has denied the parties’ requests for leave to file summary judgment motions as to these factual issues.

Moreover, the Banks contend, Safeco improperly focuses primarily on the relationship between Safeco, CMC and Anthony & Morgan, as well as on the origination and underwriting of the lease pools. The Banks argue that, in connection with the bad faith claims, the proper factual focus should be on Safeco’s relationships with the Banks, as well as Safeco’s actions relating to claims handling.

The Banks contend that, with reference to claims handling, the relevant states in-elude Ohio (the state of residence of the claimant Banks) and Washington (the state of Safeco’s principal office, from which Safeco handled claims and directed claims investigations). The Banks argue that Ohio clearly maintains a stronger interest in these transactions. The Banks note that each of them handled and funded the loans to the Guardian Entities from their Ohio offices, and managed the accounts associated with those transactions from Ohio. The Banks assert that Safeco issued alleged “estoppel letters” to certain Banks at their Ohio addresses, representing that Safeco was authorized to transact business in Ohio. Additionally, the Banks argue that Safeco authorized delivery of the issued lease bonds to the Banks in Ohio for finalization and inclusion in the loan closings, and that Safeco contemplated that payment to the Banks in Ohio would be required in the event of a default. The Banks assert that, based on Safeco’s representations contained in the bonds and the estoppel letters, the Banks had the justified expectation that Ohio law would apply in the event of a dispute.

Finally, the Banks contend that Ohio has a strong public policy interest in protecting the justified expectations of Ohio investors and obligees, ensuring that sureties licensed in Ohio deal with their obli-gees in good faith, and protecting the right of Ohio obligees to recover punitive damages in accordance with established Ohio law. The Banks assert that these public policies were articulated by the Ohio Supreme Court in Suver, 11 Ohio St.3d at 8, 462 N.E.2d 415, where the Court held that sureties on a financial responsibility bond were subject to liability for bad faith conduct.

Initially, the Court finds it clear under Ohio law that a claim for breach of the covenant of good faith and fair dealing sounds in tort. See, e.g., Staff Builders, Inc. v. Armstrong, 37 Ohio St.3d 298, 302, 525 N.E.2d 783 (1988); Maxey v. State Farm Fire & Cas. Co., 569 F.Supp.2d 720, 724 (S.D.Ohio 2008). Although the Ohio courts have not considered a case involving the precise circumstances presented here, the Court finds that Ohio courts have consistently treated bad faith claims as claims arising in tort—even when the bad faith claims relate to obligations arising from a contract (as is typical in insurance bad faith situations). See, e.g., Staff Builders, 37 Ohio St.3d at 302, 525 N.E.2d 783; Suver, 11 Ohio St.3d at 8, 462 N.E.2d 415; Maxey, 569 F.Supp.2d at 724. The bad faith claim asserted by the Banks here is not sufficiently distinguishable as to change the nature of the underlying claim. Accordingly, the Court analyzes the Banks’ bad faith claim in the context of Ohio’s tort choice of law analysis.

When conducting choice of law analysis in a tort action, Ohio courts give significant weight to the location of the injury, but do not apply that factor exclusively. See Morgan v. Biro Mfg. Co., 15 Ohio St.3d 339, 341, 474 N.E.2d 286 (1984) (“traditional rule of lex loci delicti is still viable in Ohio, but is no longer used to automatically determine the prevailing state law....”). Ohio has adopted the principles of the Restatement (Second) of Conflicts of Law, sections 146, 145 and 6, for resolving choice of law issues in tort cases. See Morgan, 15 Ohio St.3d at 342, 474 N.E.2d 286. Initially, section 146 creates a presumption that the law of the place of the injury controls, unless another jurisdiction has a more significant relationship to the lawsuit. See Burns v. Prudential Secs., Inc., 167 Ohio App.3d 809, 841, 857 N.E.2d 621 (3d Dist.2006); see also Restatement of the Law, 2d, Conflict of Laws, § 146. In order to determine which jurisdiction bears the most significant relationship to the lawsuit, an Ohio court considers the principles set forth in section 145. See Burns, 167 Ohio App.3d at 841, 857 N.E.2d 621.

Pursuant to section 145, the factors to be considered in a choice of law analysis include “(1) the place of the injury; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation, and place of business of the parties; (4) the place where the relationship between the parties, if any, is located; and (5) any factors under section 6 which the court may deem relevant to the litigation. All of these factors are to be evaluated according to their relative importance to the case.... ” See Morgan, 15 Ohio St.3d at 342, 474 N.E.2d 286; see also Restatement of the Law, 2d, Conflict of Laws, § 145. Section 6 of the Restatement provides the following additional factors relevant to the choice of the applicable law: “(a) the needs of the interstate and international systems[;] (b) the relevant policies of the forum[;] (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue[;] (d) the protection of justified expectations!;] (e) the basic policies underlying the particular field of law[;] (f) certainty, predictability and uniformity of result[;] and (g) ease in the determination and application of law to be applied.... ” Restatement of the Law, 2d, Conflict of Laws, § 6.

Undisputedly, the Banks are headquartered in Ohio and, as a result, would suffer injury in Ohio as a result of any tortious conduct directed at them. Under the presumption created by § 146 of the Restatement, Ohio law thus will control unless a balancing of the Restatement factors compels a different result.

With respect to the § 145 factors, the Court balances the first three of those factors as follows: (1) Place of injury— Ohio; (2) Place of conduct causing injury'— North Carolina (Royal), Washington (Safe-co); (3) Domicile, residence, nationality, place of incorporation, place of business of the parties — Ohio/North Carolina/Washington. Given that the Sureties’ states of headquarters are divergent, the choice of law analysis balances slightly in favor of Ohio law at this point.

The fourth factor, the place where the relationship between the parties is located, is more difficult to determine. Unquestionably, the Sureties had contacts with multiple parties, including Michael Anthony and CMC, in California. As the Banks point out, however, those contacts related to the negotiation and issuance of the lease bonds, while the Banks’ causes of action at issue here involve the investigation and denial of the Banks’ claims on the lease bonds. The contacts relating to the Banks’ filed claims involved communications between, primarily, the head offices of the Sureties (located in Washington and North Carolina) and the Banks in Ohio.

The Sureties have not argued for application of the laws of the states of their respective home offices, nor have they articulated any aspect of the claims handling process that occurred in California. Thus, a balancing of the section 145 factors demonstrates that California’s interest in this matter is insufficient to outweigh the presumption in favor of Ohio law.

Several of the factors set forth in section 6 of the Restatement also are relevant here, and weigh in favor of Ohio law. Factors (b) and (c) evaluate the relevant policies of the forum, as balanced against the relevant policies of other interested states. Although the Sureties argue that California has articulated a policy of protecting commercial sureties from bad faith suits relating to their handling of obligees’ claims, the Sureties’ handling of the Banks’ claims did not actually occur in that state. California can have no interest in protecting non-resident sureties from liability for claims brought by residents of other states, based on claims handling that occurred outside the state. Ohio, conversely, has a significant interest in determining the degree to which it will protect Ohio obligees from bad faith conduct by sureties dealing with those obligees.

Although the Sureties argue that “protection of justified expectations” (factor (d) under section 6 of the Restatement) supports the application of California law, the Court finds that any expectation that California law would apply to claims handling could not have been justified. While it may, arguably, have been reasonable to assume the application of California law as to claims arising from the terms of the bonds, each of the Sureties knew that it was headquartered in a state other than California, and that it handled claims of obligees primarily from its home office. In addition, the Sureties knew that obli-gees of the bonds resided in many states, and that any claims on the bonds would come from those states. There is simply no justification for concluding that California has the most significant relationship to the Banks’ bad faith claims, nor is there any justification for having anticipated the application of California law.

Accordingly, the Court holds that Ohio substantive law provides the rule of decision for the three cases encompassed by the Royal motion (02-16012, 02-16019 and 02-16022), as well as eight of the cases encompassed by the Safeco motion (02— 16014, 02-16020, 02-16021, and 03-16002 through 03-16006).

3. Georgia Choice of Law

With respect to 02-16010, the one case originally filed in Georgia, Safeco argues that application of Georgia choice of law rules leads to a decision that California law should apply to the bad faith claims. Safeco argues that a claim for bad faith/ breach of the covenant of good faith and fair dealing sounds in contract under Georgia law, and thus that the choice of law provisions applicable to contractual claims should apply.

NetBank, on the other hand, argues that its claims are tort claims, to which Georgia law properly applies. NetBank notes that, although Safeco has treated its claims for “bad faith” and “breach of the covenant of good faith and fair dealing” as a single claim, these are actually two independent causes of action under Georgia law. See O.C.G.A. § 10-7-30 (bad faith claim against a surety); O.C.G.A. 13-6-11 (recovery of damages for bad faith in contract actions); Spears v. Mack & Bernstein, P.C., 227 Ga.App. 743, 745-46, 490 S.E.2d 463 (1997) (claim for breach of the covenant of good faith) (non-surety). NetBank argues that both of these causes of action are tort claims. NetBank further argues, however, that even under a contractual choice of law analysis, Georgia law properly applies. The Court addresses both bad faith claims asserted by NetBank together.

Safeco contends that the Georgia courts have not held that a bad faith claim is a tort, and that such a claim is better viewed as a contract claim. Safeco relies on case law holding that a plaintiff may not sue in tort for breach of a duty imposed by a contract. See, e.g., Sheppard v. Yara Eng’g Corp., 248 Ga. 147, 281 S.E.2d 586 (1981). Safeco contends that a tort claim is appropriate only where a defendant breaches a duty independent of a contract and causes plaintiff damages other than the loss of the benefits of the contract. See Davis v. Aetna Casualty & Surety Co., 169 Ga.App. 825, 828, 314 S.E.2d 913 (1984), aff'd in part and rev’d in part, Aetna Casualty & Surety Co. v. Davis, 253 Ga. 376, 320 S.E.2d 368 (1984). Safeco argues that NetBank has not suffered any damages beyond the loss of the benefits of the contract, and thus that the claim asserted does not sound in tort under Georgia law. Safeco argues that, if a Georgia contractual choice of law analysis is applied, such an analysis leads to the application of California law.

In support of its contention that bad faith is a tort claim under Georgia law, NetBank relies on a Georgia statute allowing attorney fees and a 25% penalty above contract damages for breach of a commercial surety bond. See O.C.G.A. § 10-7-30(b). NetBank also cites to case law indicating that a plaintiff may bring a tort claim independent of a contractual relationship between the parties, if the duty alleged to be imposed upon the defendant arises outside the contract itself. See Spears, 227 Ga.App. at 745, 490 S.E.2d 463; Travelers Ins. Co. v. King, 160 Ga. App. 473, 475, 287 S.E.2d 381 (1981). Net-Bank further notes that, at least in the context of an insurer/insured relationship, breach of such an independent duty gives rise to a claim in tort, not contract. See Delancy v. St. Paul Fire & Marine Ins. Co., 947 F.2d 1536, 1545-46 (11th Cir.1991) (relationship between insurer and insured creates a duty independent of the contract, and a tort claim arises where insured sustains damages from insurer’s negligence or bad faith); see also Arrow Exterminators, Inc. v. Zurich Am. Ins. Co., 136 F.Supp.2d 1340, 1354 (N.D.Ga.2001).

In support of its contention that Georgia’s contractual choice of law rules mandate application of California law, Safeco points to the doctrine of lex loci contrac-tus, holding that “contracts are to be governed as to their nature, validity, and interpretation by the law of the place where they were made, except where it appears from the contract itself that it is to be performed in a State other than that in which it was made.... ” IBM v. Kemp, 244 Ga.App. 638, 641, 536 S.E.2d 303 (2000); see also Federal Ins. Co. v. National Distributing Co., 203 Ga.App. 763, 765, 417 S.E.2d 671 (1992). Under Georgia law, a contract is “made” where it is delivered, see Boardman Petroleum v. Federated Mut. Ins. Co., 135 F.3d 750, 752 (11th Cir.1998); Federal Ins. Co., 203 Ga.App. at 767, 417 S.E.2d 671. Based on these principles, Safeco argues that application of California law is compelled by the fact that the bonds were “delivered” to CMC in California.

As with respect to bad faith claims under Ohio law, the Court looks to the nature of the claims, and to the treatment of analogous claims by Georgia courts. Net-Bank has correctly cited Georgia case law relating to bad faith claims in numerous contexts, including insurance bad faith claims, and has pointed out that the courts have treated such claims as tort claims. See, e.g., Delancy, 947 F.2d at 1545 — 46; Arrow Exterminators, 136 F.Supp.2d at 1354. Moreover, the existence of a Georgia statute providing for attorney fees and a 25% penalty in a bad faith claim against a surety is suggestive of an intent on the part of the Georgia legislature to provide tort damages in the context of such claims. See O.C.G.A. § 10-7-30(b). While Safeco may be correct in noting that the Georgia courts have not explicitly attached the “tort” label to a bad faith claim in these precise circumstances, the treatment of such claims by the Georgia legislature and Georgia courts strongly suggests Georgia’s intent to analyze bad faith claims within a tort law framework.

Safeco’s other arguments — including its argument that NetBank fails to demonstrate damages other than those occasioned by the loss of the benefit of its contract — go to NetBank’s ability to prove its tort claim, and not to the characterization of such a claim. Thus, for the reasons set forth above, the Court finds that, under Georgia law, NetBank’s claims for bad faith and breach of the covenant of good faith and fair dealing sound in tort.

Under Georgia’s tort choice of law principles, tort cases are governed by the law of the state in which the tort was committed. See Ga. Farm Bureau Mut Ins. Co. v. Williams, 266 Ga.App. 540, 541, 597 S.E.2d 430 (2004), Kemp, 244 Ga.App. at 640, 536 S.E.2d 303. Under the traditional lex loci delicti rule, the location of the tort is the state where the tortious injury occurred. See Best Canvas Products & Supplies, Inc. v. Ploof Truck Lines, Inc., 713 F.2d 618, 621 (11th Cir.1983); Management Science America, Inc. v. NCR Corp., 765 F.Supp. 738, 739 (N.D.Ga.1991) (law of the place of the injury is “the place where ... there takes place the last event necessary to make an actor liable ....”) (internal citation omitted); Risdon Enterprises, Inc. v. Colemill Enterprises, Inc., 172 Ga.App. 902, 903, 324 S.E.2d 738 (1984).

Applying these principles, NetBank argues that its injury was sustained in Al-pharetta, Georgia, where it maintains its headquarters. In fact, NetBank contends, its only physical place of business was in the state of Georgia. Under the Georgia principle of lex loci delicti, NetBank argues that its injury and economic harm could only have been sustained in Georgia. Accordingly, NetBank asserts, Georgia law must apply to these claims.

As noted previously in this opinion, Safe-co concedes that, to the extent the Court finds that NetBank’s bad faith claims sound in tort, substantive Georgia law must apply to those tort claims. The Court agrees that Georgia tort choice of law rales, as cited by NetBank, compel such a result. Accordingly, the Court holds that Georgia substantive law provides the rule of decision for the bad faith claims asserted by NetBank in 02-16010.

C. Viability of Bad Faith Claims

The Court now considers the viability of the bad faith claims asserted by the Banks under - the laws of the relevant jurisdictions, as determined in section II.B. of this opinion. The Court evaluates the laws of California, Ohio and Georgia separately.

1. California Law

As found previously in this opinion, California law applies to the claims by USB against AMICO in 02-16024 for bad faitb/breaeh of the covenant of good faith and fair dealing. In its summary judgment motion, AMICO argues that California law does not recognize a tort claim for bad faith/breach of the covenant of good faith and fair dealing in the context of a surety bond. Accordingly, in its motion (02-16024, Doc. 52), AMICO seeks summary judgment on the second count of USB’s supplemental counterclaim (Doc. 43).

In its motion, AMICO argues that California recognizes bad faith claims only in the context of an insurer/insured relationship, and has declined to extend recognition of such claims to situations outside the insurance setting. See, e.g., Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal.App.3d 1371, 1400-01, 272 Cal.Rptr. 387 (2d Dist.1990) (declining to find a “special relationship” between a bank and its customers, such as would support the recognition of a tort remedy for breach of the implied covenant of good faith and fair dealing); Foley v. Interactive Data Corp., 47 Cal.3d 654, 693, 254 Cal.Rptr. 211, 765 P.2d 373 (1988) (“the employment relationship is not sufficiently similar to that of insurer and insured to warrant judicial extension of the proposed additional tort remedies in view of the countervailing concerns ....”); see also Hunter v. Up-Right, Inc., 6 Cal.4th 1174, 1180, 26 Cal. Rptr.2d 8, 864 P.2d 88 (1993).

AMICO’s summary judgment motion in this action is based primarily on a California Supreme Court case, Cates Construction, Inc. v. Talbot Partners, 21 Cal.4th 28, 86 Cal.Rptr.2d 855, 980 P.2d 407 (1999). In Cates, the California court held that tort claims for bad faith/breach of the covenant of good faith and fair dealing were not available against a surety in the context of a construction performance bond. The Cates obligee sued the performance bond surety in contract and tort, due to the alleged failure of the principal to properly complete the construction project. The California Supreme Court found the surety liable for contract damages, but refused to allow the bad faith claim to proceed against the surety.

The Cates court noted California’s traditional rule limiting bad faith claims to the insurance context, and observed that certain policy considerations justified recognition of such claims in the narrow circumstances of an insurance relationship. The Cates court stated:

Unlike most other contracts for goods or services, an insurance policy is characterized by elements of adhesion, public interest and fiduciary responsibility.... In general, insurance policies are not purchased for profit or advantage; rather, they are obtained for peace of mind and security in the event of an accident or other catastrophe.... Moreover, an insured faces a unique ‘economic dilemma’ when its insurer breaches the implied covenant of good faith and fair dealing.... Unlike other parties in contract who typically may seek recourse in the marketplace in the event of a breach, an insured will not be able to find another insurance company willing to pay for a loss already incurred....

Cates, 21 Cal.4th at 44, 86 Cal.Rptr.2d 855, 980 P.2d 407 (internal citations omitted). The Cates court then distinguished between insurance policies and construction performance bonds, noting that (1) in the context of a construction performance bond, obligees often have significant bargaining power; (2) construction performance bond obligees generally purchase bonds for commercial advantage, rather than protection against calamity; (3) the obligee of a construction performance bond generally has a right of recovery against the principal; (4) the construction bond obligee generally may look to the marketplace to obtain completion of its project; and (5) the relationship between a construction performance bond surety and its obligee generally is not fiduciary in nature. See id. at 53-56, 86 Cal.Rptr.2d 855, 980 P.2d 407.

The California court analyzed decisions from other jurisdictions, which permitted bad faith claims against commercial sureties, and rejected the reasoning of those courts. In summarizing its holding, the Cates court stated, “[A] construction performance bond is not an insurance policy. Nor is it a contract otherwise marked by elements of adhesion, public interest or fiduciary responsibility, such that an extra-contractual remedy is necessitated in the interests of social policy. Obligees have ample power to protect their interests through negotiation, and sureties, for the most part, are deterred from acting unreasonably by the threat of stiff statutory and administrative sanctions and penalties ....” Id. at 60, 86 Cal.Rptr.2d 855, 980 P.2d 407.

AMICO also relies on Schwerdt v. Int’l Fid. Ins. Co., 28 Fed.Appx. 715 (9th Cir.2002), an unpublished federal case, in which the Court refused to permit a bad faith claim against a surety on a technology equipment sale performance bond. After the buyers failed to perform, the seller brought suit in tort against the performance bond surety. The Schwerdt court granted summary judgment on the tort claim. In affirming the district court’s ruling, the Ninth Circuit relied on Cates, and stated:

The principles underlying the holding in Cates apply here.... Just as in Cates, there are no elements here of adhesion or disparate bargaining power.... [Plaintiff] decided the form of the bond which he was willing to accept from Buyers, and he could have rejected the surety bond provided.... Moreover, the ... bond was a means to obtain economic protection for [plaintiff], and therefore its issuance does not implicate public policy concerns. Unlike insurers who seek protection against ‘accidental and generally unforeseeable losses caused by a calamitous or catastrophic event,’ obligees such as [plaintiff] merely seek protection against an adverse financial outcome.... Finally, the relationship between [plaintiff] and [surety] is not fiduciary in nature....

Schwerdt, 28 Fed.Appx. at 718-19.

AMICO notes that this Court previously found, in its opinions on the parties’ motions for judgment on the pleadings, that the transactions between the Sureties and Banks in these actions were, in sum and substance, suretyship transactions, not insurance policies. (02-16000, Doc. 1708, 1709). AMICO argues that here, as in Cates, the Court should refuse to find these transactions functionally the equivalent of “insurance,” and should decline to recognize a bad faith claim against a commercial surety. AMICO points out that USB is a large commercial bank, which purchased the lease bonds as part of a commercial investment.

AMICO asserts that there was no adhe-sionary relationship, as USB was an as-signee of the bonds, and the bond language was actually negotiated by Blaine Tanner of Guardian Capital, one of USB’s predecessors in interest. Further, AMI-CO points out that USB purchased leases in the CMC program in order to obtain an income stream with a 9% yield. AMICO contends that, in these circumstances, USB’s position is not analogous to that of an insured that has suffered from a disaster or calamity. Thus, AMICO argues, in the event that USB should prevail in its suit against AMICO, contract remedies are sufficient to make USB whole.

AMICO asserts that California law never has recognized a tort claim for bad faith outside the context of an insurance relationship, and maintains that this case has no public policy factors that would justify the recognition of such a claim here. AM-ICO contends that it, like USB, is a victim of fraud committed by USB’s assignors, CMC and Guardian Capital. Under these circumstances, AMICO argues, there is no social policy to be vindicated by creating a tort claim in favor of USB against a party defrauded by USB’s predecessors in interest.

AMICO argues, finally, that there is no fiduciary relationship between USB and AMICO that might justify the imposition of tort duties on AMICO. AMICO asserts that sureties, unlike insurers, do not have fiduciary duties to their obligees as a matter of law. See Cates, 21 Cal.4th at 56, 86 Cal.Rptr.2d 855, 980 P.2d 407 (“a surety does not stand in a fiduciary or quasi-fiduciary position with respect to an obli-gee .... ”). Moreover, AMICO contends, the provisions in the SSA relating to AMI-CO’s obligation to defend USB from third-party claims for servicing breaches do not create any general fiduciary duty. In fact, AMICO asserts, since there are no third party claims involved in this action, AMI-CO’s duty to defend is entirely irrelevant in the context of this motion.

In its opposition to AMICO’s summary judgment motion, USB argues that the facts of this ease render it distinguishable from the Cates line of cases. USB notes that the surety bonds here contain language representing that the surety’s “obligations constitute an unconditional and absolute guarantee of payment, not collection,” and that the surety “agrees to waive all defenses.” Moreover, USB notes, pursuant to the terms of the SSAs, AMICO agreed to (1) perform all underwriting obligations regarding the leases; (2) act as the agent of USB in enforcing the leases; (3) pay USB (or any obligee) unconditionally, within 30 days of a notice of default; and (4) assume quasi-fiduciary obligations vis-a-vis the bond obligees.

USB notes that the Cates court specifically restricted its analysis “to the subject of construction performance bonds.... ” Cates, 21 Cal.4th at 47, n. 10, 86 Cal.Rptr.2d 855, 980 P.2d 407. USB maintains that the California courts have not addressed the viability of a bad faith claim against a surety issuing a loan guarantee bond. According to USB, following the Cates analysis would be inappropriate here, because the factors expressly cited in Cates are absent from the surety relationship in this case.

USB asserts that, unlike a construction performance bond, the surety bond issued by AMICO here presents characteristics of adhesion and unequal bargaining power. Despite the fact that USB is a large commercial entity, USB states that it had no involvement in negotiating the bond terms and that, rather, it accepted the language of the bond as issued by AMICO. USB argues, further, that bargaining power should be evaluated not at the time of issuance of the bonds, but at the time a claim is submitted. At the time of claim submission, USB contends, the surety has an incentive to withhold payment with no risk other than payment of the sums owed under the bond. USB thus maintains that bargaining power between the parties is dramatically unequal once a loss is suffered.

USB attempts also to distinguish this case from Schwerdt, 28 Fed.Appx. 715 (9th Cir.2002), based on the Schwerdt court’s finding of equal bargaining power between the parties. The Schwerdt court noted that the plaintiff “determined the terms of the payment bond at issue ... and had the power to seek out other principals if he objected to the terms of the bond....” Id. at 718. USB contends that, since there is no evidence that USB participated in negotiation of the bond language here, the Schwerdt reasoning cannot apply.

USB also notes that the Cates court relied, in part, on the obligee’s participation in the negotiation of the underlying contractual obligations guaranteed by the surety bond. The Cates court noted that the terms of such contracts generally are negotiated between the obligee and the principal, without input from the surety, and then are incorporated by reference into the bonds. That factor, the Cates court observed, supported its finding of significant bargaining power on the part of the obligee. USB asserts, however, that it had no such involvement in the negotiation of the underlying leases here. Rather, AMICO agreed to underwrite those leases and waive any defenses to payment.

USB also argues that, unlike the obligee involved in Cates, it did not elect to participate in the CMC lease bond program for reasons of commercial advantage. USB asserts that it entered into the CMC program with the goal of protecting its business, not gaining a business advantage. USB argues that its purchase of the lease bonds was akin to the purchase of business interruption insurance, which would have permitted USB to protect its income upon the occurrence of a covered loss.

USB contends that the public interest and fiduciary responsibility factors present in this case further distinguish it from Cates and Schwerdt. USB asserts that, contrary to the situation present in Cates, it has no ability to “go to the marketplace” to acquire a substitute for the protection that AMICO promised. See, e.g., Agricultural Ins. Co. v. Superior Court, 70 Cal.App.4th 385, 398, 82 Cal.Rptr.2d 594 (2d Dist.1999) (“an insured cannot buy protection after a loss has already oc-curred_”). Nor, USB argues, can it go to the principal — CMC—to make good its loss. USB analogizes to the insurance cases, and argues that permitting a surety to deny payment after an obligee has suffered a loss deprives the obligee of the benefit of its bargain. See, e.g., Egan v. Mutual of Omaha Ins. Co., 24 Cal.3d 809, 819, 169 Cal.Rptr. 691, 620 P.2d 141 (1979) (“[t]he purchase of ... insurance provides peace of mind and security.... To protect these interests it is essential that an insurer fully inquire into possible bases that might support the insured’s claim_”). USB argues that, unlike the obligee on a construction surety bond, USB has no other recourse to obtain payment for its losses.

USB argues, finally, that the terms of the SSA, as executed by AMICO, imposed fiduciary obligations on AMICO in favor of its obligee, USB. According to USB, the duties assumed by AMICO pursuant to the terms of the SSA included (1) the duty to act as USB’s agent and custodian of the lease files; (2) the duty to indemnify USB from any losses or liabilities arising out of breach of the bonds or breaches of servicing obligations; (3) the duty to manage, service and administer the leases; and (4) the duty to preserve USB’s rights in the leases and bonds, to take all reasonable efforts to maximize USB’s recovery under the leases, and to defend USB’s title to the lease assets against any third party claims. USB asserts that the acceptance of these fiduciary obligations by AMICO placed these parties in a relationship akin to an insurance relationship, and thus would justify the Court’s recognition of a bad faith claim in this context.

Undisputedly, this case does not involve construction performance bonds. USB emphasizes that the bonds (and related transaction documents) at issue here contain provisions distinct from those included in a typical construction performance bond. USB contends that the unique obligations created by the SSA have transformed AMICO’s bond obligations, such that those obligations are more similar to those of an insurer than to those of a typical commercial surety. Thus, USB urges the Court to extend the bad faith tort from the insurance context and permit USB to pursue such a claim here.

After careful consideration of the parties’ positions and the relevant California law, the Court finds that California law does not recognize a bad faith claim of the type sought to be asserted by USB here. Accordingly, though USB’s arguments certainly are not without force, AMICO’s motion for summary judgment on USB’s bad faith claim in this case is granted.

Initially, as noted by AMICO in its briefing, the Court previously found that the transaction documents