                                                                            FILED
                           NOT FOR PUBLICATION
                                                                            AUG 27 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS


                            FOR THE NINTH CIRCUIT


TRAVELERS CASUALTY AND                           No.   17-15911
SURETY COMPANY OF AMERICA, a
Connecticut corporation,                         D.C. No.
                                                 2:07-cv-02493-TLN-DB
              Plaintiff-Appellee,

 v.                                              MEMORANDUM*

SIDNEY B. DUNMORE, an individual; et
al.,

              Defendants-Appellants.


                    Appeal from the United States District Court
                       for the Eastern District of California
                     Troy L. Nunley, District Judge, Presiding

                           Submitted August 17, 2018**
                             San Francisco, California




      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: BEA and CHRISTEN, Circuit Judges, and McLAUGHLIN,*** District
Judge.

      Defendants timely appeal the district court’s grant of summary judgment in

favor of Plaintiff Travelers Casualty and Surety Company of America (Travelers).1

We have jurisdiction, 28 U.S.C. § 1291, and we affirm.

      1. Defendants allege that Travelers breached the covenant of good faith and

fair dealing by failing to conduct a reasonable inquiry into the validity of the

claims it paid. This contention is unavailing. Although “[i]t has long been

recognized in California that ‘[t]here is an implied covenant of good faith and fair

dealing in every contract that neither party will do anything which will injure the

right of the other to receive the benefits of the agreement[,]’” Kransco v. Am.

Empire Surplus Lines Ins. Co., 23 Cal. 4th 390, 400 (2000) (quoting Comunale v.

Traders & General Ins. Co., 50 Cal. 2d 654, 658 (1958)), the covenant does not

“prohibit a party from doing that which is expressly permitted by an agreement[,]”

Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 374 (1992).

The Indemnity Agreement expressly conferred on Travelers the right to handle

claims “in its sole discretion” and made its decisions “final, binding, and


      ***
             The Honorable Mary A. McLaughlin, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
      1
          As the parties are familiar with the facts, we do not recount them here.
                                            2
conclusive upon the [Defendants].” Defendants “w[ere] free to accept or reject the

bargain offered . . . .” Third Story Music Inc. v. Waits, 41 Cal. App. 4th 798, 809

(1995). And because the contract is not otherwise illusory, Defendants cannot now

rely on the covenant of good faith and fair dealing to “amend the terms that [have]

prove[n] unsatisfactory.” Id.

      2. Defendants also argue that the district court should not have considered

the Connelly declaration. The district court has broad discretion in deciding

whether to impose discovery sanctions, R&R Sails, Inc. v. Ins. Co. of Penn., 673

F.3d 1240, 1245 (9th Cir. 2012), and it did not abuse that discretion here.

Connelly was not disclosed by name as a witness under Rule 26 or in responses to

discovery. But as the district court noted, Connelly was listed in Travelers’s initial

disclosures as “personnel employed by Travelers;” Travelers’s supplemental

disclosure identified as potential witness “[p]ersons employed, retained, or

contracted with Travelers . . . , including, but not limited to: Sam Barker [and]

James Vicari;” and Barker subsequently left the employ of Travelers. Moreover,

“since Defendants were provided with [the Connelly] declaration on January 6,

2014, [they] had plenty of time to depose [Connelly] before the scheduled May 22,

2014 hearing date on Plaintiff’s motion for summary judgment.” The district court




                                           3
therefore did not err in concluding that Defendants suffered no prejudice from the

introduction of the Connelly declaration.

      AFFIRMED.




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