Judge Audra Mori, Case BC656364 2022-09-21 Tentative Ruling

Plaintiffs Armando Japa Cabanlit (“Armando”), Patricia Nathali (“Nathali”), and Ethan Cabanlit (“Ethan”), a minor, by and through his guardian ad litem, Patricia Nathali, (collectively, “Plaintiffs”) filed this action against defendants Con-Way Freight Inc. (“Con-Way”), XPO Logistics Freight (“XPO Logistics”), and Jose Nunez Hernandez (“Hernandez”) for damages arising from a collision between a train and tractor trailer. On June 16, 2021, Plaintiffs filed the operative Second Amended Complaint alleging the crash occurred on or about September 1, 2015, when Hernandez, who was in the course and scope of his employment for Con-Way, failed to clear train tracks at an intersection controlled by railroad cross traffic lights. The collision between the Union Pacific freight train and trailer caused the trailer to strike Plaintiff’s vehicle. XPO Logistics acquired Con-Way after the accident.

XPO Logistics and Hernandez then filed a cross-complaint against Union Pacific Railroad Company (“Union Pacific”) alleging causes of action for equitable indemnity and contribution. On April 4, 2022, XPO Logistics and Hernandez filed their operative Second Amended Cross-Complaint against Union Pacific, Mario Ramirez, and the City of Industry (the “City”) for equitable indemnity and contribution.

On August 22, 2022, XPO Logistics and Hernandez (collectively, “XPO”) filed the instant motions to seal court records and for determination of good faith settlement. In particular, XPO moved to seal the unredacted version of XPO’s motion for determination of good faith settlement. The only portions redacted in the motion for good faith settlement contain the settlement amount between Plaintiffs and XPO. The motion to seal was unopposed. The motions to seal and for determination of good faith settlement were heard on September 14, 2022, where the motion to seal was granted. The motion for determination of good faith settlement was then continued to September 21, 2022, to allow the Court additional time to review the unredacted moving papers, opposition, and reply.

XPO provides that XPO and Plaintiffs have reached a settlement, and XPO moves for an order pursuant to CCP § 877.6 determining that the settlement was entered into in good faith between them. Union Pacific opposes XPO’s motion for determination of good faith settlement, and XPO filed a reply to Union Pacific’s opposition.

The Court has reviewed the underacted documents; however, the Court will not set forth the terms of the settlement in this public order, as doing so would violate the purpose of the requested sealing order.

In an action involving two or more joint tortfeasors or co-obligors, when one tortfeasor or obligor enters into a settlement with the plaintiff, the other tortfeasors or obligors are entitled to a hearing on the issue of whether the settlement was entered into in good faith. (Code Civ. Proc., § 877.6(a).) Where a plaintiff settles with one of several joint tortfeasors or co-obligors without releasing the others, a determination of “good faith” discharges the settling defendant from liability to the other defendants for equitable contribution or comparative indemnity. (CCP § 877(a)-(b).) The amount paid by the settling defendant reduces the claim against the others (CCP § 877(a)), but a risk of prejudice remains because an unreasonably low settlement (i.e., with the “most culpable” tortfeasor) exposes the remaining defendants to a judgment exceeding their fair share of the liability. (See Bay Development, Ltd. v. Superior Court (1990) 50 Cal. 3d 1012, 1019-1020.)

There is no precise yardstick for measuring the “good faith” of a settlement with one of several tortfeasors, but it must harmonize the public policy favoring settlements with the competing public policy favoring equitable sharing of costs among tortfeasors. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.)

“A more appropriate definition of ‘good faith,’ in keeping with the policies of American Motorcycle and the statute, would enable the trial court to inquire, among other things, whether the amount of the settlement is within the reasonable range of the settling tortfeasor's proportional share of comparative liability for the plaintiff's injuries. This is not to say that bad faith is ‘established by a showing that a settling defendant paid less than his theoretical proportionate or fair share.’ [Citation.] Such a rule would unduly discourage settlements. ‘For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote. And even where the claimant's damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.’ [Citation.] Moreover, such a rule would tend to convert the pretrial settlement approval procedure into a full scale mini trial [citation].

“But these considerations do not lead to the conclusion that the amount of the settlement is irrelevant in determining good faith. Rather, the intent and policies underlying section 877.6 require that a number of factors be taken into account including a rough approximation of plaintiffs' total recovery and the settlor's proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. [Citation.] Finally, practical considerations obviously require that the evaluation be made on the basis of information available at the time of settlement. ‘[A] defendant's settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant's liability to be.’ [Citation.] The party asserting the lack of good faith, who has the burden of proof on that issue (§877.6(d)), should be permitted to demonstrate, if he can, that the settlement is so far ‘out of the ballpark’ in relation to these factors as to be inconsistent with the equitable objectives of the statute. Such a demonstration would establish that the proposed settlement was not a ‘settlement made in good faith’ within the terms of section 877.6.

Section 877.6 contemplates that the determination of good faith may be made by the court on the basis of affidavits (subd. (b)), and as the court observed in River Garden Farms, ‘The price levels are not as unpredictable as one might suppose. Despite the uncertainties, generalized valuation criteria are recognized by the personal injury bar, insurance claims departments and pretrial settlement courts. When testing the good faith of a settlement figure, a court may enlist the guidance of the judge's personal experience and of experts in the field. Represented by knowledgeable counsel, settlement negotiators can predict with some assurance whether a settlement is within the reasonable range permitted by the criterion of good faith. The danger that a low settlement violates the good faith clause will not impart uncertainty so long as the parties behave fairly and the courts maintain a realistic awareness of settlement imponderables.’ [Citation.]

(1) A rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability;

(4) A recognition that a settlor should pay less in settlement than he would if he were found liable after a trial;

(5) The financial conditions and insurance policy limits of settling defendants; and

(6) The existence of collusion, fraud, or tortious conduct aimed to injure the interests of the nonsettling defendants.

Accordingly, if the party contesting the settlement can show, with admissible evidence, that the settlement is “so far ‘out of the ballpark’ in relation to [the above-referenced factors] as to be inconsistent with the equitable objectives of the statute,” then the court should find the settlement to be lacking in good faith. (Id. at 499-500.) If no such showing is made, the settlement should be deemed to be in good faith and the settlor is entitled to an order barring any further claims by any other joint tortfeasor or co-obligor for “equitable comparative contribution, or partial or comparative indemnity” and/or an order dismissing any such claims. (CCP §877.6(c).)

Union Pacific, in its opposition, submits an objection to the entire declarations of James R. Loumiet and Charles L. Culver submitted with the motion. The objections are sustained, as neither expert provided a reasoned explanation connecting the factual predicates to the ultimate conclusions asserted therein. (See, e.g., Sanchez v. Kern Emergency etc. (2017) 8 Cal.App.5th 146, 155 [“by a reasoned explanation connecting the factual predicates to the ultimate conclusion” or it lacks evidentiary value.”].)

XPO’s burden in moving for good faith determination is to prove the value of the settlement, the evidentiary basis for the value, and that it was reached in a sufficiently adversarial manner to show a reasonable valuation was reached. (Franklin Mint Co. v. Superior Court (2005) 130 Cal.App.4th 1550, 1558; see also CCP §877.6(a)(2).)

XPO provides it has reached a monetary settlement with Plaintiffs, plus agreed to jointly retain liability experts with Plaintiffs as to the allegations against Union Pacific, as described in greater detail in the sealed submission.

As to the basis for the valuation, XPO provides that it was not the only cause of the accident, that Plaintiffs’ damages are greatly disputed, and that the settlement was reached after significant litigation and mediation. XPO shows that it has filed a Cross-Complaint against Union Pacific and the City, and states, “XPO admitted it was a factor, but denied it was the only factor, in causing the subject accident.” (Mot. Memo. of Points and Authorities at p. 1:22-23.) XPO provides evidence that its experts have determined that neither Armando nor Nathali sustained a brain injury related to this accident and that Ethan sustained a small right-sided subarachnoid hemorrhage. According to the evidence that XPO provides in connection with this motion, Ethan’s medical issues are due to a hemorrhage he suffered at his premature birth, not the accident. Thus, XPO shows that the damages claimed by Plaintiffs in this case are greatly contested, which Union Pacific does not dispute. According to XPO, “Although Plaintiffs have postured that this case is worth more than $50 Million, clearly Plaintiffs can see the hurdles they will have to overcome related to the causation and damages claims.” (Id. at p. 9.) Further, XPO shows that settlement was only reached, “[a]fter two mediations, five (5) years of litigation and prolonged negotiations.” (Mot. Luetkenhaus Decl. ¶ 44, Exh. 45.) Thus, XPO shows the evidentiary basis for the value of the settlement and that it was reached in a sufficiently adversarial manner to be reasonable.

Because XPO meets its moving burden, the burden shifts to Union Pacific to show the settlement was not in good faith. (CCP 877.6(d). [“The party asserting lack of good faith shall have the burden of proof on that issue.”]; see Mattco Forge, Inc. v. Arthur Young & Company (1995) 38 Cal.App.4th 1337, 1350 n. 6.)

In opposition, Union Pacific contends that it is undisputed that the only parties that violated the law were XPO Logistics and Hernandez, and so XPO’s settlement is not based in equity and fairness considering their culpability compared to Plaintiffs’ $164,001,000 statement of damages. Union Pacific argues that XPO caused the incident, and that Union Pacific was not responsible for installing any advanced preemption at the subject railroad crossing. Further, Union Pacific contends that XPO’s expert declaration submitted with the motion are inadmissible, and that the Tech-Bilt factors weigh in favor of denying the motion.

The Court will now consider the Tech-Bilt factors. As to the first and second factors, Union Pacific argues that XPO’s and Plaintiffs’ proposed settlement is not a rough approximation of XPO’s potential exposure and is grossly disproportionate in light of Plaintiffs’ statements of damages. XPO asserts that Armando and Nathali are claiming $27,500,000 in damages and Ethan is claiming $109,001,000 for a total of $164,001,000. (Opp. Low Decl. Exh. F.) However, while Union Pacific avers that this is the ballpark as defined by Plaintiffs, Union Pacific cites no authority holding that a plaintiff’s statement of damages is used to determine the ballpark range when considering the Tech-Bilt factors in a motion for determination of good faith settlement. Moreover, although Plaintiffs may claim a total of $164,001,000 through their statements of damages, a statement of damages is not evidence or determinative of Plaintiffs’ actual damages, and it does not otherwise itself establish Plaintiffs are entitled to the amount claimed therein.[1] (See Dole Food Co., Inc. v. Superior Court (2015) 242 Cal.App.4th 894, 904 [“A plaintiff's claims for damages are not determinative in finding good faith.” (quoting West v. Superior Court (1994) 27 Cal.App.4th 1625, 1636)].) Furthermore, any argument that Plaintiffs would recover the amounts sought in their statements of damages if this matter went to trial is merely speculative. (Tech-Bilt, Inc., 38 Cal.3d at 499 [“For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote.”].) Union Pacific provides no evidence that Plaintiffs are entitled to, or that Plaintiffs are likely to recover, substantially more in damages than the settlement amount at this time.

Concerning XPO’s proportionate liability, Union Pacific contends that XPO previously accepted liability for the incident, and that XPO’s own director of safety testified that the accident would not have happened but for Hernandez’s conduct. Union Pacific avers that it has no liability for the accident.

Union Pacific’s evidence shows the following exchange with XPO’s director of safety, who reviewed the accident for XPO, at his deposition:

Q. And you stated after further investigation, DSR Jose Nunez Hernandez made a critical error in that he failed to use his Smith System training. Was that your opinion?

Q. And it says that clearly, this accident could have been avoided. That was your opinion?

(Opp. Low Exh A at pp. 44:7-11, 47:3-7.) While this deposition testimony suggests that XPO’s director of safety found that Hernandez made a “critical error” pursuant to XPO’s defensive driver training, and that the accident was preventable, it does not establish that Hernandez was the sole cause of the accident or that Union Pacific bears no liability for it.

XPO asserts that while it has admitted that it was a factor in causing the accident, it denies being the only factor. XPO asserts that liability also lies with Union Pacific and the City. XPO asserts that Union Pacific’s engineer and conductor testified that they saw the XPO’s trailer on the train tracks and that they assumed and hoped the trailer would move prior to impact. (Mot. Luetkenhaus Decl. ¶ 14.) XPO argues that this violated Union Pacific’s own rules and regulations for train handling. XPO further avers that Union Pacific was aware of a problem with southbound traffic queueing on the tracks of the crossing as early as 1994, and that the City and Union Pacific were aware that the subject intersection where the accident happened needed 60 seconds of advanced preemption installed. (Id. at ¶¶ 15-17.) In addition, XPO contends that it is disputing Armando’s and Nathali’s claims they suffered brain injuries of any kind, (Id. at ¶¶ 32-33), and that XPO has strong evidence that Ethan’s ongoing issues are a direct result of his premature birth and not related to the accident. (Id. at ¶ 43.)

Consequently, contrary to Union Pacific’s contentions, causation is disputed in this matter. Union Pacific does not establish that XPO’s potential liability is grossly disproportionate to the settlement amount reached between Plaintiffs and XPO.[2] Accordingly, the first and second factors balance in favor of finding a good faith settlement.

As to the third factor regarding allocation of the settlement between Plaintiffs, XPO attests that 20% of the settlement is being apportioned to each Armando and Nathali and 60% is being apportioned to Ethan. In opposition, Union Pacific seemingly contends that the proposed allocations are disproportionate to each Plaintiffs’ total claimed damages in the statement of damages but does not address the allocation of the settlement proceeds among Plaintiffs. [3] However, as analyzed above, the amounts sought in the statements of damages are not evidence of Plaintiffs’ actual damages. Union Pacific does not provide any evidence to support the assertion that allocation among Plaintiffs is improper. Given the lack of evidence presented, the third factor weighs in favor of finding a good faith settlement.

As to the fourth factor, in recognizing that a settlor should pay less in settlement than if found liable after trial, settlements have been upheld as being in good faith in cases with a $25,000 settlement in a $5 million case, a $30,000 settlement in a $1 million case, a $65,000 settlement in a $7 million case, and a $50,000 settlement in a $1.425 million case. (See Cahill v. San Diego Gas & Elec. Co. (2011) 194 Cal.App.4th 939, 968 [citing Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012; Wysong & Miles Co. v. Western Industrial Movers (1983) 143 Cal.App.3d 278; Wilshire Ins. Co. v. Tuff Boy Holding, Inc. (2001) 86 Cal.App.4th 627].) Other damages are speculative or uncertain at this time. And there is no evidence submitted to suggest that Plaintiffs would be entitled to a substantially higher amount than the settlement if they were completely successfully on their claims. Therefore, the fourth factor balances in favor of finding a good faith settlement.

As to the fifth factor concerning XPO’s financial condition and insurance policy limits, as analyzed above, there is no evidence showing the settlement amount is disproportionately low. Because the settlement amount is not disproportionately low, XPO’s financial condition is not relevant at this time. (See, L.C. Rudd & Son, Inc. v. Superior Court (1997) 52 Cal.App.4th 742, 749-50 [settling defendant’s financial condition was irrelevant where the settlement amount was not disproportionately low; disproportionately low settlement is a “threshold requirement” to finding financial condition relevant.].) Further, although Union Pacific argues that XPO’s insurance limits are unknown, the party asserting the lack of good faith of a settlement agreement has the burden of proof to demonstrate that this is significant in assessing whether the settlement is so far “out of the ballpark” in relation to the reasonable range of the settling tortfeasor’s proportionate share of comparative liability for the plaintiff’s injuries as to be inconsistent with the equitable objectives of the statute. (Nutrition Now, Inc. v. Superior Court (2003) 105 Cal.App.4th 209, 213-214.) In this case, Union Pacific does not make such a showing. Furthermore, insurance limits are mainly relevant to demonstrate that even a “disproportionately low settlement figure” can often be “reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.” (Tech-Bilt, Inc., 38 Cal.3d at 499; compare with Long Beach Mem. Med. Ctr. v. Sup. Ct. (2009) 172 Cal.App.4th 865, 873-75 [a $200,000 settlement in $10 million medical malpractice case not in good faith where insurance coverage was $2 million, defendants appeared to have high degree of culpability and other co-defendants offered over $8 million].) Given the evidence presented, there is no showing that the settlement amount is disproportionately low. The fifth factor, thus, balances in favor of finding a good faith settlement.

As to the sixth factor, Union Pacific does not contend the settlement was the result of fraud, collusion, or other tortious conduct, and the Court has not found, based on the evidence presented, the settlement is so low such as to establish that it is aimed at making the non-settling defendants pay more than their fair share. There is no evidence or argument made to show collusion, fraud or tortious conduct between Plaintiffs and XPO. Consequently, the sixth factor balances in favor of finding a good faith settlement.

Based on the foregoing, XPO’s settlement with Plaintiffs appears reasonable. There is not sufficient evidence showing otherwise.

XPO’s motion for determination of good faith settlement between Plaintiffs and defendants XPO Logistics and Hernandez is granted.

Hon. Audra Mori

Judge of the Superior Court

[1] XPO asserts, and Union Pacific does not dispute, that “Plaintiffs in this case have served 998 Offers to Compromise upon Union Pacific” for amounts that are “less than half of the [total] XPO is paying to settle this claim.” (Mot. Memo. of Points and Authorities in Support of Motion for Determination of Good Faith Settlement at p. 8:23-27.) While these offers were not accepted, the amounts at which Plaintiffs offered to compromise undermine Union Pacific’s assertion that the Statement of Damages represents an accurate estimate of Plaintiff’s recovery at trial.

[2] As XPO has indicated that the 998 Offers to Compromise made by Plaintiffs to Union Pacific sought “less than half of the [total] XPO is paying to settle this claim,” it seems that the settlement also reflects the view that Union Pacific is proportionally less liable than XPO. (Mot. Memo. of Points and Authorities in Support of Motion for Determination of Good Faith Settlement at p. 8:23-27.)

[3] The percentage of the settlement allocated to each Plaintiff in the Statement of Damages is not far different than the percentage of the settlement allocated to each Plaintiff. In the Statement of Damages, Armando and Nathali each received approximately 17% of the settlement, and Ethan received approximately 66%.