Department 58

Hearing Date: November 16, 2023

Case Name: BMC West, LLC v. Karlin

Case No.: 20STCV01082 [Consolidated w/ 20STLC02980]

Matter: Motion for Determination of Good Faith Settlement

Moving Party: Cross-Complainant Michael Karlin, former Trustee of the 12822 Highwood Street Trust, Michael Karlin, Trustee of the HIGHWOOD GIFT TRUST #1 dated November 1, 2021, and Michael Karlin, Trustee of the HIGHWOOD GIFT TRUST #2 dated November 1, 2021

Responding Party: None

Tentative Ruling: The Motion for Determination of Good Faith Settlement is granted.

This lawsuit concerns construction defects by Designing Edge Builders, Inc. (Cross-Defendant and Cross-Complainant) in connection with the remodeling of Michael Karlin’s house.

On January 13, 2020, Plaintiff BMC West LLC filed a Complaint against Designing Edge, asserting causes of action for Breach of Contract, Quantum Meruit, Account Stated, Open Book Account, Recovery on Personal Guarantee, and Recovery on License Bond.

On March 4, 2020, Michael Karlin, former Trustee of the 12822 Highwood Street Trust, Michael Karlin, Trustee of the HIGHWOOD GIFT TRUST #1 dated November 1, 2021, and Michael Karlin, Trustee of the HIGHWOOD GIFT TRUST #2 dated November 1, 2021 (Karlin Parties) filed a Cross-Complaint against Designing Edge Builders, Inc. and Dominique Sauer (DE), asserting causes of action for Equitable Indemnity, Breach of Written Contract, Declaratory Relief, and Fraud.

On April 21, 2020, DE filed a Cross-Complaint against Karlin Parties, asserting causes of action for Breach of Contract, Open Book Account, Account Stated, Quantum Meruit, Total Indemnity, Equitable Indemnity, and Contribution.

On October 11, 2023, the parties – Karlin Parties, on the one hand, and DE, on the other hand – signed a settlement agreement (Settlement Agreement) in this action. The Settlement Agreement provides that DE will pay $650,000 to Karlin Parties in exchange for a full settlement and release of all claims against them and a dismissal of the Cross-Complaint. The Settlement Agreement depends upon the Court’s approval of the Motion for Good Faith Settlement.

On August 30, 2023, Karlin Parties moved for a good faith settlement with respect to a Settlement Agreement. The motion is unopposed.

The other potential parties involved include the following: Pool & Spa Builders, Inc. (Cross-Defendant); Knibb Design Corporation (Cross-Defendant); Patmar Air Systems, Inc. (Cross-Defendant), Ramglass Enterprises, Inc., dba J&J Roofing (Cross-Defendant), and BMC West, LLC (formerly Plaintiff but dismissed from action).

The Motion for Good Faith Settlement is granted.

Legal Standard

“A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Code Civ. Proc., § 877.6, subd. (c).)

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 (Tech-Bilt), our Supreme Court explained that in making a good faith settlement determination, a trial court should “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.” (Id. at p. 499.) “The party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc., § 877.6, subd. (d).)

“In the context of section 877.6, ‘[t]he trial court is given broad discretion in deciding whether a settlement is in “good faith” for purposes of section 877.6, and its decision may be reversed only upon a showing of abuse of discretion.’ ” (Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 957.)

Discussion

Karlin Parties request the Court find its settlement with DE in the amount of $650,000 was made in good faith based on its position that the Settlement Agreement meets all the relevant Tech-Bilt factors.

Acknowledging that there is no precise method to determine whether parties entered into a good faith settlement, the Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde Assoc. (1985) 38 Cal.3d 488 provided guidelines for determining whether a settlement is made in good faith. (38 Cal.3d at 495.) Rather, the court must strike a balance between the public policy favoring settlements and the competing policy favoring equitable allocation of costs between tortfeasors. (Id. at pp. 498-99.) To accomplish this, the Tech-Bilt Court provided the following factors for determining whether a proposed settlement is based on good faith: (1) a rough approximation of plaintiff’s total recovery and the settling defendant’s proportionate liability; (2) the amount paid in settlement; (3) allocation of settlement amounts among plaintiffs; (4) recognition that a settlor should pay less in settlement than it would if it were found liable after trial; (5) financial conditions and insurance policy limits of the settling defendant; and (6) the existence of collusion, fraud, or tortious conduct aimed to injure the interests of non-settling defendants. (Id. at 499-500.) The burden of proof in asserting that a settlement lacked good faith falls upon the party making the assertion and it must show that “the settlement is so far ‘out of the ballpark’ in relation to these factors as to be inconsistent with the equitable objectives of [Code of Civil Procedure section 877.6].” (Ibid.)

Here, under the Settlement Agreement, DE is to pay the sum of $650,000.00, which is approximately 50% of the recoverable damages pursuant to Karlin Parties’ expert. (Wolpert Decl., ¶¶ 2-3 Ex. 1 [Settlement Agreement], 2 [Expert’s Damage Report].) Therefore, the Settlement Amount is within the ballpark of DE’s possible share of liability, with the understanding that, under Tech-Bilt, a party should not be required to pay more in a settlement than if found liable at trial.

Further, Karlin Parties assert that this settlement was reached in good faith as an arm’s length transaction before neutral mediators. (Mot., 5:12-17.) Further, as is set forth in the settlement agreement itself, payment of the settlement amount is being made by DE’s insurance carriers; thus, there are no issues with the insurance policy limits.

Finally, under Code of Civil Procedure section 877.6, “the party asserting the lack of good faith shall have the burden of proof on that issue.” In the absence of any opposition to this motion, this burden has not been met.

Accordingly, the Court finds that the settlement was made in good faith and in compliance with the Tech-Bilt factors.

Conclusion

The Motion for Determination of Good Faith Settlement is granted.