Judge Bruce G. Iwasaki, Case Number: 20STCV10751, Date: 2023-09-25 Tentative Ruling

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

This is a legal malpractice action. Plaintiff Sara Cronstedt (Plaintiff) has settled with Defendants Gray and White Law Firm and Mark Gray (Gray Defendants), and now seeks a determination of good faith settlement by the Court.

The Complaint alleges that in 2016 Plaintiff was injured in a hot air balloon accident and retained attorney Richard A. Jones and the Law Offices of Richard A. Jones (jointly, Jones Law Firm) to represent her in that action (Balloon Action). She contends the Jones Law Firm engaged in professional negligence in its representation of her in the Balloon Action. As a result, in June 2016, she substituted Defendants McNulty Law Firm and Peter McNulty (McNulty Defendants) as counsel in the Balloon Action. In October 2016, Plaintiff also retained the Gray Defendants to represent her in the Balloon Action.

The Complaint alleges that Defendants incorrectly told her that she had until December 4, 2017 to bring her malpractice case against the Jones Law Firm. Plaintiff sued the Jones Law Firm on December 1, 2017 (Jones Malpractice Action) represented by both the defendant McNulty firm and the Gray firm. In the Jones Malpractice Action, the Jones Law Firm asserted a statute of limitations defense. Plaintiff also alleges other breaches of the standard of care in Defendants’ handling of both the Jones Malpractice Action and the Balloon Action. On March 16, 2020, Plaintiff filed a Complaint against Defendants McNulty Law Firm, Peter McNulty, Gray and White Law and Mark Gray, alleging causes of action for (1.) negligence (legal malpractice), (2.) breach of fiduciary duty, and (3.) breach of contract.

On August 30, 2023, Gray Defendants filed a Motion for Determination of Good Faith Settlement to bar any claims for indemnity, contribution, or apportionment of fault by a joint tortfeasor. The Settlement provides that Gray Defendants will pay $55,000.00 to Plaintiff in exchange for a full settlement and release of all claims against them. The Settlement depends upon the Court’s approval of the Motion for Good Faith Settlement. McNulty Defendants oppose the motion.

“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.)

Gray Defendants request the Court find its settlement with Plaintiff was made in good faith based on its position that the settlement meets all the relevant Tech-Bilt factors.

In opposition, McNulty Defendants argue the settlement was not made in good faith. They rely on Plaintiff’s settlement demand to the McNulty Defendants for $1,000,000. That is, Plaintiff has settled with the Gray Defendants for 5.5% of what Plaintiff seeks from the McNulty Defendants. McNulty Defendants argue that no competent evidence has been submitted to explain such a disparate evaluation of the Gray Defendants’ liability.

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 [CCP § 877.6].” (Ibid.)

Here, McNulty Defendants have not met their burden of demonstrating that the settlement is “so far ‘out of the ballpark’. . .[that it is] inconsistent with the objectives of the statute.” (Tech-Bilt, Inc., supra, 38 Cal.3d at 499-500.)

First, Gray Defendants argue that the settlement amount of $55,000 reflects a rough approximation of Plaintiff’s recovery and Gray Defendants’ liability. In addressing this factor, Gray Defendants separate Plaintiff’s claims into broad categories of alleged misconduct: (1.) Defendants’ failure to accurately inform Plaintiff of the correct statute of limitations deadline for her claims again the Jones Law Firm, (2.) the allegation that Plaintiff obtained a settlement in the Balloon Action for less than its value due to Defendants’ negligent legal representation, and (3.) the allegation that Plaintiff suffered damages as result of Defendants mishandling her settlement funds from the Balloon Action.[1]

With respect to all these claims, Gray Defendants argue they are all barred by the applicable statute of limitations, Code of Civil Procedure section 340.6. In opposition, McNulty Defendants do not dispute the validity of this affirmative defense. In fact, Gray Defendants note that McNulty Defendants filed a summary judgment motion asserting this same defense. Thus, contrary to the holding in West v. Superior Court (1994) 27 Cal.App.4th 1625, 1635, Gray Defendants here have articulated a strong statute limitations defense to Plaintiff’s claims, reducing Gray Defendants’ liability exposure.

Further, Gray Defendants assert that they did not represent Plaintiff in the Jones Malpractice Action, such that there can be no liability arising from this action. Nor was there any judgment that positively determined whether the Jones Malpractice Action was barred by the statute of limitations because the matter settled. Based on this settlement in the Jones Malpractice Action, Plaintiff’s ability to demonstrate malpractice by Defendants is difficult to prove, further lowering Defendants’ likely liability on Plaintiff’s claims.

In opposition, McNulty Defendants suggest that Defendants—including Gray Defendants – are potentially liable to Plaintiff in the amount of $1,000,000. In making this argument, McNulty Defendants point to Plaintiff’s 998 offer to McNulty Defendants in the amount of $1,000,000. Citing City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, McNulty Defendants argue Gray Defendants cannot show that 55,000 is good faith settlement where Plaintiff seeks $1,000,000 in damages from McNulty Defendants.

McNulty Defendants, however, do not argue that Plaintiff’s $1,000,000 demand is a reasonable amount to evaluate the $55,000 settlement amount. McNulty Defendants submit no evidence that Plaintiff’s 998 offer has any reasonable relationship to the damages Plaintiff’s allegedly suffered. Moreover, the Reply notes that McNulty Defendants gave their own 998 settlement offer to Plaintiff in the amount of $40,000. (Teel Reply Decl., ¶ 2, Ex. A.)

Given this lack of analysis indicating Plaintiff’s approximate recovery is anywhere near $1,000,000, the Court cannot determine the $55,000 is not in good faith given Gray Defendants’ uncontested statute of limitations argument.

Second, Gray Defendants also submit evidence reducing their proportionate liability compared to McNulty Defendants. Specifically, Gray Defendants assert they did not have possession or control at any point over Plaintiff’s Balloon Action settlement amounts. (Gray Decl., Ex. B.) Thus, Gray Defendants cannot be liable under Plaintiff’s mismanagement theory pertaining to the Balloon Settlement amount. McNulty Defendants appear to concede separate liability with respect to the holding of the settlement funds. (Opp. 6:13-18.)

Accordingly, the settlement amount reflects a rough approximation of Plaintiff’s total recovery and the Gray Defendants’ proportionate estimated liability of this approximation.

Lastly, there is no evidence of collusion, fraud or tortious conduct in connection with the settlement agreement and Gray Defendants deny the existence of any such circumstances. (Teel Decl., ¶ 8.)[2] Further, the Court declines McNulty Defendants’ request to continue this motion to allow for additional discovery. McNulty Defendants request a continuance to take Plaintiff’s deposition to evaluate her testimony in connection with the motion for good faith settlement. However, McNulty Defendants submit no evidence of bad faith. Their request to conduct discovery offers no basis to conclude that a closer look into Plaintiff’s motives is warranted.

McNulty Defendants do not challenge the settlement under any other Tech-Bilt factors. Under the circumstances, the Court cannot find that “the settlement is so far ‘out of the ballpark’ in relation to [the Tech-Bilt] factors as to be inconsistent with the equitable objectives of the statute.” (Tech-Bilt, Inc., supra, 38 Cal.3d at pp. 499–500.) Accordingly, the Court finds that the settlement was made in good faith.

[1] This mishandling of the Balloon Action settlement funds includes the allegation that Defendants failed to assert an offset claim against the Jones Law Firm before paying the firm money out of the Balloon Action settlement funds.

[2] This paragraph is incorrectly numbered 4.

Department 58