Judge Curtis A. Kin, Case 20STCV40677 2022-08-18 Tentative Ruling

Judge: Curtis A. Kin, Case: 20STCV40677, Date: 2022-08-18 Tentative Ruling

Case Number: 20STCV40677 Hearing Date: August 18, 2022 Dept: 72

MOTION FOR DETERMINATION OF

GOOD FAITH SETTLEMENT

Date: 8/18/22 (9:30 AM)

Case: Salvador Barrios v. Healthy Start-East LA, Inc. (20STCV40677)

TENTATIVE RULING:

Defendants Healthy Start-East LA, Inc., Daniel Tercero Neri, and Casa de Angeles Cal. Corp.’s Motion for Determination of Good Faith Settlement is CONTINUED for the limited purpose of permitting defendant City of Commerce to obtain discovery from non-parties Colony West Financial Insurance Services (“Colony West”) and Town and Country Financial and Insurance Group Inc. (“Town and Country”) concerning whether defendant Healthy Start has umbrella and/or excess insurance policy coverage for the automobile accident at issue in this case.

Defendants Healthy Start-East LA, Inc. (“Healthy Start”), Daniel Tercero Neri, and Casa de Angeles Cal. Corp. (collectively, “Healthy Start Defendants”) move for a determination that the settlement they reached with plaintiffs Salvador Barrios and Elena Barrios, as well as third-party Oscar Aldrete, who was also involved in the subject accident, was reached in good faith. Under the proposed settlement, the Healthy Start Defendants are to pay $1,000,000 total, $940,000 to plaintiffs and $60,000 to Aldrete. (Attia Decl. ¶ 7 & Ex. E at ¶ 1.)

On April 28, 2022, the Court initially heard this motion. The Court evaluated the proposed settlement based on the factors set forth in Tech-Bilt, Inc. v. Woodward-Clyde & Assocs. (1985) 38 Cal.3d 488. The Court found that the settlement was potentially within the ballpark of reasonable settlements. However, the Court continued the hearing on this motion to allow nonsettling defendants County of Los Angeles (“County”) and City of Commerce (“City”) to conduct discovery regarding the financial condition of the Healthy Start Defendants.

As a preliminary matter, the Court ordered County and City to file any sur-reply 16 court days before the new hearing date, or July 27, 2022. County and City filed their surreplies on August 5, 2022, 9 court days before the continued hearing date. County served its sur-reply on August 5, 2022. City served its sur-reply on August 4, 2022. Accordingly, both sur-replies were untimely filed and served. The Court admonishes County and City to comply with any briefing schedule specially set by the Court, as the Court may exercise its discretion to disregard any such untimely filings in the future.

Nevertheless, with respect to County and City’s untimely sur-replies on this motion, the Healthy Start Defendants filed a substantive responsive to such sur-replies. Accordingly, the Court will consider the sur-replies on their merits. (Cal. Rule of Court 3.1300(d) [“No paper may be rejected for filing on the ground that it was untimely submitted for filing. If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate”].)

County contends that, based on Healthy Start’s responses to special interrogatories, Healthy Start has a yearly net income of a half a million dollars. (Allen Thomas Ex. 10, Responses to Special Interrogatory Nos. 8, 9.) However, Healthy Start’s balance sheets indicate that it had a net income of $25,698 in 2020 and $255,100 in 2021. (Supp. Attia Decl. ¶¶ 5, 6 & Exs. K, L.) County’s calculation of net income was based on “costs of sales and/or services” subtracted from gross sales. Healthy Start’s breakdown of “costs of sales and/or services” in the special interrogatory response did not include other expenses identified in the balance sheets which apparently fall outside of this category, including insurance, management fees, and program activities. Therefore, County’s assertion of Healthy Start’s net income does not account for all Healthy Start’s expenses. Based on the information contained in Healthy Start’s balance sheets submitted to this Court, it appears that Healthy Start’s modest financial condition is not a factor that would support a finding that the proposed settlement is so far out of the ballpark as to be inconsistent with a finding of good faith settlement.

In this regard, the Court notes the City’s contention that the Healthy Start Defendants’ motion should be denied because, at deposition, Healthy Start’s Chief Financial Officer purportedly knew “absolutely nothing about the finances” of Healthy Start and failed to bring “detailed” reports providing a breakdown of expenses and salaries to his deposition. (Bagnaschi Decl. ¶¶ 28, 29.) However, the Healthy Start Defendants provided all documents requested in the notice of deposition to the CFO, including profit and loss statements, balance sheet, income and expense graphs, and statement of cash flows. (Supp. Attia Decl. ¶ 8.) “Detailed” reports were only required if Healthy Start uses QuickBooks. (Bagnaschi Decl. ¶¶ 17, 28 & Ex. 6.) It is unclear whether Healthy Start uses QuickBooks. Regardless, City does not explain why more detailed reports, as opposed to the other financial documents that the Healthy Start Defendants provided, were necessary to ascertain sources of funds available to Healthy Start. Indeed, as noted above, Healthy Start’s financial condition does not suggest that it has an ability to pay that would preclude this Court from finding the contemplated settlement is made in good faith.

In its sur-reply, City also argues that the Healthy Start Defendants hindered discovery of insurance policies available to them, including umbrella and excess policies. That is not entirely true. In discovery, Healthy Start produced a copy of its insurance policy with a $1 million limit, along with a declaration of Matilda Kodjanian, who stated that it was “[t]he only insurance policy Healthy Start had for the motor vehicle accident on February 25, 2020” and that “Healthy Start did not have an excess policy, umbrella policy or any other insurance policy in effect at the time that would provide coverage for the motor vehicle accident.” (Supp. Attia Decl. ¶ 7 & Ex. M [Kodjanian Decl. ¶ 2].) However, Kodjanian, who was produced for deposition by Healthy Start as its PMK regarding the existence of all policies of insurance available to Healthy Start, provided seemingly inconsistent testimony in this regard. (Bagnaschi Decl. ¶ 9.) Specifically, when asked if Healthy Start had an umbrella policy that covered auto policies in 2020, Kodjanian stated: “I believe so.” (Banaschi Decl. Ex. 4.1 [Kodjanian Depo. at 39:8-10].) Later in the deposition, when asked by City’s counsel whether it was correct that Healthy Start had such an umbrella policy, Kodjanian again stated: “I believe so.” (Banaschi Decl. Ex. 4.1 [Kodjanian Depo. at 60:24-61:5].)

It may be that Kodjanian was confused, uninformed, or mistaken when so testifying at her deposition. (Cf. (Banaschi Decl. Ex. 4.1 [Kodjanian Depo. at 30:12-18 (admitting no knowledge of what an umbrella policy or excess policy is)].) But, in light of the unclear status of Healthy Start’s insurance coverage, City is entitled to additional discovery to explore the limited issue of whether Healthy Start has any additional insurance coverage available. (See Tech-Bilt, Inc. v. Wooodward-Clyde & Assocs. (1985) 38 Cal.3d 488, 499 [settlor’s insurance policy limit is factor Court should consider in making good faith settlement determination].) However, that entitlement to limited discovery does not encompass the type of blunderbuss request by the City for the “[c]omplete insurance file” made in the subpoena to Colony West or “complete paper and electronic file” made in the subpoena to Town and Country. (See Supp. Attia Decl. ¶ 9 & Ex. O [Colony West subpoena]; Bagnaschi Decl. ¶ 23 & Ex. 10 [Town and Country subpoena].) Rather, as more reasonably suggested by counsel for Healthy Start in his meet and confer letters concerning the City’s overbroad subpoena requests (see Supp. Attia Decl. ¶ 10 & Ex. P; Bagnaschi Decl. ¶ 24 & Ex. 11), a more narrowly tailored discovery request is warranted.

Accordingly, the Court will again continue the hearing on this motion, but only for the limited purpose of allowing the City to complete its discovery from non-party insurers Colony West and Town Country with respect to whether Healthy Start had any umbrella or excess insurance coverage for the auto accident at issue in this case and, if so, the extent and nature of such coverage.

Lastly, the Court notes that, in its sur-reply, County also contends that Healthy Start’s driver, Neri, testified that he observed plaintiff Salvador Barrios’ vehicle for 15 seconds before the collision. (Thomas Decl. Ex. 3 at 55:5:12.) Upon questioning from his counsel, Neri stated that he saw Barrios’ vehicle for 2 seconds before the collision. (Attia Decl. ¶ 3 & 86:20-87:14.) County also contends that the parked vehicles on Telegraph Road would not have prevented Neri from seeking Barrios’ vehicle. Based on City and County’s failure to unearth additional funds that the Healthy Start Defendants could use to pay plaintiffs’ damages, the Court finds that Neri’s liability is adequately accounted for by the contemplated $940,000 payment to plaintiffs, irrespective of the parties’ dispute over the extent of Neri’s liability for the collision. That conclusion could change, however, in the event additional discovery were to reveal that excess insurance coverage exists.

For the foregoing reasons, the motion is CONTINUED to _______________________, 2022, at _________ a.m., in Department 72. At least fourteen (14) days in advance of the hearing, City may file and serve a supplemental filing limited to the issue of whether there is additional insurance coverage available beyond the $1 million policy limit and, if so, how the existence of such coverage should affect the Court’s good faith settlement determination. The Health Start Defendants may file and serve a response thereto by no later than seven (7) in advance of the hearing.