Judge: H. Jay Ford, III, Case: 19SMCV00237, Date: 2022-09-16 Tentative Ruling

Case Number: 19SMCV00237    Hearing Date: September 16, 2022    Dept: O

Case Name:               Patel, et al. v. Ramo, LLC, et al.

SUBJECT:                 (1) APPLICATION FOR DETERMINATION OF GOOD FAITH SETTLEMENT

                                    (2)  MOTION TO CONTEST GOOD FAITH SETTLEMENT

MOVING PARTY:   (1)  Cross-Defendant Serfin Construction Inc.

                                    (2)  Defendants Pacific West Construction Services, Inc. and Adrian Jesus Hernandez

RESP. PARTY:         (1)  Defendant Pacific West Construction Services, Inc.

                                    (2)  Cross-Defendant Serfin Construction

TENTATIVE RULING

            Cross-Defendant Serfin Construction Inc.’s Application for Determination of Good Faith Settlement is GRANTED.  Defendants Pacific West Constructions Services, Inc. and Adrian Jesus Hernandez’s (collectively referred to as “Pacific West”) Motion to Contest Good Faith Settlement is DENIED. 

            Pacific West fails to carry its burden as the party asserting lack of good faith under CCP §877.6(d).  Pacific West fails to establish that the settlement amount of $15,000 is “grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor's liability to be.” City of Grand Terrace vs. Superior Court (1987) 192 Cal App.3d 1251, 1262.  Pacific West also fails to establish that the settlement was the product of collusion, fraud or tortious conduct.

1. Settling parties:

(1)  Cross-Complainant Ramo LLC

(2)  Cross-Defendant Serfin Construction, Inc.

2. Terms of settlement:

Cross-Defendant Serfin Construction, Inc. will pay $15,000 to Ramo LLC for a dismissal of all claims against it. 

3. Rough Approximation of Plaintiff’s Total Recovery and Settlors’ Proportionate Liability:

Applicable Law.  Substantial evidence (e.g., factual declarations) showing the nature and extent of the settling defendant's liability is required for a good-faith determination. Without such evidence, a “good faith” determination is an abuse of discretion. See Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1348 (“questionable assumptions” in moving party's memorandum of points and authorities insufficient to show settlement was reasonable); Greshko v. County of Los Angeles (1987) 194 Cal.App.3d 822, 834 (attorney's declaration re settling defendant's liability insufficient where he failed to provide specific supporting facts or expert opinion). The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor's liability to be. City of Grand Terrace vs. Superior Court (1987) 192 Cal App.3d 1251, 1262.

“When a trial court considers the good faith of a settlement, it must determine each tortfeasor's proportionate share of liability. The trial court's good faith determination must also take into account the settling tortfeasor's potential liability for indemnity to a cotortfeasor, as well as the settling tortfeasor's potential liability to the plaintiff. In so doing, a trial court must consider each of the plaintiff's claims and possible recoveries and the potential liability of the joint tortfeasors.” Cal-Jones Properties v. Evans Pacific Corp. (1989) 216 Cal.App.3d 324, 328.

Application to Facts.  Serfin does not present any evidence of Ramo’s potential recovery.  However, Pacific West submits Ramo LLC’s discovery responses claiming $500,000 in damages.  See Dec. of C. Woolf, Ex. C, Ramo LLC Response to Interrogatory No. 205.1.

Serfin submits evidence that its proportionate liability for those damages is zero or negligible, because it only performed framing work and replaced flooring.  See Dec. of R. Gonzalez ISO Opposition to Motion to Contest, ¶4.  Serfin did not perform any work on the roofing, installation of windows or covering the roof or any other part of either Unit 3 or 5 during the rainy season.  Id. at ¶¶4-9. 

Serfin’s evidence establishes that its proportion of potential liability is low or negligible.  Based on that evidence, the settlement of 3% of the potential recovery is not disproportionately low.

Pacific West fails to establish that the $15,000 is so “grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor's liability to be.”  City of Grand Terrace vs. Superior Court (1987) 192 Cal App.3d 1251, 1262.  Pacific West argues the settlement is disproportionately low, because (1) Serfin’s work could be the source of the water damages and (2) Plaintiffs clearly identified more than one potential source of the water intrusion, the pipe burst and the failure to cover the work area properly to protect from rainfall.  Pacific West submits no evidence that Serfin was responsible in any way for covering or protecting the area from rainfall. 

The party asserting the lack of good faith has the burden of proof. CCP §877.6(d).  Pacific West fails to satisfy this burden on grounds of a disproportionately low settlement. 

4. Allocation: 

Applicable Law.  “Where the settling parties have agreed to allocate less than all of the settlement amount to a portion of the causes of action, an evidentiary showing is required to justify such allocation.  The effectiveness of such an allocation depends upon its good faith.  The statutory requirement of good faith extends not only to the amount of the overall settlement but as well to any allocation which operates to exclude any portion of the settlement from the setoff.”  Erreca's v. Superior Court (1993) 19 Cal.App.4th 1475, 1491.

“In the typical one-plaintiff, multiple-defendants, personal injury action each tortfeasor is potentially liable for the same injury to the plaintiff. Therefore the full settlement by one defendant will offset a judgment against other tortfeasors; no allocation of the settlement is required. But many lawsuits and many settlements do not fit this pattern. In some, the amount of the offset is uncertain because one settlement covers multiple plaintiffs or causes of action with different damages, or because a sliding scale settlement is used and payments by the settling defendant are contingent upon the degree of plaintiff's success against the remaining defendants. In others, the amount of the offset is clouded by injection of noncash consideration into the settlement or, as here, by settling claims for separate injuries not all of which would be attributable to conduct of the remaining defendants.

In a situation where the cash amount of the settlement does not dictate the amount of the offset, the settling parties must include an allocation or a valuation in their agreement. A natural tension will exist between plaintiff, who benefits by undervaluing the settlement in order to permit greater recovery against the remaining defendants, and the settling defendant, who would want the settlement value high enough to be approved in order to relieve settling defendant from liability for comparative indemnity or contribution.  Requiring a joint valuation by the plaintiff and the settling defendant should generally produce a reasonable valuation.”  Alcal Roofing & Insulation v. Superior Court (1992) 8 Cal.App.4th 1121, 1124-1125. 

Application to Facts.  Ramo is the only remaining plaintiff/cross-complainant.  Pacific Western fails to demonstrate that allocation is required due to noncash elements to the offset, different causes of action seeking different damages, a sliding scale settlement or multiple plaintiffs.  The full amount of settlement will be applied to offset any damage award against remaining Defendants.  There is no need for allocation.    

5. Fraud, Collusion and Tortious Conduct:

Pacific West fails to identify any fraud, collusion or tortious conduct.  Ramo LLC’s identification of Serfin as a negligent party is not evidence of fraud, collusion tortious conduct.  Ramo’s expert testifies that in his opinion Serfin did not contribute to the water intrusion allegations.  Pacific West fails to submit facts or evidence that Serfin was responsible for covering or protecting the worksite from water intrusion or the pipe.

6. Recognition that settlor should pay less in settlement than he would if he were found liable after a trial: 

Payment of $15,000 is less than Serfin’s potential liability at trial. 

7. Financial conditions and insurance policy limits of settling defendants: 

Serfin’s insurance policy limits are irrelevant.  The amount of settlement has not been demonstrated to be disproportionately low given Serfin’s work on the jobsite.  However, the policy limits based on Serfin’s responses are $1,000,000 per occurrence, $2,000,000 product completed operations and $2,000,000 general aggregate.  See Dec. of C. Woolf, Ex. A, Serfin Response to Form Rog 304.1(f).