Judge: H. Jay Ford, III, Case: 19SMCV00273, Date: 2022-10-18 Tentative Ruling

Case Number: 19SMCV00273    Hearing Date: October 18, 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 Mason-Taylor 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 Mason-Taylor Construction Inc.

TENTATIVE RULING

            Cross-Defendant Mason-Taylor Construction’s Application for Determination of Good Faith Settlement is DENIED WITHOUT PREJUDICE.  Defendants Pacific West Constructions Services, Inc. and Adrian Jesus Hernandez’s (collectively referred to as “Pacific West”) Motion to Contest Good Faith Settlement is GRANTED. 

            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).

            Mason-Taylor submits evidence that its scope of work was limited to installation of sliding doors and exterior windows.  See Application, Dec. of R. Ruhle, ¶4.  Mason-Taylor fails to submit any evidence regarding the Plaintiff’s approximate recovery or its proportionate liability Mason-Taylor. 

            Mason Taylor argues $12,000 is reasonable given Ramo’s approximate recovery and its proportionate liability, because it only installed four windows and only one leaked.  Mason Taylor contends $12,000 is reasonable for the cost of repairing one leaky window.  However, as Pacific Western points out, Mason Taylor’s liability for a leaky window would not be limited to replacement costs.  Mason Taylor’s potential liability includes all damages proximately caused by the leaky window. 

In opposition to the Motion to Contest, Mason Taylor argues its proportionate share of liability is zero to minimal, because it did not work at the subject property until after the defects and water damages were noted.  See Dec. of R. Ruhle, ¶5.  Ruhle bases his testimony on review of the complaint and Mason Taylor’s job file, including job proposals and schedules for windows and doors.  Ruhle’s testimony regarding when Mason Taylor performed work on the project lacks foundation. 

Mason-Taylor fails to make a sufficient showing of its proportionate liability and Plaintiff’s approximate recovery.  The motion for determination of good faith settlement is DENIED for failure to make a sufficient evidentiary showing on this Tech-Bilt factor.

ANALYSIS

1. Settling parties:

(1)  Cross-Complainant Ramo LLC

(2)  Cross-Defendant Mason-Taylor Construction Inc.

2. Terms of settlement:

Cross-Defendant Mason-Taylor Construction Inc. will pay $12,000 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.  Mason-Taylor submits evidence that its scope of work was limited to installation of sliding doors and exterior windows.  See Application, Dec. of R. Ruhle, ¶4.  Mason-Taylor fails to submit any evidence regarding the Plaintiff’s requested damages or its proportionate liability. 

In opposition, Mason Taylor argues its proportionate share of liability is zero to minimal, because it did not work at the subject property until after the defects and water damages were noted.  See Dec. of R. Ruhle, ¶5.  Ruhle bases his testimony on review of the complaint and Mason Taylor’s job file, including job proposals and schedules for windows and doors. 

Mason Taylor argues $12,000 is reasonable, because it only installed four windows and only one leaked.  Mason Taylor contends $12,000 is reasonable for the cost of repairing one leaky window.  However, as Pacific Western points out, Mason Taylor’s liability for a leaky window would not be limited to replacement costs.  Mason Taylor’s potential liability includes all damages proximately caused by the leaky window. 

Mason-Taylor fails to make a sufficient showing of its proportionate liability and Plaintiff’s approximate recovery.  The motion for determination of good faith settlement is DENIED for failure to make a sufficient evidentiary showing on this Tech-Bilt factor.

Pacific Western submits evidence that Ramo is seeking $500,000 in damages, and it believes the work performed by Pacific West’s subcontractors was below the standard of care.  See Dec. of C. Woolf, Ex. C [erroneously referred to as “Exhibit D”], Responses to Form Interrogatories 305.1 and 305.11.  Based on the Plaintiff’s complaint, Plaintiff’s damages arose from water intrusion.  Plaintiff alleges the water intrusion was either due to (1) Defendant Pacific West and Adrian Hernandez breaking a pipe in Unit 5; and (2) rain intrusion after Defendants failed to adequately protect Unit 5 from the rain.  See Complaint, ¶¶13-19.  Plaintiff alleges the balcony and windows in Unit 5 were leaking.  Id. at 19. 

Based on Plaintiff’s allegations, the rain intrusion leaked into the property through Unit 5’s balconies and windows.  Mason Taylor admits it was responsible for installing balconies and windows in Unit 5, an alleged source of water intrusion damage.  Mason Taylor fails to submit admissible evidence that it only performed work on the property after Plaintiffs had suffered their alleged damages.  The Court cannot find that Mason Taylor has shown that the $12,000 settlement is not grossly disproportionate to its potential proportionate liability for Plaintiff’s damages. 

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. 

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

Payment of $12,000 is less than Mason Taylor’s potential liability at trial. 

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

Mason Taylor’s insurance policy limits are $1,000,000 per occurrence under its CGL and $2,000,000 in general aggregate commercial liability insurance.  See Dec. of C. Woolf, Ex. A.  Mason Taylor’s insurance policy limits would not justify a low settlement amount.  However, the Court cannot determine whether the settlement amount is disproportionately low without a proper showing of Plaintiff’s potential recovery and Mason Taylor’s proportionate liability.