Judge: H. Jay Ford, III, Case: 19SMCV00273, Date: 2023-01-31 Tentative Ruling

Case Number: 19SMCV00273    Hearing Date: January 31, 2023    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 KN Coatings

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

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

                                    (2)  Cross-Defendant KN Coatings

TENTATIVE RULING

            Cross-Defendant KN Coatings Application for Determination of Good Faith Settlement is GRANTED.  KN Coatings’ $8500 settlement is not disproportionately low based on the evidence of Ramo’s approximate recovery and KN Coatings’ proportionate liability.  Pac West fails to establish that the settlement is in bad faith.  CCP §877.6(d)(party asserting lack of good faith has burden of proof on that issue). 

ANALYSIS

1. Settling parties:

(1)  Cross-Complainant Ramo LLC

(2)  Cross-Defendant KN Coatings

2. Terms of settlement:

$8500 paid by KN Coatings to Ramo with $3000 initial payment and $500 monthly payments thereafter.  Mutual release and waiver, dismissal of claims. 

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.  It is undisputed that KN Coatings’ work on the project was limited to coating and waterproofing three separate balconies at the project.  See Dec. of J. Lopez, ¶2.  KN Coatings submits evidence that the project installed new sliding doors leading to the balconies without using seal panels and silicone seal to prevent exterior water from coming inside.  Id. at ¶3.  KN Coatings submits evidence that its waterproofing of the three separate balconies was completed and successfully tested after completion.  KN Coatings’ principal testifies that he personally tested the waterproofing with an agent of Pacific West at the time.  Id. at ¶4. 

KN Coatings also does not dispute that Ramo LLC is seeking $500,000 in damages. Ramo’s maximum approximate recovery at the time of settlement was therefore $500,000.  KN Coatings provides substantial evidence that its share of liability for Ramo’s damages is reasonably placed at zero or minimal due to its coating and waterproofing work.

As the Court stated in connection with the Mason Taylor motion, the underlying damages were allegedly due to Pacific West breaking a pipe at the site and the failure to properly cover the site during unusually heavy rains for the season.  Pacific West argues KN Coatings fails to address its potential liability for failing to protect the site from water intrusion due to the heavy rains. 

However, as the party asserting lack of good faith, Pacific West bears the burden of proof.  CCP §877.6(d).  KN Coatings sufficiently demonstrates that the amount of settlement is not disproportionately low given its role on the project.  Pacific West fails to present any evidence that KN Coatings’ role on the project included protecting the site in general from rain intrusion and that the $8500 settlement is disproportionately low given that role.

Based on the evidence presented, KN Coatings’ settlement is not disproportionately low given Ramo’s potential recovery, which may be less than $500,000, and its proportionate liability for that recovery. 

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.  Where the full settlement by one defendant will offset a judgment against other tortfeasors, no allocation of the settlement is required.  Alcal, supra, 8 Cal.App.4^th at 1124. 

Application to Facts.  No allocation is necessary given that Ramo is now suing as assignee of Plaintiff.  The settlement is also not restricted from being applied to set off Pacific West’s liability. 

5. Fraud, Collusion and Tortious Conduct:  There is no evidence of fraud, collusion or tortious conduct.  KN Coatings presentation of its view of the case and its liability is not fraud.  The settlement is not disproportionately low.

6. Recognition that settlor should pay less in settlement than he would if he were found liable after a trial:  Undisputed that the settlement is less than KN Coatings would be liable for after trial.

7. Financial conditions and insurance policy limits of settling defendants:  Irrelevant given the settlement is not disproportionately low.