Judge: H. Jay Ford, III, Case: 19SMCV00273, Date: 2023-02-24 Tentative Ruling

Case Number: 19SMCV00273    Hearing Date: February 24, 2023    Dept: O

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

SUBJECT:                 MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT 

MOVING PARTY:   Cross-Defendant Mason-Taylor Construction Inc.

RESP. PARTY:         Defendant Pacific West Construction Services, Inc.

TENTATIVE RULING

            Cross-Defendant Mason-Taylor Construction’s Motion for Determination of Good Faith Settlement is GRANTED.  Mason Taylor’s settlement of $12000 is not disproportionately low based on Mason Taylor’s evidence and admissions regarding Plaintiff’s estimated recovery and Mason Taylor’s estimated proportion of 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 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 Motion, Dec. of J. Romero, ¶3. 

Mason-Taylor fails to submit any evidence regarding the Plaintiff’s requested damages or its proportionate liability.  However, Mason Taylor does not dispute Pac West’s estimation that Plaintiff is seeking $500,000 in damages. 

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 J. Romero, ¶8. 

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. 

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. 

Pac West submits a declaration from counsel indicating that he was led to believe that the windows continued to leak as late as 2021.  Pac West argues Mason Taylor’s start date therefore does not exonerate Mason Taylor from liability. 

However, Mason Taylor is not required to exonerate itself of all liability.  The evidence need only establish plaintiff’s estimated recovery and Mason Taylor’s potential exposure.  Based on the evidence presented, (1) Mason Taylor’s settlement would be approximately 2% of the Plaintiff’s claimed damages, which is the maximum potential recovery and (2) Mason Taylor’s proportionate liability ranges from zero to an unknown portion of Plaintiff’s $500,000 in damages.  Based on Plaintiff’s own allegations, a significant proportion of the damages are attributable to the failure to properly cover and protect the worksite from rain.  As such, Mason Taylor’s $12,000 settlement is not so disproportionately low that it is patently in bad faith. 

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 settlement amount is not disproportionately low. 

APPLICABLE LAW

CCP §877.6 states, in pertinent part: “(a) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors shall be entitled to a hearing on the issue of good faith or a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors . . . [para.] (c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasors from any further claims against the settling tortfeasors for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault. [para.] (d) The party asserting the lack of good faith shall have the burden of proof on that issue.”  Two procedures are available to obtain a court determination of the “good faith” issue, either an application, which may be followed by a motion contesting the application or a regular motion filed by the party seeking approval.  CCP §877.6(a)(1) and (2).

            In determining whether a settlement is in good faith, the Tech-Bilt court stated that the trial court should inquire into, 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.”  Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499. 

            The intent and policies underlying CCP §877.6 require that a number of facts be taken into account (i.e. the Tech-Bilt factors) including: (1) a rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability; (2) the amount paid in settlement; (3) the allocation of settlement proceeds among defendants; (4) a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial; (5) the financial conditions and insurance policy limits of settling defendants; and (6) the existence of collusion, fraud, or tortious conduct aimed to injure the interest of the nonsettling defendants.  A defendant’s settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.

            The party asserting the lack of good faith has the burden of proof. CCP §877.6(d).  The party asserting lack of good faith should demonstrate, if he can, that the settlement is so far “out of the ballpark” in relation to these factors as to be inconsistent with the objective of §877.6. Tech-Bilt at 500-501.A determination that the settlement was in good faith would “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.”  CCP 877.6(c).  Any existing cross-complaints for such claims would be subject to dismissal.

            While an unopposed application for good faith settlement may be granted on bare bones facts, an opposed application requires the Court to consider the settlement based on the Tech-Bilt factors.  See City of Grand Terrace, supra, 192 Cal.App.3d at 1261.  This requires the settlor to provide the Court with “sufficient evidentiary basis to enable the court to consider and evaluate the various aspects of the settlement.”  Id. at 1263.  “Because Tech-Bilt mandates a rough approximation of the settling defendant's proportionate liability and consideration of all other defendants' proportionate liability and consideration of all other factors that might affect the fairness of the settlement as respects non-settling defendants, the affidavits, declarations or other evidence should provide the court with the facts necessary to evaluate the settlement in terms of the factors contemplated by Tech-Bilt. Without the facts, in a contested hearing, it is impossible for a court to exercise its discretion in an appropriate fashion.”  Id.

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