Judge Kerry Bensinger, Case Number: 22STCV05374, Date: 2025-01-14 Tentative Ruling

Counsel may submit on the tentative ruling by emailing Dept. 31 before 8:30 the morning of the hearing. The email address is smcdept31@lacourt.org. Please do not call the court to submit on the tentative. Please do not submit to the tentative ruling on behalf of the opposing party. Please do not e-mail the Court if you plan to appear and argue.

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The tentative rulings authored by this court reflect that the court has read and considered all pleadings and evidence timely submitted to the court in connection with the motion, opposition, and reply (if any). Because the pleadings were filed, they are part of the public record.

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**Tentative rulings on Motions for Summary Judgment will only be available for review in the courtroom on the day of the hearing.

CROSS-DEFENDANT MAXI SERVE RESTORATION & CONSTRUCTION’S MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT

This is a nuisance action. Plaintiff Todd Sosna, PhD (Sosna or Plaintiff) owns a condominium unit (the Property) at defendant Colonnade West, Inc.’s (Colonnade) common interest development (the Development). In 2019, the Property experienced rainwater intrusions. Sosna alleges that Colonnade or its vendors failed to properly design gutters, install drainage from common-area planters, or properly waterproof the planters in the building which caused the rainwater to pool up and enter the Property through a common-area wall. Sosna seeks recovery of $73,051.62 in property damage, $580,800 in loss of use, and attorney fees.

On October 27, 2023, Colonnade filed a Cross-Complaint against ELB Capital Corp. and Maxi Serve Restoration & Construction (Maxi) for equitable indemnity. According to the Cross-Complaint, Maxi’s scope of work at the Development included waterproofing planters and waterproofing stucco flashing, including flashing adjacent to the Property.

On September 30, 2024, Plaintiff and Maxi reached a settlement agreement whereby Maxi agreed to pay Plaintiff $35,000. The settlement is dependent on a finding of good faith.

On October 7, 2024, Maxi filed this Motion for Determination of Good Faith Settlement.

Under section 877.6 of the Code of Civil Procedure,[1] “[a] determination by the court that [a] settlement was made in good faith shall bar any other joint tortfeasor . . . from any further claims against the settling tortfeasor . . . for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (§ 877.6, subd. (c).) Additionally, a determination that a settlement was made in good faith will reduce the claims against the non-settling defendants by the amount specified in the settlement agreement. (§ 877.6, subd. (a).) “The party asserting the lack of good faith has the burden of proof on that issue.” (§ 877.6, subd. (d).)

Section 877.6 requires “that the courts review [settlement] agreements made under its aegis to insure that the settlements appropriately balance the . . . statute’s dual objectives” (i.e., providing an “equitable sharing of costs among the parties at fault” and encouraging parties to resolve their disputes by way of settlement). (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 494 (Tech-Bilt).) Good faith settlements further two sometimes competing policies: (1) the equitable sharing of costs among the parties at fault, and (2) the encouragement of settlements.¿ (Erreca’s v. Superior Court (1993) 19 Cal.App.4th 1475, 1487.)¿ The evaluation of whether a settlement was made in good faith is¿required to “be made on the basis of information available at the time of settlement.”¿ (Tech-Bilt, 38 Cal.3d at p. 499.) ¿

In Tech-Bilt, the California Supreme Court set forth the factors to consider when determining whether a settlement was made in good faith. The Tech-Bilt factors are: (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 plaintiffs; (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 interests of the non-settling defendants. (Id. at pp. 498-501.)

In City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251 (Grand Terrace), the Court of Appeal provided the following guidance regarding a good faith settlement determination:¿¿

“If the good faith settlement is contested, section 877.6, subdivision (d), sets forth a workable ground rule for the hearing by placing the burden of proving the lack of good faith on the contesting party. Once there is a showing made by the settlor of the settlement, the burden of proof on the issue of good faith shifts to the nonsettlor who asserts that the settlement was not made in good faith. If contested, declarations by the nonsettlor should be filed which in many cases could require the moving party to file responsive counterdeclarations to negate the lack of good faith asserted by the nonsettling contesting party.”

As a threshold issue, Colonnade argues the motion should be denied because Maxi and Colonnade “are neither joint tortfeasors nor co-obligors on any contract.” (Opp’n., 10:24-25.) In other words, Colonnade’s position is that Section 877.6 does not apply because Maxi is a party to this action via Colonnade’s Cross-Complaint; Maxi is not a defendant in Plaintiff’s complaint.

The argument lacks merit. It is well-settled, “[i]f a cross-defendant without legal liability to the plaintiff settles with the plaintiff in an amount within the reasonable range of what the cross-defendant’s liability would be, the interests of the nonsettling cross-complainant are protected, and both the policies of encouraging settlements and equitable financial sharing are served. However, when such a cross-defendant enters into a disproportionately low settlement with the plaintiff solely to obtain immunity from the cross-complaint, the inference that the settlement was not made in good faith is difficult to avoid.” (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1354, emphasis in original.) Section 877.6 is available to Maxi. Therefore, the court proceeds to consider the Tech-Bilt factors.

The first Tech-Bilt factor consists of two parts – a rough approximation of Plaintiff’s total recovery and the settlor’s proportionate liability. When approximating a plaintiff’s total recovery or the settling defendant’s proportionate liability, “judges should . . . not yearn for the unreal goal of mathematical certainty. Because the application of section 877.6 requires an educated guess as to what may occur should the case go to trial, all that can be expected is an estimate, not a definitive conclusion.” (North County Contractor’s Assn. v. Touchstone Ins. Services (1994) 27 Cal.App.4th 1085, 1090 (North County).) “The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of the settlement would estimate the settlor’s liability to be.” (City of Grand Terrace, supra, 192 Cal.App.3d at p. 1262.)

Even though “an offer of settlement must bear some relationship to one’s proportionate liability, bad faith is not ‘established by a showing that a settling defendant paid less than his theoretical proportionate or fair share.’ [Citation.]” (North County, supra, 27 Cal.App.4th at p.1090.) “Such a rule would unduly discourage settlements” and “convert the pretrial settlement approval procedure into a full-scale mini-trial.” (Tech-Bilt, supra, 38 Cal.3d at p. 499.) Rather, in order to meet the proportionality requirement, “all that is necessary is that there be a ‘rough approximation’ between a settling tortfeasor’s offer of settlement and his proportionate liability. [Citation.]” (North County, supra, 27 Cal.App.4th at pp. 1090-91.) In determining whether the settling defendant’s settlement figure is “within the ballpark” of his fair share of liability, the Court may rely on “the judge’s personal experience” and the experience of “experts in the field.” (Tech-Bilt, supra, 38 Cal.3d at p. 500.)

Additionally, “a court not only looks at the alleged tortfeasor’s liability to the plaintiff, but it must also consider the culpability of the tortfeasor vis-à-vis other parties alleged to be responsible for the same injury. Potential liability for indemnity to a nonsettling defendant is an important consideration for the trial court in determining whether to approve a settlement by an alleged tortfeasor. [Citation.]” (TSI Seismic Tenant Space, Inc. v. Superior Court (2007) 149 Cal.App.4th 159, 166.)

Under the terms of the settlement, Maxi has agreed to a settlement of $35,000.00, to be paid by Maxi’s insurance carrier. In exchange, Plaintiff will release any and all claims that arise out of or relate to Plaintiff’s complaint as to Maxi.

The settlement of $35,000 reflects roughly 48% of Plaintiff’s property damage claim. Colonnade argues the settlement amount does accurately reflect Maxi’s central role in Plaintiff’s damages. (Opp’n, at p. 12.) In support, Colonnade submits Maxi’s responses to Colonnade’s special interrogatories wherein Maxi admits to waterproofing the flashing at the Development in 2016. (Daley Decl., Ex. 5 (Maxi’s Responses to Special Interrogatories 2 & 3 at pp. 153-54).) Colonnade also submits Plaintiff’s evidence to establish that the only property damage not associated with Maxi’s work is damage to the flooring in a closet which represents a small fraction of the overall damage. (Daley Decl., Ex. 7, at pp. 178, 182.) In other words, Colonnade contends Maxi’s share of liability exceeds Colonnade’s share of liability which cuts against the reasonableness of the settlement.

In reply, Maxi argues that bad faith is not established by showing a settling defendant paid less than his theoretical fair share. The point is well taken. The Tech-Bilt court expressly disapproved of such a rule. Showing that a settling defendant paid less than his theoretical proportionate or fair share “would unduly discourage settlements.” (Tech-Bilt, at p. 499.) This is so because “damages are often speculative, and the probability of legal liability therefor is often uncertain or remote. And even where the claimant’s damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.” (Id., quoting Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, 238.) Here, Plaintiff’s property damages claim is not speculative, nor is the settlement figure disproportionately low.

Colonnade raises three additional challenges to the reasonableness of the settlement. Colonnade argues the settlement does not account for Plaintiff’s claims for loss of use, injunctive relief to repair the flashing, and attorney fees. These challenges do not support a finding of bad faith.

As to the loss of use claim, Colonnade argues the settlement does not account at all for this claim, which Plaintiff values at nearly $600,000. However, any parties contending that the Settling Parties have not entered into a settlement in good faith bear the burden of proof to demonstrate the settlement was not entered into in good faith. (§ 877.6(d); City of Grand Terrace, supra, 192 Cal.App.3d at pp. 1261-62.) Here, as Maxi points out, Colonnade has not offered any evidence to show the claim for loss of use is worth $600,000. Thus, in contrast to Plaintiff’s property damage claim, the loss of use claim is speculative, and the failure to consider loss of use in reaching a settlement does not serve as a basis for a finding of bad faith.

As to repair costs to prevent future leaks, Plaintiff seeks “injunctive relief requiring Association to maintain and repair the common, area (including the gutters, tiles, planters, and waterproofing near the Unit) and the Unit[.]” (Complaint, Prayer for Relief, ¶ 1.) Colonnade offers evidence to show that the “flashing adjacent to Sosna’s Unit is visibly corroded and needs to be repaired.” (Colonnade’s Volume of Exhibits, Ex. 7, at pp. 174-75.) Colonnade argues that the failure to consider the future repair costs in reaching the settlement figure cuts against a finding of good faith. However, missing from Colonnade’s showing is any evidence to establish that the flashing corroded due to Maxi’s waterproofing of the flashing in 2016 or that the corrosion did not exist prior to Maxi’s work on the Development in 2016. Colonnade does not establish Maxi’s share of liability for the cost of future repair work, let alone provide an estimate of those repairs.

As to attorney fees, Plaintiff seeks recovery of attorney fees pursuant to the CC&Rs and Civil Code section 5975(c). (Complaint, ¶ 17.) Maxi argues the failure to consider attorney fees in the settlement does not weigh against good faith because Plaintiff seeks recovery of attorney fees pursuant to the CC&Rs. And as, Colonnade concedes, the CC&Rs govern the obligations between Colonnade and Plaintiff. (See Opp’n, p. 10:21-22.) Maxi is a nonparty to the CC&Rs. Thus, as Maxi’s argument goes, the obligations arising from the CC&Rs cannot apply to Maxi, including the ability to recover attorney fees from Maxi. Naturally, Colonnade argues that Plaintiff’s attorney fees claim is a part of Plaintiff’s total recovery.

Maxi’s point is well taken. In addition, according to the Cross-Complaint, Colonnade seeks indemnity from Maxi if it “is found to be liable in any respect for the damages alleged by Todd Sosna.” (Cross-Complaint, ¶ 13, emphasis added.) Plaintiff does not seek recovery of attorney fees as damages. (See Complaint, ¶ 17.) Colonnade does not have a viable indemnity claim against Maxi for any attorney fees Plaintiff may recover from Colonnade.

Colonnade does not meet its burden to show the settlement figure is “not within the ballpark.” Further, Colonnade does not establish that Maxi’s liability for indemnity to Colonnade is grossly disproportionate to the settlement amount. The first Tech-Bilt factor weighs in favor of Maxi’s good faith settlement.

The allocation of settlement proceeds among plaintiffs is only relevant if there is more than one plaintiff. (See Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 968 (Cahill).) Here, there is only one plaintiff. This factor is not relevant to the good faith inquiry.

4. A Recognition That A Settlor Should Pay Less In Settlement Than He Would If

The court expressly recognizes that a settlor should pay less in settlement that he would if he were found liable after trial. This factor weighs in Maxi’s favor. (See Cahill, supra, 194 Cal.App.4th at p. 968.)

5. The Financial Conditions And Insurance Policy Limits Of Settling Defendants.

An exception to the proportionality requirement described above is that “a disproportionately low settlement figure is often reasonable” when the settling defendant is “relatively insolvent” and uninsured or underinsured. (Tech-Bilt, supra, 38 Cal.3d at p. 499; see Schmid v. Superior Court (1988) 205 Cal.App.3d 1244, 1245–6 [holding that “a settlement of a personal injury lawsuit is in ‘good faith[]’ . . . where a defendant pays the plaintiff the limit of the defendant’s insurance policy and has no assets, even though the amount paid in settlement is far less than the likely amount of a judgement against the defendant were the case to go to trial”]; see also County of Los Angeles v. Guerrero (1989) 209 Cal.App.3d 1149, 1157–8 [finding that the settling defendant’s “modest” financial condition and insurance limits “are necessarily controlling and effectively override the other Tech-Bilt factors”].)

However, the court must be able to ascertain the information regarding the settling party’s financial condition or insurance coverage. “The wealth or nonwealth of settling defendant is a factor for the trial court to consider under Tech-Bilt.” (Grand Terrace, supra, 192 Cal.App.3d at 1263-64 [“Nonsettlors assert that there was insufficient evidence presented as to settlor’s financial condition and he availability of additional money from USAA, both of which could have added to the pot, if available, to make up his proportionate share in settlement. As to this contention, we agree”].)[2]

Here, Maxi does not describe its financial condition. Without evidence of Maxi’s financial condition, the court cannot evaluate Maxi’s ability to pay an appropriate settlement amount in relationship to its liability. This weighs somewhat against a good faith determination.

              6. The Existence Of Collusion, Fraud, Or Tortious Conduct Aimed To Injure
                  The Interests Of The Non-Settling Defendants.

            “Any negotiated settlement involves cooperation, but not necessarily collusion. It becomes collusive when it is aimed to injure the interests of an absent tortfeasor. Although many kinds of collusive injury are possible, the most obvious and frequent is that created by an unreasonably cheap settlement.” (River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986, 996.) “Prevention of collusion is but a means to the end of preventing unreasonably low settlements which prejudice a nonparticipating tortfeasor. The price of a settlement is the prime badge of its good or bad faith. Construed in the light of [section 877.6’s] objectives, the good faith release clause extends the obligation of good faith beyond the parties to the negotiations, embracing an absent tortfeasor.” (Ibid.)

Here, there is no evidence to show the settlement agreement was the product of collusion, fraud, or tortious conduct. Although the impact of the good faith settlement would be injurious to Colonnade’s rights of indemnification, Colonnade has not submitted any evidence to establish the settlement is out of the ballpark. This factor weighs slightly in favor of a good faith settlement.

After weighing the relevant Tech-Bilt factors, the court finds the settlement between Plaintiffs and Maxi passes the test for a good faith settlement.

Accordingly, Maxi Serve Restoration & Construction’s Motion for a Determination of a Good Faith Settlement is GRANTED.

[1] All statutory references are to the Code of the Civil Procedure unless otherwise specified.

[2] The court is unaware if Colonnade attempted to obtain discovery of Maxi’s financial condition.