Judge: Lon F. Hurwitz, Case: 20-01166115, Date: 2024-04-05 Tentative Ruling
Motion for Determination of Good Faith Settlement
Moving Party: Defendant/Cross-Defendant Coast Geotechnical, Inc.
Responding Party: None (unopposed)
SERVICE: February 16, 2023, by e-mail
RELIEF SOUGHT: Defendant/Cross-Defendant Coast Geotechnical, Inc. seeks an order determining that its settlement with Plaintiffs Holly Hoch and Benjamin Hoch is in good faith pursuant to CCP § 877.6, thereby dismissing all potential third-party complaints and/or cross-complaints and barring all further claims against Coast Geotechnical, Inc. for equitable comparative contribution or partial or comparative indemnity based on comparative negligence, or comparative or total equitable indemnity.
UPCOMING EVENTS:
1. Plaintiffs’ Motion for Summary Judgment and/or Adjudication, September 1, 2023;
2. Pretrial Conference, December 14, 2023; and
3. Jury Trial, January 8, 2024.
FACTS/OVERVIEW: This is a construction defect case involving residential real property at 842 Emerald Bay in Laguna Beach. On October 20, 2020, Plaintiffs Benjamin Hoch and Holly Hoch (“Plaintiffs”) filed a Complaint against general contractor, New West Properties Development Company, Inc. (“New West”) and its president, Curt Ensign, an individual (“Ensign”); foundation subcontractor, J.R. Riesberg Construction, Inc. (“Riesberg”); concrete subdrainage subcontractor, Spectrum Concrete, Inc. (“Spectrum”); landscaping subcontractor, Curran and Associates (“Curran”); utilities subcontractor, Mike Kilbride, Ltd. (“Kilbride”); geotechnical engineer, Coast Geotechnical, Inc. (“Coast”); and builder, Emerald Bay Eleven, LLC (“EB11”). (ROA 2). The Complaint alleges 10 causes of action for:
1. Breach of Contract (against New West and Ensign);
2. Breach of Express Warranty (against New West and Ensign);
3. Negligence (against New West, Ensign, Riesberg, Spectrum, Curran, and Kilbride);
4. Professional Negligence (against Coast);
5. Breach of Contract (against Coast);
6. Strict Liability Under Right to Repair Act (against EB11);
7. Strict Liability (against EB11);
8. Negligence (against EB11);
9. Breach of Express Warranty (against EB11); and
10. Breach of Implied Warranty (against EB11).
Plaintiffs allege the Subject Property suffers from various design and construction defects, including, but not limited to, water intrusion, efflorescence, electrical, framing, drywall, plastering, plumbing, and painting.
Separate cross-complaints were filed for implied indemnity, comparative equitable indemnity, express indemnity, breach of express and implied warranties, breach of written and implied contract, negligence, contribution, and/or declaratory relief by Kilbride (ROA 11), New West and Ensign (ROA 20), Spectrum (ROA 35), Curran (ROA 50), Riesberg (ROA 99), and EB11 (ROA 106).
The two Plaintiffs and eight defendants remained the primary parties until August 2021. On August 25, 2021, Defendant New West filed “Doe” amendments to its cross-complaint, naming 28 new cross-defendants of various trades. (ROA 96). Subsequently, several cross-defendants were dismissed or defaulted from the action, and separate cross-complaints were filed by Cross-Defendants SSK Construction (183), Yukon Plastering, Inc. (ROA 240), Jon’s Masonry & Landscape, Inc. (ROA 267), BROS (ROA 345), and Tom Tooma (ROA 668).
On March 20, 2023, with leave of court, Plaintiffs filed the operative First Amended Complaint (“FAC”) adding Defendant Tom Tooma (“Tooma”), managing member of Defendant EB11. The FAC alleges the original 10 causes of action and adds a claim for Negligent Misrepresentation. The sixth, seventh, eighth, ninth, tenth, and eleventh causes of action are alleged against Tooma.
On February 16, 2023, Defendant/Cross-Defendant Coast filed the current Motion for Determination of Good Faith Settlement. (ROA 596). The motion is unopposed.
CONTENTIONS AND ANALYSIS:
Statement of the Law
California Code of Civil Procedure section 877.6 sets forth the procedure for obtaining judicial determination on whether a settlement has been made in good faith in matters where it is alleged two or more parties are joint tortfeasors. Any party may file and serve a motion in accordance with Code of Civil Procedure section 1005, subdivision (b), for a hearing on the issue of the good faith of a settlement entered into by the parties. (Code Civ. Proc., §877.6, subd. (a)(1).)
Alternatively, a settling party may file and serve notice of settlement to all parties and the court together with an application for determination of good faith settlement and a proposed order. This application shall indicate the settling parties and the basis, terms, and amount of the settlement. The moving settling party is to serve said application either by personal service or by certified mail, return receipt. Within 25 days of mailing or within 20 days of personal service, a nonsettling party may file a notice of motion to contest the good faith of the settlement. If no motion is filed, then the Court may approve the settlement. (Code Civ. Code of Civil Procedure sections 877 and 877.6 are designed to further two equitable policies: (1) encouragement of settlement; and (2) equitable allocation of costs among joint tortfeasors. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 498-499.)
In determining whether a settlement is in good faith, the Court should consider affidavits served with the motion and any counter-affidavits filed in response, and any other evidence the Court receives in its discretion. (Code Civ. Proc., §877.6(b).) The Court’s inquiry may include whether the amount of the settlement is within the reasonable range of the settling tortfeasor’s proportional share of comparative liability for plaintiff’s injuries. The factors to be considered 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 the plaintiffs;
4. A recognition that a settlor should pay less in settlement than he would if he were found liable after trial;
5. The financial conditions and insurance policy limits of settling defendants; and
6. Whether collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants, exists. (Tech-Bilt, supra, 38 Cal.3d 488 at p. 499.)
Additionally, the evaluation of the settlement for practical purposes is based on the information available at the time of the settlement. (Id.)
The burden initially lies with the party opposing the good faith settlement to show that the settlement is unreasonable. (Code Civ. Proc., §877.6, subd. (d).) The opposing party must demonstrate that the settlement is far “out of the ball park” in relation to factors stated above so as to be inconsistent with the equitable objectives of the statutes. (Tech-Bilt, supra, 38 Cal.3d at pp. 499-500.) If such is demonstrated, then the burden shifts to the settling party seeking good faith confirmation to produce substantial evidence to counter the claim that the settlement is inequitable. (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1350-52.)
However, bad faith is not established simply by showing that a settling defendant paid less than his/her theoretical proportionate or fair share based on a reasonable projection of plaintiff’s damages and settling defendant’s comparative fault. (Tech-Bilt, supra, 38 Cal.3d at 499.) The reason is that such a rule would unduly discourage settlements as damages are often speculative and the probability of legal liability for them is often uncertain or remote. (Id.)
Furthermore, a particular settlement may be in good faith even if it is for a sum grossly disproportionate to the damages prayed for in the complaint, if it is not disproportionate to what the trial court might have considered the probable recovery of the plaintiff from the settling joint tortfeasor. (Long Beach Memorial Medical Center v. Superior Court (2009) 172 Cal.App.4th 865, 874.) A disproportionately low settlement figure is often reasonable in a case where the joint tortfeasor is relatively insolvent, uninsured or underinsured. (Tech-Bilt, supra, 38 Cal.3d at p. 499.) A settlement in such a case for the defendant’s liability insurance policy limits may be approved as in good faith. (Id.)
A judicial determination that a settlement was made in good faith shall bar any other joint tortfeasor from any further claim against the settling tortfeasor for equitable comparative contribution or partial or comparative indemnity based on comparative negligence or fault. (Code Civ. Proc., §877.6, subd. (c).)
Merits
Coast seeks an order finding that its settlement with Plaintiffs is in good faith pursuant to Code of Civil Procedure section 877.6, on the ground that it meets all of the Tech-Bilt requirements.
1. Rough Approximation of Plaintiffs’ Total Recovery and Defendant’s Proportionate Liability
A settling defendant's settlement amount should not be grossly disproportionate to what a reasonable person would estimate his liability to be, and a court abuses its discretion when the settlement is not in the “ballpark” of the settling defendants' proportionate liability. (See, Mattco Forge, Inc., supra; Tech-Bilt, supra. See also, Long Beach Memorial Medical Center v. Superior Court (2009) 172 Cal.App.4th 865, as modified, (Apr. 1, 2009) (abuse of discretion for court to fail to consider that amount paid in settlement “bears no rational relationship to [defendants'] proportionate share of liability for plaintiffs' damages.”).
The settling defendant's proportionate liability is a critical factor: “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 v. Sup.Ct. (Boyter) (1987) 192 Cal.App.3d 1251, 1262.) The court must consider not only the settlor's potential liability to plaintiff, but also its proportionate share of culpability as among all parties alleged to be liable for the same injury. (TSI Seismic Tenant Space, Inc. v. Sup.Ct. (Geocon) (2007) 149 Cal.App.4th 159, 166.) Substantial evidence (e.g., factual declarations) showing the nature and extent of the settling defendant's liability is required. Without such evidence, a “good faith” determination is an abuse of discretion. (Mattco Forge, supra, 38 Cal.App.4th at p. 1348.)
Here, Plaintiffs have pled a single cause of action for professional negligence against Coast. In addition, Defendant EB11 has filed a cross-complaint against Coast for implied indemnity, declaratory relief, and apportionment of fault. [Declaration of Laura G. Lopez (“Lopez Decl.”), ¶ 3.] Most of Plaintiffs’ claims pertain to construction defects related to construction of the Subject Property and subterranean water intrusion issues. Plaintiffs have alleged more than $3 million in damages against the Defendants.
Coast disputes liability in this matter, and argues that it met and exceeded the applicable standard of care in rendering its geotechnical engineering services. According to Coast, it did not perform any construction work on the Subject Property, but rather performed periodic observations and testing of the soil conditions and made recommendations for retention of a waterproofing specialist to address the water intrusion issues. [Lopez Decl., ¶ 4.] Coast states that its contract with Plaintiffs included a Limitation of Liability provision that limits Plaintiffs’ recoverable damages against Coast to $50,000. [Ibid.] This provision states:
Consultant’s liability for damages due to professional negligence will be limited to an amount not to exceed $50,000.00 or the fee, whichever is greater. Client further agrees to notify any contractor and subcontractor who may perform work in connection with design, report or study prepared by Consultant of such limitations of professional liability for design defects, errors, omissions, or professional negligence. [Ibid.]
Coast and Plaintiff engaged in extensive mediation efforts and settlement discussions. Although liability remains disputed, Coast and Plaintiffs agreed to a settlement of $50,000 and a release of Plaintiffs’ claims against Coast in light of the Limitation of Liability provision in the operative agreement between them. [Lopez Decl., ¶ 5.]
2. Settlement Amount
The court must determine the value of the consideration paid in settlement. This includes both cash and noncash consideration. (Erreca's v. Sup.Ct. (Calle Ryan Homeowner's Ass'n) (1993) 19 CA4th 1475, 1496.)
In the current litigation, the material terms of the settlement are as follows:
(1). Coast’s insurance carrier, Argonaut Insurance Company, shall pay Plaintiffs $50,000;
(2). Plaintiffs will forever release and discharge Coast from any and all claims;
(3). Plaintiffs will waive the protections of Civil Code § 1542;
(4). Plaintiffs will dismiss the Complaint, with prejudice, as to Coast;
(5). The settlement is contingent upon an Order from this Court that Coast’s settlement is in good faith pursuant to CCP § 877.6;
(6). Coast and Plaintiffs will bear their own attorneys’ fees and costs; and
(7.) No party to the settlement is admitting to the sufficiency of any claims, allegations, assertions, defenses, contentions, or position of any other party to the settlement. [Lopez Decl., ¶ 7.]
3. Allocation of Settlement Proceeds Among Plaintiffs
Since Plaintiffs are the owners of the Subject Property and sole claimants in this action, the entirety of the settlement amount will be paid to Plaintiffs.
4. Settlement Amount Less Than Amount That Would Be Paid if Defendant Was Found Liable At Trial
Coast contends the settlement amount is reasonable and was arrived at after careful consideration of the risks of litigation to the parties.
5. Defendant’s Financial Condition and Insurance Policy Limits
Coast’s insurance policy with Argonaut has a policy limit of $1,000,000. [Lopez Decl., ¶ 8.] Argonaut has not denied coverage and has agreed to fund the entire amount of the $50,000 settlement. As a result, Coast contends that its financial condition is irrelevant in evaluating whether the settlement is in good faith.
6. Existence of Collusion, Fraud, or Tortious Conduct
Coast argues the settlement will not cause any harm to the non-settling Co-Defendants, and there was no collusion, fraud, or tortious conduct in connection with the settlement.1 [Lopez Decl., ¶ 9.]
Coast has proffered the declaration of its counsel, Laura Lopez, in support of this motion. Coast also states it has lodged the executed Settlement and Release Agreement with its motion. [Lopez Decl., ¶ 9.] However, there is no notice of lodgment in the Register of Actions.
It should be found that Coast has adequately addressed each of the applicable Tech-Bilt factors. Coast’s motion, memorandum of points and authorities, and counsel declaration set forth sufficient facts to establish that Coast’s settlement with Plaintiffs was made in good faith. Moreover, where the non-settling defendants do not oppose the motion on the good faith issue, a “barebones motion which sets forth the ground of good faith, accompanied by a declaration which sets forth a brief background of the case, is sufficient.” (City of Grand Terrace, supra, 192 Cal.App.3d at p. 1261.)
RULING:
Defendant Coast Geotechnical, Inc.’s Motion for Determination of Good Faith Settlement is GRANTED.
The Court concludes that the settlement between the parties was made in good faith within the meaning of CCP §877.6 because it satisfied the weight of the factors set forth in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal. 3d 488, 499. Coast Geotechnical, Inc. has sufficiently shown that the settlement was within the reasonable range of its proportional share of liability for Plaintiffs’ alleged damages.
IT IS ORDERED THAT the other Defendants and Cross-Defendants in this litigation are barred from asserting all further claims against Coast Geotechnical, Inc. for equitable comparative contribution or partial or comparative indemnity based upon comparative negligence, or comparative or total equitable indemnity.
Defendant Coast Geotechnical, Inc. is to give notice of this Court’s ruling.