Judge Lynne M. Hobbs, Case Number: 24STCV03363, Date: 2024-09-20 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 24STCV03363, Date: 2024-09-20 Tentative Ruling

Case Number: 24STCV03363 Hearing Date: September 20, 2024 Dept: 61

PROLACTA BIOSCIENCE, INC. vs DRIVER SPG, LLC, et al.

TENTATIVE

Defendants Driver SPG, LLC and Engineering Resources Mechanical’s Motions for Determination of Good Faith Settlement are GRANTED.

Moving parties to give notice.

DISCUSSION

Code of Civil Procedure § 877.6(a)(1) provides:

Any party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors, upon giving notice in the manner provided in subdivision (b) of Section 1005. Upon a showing of good cause, the court may shorten the time for giving the required notice to permit the determination of the issue to be made before the commencement of the trial of the action, or before the verdict or judgment if settlement is made after the trial has commenced.

Code of Civil Procedure § 877(c) in turn provides:

A determination by the court that the settlement was made in good faith shall 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.

A good faith settlement determination also reduces the claims against the nonsettling defendants in the amount stipulated by the settlement. (See Code Civ. Proc. § 877(a).)

Where a motion for determination of good faith settlement is uncontested, 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 to support a good faith determination. (See City of Grand Terrace v. Superior Court (1987) 192 Cal. App. 3d 1251, 1261.) But where a motion for determination of good faith settlement is contested, the moving party must provide the court with evidence of the settlement, at which point the burden shifts to the opposing party to prove it is not made in good faith under the factors announced in Tech-Bilt v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488. (City of Grand Terrace v. Superior Court (1987) 192 Cal. App. 3d 1251, 1261.)

These factors are: (1) a rough approximation of the 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 her were found liable after trial; (5) the financial condition and insurance policy limits of the settling defendants; and (6) the existence of collusion, fraud, or tortious conduct aimed to injure the interests of the non-settling defendants. (See Tech-Bilt, supra, 38 Cal.3d 488, 499.)

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, who has the burden of proof on that issue, should be permitted to 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 equitable objectives of the statute. Such a demonstration would establish that the proposed settlement was not a “settlement made in good faith” within the terms of section 877.6. (Id. at pp. 499–500, internal citations, quotation marks, and alterations omitted.)

One of the most important factors to support a good faith settlement determination “is the settling party's proportionate liability. If there is no substantial evidence to support a critical assumption as to the nature and extent of a settling defendant's liability, then a determination of good faith based upon such assumption is an abuse of discretion.” (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1350.)

Defendants Driver SPG, LLC (Driver) and Engineering Resources Mechanical (ERM) move for approval of settlements reached between themselves and Plaintiff Prolacta Bioscience, Inc. (Plaintiff). These settlements, reached after several rounds of negotiation and informal exchanges of information, both before and after the complaint was filed, provide that Driver and ERM are to pay Plaintiff $625,000 and $125,000, respectively, as well as assign their contractual rights to indemnification from non-settling Defendant Plumbing Systems West, Inc. (PSW).

Defendant Driver’s motion, seeking approval of its $625,000 settlement, is unopposed. Driver provides a declaration setting forth a background of the case and an explanation of its proportionate share of liability. (Wintheiser Decl. ¶ 8.)

ERM’s motion is opposed by Defendant PSW. Therefore the court must assess whether ERM has presented proof of settlement, and then determine if PSW has satisfied its burden of showing the settlement is not in good faith, through analysis of the Tech-Biltfactors. (See City of Grand Terrace, supra, 192 Cal.App.3d at p. 1262.)

There is no dispute as to the existence of the settlement between ERM and Plaintiff. To justify its $125,000 settlement amount, ERM cites the allegations of the complaint, noting that it alleges the plumbing defects were caused by installing defective, rocky backfill around the pipes, which would fall more within the realm of responsibility for Defendant PSW, the plumbing subcontractor. (Motion at pp. 4–5.) However, these allegations are split with those that state that the pipes cracked because the PVC pipes selected for installation were not structurally capable of handling the hot water that would be running through the pipes. (Ibid.) Because ERM was the mechanical engineer on the project, it is alleged that it was ERM’s fault that the weaker pipe was selected. (Complaint ¶ 73.)

However, ERM argues that its proportionate liability is low. It presents the declaration of its owner, Steven Spencer, who states that Plaintiff’s engineers selected and made the final approval of the pipe, that Plaintiff provided and installed process equipment that cooled the water prior to discharge, and that it was never intended that high-temperature liquids would be drained through the project from the property. (Spencer Decl. ¶ 6.) ERM also presents the declaration of a construction consultant, Daniel S. Daderian, who states that construction documents do not demonstrate that ERM was responsible for the selection, installation, or inspection of the PVC pipes, and that ERM was not issued any notice of information concerning the installation of PVCpipes. (Daderian Decl. ¶ 10.) Daderian states that Plaintiff has identified two potential sources of hot-liquid introduction into the pipes, but both of these pieces of equipment were furnished with means of tempering the discharge water to prevent high temperature liquids from damaging the pipe. (Daderian Decl. ¶ 12.)

PSW in opposition presents the declaration of its expert, Arin Kumar, who states that his review of the materials suggests that cracks in the pipe were caused by deformations created by exposure to high-temperature liquids. (Kumar Decl. ¶¶ 3–4.)* Defendant also presents a work order issued to PSW stating that it was to install “Pol Pro piping,” which was subsequently altered by a Request for Information, stating that they would replace the piping set in the work order with PVC. (Torres-Brito Decl. ¶¶ 7–8, Exhs. 2, 3.) PSW’s counsel states that “ERM would have approved the change of materials.” (Torres-Brito Decl. ¶ 8.) PSW argues that the $125,000 settlement amount to be paid by ERM is thus disproportionate to its potential liability, which Plaintiff has asserted may include $1.9 million in replacement and repair costs, $700,000 for relocation expenses, and $4 million in lost opportunities. (Torres-Brito Decl. ¶ 12.) Thus, substantial evidence supports a critical assumption as to the nature and extent of ERM's liability.

PSW has not shown that the settlement is not in good faith. ERM in reply notes that the documents identified by PSW do not indicate any involvement by ERM, and the sole attribution of its responsibility for the change orders comes from PSW’s counsel, who lacks personal knowledge of the project. (Reply at p. 3.) While PSW presents some evidence that high-temperature liquids may have caused the piping defects, it has not presented evidence that ERM was responsible for the introduction of this piping or that it was a breach of the standard of care to introduce it. Indeed, the evidence presented by ERM suggests that any such responsibility is shared by Plaintiff, and that Plaintiff potentially possessed means to alleviate the introduction of hot liquids into the plumbing system. Accordingly, this court cannot conclude that the settlement is disproportionate to ERM’s potential liability. A settling defendant may reasonably expect to settle for less than the total amount of liability they might suffer after a trial. There is no evidence of fraud or collusion. (See Tech-Bilt, supra, 38 Cal.3d 488, 499.)

The motions are therefore GRANTED.

* ERM objects that Kumar’s declaration is inadmissible to establish ERM’s scope of work, the standard of care, or whether ERM breached the standard of care. But given that Kumar offers no testimony on these matters, the objections are OVERRULED. Plaintiff, however, objects that Kumar is a principal of EAG Laboratories, whose services, per the settlement agreement between Plaintiff and Driver, have now been contracted over to Plaintiff, meaning that Kumar ought to be conflicted out of testifying against Plaintiff, his new client. (See Plaintiff’s Objections.) This argument is inapposite, however, because Plaintiff does not claim to have already employed Kumar except contingently upon approval of its settlement with Driver, meaning that it has not disclosed confidential or privileged information to him. (See Shadow Traffic Network v. Superior Court (1994) 24 Cal.App.4th 1067, 1078.) In any case, Kumar’s testimony does not provide sufficient grounds to deny the motion. .