Judge: Mark A. Young, Case: 18SMCV00061, Date: 2022-07-27 Tentative Ruling
Case Number: 18SMCV00061 Hearing Date: July 27, 2022 Dept: M
CASE NAME: James Frank, et al., v. AG Construction, et al.
CASE NO.: 18SMCV00061
MOTION: Motion for Determination of Good Faith Settlement
HEARING DATE: 7/27/2022
BACKGROUND
This is a construction defect action. On October 19, 2018, Plaintiffs filed this action. The operative First Amended Complaint (FAC) alleges causes of action for breach of contract and negligence against Defendant AG Construction and AG Properties. On October 26, 2021, AG Properties, Inc. and AG Construction filed a Second Amended Cross-Complaint (SACC) against Plaintiffs and several subcontractors, including Cross-Defendant Christine London Ltd., for (1) equitable/implied indemnity; (2) apportionment of fault; (3) declaratory relief; (4) contribution; (5) negligence; and (6) breach of contract.
H&R Construction and Surfacing, Inc. filed a Cross-Complaint on February 9, 2020, asserting claims for (1) equitable indemnity, (2) contribution, (3) comparative fault, and (4) declaratory relief. CCL was added as Roe 1 on April 9, 2020.
On June 29, 2022, CLL filed the instant motion for an order for the court to determine that the settlement reached between Plaintiffs and CLL for the sum of $12,000.00 was made and entered into in good faith pursuant to Code of Civil Procedure Section 877.6. AG opposes the motion.
Legal Standard
In an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt, a party to that action may file a motion seeking a determination from the court that the settlement between the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors was made in good faith. (CCP § 877.6(a).) The notice of motion or application for good faith determination must list each party and pleading or portion of pleading affected by the settlement and the date on which the affected pleading was filed. (CRC Rule 3.1382.)
The California Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde & Assoc. (1985) 38 Cal.3d 488, established the standard for determining whether a settlement was made in good faith. Under Tech-Bilt, the following factors are considered: (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 498-501.) Additionally, the evaluation must be made based on the information available at the time of settlement. (Id. at 599.)
Where good faith is contested, the moving party must make a sufficient showing of all the Tech-Bilt factors, which can be made in the moving papers or in counter-declarations filed after the nonsettling defendants have filed an opposition. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261-62.) “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 non-settlor who asserts that the settlement was not made in good faith.” (Id. at 1262; CCP § 877.6(d).) In other words, the nonsettling defendant should demonstrate “that the settlement is so far ‘out of the ballpark’ in relation to the [Tech-Bilt] factors as to be inconsistent” with a settlement made in good faith. (Id. at 500.)
However, where good faith 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.” (See Grand Terrace, supra,192 Cal.App.3d at 1261 [holding that when no one objects to a motion for good faith determination, a barebones motion that sets forth the ground of good faith, accompanied by a declaration that set forth a brief background of the case was sufficient in action where motion only discussed two of the Tech-Bilt factors, settlement amount and policy limits and declaration only gave a brief background of the case].)
If the court makes a good faith determination, the court may dismiss the settling party from comparative indemnity claims if the settling party has made such a request at the time of making the good faith motion. (CCP §§ 877, 877.6(c); CRC Rule 3.1382.)
Analysis
The instant motion is opposed. Thus, the moving party must make a sufficient showing of all the Tech-Bilt factors. Plaintiffs, as the owners of the Subject Property, and CLL entered into a settlement agreement. (Custurea Decl. ¶ 26; Ex. J: Settlement Agreement.) CLL, through its insurance carrier, will make a settlement payment of $12,000 to Plaintiffs in exchange for a release of all claims.
CLL entered into a Service Agreement with Plaintiffs to perform soft landscape design, including the overall illustrative landscape and layout plan, tree and plant schematic imagery, hardscape imagery and samples for the front yard, backyard, basement, and side yards for the Subject Property, among other things. (Custurea Decl. ¶¶ 9-10; Ex. A [5/23/16 Agreement]; Ex. B [9/6/16 Agreement].) CLL incorporated the Irrigation Plans prepared by Mark Susser of Atomic Irrigation and approved by the City of Santa Monica. (Id., ¶ 11.) ECO separately contracted with Plaintiffs to perform landscaping work, including planting trees/plants, and installing the irrigation system. (Id., ¶ 12.) CLL’s involvement limited to the placement of the plants and trees, and included no supervision of the installation of the irrigation system. (Id., ¶ 13.)
Plaintiffs claim liability on the following defects: (1) failed below grade waterproofing on retaining walls on the south and north side allowing water to leak through the walls and stucco; (2) leaks and water intrusion at the master bedroom rear deck; (3) improper construction/installation of sliding glass doors; (4) failed basement sump pump and sewage ejector pump due to construction debris-removal and replacement of sumps and related plumbing; (5) improper header framing over sliders; (6) failure of basement wine cellar AC system; (7) corrective work at roof access panel; (8) improperly installed plumbing throughout residence; (9) incomplete painting; (10) improper installation of drywall at fireplaces; and (11) improperly installed roof fasteners. (Custurea Decl., ¶ 14.)
CLL contends that none of the parties have presented any evidence that CLL's design plans/ervices caused and/or compromised the waterproofing system installed by H&R. CLL maintains that Plaintiffs’ claimed defects do not implicate CLL’s scope of work. Rather, CLL submits that H&R/AG are responsible for these defects and damages. (Custurea Decl., ¶¶ 18-23; see also McKibban Decl., ¶¶ 2-10.) Plaintiffs had alleged liability against CLL based on the fact that “the waterproofing of the subterranean walls on the north and south sides of the house has failed, allowing water to leak through the walls causing staining on the walls and water to collect at the base of the walls.” (FAC ¶ 15.)
As to the Tech-Bilt factors, CLL demonstrates that the amount of the settlement is proportionate to its potential liability. The repair cost for the below grade waterproofing is estimated at $377,259.00. (Custurea Decl., ¶ 14.) Given that there are significant issues as to whether CLL’s work caused these damages, the settlement amount appears to be in the ballpark of CLL’s liability. For instance, AG’s construction expert analyzed the construction defect allegations involving the landscaping design. They claim that CLL is responsible for any completed repairs, future repairs, investigation, testing costs and expert fees. (Rodio Decl., ¶¶ 3-5.) AG construction’s expert would allocate 30% liability to CLL for the alleged defects in the subterranean walls on the north and south sides of the house. This would allocate $113,177.70-$119,177.70 in damages to CLL. (Rodio Decl., ¶¶6-9.) As such, resolving all doubts in favor of AG, the settlement would be approximate 10% of CLL’s potential liability.
The issue is whether a reasonable person would believe that the $12,000 settlement is within the ballpark of a reasonable settlement and not disproportionate to potential liability. There is no bright line rule, as the issue turns on the circumstances of the case. (See, e.g., Cahill v. San Diego Gas & Elec. Co., (2011) 194 Cal.App.4th 939, 968 [settlement of 1/2 of 1% of potential damages was within ballpark based on facts known at time of settlement]; cf. Long Beach Memorial Med. Ctr. v. Sup.Ct. (2009) 172 Cal.App.4th 865, 874 [abuse of discretion found where $200,000 to settle a $10 million medical negligence claim because it was wholly disproportionate” to physicians' potential liability and was made solely to “cut off” the hospital's $8 million indemnity claim]; see also Grand Terrace, supra, 192 Cal.App.3d at 1262 (“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.”].)
CLL’s showing is sufficient to demonstrate that the settlement represents a rough approximation of total recovery and proportionate liability. The record shows that CLL’s liability is less than certain. Furthermore, a settlor should pay less in settlement than he would if found liable after a trial. The settlement represents above 10% of CLL’s maximum supported liability. The settlement is not so far “out of the ballpark” as to be inconsistent with a settlement made in good faith. Thus, the Court finds that the proffered amount is within the “ballpark” to support a good faith finding. While CLL does not show its insurance liability limits, CLL correctly notes that this should not defeat a finding of good faith. Simply put, CLL's settlement was not limited based on its financial condition or insurance policy limits, but on the above-discussed issues supporting liability.
Furthermore, CLL demonstrates that the settlement was the product of extensive arms-length settlement negotiations using independent counsel based on a thorough investigation of the facts and independent consultation with their respective consulting experts. The settlement was arrived at without any collusion, fraud, or tortious conduct aimed at injuring the interests of any nonsettling parties, as the negotiations that led to the settlement involved the participation of each Party’s legal counsel, claims representatives of CLL's insurance carrier, and the parties themselves. (Custurea Decl., ¶30.)
As such, the Court finds that CLL met its initial burden demonstrating that the Tech-Bilt factors weighed in its favor. In turn, AG fails to demonstrate that the settlement was not made in good faith. Accordingly, CLL’s motion is GRANTED.