Judge Mark A. Young, Case 22SMCV01032 2023-01-24 Tentative Ruling

Judge: Mark A. Young, Case: 22SMCV01032, Date: 2023-01-24 Tentative Ruling

Case Number: 22SMCV01032 Hearing Date: January 24, 2023 Dept: M

CASE NAME: Barron v. R&LS Investments Inc., et al.

CASE NO.: 22SMCV01032

MOTION: Motion for Determination of Good Faith Settlement (Contested)

HEARING DATE: 1/24/2023

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

On this contested motion, Plaintiff makes a sufficient showing of the Tech-Bilt factors and thus, the Court will grant the motion for good faith settlement.

Here, Barron’s contract with Heritage serves as the basis of his claims. (Welsh Decl., Ex. B.) In the First Amended Complaint (FAC), Plaintiff claims $2.1 million in damages stemming from Defendants’ alleged negligence in setting up the auction for his real property. There is no dispute that the value of the property was in excess of $3.8 million. (Patillo Decl., ¶ 23; Ex. G.)

The settlement agreement provides that Heritage will relinquish to Barron $35,000.00 of the approximately $210,000.00 being held in escrow as Heritage’s Auction Fee, to avoid a lengthy and expensive arbitration. (Welsh Decl., Ex. D.) The parties also agree to dismiss their respective claims against each other.

Plaintiff presents evidence that his actual recovery against Heritage would be far less than that amount. Heritage maintains that it performed its duties under the contract diligently and it was not Plaintiff’s “broker” in the Auction Agreement. (Welsh Decl., Ex. A at 2-3.) Heritage contends that pursuant to the Auction Agreement, Heritage’s role was limited and did not include broker services. For instance, the contract contained language stating that “Heritage’s sole duty shall be to use commercially reasonable efforts to effect a sale of the Property.” (Welsh Decl., Ex. B [Auction Agreement] § 5.) Specifically, Heritage would “prepare and distribute advertising and sales literature,” “provide and direct all auction personnel reasonably necessary for the purpose of conducting the Auction,” and “through Broker shall have the Property listed in the local Multiple Listing Service (the ‘MLS’).” The agreement further disclaims that Heritage was “not acting in any capacity as an Agent/Broker for any Bidder; nor acting in any capacity as an Agent/Broker for the Seller.” (Id. at p. 10.) Heritage contends that it fully marketed Barron’s Property, including in the Wall Street Journal and several other prominent publications. Plaintiff thus believes that Heritage did not strictly breach the Auction Agreement. Without a fiduciary duty, Barron’s negligence claim may be barred by the economic loss rule. Furthermore, Plaintiff does not allege specific facts regarding any misrepresentation, knowledge of falsity, or intent by Heritage.

Moreover, there is a broad limitation term in the Auction Agreement. The Auction Agreement provides that “Heritage shall not be liable for any loss suffered by Seller relating to the Property or the subject matter hereto . . .. Heritage’s liability, if any, for damages to Seller for any cause whatsoever arising out of or related to this Agreement, and regardless of the form of the action, shall be limited to Seller’s actual and direct damages and shall in no event be in excess of the fees actually received by Heritage from Seller pursuant to this Agreement” and “in no event shall Heritage be liable for any indirect, incidental, punitive, exemplary, special or consequential damages of any kind whatsoever sustained as a result of a breach of this Agreement or any action or omission of Heritage.” (Auction Agreement § 10.) Thus, Barron may not be able to recover against Heritage any damages in excess of $200,000.00.

Additionally, Heritage made counter claims against Plaintiff for $500,000.00. Heritage claims that Plaintiff breached the Agreement by not paying Heritage’s fee. Specifically, the Auction Agreement states that “Seller shall pay Heritage an amount equal to ten percent (10%) of the Winning Bid or accepted price upon any sale (before or after the Auction) of the property (the “Heritage Fee”) regardless of Heritage’s involvement or noninvolvement in the sale, and if the Property is sold at any time during the 180 days following the end of the Term to any prospects with whom Seller or Heritage or any of its agents communicated during the term.” (Auction Agreement § 9.) Further, Barron “agree[d] to reimburse Heritage for all Marketing, due diligence and repair expenses at Closing, not to exceed $50,000.” (Ex. A, at 4-5.) Heritage also claims attorneys’ fees and costs.

Plaintiff also disclaims the existence of collusion, fraud, or tortious conduct aimed to injure the interests of the non-settling defendants. Specifically, the parties mediated this dispute for a full day in November 2020 before the Hon. Joyce Faye (Ret.). In September 2022, over several weeks, and with the arbitration hearing fast approaching, counsel engaged in arms-length negotiations discussing the merits of each party’s claims and the benefits of settlement. (Welsh Decl., ¶ 5.) As a result, Heritage and Mr. Barron agreed in good faith to settle on the terms set forth in the October 10, 2022, Settlement Agreement. (Id., Ex. D.)

Given its contractual relationship with Barron and uncertainty about Heritage’s tort liability, Heritage’s $35,000 payment to Barron is within the ballpark of a reasonable settlement. In opposition, Patillo does not proffer persuasive evidence that the settlement was so far “out of the ballpark” in relation to the Tech-Bilt factors as to be inconsistent with a settlement made in good faith.

Accordingly, Plaintiff’s motion is GRANTED.