Judge Melvin D. Sandvig, Case BC668642 2022-09-06 Tentative Ruling

Judge: Melvin D. Sandvig, Case: BC668642, Date: 2022-09-06 Tentative Ruling

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Case Number: BC668642 Hearing Date: September 6, 2022 Dept: F47

Dept. F-47

Date: 9/6/22

Case #BC668642

MOTION TO CONTEST GOOD FAITH OF SETTLEMENT

(CCP § 877.6)

Motion filed on 6/24/22.

MOVING PARTY: Defendant Newhall Unified School District

RESPONDING PARTY: Defendant Impact Construction Services, Inc.

RELIEF REQUESTED: For the Court to deny Defendant Impact Construction’s application for an order determining the settlement between Impact Construction and Plaintiffs is in good faith pursuant to Code of Civil Procedure §§ 877 and 877.6(a)(2).

RULING: The motion is granted.

This action arises from an incident that occurred on July 13, 2016, at the Old Orchard Elementary School in Valencia, California within the Defendant Newhall Unified School District (“the District”). Plaintiffs Jose De Jesus Diaz Mata and Maria Del Rosario Arroyo, collectively, (“Plaintiffs”) allege that Jose De Jesus Diaz Mata was in the process of dismantling, removing, and/or transporting a modular classroom at Old Orchard Elementary School when the walls and/or roof collapsed onto him. Plaintiffs allege that the defendants negligently and carelessly controlled, inspected, and operated the project and/or created a dangerous condition—specifically, the modular classroom and surrounding areas; failed to protect/guard against or warn of the dangerous condition; failed to ensure the safety of Jose De Jesus Diaz Mata; and/or failed to act with reasonable care—all of which Plaintiffs allege caused the modular classroom to collapse onto Jose De Jesus Diaz Mata.

Plaintiffs allege that Defendant Impact Construction Services, Inc. (“Impact Construction”) agreed to purchase four modular classroom units and one modular restroom unit from the District. Impact Construction then subcontracted with Defendant Hector Lopez dba HN Construction Services (“HN Construction”), a licensed contractor, to remove the modular classrooms. HN Construction employed Jose De Jesus Diaz Mata when he was allegedly injured by the modular classroom, and Maria Del Rosario Arroyo claims loss of consortium as Jose De Jesus Diaz Mata’s spouse.

On July 11, 2022, the Court granted HN Construction’s motion for summary judgment based on the “Exclusive Remedy Doctrine.” Impact Construction settled with Plaintiffs, and on May 31, 2022 applied for a determination of good faith regarding the settlement agreement. On June 24, 2022, the District filed the instant motion contesting the good faith of the settlement agreement between Plaintiffs and Impact Construction.

CCP § 877.6(a)(2) states:

[A] settling party may give notice of settlement to all parties and to the court, together with an application for determination of good faith settlement and a proposed order. The application shall indicate the settling parties, and the basis, terms, and amount of the settlement...Within 25 days of the mailing of the notice, application, and proposed order, or within 20 days of personal service, a nonsettling party may file a notice of motion to contest the good faith of the settlement.

Requiring the settling party to disclose the terms of the settlement and apply for a determination of good faith is, in part, because CCP § 877.6(c) states:

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.

CCP § 877 further states:

Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, it shall have the following effect:

(a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it, whichever is the greater.

(b) It shall discharge the party to whom it is given from all liability for any contribution to any other parties.

Here, the District raises concerns that they will not be able to seek indemnity or contribution against the against Impact Construction if the settlement between Plaintiffs and Impact Construction is determined to be in good faith.

A number of factors must be taken into account in assessing a settlement's good faith under section 877.6, including (1) a rough approximation of plaintiffs' 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 non-settling defendants. Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499. Another key factor is the settling tortfeasor’s potential liability for indemnity to the remaining alleged joint tortfeasors. Far West Fin’l Corp. v. D & S Co. (1988) 46 Cal.3d 796, 816. These factors are nonexhaustive and may not apply in all cases. “Practical considerations require that [their] evaluation be made on the basis of information available at the time of settlement.” Dole Food Co., Inc. v. Superior Court (2015) 242 Cal.App.4th 894, 909.

Here, the District takes particular issue with the third Tech-Built factor. The District raises concerns that because the settlement agreement does not allocate between Plaintiff Jose De Jesus Diaz Mata’s economic claims and Plaintiff Maria Del Rosario Arroyo’s noneconomic claims, there is no way to determine how much to offset a potential future judgment against the District. This is because Plaintiffs do not assert any noneconomic claims against the District—only economic ones. And because—unlike noneconomic damages—joint tortfeasors are joint and severally liable for economic damages. To this end, the District offers case law for the proposition that in cases with multiple defendants where only some of the defendants settle, good faith can only be determined if the settlement agreement allocates between the issues and parties. See, e.g., L. C. Rudd & Son, Inc. v. Superior Ct. (1977) 52 Cal.App.4th 742, 750; Erreca's v. Superior Court (1993) 19 Cal.App.4th 1475, 1488.

The District’s concerns are valid. The settlement between Plaintiffs and Impact Construction indicates a total amount of $210,000, but fails to indicate how much of that is allocated towards settling Jose De Jesus Diaz Mata’s economic claims versus Plaintiff Maria Del Rosario Arroyo’s noneconomic claims. There is a significant possibility that a future judgment will be rendered against the District, but any judgment would only be for economic claims made by Jose De Jesus Diaz Mata. Without knowing how much of the $210,000 is allocated between Jose De Jesus Diaz Mata and Maria Del Rosario Arroyo, the Court will have no way of knowing how much to offset any potential judgment against the District. It could be $1, it could be $209,999, or it could be any value in between—there is simply no way of knowing without an allocation in the settlement agreement. If, for example, it’s only for $1, then pursuant to CCP §§ 877 and 877.6, Impact Construction would only be contributing $1 to Jose De Jesus Diaz Mata’s economic claims and the District would potentially liable for the rest.

Impact argues that reasoning in cases like Shuler would allow a jury in this case to determine the proportionate liabilities of the settling and nonsettling Defendants through a special verdict form. Thus, the District need not worry about the apportionment of settlement amounts between Jose De Jesus Diaz Mata and Maria Del Rosario Arroyo because the District would only be liable for what the jury determines to be their share of the blame. However, in Shuler, the Court of Appeals vacated the trial court’s order reducing economic damages to the nonsettling defendant who was found liable at trial. Shuler v. Cap. Agricultural Prop. Servs., Inc. (2020) 49 Cal.App.5th 62, 71. The Shuler Court held that because joint tortfeasors are joint and severally liable for economic damages, the nonsettling defendants in that case were liable for the full amount determined by the jury, less the settlement amount already paid by the settling defendant. This is exactly what the District is worried about in this case—that they will potentially be liable for all of Jose De Jesus Diaz Mata’s economic damages without any way of knowing how much to offset those damages by and without any way of seeking contribution or indemnity from Impact Construction. Whereas in Shuler noneconomic damages were present, any judgment against the District would be for economic damages only. Therefore, the Plaintiffs and Impact Construction must indicate in their settlement agreement how much of the total amount is allocated between Jose De Jesus Diaz Mata’s economic claims and Plaintiff Maria Del Rosario Arroyo’s noneconomic claims.

Accordingly, the Court will grant Defendant Newhall Unified School District’s motion and deny Defendant Impact Construction’s application for an order determining the settlement between Impact Construction and Plaintiffs is in good faith pursuant to Code of Civil Procedure §§ 877 and 877.6(a)(2).