Judge: Nathan Nhan Vu, Case: 30-2021-01235064, Date: 2023-08-28 Tentative Ruling

Application for and Motion to Contest Determination of Good Faith Settlement

Defendant American Vision Windows, Inc. dba American Vision’s Application for Determination of Good Faith Settlement is GRANTED.

Defendant/Cross-Complainant Louis Anthony Macchiaverna’s Motion to Contest Defendant and Cross-Defendant American Vision Windows’ Application for Determination of Good Faith Settlement is DENIED.

Defendant/Cross-Complainant/Cross-Defendant Tollhouse Window Company fka Anlin Industries’ Motion Contesting Application for Determination of Good Faith Settlement is taken OFF CALENDAR.

Defendant American Vision Windows, Inc. dba American Vision (Defendant American Vision) applies to this court for a determination of good faith settlement.

Defendant/Cross-Complainant Louis Anthony Macchiaverna (Defendant Macchiaverna) moves to contest Defendant American Vision’s Application for Determination of Good Faith Settlement (Application).

Defendant/Cross-Complainant/Cross-Defendant Tollhouse Window Company fka Anlin Industries (Defendant Tollhouse) also moved to contest Defendant American Vision’s Application.

However, on August 17, 2023, Defendant Tollhouse filed a Notice of Withdrawal of Motion Contesting American Vision Windows Application for Determination of Good Faith Settlement. (See ROA #245.) The court will take Defendant Tollhouse’s motion off calendar pursuant to the notice of withdrawal.

The court must still address Defendant Macchiaverna’s motion.

Standard for Determination of Good-Faith Settlement

Code of Civil Procedure section 877.6 provides in pertinent part:

(a)(1) 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. . . .

(b) The issue of the good faith of a settlement may be determined by the court on the basis of affidavits served with the notice of hearing, and any counter affidavits filed in response, or the court may, in its discretion, receive other evidence at the hearing.

(c) 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.

(d) The party asserting the lack of good faith shall have the burden of proof on that issue.

(Code Civ. Proc., § 877.6.)

As explained by the Supreme Court in the seminal case on this subject:

[T]he intent and policies underlying section 877.6 require that a number of factors be taken into account including a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. Finally, practical considerations obviously require that the evaluation be made on the basis of information available at the time of settlement. [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.

(Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499, internal citations omitted.)

Another key factor is the settling tortfeasor’s potential liability for indemnity to joint tortfeasors. (Far West Financial Corp. v. D & S Co. (1988) 46 Cal.3d 796, 816, fn. 16; TSI Seismic Tenant Space, Inc. v. Superior Court (2007) 149 Cal.App.4th 159, 166.) Because a good faith determination bars indemnity claims by nonsettling parties, the true value of the settlement may not be the amount paid to plaintiff but rather the value of the shield against such indemnity claims. (TSI Seismic Tenant Space, Inc. v. Superior Court, supra, 149 Cal.App.4th at p. 166.)

“Finally, practical considerations obviously require that the evaluation be made on the basis of information available at the time of settlement. [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.” (Tech-Bilt, Inc. v. Woodward-Clyde & Associates, 38 Cal.3d at p. 499 [internal citations omitted].) “‘Good faith’ is not affected by the fact the parties did not have access to all the evidence ultimately offered at trial on the disputed issues.” (Toyota Motor Sales U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 878.)

When the good faith nature of a settlement is disputed, as it is here, the court must consider and weigh the Tech-Bilt factors, irrespective of the fact that the opposing party has the burden of proof on the issue of lack of good faith. (See City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261 [“when the good faith nature of a settlement is disputed, it is incumbent upon the trial court to consider and weigh the Tech-Bilt factors”]; see also id. at pp. 1263-1264.)

While the opposing party does bear the burden of proof on the issue of lack of good faith (Code Civ. Proc., § 877.6, subd. (d)), the statutory requirement of “good faith” presents an issue of fact and a finding of good faith must therefore be supported by substantial evidence. (Id. at pp. 1263-1265.) If, in a contested case, “‘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, 1350-1351 & fn. 6, quoting Toyota Motor Sales U.S.A., Inc. v. Superior Court, supra, 220 Cal.App.3d at p. 871.)

In other words, just because the contesting party has the burden of proof on the issue of lack of good faith and might fail to meet that burden, does not mean that the trial court may properly grant the application if the record lacks sufficient evidence to support the conclusion that the settlement was entered into in good faith. (City of Grand Terrace v. Superior Court, supra, 192 Cal.App.3d at pp. 1263-1264.)

Application to This Case

Defendant American Vision settled Plaintiffs’ claims for $1 million, which will be paid by Gemini Insurance Company on behalf of Defendant American Windows. (Declaration of Sean R. Ferron (Ferron Decl.), ¶ 11.)

Defendant American Vision provided evidence that this settlement was reasonable because its only involvement in this case was that it installed the windows that allegedly failed and caused Plaintiffs’ damages. (See Decl. of Sean R. Ferron, ¶ 2.)

Defendant American Vision also provided evidence that an inspection of the subject property revealed that the window in question was installed with code compliant restrictors but that they had been pushed in so that the window could open more than 4 inches, which allowed Plaintiff Blake Freeman to fall out. (See id., ¶ 4.) Thus, Defendant American Vision would have contended at trial that it had installed the window with the required restrictors and that the restrictors had been activated when the window was installed. (See ibid.)

Further, the $1 million settlement represents the entire policy limits of Defendant American Vision’s liability insurance policy applicable to this specific incident and it did not have any other applicable insurance, including any excess insurance, that could contribute to this settlement. (See id., ¶ 13).

While this factor alone is not dispositive, a settlement based on a defendant’s insurance policy limits “is very strong evidence of a ‘good faith’ settlement, absent evidence of collusion or grossly inappropriate allocation or apportionment of the settlement proceeds to injure the nonsettling alleged tortfeasors. It would be extremely difficult to envision a set of circumstances in which an insurance company would pay out its entire substantial policy limit . . . simply to injure another codefendant. Experience teaches us that insurance companies usually and ordinarily pay their policy limits only to have their insureds and themselves discharged from all liability in any given case.” (Fisher v. Superior Court (1980) 103 Cal.App.3d 434, 445.) Here, there is no evidence of collusion or improper conduct in coming to this settlement.

In addition, Plaintiffs have alleged that several defendants are liable for their damages, including Defendant Tollhouse Window Company fka Anlin Industries, Defendants The Adame Group dab RE/MAX New Dimension and Javier Robles, and Defendant Louis Anthony Macchiaverna. These other Defendants may be wholly or partially liable for Plaintiffs’ damages, potentially reducing or reducing Defendant American Vision’s eventual liability.

In particular, Defendant Tollhouse Window Company fka Anlin Industries and Defendants The Adame Group dab RE/MAX New Dimension and Javier Robles have settled with Plaintiffs for $11.95 million. In addition, as Plaintiffs themselves argue, Defendant Macchiaverna may shoulder the bulk of the liability as it is alleged that he did extensive renovations of the subject property in a negligent manner, that he advised Defendant American Vision he did not want to obtain permits for the renovations including the window installation, that he has decades of experience as a real estate professional, that he destroyed documents even after he was aware of the potential of the lawsuit, and that Plaintiffs have claims against Defendant Macchiaverna not only for negligence and breach of contract but also misrepresentation and concealment. (See, e.g., Compl., ¶¶ 14, 22-24, 29-32, 37-38.)

The court considers the factors laid out by the Supreme Court, which include: (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) the recognition that a settlor should pay less in settlement than he would if he were found liable at 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 nonsettling defendants. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra, 38 Cal.3d at p. 99.)

The court finds that the settlement here is “within the reasonable range” of the settling tortfeasor’s share of liability, (ibid.), and not “grossly disproportionate to what a reasonable person, at the time of the settlement would estimate the settling defendant’s liability to be,” (Barth-Wittmore Ins. V. H.R. Murphy Enterprises, Inc. (1985) 169 Cal.App.3d 124, 132). In exercising its discretion to determine whether a settlement was reached in good faith, “[a]n educated guess is the best a judge can do . . . [as] [e]ven the wisest judge rarely has powers to ‘prophesy with a wink of his eye, peep with security into futurity . . . .’” (North County Contractor’s Ass’n v. Touchstone Ins. Services (1994) 27 Cal.App.4th 1085, 1095, quoting Gilbert & Sullivan, The Sorcerer, Act 1.)

Defendant Macchiaverna argues it would be inequitable to allow Defendant American Vision to settle for $1 million, when it was Defendant American Vision’s defective installation that caused the accident and is the sole reason that Defendant Macchiaverna was sued in this case. Defendant Macchiaverna claims that a determination of good-faith settlement would leave him with a disproportionate share of the liability.

However, as noted above, Plaintiffs’ theory of liability against Defendant Macchiaverna is premised on Defendant Macchiaverna’s own actions – actions that go well beyond any conduct of Defendant American Vision and that open up Defendant Macchiaverna to liability potentially greater than that faced by Defendant American Vision.

Defendant also argues that the $1 million settlement is disproportionate to the Plaintiffs’ Statement of Damages, which indicates Plaintiffs seek $400 million in damages. (See Decl. of Ian J. Pittluck, Exh. 1.) However, a Statement of Damages merely establishes the maximum amount of a default judgment against a particular defendant. (See Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 399.)

As Defendant Macchiaverna later admits, Plaintiffs actually are seeking approximately $20 million in damages. The court cannot say that a settlement of $1 million by Defendant American Vision under the circumstances known at this time is grossly disproportionate to what a reasonable person would estimate the settling defendant’s liability to be.

Defendant Macchiaverna next argues that the determination of good-faith does not consider his breach of contract claims against Defendant American Vision. However, as Defendant Macchiaverna himself admits, Civil Procedure Code section 877.6 only bars a “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.” (Code Civ. Proc., § 877.6, subd. (c).)

Thus, to the extent that Defendant Macchiaverna has true breach of contract claims against Defendant American Vision, such claims would not be barred by a determination of good-faith settlement. To the extent that Defendant Macchiaverna’s cross-claims are only disguised contribution, indemnity, or comparative negligence or comparative fault causes of action, they were considered in the above analysis and once the court makes a determination of good faith settlement, such claims are properly barred.

Defendant American Vision argues that all of Defendant Macchiaverna’s cross-claims are barred because there was no right to express indemnity under the contract between the parties and the cross-claims are only disguised claims for non-contractual contribution, indemnity, or comparative negligence or comparative fault.

However, this is not before the court at this time and the court need not take up this issue. It is sufficient for now that the court finds that the settlement between Plaintiffs and Defendant American Vision is a good faith settlement pursuant to Code of Civil Procedure section 877.6.

Defendant American Vision shall give notice of this ruling.