Judge: Teresa A. Beaudet, Case: 20STCV38718, Date: 2024-04-16 Tentative Ruling

Case Number: 20STCV38718    Hearing Date: April 19, 2024    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

            Background

Plaintiff Sheldon Smith, Trustee of the Albert S. Smith, Jr. Separate Property Trust Dated November 8, 2002 (“Smith”) filed this action on October 8, 2020 against Defendants Walter Perkins, Henry A. Thomas, Trustee of the Henry A. Thomas Trust dated 2/12/2007, Orange Coast Title Company, and Emerald Escrow, Inc. (“Emerald”). On October 15, 2021, Smith filed the operative First Amended Complaint (“FAC”), asserting causes of action for (1) fraud,

(2) cancellation of deed, (3) quiet title, and (4) negligence.

On March 29, 2021, Emerald filed a Cross-Complaint against several Cross-Defendants, alleging causes of action for (1) implied indemnity, (2) comparative indemnity, (3) equitable indemnity, (4) express contractual indemnity, and (5) contribution.  

On March 1, 2024, Plaintiff and Emerald entered into a settlement. (Wayne Decl., ¶ 3.)

Emerald now applies for an order that (1) Emerald’s settlement with Plaintiff was entered into in good faith, (2) that any pending claims in connection with the instant lawsuit are dismissed, with prejudice, as to Emerald, and (3) that the subject settlement was made in good faith and shall thus bar any other joint tortfeasor(s) or co-obligor(s) from any future claims against Emerald, for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault. The application is unopposed.

Discussion

“[Code of Civil Procedure] Section 877.6 was enacted by the Legislature in 1980 to establish a statutory procedure for determining if a settlement by an alleged joint tortfeasor has been entered into in good faith and to provide a bar to claims of other alleged joint tortfeasors for equitable contribution or partial or comparative indemnity when good faith is shown.” ((Irm Corp. v. Carlson (1986) 179 Cal.App.3d 94, 104.)

Code of Civil Procedure section 877.6, subdivision (a)(1) provides, that “[a]ny 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 section 877.6, subdivision (a)(2) provides that “[i]n the alternative, 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. The notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service. Proof of service shall be filed with the court. 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. If none of the nonsettling parties files a motion within 25 days of mailing of the notice, application, and proposed order, or within 20 days of personal service, the court may approve the settlement. The notice by a nonsettling party shall be given in the manner provided in subdivision (b) of Section 1005. However, this paragraph shall not apply to settlements in which a confidentiality agreement has been entered into regarding the case or the terms of the settlement.”

“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.” ((Id., § 877.6, subd. (c).) In addition, “[t]he party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc., § 877.6, subd. (d).)

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499, the California Supreme Court identified the following nonexclusive factors courts are to consider in determining if a settlement is in good faith under section 877.6: “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 a 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.”  The evaluation of whether a settlement was made in good faith is required to “be made on the basis of information available at the time of settlement.” (Ibid.) 

Significantly, when the good faith nature of a settlement is uncontested, the Court need not consider and weigh the Tech-Bilt factors. ((City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261.) “[W]hen no one objects, the 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.” (Ibid.)

In the application, Emerald cites to Code of Civil Procedure section 877.6, subdivision (a)(2), which, as set forth above, provides as follows:

“In the alternative, 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. The notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service. Proof of service shall be filed with the court. 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. If none of the nonsettling parties files a motion within 25 days of mailing of the notice, application, and proposed order, or within 20 days of personal service, the court may approve the settlement. The notice by a nonsettling party shall be given in the manner provided in subdivision (b) of Section 1005. However, this paragraph shall not apply to settlements in which a confidentiality agreement has been entered into regarding the case or the terms of the settlement.”

Here, Emerald’s application identifies the settling parties, Plaintiff and Emerald. (Wayne Decl., ¶ 3.) Emerald’s counsel indicates that “[o]n March 1, 2024, Plaintiff and Emerald Escrow entered into a settlement. On March 1, 2024, following arms-length, good faith negotiations between their respective counsel of record, Plaintiff and Emerald reached an agreed upon settlement. The terms of the settlement include a full release of Plaintiff’s claims against Emerald in exchange for payment to Plaintiff…subject to the Court’s determination that said settlement is in good faith. The proposed settlement includes a waiver of all claims under California Civil Code Section 1542. The settlement does not include any non-monetary consideration, nor an assignment of rights from any party.” (Wayne Decl., ¶ 3.)[1] In addition, Emerald’s counsel indicates that “[t]he Settlement is between only Emerald and Plaintiffs. The settling parties will bear their own costs, expenses, and attorney’s fees. Plaintiff will file a Request for Dismissal of Emerald, with prejudice, upon receipt of the settlement funds and this Court’s determination of good faith under Code of Civil procedure sections 877 and 877.6.” (Wayne Decl., ¶ 4.) Emerald’s counsel asserts that “[t]here is no collusion, fraud, or other tortious conduct aimed to injure the non-settling parties interests in this action.” (Wayne Decl., ¶ 6.)

            The proof of service attached to Emerald’s notice of application and application indicates that the notice and application were served by certified mail, return receipt requested on March 20, 2024. In addition, the proof of service attached to the proposed order indicates that the proposed order was served by certified mail, return receipt requested on March 20, 2024. The Court notes that over 25 days have passed since March 20, 2024.

            As set forth above, Code of Civil Procedure section 877.6, subdivision (a)(2) also provides that “this paragraph shall not apply to settlements in which a confidentiality agreement has been entered into regarding the case or the terms of the settlement.” Emerald’s counsel indicates that the subject settlement agreement contains a confidentiality provision providing as follows:

“SMITH agrees that any information regarding the terms of the resolution of the LAWSUIT, including, but not limited to, the SETTLEMENT AMOUNT, must remain confidential, and promises to undertake all necessary actions to insure that this information remains confidential. To this end, SMITH agrees that he, and any other person acting on her behalf, shall never disclose the terms of the resolution of the LAWSUIT, including, but not limited to, the SETTLEMENT AMOUNT, or the fact that SMITH is receiving a settlement payment, to any other person, firm, organization, corporation, or other entity, including but not limited to newspapers, legal publications, the internet, electronic or print media, television, radio, or any other publication. In the event any inquiry is made of concerning the resolution of the subject lawsuit, SMITH agrees that he, and his attorneys, consultants, employees, agents and representatives, shall only indicate that ‘the lawsuit has been dismissed,’ and shall give no other indication of the outcome. This confidentiality provision shall not apply to any enforcement proceedings related to this RELEASE, the good faith settlement proceeding related to this RELEASE, to lawful process or judicial order, or to spouses, banks, legal and/or tax advisors, or, where mutually agreed to in writing by SMITH and EMERALD ESCROW.” (Wayne Decl., ¶ 5(a), emphasis added.)

As the settlement agreement’s confidentiality provision provides that such provision “shall not apply to…the good faith settlement proceeding related to this RELEASE” (Wayne Decl., ¶ 5), the Court finds that Code of Civil Procedure section 877.6, subdivision (a)(2) can apply here.

Emerald argues that “given the lack of liability on [Emerald] and the rough approximation of Plaintiff’s damages, the settlement is more than fair.” (App. at p. 10:14-16.) The Court finds that the unopposed application describes the background of this case, details the nature of the proposed settlement, and provides sufficient reasoning as to why the settlement was reached in good faith. All indications are that the settlement was reached as a result of arm’s length negotiations between the settling parties.

            Conclusion

            Based on the foregoing, the Court grants Emerald’s application for determination of good faith settlement.

            The Court notes that Emerald’s proposed order submitted on March 20, 2024 refers to “Plaintiff SHELDON SMITH, TRUSTEE OF THE ALBERT S. SMITH, JR. SEPARATE SHELDON SMITH, TRUSTEE OF THE PROPERTY TRUST DATED NOVEMBER 8, 2002.” (Proposed order, p. 2:3-5.) The Court notes that the plaintiff named in the FAC is Sheldon Smith, Trustee of the Albert S. Smith, Jr. Separate Property Trust Dated November 8, 2002. Thus, the foregoing underlined portion of the proposed order appears to be a typo.

Emerald’s proposed order also incorrectly indicates that the application “was presented to this Court on March 18, 2024,” and that the subject documents were served “on March 18, 2024.” (Proposed order, p. 2:6; 2:10.) In addition, the proposed order incorrectly indicates that “no confidentiality clause of any kind is contained in the settlement agreement.” (Proposed order, p. 2:11-12.)

In light of the foregoing, the Court orders Emerald to file and serve a revised proposed order to correct the above defects within 10 days of this Order. 

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Emerald is ordered to provide notice of this Order.

DATED:  April 18, 2024                                ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court