Judge Yolanda Orozco, Case 21STCV38508 2022-09-28 Tentative Ruling

Judge: Yolanda Orozco, Case: 21STCV38508, Date: 2022-09-28 Tentative Ruling

Case Number: 21STCV38508 Hearing Date: September 28, 2022 Dept: 31

MOTION FOR DETERMINATION OF

GOOD FAITH SETTLEMENT IS GRANTED

Cross-Defendant U.S. Bank’s N.A.’s Motion for Determination of Good Faith Settlement is GRANTED.

Background

On October 10, 2021, Jordan Young and Laura Valdivia (collectively, “Plaintiffs”) filed a Complaint against U.S. Bank N. A (“U.S. Bank”); Chartwell Escrow, Inc. (“Chartwell”); Coldwell Banker Realty (“Coldwell”) and Does 1 to 20. The operative second amended complaint (SAC) alleges:

1) Breach of Escrow Contract (against Chartwell and Does 1 to 20)

2) Breach of the Implied Covenant in Escrow Contract (against Chartwell and Does 1 to 20)

3) Money had and received Common Counts (against U.S. Bank)

4) Breach of Fiduciary Duty (against Chartwell and Does 1 to 20)

5) Negligence (against Chartwell and Does 1 to 20)

7) Negligence (against Coldwell and Does 1 to 20)

8) Conversion (U.S. Bank and Does 1 to 20)

9) Preliminary and Permanent Injunction (against U.S. Bank and Chartwell)

On March 11, 2022, Defendant Coldwell Banker Residential Brokerage Company dba Coldwell Banker Realty filed a Cross-Complaint against U.S. Bank, N.A., alleging causes of action for tort of another, comparative equitable indemnity, contribution and apportionment, and declaratory relief.

This action arises out of Plaintiffs engaging defendants Chartwell Escrow, Inc. (“Chartwell”) and Coldwell Banker (“Coldwell”) to assist them in purchasing real estate. On October 6, 2021, Plaintiffs allegedly received an email from someone purporting to be their designated escrow agent at Chartwell, directing Plaintiffs to wire funds to a U.S. Bank account. Defendant U.S. Bank is not listed in any of the documents and is a stranger to the parties and their real estate transaction. Plaintiffs wired $920,000.09 to the U.S. Bank account number provided via email by the individual purporting to be the Plaintiffs’ designated escrow agent. The Plaintiffs spoke with Chartwell on Friday, October 8, 2021, and were advised Chartwell did not receive the funds.

U.S. Bank recovered $843,111.62 of the funds that Plaintiffs wired. This was the amount of the settlement between Plaintiffs and U.S. Bank, in exchange for a dismissal with prejudice. The remaining $76,888.47 was not recovered.

U.S. Bank initially filed a Notice of Settlement and Application for Determination of Good Faith Settlement on January 13, 2022. The settlement was rejected on April 28, 2022, because U.S. Bank failed to provide any evidence to determine if the settlement was in good faith. (Min. Or. 04/28/22.)

On June 09, 2022, Cross-Defendant U.S. Bank renewed its application for Determination of Good Faith Settlement.

On September 07, 2022, Cross-Complainant Coldwell filed Opposition papers. On September 08, 2022, Defendant Chartwell also filed Opposition papers.

On September 14, 2022, Cross-Defendant U.S. Bank filed two responses, one for Chartwell and one for Coldwell.

On September 16, 2022, U.S. Bank was dismissed as a Defendant.

Legal Standard

Under Code of Civil Procedure (CCP) section 877.6, the court applies the factors identified by the California Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 to determine whether a settlement is in good faith and if the settlement amount is “in the ballpark” of the settling party’s share of liability for injuries:¿¿

1. a rough approximation of the plaintiff's total recovery;¿

2. an approximation of the settling party's share of the liability;¿

3. recognition that a settling party should pay less in settlement than if found liable after a trial;¿

4. the allocation of the settlement proceeds among plaintiffs;¿

5. the settling party's financial condition and insurance policy limits;¿

6. evidence that the plaintiff and the settling party acted with an intent to make the non-settling parties pay more than their fair share (considered fraud and collusion under Tech-Bilt).¿

Section 877.6 permits the court to evaluate a settlement made between a plaintiff and a defendant when the defendant is a joint tortfeasor with other non-settling defendants. A determination that the settlement is a good faith settlement under Section 877.6 will bar any claims for equitable contribution or comparative indemnity. The burden is on the party opposing the settlement to show it was not made in good faith. (Code Civ. Proc., § 877.6, subd. (d).) Accordingly, the party asserting the lack of “good faith” may meet this burden by demonstrating that the settlement is so far “out of the ballpark” as to be inconsistent with the equitable objectives of the statute. (See Tech-Bilt, Inc., supra, 38 Cal.3d at pp. 499-500.) Such a demonstration would establish that the proposed settlement was not a “settlement made in good faith” within the terms of Section 877.6. (Id.)¿¿

Request for Judicial Notice

Cross-Defendant U.S. Bank requests Judicial Notice of:

1) Exhibit A: First Amended Complaint and supporting exhibits filed in this action on December 15, 2021.

2) Exhibit B: Settlement Agreement dated December 23, 2021.

3) Exhibit C: Coldwell Banker’s Cross-Complaint against U.S. Bank.

Cross-Defendant U.S. Bank’s request for Judicial Notice is GRANTED, pursuant to Evidence Code sections 452(c), (d), (h), and 453.

Cross-Defendant U.S. Bank’s secondary request for Judicial Notice pertains to:

1) Exhibit A: Declaration of Laura Valdivia filed on October 20, 2021 in support of Plaintiffs’ Application for Temporary Restraining Order and Order to Show Cause Re Preliminary Injunction.

Defendant Chartwell filed an objection to Plaintiff’s second request for Judicial Notice on the basis that the Plaintiffs’ declaration is incomplete and does not contain a “filed” stamp from the Court Clerk or other evidence that the declaration is a reliable record of the court of this state.

Under Evidence Code section 452, the Court may judicially notice the “[r]ecords of ... any court of this state.” Accordingly, U.S. Bank’s second request for Judicial Notice is GRANTED.

Evidentiary Objections

Cross-Complainant Coldwell filed evidentiary objections to the Declaration of Shirley Masterson in Opposition to U.S. Bank’s Motion for Determination of Good Faith Settlement. U.S. Bank filed a response to the evidentiary objections.

Cross-Complainant’s Coldwell’s evidentiary objections Nos. 1 to 8 are OVERRULED.

Defendant Chartwell filed evidentiary objections to the Declaration of Shirley Masterson in Opposition to U.S. Bank’s Motion for Determination of Good Faith Settlement as to the following:

· Paragraph 5, lines 1-2: “I am informed that, in this litigation, the non-customer victims/plaintiffs sought to recover the amount of $920,000.09 from various defendants, including U.S. Bank.”

U.S. Bank filed a Reply. Chartwell’s objection is OVERRULED.

Discussion

Cross-Defendant U.S. Bank moves for an Application of Good Faith Settlement between Plaintiffs Jordan Young and Laura Valdivia in the amount of $843,111.62. From October 6, 2021, to October 8, 2021, Plaintiffs wired $920,000.09 to a third party’s account at U.S. Bank instead of to the Chartwell escrow account as indicated in the escrow contract.

Six weeks after Plaintiffs filed their Complaint, Plaintiffs agreed to settle their claims against U.S. Bank in exchange for the return of funds that U.S. Bank managed to retain or recover. Cross-Defendant U.S. Bank represents that the $843,111.62 is the full amount that U.S. Bank could recover or retain due to fraud perpetrated by a U.S. Bank customer and an outside third party. (See, generally, Masterson Decl.)

A. Procedural Defects

Chartwell asserts that U.S. Bank’s Notice of Motion and Motion fails to Comply with California Rule of Court 3.1382. Rule 3.1382 requires that the notice of motion list each party and pleading or portion of the pleading affected by the settlement.

The Court finds that U.S. Bank complied with the requirements of Rule 3.1382. Moreover, even if the notice is defective, Chartwell fails to cite any authority that failure to abide by Rule 3.1382 is grounds to deny the motion.

Accordingly, the Court considers the Motion on the merits.

B. Chartwell’s Opposition

As noted above, U.S. Bank’s initial application for good-faith settlement was rejected because it was not supported by a declaration showing U.S. Bank’s conduct and knowledge. U.S. Bank now asserts it has perfected its motion and the burden is now on Chartwell and Coldwell to prove the settlement is “so far out of the ballpark” under the Tech-Bilt factors, such that it would be unfair to bar any further claims against U.S. Bank for equitable contribution or indemnity. (Tech-Bilt, supra, 38 Cal.3d at 489.) U.S. Bank asserts that the $843,111.62 settlement represents over 90% recovery of what the Plaintiffs lost, thus making the settlement fair and in good faith.

U.S. Bank asserts that any lack of information on what remaining damages Plaintiffs may seek against Chartwell or Coldwell is not a consideration under Teck-Bilt because all that is required is a rough approximation. The rough approximation is based on the information available at the time of settlement. (Tech-Bilt, supra, 38 Cal. 3d at 499; see also Dole Food Company, Inc. v. Superior Court (2015) 242 Cal. App. 4th 894, 904.) Here, at the time of settlement, U.S. Bank and Plaintiffs only knew the damages indicated in the Complaint, which was the $920,000.09 wired to an account as U.S. Bank.

Moreover, regardless of what the total damages amount may be, U.S. Bank’s settlement is fair. First, it ensures Plaintiffs recover about 90% of what they initially lost. Second, U.S. Bank was not a party to the initial transaction and was only the recipient of the ill-gotten funds when allegedly one of its customers fell for an “elder romance scam.” (Masterson Decl. ¶ 2.) U.S. Bank provides the declaration of Shirley Masterson, a Vice President and Fraud Risk Manager for U.S. Bank, who asserts that diligent efforts were taken in first noticing what appeared to be a fraudulent transaction and then recovering whatever funds they could to give back to Plaintiffs.

Whatever additional amounts Plaintiffs may recover from the remaining Defendants, U.S. Bank’s settlement amount is still significant and neither Chartwell nor Coldwell have proven the amount the amount of the settlement is insignificant, minuscule, or unfair. In Tech-Bilt, the California Supreme Court recognized that “a settlor should pay less in settlement than he would if he were found liable after trial.” (Tech-Bilt, supra, 38 Cal.3d at 489.)

Chartwell’s argument against settlement is that U.S. Bank did not contribute any of its own funds to settle the case. The argument is without merit because there is no requirement that the settlement source come directly from U.S. Bank under Tech-Bilt.

Second, it would be unfair to penalize U.S. Bank for its swift action to recover whatever funds it could once the fraud became known to U.S. Bank.

Third, the fact U.S. Bank did not provide evidence regarding its financial condition and insurance policy limits go to just one factor under Tech-Bilt. Assuming, U.S. Bank could pay more in the settlement, Chartwell fails to show that the settlement amount is not a rough approximation of Plaintiff’s total recovery or is not in conformity with U.S. Bank’s share of liability.

Chartwell and Coldwell assert that it was the Plaintiffs’ act of wiring funds to the incorrect escrow account that led to the Plaintiffs’ loss. The account was held by a U.S. Bank customer and the facts support the finding that U.S. Bank acted swiftly to recover $843,111.62 of the Plaintiffs’ payment.

Accordingly, Defendant Chartwell cannot show that the settlement is disproportionate to U.S. Bank’s liability or that U.S. Bank acted with an intent to make the non-settling parties pay more than their fair share under Tech-Bilt.

C. Coldwell’s Opposition

Cross-Complainant Coldwell opposes the Motion on similar grounds, that there is a lack of evidence regarding the damages Plaintiffs seeks such that it would be impossible to determine whether the settlement between Plaintiffs and U.S. Bank is “in the ballpark” under Tech-Bilt.

Coldwell asserts that U.S. Bank has not provided any documents to corroborate its assertion that all but $76,888.38 of the $920,000.00 in funds wired to U.S. Bank are no longer available. A declaration from Chartwell’s counsel, Mathew S. Davis, signed on September 8, 2022, asserts that the information requested has not been produced.

U.S. Bank asserts that on August 03, 2022, it circulated a draft stipulation asking to add U.S. Bank to the existing protective order but received no response. All parties finally consented to the proposed stipulation on August 23, 2022. Afterward, U.S. Bank asserts it submitted relevant and responsive documents consistent with Ms. Masterson’s declaration. (Reply to Chartwell at 6:17-18.) U.S. Bank adds that even if it still had access to some portion of the misdirected funds, the total settlement still represents over 90% of the funds.

Moreover, U.S. Bank adds:

“Absent a contractual or other special relationship, the settling parties do not have a duty to protect the interests of the nonsettling tortfeasors. ‘They have a duty only to settle in good faith, i.e., with honest, lawful intent.’ [Citation.] ‘As understood in law the phrase ‘in good faith’ has a settled and well-defined meaning, which generally imports that in any given case the transaction involved was honestly conceived and consummated without collusion, fraud, or knowledge of fraud, and without intent to assist in a fraudulent or otherwise unlawful design.’ [Citaiton.].”

(Tech-Bilt, supra. 38 Cal.3d at 505.)

Here, Coldwell fails to show that U.S. Bank’s settlement with the Plaintiffs was made in bad faith or the result of collusion or fraud.

Second, Coldwell asserts that U.S. Bank is directly responsible for conversion. However, as U.S. Bank points out in its motion, Plaintiffs wired funds into a third party’s account at U.S. Bank and U.S. Bank is not liable because Plaintiffs were not the depositors on the account and U.S. Bank cannot be liable for the subsequent transfer of money out of the third party’s account. (See Fong v. East West Bank (2018) 19 Cal. App. 5th 224, 232-33, 235 [holding that bank may be liable to its depositor for funds transferred out of depositor’s account.].) U.S. Bank also asserts that Plaintiffs relinquished ownership or possession of the funds when they transferred the funds to U.S. Bank, such that Plaintiffs cannot sustain a claim of conversion. (See Moore v. Regents of Univ. of California (1990) 51 Cal.3d 120, 136; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal. App. 4th 221, 234.) U.S. Bank adds that a cause of action for the common count of money had and received cannot stand independent of the conversion claim. (See McBride v. Boughton (2004) 123 Cal. App. 4th 379, 394.)

The Court finds that Defendant Chartwell and Cross-Complainant Coldwell have failed to show that the settlement was not in “good faith” under the Tech-Bilt factors. Based on the foregoing, U.S. Bank’s application for Determination of Good Faith Settlement is GRANTED.

Conclusion

Cross-Defendant U.S. Bank’s N.A.’s Motion for Determination of Good Faith Settlement is GRANTED.

Cross-Defendant to give notice.

The parties are strongly encouraged to attend all scheduled hearings virtually or by audio. Effective July 20, 2020, all matters will be scheduled virtually and/or with audio through the Court’s LACourtConnect technology. The parties are strongly encouraged to use LACourtConnect for all their matters. All masking protocols will be observed at the Courthouse and in the courtrooms.