Case Number: BC635339 Hearing Date: February 05, 2018 Dept: 39

Jeffrey Appel, et al. v. D.F. Daniels Corp., et al., BC635339

Tentative Ruling for February 5, 2018

Motion by Defendant, Cross-Defendant, and Cross-Complainant Emser Tile, LLC for Order Determining that Settlement Made Was in Good Faith and an Order Dismissing All Cross-Complaints Against Emser Tile, LLC: GRANTED

The court dismisses any and all cross-complaints against Emser for equitable and/or comparative contribution, and partial or comparative indemnity based on comparative negligence or comparative fault, filed by Defendant and Cross-Complainant D.F. Daniels Corporation. Counsel for Emser Tile, LLC to give notice.

Background

This case arises from allegations of substantial defects and deficiencies related to the design, manufacture, supply, and/or installation of glass pool tile systems at properties owned by Plaintiffs Jeff and Arezou Appel (collectively the “Woodburn Appels”) and Plaintiffs Ronald and Lois Appel (collectively the “Tarzana Appels”). Defendants Chris Doman Enterprises, Inc. (“Doman, Inc.”) and Chris Doman Enterprises (“Doman Enterprises”) installed the glass tile and related components in the swimming pools located at the Subject Properties. Cross-Defendant Tyler Construction (“Tyler”) was the general contractor supervising the entire pool installation project. Defendant Emser Tile, LLC (“Emser”) was the distributor and seller of the glass tiles and related components. Defendants D.F. Daniels Corporation (d/b/a Diamond Tech Tiles, “Diamond Tech”) was the wholesaler who purchased and supplied the tiles from a China-based manufacturer.

In the Complaint filed on September 26, 2016, Plaintiffs allege four causes of action for: (1) negligence against all Defendants; (2) breach of contract against Emser and Doman, Inc.; (3) breach of implied warranty against all Defendants; and (4) breach of express warranty against Emser and Doman, Inc.

On May 3, 2017, Defendant and Cross-Complainant Diamond Tech filed its Cross-Complaint alleging three causes of action against Cross-Defendants Chris Charles Doman (“Chris Doman”), Doman, Inc., and Doman Enterprises (collectively “Doman”) for: (1) total equitable indemnity; (2) comparative equitable indemnity and apportionment of fault; and (3) declaratory relief. Diamond Tech has since amended the Cross-Complaint to name Emser, United Oil, United El Segundo, Inc., United Pacific, and Tyler as Roe Defendants.

On May 4, 2017, Defendant Emser filed its Cross-Complaint against Doman, Inc., Doman Enterprises, and Diamond Tech, alleging eight cause of action for: (1) breach of contract against Diamond Tech; (2) total indemnity against all Emser Cross-Defendants; (3) equitable indemnity against all Emser Cross-Defendants; (4) implied indemnity against all Emser Cross-Defendants; (5) contractual indemnity against Diamond Tech; (6) negligence against all Emser Cross-Defendants; (7) breach of express warranty against Diamond Tech; and (8) breach of implied warranty against all Emser Cross-Defendants.

The motion of Doman Enterprises and Cross-Defendants Doman and Tyler for a determination of good faith settlement was granted on October 25, 2017.

Emser has now come to a settlement with Plaintiffs in which it is to pay Plaintiffs $74,000. Emser now moves for an order determining that this settlement was made in good faith under Code of Civil Procedure, section 877.6 and for an order dismissing the Diamond Tech’s claims and cross-claims for indemnity against it.

Discussion

I. General Principles Applicable to Good Faith Settlement

Any party to an action involving joint tortfeasors may seek a hearing on the issue of the good faith of a settlement entered into by the plaintiff and one or more of the alleged tortfeasors. (Code Civ. Proc., § 877.6, subd. (a)(1).) “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).)

The primary purpose of the good faith requirement is to protect the interests of nonsettling defendants. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1263 (City of Grand Terrace).) The party challenging the good faith of a settlement “is not only a stranger to the settlement but has an understandable interest in establishing the lack of good faith in the settling parties, thus preserving the challenger’s right to contribution or partial indemnity.” (Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 889 (Singer).) “The financial stake an absent tortfeasor has in the fairness of a settlement between the plaintiff and a joint tortfeasor equates to the deprivation of a property interest, to wit: a nonsettling tortfeasor may be forced to bear a share of the liability greater than that proportionate to his fault when the plaintiff’s recovery is reduced only by the monetary amount of a prior settlement.” (Id. at p. 890.) “When the parties to a settlement know, or reasonably should know, that a nonsettling tortfeasor is exposed to substantial potential liability, such that his joinder as a defendant or cross-defendant is likely, the property right of that nonsettling tortfeasor must be regarded as significant.” (Id. at pp. 890-891.)

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, the California Supreme Court set forth the factors to be considered in determining whether a settlement is in good faith:

[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 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. [Citation.] Finally, practical considerations obviously require that the evaluation be made on the basis of information available at the time of settlement.

(Id. at p. 499.)

The question of whether a settlement meets the statutory requirement of good faith presents an issue of fact. (City of Grand Terrace, supra, 192 Cal.App.3d at p. 1264.) “A ‘good faith’ settlement does not call for perfect or even nearly perfect apportionment of liability. In order to encourage settlement, it is quite proper for a settling defendant to pay less than his proportionate share of the anticipated damages. What is required is simply that the settlement not be grossly disproportionate to the setllor’s fair share.” (Abbott Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 874-875.)

The party asserting the lack of good faith bears the burden of proof on that issue. (Code Civ. Proc., § 877.6, subd. (d).), and must demonstrate “that the settlement is so far ‘out of the ballpark’ in relation to [the Tech-Bilt] factors as to be inconsistent with the equitable objectives of the statute.” (Tech-Bilt, Inc., supra, 38 Cal.3d at pp. 499-500.) To carry this burden, the party opposing the settlement must necessarily produce evidence for the court to review. “[T]he trial court’s consideration of the settlement agreement and its relationship to the entire litigation in a contested setting must proceed upon a sufficient evidentiary basis to enable the court to consider and evaluate the various aspects of the settlement.” (City of Grand Terrace, at p. 1263.)

II. Application of Legal Principles

“The statutory requirement of good faith extends not only to the amount of the overall settlement but as well to any allocation which operates to exclude any portion of the settlement from the setoff.” (L.C. Rudd & Son, Inc. v. Superior Court (1997) 52 Cal.App.4th 742, 748.) “Where there are multiple defendants, each having potential liability for different areas of damage, an allocation of the settlement amount must be made.” (Id. at p. 750.) Failure to do so may preclude a ‘good faith’ determination because there is no way to determine the appropriate setoff pursuant to section 877 against the nonsettling defendant. (Ibid.) It is the burden of the settling parties to explain to the court and to all other parties the evidentiary basis for any allocations and valuations made sufficient to demonstrate that a reasonable allocation was made. (Ibid.)

Emser asserts that, after mediation with Plaintiffs, it has agreed to settle for $74,000. Emser contend that the total cost to repair both sets of Plaintiffs’ pools totals $692,392 (or, elsewhere, $692,375, the amount stated in the Doman parties’ motion for good faith settlement). Emser’s proposed settlement represents approximately 11% of Plaintiffs’ total claim for damages. Emser has not attached a copy of the proposed settlement to the motion.

Emser argues that the settlement amount exceeds its potential liability in this case because the tiles in question were not defective. However, the question of whether the tiles were defective is a fact in dispute by the parties, and Emser’s submitted evidence itself states that testing of the tiles indicated they contained stress and flaws in addition to the instillation problems Emser identifies. (Declaration of Jeff Hartke (“Harke Decl.”) Ex. 5.) Emser additionally contends that it does not bear any liability under the terms of the warranty disclaimers in the purchase contract with Plaintiffs. The subject motion is not the appropriate proceeding to determine contractual liability; nevertheless, the court recognizes that any contract between the parties would be subject to the provisions of the Commercial Code (including section 2316) and the Consumer Warranty Protection provisions of the Civil Code (beginning with Civil Code, section 1790).

Diamond Tech contends that Emser has not presented evidence that its settlement is proportionate to its potential liability, and Diamond Tech argues that because Emser was the party that sold the tiles to Plaintiff, Emser is responsible for every defect identified by Plaintiffs and bears more liability than Diamond Tech. On October 25, 2017, the court granted the Doman parties’ motion for a good faith settlement, wherein Doman agreed to provide Plaintiffs in-kind services valued between $75,980 and $81,000. In its opposition to that motion, Diamond Tech argued that Doman was liable for at least 50% of the damages incurred by Plaintiffs. The proposed settlement between Emser and Plaintiffs, like that of Doman and Plaintiffs, was entered into through arms-length negotiations and is for approximately the same amount as the Doman settlement. Accordingly, the court finds that the proposed settlement between Emser and Plaintiffs of $74,000 is a reasonable approximation of its proportionate liability, given that this settlement was entered into prior to trial.

Furthermore, the court recognizes that Emser has argued that if Plaintiffs were to prevail on their claims, Emser would be entitled to express and implied indemnity from Diamond Tech, which was the importer of the tiles, based on the terms of the parties’ purchase order. (Hartke Decl. Ex. 3.) Diamond Tech does not dispute Emser’s claims regarding indemnification or deny that it is obligated to defend and indemnify Emser in this action. Accordingly, the court finds that the proposed settlement is reasonable for this additional reason, as any payment by Emser in settlement would only act to reduce Diamond Tech’s overall liability compared to its potential liability if it were also required to indemnify Emser for Emser’s proportionate share of any liability. (See Singer, supra, 179 Cal.App.3d at p. 889.)

Diamond Tech also argues that Emser has not produced evidence regarding the full extent of applicable insurance coverage or other financial assets. Jeff Hartke, however, attests on behalf of Emser that no insurer is participating in its defense or the payment of the settlement sum. (Declaration of Jeff Hartke (“Hartke Decl.”) ¶ 14.) The fact that Emser has not submitted evidence of its other financial assets alone is not sufficient basis to warrant denial of the motion. (See Tech-Bilt, supra, 38 Cal.3d at p. 499.)

Diamond Tech further argues that the proposed settlement is insufficient as Emser has not offered evidence of the allocation of proceeds between the Plaintiffs. (Opp. 10-11, citing Regan Roofing Co. v. Superior Court (1994) 21 Cal.App.4th 1685, 1702-1703 (Regan Roofing).) Regan Roofing involved a settlement between a defendant developer and 44 individual homeowners, and an identification of the plaintiffs’ individual allocations was thus important to ensure that the settlement did not provide an inadequate amount of setoff or credit to which the nonsettling defendants would be entitled, were the plaintiffs to obtain judgments. (Id. at pp. 1693-1694.) In the case at hand, however, there are only two sets of Plaintiffs who have clearly set out their damages; the division between the parties is clear.

It is noted that the Plaintiffs seek $485,945.44 for the Jeff Appel pool and $206,429.56 for the Ron Appel pool, for total damages in the amount of $692,375.00. (Mot. 3.)

Accordingly, Emser has substantially complied with this Tech-Bilt factor.

Defendant Diamond Tech has not met its burden to demonstrate that the settlement was not in good faith. (See Code Civ. Proc., § 877.6, subd. (d).) The court finds that the proposed settlement by Emser is reasonable.

For these reasons, the court GRANTS the subject motion for a good faith settlement.

Request to Dismiss Cross-Complaints as to Moving Parties

“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.” (Code Civ. Proc., § 877.6, subd. (c).)

Pursuant to California Rules of Court, rule 3.1382, “a motion or application for determination of good faith settlement may include a request to dismiss a pleading or a portion of a pleading. The notice of motion or application for determination of good faith settlement must list each party and pleading or portion of pleading affected by the settlement and the date on which the affected pleading was filed.” The notice of this motion requests an order dismissing any and all cross-complaints against Emser for equitable and/or comparative contribution, and partial or comparative indemnity based on comparative negligence or comparative fault, filed by Defendant and Cross-Complainant Diamond Tech. (Mot. Not. 2.) Emser has thus complied with California Rules of Court, rule 3.1382.

As the court GRANTS the motion for good faith, the court also GRANTS Emser’s request for this order.