Ryan Kaufman vs Apeel Technology Inc
Case No: 17CV03060
Hearing Date: Wed May 15, 2019 9:30

Nature of Proceedings: Motion: Good Faith Settlement

TENTATIVE RULING: The motion contesting good faith settlement is denied in its entirety.

Background: On June 1, 2017, plaintiff Ryan Kaufman was installing a security camera on what he believed to be a catwalk above a utility closet, on commercial premises located at 71 S. Los Carneros Road in Goleta. He was drilling a pilot hole for a screw into the catwalk, while unaware that the utility closet contained a high voltage transformer. In doing so, he drilled into the high voltage equipment, and sustained serious injuries and burns when the equipment exploded, he caught fire, and he fell off the ladder.

Plaintiff filed his original complaint on July 12, 2017, against defendants Apeel Services, Inc. (Apeel), Southern California Edison, and Allergan Inc. (Allergan), alleging causes of action for strict products liability, negligence per se, breach of warranty, and ultrahazardous activity. His First Amended Complaint (FAC) was filed on November 16, 2018. Numerous additional parties were brought in by Doe amendment and by cross-complaints.

Prior to the incident, the property had been owned by Los Carneros Business Park L.P. (LCBP), leased by Allergan, and managed by Meridian Group Real Estate Management, Inc. (Meridian). Allegations in the FAC asserted liability by these defendants and others (vendor defendants) based upon their alleged failure to disclose the dangerous condition when the property was sold. At the time of the incident, the property was owned by Los Carneros Business Opportunity, L.P. (Opportunity), and were subleased by Allergan to Apeel.

Defendant Meridian, while contending that it has no liability for plaintiff’s injuries and damages, has now settled the action against it by payment of the remaining portion of its $1 million insurance policy limits, after that limit is reduced by its costs and fees, with the proviso that plaintiffs will receive no less than $950,000.

Meridian filed an application for determination of good faith settlement on March 18, 2019, as permitted by Code of Civil Procedure section 877.6(a)(2), serving the application by mail. Pursuant to the terms of that subdivision, the court is permitted to approve the settlement without a hearing, unless a nonsettling party files a motion to contest the good faith of the settlement within 25 days of the mailing of the application.

The time within which to file a motion contesting the application would therefore expire on April 12, 2019. On that date, the Court inadvertently executed the proposed order which had been submitted by Meridian with its application. Also on that date, however, LCBP filed the current motion to contest the good faith of the settlement between plaintiff and Meridian.

The substance of the motion, however, is not that the settlement between plaintiff and Meridian was not in good faith, but rather LCBP’s contention that the settlement is not fair to it if certain alterations are not made to the proposed order submitted by Meridian along with its application. LCBP acknowledges that it may be found to have direct liability to plaintiff, but objects to the proposed order submitted by Meridian, based upon potential vicarious liability it may be found to have for Meridian’s conduct. Specifically, LCBP contends that the order, in addition to barring any claims against Meridian for equitable or implied indemnity, or contribution based on comparative fault, must also bar any claims against any other party based upon vicarious liability for Meridian’s conduct. Indeed, LCBP seeks to affirmatively add language to the order that will forever bar any claims against any party for vicarious liability based upon Meridian’s conduct. It also seeks to add language that claims for express liability are not precluded by the order.

In seeking these revisions to the good faith determination order, LCBP asserts that, as a result of Meridian’s good faith determination, no other party can impose vicarious liability upon it for the conduct of Meridian. It contends that if that were to happen, it would be in the position of having been found liable for Meridian’s conduct, without any remedy against Meridian. It contends that, as a result, the settlement is not in good faith and is unfair to LCBP unless the order also includes language that protects LCBP from such claims. LCBP further contends that if plaintiff were allowed to recover now against Meridian for its conduct and later against LCBP on a vicarious liability basis for the same conduct, plaintiff would be receiving a double recovery, which is what the good faith settlement statute was designed to prevent.

Meridian responded to the motion, noting that claims for express indemnity are not barred by a good faith determination. With respect to the issue regarding LCBP’s purported vicarious liability for Meridian’s negligence, Meridian states that it is not clear that Section 877.6 contemplates such a bar. Meridian then reiterated the terms of the settlement, urged that an application of the Tech-Bilt factors showed that the settlement was a good faith settlement, emphasized that plaintiff cannot establish any liability against Meridian, and urged that the settlement be found to be in good faith—regardless of whether it grants LCBP’s request to bar any claims that it is vicariously liable for Meridian’s negligence.

LCBP filed a reply, noting that no party had objected to its revised proposed order. While Meridian urged that the Court still approve the settlement as having been made in good faith even if it does not adopt the revised proposed order submitted by LCBP, LCBP urges that without the language of the revised proposed order, the settlement is not in good faith, because it is “unfair” to LCBP. It again urged that without the language, plaintiff could make a double recovery for the same injuries.

ANALYSIS: The motion by defendant Los Carneros Business Park L.P. is denied in its entirety. The proposed order submitted by Meridian with its application will be the order of this Court with respect to the settlement.

In cases in which it is alleged that two or more parties are joint tortfeasors, Code of Civil Procedure section 877.6 permits a party who has settled to obtain a determination that the settlement was entered into in good faith. The effect of such determination is to bar any other joint tortfeasors from any further claims against the settling tortfeasors for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault. (Code Civ. Proc., § 877.6, subd. (c).)

Section 877.6 provides two means by which a party can obtain a determination of good faith: (a) By filing a Notice of settlement, Application for Good Faith Determination, and Order Determining Good Faith of Settlement (§ 877.6, subd. (a)(2)), after which the court may sign the order if no non-settling party timely files a motion to contest the good faith of the settlement; or (b) by moving the court for determination of the good faith of the settlement. (§ 877.6, subd. (a)(1).) Regardless of the method used, the party claiming that the settlement was not in good faith has the burden of proof on the issue. (Code Civ. Proc., § 877.6, subd. (g); Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499-500.)

As established by the California Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra, a settlement is in good faith if it is within the “reasonable range” of the settling tortfeasor’s share of liability for the plaintiff’s injuries, taking into consideration the facts and circumstances of the particular case. (Id., at p. 499.) Whether the settlement was within the good faith ballpark is evaluated on the basis of information available at the time of the settlement, including a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability; the amount paid in settlement; a recognition that a settlor should pay less in settlement than if found liable after trial; the allocation of the settlement proceeds among the plaintiffs; the settlor’s financial condition and insurance policy limits, if any; and evidence of any collusion, fraud, or tortious conduct between the settlor and the plaintiffs aimed at making the nonsettling parties pay more than their fair share. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates, supra, 38 Cal.3d at 499.) Also a consideration is the settling tortfeasor’s potential liability for indemnity to joint tortfeasors. (Far West Financial Corp. v. D & S Co. (1980) 46 Cal.3d 796, 816.) Not every factor will apply in every case. (Dole Food Co., Inc. v. Superior Court (2015) 242 Cal.App.4th 894, 909.

The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor’s liability to be. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1262.) Under Code of Civil procedure section 877(a), when one of a number of tort defendants enters into a settlement agreement with a plaintiff, the nonsettling defendants’ liability to the plaintiff is reduced by the amount of the settlement. Consequently, in the typical personal injury action each tortfeasor is potentially liable for the same injury to the plaintiff, and the full settlement by one defendant will offset a judgment against the other tortfeasors, and no allocation of the settlement among the plaintiff’s various injuries is required. (See Alcal Roofing and Insulation v. Superior Court (1992) 8 Cakl.App.4th 1121, 1124.)

In this case, Meridian filed a Notice of Settlement and the Application for Good Faith Determination. LCBP timely filed a motion to contest the good faith nature of the settlement, but never addressed the Tech-Bilt factors, or made any effort to contend that Meridian’s settlement did not fall within the standards of a good faith settlement articulated by the California Supreme Court. LCBP’s challenge was based upon its contentions that (a) the order must include a statement that the good faith finding does not preclude claims for express indemnity, and (b) unless it obtained a benefit not provided for under Section 877.6, in basically obtaining full immunity from any vicarious liability for any actions by Meridian, Meridian’s policy limits settlement was unfair to it and not in good faith. Other than contending that failing to do so would result in a double recovery by plaintiff, LCBP does not explain how the failure to include its language in the order renders the settlement “unfair” or not in good faith.

First, Section 877.6(c) makes quite clear that a good faith determination bars only claims for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault. By its own terms, it does not preclude claims for express indemnity. Language to that effect in the order would be superfluous and unnecessary.

More troublesome is LCBP’s contention that Meridian’s settlement necessarily bars any claims against LCBP for vicarious liability based upon Meridian’s conduct, for a number of reasons:

(1) Section 877.6 is quite clear in providing a bar only to equitable indemnity/comparative fault claims against the settling tortfeasors, and does not by its terms act to preclude any sorts of claims against any other party.

(2) There is no possibility of double recovery to plaintiff, as LCBP contends, because Code of Civil Procedure section 877(a) provides an offset in the amount of the settlement; it is precisely this offset which was at issue, and in fact was the subject of the provision cited to in the decision, in the case relied upon by LCBP in contending that the good faith settlement statute was designed to prevent double recovery for the same conduct. (See Reed v. Wilson (1999) 73 Cal.App.4th 439, 444.)

(3) The Tech-Bilt factors make quite clear that a settlement can be found to have been made in good faith even if the settlement amount is not absolutely equal to the amount of the settling party’s liability in the case. They require that the court consider only a rough approximation of the settling party’s proportionate liability, while taking into consideration the settlor’s financial condition and insurance policy limits, and require the court to recognize that a settlor should pay less in settlement than if found liable after trial. Given these required considerations, there is no compelling reason to immunize a party vicariously liable for the settling party’s conduct, based upon the fact of that party’s good faith settlement of the claims against it, since that settlement could well have been in an amount lower than—but in the same ballpark as—the settling party’s absolute comparative liability.

(4) It has long been contemplated that the settlement of a party for whose actions a non-settling party has vicarious liability, may leave the vicariously liable party on-the-hook for further damages and without recourse to the party for which it is vicariously liable. Shortly after the Supreme Court’s decision in Tech-Bilt, supra, the court in Standard Pacific of San Diego v. A. A. Baxter Corp. (1986) 176 Cal.App.3d 577, encountered a claim that a good faith determination’s bar to claims for equitable indemnity or contribution should not apply to a party who is vicariously liable for the conduct of the settling party, who would otherwise be entitled to seek total equitable indemnity for the settling party’s conduct. The Court found that the claim for total equitable indemnity was simply one end of the spectrum of equitable indemnity, and there was no reason to permit that claim to survive. The Court stated:

“Under Tech-Bilt the settlement will not be found in good faith unless the amount is reasonable in light of the settling tortfeasor’s proportionate share of liability. This procedure requires accounting for the comparative lack of fault of a vicariously liable defendant who may have a right of total indemnification against the settler absent any settlement.

“A good faith hearing is what ‘justice demand.’ A result where the ‘factually innocent’ party may eventually assume some degree of liability (since a good faith settlement does not require a precise proportionate share of liability but only that it be within the reasonable range) does not compel a different result. . . .” (176 Cal.App.3d at p. 589.)

While the Standard Pacific decision was made in the context of disallowing a claim for total equitable indemnity by a party only vicariously liable for the conduct of the settling party, its reasoning applies equally to refute LCBP’s contention that it is essentially entitled to immunity for any amount of vicarious liability for the actions of Meridian.

As noted by Standard Pacific, the good faith determination requires that the settlement amount be reasonable in light of the settling tortfeasor’s proportionate share of liability, and that procedure requires accounting for the comparative lack of fault of a vicariously liable defendant who would be entitled to total indemnification against the settler absent any settlement. As the party challenging the good faith nature of the settlement, the burden is legally placed upon LCBP to establish the lack of good faith. (Code Civ. Proc., § 877.6, subd. (d).) However, other than the bald statement that the settlement is “unfair” to LCBP simply because it may be in a position of being vicariously liable for Meridian’s actions, LCBP has failed to establish why that makes Meridian’s substantial settlement with plaintiff not in good faith. LCBP has made no effort to address the factors which the California Supreme Court has mandated be considered in determining whether a settlement was entered into in good faith, within the meaning of Section 877.6.

Having concluded that the fact of Meridian’s settlement would not entitle LCBP to immunity for claims based upon its vicarious liability for Meridian’s conduct, and that LCBP has absolutely failed to meet its burden of establishing that the settlement entered into by Meridian was not entered into in good faith, the Court is compelled to conclude that LCBP’s motion contesting the good faith of the settlement must be denied.

Even though LCBP’s motion failed to meet its burden of establishing the lack of good faith, after consideration of the factors set forth in Tech-Bilt v. Woodward-Clyde & Assoc. (1985) 38 Cal.3d 488, the Court finds the settlement between plaintiffs and Meridian to be in the proverbial ballpark of a good faith settlement. Meridian was no longer the property manager at the time of the incident, and plaintiff may have difficulty in establishing its knowledge of the existence of the dangerous condition, and/or awareness that it constituted a dangerous condition, such that there may have been some duty by Meridian to advise the purchaser of the property of the condition, in order to establish liability on Meridian’s behalf. Even so, Meridian has chosen to buy its peace in this action, by tendering its policy limits, the result of which is that plaintiffs will receive no less than $950,000 in settlement of their claims against Meridian. The settlement is considerable, particularly given Meridian’s potentially tenuous liability for plaintiff’s injuries. The simple fact that LCBP may have vicarious liability for Meridian’s conduct, as owner of the property at the time Meridian was its property manager, does not alter the Court’s conclusion that the settlement was entered into in good faith.

As a result, any existing cross-complaints for equitable indemnity and apportionment of fault shall be dismissed and, pursuant to Code of Civil Procedure section 877.6, subd. (c), any further claims against Meridian for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault—including any claim by LCBP for total equitable indemnity based upon its vicarious liability for Meridian’s actions—shall be barred.

The order submitted by Meridian when it filed its Application was entirely proper. Although it was erroneously prematurely executed by the Court (and would have readily been vacated by the Court had LCBP’s motion been found to have merit), upon denial of the motion to contest the good faith nature of the settlement, the Court will now reaffirm the order previously entered.