2012-00120411-CU-MC

Frances Ryan vs. Phillip B. Ryder

Nature of Proceeding: Determination of Good Faith Settlement

Filed By: Jones, Shannon B.

Defendants and Cross-Complainants Norcal Gold, Inc. dba RE/MAX Gold (“RE/MAX”)
and Phillip B. Ryder’s (collectively “Settling Defendants”) motion for determination of
good faith settlement is granted.

Settling Defendants’ request for judicial notice is granted.

In this action, Plaintiff alleges that numerous defendants profited by providing her with
unfavorable loans in 2005, one which was an equity loan on her existing home, and a
second purchase money loan, which loans were secured by her existing home and
issued so she could purchase and “flip” certain real property (“G Street Property”).
She alleges that Ryder induced her to take out the loans, that she lacked sufficient
funds to keep up with the loan payments and as a result her home is in foreclosure.
Ryder later became affiliated with RE/MAX and Plaintiff alleges that when she sold the
G Street Property, RE/MAX charged her a 2.5% commission which amounted to
$12,500, rather than 1% commission that Ryder promised. While Ryder was
associated with RE/MAX (October 5, 2006 to September 6, 2007), she sold the G
Street Property for a profit in excess of $100,000. The other alleged wrongful acts by
Ryder occurred while Ryder was associated with other real estate brokerages and
prior to his association with RE/MAX.

Settling Defendants seek a determination that their settlement with Plaintiff in the
amount of $7,500 is in good faith. Pursuant to the settlement, Settling Defendants will
pay Plaintiff $7,500 and Plaintiff will release all claims against RE/MAX, claims against
Ryder for the time period of his affiliation with RE/MAX (October 5, 2006 to September
6, 2007) and RE/MAX will release its cross-complaint against Plaintiff’s daughter.
Essentially, Ryder is being dismissed in his capacity as an agent of RE/MAX, and will
remain in the lawsuit except for that time period covering his affiliation with RE/MAX.
Settling Defendants maintain that the settlement is in good faith given that their
potential liability to Plaintiff is approximately $12,500, the amount Plaintiff allegedly
overpaid in commission when the G Street Property was sold. They argue that
although Plaintiffs seek damages upwards of one million dollars based on a conspiracy
theory against all defendants, those damages all relate to conduct that occurred prior
to the time Ryder was affiliated with RE/MAX and thus unrecoverable against them.

Defendants Bank of America, N.A., Countrywide Home Loans, Inc. and Dean Williams
(“Bank Defendants”) oppose the motion.

In considering whether a settlement is entered in good faith, the court considers the
following factors: (1) a rough approximation of the plaintiffs’ total recovery and the
settling party’s proportionate liability; (2) the amount to be paid in the settlement; (3)
the proposed allocation of the settlement proceeds; (4) a recognition that the settling
parties should pay less in settlement than if they were found to be liable after trial; (5)
the financial condition of the settling parties, and the insurance policy limits, if any; and
(6) the existence of collusion, fraud or tortuous conduct aimed to injure the interests of
the non-settling defendants. ( Tech-Bilt v. Woodward-Clyde & Assoc. (1985) 38 Cal.3d
488, 499.) The ultimate test 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. (Id.) Settling defendants may properly pay less than their proportional share of
the anticipated damages. In order to encourage settlement, what is required is simply
that the settlement not be grossly disproportionate to the settlor’s fair share of liability.
This determination is made based on the information available at the time of the
settlement. (Id.)

A party objecting to a proposed settlement has the burden to prove an absence of
good faith. (CCP § 877.6(d).) Specifically, that party must demonstrate that the
proposed settlement is “so far out of the ballpark” in comparison to the Tech-Bilt
factors. ( Tech-Bilt, supra, 38 Cal.3d at 499-500.)

In the instant case, the Bank Defendants primary objection to the settlement appears
to go the structure of the settlement. They reason that the settlement does not actually
dismiss Ryder, who is essentially alleged to be one of the primary bad actors, from the
lawsuit and instead only seeks to release him from liability for the time period in which
he was affiliated with RE/MAX (October 5, 2006 to September 6, 2007). Bank
Defendants argue that this situation is unprecedented, fails to achieve the finality
policy that underlies CCP § 877.6 and is especially inappropriate given Plaintiff alleged
a conspiracy. (Oppo. p. 7.) The Court rejects this argument as no authority is cited by
the Bank Defendants that a settlement which includes a release as to a party in one
capacity (e.g. Ryder in his capacity as an agent for RE/MAX) is not, for that sole
reason, entitled to a good faith determination under CCP § 877.6. Essentially, the
settlement dismisses Ryder from the action in his capacity as an agent for RE/MAX
and the Court sees no reason why the proposed structure of the settlement alone
precludes a determination that it is in good faith. Bank Defendants also complain that
Settling Defendants have not attempted to explain how this settlement would affect the
indemnity claims arising from a joint and several liability award, yet they offer no
cogent argument as to why the motion should be denied on this basis.

Bank Defendants next argue that the settlement is disproportionate given the fact that
Plaintiff’s overall demand including fees approaches $1.5 million. They argue that the
disparity between the demand and the $7,500 settlement amount alone shows that the
settlement is out of the ballpark especially because the Plaintiff has alleged a
conspiracy. Bank Defendants have failed to carry their burden to demonstrate that the
settlement is not in good faith simply by contrasting Plaintiff’s demand against the
settlement amount. Indeed, the proper focus is not the demand, but Plaintiff’s
probable recovery . (See e.g., Kohn v. Superior Court (1983) 142 Cal.App.3d 323, 328
[settlement in good faith “although sums paid may be grossly disproportionate to the
sums prayed for in the complaint, they are not out of proportion to what the trial
court might have considered the probable recovery of plaintiffs should they prove
their case”] [emphasis added].)

Here, Banking Defendants have not shown that the settlement is grossly
disproportionate to Plaintiff’s probable recovery. Settling Defendants have shown that
there are significant barriers to Plaintiff’s potential recovery which render the
settlement amount proportional to Settling Defendants’ potential liability. Indeed, at
her deposition, she was unable to offer Ryder’s claimed misrepresentation regarding
the commission related to the sale of the G Street Property. (Wood Decl. ¶ 4.)
Therefore, Plaintiff has significant hurdles to demonstrate that the commission
RE/MAX received from the sale was improper. In addition, this lawsuit was filed in
2012 and the underlying events with respect to the G Street Property occurred more
than four years prior to that date. As seen from Plaintiff’s deposition testimony, she
was unable to testify as to specific facts regarding the “discovery” of her claims which
would support the delayed discovery doctrine. (Id.) Plaintiff’s daughter testified that
she was aware as early as 2007 that Plaintiff had taken out two loans, suggesting that
Plaintiff was aware of such facts despite her allegations to the contrary and thus
weakening her delayed discovery claim. (Id. ¶ 6.) Further, as set forth in the reply

papers, Plaintiff’s total demand is subject to a number of offsets based on the fact that
she received significant sums when she purchased the G Street Property and when
she sold the property. While all of the offsets set forth in the reply papers might not
ultimately be applied to any recovery, the Court notes that at a minimum, they highlight
that Plaintiff’s claimed damages are not as substantial as Banking Defendants would
claim.

Banking Defendants’ argument regarding the proportionality hinges almost entirely on
their assertion that since Plaintiff alleged a conspiracy against all defendants in this
action, Settling Defendants are jointly and severally liable for all damages, not simply
damages related to the $12,500 commission they took on the sale of the G Street
Property. Again, however, the mere fact that Plaintiff alleges a conspiracy between all
the defendants and that the settlement is much lower than the amount demanded by
Plaintiff does not show the settlement is in bad faith. Indeed, Bank Defendants have
not shown any evidence that Plaintiff would be likely to prevail on her conspiracy claim
as against Moving Defendants. Plaintiff alleges a scheme pursuant to which she was
duped into obtaining loans to purchase the G Street Property. (See generally Second
Amended Complaint). A conspiracy ends when the last overt act in furtherance of the
conspiracy occurred. (Thompson v. Calif. Fair Plan Ass’n (1990) 221 Cal.App.3d 760,
767.) The conspiracy claims against Moving Defendants appear relatively weak at
best given that the loans were issued in 2005 and Ryder did not become affiliated with
RE/MAX until October 2006. It is entirely unclear how Plaintiff would be able to show
that RE/MAX was a part of any conspiracy formed in 2005 related to the loan
origination process or how Ryder’s, solely in his capacity as an agent for RE/MAX
between October 2006 and September 2007, had anything to do with the alleged
conspiracy.

The Court notes that Bank Defendants also claim that Ryder was involved in a
renovation of the G Street Property and Plaintiff alleges that he and RE/MAX took
payments from her to pay contractors during the December 2006 sale with whom there
were some apparent disagreements. However, this does not change the above
analysis, first, because Bank Defendants have failed to put on any evidence
establishing or even suggesting that this would demonstrate that the instant settlement
is not in good faith (e.g., that Settling Defendants had anything to do with these
disputes with the contractors or that they relate somehow to the alleged conspiracy),
and second, as Settling Defendants have pointed out in reply, Plaintiff was
represented by an attorney regarding the negotiations with the contractor.

Thus, Bank Defendants’ arguments that there is a possibility that Settling Defendants
could be jointly and severally liable for all damages in this action appears speculative
at best and does not meet their burden to show that the settlement is not in good faith.
Indeed, other than arguing that the settlement is grossly disproportionate, Bank
Defendants do not address any of the other Tech-Bilt factors. Given the above, the
Court is simply not convinced that the settlement is “so far out of the ballpark” so as
not to meet the Tech-Bilt factors.

Finally, the Court rejects Bank Defendants’ cursory request that the motion be “denied
without prejudice subject to being re-filed after the parties’ oral depositions have been
completed.” (Oppo. 10:26-28.) There are several objectives pointed out in Tech-Bilt,
supra, and one is the objective of promoting settlement. This would be impaired by an
interpretation that included rigid timelines for the settlement of cases. Or requiring
parties desirous of settlement to participate in expensive discovery. Parties should be

free to settle disputes when they perceive it is expedient and appropriate to do so.
There are procedures in effect to ensure that such settlements are “in the ballpark” and
in good faith. This case has been pending for almost two years. While in an
appropriate situation, discovery might be allowed to address the Tech-Bilt factors,
Bank Defendants make no argument as to what discovery would be required or how
any such discovery would assist them in addressing the Tech-Bilt factors. (City of
Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1265.) In any event
that authority would not allow the Court to deny the motion but rather would provide for
a continuance to complete discovery on the Tech-Bilt factors.

Bank Defendants have not met their burden to demonstrate that the settlement is not
in good faith. Settling Defendants’ motion is granted.

The notice of motion does not provide notice of the Court’s tentative ruling system as
required by CRC Rule 3.1308 and Local Rule 1.06(D). Moving counsel is ordered to
notify Opposing counsel immediately of the tentative ruling system and of the correct
department and time of the hearing and to be available at the hearing, in person, or by
telephone, in the event Opposing counsel appears without following the procedures
set forth in Local Rule 1.06(B).

The Court will sign the proposed order.