Defendant Heritage Bank of Commerce (“Heritage”) brings this Motion for an Order Determining that Defendant Bucknell, Stehlik, Sato and Stubner LLP’s (“Bucknell”)Settlement is not in Good Faith.  In its moving papers, Heritage argues that Bucknell’s proposed settlement with Plaintiffs does not meet the standards set for in Tech-Bilt, Inc. v.  Woodward-Clyde and Associates (1985)38 Cal.3^rd 499 and therefore does not constitute a “good faith” settlement as defined in CCP 877.6.  Specifically, Heritage maintains that the settlement agreement wherein Bucknell agreed to pay $700,000 to twenty-three plaintiffs is not in good faith for the following reasons: (1)  the settling parties have failed to provide any allocation of the settlement funds amongst the twenty-three plaintiffs thus making it impossible to determine a setoff or credit to the non-settling parties (i.e. Heritage); (2) the settlement has not been allocated among the causes of action asserted by the plaintiffs: (3) Bucknell has failed to provide any information about it potential liability of financial condition including insurance information; and (4) the damages sought by Plaintiff are at least 13 million dollars and the amount of the proposed settlement is disproportionately small given the limited number of remaining defendants.  Heritage further argues that the Application submitted by Bucknell is procedurally deficient because it does not comply with the requirements of CCP 877.6(a)(2) for confidential settlements.

 

Both Plaintiffs and Bucknell filed separate Opposition briefs to the immediate motion.  The points raised in the Opposition briefs are similar, so the Court will address them together.  In summary, the respective Oppositions argue that Heritage, as the moving party, has not met its burden of proving that the settlement was not in good faith because of the following reasons: (1) the settlement was the product of extensive and protracted arms-length negotiations after the Court had sustained Bucknell’s demurrer with leave to amend;  (2)  the amount of the settlement was extremely large given the tenuous theories of liability against Bucknell as evidenced by the Court’s ruling on demurrer; (3)  no allocation of the settlement proceeds is required in the instant case;  and (4)  Bucknell’s financial condition and insurance information is irrelevant because they faced no liability.  Finally, the Opposition argues that the settlement is not confidential because it allows the parties to provide information to the Court in a good faith settlement setting and any possible procedural problem is cured by the instant motion brought by Heritage.

 

In its Reply,  Heritage argues that since there is no information regarding an allocation of the settlement proceeds amongst the plaintiffs and the causes of action and there is no information about the settling party’s financial condition (including possible insurance), the Court does not have sufficient information to make a good faith settlement determination.

 

 

Legal Standards

 

California Code of Civil Procedure section 877.6 provides that a party to an action in which it is alleged that two or more parties are joint tortfeasors may seek a determination that a settlement was made in good faith.  “A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor…from any further claims against the settling tortfeasor…for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.”  (Code Civ. Proc., § 877.6, subd. (c).)  “The purpose of this statute is to bar claims against a settling tortfeasor and thereby promote settlement.”  (Cal-Jones Properties v. Evans Pacific Corp. (1989) 216 Cal.App.3d 324, 327.)

 

In Tech-Bilt, Inc. v. Woodward-Cycle & Associates (1985) 38 Cal.3d 488, the Supreme Court set forth the following factors for consideration of a proposed settlement:

 

• a rough approximation of plaintiffs’ total recovery and the settler’s proportionate liability;
• the amount paid in settlement;
• the allocation of settlement proceeds among plaintiffs;
• discount for settlement before trial;
• the financial conditions and insurance policy limits of settling defendants; and
• the existence of collusion, fraud, or tortious conduct aimed to injure the interests of non-settling defendants.

 

(Tech-Bilt, supra, 38 Cal.3d at p. 499.)

 

In determining whether a proposed settlement is made in good faith, the court may consider affidavits and counteraffidavits.  In its discretion, the Court may receive other evidence at the hearing on the motion.  (Cal. Code Civ. Proc., § 877.6, subd. (b).)  “The party asserting the lack of good faith shall have the burden of proof on that issue.”  (Cal. Code Civ. Proc., § 877.6, subd. (d).)  Bad faith may be established by “demonstrat[ing] that the settlement is so far ‘out of the ballpark’ in relation to these [Tech-Bilt] factors as to be inconsistent with the equitable objectives of the statute.”  (Tech-Bilt, supra, 38 Cal.3d at pp. 499-500.)

 

“Where there are multiple defendants, each having potential liability for different areas of damage, an allocation of the settlement amount must be made.”  (L.C. Rudd & Son, Inc. v. Superior Court (1997) 52 Cal.App.4th 742, 750.)  The failure to allocate the settlement “may preclude a ‘good faith’ determination because there is no way to determine the appropriate setoff pursuant to section 877 against the nonsettling defendant.  (Id.)  As a result, “[i]t 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.”  (Id.)  “[W]here the settling parties have failed to allocate, the trial court must allocate in the manner which is most advantageous to the nonsettling party.”  (Dillingham Construction N.A., Inc. v. Nadel Partnership (1998) 64 Cal.App.4th 264, 287.)

 

However, “the inquiry at the good faith settlement stage is not the same as the inquiry at trial, where complete precision of allocation could presumably be achieved.  Since we are dealing with a pretrial settlement, in which the factual findings or determinations made on contested issues of liability or damages are tentative, and made solely for purposes of evaluating the good faith of a settlement as of the date of the valuation [citation], we must necessarily apply a broader and more permissive standard for evaluating good faith of a settlement as to such allocation. . . . [W]hat should be required of the settling parties is that they furnish to the court and to all parties an evidentiary showing of a rational basis for the allocations made and the credits proposed.  They must also show that they reached these allocations and credit proposals in an atmosphere of appropriate adverseness so that the presumption may be applied that a reasonable valuation was reached. [Citation.]”  (Regan Roofing v. Superior Court (1994) 21 Cal.App.4th 1685, 1704.)

 

The Court finds that as to the amount of the settlement ($700,000), Heritage does not carry its burden of proving that the proposed settlement is so far out of the ballpark in relation to Tech-Bilt as to be inconsistent with the equitable objectives of the good faith settlement statute.  The legal defenses raised by Bucknell raised significant doubt about the viability of the Plaintiffs’ claims and the settlement amount of $700,000 does not appear to be disproportionate to Bucknell’s liability in the lawsuit.  Moreover, the settlement was the product of arms length negotiations and there is no evidence of fraud, collusion or intent to injure the non-settling parties.  With that said, Heritage’s argument that Bucknell failed to provide any meaningful information about its financial condition and/or insurance coverage is a valid one.  Undeniably, it is a factor to be considered amongst the stated Tech-Bilt factors and the papers are devoid of any information the Court can review in its analysis of the good faith nature of the settlement.  Similarly, Heritage’s arguments regarding the conspicuous absence of any allocation of the settlement proceeds is also a valid point.  Bucknell’s initial Application does not address the issue of allocation.  As this case involves multiple plaintiffs, multiple causes of action and multiple defendants,  the non-settling defendants are entitled to know what claims the settlement proceeds are being allocated to and the amounts of the  allocations.  Absent some allocation discussion and rational basis for how the allocations are made, the Court is not in a position to make a good faith settlement determination.

 

The motion is CONTINUED to Oct. 31, 2014.  Within 20 days, Bucknell shall submit supplemental papers discussing these proposed allocations as well as further information about its financial condition and insurance information.