This is a Motion for Determination of Good Faith Settlement brought by Defendants Western Pacific Housing, Inc. dba D.R. Horton America’sBuilders and all enrolled WRAP subcontractors including the following named subcontractors:  (1)Edgington Plumbing Inc.; (2)Joe Bryson dba Joe Bryson Heating and Air Conditioning; (3) Midcal Plastering, Inc. dba Quality Plastering Corporation; (4) Petersen-Dean Roofing; (5) W.L. Hickey and Sons, Inc.; (6) Dennis Boatwright dba Pacific Coast Waterproofing and Restoration; (7) Adept Painting and Plastering, Inc.; (8) CKL Construction Inc.; (9) Balfour Cauling and Waterproofing (hereinafter “Named Subcontractors”) and the following unnamed subcontractors; (1) Air Design; (2) American Electrical Services; (3) Barbosa Cabinets, Inc.; (4) Blue Ribbon Stairs, Inc.; (5) Cary Construction; (6) Certified Products and Hardware; (7) Coast Drywall Inc.; (8) Coast Insulation Contractors, Inc. dba Coast Building Products; (9) Conco Cement Company; (10) Cultured Marble Products; (11) Custom Building Products; (12) EZ Electrical;  (13) F. Rodgers Insulation; (14) Homeready, Inc.; (15) The Invironmental Residential; (16) Kenyon Construction; (17) Knight Roofing; (18) L.I. Metal Systems; (19) Larson Steel, Inc.; (20) Melody Lighting, Inc.; (21) Milgard Manufacturing, Inc.; (22) Overhead Door of SCV; (23) Plamar USA, Inc.; (24) Poured Floors dba Aerolite Concrete; (25) Rimi Security; (26) Superior Automatic Sprinkler Company; (27) T and D Tile; (28) Technibuilders Iron; (29) Western Building Specialties; and (30) Western Shower Doors (hereinafter “Unnamed Subcontractors”).(Collectively referred to as the “settling defendants”).

 

This is a construction defect action involving a large condominium project commonly known as Parc Place, consisting of 285 units within 37 residential buildings located in Milpitas, California.  According to the moving papers, Plaintiff Parc Place HOA (“Plaintiff”) has alleged two discreet sets of claims in the pending action.  The first set of claims relates to the performance of the exterior cladding consisting of a product manufactured by Defendant/Cross-Defendant CTS Cement Manufacturing Corp. (“CTS”).  Plaintiff alleges in this set of claims that CTS’s stucco product (“Eisenwall”) is causing corrosion of the metal lath embedded in the cement stucco applied as an exterior cladding to 31 of the 37 residential buildings and that the stucco product is also causing corrosion of the nails that attach the cement stucco cladding to the exterior wall of those same buildings. Plaintiff claims that the total damages arising out of this claim of a defective product is $12,045,688.  The second set of claims relate to the construction/installation at the project which include window and door deficiencies, mechanical and plumbing deficiencies, roofing, and stucco installation on the limited buildings where CTS’ product was not involved.  These claims are asserted against the settling defendants and according to Plaintiffs, the total amount of these claims is $7,207,499.

 

With the assistance of Special Master David Henningsen, the settling defendants/moving parties negotiated a settlement of the second set of claims referenced above (the non-CTS claims or “Non-Eisenwall Claims” as referred to in the moving papers) for a total sum of $6,100,000.  Pursuant to the moving papers, 5.5 Million of the 6.1 Million settlement figure will apply to the non-CTS/Eisenwall construction claims and the remaining $610,000 will apply to the Eisenwall claims.  Moving parties argue that the settlement meets the requisite Tech-Bilt factors as the proposed amount of the settlement is within the reasonable range of the settling defendant’s proportionate liability.  Specifically, the moving papers contend that the total amount paid in settlement is “within the ballpark” because the total value of the non-CTS set of claims is $7.2 million according to the plaintiff and the $5.5 Million paid in settlement towards these claims is more than reasonable in light of the defense’s estimated repair totals of $2.6 Million.  Moreover, the remaining $610,000 allocated to the stucco claims is approximately 86% of CTS’ estimated costs of repair for those claims.  In their papers, the settling defendants argue that the claims are unique to CTS and their product and accordingly, they have little to no exposure on those claims.

 

In opposition, CTS argues that the total value of the stucco claim is $12 Million and the settling defendants allocation of $610,000 towards the stucco claims is less than 5% of the total value of those claims and accordingly, it is “far outside” the ballpark of the settling defendant’s proportionate share of liability.  CTS further argues that there is evidence that the stucco installer, Mid Cal/Quality improperly embedded the lath on the buildings where they used CTS’ product resulting in greater exposure of the lath and nails to moisture and chlorides, thus heightening the appearance of rust in some of the samples taken from the buildings where they installed CTS’ stucco.  In addition, CTS argues that Mid Cal/Quality introduced materials with elevated chloride levels to the product, thus creating a more corrosive environment for the lath and nails.  In sum, CTS maintains that installation of the stucco is a “major issue,” and that the allocation of only $610,000 to a claim valued at $12 Million has no rational basis, goes against the evidence and does not meet the requisite Tech-Bilt factors.  Finally, CTS argues that its estimated costs of repair relied upon by the settling defendants is privileged and inadmissible as it was produced in the context of privileged mediation discussions.

 

In reply, the settling defendants argue that CTS’ opposition misapplies and conflates the Tech-Bilt standards as it applies the Tech-Bilt “ballpark” criteria to a particular allocation of the total settlement proceeds rather than the overall settlement figure.  According to the settling defendants, CTS’ criticism of the $610,000 allocation to the stucco claim is a separate and distinct issue from whether the overall settlement value ($6.1 Million) is within the “ballpark” and meets the Tech-Bilt standards.  In addition, settling defendants argue that there is a rational basis supported by the evidence for the allocation amount as experts for both Plaintiffs and settling defendants have opined that the corrosion observed at the buildings where CTS’ product was installed was entirely the result of the product itself and not a result of the negligent installation.  Finally, settling defendants argue that even if CTS were correct that the stucco installation is the only cause of the corrosion, it would bear no liability for those claims and the allocation of $610,000 would be irrelevant to CTS.

 

 

 

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.)

 

Analysis

 

The crux of the opposition set forth by CTS relates to the amount allocated to the stucco claims and not the overall value of the total settlement number.  As noted above, CTS argues that the allocation of $610,000 to a claim that is potentially worth up to $12 Million (per Plaintiff’s experts) is disproportionate to the potential liability of both the installer (Mid Cal/Quality) and the developer (Western Pacific/D.R. Horton) and there is no evidentiary showing of a rational basis for this allocation.  As noted above, the Regan Roofing case holds that the settling parties are required to furnish to the court and all parties an evidentiary showing of a rational basis for the allocations made and the credits proposed.  In the immediate case, the settling defendants have provided excerpts of deposition testimony from the Plaintiff’s experts (Conrad Christensen, P.E., David Trejo, Ph.D., P.E., Jon Asselanis and David Field) that certainly suggest that the CTS/Eisenwall claims are the result of a product defect rather than an installation defect.  For example, Expert Christensen testified that there was a “substantial difference in the condition of the lath and nails in the portland cement stucco as compared to the lath and nails in the Eisenwall stucco at Parc Place.”  He noted 50% loss in measurement to the cross-section on some of the wires and 70% loss in section on the nails where the CTS/Eisenwall product was installed as opposed to measurements showing no loss where the portland cement was installed.(See Exhibit A to the Declaration of Corban J. Porter). Accordingly, the settling parties have provided evidence suggesting a rational basis for the allocation amount in light of the testimony that the damage appears to be the result of the   product itself rather than the installation of the product.  Moreover, Reagan Roofing requires that these allocations be the result of an “atmosphere of appropriate adverseness.”  In the instant case, the settling defendants have indicated that both the overall settlement and the allocations were reached after four years of litigation and several conferences with the Special Master and Mediator, Mr. Henningsen.

 

The Court finds that CTS does not carry its burden to prove 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 proposed settlement figure of $6.1 Million is a significant sum notwithstanding the size of the damages claimed.  Moreover, the settling parties have provided evidence supporting a rational basis for the allocation towards the CTS/Eisenwall claims.  There is no evidence of any collusion, fraud or conduct aimed to injure non-settling parties.  Accordingly, the Motion for Determination of Good Faith Settlement is GRANTED.