Case Number: BC590476 Hearing Date: July 21, 2016 Dept: 51

BC590476

Motion for Good Faith Settlement Determination and Request to Continue to Conduct Discovery

Defendants Langham Hotels Pacific Corporation and Esteban Ruiz (collectively, Langham) move for a good faith settlement determination in this FEHA action. Langham filed a cross-complaint for indemnity against defendants TruStaffing, Inc. and Advanced Dynamic Solutions, Inc. (ASDI), which oppose.
The Court considered the moving, opposition, and reply papers, and rules as follows.
Good Faith Settlement Determination Standard

Any party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt, as here, is entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors. CCP § 877.6(a)(1).

The court may determine the issue of good faith of a settlement on the basis of affidavits served with the notice of hearing, and any counteraffidavits filed in response, or the court may, in its discretion, receive other evidence at the hearing. CCP § 877.6(b). The party asserting the lack of good faith has the burden of proof. CCP § 877.6(d). The objecting party may carry its burden by demonstrating that the settlement is so far “out of the ballpark” in relation to the factors set forth below. Tech-Bilt, Inc., supra, 38 Cal.3d at 498-501.

Six factors guide the good faith determination:
(1) A rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability;
(2) The amount paid in settlement;
(3) The allocation of settlement proceeds among defendants;
(4) A recognition that a settlor should pay less in settlement than it would if it were found liable after a trial;
(5) The financial conditions and insurance policy limits of settling defendants; and
(6) The existence of collusion, fraud, or tortious conduct aimed to injure the interests of the nonsettling defendants.
Ibid. Additionally, “[w]hen testing the good faith of a settlement figure, a court may enlist the guidance of the judge’s personal experience and of experts in the field. Represented by knowledgeable counsel, settlement negotiators can predict with some assurance whether a settlement is within the reasonable range permitted by the criterion of good faith.” Id. at 500.

Analysis

“The party asserting a settlement is not in “good faith” within the meaning of the statute has the burden of proof on that issue. (§ 877.6, subd. (d); Tech-Bilt v. Woodward-Clyde & Associates, supra, 38 Cal.3d at p. 499.) However, the question of whether a settlement meets the statutory requirement of ‘good faith’ presents an issue of fact.” City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1264. “At the time of the hearing, the objecting nonsettlor in many instances does not possess sufficient factual information to carry its burden of proof as to lack of good faith.” Id. at 1265.

Based on this asymmetry, the Court of Appeal has “determined that it would be appropriate for the objecting nonsettlor to move for a continuance of the hearing, if necessary, for the purpose of gathering facts, which could include further formal discovery, to support its statutory burden of proof as to all Tech-Bilt factors nonsettlors placed in issue in order that the matter can be fully and fairly litigated. Such a procedure was suggested in the recent case of Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 898 [225 Cal.Rptr. 159]. This rule shall apply to all contested good faith settlement hearings, no matter which of the Tech-Bilt factors are in issue. As we indicated earlier in this opinion, this could necessarily lead to motions for further discovery, additional declarations, and counterdeclarations by the parties and a delay in the proceedings, but this procedure will ensure that the expanded scope of the hearing dictated by Tech-Bilt will be followed, the evidence will be intelligently assessed, and the objectives of Tech-Bilt will be attained.” Ibid.

Relying on this authority, objecting parties request a 120-day continuance to conduct discovery. There is no dispute that objecting parties have conducted no formal discovery. TruStaffing’s notice of acknowledgment and receipt was filed on June 3, 2016. ASDI filed a responsive pleading on May 26, 2016. That their counsel was “aware” of this litigation last summer is not persuasive on the issue now before the court: whether the proposed settlement is in good faith. No potentially objecting party can properly rely on average settlement information alone to make the determination whether and how to oppose a potentially good faith settlement. In addition. Granting the request may also result in an agreement, or lack of opposition, to the settlement now proposed. The potentially-objecting-party’s view of the strength of the claims and defenses is an important factor in evaluating the defendants’ liability, and the objecting parties should have an opportunity to make their own independent assessment. In reply, Langham does not articulate any persuasive reason that a continuance would cause prejudice.

The question which remains is whether the full 120-day continuance is excessive. The parties should be prepared to address this issue today.

Once the new date for this hearing is set, each party will be asked to serve and file a supplemental memorandum, not to exceed 5 pages, and submit courtesy copies directly to the Department.
Counsel should also address today whether the August 4 hearing, and any others now set, should be continued until after this motion is resolved.