2017-00209550-CU-PN

Sourcis, Inc. vs. Faryan Afifi

Nature of Proceeding: Determination of Good Faith Settlement

Filed By: Painter, Charles S.

The motion of Defendant Samuel K. Swenson dba The Swenson Law Firm (Swenson) for determination of good faith settlement is DENIED.

Overview

This is a legal malpractice action. The plaintiffs are Sourcis, Inc. and Shahram Elli (collectively “Plaintiffs”). The defendants are Swenson and Faryan Afifi dba Afifi Law Group (Afifi) (collectively “Defendants”). According to Plaintiffs, Defendants were its co -counsel in Bravo Development Group, LLC et al. v. Shahram Elli et al., Sacramento County Superior Court Case No. 2012-133552 (the “Bravo Action”). The plaintiffs in the Bravo Action sued Plaintiffs to resolve claims arising from a business relationship. Plaintiffs contend Defendants mishandled the Bravo Action in a variety of ways. Plaintiffs’ complaint contains causes of action for professional negligence, breach of contract, breach of fiduciary duties and “Request for Trial De-Novo Following Non-Binding Fee Arbitration Award and for Declaratory Relief.”

In the complaint, Plaintiffs describe Afifi as lead counsel in the Bravo Action and Swenson as local counsel working under Afifi’s direction. (Compl., ¶ 17.) Plaintiffs also describe Swenson as their “co-counsel” charging approximately half of Afifi’s

hourly rate. (Id.) Plaintiffs allegedly entered into a fee agreement with Swenson that was separate from the one with Afifi. Swenson was not substituted into the Bravo Action until about a year after Afifi began representing Plaintiffs in the case. The instant complaint describes errors that Defendants made together as well as some they made separately. Plaintiffs allege that Swenson–not Afifi–wrongfully settled with an expert consulting in the Bravo Action by obtaining a release for himself without obtaining a release on behalf of Plaintiffs. (Id., ¶ 52.)

Plaintiffs allege various categories of damages as a result of the Bravo Action. Among other things, they allege Defendants mishandled a subpoena issued to an internet service provider and, consequently, “extremely damaging” disclosures of trade secrets and confidential information. (Compl., ¶ 25.) Plaintiffs also allege that, by the time the Bravo Action was resolved, Afifi had billed $306,000 in fees, and Swenson had billed $240,000. (Compl., ¶ 24.) Given the Bravo Action plaintiffs’ early demand to settle for $100,000, Plaintiffs describe these fees as injurious. (Id., ¶ 34.) Afifi is seeking his unpaid fees by way of a cross-complaint in this case. Swenson filed a related action against Plaintiffs for his unpaid fees. (It appears that action was dismissed.)

The settlement Swenson asks the court to approve requires him and Plaintiffs to

release their claims against each other, and for Plaintiffs to pay him $15,500 on his
claim for unpaid fees. The settlement agreement indicates Plaintiffs owe Swenson
$56,258.76 in additional unpaid fees, but that Swenson waives any right to these fees
along with his other claims against Plaintiffs.

Legal Standards

In addressing good faith, the question for the court is “whether the amount of the settlement is within the reasonable range of the settling tortfeasor’s proportional share of comparative liability for the plaintiff’s injuries.” (Tech-Bilt, 38 Cal.3d at p. 499.) A number of factors are considered in making this determination, including: “a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants.” (Id.) A settlement is not in good faith if it “is so far ‘out of the ballpark’ in relation to these factors as to be inconsistent with the equitable objectives of the statute.” (Id., pp. 499-500.) “The dual equitable goals of section 877.6 are ‘equitable sharing of costs among the parties at fault and encouragement of settlements. [Citation.]’ [Citation.]” (Long Beach Memorial Med. Ctr. v. Superior Court (2009) 172 Cal.App.4th 865, 872.)

The evaluation of the settlement must be made on the basis of information available at the time of settlement; the settlement amount “‘must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.’ [Citation.]” (Tech-Bilt, 38 Cal.3d at p. 499.)

“The party asserting the lack of good faith shall have the burden of proof on that issue.” (CCP § 877.6(d).) The party seeking a determination of good faith may file a “bare bones” motion, stating the grounds on which the determination is sought and supporting the motion with a declaration setting forth a brief background of the case and the settlement terms. (City of Grand Terrace v. Superior Court (1987) 192

Cal.App.3d 1251, 1261.) The party challenging the good faith of the settlement bears the burden of presenting evidence demonstrating that the settlement is not in good faith. (Id., pp. 1261-1262.) The moving party may then file responsive declarations or other evidence negating the asserted lack of good faith. (Id., p. 1262.)

Discussion

Swenson has filed a bare bones motion setting forth the terms of the settlement. Afifi contests the settlement’s good faith. He notes that the settling parties have not allocated any portion of the settlement to injuries for which he and Swenson are alleged to be jointly liable. Afifi argues an order approving the settlement would bar him from seeking indemnity from Swenson without affording him any setoff at trial for these injuries.

In addition, Afifi has produced evidence that Swenson was exclusively responsible for responding to the subpoena Plaintiffs allege resulted in extreme damage to their business. (See Afifi Decl., 8.) And Afifi has produced evidence that Swenson had substantial trial and pretrial responsibilities in the Bravo Action. Afifi has demonstrated the absence of good faith, and the burden fell to Swenson to produce some evidence of each of the Tech-Bilt factors.

Swenson has not met his burden. He makes arguments in the reply, but there is no supporting evidence. Without at least some evidence of Swenson’s proportionate liability on injuries for which he and Afifi are jointly charged, as well as evidence on the other Tech-Bilt factors, the court will not find the settlement to be in good faith. That Swenson is willing to relinquish part of his claim to unpaid attorney’s fees does not suffice to alter the outcome.