Motion – Contesting good faith settlement
The motion of Defendant BKF Engineers (“BKF”) to contest the application of Plaintiff Lucky Nellen, LLC (“Plaintiff”) for determination of good faith settlement is DENIED. The Court finds the settlement was made in good faith settlement. (Code Civ. Proc., § 877.6.)
Background
Plaintiff is the owner of the commercial building at issue in this litigation. Plaintiff hired Cross- Defendant and Cross-Complainant McDevitt Construction Partners, Inc. (“McDevitt”) as the general contractor for the construction of the building. McDevitt thereafter hired Defendant BKF to provide land survey services for the construction. There is currently litigation between the parties over alleged defects in the construction. Plaintiff claims that the building was not constructed in accordance with required elevation regulations.
After a full-day mediation, Plaintiff and McDevitt entered into a settlement in this matter. The settlement provides that McDevitt will do the following: (1) pay Plaintiff $60,000; (2) release any claim to $373,874 in retained funds and interest held by Plaintiff; and (3) assign any claims it has against BKF to Plaintiff. The settlement is conditioned on approval by the Court of the good faith of the settlement.
Plaintiff applied to the Court for a determination of good faith. BKF has filed a motion contesting the good faith of the settlement.
Legal Standard
California Code of Civil Procedure section 877 provides that a release given in good faith before verdict or judgment to one or more tortfeasors "shall discharge the party to whom it is given from all liability for any contribution to any other parties." (Code Civ. Proc., § 877.) Section 877.6 establishes the procedural mechanism for determining good faith, providing that "a determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." (
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The California Supreme Court has established that courts must consider multiple factors when determining whether a settlement is in good faith including: a rough approximation of the plaintiff’s total recovery and the settlor’s proportionate liability; the amount paid in settlement; the allocation of the settlement proceeds among plaintiffs; a recognition that a settlor should pay less in settlement than he would if he were found liable after trial; settlor’s financial condition and insurance policy limits; and existence of collusion, fraud or tortious conduct. (Tech-Bilt,Inc. v.
Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.) The settling party must make a prima facie showing of these factors through counsel’s affidavits, expert declarations, or other means. (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1350, n. 6; City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261-1262.) When contested, the party asserting the lack of good faith has the burden of proof on that issue. (Code Civ. Proc., § 877.6(d).)
Discussion
As one of the settling parties, McDevitt has responded to BKF’s motion. McDevitt estimates that Plaintiff’s damages in this case are roughly $1,000,000, based on the diminution in value of the building, an estimate of $122,600 to move an electrical box, and other costs not quantified at this time. McDevitt asserts that the value of its settlement is $433,874, although it also argues that it also added additional benefits through its involvement in the case. As to proportionate liability, McDevitt argues that Plaintiff’s damages are primarily attributable to survey issues caused by other parties, and not construction defects for which it would be responsible. Nevertheless, it asserts that its settlement alone1 represents approximately 38.7 % of Plaintiff’s known damages. McDevitt has made a sufficient prima facie showing under the Tech-Bilt factors.
As the contesting party, BKF bears the burden of showing a lack of good faith. BKF argues inter alia that the total liability is understated because it should include prejudgment interest.2 It
1 There has also been a settlement with Tarnoff Engineering Corporation for $49,000. 2 Civil Code section 3287, subdivision (a) provides: “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled to also recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt.” Under this provision the test is whether the defendant (1) actually knows the amount of damages owed plaintiff, or (2) could have computed that amount from reasonably available information. (Chesapeake Industries, Inc. v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d 901,
further contends that McDevitt’s proportionate share is more than $1,000,000, because McDevitt is contractually responsible for any negligence of the subcontractors. For this reason, it argues that a payment of $60,000 is insufficient. BKF also argues that the settlement appears collusive because McDevitt assigns any rights it has against BKF to Plaintiff. BKF’s arguments are not persuasive. First, there is no reason for the Court to ignore the part of the settlement where McDevitt releases its rights to funds retained by Plaintiff.
This is not illusory consideration. Second, the finds it difficult to accept the premise that it is established that McDevitt is contractually responsible for any and all the negligence of the subcontractors. All contract provisions are subject to litigation risk and no final determinations on the scope of contractual obligations have been made. In these circumstances, a settlement which represents approximately 38% of total liability is not outside the “ballpark” of proportionate liability.
Finally, the Court rejects the claim that the settlement is suggestive of collusion because McDevitt assigns its claims against BKF to Plaintiff. Such assignments are common in these types of disputes. Moreover, if BKF is correct in its interpretation of the contractual requirements and McDevitt lacks authority to assign these claims, then BKF has not been harmed. McDevitt has simply made an assignment of little or no value. Indeed, the parties do not ascribe any value to the assignment for purposes of this motion. The assignment itself does not establish an intent to injure BKF.
For these reasons the motion contesting the good faith of the settlement is denied.
All parties must comply with Marin County Superior Court Local Rules, Rule 2.10(B) to contest the tentative decision. Parties who request oral argument are required to appear in person or remotely by ZOOM. Regardless of whether a party requests oral argument in accordance with Rule 2.10(B), the prevailing party shall prepare an order consistent with the announced ruling as required by Marin County Superior Court Local Rules, Rule 2.11.
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907.) No party has submitted information that would permit the Court to determine whether such interest would be recoverable in this case.