How to Structure the Motion

The question of whether a settlement meets the statutory requirement of good faith presents an issue of fact. (Grand Terrace, supra, 192 Cal.App.3d at p. 1264.) “A ‘good faith’ settlement does not call for perfect or even nearly perfect apportionment of liability. In order to encourage settlement, it is quite proper for a settling defendant to pay less than his proportionate share of the anticipated damages. What is required is simply that the settlement not be grossly disproportionate to the settlor’s fair share.” (Abbott Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 874-875.)

“A motion or application for determination of good faith settlement may include a request to dismiss a pleading or a portion of a pleading. The notice of motion or application for determination of good faith settlement must list each party and pleading or portion of pleading affected by the settlement and the date on which the affected pleading was filed.” (California Rules of Court: Rule 3.1382.)

Subdivision (a)(1) of section 877.6, provides for court approval of a settlement, based on a settling party’s noticed motion pursuant to CCP § 1005, which generally should include a memorandum, and ordinarily a declaration of counsel regarding the Tech-Bilt factors. (Code Civ. Proc. § 877.6(a)(1), (b); Code Civ. Proc. § 1005(a)(5); Cal. Rules of Court, Rules 3.1112(a) and 3.1113(a); Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1349.)

Subdivision (a)(2) of section 877.6, provides for a settling party to serve a notice of a settlement, an application, and proposed order. To proceed by this means, the statute requires service of the application papers, by certified mail with return receipt requested, or by personal service. (Code Civ. Proc. § 877.6(a)(2); Civ. Proc. Before Trial ¶ 12:848).

Good Faith

When the good faith nature of a settlement is uncontested, the Court need not consider and weigh the Tech-Bilt factors (see below). (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261.) “[W]hen no one objects, the barebones motion which sets forth the ground of good faith, accompanied by a declaration which sets forth a brief background of the case is sufficient.” (Id.)

“[O]nly when the good faith nature of a settlement is disputed, it is incumbent upon the trial court to consider and weigh the Tech-Bilt factors. That is to say, when no one objects, the barebones motion which sets forth the ground of good faith, accompanied by a declaration which sets forth a brief background of the case is sufficient.” (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261.)

As established by the California Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde & Associates, a settlement is in good faith if it is within the “reasonable range” of the settling tortfeasor’s share of liability for the plaintiff’s injuries, taking into consideration the facts and circumstances of the particular case. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.)

Whether the settlement was within the good faith ballpark is evaluated on the basis of information available at the time of the settlement, including a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability; the amount paid in settlement; a recognition that a settlor should pay less in settlement than if found liable after trial; the allocation of the settlement proceeds among the plaintiffs; the settlor’s financial condition and insurance policy limits, if any; and evidence of any collusion, fraud, or tortious conduct between the settlor and the plaintiffs aimed at making the nonsettling parties pay more than their fair share. (Id. at 499.) Also a consideration is the settling tortfeasor’s potential liability for indemnity to joint tortfeasors. (Far West Financial Corp. v. D & S Co. (1980) 46 Cal.3d 796, 816.) Not every factor will apply in every case. (Dole Food Co., Inc. v. Superior Court (2015) 242 Cal.App.4th 894, 909.)

The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor’s liability to be. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1262.)

Evidentiary Standard

Where an application is opposed, the moving party must show by competent evidence all Tech Bilt factors. (Mediplex of Cal. v. Sup. Ct. (1995) 34 Cal.App.4th 748, 753, fn.4; Greshko v. Los Angeles (1987) 194 Cal.App.3d 822.) "[T]he determination whether the settlement was in good faith must be based on competent, admissible evidence." (Brehm Communities v. Sup. Ct. (2001) 88 Cal.App.4th 730, 736.) A determination of a good faith settlement must be supported by substantial evidence. (Norco Delivery Service, Inc. v. Owens Corning Fiberglas (1998) 64 Cal.App.4th 955, 962.) Substantial evidence (e.g., factual declarations) that shows the nature and extent of the settling defendant's liability is required. Without such evidence, a “good faith” determination is an abuse of discretion. (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1348 (“questionable assumptions” in moving party's memorandum of points and authorities insufficient to show settlement was reasonable); Greshko v. County of Los Angeles (1987) 194 Cal.App.3d 822, 834 (attorney's declaration re settling defendant's liability insufficient where he failed to provide specific supporting facts or expert opinion).)

Insurance Policy Limits

Insurance policy limits are one factor to be considered under Tech-Bilt. They are not, however, dispositive. The only cases holding that policy limits are dispositive are cases where the settling defendant has no other assets from which to satisfy a judgment. (See, e.g., Schmid v. Sup.Ct. (1988) 205 Cal.App.3d 1244, 1249).

Response

“The party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc. § 877.6(d).)

Preemptive Opposition

In the absence of any application filed with the court, the motion to oppose a determination of good faith settlement is at best premature. “Code of Civil Procedure section 877.6 provides a mechanism by which a party can obtain a court determination that a settlement and the allocations contained therein were made in good faith. If the court determines that the settlement was made in good faith, the settling parties are entitled to the benefit of subdivision (c) of section 877.6…. No party involved in this case was seeking to obtain a trial court determination that the settlement was in good faith in order to bar a joint tortfeasor’s or co-obligor’s contribution claims. Obtaining a determination that a settlement is in bad faith is a nullity under the statute, or, put simply, has the same effect as making no motion at all—the settlement does not act as a bar to further contribution and the nonsettling defendants can continue to pursue the settling defendant for a greater share of the damages.” (Bailey v. Reliance Ins. Co. (2000) 79 Cal.App.4th 449, 457-458.)

Nonsettling Defendants

The primary purpose of the good faith requirement is to protect the interests of nonsettling defendants. (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1263.) The party challenging the good faith of a settlement “is not only a stranger to the settlement but has an understandable interest in establishing the lack of good faith in the settling parties, thus preserving the challenger’s right to contribution or partial indemnity.” (Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 889.)

“The financial stake an absent tortfeasor has in the fairness of a settlement between the plaintiff and a joint tortfeasor equates to the deprivation of a property interest, to wit: a nonsettling tortfeasor may be forced to bear a share of the liability greater than that proportionate to his fault when the plaintiff’s recovery is reduced only by the monetary amount of a prior settlement.” (Id. at 890.)

“When the parties to a settlement know, or reasonably should know, that a nonsettling tortfeasor is exposed to substantial potential liability, such that his joinder as a defendant or cross-defendant is likely, the property right of that nonsettling tortfeasor must be regarded as significant.” (Id. at 890-891.) Consequently, in the typical personal injury action each tortfeasor is potentially liable for the same injury to the plaintiff, and the full settlement by one defendant will offset a judgment against the other tortfeasors, and no allocation of the settlement among the plaintiff’s various injuries is required. (Alcal Roofing and Insulation v. Superior Court (1992) 8 Cakl.App.4th 1121, 1124.)

Joint Tortfeasors or Co-obligors

“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 shall be 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, upon giving notice in the manner provided in subdivision (b) of Section 1005.” (Code Civ. Proc., § 877.6(a)(1).) No motion has been filed by any party to determine that a settlement is in good faith pursuant to subdivision (a)(1).

“In the alternative, a settling party may give notice of settlement to all parties and to the court, together with an application for determination of good faith settlement and a proposed order. The application shall indicate the settling parties, and the basis, terms, and amount of the settlement. The notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service. Proof of service shall be filed with the court.

Within 25 days of the mailing of the notice, application, and proposed order, or within 20 days of personal service, a nonsettling party may file a notice of motion to contest the good faith of the settlement. If none of the nonsettling parties files a motion within 25 days of mailing of the notice, application, and proposed order, or within 20 days of personal service, the court may approve the settlement.

The notice by a nonsettling party shall be given in the manner provided in subdivision (b) of Section 1005.” (Code Civ. Proc. § 877.6(a)(2).)

The Court’s Decision

The determination as to whether a settlement was made in good faith is a matter left to the judge's discretion. (Dole Food Co., Inc. v Superior Court (2015) 242 CA4th 894, 909.) In making this determination, a judge should bear in mind the policy objectives behind the enactment of Code Civ. Proc. § 877.6: (1) to encourage settlements; and (2) to allocate costs equitably among multiple tortfeasors or co-obligors. (Abbott Ford, Inc. v Superior Court (1987) 43 C3d 858, 872.)

Bar Under Code of Civil Procedure § 877.6

“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.” (Code Civ. Proc. § 877.6(c).)

Surviving Code of Civil Procedure § 877.6

“A claim by a joint tortfeasor seeking neither indemnity nor contribution and which the trial court would not contemplate in determining the proportionate liability of a settling tortfeasor is not a claim for indemnity and hence survives a good faith settlement under section 877.6. If a claim is in fact one of indemnity, then it is barred pursuant to section 877.6. [¶] Indemnity has been defined as the obligation of one party to make good a loss or damage which another party has incurred.” (Cal-Jones Properties v. Evans Pacific Corp. (1989) 216 Cal.App.3d 324, 328.)

Arbitration

A good faith determination is beyond a Court's vestigial jurisdiction, because it seeks a final determination (e.g., of good faith, that all claims for equitable contribution/comparative fault against Mendoza are barred, etc.) rather than provision relief—it has a potential to interfere with the arbitrator's determination of the parties' respective liabilities. It would involve the Court making determinations regarding the value of Plaintiff's claims and the Defendants' respective liability when the parties agreed to have such issues determined by an arbitrator. (See, e.g., Briggs v. Resolution Remedies (2008) 168 Cal. App. 4th 1395, 1400-1401.)

Arbitrator’s Failure to Make a Good Faith Determination

This may be correct as a legal proposition, but the mere fact that the arbitrator cannot make an effective determination of good faith does not compel the conclusion that a Court retained the jurisdiction to do so. Arbitration is a streamlined process, and by agreeing to arbitration the parties give up certain procedures and rights which may be available in a court action. (See, e.g., Sanchez v. Carmax Auto Superstores California, LLC (2014) 224 Cal. App. 4th 398, 404.) As a result, the availability of the same remedy from the arbitrator is not determinative on the issue.

Monetary Sanctions

Under Code of Civil Procedure § 1032(b), a prevailing party is entitled to recover costs. Further, § 1032(a)(4) defines “prevailing party” to include a party in whose favor a dismissal was entered. A cross-defendant in whose favor a dismissal under Code of Civil Procedure § 877.6 is a prevailing party for the purposes of obtaining costs under Code of Civil Procedure § 1032. Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47 Cal.App.4th 886, 889-890.) In Crib Retaining Walls, a party who obtained a good faith determination regarding a settlement and, as a result, a dismissal of a cross-complaint under CCP section 877.6, filed its cost bill to claim costs as the prevailing party under Code of Civil Procedure § 1032.