On April 26, 2019 a
Motion-Secondary
was filed
involving a dispute between
A., A.,
A., D.,
Ahlheim, Kimberly,
A., S.,
B., B.,
C., A.,
C., B.,
C., C.,
Christ, Alexandra,
C., M.,
D., B.,
D., D.,
Doe, Jane,
E., E.,
F., B.,
F., C.,
F., F.,
F., J.,
Flaherty, Daniel,
F., S.,
G., F.,
G., G.,
G., K.,
H., D.,
H., G.,
H., H.,
H., T.,
I., I.,
J., A.,
J., I.,
J., J.,
J., Q.,
J., R.,
K., K.,
L., A.,
L., B.,
L., C.,
L., E.,
Levin, Rachel,
L., H. A.,
L., I.,
L., K.,
L., L.,
L., T.,
Luo, Michelle,
M., A.,
M., Amanda,
M., K.,
M., L.,
M., M.,
M., N.,
M., R.,
Nail, Katharine,
Nail, Robert,
N., N.,
N., S.,
O., J.,
O., N.,
O., S.,
O., X.,
P., J.,
Plaintiffs,
P., M.,
P., O.,
P., R.,
P., S.,
Q., P.,
Q., Q.,
R., E.,
Rivera, Sylvia,
R., J.,
Rosenbaum, Amy,
R., Q.,
R., R.,
S., B.,
S., Lucas,
S., S.,
T., G.,
T., M.,
T., S.,
T., T.,
V., U.,
Wallace, Paul,
Walsh, Kelly,
W., K.,
Wong, Lawrence,
Wong, Sharlene,
W., Q.,
Y., N.,
Y., Y.,
Z., A.,
Z., Z.,
and
Chart Inc.,
Chart, Inc.,
Chart Industries, Inc., A Corporation,
Chenette, Philip,
Conaghan, Joseph,
Does 1-100, Inclusive,
Does One Through One Hundred,
Does One Through One Hundred, Inclusive,
Extron Co.,
Extron Company, A Corporation,
Givens, Carolyn,
Herbert, Dr. Carl M.,
Li, Liyun,
Pacific Fertility Center,
Pacific Fertility Center, An Unincorporated Entity,
Pacific Mso, Llc,
Praxair Distribution, Inc.,
Praxair, Inc.,
Prelude Fertility, Inc., A Corporation,
Ryan, Isabelle,
San Francisco Fertility Centers D B A Pacific,
Schriock, Eldon,
for COORDINATION
in the District Court of San Francisco County.
Preview
1 ERIN M. BOSMAN (CA SBN 204987) JOSEPH S. PICCHI (CA SBN 157102)
EBosman@mofo.com jpicchi@glattys.com
2 WILLIAM F. TARANTINO (CA SBN 215343) SUKHWINDER K. BAJWA (CA SBN 161565)
WTarantino@mofo.com sbajwa@glattys.com
3 JULIE Y. PARK (CA SBN 259929) AARON T. SCHULTZ (CA SBN 222949)
JuliePark@mofo.com aschultz@glattys.com
4 MORRISON & FOERSTER LLP GALLOWAY, LUCCHESE, EVERSON &
425 Market Street PICCHI
5 San Francisco, California 94105 2300 Contra Costa Boulevard, Suite 350
Telephone: 415.268.7000 Pleasant Hill, California 94523
6 Facsimile: 415.268.7522 Telephone: 925.930.9090
7 DAVID F. McDOWELL (CA SBN 125806) Attorneys for Defendants
DMcDowell@mofo.com PACIFIC FERTILITY CENTER,
8 MORRISON & FOERSTER LLP CARL HERBERT, ELDON SCHRIOCK,
707 Wilshire Boulevard, Suite 6000 PHILIP CHENETTE, CAROLYN GIVENS,
9 Los Angeles, California 90017 LIYUN LI and ISABELLE RYAN
Telephone: 213.892.5200
10 Facsimile: 213.892.5454 ELECTRONICALLY
11 Attorneys for Defendants
F I L E D
Superior Court of California,
PRELUDE FERTILITY, INC County of San Francisco
12 PACIFIC MSO, LLC and 08/27/2021
JOSEPH CONAGHAN Clerk of the Court
13 BY: JUDITH NUNEZ
Deputy Clerk
14 SUPERIOR COURT OF CALIFORNIA
15 COUNTY OF SAN FRANCISCO
16 COORDINATION PROCEEDING Judicial Council Coordination Proceeding
SPECIAL TITLE [RULE 3.550] Case No. CJC-19-005021
17
PACIFIC FERTILITY CASES DEFENDANTS PACIFIC MSO, LLC,
18 PRELUDE FERTILITY, INC, PACIFIC
FERTILITY CENTER, JOSEPH
19 CONAGHAN AND PFC PHYSICIANS’
MEMORANDUM OF POINTS AND
20 AUTHORITIES IN SUPPORT OF
MOTION FOR APPROVAL OF GOOD
21 FAITH SETTLEMENT
22 Date: September 23, 2021
Time: 10:30 a.m.
23
Judge: Honorable Andrew Y.S. Cheng
24 Dept.: 613
25
REDACTED VERSION
26
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 TABLE OF CONTENTS
2 Page
3 I. INTRODUCTION .............................................................................................................. 5
4 II. FACTUAL AND PROCEDURAL BACKGROUND ........................................................ 6
5 A. Procedural History of the Federal Litigation .......................................................... 6
B. Extensive Discovery Conducted in the Federal Litigation ..................................... 8
6
C. The First Bellwether Trial in the Federal Litigation Showed Chart Is
7 Responsible for Its Defective Tank That Failed on March 4, 2018 ........................ 8
D. JCCP Proceedings ................................................................................................. 10
8
E. Pending JAMS Arbitrations .................................................................................. 11
9 III. THE TERMS OF THE MASTER SETTLEMENT AGREEMENT ................................ 11
10 IV. LEGAL STANDARD ....................................................................................................... 11
11 V. THE SETTLING PARTIES NEGOTIATED THE MSA IN GOOD FAITH AND
ANY CLAIMS FOR INDEMNITY AND CONTRIBUTION AGAINST THE
12 SETTLING DEFENDANTS SHOULD BE BARRED .................................................... 12
13 A. The Settlement Funds Are Within a Reasonable Range of the Amount
Claimants Could Have Obtained at Trial or An Arbitration Hearing ................... 13
14
B. Claimants Face Significant Risks Should Litigation Continue ............................. 13
15 1. One Jury Already Found Chart Liable for the Tank 4 Incident ................ 14
16 2. Settling Defendants Have Strong Defenses to Liability ........................... 14
3. Claimants Face Additional Risk that the Limitation of Liability
17 Provision in the Informed Consents is Enforceable .................................. 15
18 C. The Remaining Tech-Bilt Factors Also Weigh in Favor of Approval .................. 18
1. The Settlement Funds Are Greater Than the Amount Available
19 Under the Settling Defendants’ Insurance Policies................................... 18
20 2. Settling Defendants Will Issue Payment to a Single Trust Fund For
Allocation to Claimants ............................................................................ 19
21 3. No Evidence of Fraud, Collusion, or Tortious Conduct Exists ................ 19
22 VI. CONCLUSION ................................................................................................................. 19
23
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 Appling v. State Farm Mut. Auto. Ins. Co.,
340 F.3d 769 (9th Cir. 2003).....................................................................................................14
5
6 Bd. of Trustees of Leland Stanford Junior Univ. v. Trump Card, Inc.,
No. 18-CV-01497-RS, 2019 WL 1436349 (N.D. Cal. Apr. 1, 2019) .......................................16
7
Britz, Inc. v. Dow Chem. Co.,
8 73 Cal. App. 4th 177 (1999) .....................................................................................................18
9 Dole Food Co., Inc. v. Super. Ct.,
242 Cal. App. 4th 894 (2015) ...................................................................................................12
10
Far West Fin. Corp. v. D & S Co.,
11
46 Cal. 3d 796 (1988) ...............................................................................................................12
12
Food Safety Net Servs. v. Eco Safe Sys. USA, Inc.,
13 209 Cal. App. 4th 1118 (2012) .................................................................................................16
14 Gackstetter v. Frawley,
135 Cal. App. 4th 1257 (2006) .................................................................................................11
15
McCarn v. Pac. Bell Dir.,
16
3 Cal. App. 4th 173 (1992) .......................................................................................................17
17
In Re Pacific Fertility Center Litigation,
18 Case No. 3:18-cv-01586 (N.D. Cal.) ................................................................................ passim
19 Peregrine Pharms., Inc. v. Clinical Supplies Mgmt., Inc.,
No. SACV 12-1608 JGB ANX, 2014 WL 3791567 (C.D. Cal. July 31, 2014) .......................17
20
Tech-Bilt, Inc. v. Woodward-Clyde & Assocs.,
21 38 Cal. 3d 488 (1985) ...................................................................................................12, 15, 18
22
Tunkl v. Regents of Univ. of Cal.,
23 60 Cal. 2d 92 (1963) .....................................................................................................16, 17, 18
24 Ward v. Cty. of Mendocino,
No. 17-CV-00911-PJH, 2019 WL 884016 (N.D. Cal. Feb. 22, 2019) .....................................19
25
Whitehurst v. Heinl,
26 No. 09-CV-04808-MEJ, 2015 WL 1738385 (N.D. Cal. Apr. 14, 2015) ..................................19
27
28
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 Statutes
2 Cal.Code Civ. Proc.
§ 877.6 ...........................................................................................................................11, 18, 19
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 I. INTRODUCTION
2 Claimants1, which includes plaintiffs in this JCCP, and the Settling Defendants2 have
3 successfully negotiated a Master Settlement Agreement (the “Agreement”) to settle fully and
4 forever all of Claimants’ claims arising out of or relating to the March 4, 2018 cryostorage tank
5 failure at Pacific Fertility Center in San Francisco, California (the “Tank 4 Incident”). Claimants
6 and the Settling Defendants (collectively, the “Settling Parties”) respectfully request the Court
7 grant this motion for an order of good faith determination of settlement.
8 More than three years have passed since the Tank 4 Incident. During that time, the
9 Settling Parties have engaged in multiple rounds of mediation and settlement negotiations with
10 the help of experienced and impartial mediators. The Agreement was reached after extensive,
11 arms-length negotiations with the assistance of the Honorable Edward A. Infante (Ret.) and
12 Adrienne Publicover, Esq. of Judicial Arbitration and Mediation Services, Inc. (“JAMS”). The
13 Agreement seeks to resolve claims pending against the Settling Defendants in In Re Pacific
14 Fertility Center Litigation, Case No. 3:18-cv-01586 (N.D. Cal.) (the “Federal Litigation”), this
15 JCCP, and all other cases and arbitrations pending with JAMS. The Settling Parties entered into
16 the Agreement following 18 months of mediation through Judge Infante and Ms. Publicover. The
17 Agreement embodies years of extensive investigation and analysis into the claims and defenses
18 arising from the Tank 4 Incident, formal written discovery and depositions in these matters, and a
19 bellwether trial in the Federal Litigation in which the jury found the tank manufacturer, Chart,
20 Inc. (“Chart”),3 primarily liable for the tank failure.
21 Strong grounds exist to grant this Motion. The allocated amount toward settlement from
22 the Settling Defendants is a reasonable amount based on the information available at the time of
23 settlement, and the settlement terms are fair to the Settling Parties. The Agreement is reasonable
24 because Claimants face substantial risk at trial or in arbitration proving the Settling Defendants’
25
1
As defined in the Master Services Agreement. (Declaration of Erin M. Bosman in Support of
26 Motion for Approval of Good Faith Settlement (“Bosman Decl.”) ¶ 3, Ex. 1.)
2
Pacific MSO, LLC (“Pacific MSO”), Prelude Fertility, Inc (“Prelude”), Pacific Fertility Center
27 (“PFC”), and Drs. Carl Herbert, Eldon Schriock, Philip Chenette, Carolyn Givens, Liyun Li, and
Isabelle Ryan (collectively “PFC Physicians”), and Joseph Conaghan (“Dr. Conaghan”).
28 3
Defendants Chart and Praxair are not parties to the Agreement.
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 proportional share of potential liability, Claimants will on average receive amounts roughly
2 approximate to total recovery that they could obtain at trial, and the settlement is otherwise fair
3 under the factors set forth by the California Supreme Court.
4 Settlement will resolve multiple lawsuits and arbitrations and provide immediate relief to
5 Claimants after over three years of litigation. As such, Settling Defendants respectfully request
6 that the Court find that the Agreement was made in good faith and bar any claims for indemnity
7 or contribution by a joint tortfeasor against the Settling Defendants.
8 II. FACTUAL AND PROCEDURAL BACKGROUND
9 The Agreement seeks to resolve the Federal Litigation and all cases and claims pending in
10 the JCCP against the Settling Defendants, and the arbitrations arising from the Tank 4 Incident
11 against the Settling Defendants. The claims arise from a March 4, 2018, incident at PFC, in which
12 a tank (manufactured by Chart) holding biological reproductive material failed. Claimants are
13 fertility patients or reproductive partners of patients at PFC whose eggs and/or embryos were
14 stored in Chart’s tank when the incident occurred. PFC, a fertility clinic in San Francisco,
15 employs the physicians at the fertility clinic who perform medical services. Pacific MSO is the
16 management services organization that provides administrative support to PFC, employs all of the
17 non-physicians (including the embryologists), and operates the embryology laboratory.
18 Dr. Conaghan is an employee of Pacific MSO and the embryology laboratory director. Prelude is
19 a majority stakeholder in Pacific MSO, but has no active role in the operation of the laboratory.
20 Settlement will resolve all Tank 4 Claims4 against the Settling Defendants.
21 A. Procedural History of the Federal Litigation
22 Shortly after the Tank 4 Incident, the first class action lawsuits related to the Tank 4
23 Incident were filed, and a consolidated class action complaint was filed May 30, 2018, titled In Re
24 Pacific Fertility Center Litigation, Case No. 3:18-cv-01586, before the Honorable Jaqueline Scott
25 Corley. (Request for Judicial Notice (“RJN”), Ex. B.) The complaint alleged claims against PFC,
26 Prelude, and Chart. (Id.) Pacific MSO was added as a party on December 5, 2018.5 (RJN, Ex. F.)
27
4
All claims arising out of the Tank 4 Incident, as defined in the Master Settlement Agreement.
28 5
The First Amended Consolidated Class Action Complaint, which named Pacific MSO, alleged
sf-4543218 6
SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 PFC moved to compel arbitration and the other defendants joined in that motion. (RJN, Exs. C-E,
2 G-I.) On March 25, 2019, Judge Corley granted PFC’s motion to compel arbitration and denied
3 Pacific MSO, Prelude, and Chart’s joinders. (RJN, Ex. N.) Pacific MSO, Prelude, and Chart
4 appealed the ruling to the Ninth Circuit and moved to stay the litigation pending their appeals.
5 (RJN, Exs. O-S.) Judge Corley declined to stay the litigation. (RJN, Ex. BB.)
6 Prelude, Pacific MSO, and Chart also filed motions to dismiss, which were granted in part
7 and denied in part. (RJN, Exs. W-Y, FF.) Judge Corley dismissed the bailment claim against
8 Prelude, the fraud-based claims against Prelude and Pacific MSO, and the failure to warn and
9 negligence failure to recall claims against Chart, but granted leave to amend. (Id., Ex. FF.)
10 Plaintiffs amended their complaint again on August 29, 2019 to conform their claims to the
11 Court’s ruling6 and defendants answered. (RJN, Exs. GG-JJ.) Substantial discovery occurred,
12 including fact and expert discovery and depositions, over the course of the federal action.
13 On appeal, the Ninth Circuit reversed the Court’s ruling on the motions to compel
14 arbitration as to Pacific MSO and Prelude and affirmed as to Chart. (RJN, Ex. OO.) The
15 representative plaintiffs proceeded with their claims in federal court against Chart and filed
16 arbitration demands with JAMS against the Settling Defendants. (Bosman Decl. ¶ 6.) Most of the
17 unnamed putative class members also filed arbitration demands with JAMS against the Settling
18 Defendants. (Id.)
19 Plaintiffs moved for class certification, which was denied. (RJN, Ex. KK, PP.) As a result,
20 individual plaintiffs filed nearly 150 lawsuits against Chart that are related and currently pending
21 in the Federal Litigation. (Bosman Decl. ¶ 6.) The first bellwether trial resulted in a verdict
22
23 the following causes of action: (1) negligence and/or gross negligence (against Prelude and
Pacific MSO); (2) negligent failure to recall (against Chart); (3) bailment (against Prelude and
24 Pacific MSO); (4) premises liability (against Prelude and Pacific MSO); (5) violations of the
Unfair Competition Law (against Prelude, Pacific MSO, Chart, and PFC); (6) violations of the
25 Consumer Legal Remedies Act (against PFC, Prelude, and Pacific MSO); (7) fraudulent
concealment (against PFC, Prelude, and Pacific MSO); (8) strict products liability – failure to
26 warn (against Chart); (9) strict products liability – manufacturing defect (against Chart); (10)
strict products liability – design defect – consumer expectations test (against Chart); and (11)
27 strict products liability – design defect – risk-utility test (against Chart).
6
Plaintiffs dropped their bailment claim and fraud-based claims against Prelude and Pacific
28 MSO.
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 against Chart and in favor of the five plaintiffs that served as class representatives. (RJN, Exs.
2 RR, TT.) The next trial against Chart is expected to start on January 31, 2022. (RJN, Ex. SS.)
3 B. Extensive Discovery Conducted in the Federal Litigation
4 The Settling Defendants participated in extensive discovery in the Federal Litigation.
5 Pacific MSO produced three 30(b)(6) witnesses to testify on its behalf, including Dr. Conaghan
6 who testified three separate times, and several additional Pacific MSO witnesses testified in their
7 individual capacity. (Bosman Decl. ¶ 4.) Prelude produced a 30(b)(6) witness. (Id.) All PFC
8 Physicians were deposed in their individual capacity, and two PFC Physicians additionally
9 testified on behalf of PFC as 30(b)(6) witnesses. (Id.) Additionally, Pacific MSO and Prelude
10 responded to numerous formal written discovery requests, including approximately 57
11 interrogatories, 78 requests for production, and 23 requests for admission, and produced around
12 5,800 documents. (Id.)
13 Pacific MSO and Prelude retained several experts, including a statistician, an
14 embryologist, a reproductive endocrinologist, and metallurgists and engineers. (Id. ¶ 5.) The
15 statistician, embryologist, and reproductive endocrinologist were used to rebut Plaintiffs’ experts’
16 opinions during the class certification phase of the Federal Litigation. (Id.) Pacific MSO and
17 Prelude would also use these experts in a future trial or arbitration hearing. (Id.)
18 Lastly, counsel for the Settling Parties, as well as Chart, attended multiple laboratory
19 inspections and tests of Tank 4 under agreed-upon protocols. (Id.) Plaintiffs’ experts relied on the
20 tank testing to show that Tank 4 failed due a crack in the tank’s interior weld. (RJN, Ex. QQ
21 (Pltfs’ Trial Brief at p. 5).) Pacific MSO and Prelude’s experts would likewise rely on the tank
22 testing in a future trial or arbitration hearing. (Bosman Decl. ¶ 5.)
23 C. The First Bellwether Trial in the Federal Litigation Showed Chart Is
Responsible for Its Defective Tank That Failed on March 4, 2018
24
In the first bellwether trial in the Federal Litigation against Chart, the jury found that
25
Chart was primarily responsible for the defects in Tank 4 that were substantial factors in causing
26
the plaintiffs’ harm. (See RJN, Ex. RR (Verdict Form).)
27
Tank 4 was manufactured in January 2012 by Chart—a leading supplier of cryogenic
28
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 containers for the IVF industry that claims to have “set the standard for storage of biological
2 materials at low temperatures.” (RJN, Ex. QQ at p. 3.) The tank was designed to maintain
3 cryogenic temperatures with minimal evaporation of liquid nitrogen, which acts as a refrigerant
4 for the biological material. (Id.) Tank 4’s vacuum insulation should have lasted 10 years and
5 gradually degraded over the life of the tank. (Id. at 3–4.) Chart told customers that its cryogenic
6 contains have a “10-year life expectancy” and that continued use after this time is normal and
7 acceptable. (Id. at 4.) Instead, the tank suddenly failed in less than 10 years, contrary to how
8 ordinary users of cryogenic containers would have reasonably expected it to perform. (Id.)
9 Post-mortem testing conducted by experts retained by plaintiffs, Chart, and Pacific MSO
10 disclosed why Tank 4’s vacuum suddenly failed. The testing revealed a crack in a weld on the
11 inside of the tank that connects the tank’s fill tube to its inner vessel. (Id. at 5.) The crack in Tank
12 4’s interior weld allowed liquid nitrogen to seep from its inner vessel into its vacuum-insulation
13 layer, where it was warmed by the surrounding laboratory air, transformed from liquid to gas, and
14 expanded to almost 700 times its original volume. (Id. at 7.) The presence of so much nitrogen
15 gas trapped between the tank’s inner and outer vessels exerted substantial pressure, causing the
16 inner vessel to implode and allowing outside air into Tank 4. (Id.)
17 Testing also showed that the weld cracked because it was too thin and experienced a
18 progressive fatigue fracture. (Id. at 8.) Chart’s design specifications called for a full-penetration
19 weld, which would completely fuse the fill tube’s fitting to the tank’s inner vessel wall and result
20 in a weld at least as thick as the base metal. (Id.) But Chart instead manufactured Tank 4 with a
21 partial-penetration weld, which, instead of complete fusion, resulted in a thinner and weaker
22 bridge between the two metal components. (Id.) Over time, the fatigue crack propagated through
23 the entire thickness of the weld and ultimately caused it to fail. (Id. at 9.)
24 Elements of Tank 4’s design also contributed to its failure. The fitting Chart used to join
25 Tank 4’s fill tube to its inner vessel was not designed to sit flush against the inner vessel—
26 although the fitting is flat, the inner vessel is curved. (Id.) The poor fit between Chart’s fitting and
27 Tank 4’s inner vessel wall contributed to the v-shaped stress concentrator that made Tank 4’s
28 weld susceptible to a fatigue fracture. (Id. at 10.) Chart could have also welded the fitting on both
sf-4543218 9
SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 sides of the inner vessel instead of only one, resulting in a more robust weld, but it did not. (Id.)
2 Further, Chart knew that Tank 4’s TEC 3000 electronic controller that PFC was using to
3 monitor the tank’s conditions was defective several years before the incident but failed to recall or
4 retrofit the controller. (Id. at 11-14.) As a result of Chart’s defective tank and controller,
5 plaintiffs’ eggs and embryos stored in Tank 4 during the March 4, 2018 incident were subjected
6 to potentially hazardous conditions.
7 The jury found: (1) Tank 4 contained a manufacturing defect, (2) Tank 4 failed to perform
8 as safely as an ordinary user of cryogenic storage tanks would have expected, (3) the benefits of
9 the tank’s design did not outweigh the design risks, (4) Chart knew that Tank 4’s controller was
10 dangerous but failed to recall or retrofit the controller, and (5) that these defects were substantial
11 factors in causing harm to plaintiffs. (RJN, Ex. RR (Verdict Form).) The jury awarded nearly $15
12 million in total damages to the five plaintiffs and allocated 90 percent of the fault to Chart. (Id.)
13 Chart faces over 100 additional trials in the Federal Litigation arising from the Tank 4
14 Incident. (RJN, Ex. A.) While questions of specific causation and damages may vary among the
15 remaining plaintiffs, extensive evidence exists demonstrating Chart’s liability for the incident as
16 evidenced in the first bellwether trial.
17 D. JCCP Proceedings
18 Claimants not involved in the Federal Litigation filed 60 individual lawsuits in California
19 state courts against PFC, Pacific MSO, Prelude, and Chart.7 (Bosman Decl. ¶ 7.) The cases were
20 coordinated and are currently pending before this Court. (Id.) PFC filed a motion to compel
21 arbitration before the Hon. Teri L. Jackson and the remaining defendants joined in that motion.
22 (Id.) Plaintiffs and PFC subsequently stipulated to proceed in arbitration. (Id.) Judge Jackson
23 denied the remaining defendants’ joinders, and they appealed. (Id.) The JCCP remains stayed
24 pending the appeals, which are ongoing.8 (Id.)
25
26
7
All but one lawsuit was originally filed in San Francisco Superior Court. (Bosman Decl. ¶ 7.)
27 8
Pacific MSO and Prelude have stayed their appeal due to the settlement and this pending
motion. (Id.)
28
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 settlements. Far West, 46 Cal. 3d at 810.
2 A settlement is made in “good faith” where “the amount of the settlement is within the
3 reasonable range of the settling tortfeasor’s proportional share of comparative liability for the
4 plaintiff’s injuries.” Tech-Bilt, Inc. v. Woodward-Clyde & Assocs., 38 Cal. 3d 488, 499 (1985).
5 Courts generally consider the following non-exhaustive Tech-Bilt factors, where applicable:
6 (1) a rough approximation of the plaintiff’s total recovery and the
settlor’s proportionate liability;
7
(2) the amount paid in settlement;
8 (3) the allocation of settlement proceeds among plaintiffs;
9 (4) a recognition that a settlor should pay less in settlement than if
found liable after a trial;
10 (5) the financial conditions and insurance policy limits of settling
defendants; and
11
(6) the existence of collusion, fraud, or tortious conduct aimed to
12 injure the interests of nonsettling defendants.
13 Dole Food Co., Inc. v. Super. Ct., 242 Cal. App. 4th 894 (2015) (citing Tech-Bilt, 38 Cal.
14 3d at 499). When there is an objection to the settlement, the party asserting lack of good faith
15 bears the burden to prove that the settlement “is so far ‘out of the ballpark’ in relation to these
16 factors as to be inconsistent with the equitable objectives of the statute.” Tech-Bilt, 38 Cal. 3d at
17 499-500.
18 V. THE SETTLING PARTIES NEGOTIATED THE MSA IN GOOD FAITH
AND ANY CLAIMS FOR INDEMNITY AND CONTRIBUTION AGAINST
19 THE SETTLING DEFENDANTS SHOULD BE BARRED
20 When determining whether a settlement was made in good faith, the Court need not and
21 should not conduct “a minitrial” to determine the good faith nature of the settlement as such a rule
22 would “unduly discourage settlements.” Tech-Bilt, 38 Cal. 3d at 499. The Master Settlement
23 Agreement reasonably compensates Claimants for the Settling Defendants’ proportional share of
24 potential liability, and the settlement amount is reasonable under the Tech-Bilt factors. First, the
25 settlement is within a reasonable range of the rough approximation of Claimants’ total recovery.
26 Second, the Agreement reflects Claimants’ risks of proceeding to trial or an arbitration hearing.
27 Third, the remaining Tech-Bilt factors also weigh in favor of approving the good faith settlement.
28
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SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 defenses to liability, namely that Chart is responsible for the Tank 4 failure as shown in the first
2 bellwether trial and that Claimants signed Informed Consents that contractually limit the Settling
3 Defendants’ liability. Factoring in these additional risks, the Agreement is within a reasonable
4 range of the Settling Defendants’ proportionate share of potential liability.
5 1. One Jury Already Found Chart Liable for the Tank 4 Incident
6 Chart, the tank manufacturer, is responsible for the product defects that caused the Tank 4
7 Incident. In the first bellwether trial against Chart, the jury found that Tank 4 failed primary due
8 to Chart’s conduct. (RJN, Ex. RR.) Chart’s tank vacuum was expected to last 10 years and
9 gradually degrade over the life of the tank, but instead, the tank suddenly failed in less than its life
10 expectancy contrary to an ordinary users expectations. (RJN, Ex. QQ at p. 3-4.) Chart’s tank
11 contained a manufacturing defect that caused a crack in a weld on the inside of the tank that
12 connects the tank’s fill tube to its inner vessel, which led to the tank imploding. (Id. at p. 7.)
13 Chart’s tank design was defective because the weld was too thin and it experienced a progressive
14 fatigue fracture that ultimately caused it to fail. (Id. at p. 8-9.) Chart knew the tank’s controller
15 was defective but neglected to recall or retrofit it. (Id.) The defective tank and defective controller
16 were substantial factors in causing harm to the plaintiffs, and the jury awarded $15 million in total
17 damages to five plaintiffs. (RJN, Ex. RR.)
18 Over 100 additional lawsuits against Chart are pending in the Federal Litigation arising
19 from the Tank 4 Incident. Chart may be collaterally estopped from relitigating liability issues in
20 future trials. See Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769, 775 (9th Cir. 2003)
21 (district courts have discretion to apply offensive non-mutual collateral estoppel to estop a
22 defendant from relitigating an issue which the defendant previously litigated and lost against
23 another plaintiff) (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329 (1979)). As the
24 federal plaintiffs did, the Settling Defendants will likewise show in future trials or arbitration
25 hearings that Chart is responsible for the tank failure.
26 2. Settling Defendants Have Strong Defenses to Liability
27 The Settling Defendants have strong liability defenses that make trial a substantial gamble
28 for Claimants. The Settling Defendants would present evidence to show they met the standard of
sf-4543218 14
SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 care with respect to the storage of Claimants’ biological materials; that Claimants’ damages are
2 reduced if they met their family planning goals, failed to mitigate their damages, or never tested
3 their Tank 4 tissue to determine its status after the incident; and that Chart caused Tank 4 to fail.
4 At the class certification phase of the Federal Litigation, the Settling Defendants relied on
5 their experts to show favorable outcomes for patients with tissue stored in Tank 4. At that time,
6 18 patients had had healthy babies from Tank 4 embryos transferred post-incident. (RJN, Ex. LL
7 at p. 9.) 19 percent of all patients with embryos stored in Tank 4 had attempted to thaw and
8 transfer their embryos, and approximately 71 percent of those patients had successful thaws of
9 Tank 4 tissue. (Id.) Over 26 percent of patients had comparable tissues stored in other tanks. (Id.)
10 The statistics highlight the risks Claimants face in proving damages should litigation continue.
11 Further, Claimants’ experts agree that Chart caused Tank 4 to fail as demonstrated in the
12 bellwether trial. (See generally, RJN, Ex. QQ.) Plaintiffs agree that “[a]s a result of Chart’s
13 defective weld and defective controller, [Claimants’] eggs and embryos were subjected to
14 hazardous conditions and irreparably damaged.” (Id. at p. 14.) The Settling Defendants’ experts
15 would come to the same conclusion.
16 Claimants risk that a future jury or arbitrator finds the Settling Defendants not liable for
17 Claimants’ damages, or, at minimum, finds that the Settling Defendants’ relative liability is less
18 than the 10 percent apportioned in the first bellwether in which they were not parties. The
19 settlement value recognizes this risk and that Settling Defendants “should pay less in settlement
20 than [they] would if [they] were found liable after trial.” See Tech-Bilt, 38 Cal. 3d at 499.
21 3. Claimants Face Additional Risk that the Limitation of Liability
Provision in the Informed Consents is Enforceable
22
23 Claimants’ total recovery may be limited by the respective Informed Consents that each
24 Claimant signed with PFC.10 The Informed Consents explained the procedures and risks involved
25
10
On appeal from the denial of motions to compel arbitration, the Ninth Circuit found that “the
26 claims [Plaintiffs] raise against Prelude and [Pacific] MSO are founded in and inextricably
intertwined with the terms and obligations of the [Informed Consents]” and therefore, Pacific
27 MSO and Prelude “can invoke equitable estoppel to compel Plaintiffs to arbitrate the[ir] claims.”
(RJN, Ex. OO.) The same argument would apply to allow Pacific MSO and Prelude to invoke
28 equitable estoppel to enforce the limitation of liability provisions in the Informed Consents.
sf-4543218 15
SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT
1 with Claimants’ respective treatment and include a limitation of liability provision that
2 contractually caps liability for the loss of cryopreserved eggs and/or embryos to the fees paid for
3 the services performed at PFC. The Informed Consents contain the follow language:
4 Limitation of Liability. In the normal course of thawing
cryopreserved eggs or embryos, some eggs or embryos may not
5 survive the freeze and thaw process. Accordingly, the [Patients] each
hereby waive any and all claims at law or in equity against Physician
6 arising from the loss of any or all cryopreserved eggs or embryos or
for such cryopreserved eggs or embryos’ failure to survive the thaw
7 except to the extent such loss is caused by the gross negligence or
willful misconduct of the Physician. With regard to the loss of
8 cryopreserved eggs and/or embryos attributable to the gross
negligence or willful misconduct of Physician, [Patient’s] losses with
9 respect to any such claim shall be limited to the fees paid to Physician
for the procedures performed by Physician.
10
11 (See, e.g., RJN, Ex. C (PFC’s Mem. of Ps&As ISO MTC Arb., Ex. B at p. 20).)11
12 Claimants risk extensive litigation over whether these provisions apply to limit their
13 potential damages. For example, in Stanford v. Trump Card, Inc., the court rejected the non-
14 settling defendants’ argument that the settlement did not reflect the settling defendants’
15 proportionate liability in part because a federal statute arguably applied that, if litigated, “could
16 have potentially provided for substantially lower damages liability for some or all of the Settling
17 Defendants.” Bd. of Trustees of Leland Stanford Junior Univ. v. Trump Card, Inc., No. 18-CV-
18 01497-RS, 2019 WL 1436349, at *3 (N.D. Cal. Apr. 1, 2019). The court noted that the parties
19 “risked extensive litigation over the application of th
Preview
1 ERIN M. BOSMAN (CA SBN 204987) JOSEPH S. PICCHI (CA SBN 157102) EBosman@mofo.com jpicchi@glattys.com 2 WILLIAM F. TARANTINO (CA SBN 215343) SUKHWINDER K. BAJWA (CA SBN 161565) WTarantino@mofo.com sbajwa@glattys.com 3 JULIE Y. PARK (CA SBN 259929) AARON T. SCHULTZ (CA SBN 222949) JuliePark@mofo.com aschultz@glattys.com 4 MORRISON & FOERSTER LLP GALLOWAY, LUCCHESE, EVERSON & 425 Market Street PICCHI 5 San Francisco, California 94105 2300 Contra Costa Boulevard, Suite 350 Telephone: 415.268.7000 Pleasant Hill, California 94523 6 Facsimile: 415.268.7522 Telephone: 925.930.9090 7 DAVID F. McDOWELL (CA SBN 125806) Attorneys for Defendants DMcDowell@mofo.com PACIFIC FERTILITY CENTER, 8 MORRISON & FOERSTER LLP CARL HERBERT, ELDON SCHRIOCK, 707 Wilshire Boulevard, Suite 6000 PHILIP CHENETTE, CAROLYN GIVENS, 9 Los Angeles, California 90017 LIYUN LI and ISABELLE RYAN Telephone: 213.892.5200 10 Facsimile: 213.892.5454 ELECTRONICALLY 11 Attorneys for Defendants F I L E D Superior Court of California, PRELUDE FERTILITY, INC County of San Francisco 12 PACIFIC MSO, LLC and 08/27/2021 JOSEPH CONAGHAN Clerk of the Court 13 BY: JUDITH NUNEZ Deputy Clerk 14 SUPERIOR COURT OF CALIFORNIA 15 COUNTY OF SAN FRANCISCO 16 COORDINATION PROCEEDING Judicial Council Coordination Proceeding SPECIAL TITLE [RULE 3.550] Case No. CJC-19-005021 17 PACIFIC FERTILITY CASES DEFENDANTS PACIFIC MSO, LLC, 18 PRELUDE FERTILITY, INC, PACIFIC FERTILITY CENTER, JOSEPH 19 CONAGHAN AND PFC PHYSICIANS’ MEMORANDUM OF POINTS AND 20 AUTHORITIES IN SUPPORT OF MOTION FOR APPROVAL OF GOOD 21 FAITH SETTLEMENT 22 Date: September 23, 2021 Time: 10:30 a.m. 23 Judge: Honorable Andrew Y.S. Cheng 24 Dept.: 613 25 REDACTED VERSION 26 27 28 sf-4543218 1 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 TABLE OF CONTENTS 2 Page 3 I. INTRODUCTION .............................................................................................................. 5 4 II. FACTUAL AND PROCEDURAL BACKGROUND ........................................................ 6 5 A. Procedural History of the Federal Litigation .......................................................... 6 B. Extensive Discovery Conducted in the Federal Litigation ..................................... 8 6 C. The First Bellwether Trial in the Federal Litigation Showed Chart Is 7 Responsible for Its Defective Tank That Failed on March 4, 2018 ........................ 8 D. JCCP Proceedings ................................................................................................. 10 8 E. Pending JAMS Arbitrations .................................................................................. 11 9 III. THE TERMS OF THE MASTER SETTLEMENT AGREEMENT ................................ 11 10 IV. LEGAL STANDARD ....................................................................................................... 11 11 V. THE SETTLING PARTIES NEGOTIATED THE MSA IN GOOD FAITH AND ANY CLAIMS FOR INDEMNITY AND CONTRIBUTION AGAINST THE 12 SETTLING DEFENDANTS SHOULD BE BARRED .................................................... 12 13 A. The Settlement Funds Are Within a Reasonable Range of the Amount Claimants Could Have Obtained at Trial or An Arbitration Hearing ................... 13 14 B. Claimants Face Significant Risks Should Litigation Continue ............................. 13 15 1. One Jury Already Found Chart Liable for the Tank 4 Incident ................ 14 16 2. Settling Defendants Have Strong Defenses to Liability ........................... 14 3. Claimants Face Additional Risk that the Limitation of Liability 17 Provision in the Informed Consents is Enforceable .................................. 15 18 C. The Remaining Tech-Bilt Factors Also Weigh in Favor of Approval .................. 18 1. The Settlement Funds Are Greater Than the Amount Available 19 Under the Settling Defendants’ Insurance Policies................................... 18 20 2. Settling Defendants Will Issue Payment to a Single Trust Fund For Allocation to Claimants ............................................................................ 19 21 3. No Evidence of Fraud, Collusion, or Tortious Conduct Exists ................ 19 22 VI. CONCLUSION ................................................................................................................. 19 23 24 25 26 27 28 sf-4543218 2 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769 (9th Cir. 2003).....................................................................................................14 5 6 Bd. of Trustees of Leland Stanford Junior Univ. v. Trump Card, Inc., No. 18-CV-01497-RS, 2019 WL 1436349 (N.D. Cal. Apr. 1, 2019) .......................................16 7 Britz, Inc. v. Dow Chem. Co., 8 73 Cal. App. 4th 177 (1999) .....................................................................................................18 9 Dole Food Co., Inc. v. Super. Ct., 242 Cal. App. 4th 894 (2015) ...................................................................................................12 10 Far West Fin. Corp. v. D & S Co., 11 46 Cal. 3d 796 (1988) ...............................................................................................................12 12 Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 13 209 Cal. App. 4th 1118 (2012) .................................................................................................16 14 Gackstetter v. Frawley, 135 Cal. App. 4th 1257 (2006) .................................................................................................11 15 McCarn v. Pac. Bell Dir., 16 3 Cal. App. 4th 173 (1992) .......................................................................................................17 17 In Re Pacific Fertility Center Litigation, 18 Case No. 3:18-cv-01586 (N.D. Cal.) ................................................................................ passim 19 Peregrine Pharms., Inc. v. Clinical Supplies Mgmt., Inc., No. SACV 12-1608 JGB ANX, 2014 WL 3791567 (C.D. Cal. July 31, 2014) .......................17 20 Tech-Bilt, Inc. v. Woodward-Clyde & Assocs., 21 38 Cal. 3d 488 (1985) ...................................................................................................12, 15, 18 22 Tunkl v. Regents of Univ. of Cal., 23 60 Cal. 2d 92 (1963) .....................................................................................................16, 17, 18 24 Ward v. Cty. of Mendocino, No. 17-CV-00911-PJH, 2019 WL 884016 (N.D. Cal. Feb. 22, 2019) .....................................19 25 Whitehurst v. Heinl, 26 No. 09-CV-04808-MEJ, 2015 WL 1738385 (N.D. Cal. Apr. 14, 2015) ..................................19 27 28 sf-4543218 3 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 Statutes 2 Cal.Code Civ. Proc. § 877.6 ...........................................................................................................................11, 18, 19 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 sf-4543218 4 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 I. INTRODUCTION 2 Claimants1, which includes plaintiffs in this JCCP, and the Settling Defendants2 have 3 successfully negotiated a Master Settlement Agreement (the “Agreement”) to settle fully and 4 forever all of Claimants’ claims arising out of or relating to the March 4, 2018 cryostorage tank 5 failure at Pacific Fertility Center in San Francisco, California (the “Tank 4 Incident”). Claimants 6 and the Settling Defendants (collectively, the “Settling Parties”) respectfully request the Court 7 grant this motion for an order of good faith determination of settlement. 8 More than three years have passed since the Tank 4 Incident. During that time, the 9 Settling Parties have engaged in multiple rounds of mediation and settlement negotiations with 10 the help of experienced and impartial mediators. The Agreement was reached after extensive, 11 arms-length negotiations with the assistance of the Honorable Edward A. Infante (Ret.) and 12 Adrienne Publicover, Esq. of Judicial Arbitration and Mediation Services, Inc. (“JAMS”). The 13 Agreement seeks to resolve claims pending against the Settling Defendants in In Re Pacific 14 Fertility Center Litigation, Case No. 3:18-cv-01586 (N.D. Cal.) (the “Federal Litigation”), this 15 JCCP, and all other cases and arbitrations pending with JAMS. The Settling Parties entered into 16 the Agreement following 18 months of mediation through Judge Infante and Ms. Publicover. The 17 Agreement embodies years of extensive investigation and analysis into the claims and defenses 18 arising from the Tank 4 Incident, formal written discovery and depositions in these matters, and a 19 bellwether trial in the Federal Litigation in which the jury found the tank manufacturer, Chart, 20 Inc. (“Chart”),3 primarily liable for the tank failure. 21 Strong grounds exist to grant this Motion. The allocated amount toward settlement from 22 the Settling Defendants is a reasonable amount based on the information available at the time of 23 settlement, and the settlement terms are fair to the Settling Parties. The Agreement is reasonable 24 because Claimants face substantial risk at trial or in arbitration proving the Settling Defendants’ 25 1 As defined in the Master Services Agreement. (Declaration of Erin M. Bosman in Support of 26 Motion for Approval of Good Faith Settlement (“Bosman Decl.”) ¶ 3, Ex. 1.) 2 Pacific MSO, LLC (“Pacific MSO”), Prelude Fertility, Inc (“Prelude”), Pacific Fertility Center 27 (“PFC”), and Drs. Carl Herbert, Eldon Schriock, Philip Chenette, Carolyn Givens, Liyun Li, and Isabelle Ryan (collectively “PFC Physicians”), and Joseph Conaghan (“Dr. Conaghan”). 28 3 Defendants Chart and Praxair are not parties to the Agreement. sf-4543218 5 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 proportional share of potential liability, Claimants will on average receive amounts roughly 2 approximate to total recovery that they could obtain at trial, and the settlement is otherwise fair 3 under the factors set forth by the California Supreme Court. 4 Settlement will resolve multiple lawsuits and arbitrations and provide immediate relief to 5 Claimants after over three years of litigation. As such, Settling Defendants respectfully request 6 that the Court find that the Agreement was made in good faith and bar any claims for indemnity 7 or contribution by a joint tortfeasor against the Settling Defendants. 8 II. FACTUAL AND PROCEDURAL BACKGROUND 9 The Agreement seeks to resolve the Federal Litigation and all cases and claims pending in 10 the JCCP against the Settling Defendants, and the arbitrations arising from the Tank 4 Incident 11 against the Settling Defendants. The claims arise from a March 4, 2018, incident at PFC, in which 12 a tank (manufactured by Chart) holding biological reproductive material failed. Claimants are 13 fertility patients or reproductive partners of patients at PFC whose eggs and/or embryos were 14 stored in Chart’s tank when the incident occurred. PFC, a fertility clinic in San Francisco, 15 employs the physicians at the fertility clinic who perform medical services. Pacific MSO is the 16 management services organization that provides administrative support to PFC, employs all of the 17 non-physicians (including the embryologists), and operates the embryology laboratory. 18 Dr. Conaghan is an employee of Pacific MSO and the embryology laboratory director. Prelude is 19 a majority stakeholder in Pacific MSO, but has no active role in the operation of the laboratory. 20 Settlement will resolve all Tank 4 Claims4 against the Settling Defendants. 21 A. Procedural History of the Federal Litigation 22 Shortly after the Tank 4 Incident, the first class action lawsuits related to the Tank 4 23 Incident were filed, and a consolidated class action complaint was filed May 30, 2018, titled In Re 24 Pacific Fertility Center Litigation, Case No. 3:18-cv-01586, before the Honorable Jaqueline Scott 25 Corley. (Request for Judicial Notice (“RJN”), Ex. B.) The complaint alleged claims against PFC, 26 Prelude, and Chart. (Id.) Pacific MSO was added as a party on December 5, 2018.5 (RJN, Ex. F.) 27 4 All claims arising out of the Tank 4 Incident, as defined in the Master Settlement Agreement. 28 5 The First Amended Consolidated Class Action Complaint, which named Pacific MSO, alleged sf-4543218 6 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 PFC moved to compel arbitration and the other defendants joined in that motion. (RJN, Exs. C-E, 2 G-I.) On March 25, 2019, Judge Corley granted PFC’s motion to compel arbitration and denied 3 Pacific MSO, Prelude, and Chart’s joinders. (RJN, Ex. N.) Pacific MSO, Prelude, and Chart 4 appealed the ruling to the Ninth Circuit and moved to stay the litigation pending their appeals. 5 (RJN, Exs. O-S.) Judge Corley declined to stay the litigation. (RJN, Ex. BB.) 6 Prelude, Pacific MSO, and Chart also filed motions to dismiss, which were granted in part 7 and denied in part. (RJN, Exs. W-Y, FF.) Judge Corley dismissed the bailment claim against 8 Prelude, the fraud-based claims against Prelude and Pacific MSO, and the failure to warn and 9 negligence failure to recall claims against Chart, but granted leave to amend. (Id., Ex. FF.) 10 Plaintiffs amended their complaint again on August 29, 2019 to conform their claims to the 11 Court’s ruling6 and defendants answered. (RJN, Exs. GG-JJ.) Substantial discovery occurred, 12 including fact and expert discovery and depositions, over the course of the federal action. 13 On appeal, the Ninth Circuit reversed the Court’s ruling on the motions to compel 14 arbitration as to Pacific MSO and Prelude and affirmed as to Chart. (RJN, Ex. OO.) The 15 representative plaintiffs proceeded with their claims in federal court against Chart and filed 16 arbitration demands with JAMS against the Settling Defendants. (Bosman Decl. ¶ 6.) Most of the 17 unnamed putative class members also filed arbitration demands with JAMS against the Settling 18 Defendants. (Id.) 19 Plaintiffs moved for class certification, which was denied. (RJN, Ex. KK, PP.) As a result, 20 individual plaintiffs filed nearly 150 lawsuits against Chart that are related and currently pending 21 in the Federal Litigation. (Bosman Decl. ¶ 6.) The first bellwether trial resulted in a verdict 22 23 the following causes of action: (1) negligence and/or gross negligence (against Prelude and Pacific MSO); (2) negligent failure to recall (against Chart); (3) bailment (against Prelude and 24 Pacific MSO); (4) premises liability (against Prelude and Pacific MSO); (5) violations of the Unfair Competition Law (against Prelude, Pacific MSO, Chart, and PFC); (6) violations of the 25 Consumer Legal Remedies Act (against PFC, Prelude, and Pacific MSO); (7) fraudulent concealment (against PFC, Prelude, and Pacific MSO); (8) strict products liability – failure to 26 warn (against Chart); (9) strict products liability – manufacturing defect (against Chart); (10) strict products liability – design defect – consumer expectations test (against Chart); and (11) 27 strict products liability – design defect – risk-utility test (against Chart). 6 Plaintiffs dropped their bailment claim and fraud-based claims against Prelude and Pacific 28 MSO. sf-4543218 7 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 against Chart and in favor of the five plaintiffs that served as class representatives. (RJN, Exs. 2 RR, TT.) The next trial against Chart is expected to start on January 31, 2022. (RJN, Ex. SS.) 3 B. Extensive Discovery Conducted in the Federal Litigation 4 The Settling Defendants participated in extensive discovery in the Federal Litigation. 5 Pacific MSO produced three 30(b)(6) witnesses to testify on its behalf, including Dr. Conaghan 6 who testified three separate times, and several additional Pacific MSO witnesses testified in their 7 individual capacity. (Bosman Decl. ¶ 4.) Prelude produced a 30(b)(6) witness. (Id.) All PFC 8 Physicians were deposed in their individual capacity, and two PFC Physicians additionally 9 testified on behalf of PFC as 30(b)(6) witnesses. (Id.) Additionally, Pacific MSO and Prelude 10 responded to numerous formal written discovery requests, including approximately 57 11 interrogatories, 78 requests for production, and 23 requests for admission, and produced around 12 5,800 documents. (Id.) 13 Pacific MSO and Prelude retained several experts, including a statistician, an 14 embryologist, a reproductive endocrinologist, and metallurgists and engineers. (Id. ¶ 5.) The 15 statistician, embryologist, and reproductive endocrinologist were used to rebut Plaintiffs’ experts’ 16 opinions during the class certification phase of the Federal Litigation. (Id.) Pacific MSO and 17 Prelude would also use these experts in a future trial or arbitration hearing. (Id.) 18 Lastly, counsel for the Settling Parties, as well as Chart, attended multiple laboratory 19 inspections and tests of Tank 4 under agreed-upon protocols. (Id.) Plaintiffs’ experts relied on the 20 tank testing to show that Tank 4 failed due a crack in the tank’s interior weld. (RJN, Ex. QQ 21 (Pltfs’ Trial Brief at p. 5).) Pacific MSO and Prelude’s experts would likewise rely on the tank 22 testing in a future trial or arbitration hearing. (Bosman Decl. ¶ 5.) 23 C. The First Bellwether Trial in the Federal Litigation Showed Chart Is Responsible for Its Defective Tank That Failed on March 4, 2018 24 In the first bellwether trial in the Federal Litigation against Chart, the jury found that 25 Chart was primarily responsible for the defects in Tank 4 that were substantial factors in causing 26 the plaintiffs’ harm. (See RJN, Ex. RR (Verdict Form).) 27 Tank 4 was manufactured in January 2012 by Chart—a leading supplier of cryogenic 28 sf-4543218 8 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 containers for the IVF industry that claims to have “set the standard for storage of biological 2 materials at low temperatures.” (RJN, Ex. QQ at p. 3.) The tank was designed to maintain 3 cryogenic temperatures with minimal evaporation of liquid nitrogen, which acts as a refrigerant 4 for the biological material. (Id.) Tank 4’s vacuum insulation should have lasted 10 years and 5 gradually degraded over the life of the tank. (Id. at 3–4.) Chart told customers that its cryogenic 6 contains have a “10-year life expectancy” and that continued use after this time is normal and 7 acceptable. (Id. at 4.) Instead, the tank suddenly failed in less than 10 years, contrary to how 8 ordinary users of cryogenic containers would have reasonably expected it to perform. (Id.) 9 Post-mortem testing conducted by experts retained by plaintiffs, Chart, and Pacific MSO 10 disclosed why Tank 4’s vacuum suddenly failed. The testing revealed a crack in a weld on the 11 inside of the tank that connects the tank’s fill tube to its inner vessel. (Id. at 5.) The crack in Tank 12 4’s interior weld allowed liquid nitrogen to seep from its inner vessel into its vacuum-insulation 13 layer, where it was warmed by the surrounding laboratory air, transformed from liquid to gas, and 14 expanded to almost 700 times its original volume. (Id. at 7.) The presence of so much nitrogen 15 gas trapped between the tank’s inner and outer vessels exerted substantial pressure, causing the 16 inner vessel to implode and allowing outside air into Tank 4. (Id.) 17 Testing also showed that the weld cracked because it was too thin and experienced a 18 progressive fatigue fracture. (Id. at 8.) Chart’s design specifications called for a full-penetration 19 weld, which would completely fuse the fill tube’s fitting to the tank’s inner vessel wall and result 20 in a weld at least as thick as the base metal. (Id.) But Chart instead manufactured Tank 4 with a 21 partial-penetration weld, which, instead of complete fusion, resulted in a thinner and weaker 22 bridge between the two metal components. (Id.) Over time, the fatigue crack propagated through 23 the entire thickness of the weld and ultimately caused it to fail. (Id. at 9.) 24 Elements of Tank 4’s design also contributed to its failure. The fitting Chart used to join 25 Tank 4’s fill tube to its inner vessel was not designed to sit flush against the inner vessel— 26 although the fitting is flat, the inner vessel is curved. (Id.) The poor fit between Chart’s fitting and 27 Tank 4’s inner vessel wall contributed to the v-shaped stress concentrator that made Tank 4’s 28 weld susceptible to a fatigue fracture. (Id. at 10.) Chart could have also welded the fitting on both sf-4543218 9 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 sides of the inner vessel instead of only one, resulting in a more robust weld, but it did not. (Id.) 2 Further, Chart knew that Tank 4’s TEC 3000 electronic controller that PFC was using to 3 monitor the tank’s conditions was defective several years before the incident but failed to recall or 4 retrofit the controller. (Id. at 11-14.) As a result of Chart’s defective tank and controller, 5 plaintiffs’ eggs and embryos stored in Tank 4 during the March 4, 2018 incident were subjected 6 to potentially hazardous conditions. 7 The jury found: (1) Tank 4 contained a manufacturing defect, (2) Tank 4 failed to perform 8 as safely as an ordinary user of cryogenic storage tanks would have expected, (3) the benefits of 9 the tank’s design did not outweigh the design risks, (4) Chart knew that Tank 4’s controller was 10 dangerous but failed to recall or retrofit the controller, and (5) that these defects were substantial 11 factors in causing harm to plaintiffs. (RJN, Ex. RR (Verdict Form).) The jury awarded nearly $15 12 million in total damages to the five plaintiffs and allocated 90 percent of the fault to Chart. (Id.) 13 Chart faces over 100 additional trials in the Federal Litigation arising from the Tank 4 14 Incident. (RJN, Ex. A.) While questions of specific causation and damages may vary among the 15 remaining plaintiffs, extensive evidence exists demonstrating Chart’s liability for the incident as 16 evidenced in the first bellwether trial. 17 D. JCCP Proceedings 18 Claimants not involved in the Federal Litigation filed 60 individual lawsuits in California 19 state courts against PFC, Pacific MSO, Prelude, and Chart.7 (Bosman Decl. ¶ 7.) The cases were 20 coordinated and are currently pending before this Court. (Id.) PFC filed a motion to compel 21 arbitration before the Hon. Teri L. Jackson and the remaining defendants joined in that motion. 22 (Id.) Plaintiffs and PFC subsequently stipulated to proceed in arbitration. (Id.) Judge Jackson 23 denied the remaining defendants’ joinders, and they appealed. (Id.) The JCCP remains stayed 24 pending the appeals, which are ongoing.8 (Id.) 25 26 7 All but one lawsuit was originally filed in San Francisco Superior Court. (Bosman Decl. ¶ 7.) 27 8 Pacific MSO and Prelude have stayed their appeal due to the settlement and this pending motion. (Id.) 28 sf-4543218 10 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 settlements. Far West, 46 Cal. 3d at 810. 2 A settlement is made in “good faith” where “the amount of the settlement is within the 3 reasonable range of the settling tortfeasor’s proportional share of comparative liability for the 4 plaintiff’s injuries.” Tech-Bilt, Inc. v. Woodward-Clyde & Assocs., 38 Cal. 3d 488, 499 (1985). 5 Courts generally consider the following non-exhaustive Tech-Bilt factors, where applicable: 6 (1) a rough approximation of the plaintiff’s total recovery and the settlor’s proportionate liability; 7 (2) the amount paid in settlement; 8 (3) the allocation of settlement proceeds among plaintiffs; 9 (4) a recognition that a settlor should pay less in settlement than if found liable after a trial; 10 (5) the financial conditions and insurance policy limits of settling defendants; and 11 (6) the existence of collusion, fraud, or tortious conduct aimed to 12 injure the interests of nonsettling defendants. 13 Dole Food Co., Inc. v. Super. Ct., 242 Cal. App. 4th 894 (2015) (citing Tech-Bilt, 38 Cal. 14 3d at 499). When there is an objection to the settlement, the party asserting lack of good faith 15 bears the burden to prove that the settlement “is so far ‘out of the ballpark’ in relation to these 16 factors as to be inconsistent with the equitable objectives of the statute.” Tech-Bilt, 38 Cal. 3d at 17 499-500. 18 V. THE SETTLING PARTIES NEGOTIATED THE MSA IN GOOD FAITH AND ANY CLAIMS FOR INDEMNITY AND CONTRIBUTION AGAINST 19 THE SETTLING DEFENDANTS SHOULD BE BARRED 20 When determining whether a settlement was made in good faith, the Court need not and 21 should not conduct “a minitrial” to determine the good faith nature of the settlement as such a rule 22 would “unduly discourage settlements.” Tech-Bilt, 38 Cal. 3d at 499. The Master Settlement 23 Agreement reasonably compensates Claimants for the Settling Defendants’ proportional share of 24 potential liability, and the settlement amount is reasonable under the Tech-Bilt factors. First, the 25 settlement is within a reasonable range of the rough approximation of Claimants’ total recovery. 26 Second, the Agreement reflects Claimants’ risks of proceeding to trial or an arbitration hearing. 27 Third, the remaining Tech-Bilt factors also weigh in favor of approving the good faith settlement. 28 sf-4543218 12 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 defenses to liability, namely that Chart is responsible for the Tank 4 failure as shown in the first 2 bellwether trial and that Claimants signed Informed Consents that contractually limit the Settling 3 Defendants’ liability. Factoring in these additional risks, the Agreement is within a reasonable 4 range of the Settling Defendants’ proportionate share of potential liability. 5 1. One Jury Already Found Chart Liable for the Tank 4 Incident 6 Chart, the tank manufacturer, is responsible for the product defects that caused the Tank 4 7 Incident. In the first bellwether trial against Chart, the jury found that Tank 4 failed primary due 8 to Chart’s conduct. (RJN, Ex. RR.) Chart’s tank vacuum was expected to last 10 years and 9 gradually degrade over the life of the tank, but instead, the tank suddenly failed in less than its life 10 expectancy contrary to an ordinary users expectations. (RJN, Ex. QQ at p. 3-4.) Chart’s tank 11 contained a manufacturing defect that caused a crack in a weld on the inside of the tank that 12 connects the tank’s fill tube to its inner vessel, which led to the tank imploding. (Id. at p. 7.) 13 Chart’s tank design was defective because the weld was too thin and it experienced a progressive 14 fatigue fracture that ultimately caused it to fail. (Id. at p. 8-9.) Chart knew the tank’s controller 15 was defective but neglected to recall or retrofit it. (Id.) The defective tank and defective controller 16 were substantial factors in causing harm to the plaintiffs, and the jury awarded $15 million in total 17 damages to five plaintiffs. (RJN, Ex. RR.) 18 Over 100 additional lawsuits against Chart are pending in the Federal Litigation arising 19 from the Tank 4 Incident. Chart may be collaterally estopped from relitigating liability issues in 20 future trials. See Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769, 775 (9th Cir. 2003) 21 (district courts have discretion to apply offensive non-mutual collateral estoppel to estop a 22 defendant from relitigating an issue which the defendant previously litigated and lost against 23 another plaintiff) (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329 (1979)). As the 24 federal plaintiffs did, the Settling Defendants will likewise show in future trials or arbitration 25 hearings that Chart is responsible for the tank failure. 26 2. Settling Defendants Have Strong Defenses to Liability 27 The Settling Defendants have strong liability defenses that make trial a substantial gamble 28 for Claimants. The Settling Defendants would present evidence to show they met the standard of sf-4543218 14 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 care with respect to the storage of Claimants’ biological materials; that Claimants’ damages are 2 reduced if they met their family planning goals, failed to mitigate their damages, or never tested 3 their Tank 4 tissue to determine its status after the incident; and that Chart caused Tank 4 to fail. 4 At the class certification phase of the Federal Litigation, the Settling Defendants relied on 5 their experts to show favorable outcomes for patients with tissue stored in Tank 4. At that time, 6 18 patients had had healthy babies from Tank 4 embryos transferred post-incident. (RJN, Ex. LL 7 at p. 9.) 19 percent of all patients with embryos stored in Tank 4 had attempted to thaw and 8 transfer their embryos, and approximately 71 percent of those patients had successful thaws of 9 Tank 4 tissue. (Id.) Over 26 percent of patients had comparable tissues stored in other tanks. (Id.) 10 The statistics highlight the risks Claimants face in proving damages should litigation continue. 11 Further, Claimants’ experts agree that Chart caused Tank 4 to fail as demonstrated in the 12 bellwether trial. (See generally, RJN, Ex. QQ.) Plaintiffs agree that “[a]s a result of Chart’s 13 defective weld and defective controller, [Claimants’] eggs and embryos were subjected to 14 hazardous conditions and irreparably damaged.” (Id. at p. 14.) The Settling Defendants’ experts 15 would come to the same conclusion. 16 Claimants risk that a future jury or arbitrator finds the Settling Defendants not liable for 17 Claimants’ damages, or, at minimum, finds that the Settling Defendants’ relative liability is less 18 than the 10 percent apportioned in the first bellwether in which they were not parties. The 19 settlement value recognizes this risk and that Settling Defendants “should pay less in settlement 20 than [they] would if [they] were found liable after trial.” See Tech-Bilt, 38 Cal. 3d at 499. 21 3. Claimants Face Additional Risk that the Limitation of Liability Provision in the Informed Consents is Enforceable 22 23 Claimants’ total recovery may be limited by the respective Informed Consents that each 24 Claimant signed with PFC.10 The Informed Consents explained the procedures and risks involved 25 10 On appeal from the denial of motions to compel arbitration, the Ninth Circuit found that “the 26 claims [Plaintiffs] raise against Prelude and [Pacific] MSO are founded in and inextricably intertwined with the terms and obligations of the [Informed Consents]” and therefore, Pacific 27 MSO and Prelude “can invoke equitable estoppel to compel Plaintiffs to arbitrate the[ir] claims.” (RJN, Ex. OO.) The same argument would apply to allow Pacific MSO and Prelude to invoke 28 equitable estoppel to enforce the limitation of liability provisions in the Informed Consents. sf-4543218 15 SETTLING DEFENDANTS’ MPA ISO MOTION FOR APPROVAL OF GOOD FAITH SETTLEMENT 1 with Claimants’ respective treatment and include a limitation of liability provision that 2 contractually caps liability for the loss of cryopreserved eggs and/or embryos to the fees paid for 3 the services performed at PFC. The Informed Consents contain the follow language: 4 Limitation of Liability. In the normal course of thawing cryopreserved eggs or embryos, some eggs or embryos may not 5 survive the freeze and thaw process. Accordingly, the [Patients] each hereby waive any and all claims at law or in equity against Physician 6 arising from the loss of any or all cryopreserved eggs or embryos or for such cryopreserved eggs or embryos’ failure to survive the thaw 7 except to the extent such loss is caused by the gross negligence or willful misconduct of the Physician. With regard to the loss of 8 cryopreserved eggs and/or embryos attributable to the gross negligence or willful misconduct of Physician, [Patient’s] losses with 9 respect to any such claim shall be limited to the fees paid to Physician for the procedures performed by Physician. 10 11 (See, e.g., RJN, Ex. C (PFC’s Mem. of Ps&As ISO MTC Arb., Ex. B at p. 20).)11 12 Claimants risk extensive litigation over whether these provisions apply to limit their 13 potential damages. For example, in Stanford v. Trump Card, Inc., the court rejected the non- 14 settling defendants’ argument that the settlement did not reflect the settling defendants’ 15 proportionate liability in part because a federal statute arguably applied that, if litigated, “could 16 have potentially provided for substantially lower damages liability for some or all of the Settling 17 Defendants.” Bd. of Trustees of Leland Stanford Junior Univ. v. Trump Card, Inc., No. 18-CV- 18 01497-RS, 2019 WL 1436349, at *3 (N.D. Cal. Apr. 1, 2019). The court noted that the parties 19 “risked extensive litigation over the application of th