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Maxwell v. MortgageIT

June 1, 2010

SAMUEL MAXWELL, PLAINTIFF,
v.
MORTGAGEIT, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION RE MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT (DOC. 39)

I. INTRODUCTION

Plaintiff Samuel Maxwell‟s complaint arises out of a home mortgage refinance transaction he entered into with Defendants Union Fidelity Mortgage, Inc., Erin Reilly, and Randolph Martin ("Union Defendants") in June 2007 for approximately $358,000. The loan was subsequently purchased by Defendant MortgageIT, Inc. ("MortgageIT").

Plaintiff alleges Defendants failed to disclose and knowingly misrepresented key terms of the loan, including the interest rate and finance charges, in violation of the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. , and California‟s unfair competition law ("UCL"), codified at California Business and Professions Code § 17200 et seq . MortgageIT‟s previous motion to dismiss the TILA and UCL claims was denied. Doc. 22, filed Feb. 19 2009.

Subsequently, Plaintiff and MortgageIT entered into an arms-length agreement for the settlement of all claims and disputes involving MortgageIT, whereby MortgageIT will be dismissed with prejudice from the action in exchange for a payment of $15,000.00

Before the court for decision is MortgageIT‟s motion for determination of good faith settlement pursuant to California Code of Civil Procedure 877.6(a)(2). Doc. 39-2.

II. LEGAL STANDARD

California Code of Civil Procedure Section 877.6 provides that if a party is sued as a joint tortfeasor or co-obligor and subsequently settles the litigation, it may bring a motion for determination of the good faith of the settlement. Federal courts may enter such determinations. FSLIC v. Butler , 904 F.2d 505, 511 (9th Cir. 1990).

In Tech-Bilt, Inc. v. Woodward-Clyde & Assoc ., 38 Cal. 3d 488 (1985), the California Supreme Court articulated a liberal standard for determining good faith, requiring only that "a defendant‟s settlement figure must not be so grossly disproportionate to what a reasonable person, at the time of settlement, would estimate the settling defendant‟s liability to be." Id . at 499. "Any settlement that is not "out of the ballpark‟ will pass muster." Id . Although there is no precise formula, courts look to a variety of factors to determine what is "in the ballpark," including:

(1) a rough approximation of the plaintiff's probable total recoveries;

(2) a rough approximation of the settling defendant's proportional liability;

(3) the amount paid in settlement;

(4) the recognition that less is paid in settlement than should be ...


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