On November 9, 2011, the court heard argument on defendant and
cross-claimant Paneltech's motion to contest the good faith settlement
between third party defendant and counter-claimant CORP*fn1
and plaintiff Horner. Jason Shane and Vince Castillo,
Lombardi, Loper & Conant, LLP, appeared for CORP. Tamara Wood, Reiner,
Simpson & Slaughter appeared for plaintiff; David MacMillan, the Costa
Law Firm, appeared for defendant/cross-claimant Paneltech
International LLC. For the reasons discussed below, the court denies
On February 10, 2009, Horner filed a complaint against Paneltech and fifty "Doe" defendants in Siskiyou County Superior Court. Paneltech removed the case to this court, relying on diversity jurisdiction. ECF No. 1. The parties stipulated to Paneltech's filing a third party complaint against CORP, which included causes of action for express written indemnity and breach of contract, implied total indemnity and contribution/apportionment of fault. ECF Nos. 10, 11.
CORP answered Paneltech's third party complaint and filed a cross-claim against Paneltech, raising claims of equitable indemnity, comparative indemnity and declaratory relief. ECF Nos. 13, 14.
On January 28, 2010, Horner filed an amended complaint, naming Paneltech and CORP as defendants. ECF No. 18. In October 2010, the parties stipulated to Horner's filing a second amended complaint, naming Paneltech, CORP and Greenbrier Industries as defendants. ECF Nos. 22-23. The parties again stipulated to Horner's filing a third amended complaint, which substituted Gunderson Rail Services LLC for the erroneously named Greenbrier Companies, Inc. ECF Nos. 29, 30. This third amended complaint states claims for negligence and products liability against defendants CORP and Paneltech. ECF No. 29.
On May 16, 2011, the parties stipulated to the dismissal of Gunderson Rail Services LLC. ECF No. 39.
CORP filed a motion for summary judgment on July 8, 2011 and, while it was pending, filed a notice of settlement and an application for a determination of good faith settlement under section 877.6 of the California Code of Civil Procedure. ECF Nos. 64-65.
Under section 877 of the California Code of Civil Procedure, when a release or dismissal is "given in good faith" to "one or more of a number of tortfeasors claimed to be liable for the same tort," the release "shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors." Section 877.6(a) provides that any party to an action "shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff and one or more alleged tortfeasors. The initial application for approval of a settlement may be relatively "barebones," outlining "the ground of good faith, accompanied by a declaration which sets forth a brief background of the case. . . ." City of Grand Terrace v. Superior Court, 192 Cal.App.3d 1251, 1261 (1987).*fn2 This showing shifts the burden to any non-settling defendant who objects to the settlement; if the objector files declarations, the settling party may file responsive counterdeclarations. Id. at 1261-62. The hearing contemplated by the statute may be conducted on these declarations and counterdeclarations. See Nutrition Now, Inc. v. Superior Court, 105 Cal.App.4th 209, 213 (2003). Federal courts sitting in diversity or hearing state law claims based on supplemental jurisdiction use this framework in evaluating a proposed settlement. Mason and Dixon Intermodal, Inc. v. Lapmaster International LLC., 632 F.3d 1056, 1060 (9th Cir. 2011); Federal Savings and Loan. Ins. Corp. v. Butler, 904 F.2d 505, 511 (9th Cir. 1990).
In Tech-Bilt, Inc v. Woodward-Clyde & Associates, 38 Cal.3d 488, 491 (1985), the California Supreme Court examined "the meaning of the phrase 'settlement made in good faith' as used in Code of Civil Procedure section 877.6." After examining the case law, the court concluded that:
A more appropriate definition of 'good faith,' . . .in keeping with the policies of the statute, would enable the trial court to inquire, among other things, whether the amount of the settlement is within the reasonable range of the settling tortfeasor's proportional share of comparative liability for the plaintiff's injuries. This is not to say that bad faith is 'established by a showing that a settling defendant paid less than his theoretical proportionate or fair share.' Such a rule would unduly discourage settlements. 'For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote. And even where the claimant's damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively uninsured, or underinsured, joint tortfeasor.' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . But these considerations do not lead to the conclusion that the amount of the settlement is irrelevant in determining good faith. Rather, . . . a number of factors [must] be taken into account, including a rough approximation of plaintiff's total recovery and the settlor's proportionate liability, the amount paid in settlement, the allocation of the settlement proceeds among plaintiffs, and a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. Other relevant considerations include the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of non-settling defendants. Finally, practical considerations require that the evaluation be made on the basis of information available at the time of settlement.
Id. at 499 (internal citations omitted). Another consideration is the potential for indemnity to a non-settling defendant. Long Beach Memorial Medical Center v. Superior Court, 172 Cal.App.4th 865, 873 (2009); Holmes v. Home Depot USA, Inc., 2009 WL 2030898, at *3 (E.D. Cal. July 9, 2009). The party who asserts the lack of good faith should be permitted to show "that the settlement is so far 'out of the ballpark' in relation to these factors as to be inconsistent with the equitable objectives of the statute." Tech-Bilt, 38 Cal.3d at 499-500.
B. The Challenged Settlement
Plaintiff Horner filed this action to recover damages for injuries he suffered on February 12, 2007 at the lumber yard of Roseburg Forest Products, when a chain binder attached to a log bunk on a railcar broke as he was adjusting it, causing him to fall. Paneltech leased the railcar from GE Railcar Services and owned the chain binder and log bunk; ...