Chevron Environmental Management Company et al v. BKK Corporation et al
Filing
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FINDINGS and RECOMMENDATIONS on Approving SETTLEMENT Agreement and Dismissing Defendant (Crosby & Overton, Inc.) with Prejudice. [Doc. 110]. Referred to Judge O'Neill; Objections to F&R due within 15 days after being served with these Findings and Recommendations. signed by Magistrate Judge Barbara A. McAuliffe on 10/26/2012. (Herman, H)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA
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CHEVRON ENVIRONMENTAL
MANAGEMENT COMPANY
AND CHEVRON USA,
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CASE NO. 1:11-cv-1396 LJO-BAM
Plaintiffs,
FINDINGS AND RECOMMENDATIONS ON
APPROVING SETTLEMENT AGREEMENT
AND DISMISSING DEFENDANT WITH
PREJUDICE
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vs.
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(Doc. 110).
BKK CORPORATION, et. al,
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Defendants.
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/
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INTRODUCTION
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Before the Court is Plaintiffs Chevron Environmental Management Company and Chevron
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USA’s (collectively “Chevron”) Motion for Good Settlement Determination. (Doc. 110). In this
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Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) action,
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Chevron moves for a good faith settlement determination pursuant to California Code of Civil Procedure
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Section 877.6 with Defendant Crosby & Overton, Inc. (“Crosby & Overton” or “Settling Party”). (Doc.
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110). On October 16, 2012, a hearing on the motion was held. Counsel Daniel Vineyard and Courtney
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Carlson appeared in person and by telephone, respectively, on behalf of Plaintiff Chevron. Counsel Lee
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Smith appeared in person for Defendant Ranchers Cotton Oil. Counsel John Allen appeared by
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telephone for Defendants Burtch Trucking Inc., Crosby & Overton Inc., L.W. Potter Inc., MP Vacuum
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Truck Service, Ensign United States Drilling Inc., Mosaic Global Holdings Inc., and San Joaquin
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Refining Co. Counsel David Metres appeared by telephone for Defendant BKK Corporation. Counsel
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Dennis O’Keefe appeared by telephone for Defendant Golden Gate Petroleum Co. Pro se Defendants
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Roger Draucker with Defendant Kern Front Se.-35 Partner; Mary Hodges with Defendant Energy
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Productions & Sales Co. and Ron Steward with Defendant Petrominerals Corp appeared by telephone.
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For the reasons discussed below, this Court recommends that Chevron’s Motion for Good Faith
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Settlement Determination should be GRANTED.
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BACKGROUND
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Chevron is the owner of EPC Eastside Disposal Facility (the “Site”), which is located on Round
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Mountain Road in Kern County, fifteen (15) miles northeast of Bakersfield, California. Pl’s Complaint
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at ¶ 1, Doc. 1. From approximately 1971 to 1985, the Site was operated as a waste disposal facility.
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During this time, the Site received millions of gallons of oil and non-oil waste that was later disposed
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of in unlined impoundments. After site testing, the State of California determined that clean-up of the
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Site was necessary.
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As an effort to coordinate clean-up efforts with responsible parties, Chevron executed an
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Imminent and Substantial Endangerment Determination and Consent Order. The Remedial Action Plan
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for the Site was approved on February 1, 2008 by the Department of Toxic Substances Control. The
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Remedial Plan stemming from the Consent Order requires substantial remedial efforts, construction and
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long-term monitoring of the site. Chevron has paid and is currently paying the response costs associated
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with the investigation and cleanup of the EPC site.
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On August 22, 2011, Chevron filed this cost recovery action under the CERCLA, 42 U.S.C. §§
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9601-9675; alleging CERCLA causes of action, as well as contribution and/or indemnity claims against
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a number of defendants in response to releases or threatened release of hazardous substances at the Site.
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Complaint at ¶ 1. In its Complaint, Chevron alleges that the total cost of clean-up exceeds $17,000,000
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and that it is entitled to contribution and/or indemnity of the response costs from the named Defendants,
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as each are strictly, jointly and severally liable for all past and future response costs associated with the
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investigation and cleanup at the Site. Complaint at ¶ 41.
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In October 2011, Chevron began settlement negotiations with the named Defendants in order to
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reduce the significant defense costs involved with this litigation as well as costs related to each
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Defendants’ apportionment of joint and several liability. See Complaint at ¶¶ 31-42. The potential share
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of liability for each Defendant, and Chevron, was calculated by Chris Wittenbrink, President of CR
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Consulting, Inc., a management consulting firm that specializes in resolution of environmental disputes
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and litigation. See Wittenbrink Decl. at ¶¶ 1-2, Ex. 2, Doc. 110. The basis for Mr. Wittenbrink’s
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calculations was the initial estimated amount of cleanup costs, $16,830,000. See Id. at ¶3. Mr.
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Wittenbrink subtracted the total amount of settlements received at the time of the calculation,
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$3,883,445.00, as well as the financial contribution made by the owner, $1,910,138.00. Id. at ¶3. Mr.
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Wittenbrink created a formula for liability based on each transporter’s and each generator’s relative share
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of oil and non-oil volumes, as shown in operational records and manifests. Id. at ¶ 4. He then allocated
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10% of the unrecovered costs to the transporters and 90% to the generators and thereafter calculated the
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relative share according to the enumerated formula, taking into account the oil and non-oil related
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volumes, the toxicity premium, and a premium for avoidance costs and indemnity from Chevron. Id.
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at ¶¶ 3-6. Mr. Wittenbrink then assigned an approximate cost of clean-up for each Defendant, which
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Chevron used in its settlement negotiations.
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Chevron has now reached a settlement agreement with Defendant Crosby & Overton. The key
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terms of the settlement agreement are, without admitting liability and with no admission of wrongdoing:
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(1) Chevron assumes any and all obligations that the Settling Party may have to conduct and pay all costs
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related to clean-up at the Site; (2) Chevron and the Settling Party agree to mutually release existing or
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future claims related to clean up actions at the Site and Chevron further agrees to indemnify the Settling
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Party for costs incurred in connection to clean-up at the Site; and (3) the Settling Party agrees not to sue
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any other potentially responsible parties who enter into similar settlement agreements with Chevron.
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EPC Eastside Disposal Settlement Agreement, Exh. 1, Doc. 110-1.
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Chevron moves for an order approving that its settlement with Crosby & Overton is in good faith
pursuant to California Code of Civil Procedure § 877.6.
ANALYSIS
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A court sitting in diversity has discretion to determine that a settlement is in good faith pursuant
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to California Code of Civil Procedure Section 877. Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l
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LLC, 632 F.3d 1056, 1064 (9th Cir. 2011). The good faith provision of section 877 mandates that the
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courts review agreements purportedly made under its aegis to insure that such settlements appropriately
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balance the contribution statute’s dual objectives.” Tech-Bilt, Inc. v. Woodward-Clyde & Assocs., 38
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Cal. 3d 488 (Cal. 1985). The good faith provision further provides that when a settlement is determined
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by a court to have been made in good faith, the settlement “bar[s] any other joint tortfeasor or co-obligor
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from any further claims against the settling tortfeasor or co-obligor for equitable comparative
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contribution, or partial or comparative indemnity, based on comparative negligence or comparative
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fault.” CAL. CIV . PROC. CODE § 877.6(C). The party applying for a good faith settlement determination
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is required to give notice of its application to all other parties and to the court. CAL. CIV . PROC. CODE
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§ 877.6(a). “A settling tortfeasor’s section 877.6, subdivision (c) good faith settlement determination
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discharges indemnity claims by other tortfeasors, whether or not named as parties, so long as the other
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tortfeasors were given notice and an opportunity to be heard.” Gackstetter v. Frawley, 135 Cal. App.
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4th 1257, 1273 (Cal. App. 2d Dist. 2006).
To determine whether a settlement was entered into in good faith, the Courts consider the Tech-
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Bilt factors which include:
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(1) a rough approximation of plaintiff’s total recovery and the settler’s proportionate
liability; (2) the amount paid in settlement; (3) a recognition that a settler should pay less
in settlement than if found liable after trial; (4) the allocation of the settlement proceeds;
(5) the settling party’s financial condition and the availability of insurance; and (6)
evidence of any collusion, fraud or tortious conduct between the settler and the plaintiff
aimed at requiring the non-settling parties to pay more than their fair share.
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Tech-Bilt, Inc., 38 Cal.3d at 499. “Once there is a showing made by the settlor of the settlement, the
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burden of proof on the issue of good faith shifts to the nonsettlor who asserts that the settlement was not
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made in good faith.” City of Grand Terrace v. Superior Court, 192 Cal. App. 3d 1251, 1261 (1987). A
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party opposing the settlement agreement “must demonstrate . . . that the settlement is so far ‘out of the
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ballpark’ in relation to these factors as to be inconsistent with the equitable objectives of the statute.”
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Tech-Bilt, Inc., 38 Cal.3d at 499-500.
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Terms of the Chevron-Crosby & Overton Settlement Agreement
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Crosby & Overton has agreed to pay $263,045.54 to settle all of Chevron’s claims as to Crosby
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& Overton. (Doc. 110 at 3). As calculated by Mr. Wittenbrink, Crosby & Overton is likely responsible
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for at least $280,025.26 in estimated clean-up costs. Wittenbrink Decl. at ¶ 6. This represents less than
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2% of the $16,830,000 in total clean up costs. Wittenbrink Decl. at ¶ 3. Thus, the settlement amount
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is within the ballpark of Crosby & Overton’s alleged proportionate liability.
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Further, the proposed settlement with Crosby & Overton was reached after extensive settlement
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negotiations. Chevron and Crosby & Overton negotiated the settlement for approximately ten (10)
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months. Carlson Decl. at ¶ 4, Doc. 110-3. Chevron began communications with Crosby & Overton’s
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counsel in November 2011. Carlson Decl. at ¶ 5. During the negotiation period, the parties
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communicated no less than two (2) times via telephone and exchanged no less than ten (10) emails, and
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two (2) letters regarding settlement. Crosby & Overton represents that it does not oppose the motion
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for good faith settlement. Carlson Decl. at ¶ 5.
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2.
The Chevron-Crosby & Overton Settlement is in Good Faith
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The Court has reviewed Chevron’s motion for good faith settlement, its supporting declarations,
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the Tech-Bilt factors, and the lack of opposition. The Court finds that the settlement was reached in
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good faith under California Code of Civil Procedure section 877.6. All named Defendants received
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notice of the motion, the accompanying settlement amount, and the supporting declarations. The parties
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have now had an adequate opportunity to perform a complete analysis of the settlement agreements and
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express any objections or opposition. To date, no party has filed objections. Further, at the hearing on
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the motion, no party objected to the settlement. The motion is unopposed, and no party has
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demonstrated that the settlement agreement is unreasonable or inconsistent with the equitable objectives
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of Section 877.6. Moreover, no party has objected to the formula or calculations by Mr. Wittenbrink
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to determine the basis of liability for Chevron or Crosby & Overton.
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Next, the Chevron-Crosby & Overton settlement satisfies the Tech-Bilt factors. One of the most
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important Tech-Bilt factors is the proportion of liability. Toyota Motor Sales U.S.A., Inc. v. Super. Ct.,
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220 Cal. App. 3d 864, 871 (1990). A “settlement figure must not be grossly disproportionate to what
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a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.”
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Torres v. Union Pac. R. R. Co., 157 Cal. App. 3d 499, 508 (1984). The $263,045.54 Crosby & Overton
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has agreed to pay is proportionate to Crosby & Overton’s potential liability of $280,025.26 as calculated
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by Mr. Wittenbrink. Further, the Court has considered that the settlement amount is less than the amount
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Crosby & Overton may have paid had it been found liable at trial. Tech-Bilt, Inc., 38 Cal. 3d at 499.
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With regard to the remaining Tech-Bilt factors, in consideration of Crosby & Overton’s financial
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condition and insurance policy limits, Crosby & Overton does not dispute that it has sufficient finances
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and insurance to pay more than the settlement amount on any judgment that may be entered against it
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at the time of trial. Finally, no evidence suggests that the Chevron-Crosby & Overton settlement is a
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result of collusion, fraud, or tortious conduct. Indeed, the settlement was initiated during an arms-length,
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informed, and independent settlement negotiation. The settlement agreement was reached early in the
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litigation and the settlement eliminates any additional costs of discovery, motions, and trial preparation
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as to the Settling Party.
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Accordingly, the Chevron-Crosby & Overton settlement agreement is a culmination of good faith
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negotiations, and no evidence has been presented to show the amount of settlement or any other matter
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in connection with the settlement is aimed at harming the non-settling defendants. Pursuant to Section
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877.6, this Court recommends that Chevron’s settlement agreement with Crosby & Overton is in good
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faith.
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FINDINGS AND RECOMMENDATIONS
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For the reasons discussed above, this Court RECOMMENDS, that:
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Chevron’s settlement with Crosby & Overton, Inc. should be GRANTED as entered into
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in good faith within the meaning of California Code of Civil Procedure section 877.6 and
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therefore any and all claims for equitable comparative contribution, and partial and
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complete comparative indemnity, based on comparative negligence or comparative fault,
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against Crosby & Overton, Inc. be forever barred pursuant to California Code of Civil
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Procedure §877.6 (c). (Doc. 110);
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2.
Chevron’s claims against Crosby & Overton, Inc. should be DISMISSED with prejudice;
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Counsel for Chevron is DIRECTED to serve a copy of this Order on all named
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defendants.
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These Findings and Recommendations are submitted to the United States District Judge assigned
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to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and Rule 304 of the Local Rules of
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Practice for the United States District Court, Eastern District of California. Within fifteen (15) days after
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being served with these Findings and Recommendations, any party may file written objections with the
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court and serve a copy on all parties. Such a document should be captioned “Objections to Magistrate
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Judge’s Findings and Recommendations.” The district judge will review the magistrate judge’s findings
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and recommendations pursuant to Title 28 of the United States Code section 636(b)(1)(C). The parties
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are advised that failure to file objections within the specified time may waive the right to appeal the
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District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).
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IT IS SO ORDERED.
Dated:
10c20k
October 26, 2012
/s/ Barbara A. McAuliffe
UNITED STATES MAGISTRATE JUDGE
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