Square 1 Bank v. Lo et al

Filing 61

ORDER by Magistrate Judge Jacqueline Scott Corley granting 52 Motion for Good Faith Settlement Determination (ahm, COURT STAFF) (Filed on 1/6/2014)

1
2
3
4
5
6
7

IN THE UNITED STATES DISTRICT COURT

8

FOR THE NORTHERN DISTRICT OF CALIFORNIA

9
10

Northern District of California

United States District Court

11
12

SQUARE 1 BANK,

13
14

Case No.: C-12-05595 JSC
ORDER GRANTING MOTION FOR
GOOD FAITH SETTLEMENT (Dkt.
No. 52)

Plaintiff,
v.

15
16
17
18

HENRY LO, and ABSOLUTELY NEW,
INC.,
Defendants.

19
20

Now pending before the Court is Defendant Absolutely New, Inc.’s (“ANI”) motion for good

21

faith settlement pursuant to California Code of Civil Procedure Section 877. (Dkt. No. 52.) No

22

party has objected to the motion. After carefully considering the filings in this case, the Court

23

GRANTS the motion. The Court further VACATES the hearing on the motion scheduled for

24

January 9, 2014.

25

LEGAL STANDARD

26

California Code of Civil Procedure Section 877.6 permits a court to approve a settlement if it

27

determines that the settlement was made in good faith. See Cal. Code Civ. P. § 877.6; see also Fed.

28

Sav. & Loan Ins. Corp. v. Butler, 904 F.2d 505, 511 (9th Cir. 1990) (holding that while the “section

1

877.6 procedures do not govern a federal action . . . the substantive provisions . . . are applicable”).

2

A finding of good faith settlement between a plaintiff and “one or more of a number of tortfeasors

3

claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to

4

contribution rights,” releases the settling defendant “from all liability for any contribution to any

5

other parties.” Cal. Civ. Code § 877(b). While the settlement does not discharge any other party

6

from liability, unless its terms so provide, “it shall reduce the claims against the others in the amount

7

stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for

8

it, whichever is the greater.” Id. at § 877(a). Section 877.6(a)(1) further provides that a

9

determination of good faith settlement within the meaning of the statute applies only to “any party to

Northern District of California

an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a

11
United States District Court

10

contract debt.” See Forman v. Gov’t Emps. Ins. Co., 920 F. Supp. 1065, 1066 (N.D. Cal. 1996).

12

Section 877.6 reflects “two major goals”: “the equitable sharing of costs among the parties at

13

fault and the encouragement of settlements.” Abbott Ford, Inc. v. Superior Court, 43 Cal. 3d 858, 872

14

(1987). A good faith examination enables the court “to inquire, among other things, whether the

15

amount of the settlement is within the reasonable range of the settling tortfeasor’s proportional share

16

of comparative liability for the plaintiff’s injuries.” Tech–Bilt, Inc. v. Woodward–Clyde & Assoc., 38

17

Cal. 3d 488, 499 (1985). When making a determination that a settlement was made in good faith

18

under section 877.6(a)(1), “the intent and policies underlying section 877.6 require that a number of

19

factors be taken into account:” (1) a rough approximation of the plaintiff’s total recovery and the

20

settlor’s proportional liability; (2) the amount paid in settlement; (3) the allocation of settlement

21

proceeds among plaintiffs; (4) the recognition that a settlor should pay less in settlement than he

22

would if he were found liable after trial; (5) the financial conditions and insurance policy limits of the

23

settling tortfeasor; and (6) the existence of collusion, fraud or tortious conduct intended to injure the

24

interests of the non-settling parties. See id. “Practical considerations” require that the evaluation “be

25

made on the basis of the information available at the time of settlement[,] and a defendant’s settlement

26

figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement,

27

would estimate the settling defendant’s liability to be.” Id. (internal citation omitted).

28

2

1

DISCUSSION

2

As an initial matter, Section 877.6’s requirement that the action comprise allegations

3

regarding joint tortfeasors and/or co-obligors on a contract debt is satisfied here. Plaintiff Square 1

4

Bank’s Amended Complaint asserts three tort claims against both ANI and Defendant Henry Lo.

5

(See Dkt. No. 8 at ¶¶ 38-41 (second claim: negligence against ANI and Lo), 42-46 (third claim:

6

impairment of collateral against ANI and Lo), 47-54 (negligent misrepresentation against ANI and

7

Lo).) Thus, ANI is a “party to an action in which it is alleged that two or more parties are joint

8

tortfeasors.” Cal. Code Civ. P. § 877.6(a)(1).

9

Turning to the terms of the settlement and the application of the Tech-Bilt factors, the Court

Northern District of California

finds that those factors favor approval of the settlement agreement. The terms of the settlement

11
United States District Court

10

agreement, among others, are: a mutual release and waiver under California Civil Code Section

12

1542, dismissal of Plaintiff’s Amended Complaint as to ANI with prejudice, and payment of

13

$450,000 from ANI’s insurer, National Union Fire Insurance Co., to Plaintiff. (See Dkt. No. 52-1.)

14

ANI’s insurer’s payment of $450,000 is consistent with a rough approximation of Plaintiff’s

15

total recovery and ANI’s proportional liability. The Amended Complaint alleges that Defendants’

16

tortious actions caused damages in excess of $5,500,000. The motion states that Plaintiff made an

17

initial demand on ANI of $975,000, but after mediation held before JAMS mediator Craig Meredith,

18

the parties settled on $450,000. ANI contends that this is a fair approximation of its proportional

19

liability because Defendant Lo, ANI’s former Chief Financial Officer, is the one ultimately

20

responsible for squandering ANI’s funds and concealing that fact from Plaintiff. Although the Court

21

makes no definitive determination concerning asset management at ANI, Defendant Lo’s admitted

22

expenditure of ANI funds for personal use supports ANI’s contention that, at least for purposes of

23

Section 877.6, Defendant Lo is primarily responsible for Plaintiff’s damages arising out of the

24

alleged tortious conduct. This Tech-Bilt factor is accordingly satisfied.

25

The Court also notes that, in regards to the fifth factor—the financial conditions and

26

insurance policy limits of the settling tortfeasor—ANI asserts that it has no assets or employees and

27

that its insurance policy is limited to $1,000,000. (Dkt. No. 52-1 ¶¶ 3-4.) Considering that ANI has

28

no money to contribute to the settlement, and in light of its insurer’s decision to contribute

3

1

approximately half of the policy limit, the Court concludes that this factor supports a determination

2

of a good faith settlement.
The Court further finds that none of the other Tech-Bilt factors weigh against finding a good

3
4

faith settlement. There is no evidence of collusion, fraud or tortious conduct between Plaintiff and

5

ANI.
CONCLUSION

6
7

For the reasons stated, the Court GRANTS the unopposed motion for good faith settlement.

8
9

IT IS SO ORDERED.

10

Northern District of California

United States District Court

11

Dated: January 6, 2014
_________________________________
JACQUELINE SCOTT CORLEY
UNITED STATES MAGISTRATE JUDGE

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

4