ALEX SANITATION v. Real Parties in Interest.

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Court of Appeal, Second District, California.

ALEX SANITATION, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DONNA KAY PHARRIS et al., Real Parties in Interest.

B220566

Decided: February 25, 2010

Wood, Smith, Henning & Berman, David F. Wood, Joshua A. Quinones and Nicholas M. Gedo for Petitioner. No appearance for Respondent.

OPINION AND ORDER

GRANTING PEREMPTORY

WRIT OF MANDATE

Cheong, Denove, Rowell & Bennett and John D. Rowell for Real Parties in Interest Donna Kay Pharris et al.

Hosp, Gilbert, Bergsten & Hough and Robert T. Bergsten for Real Parties in Interest Smith & Thompson Pumping Co., Dorothy Ann Smith and Glenn E. Smith.

The trial court abused its discretion by denying defendant Alex Sanitation its request for a continuance of the good faith hearing so that it could have an opportunity to conduct discovery regarding defendants Smith & Thompson Pumping, Dorothy Anne Smith, Glynn E. Smith and Sherwin Pascal Smith's (collectively referred to as Smith) financial ability to pay the judgment and their insurance policies.1  Accordingly, the petition is granted.

FACTUAL AND PROCEDURAL BACKGROUND

This action arises out of the alleged unlawful dumping of harmful waste at the property owned by Smith & Thompson Pumping Company, located at 244 and 258 West Avenue L9 in Lancaster.   Forty-nine plaintiffs allege they suffered from an assortment of ailments from exposure to the harmful chemicals that were stored on the Smith property.   Plaintiffs further allege that defendant Alex Sanitation dumped harmful materials on the Smith property.

On July 9, 2009, following extensive discovery by all parties, Smith and the plaintiffs, by and through their counsel, engaged in mediation with attorney Lester Levy of JAMS. The arms length negotiations resulted in an agreement that the insurance carrier for Smith agreed on Smith's behalf to pay to plaintiffs the sum of $1,100,000.00, subject to the trial court's determination that the settlement was made in good faith.   In another action the insurance carrier filed a declaratory relief action seeking to revoke any insurance agreements.   If successful, any potential insurance coverage by the carrier will be eliminated.

Around August 25, 2009, Smith filed an application for good faith settlement determination pursuant to Code of Civil Procedure section 877.6, subdivision (a)(2).   Smith stated that the Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 (Tech-Bilt ) factors had been satisfied.   Here, the issue is whether the potential liability of the settling defendants, when evaluated on the basis of the information currently available, is proportionate to what a reasonable person, at the time of the settlement, would estimate subcontrator's liability to be.   According to Tech-Bilt, the amount must be in the “ballpark.”  (Id. at pp.   499-500.)   And Tech-Bilt recognized that a “settlor should pay less in settlement than he would if he were found liable after trial.”  (Id. at p. 499.)

Alex Sanitation contested the application on the grounds that Smith's application fails to provide specific facts for analysis under the Tech-Bilt factors;  the application is devoid of any analysis or substantive discussion of, among other things, the financial condition or insurance policy limits of Smith.   Smith has made no showing that its settlement, which is disproportionate to his total exposure for damages, should be found in good faith based on financial hardship or its insurance policy limits.   There is no mention of any personal assets, such as bank accounts, real or personal property, or trust funds, or a lack thereof.   And there is no indication that there is any other applicable insurance coverage for Smith.

At the hearing on November 9, 2009, the trial court found the settlement to be in good faith and denied Alex Sanitation a continuance to conduct discovery as to the insurance policies and Smith's financial situation.   The trial court stated, in relevant part:  “You know, I agree with you that the Tech-Bilt factors are not very well addressed in the plaintiffs' papers, but standing back from it all and knowing that you've got the burden of proof if you're trying to prove it's not in good faith, you know, there's no fraud or collusion.   This was through a mediator at arm's length, at great length, I assume, number one.  [¶] Number two, it's real money in the sense that it's not an insubstantial sum that sounds totally out of the ballpark.  [¶] Nobody gave me any evidence at all about how this was going to be allocated among the plaintiffs.   There does seem to be a bona fide dispute over coverage.   And there does seem to be a question about the financial responsibility or the financial wherewithal of anybody to pay a judgment other than the insurance company.  [¶] You know, it's troubling that if you really look at the plaintiffs' claims and add them all up, it comes out to many millions and millions, which then makes 1.1 look paltry.   However, I don't think you've really persuaded me, looking at everything together, that I should set it aside as in bad faith.  [¶] It seems to me there are real questions about liability, there are real questions about insurance companies, there are real questions about the wherewithal of these defendants to pay any judgment.   Although there was a fair amount of coverage still left under the policy, from your point of view, I think it's real hard for me to find it's in bad faith.”

As to the $1.1 million amount, plaintiffs' counsel stated:  “If they want to give me more than a million one, I would be happy to take it., but it took me a long time to get to the point where I am today.  [¶] And I'm not saying that it is representative of their liability.   What I am saying is that it is something that we had to do in consideration of non-liability factors.  [¶] Now, there's also problems with liability.   And of course, Alex has taken the position throughout the case that there is no liability.   All of the defendants have taken that position.”   Furthermore, counsel stated:  “I'm not saying this is the greatest settlement in the world.   It is not.   I would be more than happy to have taken the entire policy limits if I could have.   But my problem is, is that the mediator and I and my clients, we worked as much as we could to get as much as we could.   And I think we did a good job.”

Then Alex Sanitation's counsel stated:  “Well, I think, your honor, if I could add to that, all that we were asking was for some additional time to do some additional discovery, perhaps stay your decision for, I don't know, 60 days so that we can do some additional discovery, maybe on an expedited basis.  [¶] Perhaps they can provide the additional supporting documentation that we feel is missing.   And perhaps we just walk away, we don't say any more about it.   Perhaps the issue is moot, we don't even come back, we just stipulate, and we don't have to bother you again.  [¶] But I just feel like there's information missing.   And to my satisfaction, we don't have everything we need to say that, yeah, this is the best settlement.”   The trial court responded:  “I appreciate you'd probably feel better about it if you did a little more discovery, but that's just going to cost everybody more money.   So I think we'll put the silver stake into it.”

DISCUSSION

Alex Sanitation is entitled to vacate the trial court's ruling and a continuance of the hearing on the good faith settlement so that it can conduct discovery on the crucial Tech-Bilt factor of the settling defendants' financial status and insurance coverage.   The trial court apparently found the settlement to be in good faith based on Smith's insurance carrier's having filed a declaratory relief action in an attempt to deny coverage in the instant action under Smith's liability policy and Smith's lack of wherewithal to pay any judgment.   We conclude that Alex Sanitation have an opportunity to conduct discovery to determine if the insurance carrier's position has any merit.   It is undisputed that Smith's liability policy's applicable limits of liability are $2,000,000.   Based on Smith's criminal conduct and the absence of even negligence on the nonsettling defendant's part, it is appropriate that-at a minimum-those insurance benefits be exhausted before any other defendants pay any money to plaintiffs.

In City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, an action by an injured automobile passenger against her husband for negligent driving, and against certain public entities for defective highway design, the public entity defendants sought a writ of mandate to vacate the trial court's finding under Code of Civil Procedure section 877.6 that a settlement between the passenger and her husband and his liability insurer was made in good faith.   The Court of Appeal found that there was insufficient evidence to support the trial court's determination of good faith, since the insurance policy in question was never presented into evidence, and no evidence of the driver's financial situation was submitted.   The court further stated:  “The procedures to be

followed by the parties in a contested good faith hearing have not been directly the subject of appellate review and guidelines are necessary.   At the time of the hearing, the objecting nonsettlor in many instances does not possess sufficient factual information to carry its burden of proof as to lack of good faith.   As we have stated, the financial condition of the settlor is a relevant issue in this case as it is or will be in many other contested good faith settlement hearings.   Facts in regard to financial condition are in the particular knowledge of settlor and have not until now been a proper subject of inquiry in the usual discovery process unless punitive damages are at issue.   [Citation.]  Such inquiry is also subject to the imposition of a protective order in regard to the disclosure of a defendant's financial condition.   [Citation.]  [¶] We have determined that it would be appropriate for the objecting nonsettlor to move for a continuance of the hearing, if necessary, for the purpose of gathering facts, which could include further formal discovery, to support its statutory burden of proof as to all Tech-Bilt factors nonsettlors placed in issue in order that the matter can be fully and fairly litigated.   Such a procedure was suggested in the recent case of Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, 898.   This rule shall apply to all contested good faith settlement hearings, no matter which of the Tech-Bilt factors are in issue.   As we indicated earlier in this opinion, this could necessarily lead to motions for further discovery, additional declarations, and counterdeclarations by the parties and a delay in the proceedings, but this procedure will ensure that the expanded scope of the hearing dictated by Tech-Bilt will be followed, the evidence will be intelligently assessed, and the objectives of Tech-Bilt will be attained.   A remand is appropriate in this case to allow for a good faith settlement hearing which conforms to this procedure.”  (City of Grand Terrace v. Superior Court, supra, 192 Cal.App.3d at pp.   1264-1265.)

In sum, Alex Sanitation should have been granted a continuance of the good faith hearing to conduct discovery on the financial ability of Smith to pay the judgment and on the insurance policies.   Declarations by Smith as to assets and financial situation were filed in opposition to Alex Sanitation's contest.   The declarations were vague and the timing of information presentation was not proper.   Alex Sanitation did not have the information it needed.   The trial court should vacate its findings under Code of Civil Procedure section 877.6 that a settlement between Smith and the plaintiffs was made in good faith and allow a continuance for Alex Sanitation to conduct discovery.

DISPOSITION

All parties shall bear their own costs.

NOT TO BE PUBLISHED

_ _

MALLANO, P.J. ROTHSCHILD, J. JOHNSON, J.

FOOTNOTES

FN1. As there is not a plain, speedy and adequate remedy at law, and in view of the fact that the issuance of an alternative writ would add nothing to the presentation already made, we deem this to be a proper case for the issuance of a peremptory writ of mandate “in the first instance.”  (Code Civ. Proc., § 1088;  Lewis v. Superior Court (1999) 19 Cal.4th 1232, 1240-1241;  Alexander v. Superior Court (1993) 5 Cal.4th 1218, 1222-1223;  Ng v. Superior Court (1992) 4 Cal.4th 29, 35.)   Opposition was requested and the parties were notified of the court's intention to issue a peremptory writ.  (Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 180.).  FN1. As there is not a plain, speedy and adequate remedy at law, and in view of the fact that the issuance of an alternative writ would add nothing to the presentation already made, we deem this to be a proper case for the issuance of a peremptory writ of mandate “in the first instance.”  (Code Civ. Proc., § 1088;  Lewis v. Superior Court (1999) 19 Cal.4th 1232, 1240-1241;  Alexander v. Superior Court (1993) 5 Cal.4th 1218, 1222-1223;  Ng v. Superior Court (1992) 4 Cal.4th 29, 35.)   Opposition was requested and the parties were notified of the court's intention to issue a peremptory writ.  (Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 180.)

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