CITY OF LOS ANGELES v. HUTCHERSON

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Court of Appeal, Second District, Division 3, California.

The CITY OF LOS ANGELES, Petitioner, v. SUPERIOR COURT of the State of California, County of Los Angeles, Respondent, Paul HUTCHERSON;  Daniel Freeman Hospital;  J. Robinson, M.D.;  Goodhew Ambulance Service, Inc., a corporation, Real Parties in Interest.

Civ. B 005694.

Decided: September 28, 1984

Ira Reiner, City Atty., John T. Neville, Sr. Asst. City Atty., Richard M. Helgeson, Asst. City Atty., Michael K. Fox and Katherine J. Hamilton, Deputy City Attys., for petitioner. No appearance for respondent. Omansky & Lazarus and Alfred W. Omansky, Encino, for real party in interest, J. Robinson, M.D. Greene, O'Reilly, Broillet, Paul, Simon, McMillan, Wheeler & Rosenberg and Gary Paul, Los Angeles, for real party in interest Paul Hutcherson. La Follette, Johnson, Schroeter and De Haas, P.C., and Louis H. De Haas, Los Angeles, for real party in interest Daniel Freeman Memorial Hosp. Winnikoff & Associates and Samuel Z. Winnikoff, Los Angeles, for real party in interest Goodhew Ambulance Service, Inc.

Petitioner The City of Los Angeles (the City) seeks a writ of mandate, or in the alternative, a writ of prohibition, to set aside respondent superior court's order of May 7, 1984.   The order found a sliding scale settlement agreement negotiated between plaintiff Paul Hutcherson (Hutcherson) and all defendants except the City pursuant to Code of Civil Procedure sections 877.5 (section 877.5) and 877.6 (section 877.6) was made in good faith.

The petition for a peremptory writ is denied because section 877.5 is constitutional, and the sliding scale settlement agreement was a good faith settlement.

FACTUAL AND PROCEDURAL BACKGROUND 1

In November 1978, Hutcherson was involved in an automobile accident in which his car overturned.   He was treated by the City's paramedics who transported him to Daniel Freeman Memorial Hospital (the Hospital).   There he was examined by Dr. Jerome Robinson (Robinson), an emergency room physician.   Blood tests indicated a .184 alcohol level;  he was therefore released to the City police who arrested him, and transported him to the City jail where he was booked.

His mother picked him up at the City jail and took him home.   Because he was unable to move his lower extremities, his mother had Goodhew Ambulance Service (Goodhew) return him to the Hospital.   At this second visit, a cervical spine subluxation was diagnosed and surgery was performed, but Hutcherson remained a paraplegic with some loss of use of his arms as well.

Hutcherson's first amended complaint, filed November 26, 1980, alleged medical negligence against the Hospital, Goodhew, Robinson and several Doe defendants.   He also alleged negligence against the City in its handling, transportation, booking and confining of him.   In addition, there was an allegation of battery against the City in its detention, arrest and custody of him.   There was no specific allegation of medical negligence against the City.

A mandatory settlement conference was held in December 1983, without success.   The parties then retained retired Los Angeles Superior Court Judge, Dickran Tevrizian, to oversee further settlement negotiations.   Approximately four sessions took place.   All parties, including the City, had representatives available at each of these sessions, but the City did not send the same attorney each time, and did not participate in the sessions during which the disputed settlement was worked out.

Hutcherson's initial demand was for $4 million.   There was a renegotiation, and the tentative settlement package was reduced to $3 million.   The parties collectively could not amass this money, so a structured settlement was worked out, which involved an initial $750,000 payment, and a monthly payment of $5,000 for life.

The City did not offer to contribute anything to the settlement package at these negotiation sessions, although the City attorney did mention a $50,000 figure in a private discussion with Judge Tevrizian.   In one of the later settlement negotiations, the defendant parties, absent the City, redesigned the structured settlement into a sliding scale agreement pursuant to section 877.5, wherein the settling defendants would purchase an annuity to provide for a $5,000 monthly payment.   The present value of this annuity plus $750,000 was calculated at $1.9 million.

The settling defendants, absent the City, agreed to guarantee this amount to Hutcherson, regardless of the outcome at trial.   If at trial the City received a defense verdict, Hutcherson would receive $750,000 from the settling defendants and would not have to repay the purchase price of the annuity.   If a verdict against the City were to occur with a present value of less than $1.9 million, the settling defendants would make up the difference.   If, however, the verdict against the City were $1.9 million or larger, the settling defendants would be reimbursed for the purchase price of the annuity;  in other words, they would pay nothing, and the City would be responsible for the entire verdict.

Once the sliding scale agreement was worked out, the settling defendants moved for a hearing on the good faith of the agreement, as provided by section 877.6.   After hearing testimony and oral argument by the parties, the trial judge, determined on May 7, 1984, that the settlement was in good faith.

On June 12, 1984, at the request of the City this court issued a temporary stay order, and on July 2, 1984, we issued an alternative writ of mandate ordering the trial court to vacate the decision of May 7 or in the alternative, show cause why a peremptory writ should not issue, and suggesting that the written return in opposition include reference to the recent case of Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499, 203 Cal.Rptr. 825.   The writ also directed that the stay order remain in effect pending resolution of the petition or further order of the court.

On August 2, 1984, in denying a request for a further stay order, this court modified the alternative writ to allow the trial court to conduct a rehearing for the purpose of reconsideration of its decision of May 7, 1984.   No such rehearing has occurred, so the order which is the subject of this writ remained the May 7, 1984 finding of good faith.

CONTENTIONS

The City puts forth a number of contentions as follows:  the settlement was not in good faith because there was no City attorney present at the session where the sliding scale agreement was worked out;  the City had been willing to look into a $50,000 settlement offer;  the agreement on its face is not in good faith because there is a possibility that the settling defendants will pay nothing;  and, if such a settlement is condoned by section 877.6, the section is unconstitutional in that it deprives the nonsettling defendant of equal protection and a fair trial.

The settling defendants counter that the City was uncooperative in settlement negotiations, and that there was a real fear of a large verdict against all defendants at trial and the City's intransigence made a sliding scale settlement a reasonable alternative, while still protecting Hutcherson's interest.   They claim that the Legislature recognized the utility of such sliding scale agreements by enacting section 877.5.

DISCUSSION

1. Section 877.5 is constitutional.

The City's initial argument suggests that section 877.5 is unconstitutional in that it denies nonsettling defendants both equal protection of the law and the right to a fair trial under the due process clauses of the California and federal constitutions.

a. Equal protection considerations.

The City's equal protection argument is that the statutory scheme treats nonsettling defendants under a sliding scale agreement (§ 877.5) 2 differently from nonsettling defendants under the release statute.  (§ 877.)3

Under section 877, subdivision (a), a nonsettling defendant is allowed to deduct any previous settlements from the ultimate verdict, whereas a nonsettling defendant under section 877.5 has nothing to deduct.   The City contends that this arrangement is a legislative classification which treats similarly situated parties differently, in violation of equal protection principles.

 It is not clear to this court that nonsettling defendants are any worse off under section 877.5 than under section 877, since a good faith release under section 877 could conceivably be for a small sum, or no sum at all.   However, even assuming that a section 877.5 defendant is at a disadvantage, the test of constitutionality under the equal protection theory is merely that the legislation be found rationally related to a legitimate state purpose, after a serious and genuine judicial inquiry.  (Cooper v. Bray (1978) 21 Cal.3d 841, 848, 148 Cal.Rptr. 148, 582 P.2d 604.)

 The City concedes that encouraging settlement of litigation is public policy in California.  (See Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 496, 147 Cal.Rptr. 262.)   The sliding scale settlement agreement, whatever its other consequences to a nonsettling defendant, does offer the possibility of encouraging at least partial settlement of disputes.   More importantly, it protects the plaintiff's interests by providing for a guarantee of a minimum recovery.   Maximization of recovery to an injured party for the amount of an injury to the extent fault of others has contributed to it is first in the “hierarchy of interests.”   (Ibid.;  Fisher v. Superior Court (1980) 103 Cal.App.3d 434, 447, 163 Cal.Rptr. 47.)

 The public policy rationale to encourage settlement of lawsuits provides a rational basis for section 877.5.

b. Due process consideration.

The City argues that section 877.5 deprives the nonsettling defendant of a right to a fair trial because the settling defendants can remain active in the litigation throughout the trial as witnesses or as nominal defendants, and can manipulate the presentation of evidence so as to obtain a verdict in excess of the guaranteed amount, thus placing the entire burden on the nonsettling defendant.

The possibility of such manipulation admittedly was of concern to interested persons prior to the enactment of the statute because sliding scale agreements were often kept secret from both the court and the nonsettling defendant.4

The California Legislature, in apparent recognition of this problem, provided in the statute for mandatory disclosure to both the nonsettling defendant and the court, and discretionary disclosure to the jury.  (§ 877.5, subd. (a)(2).)   A subsequent addition to the statutory scheme, section 877.6, further enables a pretrial hearing on the good faith of an agreement.5

 Given these statutory safeguards, the potential problems to the remaining nonsettling defendant are not of constitutional proportions.

2. Good faith considerations.

The City argues that the provision in the settlement agreement that the settling defendants be reimbursed for the purchase price of the annuity in the event of a verdict in excess of $1.9 million, thereby placing the entire burden of the loss on the City, is not in good faith.

For this proposition, the City relies on River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986, 103 Cal.Rptr. 498.  River Garden involved lump sum settlements and accompanying section 877 releases in a suit against several defendants for personal injuries and wrongful death.   The dispute in River Garden was not over the total amounts paid by the settling defendants, but rather over the allocation of the settlement amounts between the wrongful death claims and the personal injury claims.

The plaintiffs therein were severely injured children suing for their own injuries and the death of their parents.   On the facts of the case, the personal injury claims had a potential for much greater recovery than the wrongful death claims, but the plaintiffs' attorneys allocated the settlements in inverse proportions, leaving the remaining defendant vulnerable to a much greater liability.  (Id., at pp. 991–992, 103 Cal.Rptr. 498.)

The River Garden court analyzed the good faith of the settlement allocations in terms of collusion:  “Although many kinds of collusive injury are possible, the most obvious and frequent is that created by an unreasonably cheap settlement.   Applied pro tanto to the ultimate judgment, such a settlement contributes little toward equitable—even though unequal—sharing.   As we noted earlier, unreasonably low settlements with the other tortfeasors and the fear of a large unshared judgment may propel the last remaining defendant into a settlement exceeding the plaintiff's remaining damages and transcending that defendant's equitable share.   Prevention of collusion is but a means to the end of preventing unreasonably low settlements which prejudice a nonparticipating tortfeasor.   The price of a settlement is the prime badge of its good or bad faith.”  (Id., at p. 996, 103 Cal.Rptr. 498.)

The River Garden court held that the good faith issue could be litigated within the framework of the claimant's tort suit.  (Id., at p. 1002, 103 Cal.Rptr. 498.)

A subsequent case, Lareau v. Southern Pac. Transportation Co. (1975) 44 Cal.App.3d 783, 798–799, 118 Cal.Rptr. 837, on very similar facts was unable to conclude that the settlement allocation raised no issue as to the good faith of the settling parties, and therefore allowed a separate trial on the good faith issue.

Both of these cases, however, preceded the enactment of section 877.5 and thus did not reach the issue of whether the River Garden rationale could apply where the nature of the settlement is such that no minimum amount is paid “up front” and there is a possibility of no payment at all by the settling defendant.

In the first appellate case subsequent to River Garden to deal with the issue of the good faith of a sliding scale agreement, the court merely relied on the trial court's factual determination that there was no bad faith.   (Pease v. Beech Aircraft Corp. (1974) 38 Cal.App.3d 450, 474, 113 Cal.Rptr. 416.)   In the settlement in Pease, like the one before us, there was a possibility of no payment at all by the settling defendant.

More recently, the court in Burlington Northern R.R. Co. v. Superior Court (1982) 137 Cal.App.3d 942, 946–947, 187 Cal.Rptr. 376, found that a sliding scale agreement wherein the plaintiff was precluded by the settling defendants from settling with the remaining defendants for less than the $2 million guaranteed amount was not in bad faith, because there was no specific tortious conduct against the nonsettling defendants.  “Given the Legislative approval of the sliding scale agreement, ․ the trial court's finding of unfairness cannot support a conclusion that the settlement was not made in good faith.   This is so even where a nonsettling tortfeasor has been required to pay the entire compensation, without contribution or indemnity from the settling joint tortfeasor.”  (Id., at p. 947, 187 Cal.Rptr. 376, citing Cardio Systems, Inc. v. Superior Court (1981) 122 Cal.App.3d 880, 176 Cal.Rptr. 254.)

While the Burlington court and the Cardio Systems court (which involved a section 877 release in exchange for costs) questioned the fairness of the result, both followed the standard adopted in such earlier cases as Dompeling v. Superior Court (1981) 117 Cal.App.3d 798, 809, 173 Cal.Rptr. 38 (good faith requires only that a settling defendant owe to a nonsettling defendant a duty to refrain from tortious or other wrongful or collusive conduct against that nonsettling defendant), and Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, 238, 132 Cal.Rptr. 843 (no bad faith or collusion by settling defendants).  (Cardio Systems, Inc. v. Superior Court, supra, 122 Cal.App.3d at p. 890, 176 Cal.Rptr. 254.)

In none of these cases did the courts interpret the good faith standard of section 877 to require that a settlement be proportional to the estimated liability of that settling defendant.  (See Fisher v. Superior Court, supra, 103 Cal.App.3d at pp. 444–445, 163 Cal.Rptr. 47;  Wysong & Miles Co. v. Western Industrial Movers (1983) 143 Cal.App.3d 278–288, 191 Cal.Rptr. 671.)   Stambaugh specifically rejected this test.  (Stambaugh v. Superior Court, supra, 62 Cal.App.3d at page 238, 132 Cal.Rptr. 843.)

Only one case subsequent to the enactment of section 877.5 has explicitly stated that the good faith standard incorporates by reference general equitable principles of contribution law and therefore requires that the settlement figure must not be “grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant's liability to be.”  (Torres v. Union Pacific R.R. Co., supra 157 Cal.App.3d at p. 509, 203 Cal.Rptr. 825;  see also Commercial U. Ins. Co. v. Ford Motor Co. (9th Cir.1981) 640 F.2d 210, 213–214, cert. den. 454 U.S. 858, 102 S.Ct. 310, 70 L.Ed.2d 154;  Owen v. United States (9th Cir.1983) 713 F.2d 1461, 1465.)  Torres acknowledged the River Garden assessment of settlement price as “one of the many factors influencing the finding of good faith” (River Garden Farms, Inc. v. Superior Court, supra, 26 Cal.App.3d at p. 997, 103 Cal.Rptr. 498), but concluded that the settlement price in some cases may be “so egregiously low as to constitute a sufficient ground, by itself, for a finding of bad faith” (Torres v. Union Pacific R.R. Co., supra, 157 Cal.App.3d at p. 508, 203 Cal.Rptr. 825).   In the Torres case, however, the appellate court upheld the trial court's finding of good faith where the actual amount paid was $50,000 and the guaranteed amount was $200,000.

The Torres case was subsequently criticized in Imperial Spa, Inc. v. Superior Court (1984) 158 Cal.App.3d 1185, 205 Cal.Rptr. 337.   The Imperial Spa court concluded “the wisdom of legislation that does not interfere with the federal or state Constitution is a matter for determination by the Legislature and not by the courts.  [¶]  Public policy is a legislative matter.   The Legislature has approved sliding scale recovery agreements by its enactment of section 877.5.   In doing so, the Legislature clearly indicated its rejection of the requirement of proportionality.   Where, as here, legislation does not violate constitutional proscriptions, it is not for the courts to attempt to thwart the expressed intent of the Legislature.   Accordingly, as long as the parties do not design their sliding scale recovery agreements or settlement agreements to tortiously injure the nonsettlors, but merely ignore them, nothing violative of the legislatively set public policy results.”   (Id., at pp. 1206–1207, 205 Cal.Rptr. 337.)

3. Application to instant case.

At the hearing on the issue of good faith, Judge Tevrizian testified that negotiations led to an overall settlement figure of $3 million which amount the defendants could not raise.   Thereafter, the sliding scale agreement was worked out, whereby the settling defendants would come forward with $750,000.   The settlement agreement was before the trial court, and the trial court in this case found the settlement to be a “good faith settlement pursuant to 877.5 and 877.6.”

The opposition to the petition for writ of mandate filed in this court by the Hospital contained a declaration dated August 6, 1984, a date after the Torres case had come down, wherein Judge Tevrizian opined that the agreement was not “disproportionate to the fair share of the damages of the parties to the agreement given their respective liabilities.”   The City also conceded at oral argument that $1.9 million was not disproportionate to the settling defendants' potential share of liability.

 We note that the Supreme Court has before it the issue of the good faith of a section 877 agreement which provided for a release in exchange for a payment of $15 in costs, leaving the remaining defendant to bear the burden of a verdict.  (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (L.A. 31826, argued May 7, 1984) ––– Cal.3d –––.)  Unless and until the Supreme Court determines the issue of good faith in both the section 877 context and the sliding scale settlement context differently from the line of cases which have ruled consistently on the subject, we shall follow the interpretations of those cases holding that a nontortious and noncollusive settlement is in good faith.

 In light of the line of cases following Stambaugh which attempt to clarify the definition of good faith for the purposes of sections 877 and 877.6, the public policy of California as expressed in the recognition of sliding scale settlement agreements, and the somewhat exceptional status of the Torres proportionality test, we cannot say that Hutcherson's sliding scale settlement agreement with the Hospital and the other settling defendants constituted bad faith toward the City because of the chance of a zero payment.

CONCLUSION

 Because we find section 877.5 constitutional, and conclude the trial court did not abuse its discretion in finding the settlement was made in good faith, we deny the City's request that a peremptory writ issue requiring the trial court enter a new and different order.

DISPOSITION

The petition for writ of mandate and/or prohibition is denied, the alternative writ discharged, and request for costs denied.

It is ordered that this decision be final forthwith, and the stay of proceedings in the lower court shall remain in effect for five days following the filing of this opinion.

I concur in the result reached in Justice Klein's opinion.   I find the sliding scale recovery agreement which was negotiated in the instant appeal to be inconsistent with the dictates of Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499, 203 Cal.Rptr. 825.   It is, however, consistent with the more recent decision of Imperial Spa, Inc. v. Superior Court (1984) 158 Cal.App.3d 1185, 205 Cal.Rptr. 337.

Torres holds that a “good faith [settlement under Code Civ.Proc., § 877] is not present ․ where a defendant settles by paying a sum which is grossly disproportionate to that defendant's fair share of the damages.”  (Id., 157 Cal.App.3d at p. 508, 203 Cal.Rptr. 825.)  Torres also states that “[s]ection 877, ․ requires that the settling codefendant look beyond the immediate prospect of a favorable deal with the plaintiff.   Rather, the codefendant must ‘make a good faith determination of the relative liabilities' in the case.  [Citation.]  If such codefendant wishes to enjoy the section 877 bar against indemnity, he must make some attempt to place the price of his settlement within a reasonable range of his relative share of the liability.”   (Id., at p. 507, 203 Cal.Rptr. 825.)

If the holding of Torres is correct, it would establish a duty of a settling defendant towards a nonsettling defendant to reach a settlement with the plaintiff which is not “grossly disproportionate” to the settling defendant's liability.  Imperial Spa, Inc. v. Superior Court, supra, 158 Cal.App.3d 1185, 1205–1206, 205 Cal.Rptr. 337, rejects such a duty.   I find the reasoning of Imperial Spa more persuasive than the reasoning of Torres.

We have an adversary system of justice and this system exists not only at trial but also in settlement negotiations.   I cannot accept the fact that a settling defendant owes a greater duty to a nonsettling defendant other than to refrain from any collusive or tortious conduct.

One must accept the inherent fairness of the trier of fact to reach a proper award if the nonsettling defendant loses at trial.  American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, at page 604, 146 Cal.Rptr. 182, 578 P.2d 899, holds that a “plaintiff's recovery from nonsettling tortfeasors should be diminished only by the amount that the plaintiff has actually recovered in a good faith settlement, rather than by an amount measured by the settling tortfeasor's proportionate responsibility for the injury.”   This statement by the Supreme Court is inconsistent with the notion of proportionality espoused in Torres, supra, 157 Cal.App.3d 499, 203 Cal.Rptr. 825.  “Mary Carter” type sliding scale settlements create the possibility of disproportionate settlements.   However, that is simply one of the risks associated with an adversary system.

In my view, a nonsettling defendant should not be able to “hold up” the settlement of a case by a claim of lack of proportionality.   A trial court's determination that a settlement was made in good faith under Code of Civil Procedure section 877.6 affords adequate protection against collusive or tortious conduct by the a settling defendant.   Should the trial against the nonsettling defendant proceed, the nonsettling defendant may be allowed certain disclosures and instructions to the jury under Code of Civil Procedure section 877.5 concerning the settlement.   I urge the Supreme Court to review the conflict in the Imperial Spa, Inc. and Torres decisions and to resolve such conflict.

I concur in the above decision but my concurrence is not without misgivings.   Unless and until our Supreme Court makes a definitive ruling on the issues of good faith, proportionality, and fairness in section 877 releases and sliding scale recovery agreements, the precedents cited in the opinion above control our decision.   Nevertheless, I am concerned that the sliding scale settlement procedure is fraught with the potential for sham, unfair, and even fraudulent settlements.

It is implicit in the sliding scale agreement before us that the settling co-defendants consider that $1,900,000 is not disproportionate to their share of the liability in this case.   At oral argument, the City conceded that $1,900,000 was not disproportionate to the potential share of the liability of the settling co-defendants.   Yet the sliding scale agreement makes it possible that ultimately the settling defendants will share none of the liability and will pay no part of whatever judgment is finally entered.

Where settling joint tortfeasors concede that a figure of $1,900,000 is not disproportionate to their share of the liability, it is difficult to understand how a zero payment could be considered as not disproportionate to that same liability.

Under the sliding scale agreement before us, it is entirely possible that a verdict against the City might exceed $1,900,000.   In that event, the settling defendants would be reimbursed for the price of the annuity policy which they have provided to the plaintiff and would actually pay nothing as their share of the liability.   The City would then be responsible for the entire verdict.   If that verdict should be $2,000,000, for example, the settling defendants would in the end pay nothing, while the City would have to pay the entire $2,000,000.

To say that $1,900,000 is not disproportionate to the settling defendants' potential liability is not the same as to say that a zero payment would not be disproportionate.   In fact, such a zero payment might well be grossly disproportionate.

In Torres v. Union Pacific R.R. Co., supra, 157 Cal.App.3d 499, 509, 203 Cal.Rptr. 825, the court said:

“․  In order to promote the finality of settlements, we hold that a defendant's settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant's liability to be.

“This holding should discourage fraudulent or sham settlements, as well as settlements which are unfair because they are simply ‘too cheap.’   By the same token, this standard should encourage defendants, who really do wish to ‘close the book’ on a matter, to arrive at a settlement figure which bears some relationship to what is fair.”

The quoted language from Torres expresses my opinion on the matter.

It is true that the wisdom of legislation is a matter for the Legislature and not the courts;  that public policy is a legislative matter.  (Imperial Spa, Inc. v. Superior Court, supra, 158 Cal.App.3d at p. 1206, 205 Cal.Rptr. 337.)   But it is also true that sections 877.5 and 877.6 require that sliding scale recovery agreements must be made in “good faith”, and the Legislature has not defined good faith, nor can it.   Good faith is a concept that defies legislative definition;  it must depend for its identity upon judicial analyses evolving from the examination of facts of many cases.   Eventually, and I hope soon, principles declaring what are the essential qualities of good faith will emerge from reported decisions, born of the tensions presented in strenuous litigation.   Today those principles are confused and run in different directions, some are only vaguely seen.   They must be identified, clarified, sorted out and placed in their proper context.   For this we need the analysis and decision of our highest court.

I am reminded of our Supreme Court's opinion in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 607–608, 146 Cal.Rptr. 182, 578 P.2d 899, where in its conclusion, the court stated:

“․  [T]he force of Li's [Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 119 Cal.Rptr. 858, 532 P.2d 1226] rationale applies equally to the allocation of responsibility between two or more negligent defendants and requires a modification of this state's traditional all-or-nothing common law equitable indemnity doctrine.   Again, we concur with Dean Prosser's observation in a related context that ‘[t]here is obvious lack of sense and justice in a rule which permits the entire burden of a loss, for which two defendants were ․ unintentionally responsible, to be shouldered onto one alone, ․ while the latter goes scot free.’  (Prosser, Law of Torts, supra, § 50, p. 307.)”

Can a settlement arrangement with an obvious lack of sense and justice be in good faith?   Are not both sense and justice essential elements of our system of jurisprudence?   In the absence of sense and justice is not a settlement unconscionable and, if so, can an unconscionable settlement be one in good faith?   Does not fairness enter into good faith?   Does everything and anything which is not tortious or collusive deserve the imprimatur of “good faith”?   Are the morals of the marketplace the measure of good faith in the courts of our land?

These are questions for which we need definitive answers, for the fact situation presented by the case at bench will recur time and again.   I urge that our Supreme Court will review this and all related cases and provide the needed answers.

FOOTNOTES

1.   The facts were developed from the pleadings filed by the parties.

2.   Section 877.5, subdivision (b) defines a sliding scale recovery agreement as “an agreement ․ between a plaintiff ․ and one or more, but not all, alleged tortfeasor defendants, where the agreement limits the liability of the agreeing tortfeasor defendants to an amount which is dependent upon the amount of recovery which the plaintiff is able to recover from the nonagreeing defendant ․  This includes, but is not limited to, agreements within the scope of Section 877, and agreements in the form of a loan from the agreeing tortfeasor defendant to the plaintiff ․ which is repayable in whole or in part from the recovery against the nonagreeing tortfeasor defendant.”  (Emphasis added.)

3.   Section 877 provides:  “Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort—[¶]  (a) It shall not discharge any other such tortfeasor from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it whichever is the greater;  and [¶]  (b) It shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors.”

4.   The general characteristics of the so-called “Mary Carter” agreements are described in “The Mary Carter Agreement—Solving the Problems of Collusive Settlements in Joint Tort Actions,” (47 So.Cal.L.Rev. (1974) 1393), and the prejudicial effects of their secrecy are noted therein.  (47 So.Cal.L.Rev., op. cit. supra, at p. 1402.)

5.   Section 877.6 states in pertinent part:  “(a) Any party to an action wherein it is alleged that two or more parties are joint tortfeasors 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, ․  [¶]  (b) The issue of the good faith of a settlement may be determined by the court on the basis of affidavits ․, and any counter-affidavits ․, or the court may, in its discretion, receive other evidence at the hearing.  [¶]  (c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor from any further claims against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.  [¶]  (d) The party asserting the lack of good faith shall have the burden of proof on that issue.”

KLEIN, Presiding Justice.

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