Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02593/USCOURTS-caed-2_05-cv-02593-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

KLS AIR EXPRESS, INC., dba

FREIGHT SOLUTION PROVIDERS,

NO. CIV. S-05-2593 FCD DAD

Plaintiff,

v. MEMORANDUM AND ORDER

CHEETAH TRANSPORTATION LLC,

and DOES 1 through 25, et al.,

Defendants.

____________________________/

AND ALL RELATED ACTIONS.

____________________________/

----oo0oo----

This matter comes before the court on the motion of thirdparty defendant Van Bedrick dba Hemi Express (“Hemi”) for

determination of the good faith settlement which it reached with

defendant and third-party plaintiff Cheetah Transportation LLC

(“Cheetah”). For the reasons set forth below, Hemi’s motion is

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Case 2:05-cv-02593-FCD-DAD Document 86 Filed 01/15/08 Page 1 of 8
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1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs.

E.D. Cal. L.R. 78-230(h).

2 Sonko defaulted. (Clerk’s Entry Default, filed Apr. 6,

2007.) Dushcak obtained a discharge in bankrupctcy. (Notice of

Automatic Stay in Bankruptcy, filed Apr. 24, 2007.)

2

GRANTED.1

BACKGROUND

In March 2005, plaintiff KLS Air Express, Inc. (“KLS”)

contacted Cheetah to arrange for the transportation of a shipment

of flat panel monitors (the “shipment”) from Jonestown,

Pennsylvania to City of Industry, California. After receiving

KLS’s request for the transportation of the monitors, Cheetah

contacted Sonko Trucking (“Sonko”) to handle the transportation.

Sonko then subcontracted with Val Bedrick, owner of Hemi, to

transport the shipment. Val Bedrick, in turn, subcontracted with

Dimitry Duschak (“Duschak”) to transport the shipment. The entire

shipment was stolen on March 21, 2005, while in the possession of

Duschak.

KLS subsequently filed suit against Cheetah for damages and

declaratory relief on December 20, 2005. On April 19, 2006,

Cheetah filed a third-party complaint for indemnity against

Sonko, Hemi, and Duschak.2

In October 2007, Cheetah and Hemi entered into settlement

negotiations. (Def.’s Mem. of P. & A. at 2:24-25, filed Nov. 9,

2007.) These negotiations resulted in an agreement between

Cheetah and Hemi that, in exchange for a complete release of all

claims by Cheetah against Hemi, Hemi would pay Cheetah a total of

$30,000 on the following terms: (1) $15,000 would be paid on or

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before November 30, 2007; (2) an additional $15,000 would be paid

on or before December 31, 2007; (3) the settlement was

conditioned on a determination of good faith settlement by the

court; and (4) should Hemi fail to make the payments as

scheduled, Cheetah would be entitled to recover from Hemi the

lesser of $30,000 (with deduction for payments made by Hemi) or

the amount of any judgment which may be entered against Cheetah

on KLS’s complaint. (Id. at 2:25-3:7.)

Hemi thereafter filed the instant motion, seeking approval

of the settlement under California Code of Civil Procedure

Section 877.6. KLS filed an opposition to the motion, and Cheetah

and Hemi filed replies. (Opp’n, filed Dec. 31, 2007; Cheetah’s

Reply, filed Jan. 2, 2008; Hemi’s Reply, filed Jan. 9, 2008.)

STANDARD

In this diversity case, the court applies the substantive

law of California. Gasperini v. Center for Humanities, Inc., 518

U.S. 415, 427 (1996). Under California Code of Civil Procedure

Section 877.6, any party to an action involving two or more joint

tortfeasors or co-obligors on a contract debt are entitled to a

hearing on the good faith of a settlement between a plaintiff or

other claimant and one or more of the joint tortfeasors or coobligors after giving notice of the settlement to all parties and

the court. Cal. Code Civ. Proc. § 877.6(a)(1) (West Supp. 2007).

Alternatively, a party to such a settlement may give notice to

all parties and the court of the settlement together with an

application for determination of good faith settlement and a

proposed order. Id. at § 877.6(a)(2). A nonsettling party may,

within 25 days of the mailing of the notice, file a motion

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contesting the good faith of the settlement. Id. at §

877.6(a)(2). The party contesting good faith bears the burden of

persuasion on the issue. Id. at § 877.6(d).

The court may determine the issue of good faith on the basis

of affidavits, counteraffidavits, or any other evidence submitted

with the application or admitted, in the court’s discretion, at

any hearing on the motion. Id. at § 877.6(b). The court’s

determination that a settlement was made in good faith bars “any

other joint tortfeasor or coobligor from any further claims

against the settling tortfeasor or coobligor for equitable

comparative contribution, or partial or comparative indemnity.”

Id. at § 877.6(c).

ANALYSIS

KLS objects to the settlement, arguing this court cannot

find it in good faith because KLS is not a party to the

settlement. KLS’s argument is unavailing for several reasons.

First, and most significantly, KLS has not sued Hemi; rather,

Hemi is in this action pursuant to Cheetah’s third-party

complaint alone. Indeed, at no time has KLS sought to sue Hemi,

and it did not object to the court’s entry of the amended final

pretrial conference order, which took into consideration the

settlement between Cheetah and Hemi, and deleted all references

to Hemi in this action. (Am. Pretrial Conf. Order (“APCF”) 8:21-

22, filed Nov. 16, 2007.) As a result of the settlement with

Hemi, and the prior proceedings with respect to Sonko and

Duschak, Cheetah’s third-party complaint is no longer at issue in

this case. If KLS opposed the settlement, the court would have

expected KLS to object to the amended final pretrial order and

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request amendment of its pleading. However, it did not do so, and

the court will not permit it to do so now.

Moreover, KLS’s reliance on Arizona Pipeline Co. v. Superior

Court, 22 Cal. App. 4th 33 (1994), to argue that the court cannot

find the instant settlement in good faith, is unpersuasive. In

Arizona Pipeline, the court held that, “[i]n the context of tort

litigation,” settlements between joint tortfeasors are not

subject to a good faith determination under Section 877.6 where

the plaintiff is not a party to the settlement. Id. at 42. In

direct conflict with Arizona Pipeline, however, the court in

KAOM, Inc. v. Superior Court, 35 Cal. App. 4th 549 (1995), a

construction defect case, held that a settlement between a crosscomplainant and a cross-defendant on an indemnity claim was

subject to a good faith determination under Section 877.6 because

“a cross-complainant who claims . . . indemnity from a joint

tortfeasor is the functional equivalent of a plaintiff.” Id. at

554. 

The court finds KAOM is factually more on point with this

case than Arizona Pipeline, and that KAOM is more in line with

the language of the statute, which expressly applies to

settlements by the “plaintiff or other claimant and one or more

alleged tortfeasors or coobligors.” Cal. Code Civ. Proc. §

877.6(a)(1) (emphasis added). KAOM is also consistent with the

dual purposes of the statute to encourage settlements and promote

the equitable sharing of costs. Abbott Ford, Inc. v. Superior

Court, 43 Cal. 3d 858, 871-72 (1987). As such, the court follows

KAOM in this case and finds that it may approve Hemi and

Cheetah’s settlement, which did not involve plaintiff KLS,

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3 KLS does not contest the fourth and sixth Tech-Bilt

factors. Accordingly, those factors are not discussed.

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provided it meets the so-called “Tech-Bilt” factors.

When determining whether a settlement is in good faith, the

court considers the following factors: (1) a rough approximation

of the plaintiff’s total recovery and the settlor’s proportionate

liability; (2) the amount paid in settlement; (3) the allocation

of settlement proceeds among the plaintiffs; (4) a recognition

that a settlor should pay less in settlement than s/he would if

found liable after trial; (5) the financial condition and

insurance policy limits of the settling defendants; and (6) the

existence of collusion, fraud, or tortiuous conduct aimed to

injure the interest of nonsettling parties.3 Tech-Bilt, Inc. v.

Woodward-Clyde & Assocs., 38 Cal. 3d 488, 499 (1985).

KLS argues that the settlement is not in good faith because

it does not fairly represent Hemi’s proportionate liability.

However, bad faith is not “established by a showing that a

settling defendant paid less than his theoretical proportionate

share.” Id. at 499. Moreover, KLS is proceeding against Cheetah

only, making it irrelevant to KLS whether Hemi is liable for more

damages. As between Hemi and Cheetah, it is reasonable to assume

that they adequately protected their own individual interests in

reaching the settlement.

KLS also challenges the amount paid in settlement. To meet

its burden of persuasion, however, KLS must show that the

settlement is “out of the ballpark.” Id. at 499-500. The court

cannot find that a settlement for $30,000, of an untested demand

by KLS for $250,000, is outside the “ballpark.”

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KLS also protests the allocation of settlement proceeds

“among plaintiffs,” arguing no monies are being paid to it.

However, as the court has repeatedly noted herein, Hemi is only a

party to this action by virtue of Cheetah’s third-party complaint

for indemnity. KLS has not sued Hemi.

Lastly, KLS argues Hemi and Cheetah have failed to show that

Hemi’s financial condition and insurance limits make this

settlement amount reasonable. However, according to Cheetah, the

settlement was reached “based upon Hemi Express’ poor financial

condition.” (Cheetah’s Reply at 2 n.1.) Cheetah also represents

that Hemi has no insurance coverage relating to the action

because its policy did not cover Duschak’s vehicle. (Def.’s Mem.

of P. & A. at 4:26-5:2.) Absent evidence to the contrary, the

court concludes that Hemi’s financial situation and insurance

coverage are poor and that the settlement of $30,000 is

reasonable.

In sum, the court finds the settlement between Cheetah and

Hemi satisfies the Tech-Bilt factors. The settlement is

proportionate to what a reasonable person would estimate Hemi’s

liability to be based on an approximation of KLS’s total

recovery, the likelihood of a judgment in favor of Hemi on

Cheetah’s third-party complaint, and the potential for

apportionment of fault to other parties in this action. The

effect of this finding is that Cheetah’s third-party complaint

against Hemi is dismissed, and any future cross-complaints for

indemnity or contribution arising out of this action are barred.

Cal. Code Civ. Proc. § 877.6(c). The court’s finding does not,

contrary to the suggestion in Hemi’s reply, preclude plaintiff

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4 The court will not, however, permit KLS to amend its

complaint to add Hemi as a defendant in this action at this late

stage of the litigation; the court has entered a final pretrial

conference order, and trial is set for February 26, 2008.

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KLS from filing a separate, direct claim against Hemi in the

future.4

CONCLUSION

The court, having considered the moving papers and the

declaration of J. Michael Cochrane, finds the settlement

agreement between Cheetah and Hemi is in good faith pursuant to

Section 877.6 of the California Code of Civil Procedure and the

factors outlined in Tech-Bilt. Accordingly, Hemi’s motion for

determination of good faith settlement is hereby GRANTED.

Cheetah’s cross-complaint against Hemi is dismissed, and any

future cross-claims for indemnity or contribution based on the

allegations involved in this litigation are barred.

IT IS SO ORDERED

DATED: January 15, 2008

Case 2:05-cv-02593-FCD-DAD Document 86 Filed 01/15/08 Page 8 of 8