Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-02905/USCOURTS-cand-5_05-cv-02905-13/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1331(a) Fed. Question: Real Property

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United States District Court

For the Northern District of California

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1 The instant lawsuit is related to Rodriguez v. Summit Mortgage Realty, C05-

02904 HRL. However, the settlement in question does not involve any of the parties to that

action.

2 Argent has filed a third-party complaint against Commonwealth Land Title

Company (“Commonwealth”). Commonwealth did not make an appearance on the instant

motion.

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JUAN MEDINA, et al.,

Plaintiffs,

 v.

ARGENT MORTGAGE COMPANY, et al.,

Defendants.

 /

No. C05-02905 HRL

ORDER RE DEFENDANT AMERIMAC’S

MOTION FOR A FINDING OF GOOD

FAITH SETTLEMENT

[Docket No. 122]

On June 26, 2007, this court heard the “Motion for Finding Good Faith Settlement” filed

by defendant R+ Financial, Inc. dba Amerimac First Mortgage (“Amerimac”).1 Defendant

Argent Mortgage Company (“Argent”) does not oppose the motion.2 Defendants Summit

Mortgage Realty, Esperanza Valverde, Herman Covarrubias and Cesar Valverde (aka Cesar

Ponte) (the “Summit Defendants”) filed an objection. Defendant BNC Mortgage, Inc. (“BNC”)

did not file any responsive papers; however, its counsel appeared at the motion hearing to state

that BNC agrees with the Summit Defendants’ position. Upon consideration of the moving and

responding papers, as well as the arguments of counsel, the court issues the following order.

*E-FILED: 6/27/2007*

Case 5:05-cv-02905-HRL Document 142 Filed 06/27/07 Page 1 of 5
United States District Court

For the Northern District of California

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This action arises from alleged predatory lending practices in connection with home

loan mortgages for which plaintiffs seek damages, as well as declaratory and injunctive relief. 

The Second Amended Complaint, the operative pleading, asserts that defendants have violated a

number of federal and state laws. Apparently, only one of the disputed loans was brokered

through Amerimac. That loan reportedly involved plaintiffs Alberto and Maria Reyes and

defendants Esperanza Valverde, BNC and Amerimac. Plaintiffs and Amerimac have reached a

settlement that, among other things, requires Amerimac to pay $17,000 to the Reyes plaintiffs. 

Amerimac now moves for (a) court approval of the settlement; and (b) entry of a “bar order”

precluding any non-settling defendant from seeking contribution or indemnification from it in

this or any other action.

Notably, there is no dispute as to the reasonableness of the settlement or to the need for

the entry of a bar order. The only issues presented are whether and how Amerimac’s proposed

bar order should be supplemented as to the apportionment of damages among the non-settling

defendants. Plaintiffs contend that the court must include language in the bar order specifying

that damages will be apportioned under the pro tanto approach. The Summit Defendants urge

the court to add language adopting the so-called “proportionate liability” scheme as set out in

Franklin v. Kaypro, 884 F.2d 1222 (9th Cir. 1989).

Briefly stated, “[i]n a pro tanto regime, the amount paid by the settling defendants is

deducted from the overall verdict, and the non-settling defendants are liable for the balance.” 

Fluck v. Blevins, 969 F. Supp. 1231, 1233 (D. Or. 1997). “By contrast, in a proportionate

liability system, the jury determines the amount of total damages and the percentage of

culpability for each defendant. The percentage attributable to the settling defendants is then

subtracted, and the non-settling defendants are jointly and severally liable for the balance of the

damages.” Id. California has codified the effect of a settlement among one or more joint

tortfeasors or co-obligors in legislation espousing the pro tanto approach. See CAL. CODE CIV.

PROC. §§ 877, 877.6; see also Slaven v. BP America, Inc., 958 F. Supp. 1472, 1480 (C.D. Cal.

1997). Settlement of federal claims, by contrast, generally is governed by federal common law. 

Case 5:05-cv-02905-HRL Document 142 Filed 06/27/07 Page 2 of 5
United States District Court

For the Northern District of California

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See generally McDermott, Inc. v. AmClyde and River Don Castings, Ltd., 511 U.S. 202, 207-08

(1994); Franklin, 884 F.2d at 1228.

In the instant case, the parties agree that California’s settlement law (Cal. Code Civ.

Proc. § 877) is substantive, and not merely procedural. See Slaven, 958 F. Supp. at 1478, 1484

(“The Ninth Circuit has held that although [California Code of Civil Procedure] § 877.6 is

procedural, § 877 amounts to substantive law.”) (citing Fed. Savings & Loan Ins. Corp. v.

Butler, 904 F.2d 505, 511 (9th Cir. 1990)). Thus, absent conflicting federal law, this court is

obliged to apply substantive provisions of California’s settlement law to plaintiffs’ state law

claims. See id. at 1484 (concluding that federal maritime law preempts the application of

California’s pro tanto approach).

Courts have adopted the proportionate liability scheme in certain kinds of federal cases. 

See, e.g., McDermott, Inc., 511 U.S. at 217-21 (adopting proportionate liability method in

admiralty case); Franklin, 884 F.2d at 1231-32 (following proportionate liability approach in

securities litigation). However, the parties have not cited (and this court has not found) binding

precedent which mandates the application of the proportionate liability approach to the federal

claims being asserted by plaintiffs here. Moreover, the Summit Defendants acknowledge that,

with respect to plaintiffs’ federal claims, the court has discretion to decide whether the pro tanto

or proportionate liability method should be applied. Under the circumstances presented here,

and based on the record currently before the court, there is no apparent inequity to the nonsettling defendants if the pro tanto approach is adopted. Accordingly, at this time, this court

concludes that damages should be apportioned among the non-settling defendants according to

the pro tanto approach.

Based on the foregoing, IT IS ORDERED THAT:

1. Amerimac’s motion for approval of its settlement with plaintiffs is GRANTED. 

The court will concurrently enter the parties’ proposed consent decree; and

Case 5:05-cv-02905-HRL Document 142 Filed 06/27/07 Page 3 of 5
United States District Court

For the Northern District of California

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2. The court will enter the bar order proposed by plaintiffs.

Dated:

 

HOWARD R. LLOYD

UNITED STATES MAGISTRATE JUDGE

June 27, 2007

Case 5:05-cv-02905-HRL Document 142 Filed 06/27/07 Page 4 of 5
United States District Court

For the Northern District of California

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5:05-cv-2905 Notice will be electronically mailed to: 

Philip M. Adleson padleson@ahk-law.com, tclark@ahk-law.com 

Kerstin Arusha kerstina@lawfoundation.org 

Peter N. Brewer pbrewer@brewerfirm.com, julia@brewerfirm.com 

Moses Diaz mosesd@lawfoundation.org, moses@ucdavis-alumni.com 

Matthew Greinert greinertm@howrey.com, jamesjimmy@howrey.com 

Kyra Ann Kazantzis kyrak@lawfoundation.org 

David A. Makman makmand@howrey.com, 

Hsiao C. Mao mmao@ahk-law.com, dvajretti@ahk-law.com 

Jack R. Nelson jnelson@reedsmith.com, cahunt@reedsmith.com; jnelson@reedsmith.com 

Paul E. Rice price@rutan.com, jmccluskey@rutan.com 

James F. Zahradka , II jamesz@lawfoundation.org, teresam@lawfoundation.org 

Counsel are responsible for distributing copies of this document to co-counsel who have

not registered for e-filing under the court’s CM/ECF program.

Case 5:05-cv-02905-HRL Document 142 Filed 06/27/07 Page 5 of 5