Opinion ID: 1234083
Heading Depth: 2
Heading Rank: 5

Heading: Practical effects of the majority decision

Text: Apparently in recognition of the great potential for unfairness under its rule, the majority advises trial courts they must take into account any contractual relationship between the settling and nonsettling defendants. (Maj. opn., ante, at p. 1034.) I believe the majority's cautionary note is insufficient. For example, the majority opinion states that, when the nonsettling defendant is primarily responsible for the plaintiff's damages, ... the court should find the settlement in good faith only if the settlement requires the settling defendant to bear an appropriate share of the damages and leaves the nonsettling defendant with a remaining liability that is not grossly disproportionate to its own responsibility for the loss. (Maj. opn., ante, at p. 1034, italics added.) This is troublesome in two respects. First, it is a mere suggestion and does not reflect the reality of litigation. There are extreme pressures on trial courts to dispose of as many cases as possible by settlement. Faced with even a remotely colorable claim of good faith, many trial courts will be disposed to view it favorably and approve settlement under section 877.6. Under the majority's should language, a trial court can approve a settlement even if the settling defendant does not bear an appropriate share of the damages. Second, the phrase appropriate share of the damages provides no guidance. The term is not defined or even explained. Moreover, where, as in this case, the nonsettling defendant is found to have no responsibility for the loss, I do not see how any damages sustained by the nonsettling defendant can be said to be appropriate. For the same reason, I also question the majority's observation that a trial court may decline to find good faith if the nonsettling defendant's liability to plaintiff is wholly attributable to the settling defendant's breach. (Maj. opn., ante, at pp. 1034-1035.) I do not see how a trial court could possibly find good faith in that situation. As a matter of logic and fairness, the party without fault should not be required to pay anything. For example, if the breaching party settles with the third party by paying 90 percent of its damages, the nonbreaching party would be liable to the third party for the remaining 10 percent. The majority opinion, however, would allow the trial court to bar the nonbreaching party from recovering this 10 percent from the breaching (settling) party. This result would be grossly and fundamentally unfair. The majority opinion should make clear that the trial court in that situation must not deem a settlement to be in good faith. In short, the majority opinion leaves too much room for grossly unfair results. The majority opinion also interjects an element of whimsy into contract law, the very essence of which is to allow contracting parties to plan for the future. (Cf. Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1269 [241 Cal. Rptr. 22, 743 P.2d 1279] [noting the business community's desire for certainty and predictability].) The aircraft bolt example used above helps to illustrate. (See discussion at p. 1043, ante. ) Assume the aircraft manufacturer incorporates the defective bolts into an aircraft and delivers it to an airline company. The airline has to replace the defective bolts and recovers from the manufacturer for breach of contract. Even if the contract between the manufacturer and bolt maker contains no express indemnity provision, the manufacturer can recover its damages, including the amount paid to the third party purchaser, from the bolt maker for its breach of warranty. This is the result the parties anticipated when they negotiated and entered into their contract, i.e., recovery of damages for a breach of warranty. Assume, however, the airline does not discover the defective bolts, and the plane crashes. The victims sue the manufacturer, the airline, and the bolt maker. If the bolt maker enters into a good faith settlement with the victims under section 877.6, the majority opinion would preclude the manufacturer from recovering for the breach of its contract with the bolt maker. The manufacturer would be deprived of the benefit of a freely negotiated and bargained-for performance provision in the contract. [9] Thus, whether the manufacturer can recover for breach depends entirely on events beyond its control. In short, the majority will render some contracts illusory. It holds in effect, Contracts may mean what they say, but then again they may not. It just depends. This ignores the far-reaching effects the majority opinion will have on commercial contracts in California.