Court Opinion

ID: 9547340
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:46:03.883056+00
Date Added: 2024-06-11T15:17:37.851366
License: Public Domain

BIRD, C. J.
I respectfully dissent.
The new rule adopted by the majority will require trial courts to apply an unworkable standard to every settlement. It will clog our trial courts with unnecessary hearings, discourage the settlement of legitimate claims, and severely strain the resources of the parties and the trial and appellate courts of this state.
The majority hold that in determining whether a settlement was made in good faith within the meaning of Code of Civil Procedure section 877.6,1 the trial court must inquire “whether the amount of the settlement is within the reasonable range of the settling tortfeasor’s proportional share of comparative liability for the plaintiff’s injuries.” (Maj. opn., ante, at p. 499.)
Such a rule will not only discourage settlements, but will place an intolerable burden on our trial courts. Moreover, the Legislature never intended to impose a legal duty upon settling parties to protect the interests of adverse parties at the expense of their own mutual benefit. In accordance with a long line of California appellate court decisions, I would hold that a settlement satisfies the good faith requirement if it is free of corrupt intent, i.e., free of intent to injure the interests of the nonsettling tortfeasors. A settlement is made in bad faith only if it is collusive, fraudulent, dishonest, or involves tortious conduct. (See, e.g., Ford Motor Co. v. Schultz (1983) 147 Cal.App.3d 941, 950 [195 Cal.Rptr. 470]; Burlington Northern R.R. Co. v. Superior Court (1982) 137 Cal.App.3d 942, 945-946 [187 Cal.Rptr. 376]; Dompeling v. Superior Court (1981) 117 Cal.App.3d 798, 809-810 [173 Cal.Rptr. 38].)
The majority’s proportionate liability test of good faith originated in River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986 [103 *503Cal.Rptr. 498]. Although River Garden Farms discusses the “danger that a low settlement violates the good faith clause” (id., at p. 998), that discussion is mere dictum. River Garden Farms did not involve settlements that were inordinately low, but settlements that were allegedly unfairly allocated among the plaintiffs’ claims. “River Garden Farms did not involve the usual objection that the settlement entered into was too low and, therefore, should not be determined to be in ‘good faith.’ The charge of lack of ‘good faith’ was aimed at the plaintiff [sic] alone, and was based upon the plaintiff’s [sic] allocation of certain settlement proceeds among various claims so as to increase the potential liability of the nonsettling defendant, River Garden Farms.” (Roberts, The “Good Faith” Settlement: An Accommodation of Competing Goals (1984) 17 Loyola L.A. L.Rev. 841, 855; see also River Garden Farms, supra, 26 Cal.App.3d at p. 992.)
The court in River Garden Farms purported to base its interpretation of the good faith clause upon the legislative history of section 877. (Id., at p. 995.) However, there is nothing in the legislative history of section 877 to indicate the meaning to be given to the clause. Therefore, the court in River Garden Farms speculated that section 877 was based upon section 4 of the proposed Uniform Contribution Among Tortfeasors Act as revised in 1955.2 (Id., at pp. 995-996.)
The commissioners’ notes to section 4 explained that the purpose of the good faith clause was a narrow one. The clause was intended only to give the court “occasion to determine whether the transaction was collusive . . . .” (12 Uniform Laws Annot. (Master ed. 1975) p. 99.) However, the court in River Garden Farms contended that the good faith requirement was designed to prohibit “many kinds of behavior” other than collusive conduct “aimed to injure the interests of an absent tortfeasor. ” (River Garden Farms, supra, 26 Cal.App.3d at pp. 996, 997.) The court cited no authority for this conclusion, but suggested that section 4 was revised to include the good faith clause because the “ ‘plaintiff should not be permitted to release one tortfeasor from his fair share of liability and mulct another instead, from motives [of] sympathy or spite, or because it might be easier to collect from one than from the other. . . .’” (Id., at pp. 995-996; 12 Uniform Laws Annot. (Master ed. 1975) p. 99, comrs. com. to § 4.)
*504While the above-quoted passage appears in the comments to section 4 of the 1955 revision of the uniform act, it actually refers to the rationale behind section 5 of the 1939 version of the act. Section 5 provided that a settling tortfeasor was not released from liability unless the release provided that plaintiff’s ultimate recovery would be reduced to the extent of the released tortfeasor’s pro rata share of the damages.
The commissioners noted that “[rjeports from the state where the Act is adopted appear to agree that [section 5] has accomplished nothing in preventing collusion.” (Ibid.) Moreover, its effect “has been to discourage settlements in joint tort cases, by making it impossible for one tortfeasor alone to take a release and close the file. Plaintiff’s attorneys are said to refuse to accept any release which contains the provision reducing the damages . . . because they have no way of knowing what they are giving up.” (Ibid.)
Therefore, in 1955 the commissioners abandoned section 5 of the uniform act in favor of permitting release from contribution where the settlement is made in good faith. “It seems more important not to discourage settlements than to make an attempt of doubtful effectiveness to prevent discrimination by plaintiffs, or collusion in the suit. Accordingly [section 4(b)] provides that the release in good faith discharges the tortfeasor outright from all liability for contribution.” (Id., at p. 100.) Thus, contrary to River Garden Farms’ broad interpretation of the good faith clause, the 1955 revisions to the uniform act represented a policy decision to encourage settlement. The commissioners abandoned as unworkable their earlier attempt to protect nonsettling parties from inequity other than that caused by collusive conduct.
The court in River Garden Farms also based its “fair share” good faith test on an analogy to contract law. The court relied upon insurance cases holding that the implied covenant of good faith and fair dealing in an insurance contract requires the insurer to consider the insured’s interests in deciding whether to settle. (Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 430 [58 Cal.Rptr. 13, 426 P.2d 173]; Critz v. Farmers Ins. Group (1964) 230 Cal.App.2d 788, 793-794 [41 Cal.Rptr. 401, 12 A.L.R.3d 1142]; see River Garden Farms, supra, 26 Cal.App.3d at p. 997.) “The carrier’s duty of good faith extends beyond fraud or dishonesty and encompasses any kind of unfair dealing.” (Ibid.)
The obvious flaw in this analogy is that the relationship between the settling parties and the nonsettling parties is not contractual. Their relationship is simply not comparable to the fiduciary relationship between an insurance carrier and the insured who has contracted for the carrier’s protection. In *505fact, the settling parties and the nonsettlors are adverse parties. (Dompeling v. Superior Court, supra, 117 Cal.App.3d at p. 809.)
Absent a contractual or other special relationship, the settling parties do not have a duty to protect the interests of the nonsettling tortfeasors. They have a duty only to settle in good faith, i.e., with “ ‘honest, lawful intent’ ” (People v. Nunn (1956) 46 Cal.2d 460, 468 [296 P.2d 813]). “‘As understood in law the phrase “in good faith” has a settled and well-defined meaning, which generally imports that in any given case the transaction involved was honestly conceived and consummated without collusion, fraud, or knowledge of fraud, and without intent to assist in a fraudulent or otherwise unlawful design.’” (Appel v. Morford (1943) 62 Cal.App.2d 36, 40 [144 P.2d 95].)
I agree with the court in Dompeling that “[t]he settling parties owe the nonsettling defendants a legal duty to refrain from tortious or other wrongful conduct; absent conduct violative of such duty, the settling parties may act to further their respective interests without regard to the effect of their settlement upon other defendants.” (Dompeling v. Superior Court, supra, 117 Cal.App.3d at pp. 809-810, fn. omitted.)
The persuasiveness of River Garden Farms is also undermined by the fact that in 1972, when the case was decided, contribution applied only among joint judgment debtors to the extent of each debtor’s pro rata share of the judgment. (See § 875, subds. (a) & (c).) This court has since adopted the partial indemnity rule permitting a tortfeasor to seek indemnity from all joint tortfeasors to the extent of their comparative fault. (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 583, 604 [146 Cal.Rptr. 182, 578 P.2d 899].) Therefore, River Garden Farms’ assurances that the “fair share” inquiry “will not impart uncertainty” is no longer convincing. (River Garden Farms, supra, 26 Cal.App.3d at p. 998.)
Under a pro rata approach, once the court has estimated plaintiff’s damages, it need only divide that amount by the number of defendants to determine each defendant’s “fair share.” The good faith inquiry is rendered much more complex by the added burden of determining the comparative fault of each defendant in order to decide if the settlement is within a “reasonable range” of the tortfeasor’s proportionate liability.
The majority rely on River Garden Farms for their conclusion that the proportionate liability test of good faith should not “unduly burden the parties or the trial court.” (Maj. opn., ante, at p. 500.) I disagree. Under the majority’s rule, the trial court will have to make a pretrial determination of plaintiff’s potential recovery. “[R]elevant to this inquiry are the strengths *506of the plaintiff’s liability claim and defendant’s defenses, the seriousness of the injury . . ., the out-of-pocket expenses incurred by the plaintiff as a result of the injury, whether the case will be tried by a judge or a jury and if by a jury, whether juries from that location are more apt to render high or low verdicts, and a subjective evaluation of the parties, their witnesses and their attorneys. This list is by no means exclusive.” (Roberts, The “Good Faith” Settlement: An Accommodation of Competing Goals, supra, 17 Loyola L.A. L.Rev. at p. 922.)
In addition, the trial court must determine the comparative fault of the settling tortfeasor with reference to all the parties. “Thus, the court should not look merely to the settlor’s liability to the plaintiff, but also to the settlor’s liability to his fellow joint tortfeasors under a partial indemnity theory had there been no settlement.” (Id., at p. 920.) Finally, in some situations the trial court will have to inquire into the financial condition of the settling defendant. (See maj. opn., ante, at p. 499.)
In a complicated case, the time, effort, and expense involved in presenting evidence on all these issues will be considerable. While the trial court has the discretion to determine the good faith issue on the basis of affidavits alone (§ 877.6, subd. (b)), this court cannot predict the percentage of cases in which live testimony will be necessary. The good faith hearings mandated by the majority’s decision promise to be lengthy, complex and hotly contested. In my view, they will overburden the courts and severely strain the resources of the parties. (See Dompeling v. Superior Court, supra, 117 Cal.App.3d at p. 810.)
Moreover, when the majority acknowledge that an overly strict proportionate liability standard would “unduly discourage settlements,” (maj. opn., ante, at p. 499, italics added) they impliedly concede that their rule will discourage settlements to some degree. Both plaintiffs and defendants will be discouraged from settling if faced with the spectre of an expensive and lengthy hearing on the good faith issue.
A defendant who settles gives up his right to contest his liability at trial and forgoes the possibility that a jury will find him completely blameless. If he must nonetheless pay plaintiff an amount “within the reasonable range of [his] proportional share of comparative liability” and defend the settlement amount in a lengthy pretrial proceeding, he may often decide that he has little to gain by settling. (See Burlington Northern R.R. Co. v. Superior Court, supra, 137 Cal.App.3d at p. 945.)
As the cases and commentators note, settlement is dependent upon the degree to which the settling defendant can be assured of the settlement’s *507finality. (See River Garden Farms, supra, 26 Cal.App.3d at p. 993; comrs. com. to § 4(b) of the Uniform Contribution Among Tortfeasors Act, 12 Uniform Laws Annot. (Master ed. 1975) pp. 99-100; Note, Settlement in Joint Tort Cases (1966) 18 Stan.L.Rev. 486, 488-489.) However, the standard propounded by the court in River Garden Farms and adopted by the majority here does not promote finality because it is admittedly vague. (See River Garden Farms, supra, 26 Cal.App.3d at p. 997.) It will be difficult for a settling defendant to predict whether the trial court will find his settlement to be in good faith. The imprecise nature of the test also produces the added risk that despite the deference paid to the trial court, a favorable good faith determination will be reversed by the appellate court.
Although the majority only briefly mention the policy favoring settlements, it is “[pjerhaps the principal and most often discussed policy relevant to the issue of a ‘good faith’ settlement . . . .” (Roberts, The “Good Faith” Settlement: An Accommodation of Competing Goals, supra, 17 Loyola L.A. L.Rev. at p. 883.) The policy’s importance is strongly reflected in section 877, subdivision (b), which releases a settling defendant from the liability claims of all parties to the litigation. (Id., at p. 884; American Motorcycle Assn. v. Superior Court, supra, 20 Cal.3d at p. 603.) In American Motorcycle, this court stressed the importance of the policy of encouraging settlements and held that section 877 also applied to partial indemnity. (Id., at pp. 603-604.)3
Nevertheless, the majority argue that in American Motorcycle this court accepted the River Garden Farms definition of good faith despite its inhibitory effect on settlements. (See maj. opn., ante, at p. 496.) Indeed, the court in American Motorcycle cited River Garden Farms in holding that section 877 applied to claims for comparative indemnity. (American Motorcycle, supra, 20 Cal.3d at p. 604.) However, the court also cited Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231 [132 Cal.Rptr. 843], which limited River Garden Farms to its facts—tortious conduct on the part of a settling party—and held that “a joint tortfeasor should be permitted to negotiate settlement of an adverse claim according to his own best interests, whether for his financial advantage, or for the purchase of peace and quiet, or otherwise. His good faith will not be determined by the proportion his settlement bears to the damages of the claimant.” (Id., at p. 238.)
Moreover, with the exception of the recent decision in Torres v. Union Pacific R.R. Co. (1984) 157 Cal.App.3d 499 [203 Cal.Rptr. 825], no case *508decided since American Motorcycle has adopted the rule of River Garden Farms. (See, e.g., Fisher v. Superior Court (1980) 103 Cal.App.3d 434 [163 Cal.Rptr. 47]; Dompeling v. Superior Court, supra, 117 Cal.App.3d 798; Burlington Northern R.R. Co. v. Superior Court, supra, 137 Cal.App.3d 942; Ford Motor Co. v. Schultz, supra, 147 Cal.App.3d 941.)
In sum, neither the decision in American Motorcycle nor the legislative history of the good faith clause supports the majority’s conclusion that the clause requires a settlement to be “within the reasonable range of the settling tortfeasor’s proportional share of comparative liability for plaintiff’s injuries.” (Maj. opn., ante, at p. 499.) Contrary to the majority’s assertions, such a rule will unduly discourage settlements and severely burden the trial courts by “convert[ing] the pretrial settlement approval procedure into a full-scale mini-trial.” (Maj. opn., ante, at p. 499.)
Unlike the Legislature, this court lacks “the facilities and the forum to hear from all interested parties” and determine whether the inequity presented by this case is a common enough occurrence to warrant the decline in settlements and the burden on the legal system that the majority’s rule will entail. (Cardio Systems, Inc. v. Superior Court (1981) 122 Cal.App.3d 880, 891 [176 Cal.Rptr. 254]; see also Burlington Northern R.R. Co. v. Superior Court, supra, 137 Cal.App.3d at p. 946.)
I would let the Legislature determine whether a departure from the tortious conduct test of good faith is warranted.

All statutory references are to the Code of Civil Procedure unless otherwise indicated.

Section 4 provides as follows: “When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death: [U] (a) It does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater; and, [1] (b) It discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.”

Several cases decided after American Motorcycle have held that the policy favoring settlement is more important than the policy favoring “equitable apportionment of liability among the tortfeasors.” (Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 496-497 [147 Cal.Rptr. 262]; accord American Bankers Ins. Co. v. Avco-Lycoming Division (1979) 97 Cal.App.3d 732, 736 [159 Cal.Rptr. 70].)