Settlement

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Settlement in California

Good Faith Settlements

All litigators need to know the statutory rules governing good faith settlements.

By Gilda R. Turitz. She is a partner and litigation practice group leader at Sideman & Bancroft in San Francisco.

When one defendant in a multiparty case settles for a low amount, an issue often arises as to whether the settlement has been entered in “good faith.” The issue is important because a key California statute enables a party who settles in good faith to leave the litigation and exempts them from certain cross-claims asserted by the other defendants.

Statutory Procedure

Settlements are supposed to bring warring litigants peace and finality, but that goal may be jeopardized when non-settling defendants challenge a pre-verdict or pre-judgment settlement between the plaintiff and some – but not all – joint tortfeasor or co-obligor defendants. The challenge usually comes in the form of an objection that the settlement lacks the requisite good faith to qualify for the protective statutory cloak that would shield the settling party from the cross-claims asserted by other defendants for equitable comparative contribution or indemnity based on comparative negligence or comparative fault. Moreover, a good faith settlement will reduce the plaintiff’s claims against the non-settlors by the amount stipulated in the release, dismissal, or covenant not to sue or enforce judgment, or by the amount of consideration paid to the plaintiff, whichever is greater. (See Cal. Civ. Proc. Code §§ 877 and 877.6.)

Any party can apply to the superior court for a good faith determination under alternative procedures of section 877.6(a) by a formal motion or a simple notice served by certified mail. A party asserting the lack of good faith (which is a question of fact) bears the burden of proof. (§ 877.6(d).) The battle regarding a disputed good faith claim usually focuses on the factors explained in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (38 Cal. 3d 488 (1985)) and its progeny. The issue is whether the settlement is so far “out of the ballpark” that it is inconsistent with the statute’s dual goals of encouraging settlements and equitably allocating costs among multiple tortfeasors.

Proportionate Liability

The predominant factor under Tech-Bilt is that the settlement amount cannot be “grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.” (38 Cal. 3d at 499.) Although a monetary sum is easily quantified, total settlement value must factor in any nonmonetary considerations. Admissible evidence is required to prove value and the settlor’s proportionate liability, and expert affidavits in support may be necessary on both issues.

Financial Reality

Courts recognize that a settlor may pay less in settlement than it would be found liable for at trial, especially if its financial resources are limited. The good faith determination requires adequate and admissible evidence of the settling defendant’s net worth and any insurance or claimed noncoverage. An objecting party may properly seek a continuance of the good faith hearing to marshal evidence, including taking discovery, to support its burden of proof on the financial issues. If discovery is sought, the settlor may seek a protective order to limit financial disclosures.

Although courts are quite flexible in applying the good faith analysis, a settlement will not qualify as valid under section 877.6 if the evidence demonstrates that the settling parties engaged in conduct aimed at injuring the non-settlors’ interests. A collusion finding may be supported by a disproportionately low settlement figure entered into solely to immunize the settlors from a cross-complaint. (See Mattco Forge, Inc. v. Arthur Young & Co., 38 Cal. App. 4th 1337 (1995).) However, if the settlement resulted from a mediation or judicially hosted settlement conference, there is a much better chance that it will meet the good faith standard.

Make It Conditional

If settling parties anticipate a challenge, they should consider conditioning the settlement upon the court’s approval. Otherwise, if the court finds lack of good faith, the settling defendants will still be bound to pay, and they will face continuing potential exposure to indemnify non-settlors.

Dismissing Cross-Complaints

A good faith settlement order does not by itself dismiss indemnity and contribution cross-complaints. The settling defendant must move for that relief, and the motion can be made concurrently with or immediately following the good faith hearing.

Appellate Relief

Any aggrieved party may file a petition for writ of mandate within 20 days after written notice of the good faith ruling. (Cal. Civ. Proc. Code § 877.6(e).) Because there is no right to appeal from a good faith settlement order, to contest the trial court’s ruling, a party should promptly file a writ. Waiting to pursue appellate relief until after a judgment is entered will usually be too late.

The rules governing settlement are designed to be efficient and user-friendly. And any lawyer in a multiparty case is well advised to not only be aware of them, but also to understand both their potency and their limitations.

California Settlement

This section covers California-specific basic information on settlement and related topics. Many of California's laws on settlement are similar to those of other U.S. states, with some differences (in some cases, minor differences). California settlement laws on settlement are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on settlement, which is a basic matter in California law.

Settlement Contracts

Welcome to the California legal encyclopedia's introductory part covering the settlement contracts laws of California, with explanations of the various implications of settlement contracts in California and the statutes enforced in California in connexion with settlement contracts. This introductory section covers case law related to settlement contracts in California, the legal approach on settlement contracts in the United States and related topics. The information below provides an California-specific general overview of the legal regime of settlement contracts in California.

Settlement Contracts in relation to Commercial Law

This section analizes the legal issue of settlement contracts in this context, and provides information on its relation with Contracts.

Settlement of Small Estates

Welcome to the California legal encyclopedia's introductory part covering the settlement of small estates laws of California, with explanations of the various implications of settlement of small estates in California and the statutes enforced in California in connexion with settlement of small estates. This introductory section covers case law related to settlement of small estates in California, the legal approach on settlement of small estates in the United States and related topics. The information below provides an California-specific general overview of the legal regime of settlement of small estates in California.

Settlement of Small Estates in relation to Probate, Estates and Trusts

This section analizes the legal issue of settlement of small estates in this context, and provides information on its relation with Administration of Estates.

Settlements; Agreements on Compensation

Welcome to the California legal encyclopedia's introductory part covering the settlements; agreements on compensation laws of California, with explanations of the various implications of settlements; agreements on compensation in California and the statutes enforced in California in connexion with settlements; agreements on compensation. This introductory section covers case law related to settlements; agreements on compensation in California, the legal approach on settlements; agreements on compensation in the United States and related topics. The information below provides an California-specific general overview of the legal regime of settlements; agreements on compensation in California.

Settlements; Agreements on Compensation in relation to Workers' Compensation

This section analizes the legal issue of settlements; agreements on compensation in this context.

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Landowner

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Landowner in California

Adjoining Landowners in relation to Property

This section analizes the legal issue of adjoining landowners in this context, and provides information on its relation with Use and Development of Property

Adjoining Landowners in California: General Overview

This entry offers readers with practical insight to the subject of adjoining landowners in California, a general introduction to the legal issues relating to adjoining landowners under California law and practice.

Bonds

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Bonds in California

Bond Bill (General Obligation Bonds) and the Legislative Process

A bill authorizing the sale of State general obligation bonds to finance specified projects or activities; the measure subsequently must be approved by the voters.

California Bonds

This section covers California-specific basic information on bonds and related topics. Many of California's laws on bonds are similar to those of other U.S. states, with some differences (in some cases, minor differences). California bonds laws on bonds are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on bonds, which is a basic matter in California law.

Bonds of Guardians

Welcome to the California legal encyclopedia's introductory part covering the bonds of guardians laws of California, with explanations of the various implications of bonds of guardians in California and the statutes enforced in California in connexion with bonds of guardians. This introductory section covers case law related to bonds of guardians in California, the legal approach on bonds of guardians in the United States and related topics. The information below provides an California-specific general overview of the legal regime of bonds of guardians in California.

Bonds of Guardians in relation to Probate, Estates and Trusts

This section analizes the legal issue of bonds of guardians in this context, and provides information on its relation with Administration of Estates.

Bonds in California: General Overview

This entry offers readers with practical insight to the subject of bonds in California, a general introduction to the legal issues relating to bonds under California law and practice.

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Aliens

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Aliens

California Aliens

This section covers California-specific basic information on aliens and related topics. Many of California's laws on aliens are similar to those of other U.S. states, with some differences (in some cases, minor differences). California aliens laws on aliens are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on aliens, which is a basic matter in California law.

Aliens With Extraordinary Ability

Welcome to the California legal encyclopedia's introductory part covering the aliens with extraordinary ability laws of California, with explanations of the various implications of aliens with extraordinary ability in California and the statutes enforced in California in connexion with aliens with extraordinary ability. This introductory section covers case law related to aliens with extraordinary ability in California, the legal approach on aliens with extraordinary ability in the United States and related topics. The information below provides an California-specific general overview of the legal regime of aliens with extraordinary ability in California.

Aliens With Extraordinary Ability in relation to Immigration Law

This section analizes the legal issue of aliens with extraordinary ability in this context.

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Distribution

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Distribution

California Distribution

This section covers California-specific basic information on distribution and related topics. Many of California's laws on distribution are similar to those of other U.S. states, with some differences (in some cases, minor differences). California distribution laws on distribution are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on distribution, which is a basic matter in California law.

Distribution in relation to Probate, Estates and Trusts

This section analizes the legal issue of distribution in this context, and provides information on its relation with Administration of Estates

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Supreme Court

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California Supreme Court

The California Supreme Court Activity in 2013-2014

From July 1, 2013, to June 30, 2014 – with Justice Joyce L. Kennard absent during the final three months – the California Supreme Court decided 89 cases, matching the previous year’s output with a balanced caseload of 32 civil cases, 26 death penalty cases, 28 non-death criminal cases, and three State Bar matters. All of the death penalty cases were affirmed, and all but two of those decisions were unanimous. Most of the non-death criminal rulings were also unanimous, with one 43 split and three solo dissents (two from Kennard and one from Justice Marvin R. Baxter).

In the civil cases, the Court split 43 three times, 52 five times, and 61 twice. Thus, the overall dissent rate for the year was a paltry 4.5 percent, falling between the record low of 2.3 percent set during the first year of the Cantil-Sakauye Court and 6.1 percent achieved in 2013.

The California Supreme Court Activity in 2012-2013

By Gerald F. Uelmen, a professor at Santa Clara University School of Law. Earl Horner (Class of 2014) compiled the data for this article.

In sharp contrast to the first year of Chief Justice Tani Cantil-Sakauye’s leadership of the California Supreme Court, her second year saw dissent and disagreement rates sharply increase, with some unusual combinations in both the majority and dissenting opinions. From July 1, 2012, to June 30, 2013, the court split 4-3 in seven cases, compared with only one in the previous twelve months. (See “Justices United,” September 2012.) There were also seven 5-2 opinions, compared with one the previous year. As a result, the overall dissent rate nearly tripled – from 2.3 percent to 6.1 percent.

Justices Joyce Kennard and Goodwin Liu tied for the highest dissent rate (15.5 percent), but they weren’t always dissenting in the same cases. And even when they were, they rarely joined each other’s opinions.

When the court split 4-3, I found the alignments to be especially intriguing, with a different lineup in each case. (See “Close Calls” below.) Five of the seven were criminal cases. The defense lost in four of those five. Although few consistent patterns emerged, I did note that Liu was with the defense in all five cases, joined by Justice Kathryn Werdegar in four. Justice Marvin Baxter, on the other hand, was with the prosecution in four of the five cases. In the one case in which he sided with the defense, Baxter wrote an unusual (for him) concurring opinion, offering a Scalia-like explanation that the result was compelled by the plain language of the statute, without looking beyond the text. (People v. Rodriguez, 55 Cal. 4th 1125, 1139-1141 (2012) (Baxter, J., concurring).)

Disagreement Rates

Rates of disagreement measure the proportion of cases in which the justices vote on opposite sides of cases that divide the court. The lowest rate of disagreement is that between Baxter and Justice Ming Chin, who were on the same side in 98 percent of the cases. The highest rates of disagreement were registered by Liu and Baxter, who were on opposite sides in 15 percent of the cases. (Kennard and Liu cast different votes 13.3 percent of the time.)
To me, the biggest surprise was Liu’s rate of agreement with Justice Carol Corrigan. They voted together in 94 percent of the cases – an “odd couple” – in which one of the more conservative justices (Corrigan) joined one of the more liberal (Liu). The explanation for this may be that they actually talk to each other outside the conferences!

In a pair of interesting cases, Liu joined Corrigan’s dissenting opinions: In re Boyette (56 Cal. 4th 866 (2013)), in which she argued that jurors watching a film about prison life during their deliberations was misconduct requiring reversal; and People v. Dungo (55 Cal. 4th 608 (2012)), one of the Confrontation Clause cases discussed on the opposite page. Liu also had a 94 percent rate of agreement with Werdegar.

Like her predecessor, Chief Justice Ronald George, Chief Cantil-Sakauye staked out a very centrist position, tilting slightly to the right. She parted company with Chin in 5 percent of the cases, and with Liu in 10 percent. Liu’s tilt to the left was very similar to that of his predecessor, Justice Carlos Moreno: Liu disagreed with both the chief and Chin in 10 percent of the cases.

When the cases are broken down into separate categories – civil cases, death penalty cases, and noncapital criminal cases – the dissent and disagreement rates look very different. Of the 96 cases decided this year, 32 were civil cases, 21 were death penalty cases, and 43 were noncapital criminal cases. The dissent rate for civil cases was 5.1 percent. Although three of the death cases were reversals, only two of the affirmances drew dissents, for an overall dissent rate of 2.8 percent. For non-death criminal cases, however, the dissent rate was 7.9 percent.

Confrontation Confusion

What happens when the U.S. Supreme Court fails to muster a majority to agree on the same rationale for its decision? Last term the high court did just that, fumbling the ball in its decision in Williams v. Illinois (132 S. Ct. 1221 (2012)). In upholding the admission of the results of a laboratory DNA analysis without cross-examination of the analyst who prepared it, four justices joined a plurality opinion that watered down the Confrontation Clause analysis of Crawford v. Washington (541 U.S. 36 (2004)), while four justices, including Crawford author Justice Antonin Scalia, insisted that Crawford required reversal. The concurring opinion of Justice Clarence Thomas, which relied upon a totally different rationale, arguing that Confrontation Clause protection applies only to statements “with the solemnity of an affidavit or deposition,” provided the fifth vote needed to decide the case. But the decision’s split rationales left the fate of Crawford’s approach to the Confrontation Clause in limbo.

In California, the state Supreme Court struggled with the impact of Williams upon the admissibility of various forensic reports in a trilogy of cases. Not surprisingly, the cases resulted in a bewildering array of opinions, as the justices attempted to pick through the high court’s tea leaves. All three of the cases produced majority opinions upholding the convictions, and all were authored by Justice Kennard.

In People v. Lopez (55 Cal. 4th 569 (2012) (blood-alcohol concentration test results)), the state Supreme Court concluded that a laboratory technician’s initials on a report “were not made with the requisite degree of formality or solemnity” to be considered testimonial. Justice Liu dissented.

The conclusion in People v. Dungo (55 Cal. 4th 608 (2012) (observations during autopsy)) was that a physician’s description in a report of what he observed during an autopsy was not testimonial, because a criminal investigation was not the primary purpose of the autopsy, but rather only one of several purposes. Justices Corrigan and Liu dissented.

In People v. Rutterschmidt (55 Cal. 4th 650 (2012) (toxicology analysis)), Justice Kennard threw up her hands and declared that even if an analyst’s report was testimonial, its admission was harmless error. Just like Williams, none of these cases will provide much guidance to trial courts in determining whether out-of-court statements were testimonial. But one can hardly blame the California Supreme Court: It was simply following the bad example of the highest court in the land.

The Best and the Worst

Although I didn’t like the result in the closely watched case of City of Riverside v. Inland Empire Patients Health and Wellness Center, Inc. (56 Cal. 4th 729 (2013)), I must compliment Justice Baxter on a masterful job of laying out the issues and resolving them concisely: State medical-marijuana laws do not preempt local regulation. Therefore, local governments remain free to prohibit the operation of marijuana dispensaries within their jurisdiction, even when such operations are in full compliance with state law. Unfortunately, this encourages a not-in-my-backyard mentality that will likely drive distribution underground, as well as require many patients to travel long distances to get safe access to medical marijuana. But as Justice Baxter notes, “[N]othing prevents future efforts by the Legislature, or by the People, to adopt a different approach.”

A different approach indeed was used in the recent initiative measures legalizing recreational use of marijuana in the states of Colorado and Washington. The Colorado measure requires a comprehensive system of statewide rules that will preempt local regulation of marijuana distribution. Similarly, the Washington measure creates a framework similar to the regulation of liquor, to be administered by the state Liquor Control Board. This issue will surely be confronted in California’s next marijuana-legalization initiative.

I thought the best opinion of the year was Justice Liu’s concurrence in People v. Barrett (54 Cal. 4th 1081, 1114–1151 (2012)). He concluded that a distinction between mentally ill persons and mentally retarded persons in the statutory right to advisement to be tried by a jury violates California’s own constitutional guarantee of equal protection. Thus the Mosk Doctrine – that state courts should look first to their independent state constitutions-lives on.

In my view, the worst opinion of the year was Justice Kennard’s majority opinion in In re Richards (55 Cal. 4th 948 (2012)). (See “Close Calls,” below.) By creating a shadowy distinction between the testimony of experts and the testimony of laypersons in applying the protections against false evidence in Penal Code section 1473(b), the decision creates a substantial obstacle to correcting what the California Commission on the Fair Administration of Justice identified as the second-most-common factor contributing to wrongful convictions: erroneous scientific evidence – in identifying “hair, bullets, handwriting, footprints, bite marks and even venerated fingerprints.”

The court’s opinion, by requiring that evidence that a forensic expert’s conclusions were mistaken must point “unerringly to innocence or reduced culpability,” would deny relief even if the defendant can show it is reasonably probable that the verdict would have been different absent the expert’s mistake.

A close runner-up for worst opinion of the year was Chief Cantil-Sakauye’s majority opinion in People v. Aranda (55 Cal. 4th 342 (2012)). In this case there was no question that the trial court erred in failing to instruct the jury on reasonable doubt. But Cantil-Sakauye confidently concluded that it was harmless error because “there was no reasonable probability that the outcome” would have been different had the instruction been given. Yet both Justices Kennard and Liu dissented because they were not convinced, beyond a reasonable doubt, that the jury in the case applied the correct standard of proof.

If two justices on the state Supreme Court have a reasonable doubt, how can a majority of that court confidently conclude that a reasonable juror would not? In general, I’m suspicious of “harmless error” findings that are not unanimous. As Justice Liu noted in his dissent, “Until today, no California case had ever held or even suggested that despite a trial court’s failure to instruct the jury with a standard reasonable doubt instruction … an appellate court can still be certain beyond a reasonable doubt that the jury understood its obligation.”

Original Actions in the Supreme Court

Welcome to the California legal encyclopedia's introductory part covering the original actions in the supreme court laws of California, with explanations of the various implications of original actions in the supreme court in California and the statutes enforced in California in connexion with original actions in the supreme court. This introductory section covers case law related to original actions in the supreme court in California, the legal approach on original actions in the supreme court in the United States and related topics. The information below provides an California-specific general overview of the legal regime of original actions in the supreme court in California.

Original Actions in the Supreme Court in relation to Criminal Law & Procedure

This section analizes the legal issue of original actions in the supreme court in this context, and provides information on its relation with Posttrial Matters; Appeals.

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Police

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Police in California

Police, Sheriffs, and Related Officers in California: General Overview

This entry offers readers with practical insight to the subject of police, sheriffs, and related officers in California, a general introduction to the legal issues relating to police, sheriffs, and related officers under California law and practice.

Liquors

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Liquors in California

Intoxicating Liquors in California: General Overview

This entry offers readers with practical insight to the subject of intoxicating liquors in California, a general introduction to the legal issues relating to intoxicating liquors under California law and practice.

Court System

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Court System in California

Introduction to the California Court System

Welcome to the California legal encyclopedia's introductory part covering the introduction to the California court system laws of California, with explanations of the various implications of introduction to the California court system in California and the statutes enforced in California in connexion with introduction to the California court system. This introductory section covers case law related to introduction to the California court system in California, the legal approach on introduction to the California court system in the United States and related topics. The information below provides an California-specific general overview of the legal regime of introduction to the California court system in California.

Introduction to the California Court System in relation to Civil Procedure

This section analizes the legal issue of introduction to the California court system in this context.

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Criminal Law

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Criminal Law in California

For California Attorneys: Criminal Law

There is more information about this subjet in the California legal portal in these entries: Victim Restitution Plea Bargaining Proceeding Innocence Money Laundering Evidence Victims Three Strikes Law

California Criminal Law

This section covers California-specific basic information on criminal law and related topics. Many of California's laws on criminal law are similar to those of other U.S. states, with some differences (in some cases, minor differences). California criminal law laws on criminal law are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on criminal law, which is a basic matter in California law.

Criminal Law (Substantive Principles and Offenses) in California: General Overview

This entry offers readers with practical insight to the subject of Criminal Law (Substantive Principles and Offenses) in California, a general introduction to the legal issues relating to Criminal Law (Substantive Principles and Offenses) under California law and practice.

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