Maxwell v. MortgageIT, Inc., No. 1:2008cv01329 - Document 53 (E.D. Cal. 2010)

Court Description: MEMORANDUM DECISION Re: 39 Motion For Determination of Good Faith Settlement, signed by Judge Oliver W. Wanger on 6/1/2010. (Gaumnitz, R)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 FOR THE EASTERN DISTRICT OF CALIFORNIA 7 8 SAMUEL MAXWELL, 9 10 11 1:08-CV-01329 OWW SKO Plaintiff, MEMORANDUM DECISION RE MOTION FOR DETERMINATION OF GOOD FAITH SETTLEMENT (DOC. 39) v. MORTGAGEIT, INC., et al., 12 13 Defendants. 14 15 I. INTRODUCTION Plaintiff Samuel Maxwell s complaint arises out of a home 16 17 18 mortgage refinance transaction he entered into with Defendants Union Fidelity Mortgage, Inc., Erin Reilly, and Randolph Martin 19 ( Union Defendants ) in June 2007 for approximately $358,000. 20 The loan was subsequently purchased by Defendant MortgageIT, Inc. 21 ( MortgageIT ). 22 23 24 Plaintiff alleges Defendants failed to disclose and knowingly misrepresented key terms of the loan, including the interest rate and finance charges, in violation of the federal 25 26 Truth in Lending Act ( TILA ), 15 U.S.C. § 1601 et seq., and 27 California s unfair competition law ( UCL ), codified at 28 California Business and Professions Code § 17200 et seq. 1 1 2 MortgageIT s previous motion to dismiss the TILA and UCL claims was denied. 3 4 Doc. 22, filed Feb. 19 2009. Subsequently, Plaintiff and MortgageIT entered into an armslength agreement for the settlement of all claims and disputes 5 6 7 involving MortgageIT, whereby MortgageIT will be dismissed with prejudice from the action in exchange for a payment of $15,000.00 8 Before the court for decision is MortgageIT s motion for 9 determination of good faith settlement pursuant to California 10 Code of Civil Procedure 877.6(a)(2). Doc. 39-2. 11 II. LEGAL STANDARD 12 California Code of Civil Procedure Section 877.6 provides 13 14 that if a party is sued as a joint tortfeasor or co-obligor and 15 subsequently settles the litigation, it may bring a motion for 16 determination of the good faith of the settlement. 17 courts may enter such determinations. 18 FSLIC v. Butler, 904 F.2d 505, 511 (9th Cir. 1990). 19 In Tech-Bilt, Inc. v. Woodward-Clyde & Assoc., 38 Cal. 3d 20 21 Federal 488 (1985), the California Supreme Court articulated a liberal 22 standard for determining good faith, requiring only that a 23 defendant s settlement figure must not be so grossly 24 disproportionate to what a reasonable person, at the time of 25 settlement, would estimate the settling defendant s liability to 26 27 28 be. Id. at 499. Any settlement that is not out of the ballpark will pass muster. Id. 2 Although there is no precise 1 formula, courts look to a variety of factors to determine what is 2 in the ballpark, including: 3 4 (1) a rough approximation of the plaintiff's probable total recoveries; 5 (2) a rough approximation of the settling defendant's proportional liability; 6 (3) the amount paid in settlement; 7 8 (4) the recognition that less is paid in settlement than should be awarded at trial; 9 (5) the financial condition of the settling defendant; 10 (6) the insurance policy limits of the settling defendant; 11 (7) the existence of collusion, fraud or tortious misconduct intended to injure the interests of the other defendants. 12 13 Id. at 488. 14 III. ANALYSIS. 15 16 17 A. The Request for Determination of Good Faith Settlement. Here, only two of the five causes of action alleged in the 18 complaint are against MortgageIT: (1) Violation of TILA, and (2) 19 Unfair Business Practices. 20 claims against it are speculative and flawed. 21 22 MortgageIT asserts that Plaintiff s As to the TILA Claims, TILA sets forth lenders disclosure obligations; it does not directly govern the substance of 23 24 mortgage loan transactions. See 15 U.S.C. § 1601 et seq. As a 25 result, Plaintiff s allegations that the fees charged by Union 26 Fidelity, the originator of the subject loan, were excessive or 27 that it should not have made the subject loan are not governed by 28 3 1 2 3 4 TILA. As to Plaintiff s remaining disclosure-related TILA allegations, MortgageIT asserts that the evidence produced during discovery so far indicates that Union Fidelity provided Plaintiff 5 6 7 with accurate TILA disclosures and that Plaintiff acknowledged receipt of these disclosures. Moreover, MortgageIT, as a 8 subsequent assignee of Plaintiff s loan, is liable for only those 9 TILA violations that are evident on the face of the subject loan 10 documents. 11 Moreover, any recovery in this case would be limited to statutory 12 13 14 15 There is no such alleged violation in this case. damages under TILA. As to the unfair competition claim, it is premised entirely upon the alleged TILA violation. MortgageIT asserts that because 16 the TILA claim would likely fail, so would the unfair competition 17 claim. 18 Section 17200 does not provide for the recovery of damages. 19 Plaintiff may seek to recover, at most, restitution. 20 case, any claim for restitution would be minimal at best, because 21 Moreover, California Business and Professions Code In this MortgageIT transferred its interest in the subject loan after 22 23 24 25 acquiring it from Union Fidelity and did not own the loan long enough to substantially benefit. The settlement amount of $15,000.00 to be distributed to 26 Plaintiff by his counsel exceeds the statutory damages limit of 27 $4000.00 provided for under TILA. 28 4 16 U.S.C. § 1640(a)(2)(A)(iv). 1 Moreover, a settling party is entitled to an additional discount 2 based on the mere fact that it is settling the litigation. 3 Norco Delivery Service, Inc. v. Owens-Corning Fiberglass, Inc., 4 See 64 Cal. App. 4th 955 (1998) (affirming good faith determination 5 6 7 after defendant settled case for $88,000, when plaintiff's alleged damages ranged from $300,000 to $1 million). Finally, there is no evidence of fraud or collusion in the 8 See Doc. 39-2, Chen Decl., at ¶3. 9 negotiation of the settlement. 10 Even to the extent other parties may be responsible, based on 11 MortageIT s limited participation, the settlement is fair and 12 reasonable. 13 No objections to a good faith determination have been filed. 14 The request for determination of good faith is GRANTED. 15 16 B. 17 MortgageIT s Request to be Discharged from Any Claim for Liability for Contribution or Indemnification. 18 MortgageIT also asserts that it is entitled to a bar against 19 further contribution to or indemnification of nonsettling 20 parties. 21 states that where a release or dismissal is given in good faith 22 to one or more tortfeasors, it shall have the effect of 23 California Code of Civil Procedure Section 877(b) discharging the party to whom it is given from all liability for 24 25 26 27 28 any contribution to any other parties. In the settlement with Plaintiff, MortgageIT is receiving both a release and dismissal. See Chen Decl., ¶4, Exh. A, ¶¶ 1, 3. In addition, California Code of Civil Procedure Section 5 1 877.6(c) provides that a finding of good faith settlement shall 2 bar any other joint tortfeasor or co-obligor from any further 3 claims against the settling tortfeasor or co-obligor for 4 equitable comparative contribution, or partial or comparative 5 6 7 indemnity. Entry of a bar against further contribution is consistent with California and federal law. In Franklin v. 8 Kaypro Corporation, 884 F.2d 1222 (1989), the Ninth Circuit 9 approved of the practice of entering a bar order precluding non- 10 settling defendants from further rights of contribution from the 11 settling defendants, so long as the order also limits the non- 12 13 14 15 settling defendants actual percentage of liability to that determined at trial. Id; see also In re First Alliance Mortg. Co., 471 F.3d 977, 1004 (9th Cir. 2006) (noting that the bar 16 order stated [t]he amount of any verdict or judgment obtained 17 against any of the Non-Settling Defendants in any litigation 18 arising out of or relating to the [underlying allegations] shall 19 be limited to the Non-Settling Defendants proportionate share of 20 liability, i.e., their actual percentage of liability for the 21 amount of total damages determined at trial, in accordance with 22 23 24 Kaypro, 884 F.2d 1222 ). Here the bar order requested by MortgageIT does not contain 25 any language limiting the subsequent liability of the non- 26 settling defendants. 27 that the settlement is in good faith and barring further 28 This must be added to the order finding 6 1 contribution or indemnification. 2 of this language, MortgageIT s request to be discharged from any 3 claim for liability for contribution or indemnification is 4 Conditioned upon the addition GRANTED. 5 6 7 8 9 10 IV. CONCLUSION For the reasons stated above, MortgageIT s request for a determination that its settlement with Plaintiff was in good faith is GRANTED. In addition, conditioned upon the addition of appropriate 11 12 language limiting the subsequent liability of the non-settling 13 defendants, MortgageIT s request to be discharged from any claim 14 for liability for contribution or indemnification is GRANTED 15 MortgageIT shall submit a proposed form of order consistent 16 with this memorandum decision within five (5) days of electronic 17 service. 18 19 20 SO ORDERED June 1, 2010 /s/ Oliver W. Wanger Oliver W. Wanger United States District Judge 21 22 23 24 25 26 27 28 7

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