Travelers Commercial Insurance Company v. Gabai Construction et al, No. 3:2013cv01881 - Document 65 (S.D. Cal. 2015)
Court Description: ORDER Granting 58 Motion for Confirmation of Good Faith Settlement: The Cross Claim against Westside (ECF No. 16) is dismissed. Signed by Judge Cynthia Bashant on 11/6/15. (dlg)
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Travelers Commercial Insurance Company v. Gabai Construction et al Doc. 65 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 TRAVELERS COMMERCIAL INSURANCE COMPANY, 12 13 14 15 16 Plaintiff, v. Case No. 13-cv-01881-BAS(DHB) ORDER GRANTING MOTION FOR CONFIRMATION OF GOOD FAITH SETTLEMENT (ECF No. 58) GABAI CONSTRUCTION, ET AL., Defendants 17 18 AND RELATED CROSS-CLAIMS 19 20 Plaintiff Travelers Commercial Insurance Company (“Travelers”) commenced 21 this action on August 13, 2013 against Gabai Construction (“Gabai”) alleging strict 22 products liability, breach of implied warranty of fitness, breach of implied warranty 23 of merchantability, breach of contract, negligence, and breach of express warranty. 24 (ECF No. 1.) On March 10, 2014, Gabai filed a Cross Claim for equitable indemnity, 25 contribution, and equitable apportionment against Roanja Planning, Inc. dba 26 Westside Door & Moulding (“Westside”). (ECF No. 16.) On April 10, 2014, 27 Travelers filed a First Amended Complaint (“FAC”) against Gabai and Fire 28 Protection Group, Inc. (“FPG”). (ECF No. 22.) –1– 13cv1881 Dockets.Justia.com 1 Westside now moves this Court to approve the settlement it has reached with 2 Travelers as made in good faith pursuant to California Code of Civil Procedure 3 sections 877, et seq., and to dismiss the Cross Claim against Westside. (ECF No. 4 58.) No opposition has been filed. 5 The Court finds this motion suitable for determination on the papers submitted 6 and without oral argument. See Civ. L.R. 7.1(d)(1). For the following reasons, the 7 Court GRANTS Travelers’ motion for confirmation of good faith settlement and 8 DISMISSES the Cross Claim. 9 I. BACKGROUND 10 A. Statement of Facts 11 Gabai was the developer and/or general contractor of a residential property 12 located in Beverly Hills, California (“Residence”) purchased by Travelers’ insureds. 13 (FAC at ¶¶ 2-4, 18.) Gabai subcontracted with FPG to install a fire sprinkler system 14 in the Residence. (Id. at ¶ 5; ECF No. 58-3 at Exh. C.) On or about December 2010, 15 Gabai hired Westside, a window and door supplier, to furnish a replacement skylight 16 panel for the central entry-way skylight of the Residence. (ECF No. 16 at ¶ 7, ECF 17 No. 58-2 at p. 3.) On May 3, 2011, one of the sprinkler heads installed in a skylight 18 well in the central entryway flooded the home and caused damages paid for by 19 Travelers in the approximate amount of $894,999.06. (ECF No. 58-2 at ¶ 2; FAC at 20 ¶ 3; ECF No. 16 at ¶ 10.) 21 Travelers alleges the flood was caused by: (1) “[f]aulty design, construction, 22 remodel and installation of an entry way sky-light;” and (2) “[f]aulty design, 23 construction and installation of a fire sprinkler system.” (FAC at ¶ 19.) Gabai filed 24 a Cross Claim against Westside alleging that Gabai “hired Westside to furnish a 25 replacement skylight panel for the central entry-way skylight.” (ECF No. 16 at ¶ 7.) 26 According to the Cross-Claim, “[t]he Skylight materials [used by Westside] were 27 different than the prior entry-way skylight panel which it replaced” and thus Westside 28 may be in some way responsible for the resulting flood. (Id. at ¶¶ 9, 11.) –2– 13cv1881 1 As of the date of filing of Westside’s motion, three separate theories as to what 2 caused the sprinkler head to trigger had emerged: (1) the wrong sprinkler head was 3 installed; (2) when Westside changed the skylight from domed to flat and from 4 Plexiglas to glass, this increased the temperature in the skylight well and triggered 5 the sprinkler; and (3) the glass bulb which serves as the triggering mechanism for the 6 sprinkler head was damaged. (ECF No. 58-1 at p. 4.) Each of the three theories and 7 their relationship to Westside is discussed below. 8 The first theory, which appears to be supported by some documentary evidence 9 supplied in Westside’s motion is that an “ordinary” sprinkler head with a 155 degree 10 trigger point was installed, when an “intermediate” sprinkler head with a higher 11 minimum trigger point of 175 degrees should have been installed. (Id. at pp. 4-5.) 12 Westside provides an Installation Guide from the sprinkler head manufacturer noting 13 that “[w]hen residential sprinklers will be exposed to the rays of the sun passing 14 through glass or plastic skylights, use intermediate temperature rated sprinklers.” 15 (ECF No. 58-3, Exh. D.) According to Westside’s motion, which is unopposed, 16 experts retained by Travelers, Gabai, and Westside are all in agreement that an 17 intermediate sprinkler head should have been installed. (ECF No. 58-1 at p. 4.) 18 FPG’s expert has taken no position on this issue. 19 disagreement among the parties as to who installed the sprinkler head, there is no 20 dispute that Westside had no involvement in the supply, installation, or maintenance 21 of any sprinkler heads. (ECF No. 58-1 at p. 3; ECF No. 58-2 at ¶ 8.) (Id.) Although there is 22 The second theory of liability is that the change in skylight type increased the 23 temperature such that the sprinkler head was then triggered. (ECF No. 58-1 at p. 5.) 24 According to Westside’s motion, which is unopposed, while Traveler’s and FPG’s 25 experts issued reports suggesting this theory of liability, Gabai’s expert directly 26 contradicts this theory. (ECF No. 58-3, Exh. E.) 27 The third theory of liability has to do with the fragile nature of the glass bulb 28 which serves as the triggering mechanism for the sprinkler head. (ECF No. 58-1 at –3– 13cv1881 1 p. 5.) According to Westside’s motion, just prior to the flood, Gabai installed a large 2 steel structure to support a chandelier. This installation required demolition of a wall 3 and moving the offending sprinkler head physically to one side and then reinstalling 4 it. (Id. at p. 6.) Thus, it is possible the glass bulb was damaged in the move, and the 5 flood ensued. Again, Westside had no involvement in the installation of the steel 6 structure or movement of the sprinkler head. (Id.) 7 B. Procedural History 8 Travelers commenced this action on August 13, 2013 against Gabai alleging 9 strict products liability, breach of implied warranty of fitness, breach of implied 10 warranty of merchantability, breach of contract, negligence, and breach of express 11 warranty. (ECF No. 1.) Travelers asserted diversity jurisdiction pursuant to 28 12 U.S.C. § 1332. (Id. at ¶ 11.) On March 10, 2014, Gabai filed a Cross Claim for 13 equitable indemnity, contribution, and equitable apportionment against Westside. 14 (ECF No. 16.) On April 7, 2014, Westside filed an Answer to the Cross Claim. (ECF 15 No. 19.) 16 On April 10, 2014, Travelers filed the FAC against Gabai and FPG. (ECF No. 17 22.) Again, Travelers asserted diversity jurisdiction. (Id. at ¶ 12.) On April 28, 2014 18 and May 5, 2014, Gabai and FPG filed their respective Answers to the FAC. (ECF 19 Nos. 25, 26.) On May 5, 2014, FPG filed a Cross Complaint for equitable indemnity 20 against Gabai. (ECF No. 27.) Gabai filed an Answer to the Cross Complaint on May 21 30, 2014. (ECF No. 31.) 22 On December 29, 2014, FPG filed a motion for summary judgment or, in the 23 alternative, summary adjudication as to Travelers’ FAC. (ECF No. 42.) The Court 24 granted in part and denied in part the motion for summary judgment on October 19, 25 2015. (ECF No. 63.) Presently before the Court is a motion for confirmation of good 26 faith settlement pursuant to California Code of Civil Procedure §§ 877, et seq. filed 27 by Westside requesting that this Court confirm its settlement reached with Travelers. 28 /// –4– 13cv1881 1 II. LEGAL STANDARD 2 “When a district court sits in diversity, or hears state law claims based on 3 supplemental jurisdiction, the court applies state substantive law to the state law 4 claims.” Mason & Dixon Intermodal, Inc. v. Lapmaster Int’l LLC, 632 F.3d 1056, 5 1060 (9th Cir. 2011). California Code of Civil Procedure sections 877 and 877.6(c) 6 constitute substantive law. Id.; see also Fed. Sav. & Loan Ins. Corp. v. Butler, 904 7 F.2d 505, 511, n. 6 (9th Cir. 1990). While the rest of section 877.6 is mostly 8 procedural, “nothing is to prevent the district court from granting a motion for an 9 early determination of the good faith question.” Fed. Sav. & Loan Ins. Corp., 904 10 F.2d at 511. 11 Section 877.6(a)(2) provides that “a settling party may give notice of 12 settlement to all parties and to the court, together with an application for 13 determination of good faith settlement,” setting forth the settling parties, basis, terms, 14 and amount of the settlement, and a proposed order. Cal. Civ. Proc. Code § 15 877.6(a)(2). “Within 25 days of the mailing of the notice, application, and proposed 16 order, or within 20 days of personal service, a nonsettling party may file a notice of 17 motion to contest the good faith of the settlement.” Id. “If none of the nonsettling 18 parties files a motion within 25 days of mailing . . . , or within 20 days of personal 19 service, the court may approve the settlement.” Id. 20 The court is given broad discretion in deciding whether a settlement is in good 21 faith for purposes of section 877.6. Cahill v. San Diego Gas & Elec. Co., 194 Cal. 22 App. 4th 939, 957 (2011). However, discretion is not unlimited and “should be 23 exercised in view of the equitable goals of the statute, in conformity with the spirit of 24 the law and in a manner that services the interests of justice.” Long Beach Mem’l 25 Med. Ctr. v. Super. Ct., 172 Cal. App. 4th 865, 873 (2009). The two major goals of 26 section 877.6 include: (1) the equitable sharing of costs among parties at fault; and 27 (2) the encouragement of settlements. 28 Woodward-Clyde & Assocs., 38 Cal. 3d 488, 494-97 (1985). Id. at 872; see also Tech-Bilt, Inc. v. –5– 13cv1881 1 The court may determine the issue of the good faith of a settlement “on the 2 basis of affidavits served with the notice of hearing, and any counteraffidavits filed 3 in response, or the court may, in its discretion, receive other evidence at the hearing.” 4 Cal. Civ. Proc. Code § 887.6(b). Nonexclusive factors the court should take into 5 account in determining whether the settlement is made in good faith include: (1) “a 6 rough approximation of plaintiffs’ total recovery and the settlor’s proportionate 7 liability”; (2) “the amount paid in settlement”; (3) “the allocation of settlement 8 proceeds among plaintiffs”; and (4) “a recognition that a settlor should pay less in 9 settlement than he would if he were found liable after a trial.” Mason & Dixon 10 Intermodal, Inc., 632 F.3d at 1064 (citing Tech–Bilt, Inc. v. Woodward-Clyde & 11 Assocs., 38 Cal.3d 488, 499 (1985)). “Other relevant considerations include the 12 financial conditions and insurance policy limits of settling defendants, as well as the 13 existence of collusion, fraud, or tortious conduct aimed to injure the interests of non- 14 settling defendants.” Id. (citing Tech-Bilt, Inc., 38 Cal.3d at 499); see also Fed. Sav. 15 & Loan Ins. Corp. v. Butler, 904 F.2d 505, 512 (9th Cir. 1990) (“[T]he provisions of 16 section 877 require that any settlement that cuts off the right of contribution by 17 nonsettling defendants must be in good faith.”); N. Cnty. Contractor’s Ass’n. v. 18 Touchstone Ins. Servs., 27 Cal. App. 4th 1085, 1089-90 (1994) (“Good faith may be 19 found only if there has been no collusion between the settling parties and where the 20 settlement amount appears to be within the ‘reasonable range’ of the settling party’s 21 proportionate share of comparative liability for a plaintiff’s injuries.”). 22 “The party asserting the lack of good faith shall have the burden of proof on 23 that issue.” Cal. Civ. Proc. Code § 887.6(d). That party must show that the settlement 24 is “so far ‘out of the ballpark’” as to be inconsistent with the equitable goals of section 25 877.6. Tech-Bilt, Inc., 38 Cal. 3d at 499–500. 26 “A party which receives court approval of a settlement is entitled to a dismissal 27 of the action.” Great W. Bank v. Converse Consultants, Inc., 58 Cal. App. 4th 609, 28 613 (1997). “A cross-defendant who has not been named as a defendant in the main –6– 13cv1881 1 action may enter into a good faith settlement with the plaintiff in the main action and 2 obtain a dismissal of the cross-complaint pursuant to Code of Civil Procedure section 3 877.6.” Id. (citation omitted). “However, such a settlement should be carefully 4 scrutinized to ensure the settlement is reasonable, not collusive or fraudulent, and 5 made in good faith.” Id. (citation omitted). 6 III. DISCUSSION 7 A. Subject Matter Jurisdiction 8 The Court has diversity jurisdiction over the FAC. See 28 U.S.C. § 1332(a)(1). 9 The Court has subject matter jurisdiction over the Cross Claim pursuant to 28 U.S.C. 10 § 1367 which “permits a federal court to exercise supplemental jurisdiction over a 11 cross-claim between non-diverse defendants, providing such claim is ancillary to a 12 matter over which the court already has jurisdiction.” Pilavskaya v. Henderson, No. 13 CV 11-4075 CAS (Ex), 2012 WL 3279517, at *4 (C.D. Cal. Aug. 9, 2012); see also 14 Glen Falls Indem. Co. v. U.S. ex rel. Westinghouse Elec. Supply Co., 229 F.2d 370, 15 373-74 (9th Cir. 1955); Meritor Sav. Bank v. Camelback Canyon Investors, 783 F. 16 Supp. 455, 457 (D. Ariz. 1991). 17 B. Good Faith Settlement 18 Westside moves this Court to approve its settlement with Travelers of 19 $7,500.00, which is considerably less than the $894,999.06 Travelers allegedly paid 20 to its insureds as a result of the flood. Westside states the settlement is “only an 21 attempt to extricate Westside from this lawsuit where none of the evidence even 22 suggests that Westside might have responsibility for the subject flooding incident.” 23 (ECF No. 58-2 at ¶ 17.) Of great weight to the Court is the fact that no party opposes 24 this motion. 25 According to Westside, the only theory of liability that could possibly 26 implicate Westside is that installation of the new skylight caused the temperature to 27 rise and triggered the sprinkler head. However, Westside has shown that the expert 28 retained by Gabai, the cross-plaintiff, explicitly contradicts this theory. Moreover, –7– 13cv1881 1 even under this theory of liability, the fact that whoever installed the sprinkler system 2 installed an “ordinary” sprinkler head with a trigger point of 155 degrees is 3 significant. 4 responsible for installing the sprinkler head or assessing whether the newly-installed 5 skylight would be appropriate for the currently installed sprinkler system. There is no allegation that, as a skylight installer, Westside was 6 In light of these unopposed contentions, the Court agrees that the sum of 7 $7,500.00 “in exchange for a release from any past, present or future liability to 8 [Travelers] or its insureds arising out of the flood incident that forms the basis for 9 this lawsuit,” with each party to bear its own costs and fees, is a good faith attempt 10 to extricate Westside from the lawsuit, when there is no evidence that Westside is 11 likely to be found liable were a trial to ensue. (See ECF No. 58-1 at pp. 2-3.) There 12 is no evidence of fraud or collusion in the settlement agreement between Westside 13 and Travelers. Travelers, as the only plaintiff, will receive the entire settlement, and 14 this Court has been given no information about the financial viability of Westside. 15 After considering all of the Tech-Bilt factors, the Court concludes the settlement was 16 reached in good faith under California Code of Civil Procedure section 877.6. 17 As the Court finds the settlement to be in good faith, Westside is entitled to 18 dismissal. See Great W. Bank, 58 Cal. App. 4th at 613. “A determination by the 19 court that the settlement was made in good faith shall bar any other joint tortfeasor 20 or co-obligor from any further claims against the settling tortfeasor or co-obligor for 21 equitable comparative contribution, or partial or comparative indemnity, based on 22 comparative negligence or comparative fault.” Cal. Civ. Proc. Code § 877.6(c); see 23 also Cal. Civ. Proc. Code § 877(b) (“Where a release . . . is given in good faith before 24 verdict or judgment . . . [i]t shall discharge the party to whom it is given from all 25 liability for any contribution to any other parties.”); Bay Dev., Ltd. v. Super. Ct., 50 26 Cal. 3d 1012, 1029-33 (1990) (claims seeking implied contractual indemnity barred 27 by finding of good faith); Far West Fin. Corp. v. D&S Co., Inc., 46 Cal. 3d 796, 817 28 (1998) (all equitable indemnity claims, including total equitable indemnity claims, –8– 13cv1881 1 barred by finding of good faith). In the Cross Claim, Gabai seeks equitable 2 indemnity, contribution, and equitable apportionment. Accordingly, the Cross Claim 3 of Gabai against Westside is hereby DISMISSED. 4 IV. CONCLUSION & ORDER 5 For the foregoing reasons, Westside’s motion for confirmation of good faith 6 settlement (ECF No. 58) is GRANTED and the Cross Claim against Westside (ECF 7 No. 16) is DISMISSED. 8 IT IS SO ORDERED. 9 10 DATED: November 6, 2015 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 –9– 13cv1881
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