More than two decades of proven excellence

+1 858.622.7878

GOOD FAITH SETTLEMENTS IN MULTI-PARTY LITIGATION

By admin | January 11th, 2017 | Tags: , , , | 0 Comments.

In multi-party litigation, settlements become tricky when not all the parties agree to resolve the case in its entirety.  On the one hand, a party should be free to resolve the matter in the party’s best interest, regardless of the interests of the other parties.  On the other hand, a joint wrongdoer should not be free to shift responsibility to a co-wrongdoer by a nominal settlement.  To moderate these competing interests, the law of good faith settlements has evolved so having a good litigation attorney is always in your best interest.

Code of Civil Procedure § 877 provides in part:

Where a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, it shall have the following effect:

(b) It shall discharge the party to whom it is given from all liability for any contribution to any other parties.

(c) This section shall not apply to co-obligors who have expressly agreed in writing to an apportionment of liability for losses or claims among themselves.

“The purpose of this legislation is to provide for equitable sharing of damages among the parties at fault and to encourage settlement.”  Great Western Bank v. Converse Consultants, Inc. (1997) 58 Cal.App.4th 609, 613.  “In addition, the offset provided for in section 877 assures that a plaintiff will not be enriched unjustly by a double recovery, collecting part of his total claim from one joint tortfeasor and all of his claim from another.”  Reed v. Wilson (1999) 73 Cal.App.4th 439, 444.

Code of Civil Procedure § 877 defines the rights of all persons jointly responsible for the same wrong or the same loss. “As long as the settlement is reached before rather than after judgment …, it matters not whether the tortfeasors acted in concert to create a single injury, or successively to create distinct and divisible injuries …, or whether the injured party filed a single action against the tortfeasors.”  Bob Parrett Const., Inc. v. Sup.Ct. (Northrop Grumman) (2006) 140 CA4th 1180, 1187-1188.

Further, Code of Civil Procedure § 877.6 states:

(c) A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.

The Supreme Court has suggested that section 877.6, subdivision (c) should be interpreted so as to encourage settlements.  Far West Financial Corp. v. D & S Co., Inc. (1988) 46 Cal.3d 796, 810.

The California Supreme Court set forth several factors to be considered in making a good faith settlement determination.  These factors are “a rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability,” “the amount paid in settlement,”  “the allocation of settlement proceeds among Plaintiffs,” and “a recognition that a settlor should pay less than he would if he were found liable after trial.”  Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.

As Gackstetter v. Frawley (2006) 135 Cal.App.4th 1257, makes clear:

Under section 877.6, if the injured party settles with one of the parties alleged to have caused its damages and the settlement is confirmed to be in good faith “other joint tortfeasors (parties who the injured party also alleges to have caused its damage) are barred from bringing equitable indemnity or contribution actions against the settling tortfeasor. This result achieves the primary objectives of section 877.6:         promoting the ‘equitable sharing of costs among the parties at fault and the encouragement of settlements.’ ” (Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 877, 41 Cal.Rptr.2d 519.) Gackstetter v. Frawley (2006) 135 Cal.App.4th 1257, 1271.

Furthermore, “claims for indemnification can include other claims not labeled as indemnity claims, but that in reality are ‘disguised’ indemnity claims.”  Id. (citations omitted).

Viewed differently, a good faith settlement does not eliminate separate and distinct claims of the non-settling party.  “[A] good faith settlement does not bar a claim that the trial court would not contemplate in determining the proportionate liability of a settling tortfeasor. A good faith settlement would not preclude a claim by a tortfeasor who committed a tort separate and distinct from the tort committed by the settling tortfeasor. Under this circumstance, there could be no right to indemnity.”  Gackstetter, supra at 1274 (citations omitted).

While the law appears clear to any litigation attorney, its application to any given multi-party settlement situation is often cloudy.  Prior to the acceptance of a proposed settlement, the court will carefully analyze it in terms of reasonableness and its effect on the remaining parties. Only after the court is satisfied that the competing interests of the parties are protected will it determine that the settlement has been made in good faith.

For more information on how you can retain a knowledgeable litigation attorney contact Teeple Hall, LLC.

The Impact of Attorney Fees in Civil Litigation and The Importance of Early Analysis of The Merits of The Case

By admin | October 27th, 2016 | Tags: , , , | 0 Comments.

The award of attorney fees at the conclusion of a civil lawsuit often constitutes the most important recovery to the prevailing party.  If the prevailing party is the defendant, recovery of attorney fees permits the defendant to “break even.”  If the prevailing party is the plaintiff, the attorney fee award may provide for additional compensation above and beyond any recovery of actual damages.  In fact, the fee award often exceeds a plaintiff’s recovery for actual damages.

Because of the significant impact of attorney fees awards in civil litigation, it is important to evaluate cases early in the process in terms of such potential awards.

General Principles regarding the award of attorney fees:

California follows the “American Rule” regarding attorney fees – each party bears the cost of their respective legal representation.  However, exceptions exist.  First, if the action is based on a contract which contains an attorney fees provision, the prevailing party is entitled to recover their reasonable fees.  Second, certain statutes provide for attorney fees to the prevailing party.  Examples include certain labor claims and consumer actions.

As such, the prevailing party must establish a predicate contract or statute providing for an award of attorney fees.  Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966.

            A trial court is afforded wide latitude in ruling on fee motions and it ruling is reviewed on appeal by the abuse of discretion standard.   The trial court’s determination:

“…will only be disturbed when there is no substantial evidence to support the trial court’s findings or when there has been a miscarriage of justice.” ’ ” (citation) As with all orders and judgments, this fee order “is presumed correct, all intendments and presumptions are indulged in its favor, and ambiguities are resolved in favor of affirmance.” (citation). “Ascertaining the fee amount is left to the trial court’s sound discretion. (citations); Trial judges are entrusted with this discretionary determination because they are in the best position to assess the value of the professional services rendered in their courts. (citations); Thus, the court’s fee award “ ‘will not be disturbed unless the appellate court is convinced that it is clearly wrong.’ ” (citation).  Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 882, as modified (Aug. 14, 2013), as modified on denial of reh’g (Sept. 10, 2013).

In determining the reasonableness of attorney fees requested, the court should consider:

The nature of the litigation, its difficulty, the amount involved, the skill required and the skill employed in handling the litigation, the attention given, the success of the attorney’s efforts, his learning, his age, and his experience in the particular type of work demanded; the intricacies and importance of the litigation, the labor and the necessity for skilled legal training and ability in trying the cause, and the time consumed. Clayton Development Co. v. Falvey (1988) 206 Cal.App.3d 438, 447 (quoting Clejan v. Reisman (1970) 5 Cal.App.3d 224, 241 (internal citations omitted)).

Furthermore, whether a case is difficult or involves a novel question or questions of law is important in determining the reasonableness of the attorney fees.  Olson v. Cohen (2003) 106 Cal.App.4th 1209, 1218.  Courts have determined that attorneys’ rates are reasonable if they are within the range of rates charged by private attorneys of similar skill and reputation for comparably complex litigation.  Bihun v. AT&T Info.Sys. (1993) 13 Cal.App.4th 976, 997.  As to the hours expended, a successful party is entitled to “compensation for all hours reasonably spent.” Serrano v. Unruh (1982) 32 Cal.3d 621, 639.

When a party prevails on some, but not all, claims – allocation of fees is required:

Cases often resolve where a party prevails on some claims but not on others.  In that situation, the party is entitled to recovery only those fees associated with their successful prosecution or defense.

“A trial judge deciding attorney fees may appropriately “allocate” or “apportion” fees…”  Ritter & Ritter, Inc. v. Churchill Condominium Ass’n (2008) 166 Cal.App.4th 103, 129. “Apportionment of a fee award between fees incurred on a contract cause of action and those incurred on other causes of action is within the trial court’s discretion.”  Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111, as modified on denial of reh’g (Mar. 22, 1996).

In the context of a contractual attorney fees, the California Supreme Court has observed that:

Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action. (McKenzie v. Kaiser-Aetna (1976) 55 Cal.App.3d 84, 88-90, 127 Cal.Rptr. 275; see Schlocker v. Schlocker, supra, 62 Cal.App.3d 921, 923, 133 Cal.Rptr. 485.) Describing the attorney’s fees provision, section 1717 specifically refers to fees “incurred to enforce the provisions of such contract.” A litigant may not increase his recovery of attorney’s fees by joining a cause of action in which attorney’s fees are not recoverable to one in which an award is proper.   Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-30.

Thus, under California law, trial courts should exercise its discretion to apportion attorney fee award in at least two circumstances: (1) in cases in which fees are contractually or statutorily recoverable on some but not all causes of action; and (2) in cases in which the prevailing party was unsuccessful on portion of its suit.   In re Gorina (Bankr.C.D.Cal.2002) 296 B.R. 23, 32–33.

Partial success, however, reduces the awardable fees and costs; and the party seeking attorney fees bears the burden of demonstrating to the court the time and costs expended on the claims on which it prevailed.  ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1016-1020; Bowman v. City of Berkeley (2005) 131 Cal.App.4th 173, 177-178; Lyons v. Chinese Hosp. Ass’n (2006) 136 Cal.App.4th 1331, 1344.

In Conclusion:

Attorney fee awards can have significant impact on the ultimate outcome of a case.  For the prevailing defendant, an attorney fees provision in the contract at issue or the applicable statute may allow the defendant to shift the cost of the defense to the plaintiff.  For the prevailing plaintiff, such an award may substantially increase the recovery.  For these reasons, it is important to realistically analyze the merits of a civil lawsuit at the outset where attorney fees may be awarded to the prevailing party.