Opinion
No C 01-1624 VRW
February 24, 2003
ORDER
Plaintiffs filed a complaint in Los Angeles superior court on January 29, 2001, alleging causes of action for strict products liability, negligence and breach of express warranty against defendant arising out of an automobile accident that occurred on July 23, 2000. See Def Mot (Doc #9), Exh 1. Defendant removed the action to the Central District of California on diversity grounds on February 28, 2001. On April 25, 2001, the matter was transferred to this court, the appropriate venue. See Doc #1. On August 1, 2001, the matter was again transferred, this time to the Southern District of Indiana, the court in which all actions alleging tread separation defects in Firestone tires had been consolidated. See Doc #4.
The parties subsequently reached a settlement agreement in May 2002. Because, under governing California law, finalizing the settlement is contingent on a judicial determination that the settlement was reached in good faith, the case was transferred back to this court on May 28, 2002. See Doc #5. Defendant now moves the court for a determination that the settlement was reached in good faith. Doc #9. For the reasons detailed below, defendant's motion (Doc #9) is GRANTED.
Because the court finds this matter suitable for determination without oral argument, the hearing scheduled for February 20, 2003 is VACATED. See Civ. LR 7-1(b).
I A
On July 23, 2000, plaintiffs' mother, Elisa Alvarez (Alvarez), was driving the family's 1991 Dodge Dakota pickup truck (truck) when that truck was involved in an accident. See Complaint (Doc #9, Exh 1). At the time of the accident, Alvarez's daughters, the two plaintiffs, were seated not in the cab of the truck, but rather in the bed area, unbelted. See id, ¶ 7. The complaint alleges that one of the truck's tires deflated suddenly causing Alvarez to lose control of the vehicle. The truck rolled over once, throwing Natalie Alvarez completely out of the bed.
As a result, Natalie Alvarez suffered traumatic brain injury. Shortly after the accident, she was diagnosed with a depressed skull fracture. The complaint further alleges that she continues to suffer from deficits in attention and memory, difficulty with word retrieval and concentration, gross and fine motor skill impairment and balance problems. She is also alleged to have suffered central diabetes insipidus as a result of the trauma, as well as mild to moderate hearing loss in one ear and partial loss of vision in one eye. Roxanne Alvarez suffered scrapes to both knees and to her right hand and alleges that she experienced right knee pain for some months after the accident.
The alleged cause of the accident was sudden and unexpected tread separation in the left rear tire of the truck, a Firestone tire manufactured in 1994. See id, ¶ 7; see Whalen Decl (Doc #9, Attach 1). The car, which plaintiffs' father purchased at an auction, had prior to that purchase been totaled and thereafter salvaged. See Complaint (Doc #9, Exh 1), ¶ 6. Although plaintiffs' father had some work performed on the truck, the allegedly defective tire had not been replaced between the time of the Alvarez's purchase of the car and the time of the accident. See id. Two of the four tires had been replaced in February 2000, at a Costco store, but the tire that eventually deflated, allegedly causing the accident, was one of the two remaining older tires. See Costco Complaint (Doc #9, Exh 3), ¶¶ 14-15, 16, 18.
Subsequent analysis of the allegedly defective tire revealed substantial wear, so excessive that "the under-tread rubber and the steel wire of the #2 belt were exposed for a significant length to have been readily noticeable." Whalen Decl (Doc #9, Attach 1), ¶ 4. In the opinion of Dennis Whalen, a senior product engineer employed by defendant, excessive wear and tear, not any product defect, caused the sudden deflation that led to the accident. Id, ¶ 6.
In addition to pursuing litigation against defendant, plaintiffs have filed a separate complaint against Costco Wholesale, Daimler Chrysler Corporation, Copart, Inc and Los Reyes Auto Body (Costco litigation). See Not of Pend (Doc #10). That litigation is ongoing.
The settlement agreement reached by plaintiffs and defendant provides that defendant will pay plaintiffs a sum of $250,000 in exchange for a complete release and discharge of liability. See Settlement Agreement (Doc #9, Exh 5) at 1. Plaintiffs will continue to pursue relief from other parties that may be liable in the ongoing Costco litigation.
II
Civil Local Rule 7-3 governs the filing of an opposition or statement of non-opposition to a motion filed with the court. It provides that "not less than 21 days before the hearing date" a party against whom a motion is directed must serve and file either an opposition or a statement of non-opposition. See Civ. LR 7-3(a), (b). Plaintiffs have served and filed neither. Given the nature of the motion before the court, the court concludes that this oversight indicates the absence of any opposition to defendant's motion. The court therefore treats the motion as unopposed.
Defendant seeks a court order determining that the settlement agreement was entered by the parties in good faith and barring any present or potential joint tortfeasor from bringing any future claims against defendant for equitable contribution or partial or comparative indemnity based on comparative negligence or comparative fault. See Def Mot (Doc #9) at 6.
In a diversity case, the court applies federal law to procedural matters and the law of the state in which it sits to substantive matters. See Erie Railroad Co v. Tompkins, 304 U.S. 64, 78 (1938); Gasperini v. Center for Humanities, Inc, 518 U.S. 415, 427 (1996). "The major substantive provision [governing good faith settlement under California law] is section 877" of the California Code of Civil Procedure. Federal Savings and Loan Insurance Corp v. Butler, 904 F.2d 505, 511, (9th Cir 1990).
By contrast, "section 877.6 [of the code] is essentially a procedural statute." Id. Nonetheless, the Ninth Circuit has recognized that "the addition of section 877.6(c) did make a substantive modification by codifying a Supreme Court ruling that section 877 applied to partial or comparative indemnity as well as contribution." Id at 511 n 6. Although the remainder of section 877.6 is procedural, and therefore not binding on the court, the Ninth Circuit has determined that there is no federal procedural impediment to a district court's entertaining "a motion for an early determination of the good faith question," and so such a motion can be properly brought before the court. Id at 511.
Under California law, "[w]here 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 — * * * (b) It shall discharge the tortfeasor to whom it is given from all liability for any contribution to any other tortfeasors." Cal Civ. Pro § 877. As a check on the validity of settlement agreements that might affect joint tortfeasors not a party to the settlement, California law further requires the court to make a determination that a settlement has been entered in good faith before that settlement can become final. See Cal Civ. Pro § 877.6. Section 877.6 allows a party to a proposed settlement to move the court for an order making such a determination. See id. That section provides further that "[a] determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor from any further claims against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault." See Cal Civ. Pro § 877.6(c).
A good faith settlement is one within "the reasonable range of the settling tortfeasor's proportional share of comparative liability for the plaintiff's injuries." Tech-Bilt, Inc v. Woodward-Clyde Assoc, 213 Cal.Rptr. 256, 263 (Cal 1985). To determine whether a proposed settlement fits that description, the court should consider the following factors: (1) a rough approximation of the settlor's proportionate liability; (2) the amount of the settlement; (3) the fact that a settlor should pay less in settlement that the amount of damages for which the settlor would be liable at trial; (4) the financial condition of the settling defendant; and (5) the existence or absence of any collusion, fraud or tortious conduct aimed to injure the interests of any non-settling defendants. See id. Obviously, the court can only assess these factors "on the basis of the information available at the time of settlement." Id.
Ultimately, "a defendant's settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant's liability to be." Torres v. Union Pacific RR Co, 203 Cal.Rptr. 825 (Cal 1984). If the court finds evidence that would wholly or substantially negate a settling defendant's liability, the fact that the settlement was disproportionate to the claims made by plaintiffs' complaint is not in itself evidence of the lack of good faith." Wysong Miles Company v. Western Industrial Movers, 191 Cal.Rptr. 671, 680 (Cal App. 1983). The court should approve even a contested settlement, unless there is a showing "that the settlement is so far out of the ballpark in relation to these factors to be inconsistent with the equitable objectives of the statute." Tech-Bilt, 213 Cal Rptr at 263-64.
III
Plaintiffs' complaint alleges strict products liability, negligence and breach of warranty. See Complaint (Doc #9, Exh 1). On the available record, plaintiffs would face considerable difficulty in demonstrating liability under any of these theories. In the complaint in the Costco litigation, plaintiffs acknowledge that a routine inspection of the tires on the vehicle would have revealed potentially dangerous wear and tear to the tire that deflated, allegedly causing the accident. See Costco Complaint (Doc 9, Exh 3), ¶ 31. Defendant's expert analysis of the tire confirms this conclusion and suggests that wear and tear, not any defect inherent in the tire design, caused the tire to deflate suddenly. See Whalen Decl (Doc #9, Attach 1), ¶ 4.
This evidence calls into question plaintiffs' ability to develop a persuasive case that a defect existing at the time of the tire's manufacture was the proximate cause of plaintiffs' injuries. See Greenman v. Yuba Power Products, Inc, 27 Cal.Rptr. 697 (Cal 1963); Barker v. Lull Engineering Co, Inc, 143 Cal.Rptr. 225 (Cal 1978). Moreover, the evidence also reveals potential difficulties for plaintiffs in establishing proximate causation under a theory of strict products liability. See Erickson v. Sears, Roebuck Company, 50 Cal.Rptr. 143 (Cal App. 1966); Martinez v. Nichols Conveyer Eng Co, 52 Cal.Rptr. 842 (Cal App. 1966). The fact of the prior accident and the evident wear on the two unreplaced tires would pose significant impediments to plaintiffs proving that defendant should be held strictly liable for plaintiffs' injuries.
Under California's comparative fault negligence regime, as first articulated in Liv. Yellow Cab Co of California, 119 Cal.Rptr. 858 (Cal 1975), defendant would have a reasonable expectation that, based on the existing evidence, if assigned any liability at all, defendant would not be found exclusively liable. Plaintiffs were riding not in the passenger cab of the truck but in the bed area. The truck had two tires showing signs of significant wear and tear, detectable upon inspection, that had not been replaced even after plaintiffs' parents purchased the vehicle knowing it had previously been seriously damaged in an earlier accident. There is also evidence that Alvarez, the driver, contributed to the accident. The accident report concludes that Alvarez "overcorrected by turning sharply to the left" in response to the sudden tire deflation. See Traffic Collision Report (Doc #9, Exh 2) at 8.
In addition to potential comparative fault on the part of plaintiffs and their parents, the defendants in the Costco litigation may bear some liability for the accident. It was Costco employees who replaced only two of the four tires on the truck in 2000, although there is evidence that the wear and tear on the unreplaced tires would have been visible upon a casual inspection. Plaintiffs have alleged a defect in the manufacture of the truck against Daimler Chrysler, its manufacturer. Plaintiffs have alleged that negligent and reckless repairs were conducted by the company that purchased the car after the first accident: Copart, Inc. Copart is alleged to have performed negligent and/or reckless repairs to the vehicle before selling it to Los Reyes Auto Body, the company from which plaintiffs purchased the truck. Plaintiffs have also alleged that Los Reyes Auto Body breached its duty of care to plaintiffs by failing adequately to inspect the vehicle before selling it to plaintiffs and by failing to warn plaintiffs' parents of dangers inherent in the vehicle. Each and any of these defendants in the Costco litigation found liable for plaintiffs' injuries would reduce defendant's liability to the extent of that other party's liability.
Under the circumstances, the court concludes that the settlement amount of $250,000 is within the ballpark of reasonable settlement figures. There is no question regarding Firestone's ability to pay this sum. Likewise, there is no evidence of any collusion on the part of plaintiffs and defendant to injure the interests of any or other person or entity potentially liable to plaintiffs for injuries arising out of the accident. Given the state of the evidence, it would appear that $250,000 is an ample sum to cover defendant's liability, considering that (1) plaintiffs would encounter significant obstacles in establishing defendant's liability; (2) defendant's liability would likely be offset to some extent by plaintiffs' and plaintiffs' parents liability and possibly offset further by the liability of other defendants in the Costco litigation; and (3) settlement awards are anticipated, by the very test the court is asked to employ here, to be lower than an award that might be obtained at a successful trial. In exchange for $250,000, defendant can close out a lawsuit that is just one of a legion filed against defendant for injuries allegedly stemming from road accidents caused by unexpected tread separation in defective tires. Based on the factors just considered, the court has no trouble concluding that the settlement agreement reached by the parties in this action has been negotiated in good faith as that term is defined by California law.
IV
For the reasons just stated, defendant's motion for a determination of good faith settlement (Doc #9) is GRANTED. Pursuant to § 877.6 of the California Code of Civil Procedure, any other joint tortfeasor is barred from further claims against defendant for equitable comparable contribution or partial or comparative indemnity based on comparative negligence or comparative fault arising out of the events described above. See Cal Civ. Pro § 877.6(c).
IT IS SO ORDERED.