Lead Opinion
Opinion
Californiahas adopted a variety of statutes to promote the voluntary settlement of litigation. One of these provisions, section 877.6, subdivision (c) of the Code of Civil Procedure,
The great majority of Court of Appeal decisions which have addressed this question have concluded that a claim for total equitable indemnity, like other equitable indemnity claims, is barred by a good faith settlement.
Because the Court of Appeal in the case at bar correctly interpreted, the statute, we affirm the judgment.
I
In 1972, Far West Financial Corporation, a real estate developer involved in the financing and developing of condominiums in Los Angeles County,
Shortly after the completion of the project and the sale of the condominiums to private owners, a number of defects in the common areas of the project appeared. In response to complaints by the homeowners, Far West, the developer and seller of the units, made some repairs. In October 1976, the Studio Village Homeowners Association (hereafter the Association or plaintiff) and Far West entered into a settlement and release agreement in which Far West agreed to make a number of additional specified repairs and to pay the Association $22,750 in return for the Association’s agreement to release Far West from any further liability for defects in the project.
The Association’s third amended complaint, filed in October 1980, sought to set aside the earlier release agreement between the Association and Far West and sought recovery against various defendants on theories of (1) fraudulent concealment of the defects at the time of the initial settlement agreement, (2) negligent and intentional misrepresentation, (3) strict liability, (4) breach of express and implied warranties, (5) negligence, and (6) fraud and deceit.
In July 1981, after answering the complaint, Far West filed a cross-complaint against D & S and various Doe defendants, seeking either “complete indemnification from or partial contribution from” those defendants. Far West claimed that D & S had exercised complete control over the construction of the project and that if there were any deficiencies in the construction, such defects were directly attributable to D & S or to the subcontractors D&S had hired and supervised. Thereafter, D & S and a number of the other defendants filed their own indemnity cross-complaints against each other and against Far West.
During the summer of 1983, one of the defendants, structural engineers who had worked on a portion of the underground construction, settled with plaintiff for $100,000. On motion the trial court found the settlement in good faith and dismissed the cross-complaints against that defendant.
In early 1984, Far West and plaintiff entered into a settlement agreement under which Far West paid plaintiff $315,000 outright and provided a sliding scale guaranty of an additional $35,000 recovery, in return for plaintiff’s agreement to release Far West from any further liability. On Far West’s motion, the trial court found the settlement to be in good faith and dismissed the numerous indemnity cross-complaints which were then pending against Far West. Although the actions against Far West had been dismissed, Far West continued to pursue its own cross-complaint against the remaining defendants seeking indemnification of the $315,000 it had paid to plaintiff. It is clear under existing precedent that Far West had the right to continue to seek indemnification in this manner (see, e.g., Sears, Roebuck & Co. v. International Harvester Co. (1978)
In August 1984, in accordance with the suggestions of a settlement judge at a voluntary settlement conference, D & S and a number of subcontractors (hereafter sometimes referred to as the D & S defendants) entered into a settlement agreement (hereafter sometimes referred to as the D & S settlement) with plaintiff under which the D & S defendants agreed to pay plaintiff $450,000 in return for a release of plaintiff’s claims against them. The settlement agreement was conditioned on (1) the trial court’s determination that the settlement was in good faith and (2) the dismissal of all outstanding cross-complaints against the D & S defendants.
On September 4, 1984, the D & S defendants moved for an order under section 877.6 declaring the settlement agreement in good faith and dismissing all of the cross-complaints pending against them. On September 14, Far West filed a partial opposition to the D & S defendants’ motion; in that opposition, Far West did not challenge the good faith nature of the D & S settlement, but simply opposed the D & S defendants’ request for an order dismissing Far West’s cross-complaint for indemnification against such defendants. Far West contended that under section 877.6 a good faith settlement does not operate to bar a claim for complete or total indemnity, as contrasted with a claim for partial indemnity or contribution, and it maintained that its cross-complaint sought total indemnity from D & S and the other defendants who were parties to the $450,000 settlement. On that same date, September 14, 1984, Far West also filed a separate motion, seeking leave to file a second amended cross-complaint in which it proposed to add claims for express contractual indemnity and implied contractual indemnity to its previous claim for “complete indemnification ... or partial contribution.”
The D & S defendants’ motion for a good faith determination came on for hearing on September 21, 1984. After considering the parties’ contentions, the trial court—without specifically passing on Far West’s motion for leave to file an amended cross-complaint—found the D & S settlement to be in good faith and dismissed all of the cross-complaints, including Far West’s cross-complaint, against the settling defendants. Two weeks later, on October 4, the trial court heard and denied Far West’s request for leave to file an amended cross-complaint, noting the belated nature of the request. On October 15, the court entered a formal order finding the D & S settlement in good faith and dismissing all cross-complaints against the parties to that agreement.
As noted, we granted review to resolve the conflict in the Court of Appeal decisions on this question.
II
A.
Section 877.6, subdivision (c) provides in relevant part that when an alleged tortfeasor enters into a settlement agreement with the plaintiff “[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.” (Italics added.)
As the division in the past Court of Appeal decisions on this subject suggests (see fns. 2, 3, ante), the language of section 877.6 is, on its face, reasonably susceptible to either of the suggested interpretations. Although the statute does not expressly refer to “total indemnity” claims, the section does expressly apply to “partial or comparative” indemnity claims; if the Legislature clearly intended the section to apply only to claims seeking partial indemnity, the reference to “comparative” indemnity could be viewed as superfluous. In context, the issue before us cannot properly be decided by reference to the “plain language” of the statute itself.
In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985)
In American Motorcycle, the court addressed, inter alia, the broad question of what effect, if any, the adoption of comparative negligence principles in Li v. Yellow Cab Co. (1975)
At the same time as it modified the common law equitable indemnity doctrine to permit partial indemnity on a comparative fault basis, the American Motorcycle court recognized the necessity of dealing with the question of how a tortfeasor’s right to pursue a claim for partial or comparative indemnity against another tortfeasor would be affected when the tortfeasor from whom indemnity was sought entered into a settlement agreement with the plaintiff. Relying on the provisions of section 877, subdivision (b)— which dealt with the effect of a settlement in the related area of contribution between tortfeasors—as reflecting a strong state policy in favor of promot
Although nothing in American Motorcycle suggests that the decision, in modifying the preexisting all-or-nothing equitable indemnity doctrine, intended to create a wholly new legal doctrine, separate and distinct from the old total equitable indemnity doctrine, Far West relies on a footnote in Safeway Stores, Inc. v. Nest-Kart (1978)
In Safeway Stores, a patron who had been injured by a defective shopping cart sued Safeway and the manufacturer of the cart on negligence and strict product liability theories; the jury found both defendants liable, and apportioned 80 percent of the liability to Safeway and 20 percent to the manufacturer. On appeal, the principal issue before the court was whether “the comparative fault principle . . . should be utilized as the basis for apportioning liability between two tortfeasors, one whose liability rests upon California’s strict product liability doctrine and the other whose liability derives, at least in part, from negligence theory.” (
In the course of the Safeway Stores opinion, the court observed in a footnote that “[i]n the instant case the jury found that Safeway was itself negligent in failing to safely maintain its carts, and thus Safeway’s liability is in no sense solely derivative or vicarious. Accordingly, we have no occasion to determine in this case whether the comparative indemnity doctrine should be applied in a situation in which a party's liability is entirely derivative or vicarious in nature. [Citations.]” (Italics added.) (
Less than two years after the Safeway Stores decision, our court, in the course of an opinion which considered when an action for comparative indemnity accrues, did speak directly to the question of whether the American Motorcycle decision (supra,
Thus, People ex rel. Dept. of Transportation, supra,
In July 1980, just a few months after the decision in People ex rel. Dept. of Transportation was rendered, the Legislature enacted section 877.6. The provision established an orderly procedure to permit a trial court to determine, prior to trial, whether a settlement entered into by one of a number of tortfeasors was made in good faith, and, in subdivision (c), codified American Motorcycle’s holding that when such a settlement is determined to be in
Furthermore, the purposes which underlie section 877.6, subdivision (c) strongly support an interpretation which would include a claim for total equitable indemnity within the claims that are barred by a good faith settlement. In Tech-Bilt, supra,
1.
To begin with, it is evident that the statutory objective of promoting settlement agreements would be impaired by an interpretation of section 877.6, subdivision (c) which leaves a tortfeasor who has entered into a good faith settlement vulnerable to further liability for total equitable indemnity. As noted above, in American Motorcycle this court specifically recognized that “ ‘[f]ew things would be better calculated ... to discourage settlement of disputed tort claims, than knowledge that such a settlement lacked finality and would lead to further litigation with one’s joint tortfeasors, and perhaps further liability.’ ” (American Motorcycle, supra,
Although Far West does not seriously take issue with the above proposition,
First, we cannot agree that an exception for claims for total equitable indemnity will, as a realistic matter, affect as few cases as Far West suggests. As a review of the numerous recent decisions on this issue attests,
Furthermore, even when it is clear from the relationship of the settling and nonsettling defendants that the nonsettling defendant is vicariously or derivatively liable for the acts of the settling defendant, that factor alone still provides no assurance that a total shifting of loss is warranted under equitable indemnity principles. To begin with, there are many instances in which a defendant who is vicariously liable for another’s acts may also bear some direct responsibility for an accident, either on the basis of its own action—for example, the negligent hiring of an agent—or of its own inaction—for example, the failure to provide adequate supervision of the agent’s work. In addition, even when a nonsettling tortfeasor’s liability may be wholly vicarious or derivative in nature, it does not invariably follow that equitable considerations will, as a matter of law, always call for the total shifting of loss to the more directly culpable tortfeasor. As the court explained in Safeway Stores, supra,
As discussed above, in the American Motorcycle decision our court reviewed past judicial attempts to formulate a satisfactory standard for determining under what circumstances liability should be totally shifted from one tortfeasor to another, and found that the task had been largely a futile one. {American Motorcycle, supra, 20 Cal.3d at pp. 594-595.) Far West’s proposed interpretation of section 877.6, subdivision (c) would reintroduce the intractable problem of attempting to define, through a general formula, the appropriate occasions for total equitable indemnity, one of the key
Thus, contrary to Far West’s suggestion, we believe that, as a practical matter, its proposed interpretation of the statute is likely to discourage settlements in a wide range of cases.
2.
Furthermore, even if it were possible to confine the antisettlement effect of its proposed interpretation of the statute to cases in which the nonsettling defendant was in fact entitled to 100 percent indemnity, the second prong of Far West’s argument—i.e., that a claim for total indemnity must survive a good faith settlement if the statutory goal of a fair apportionment of loss is to be achieved—is also flawed. This contention fails to take adequate account of the nature of the trial court’s “good faith” determination under section 877.6 as explained in this court’s decision in Tech-Bilt, supra,
In Tech-Bilt, we disapproved a number of earlier Court of Appeal decisions which had indicated that a settlement agreement should be found in good faith for purposes of section 877.6 so long as the settling parties had not engaged in any “tortious conduct” toward the nonsettling parties (see, e.g., Dompeling v. Superior Court (1981)
As we explained in our recent decision in Abbott Ford, supra,
Thus, under Tech-Bilt, supra,
In similar fashion, if, as in this case, an allegedly vicariously liable tortfeasor has already settled with the plaintiff in order to limit its potential
It is true, of course, that under the Tech-Bilt approach a nonsettling tortfeasor may be left to bear some portion of the plaintiff’s loss, even in situations in which, if the indemnity claim had gone to trial, the trier of fact might have concluded that the equities supported a total shifting of loss to the more culpable tortfeasor. This follows from Tech-Bilt's recognition (1) that a settlement may be found in good faith even if the settling tortfeasor does not pay a sum precisely commensurate with its proportionate share of liability (Tech-Bilt, supra,
III
In sum, in light of the judicial background, the legislative history and the statutory purposes of section 877.6, subdivision (c), we conclude that a tort defendant who has entered into a good faith settlement within the meaning of section 877.6, subdivision (c) is absolved of any further liability for all equitable indemnity claims, including claims seeking total equitable indemnity.
The judgment of the Court of Appeal is affirmed.
Lucas, C. J., Mosk, J., Broussard, J., and Panelli, J., concurred.
Notes
Unless otherwise stated, all section references are to the Code of Civil Procedure.
City of Sacramento v. Gemsch Investment Co. (1981)
Huizar v. A hex Corp. (1984)
Far West Financial Corporation is a holding company incorporated in Delaware and licensed to do business in California. Far West Savings and Loan Association, the successor in interest to State Mutual Savings and Loan Association, is a California subsidiary of Far West Financial Corporation and is engaged in the business of financing and developing condominiums. Both entities have been joined as defendants in this action and, for convenience, both will be referred to collectively as Far West.
In addition to rejecting Far West’s contention with regard to the effect of a good faith settlement on a claim for total equitable indemnity, the Court of Appeal rejected Far West’s claim that the trial court had abused its discretion in denying Far West’s motion for leave to file a second amended cross-complaint to add claims for implied and express contractual indemnity. The Court of Appeal determined that the trial court properly found that Far West had provided no adequate explanation for its eleventh-hour request for leave to amend and that Far West’s delay had prejudiced the other parties who had spent considerable time and effort in negotiating a settlement agreement with knowledge only of Far West’s prior cross-complaint.
Far West’s statement of issues in its petition for review did not seek review of this aspect of the Court of Appeal’s ruling and, under the circumstances, we see no reason to disturb the Court of Appeal’s conclusion. As a consequence, we have no occasion in this case to determine whether an indemnity claim resting on an implied contract theory or arising from an express indemnification agreement is barred by a good faith settlement. We note that there is a split in Court of Appeal decisions with respect to the implied contractual indemnification question (compare IRM Corp. v. Carlson, supra,
In an amendment effective January 1, 1988, the Legislature has extended the reach of section 877.6, subdivision (c) to co-obligors on a contract debt, providing that a good faith set
Contrary to the suggestion of the Court of Appeal in Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra,
In E. L. White, supra,
As initially introduced on March 20, 1980, Assembly Bill No. 3425, 1979-1980 Regular Session, which ultimately became section 877.6, did not contain any provision which addressed the substantive effect of a good faith determination, but simply established a procedure by which any party to an action could obtain a hearing on the good faith issue prior to or at the commencement of the trial of the action.
The first version of section 877.6, subdivision (c), was added to the bill in the Assembly on May 7, 1980, and provided simply that the good faith determination would relieve the settling tortfeasor from further claims for “equitable comparative contribution based on comparative negligence or comparative fault.” From the Legislative Counsel’s Digest of the bill, it appears that the drafters intended by this language simply to codify the effect of a good faith settlement agreement under “[ejxisting law,” i.e., the American Motorcycle decision (supra,
Section 877.6, subdivision (c), was further amended in the Senate on July 1, 1980, but there is nothing in the legislative history to suggest that the expansion of the language to encompass “any further claim ... for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault,” was intended to have any effect other than to more closely track the language used in the. American Motorcycle decision. The Legislative Counsel’s Digest continued to describe the bill as simply “specifying] that any party has a right to contest the issue of the ‘good faith’ of a settlement at a noticed hearing” and did not suggest that the language of subdivision (c) was intended to alter existing law on the effect of a good faith settlement.
The decision in Mesler v. Bragg Management Co. (1985)
With the advent of the comparative indemnity doctrine in American Motorcycle, supra, 20 Cal.3d 578, and the subsequent adoption of section 877.6, subdivision (c), it appears clear that the Legislature contemplated that section 877.6, subdivision (c), the more recent provision which is specifically addressed to the comparative indemnity context, would govern the effect of a good faith settlement agreement on post-American Motorcycle equitable indemnity claims.
Justice Kaufman’s concurring and dissenting opinion does suggest that an interpretation of section 877.6 which exempts total equitable indemnity claims from the reach of a good faith settlement will actually promote the settlement of cases. The opinion reaches this surprising conclusion by postulating that such a rule would induce vicariously liable tortfeasors to enter into early “full-value” settlements with plaintiffs by providing assurance to such tortfeasors that their right to seek total equitable indemnity would remain intact. The argument on this point is flawed on two levels.
In the first place, it is unrealistic to expect that an allegedly vicariously liable defendant, who believes that a solvent directly liable tortfeasor is likely to be found 100 percent responsible for an injury, will often be willing to enter into a “full-value” settlement with a plaintiff. In contemporary multi-party litigation, it is much more likely that settlements will take the form of piecemeal contributions by individual defendants in some rough approximation to each defendant’s likely proportionate responsibility for the plaintiff’s damages. In such a setting, the rule proposed by the opinion would clearly have a significant anti-settlement effect, for any defendant facing a claim for total equitable indemnity is unlikely to be willing to go forward with the settlement if he will remain potentially responsible for additional liability even if the trial court finds that his contribution to the settlement is “in the ballpark” of his fair share of liability.
Second, in the event an allegedly vicariously liable tortfeasor does wish to proceed along the lines suggested by Justice Kaufman—i.e., if he does wish to enter into an early “full-value" settlement with the plaintiff—there is nothing in the present opinion which would preclude such a tortfeasor from including in the settlement agreement a provision in which the plaintiff—who, by hypothesis, has received a “full-value” settlement—agrees to dismiss his action against the directly liable tortfeasor. Such a dismissal would permit the settling vicariously liable tortfeasor to pursue his total equitable indemnity claim without any risk of encountering a subsequent good faith settlement between the directly liable tortfeasor and the plaintiff. Thus, any alleged pro-settlement benefits which Justice Kaufman suggests his rule would produce are equally available under the interpretation of the statute which we adopt.
In City of Sacramento v. Gemsch Investment Co., supra,
Justice Kaufman, relying on section 876, subdivision (b), maintains that a vicariously liable party is in an entirely different category than any other defendant seeking total equitable indemnity. Section 876, subdivision (b), however, contains no suggestion that a vicariously liable party’s indemnity claim is different in kind from any other equitable indemnity claim or that such a claim, unlike all other claims for total equitable indemnity, is immune from the effect of a good faith settlement under section 877.6, subdivision (c). Enacted in 1957 as part of California’s initial contribution legislation, at a time when all equitable indemnity claims involved loss shifting rather than loss sharing, section 876, subdivision (b) provides no support for Justice Kaufman’s argument that section 877.6, subdivision (c) should be interpreted to draw a distinction between different types of total equitable indemnity claims.
Nor does the nature of vicarious liability indicate that the Legislature must have intended—despite the absence of any language in section 877.6, subdivision (c) indicative of such intent—to draw a distinction among total equitable indemnity claims. In many instances— for example, strict product liability—tort law places “direct” liability on an individual or entity which may have exercised due care in order to serve the public policies of a fair allocation of the costs of accidents or to encourage even greater safety efforts than are imposed by the due care standard. (See, e.g., Greenman v. Yuba Power Products, Inc. (1963)
Thus, the fact that a tortfeasor’s liability is vicarious does not necessarily distinguish him from other tortfeasors nor does it indicate that the public policies on which tort liability rests justify special dispensation from the good faith settlement rules applicable to other tortfeasors.
The Court of Appeal decisions which hold that a claim for total equitable indemnity survives a good faith settlement were decided before Tech-Bilt, and assumed that a vicariously or derivatively liable tortfeasor had no means of challenging, at the good faith hearing, a settlement in which a clearly culpable defendant attempts “to buy peace too cheaply at the expense of codefendants who are merely vicariously liable.” (Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra,
Contrary to the implications in the concurring and dissenting opinions, nothing in this opinion is intended to foreclose a trial court from concluding, on the facts of a particular case, that a proposed settlement agreement is not in good faith either because an allegedly vicariously liable tortfeasor has been improperly excluded from settlement negotiations or because such a tortfeasor has not been included within the settlement agreement. At the same time, we do reject the suggestion that a proposed settlement agreement may never be found to constitute a good faith settlement unless it provides for the total dismissal of any cause of action as to which a nonsettling defendant claims to be only vicariously liable. We believe the trial court which presides over the good faith settlement hearing is in the best position to determine, based on the circumstances of the particular case, whether the terms of a proposed settlement are unfair to a nonsettling defendant who claims that its liability is only vicarious in nature.
The facts of Tech-Bilt, supra,
As noted above, in this case Far West did not challenge the terms of the D & S settlement agreement at the good faith hearing and never urged the court to withhold its good faith determination until the D & S defendants agreed to assume all or a substantial portion of the sum which Far West had already paid to the plaintiff.
Concurrence Opinion
I agree with the majority that a “good faith settlement” in conformity with Code of Civil Procedure
As I shall explain, the purported justification for the rule announced today, the encouragement of settlements, is unsound because the rule will actually deter overall settlement of cases involving vicariously liable defendants. But the truth is that the majority’s belief that good policy supports the rule it promulgates is immaterial. A claim for total indemnity based on vicarious liability is simply not barred under the statute upon which the majority relies.
In addition, application of the newly promulgated rule to the facts of this case is not only unfair but little short of confiscatory. The essential facts are that the alleged vicariously liable defendant (Far West
I also dissent from the majority’s wholly gratuitous ruling, on a question not at all in issue in this case, that a settling tortfeasor has an unqualified “right to continue to seek indemnification” (ante, p. 801) from any nonsettling joint tortfeasor. Here, both defendants have settled and no such question arises. It is astounding that without discussion, briefing or argument the court would reach out to resolve a question not remotely presented and in the process fail to consider the limitations that ought to be imposed on a settling defendant’s right to pursue equitable indemnity claims.
I. A Claim for Total Indemnity Based on Vicarious Liability Is Different in Kind From Other Indemnity Claims
Section 876, subdivision (b) (hereafter section 876(b)) provides: “Where one or more persons are held liable solely for the tort of one of them or of another, as in the case of the liability of a master for the tort of his servant,
The majority declares that vicarious liability is similar to strict products liability because similar justifications have been offered to explain why the law imposes them and from this premise leaps blithely but blindly to the conclusion that vicariously liable defendants should not be granted “special dispensation” from the rules applicable to “other . . . tortfeasors” (ante, p. 813, fn. 13.).
As the Legislature has recognized in section 876(b), one who is vicariously liable is not a tortfeasor. When the issue is equitable apportionment of responsibility for the plaintiff’s loss, the vicariously liable party and the fault-source defendant are to be jointly assessed a single share based on the fault of the latter but as between themselves apportionment of loss is governed by the traditional rule of full equitable indemnity, a rule of loss shifting rather than loss sharing, as the law has recognized from very early days. (See Bradley v. Rosenthal (1908)
Thus the majority’s attempt to equate the venerable indemnity rights attending vicarious liability with those recently established for joint and concurrent tortfeasors, including defective product manufacturers, is not only logically and historically inaccurate, it is inconsistent with the statutory scheme. To recognize the unique character of vicarious liability is not to grant “special dispensation” to vicariously liable defendants. Unfairness may be practiced not only by applying different treatment to parties similarly situated but also by applying uniform treatment to parties situated differently. The majority practices the latter form of unfairness, which is every bit as destructive as the former.
The majority claims to derive support for its conclusions from the legislative history and the purpose of section 877.6. As I will show, the majority’s interpretation of that provision finds no support in the plain language of the statute, the statutory scheme of which it is a part, or the history of its enactment.
In construing a statute to effectuate the Legislature’s intent, we turn first to the words themselves, giving them their usual, ordinary meaning. (Moyer v. Workmen’s Comp. Appeals Bd. (1973)
The majority argues that the term “comparative fault” has never been read literally and therefore its meaning may be expanded to reach whatever result the majority deems desirable. As authority the majority relies on Daly v. General Motors Corp. (1978)
Apparently relying on the rule that statutory constructions which render some words surplusage should be avoided (White v. County of Sacramento (1982)
The conclusion that the settlement bar was not intended to apply to equitable indemnity claims based on vicarious liability is reinforced when section 877.6(c) is read in its statutory context, in accordance with the familiar rule of construction that “a statute should be construed with reference to the entire statutory system of which it forms a part in such a way that harmony may be achieved among the parts” (Merrill v. Department of Motor Vehicles (1969)
Section 877.6(c) is part of title 11. In section 875, subdivision (f), the Legislature has declared: “This title [i.e., title 11] shall not impair any right of indemnity under existing law. . . .’’As noted, section 876(b) expressly provides that where one party is vicariously liable for the tort of another “they shall contribute a single pro rata share, as to which there may be indemnity between them.” Thus the right of indemnity based on vicarious liability enjoys explicit legislative recognition and approval.
More importantly, if section 877.6(c) does not “impair any right of indemnity under existing law,” it cannot be read as barring any indemnity claims not barred under existing law at the time of its enactment. At that time, as will be demonstrated, indemnity claims based on vicarious liability had never been held subject to a good faith settlement bar.
This court’s decision in American Motorcycle Assn. v. Superior Court, supra,
The majority would read the italicized language as including an equitable indemnity claim by a vicariously liable defendant against a fault-source tortfeasor. Again I insist that it is logically and semantically impossible to view an indemnity claim based on vicarious liability as one “for partial or comparative indemnity.” This is just as true when applied to American Motorcycle as when applied to section 877.6. The majority reasons, however, that American Motorcycle did not establish a new doctrine of partial comparative indemnity as separate and distinct from the existing doctrine of total equitable indemnity, but instead modified the existing total equitable indemnity rule by replacing it with, or transmuting it into, a new system of partial indemnity based on comparative fault.
The majority’s analysis rests on a false premise. The majority reasons that because American Motorcycle did not create a wholly new equitable indemnity action, the action for comparative partial indemnity must have replaced or superseded the earlier action for total equitable indemnity. The majority fails to acknowledge a third possibility, which is most faithful to the language used in American Motorcycle, that the action for partial indemnity based on comparative fault was intended to be a new subcategory within the broader class of equitable indemnity actions.
But any doubt on the question of what American Motorcycle actually decided was conclusively laid to rest by Safeway Stores, Inc. v. Nest-Kart, supra,
When section 877.6(c) was enacted, therefore, neither American Motorcycle nor any other authority had established that a fault-source tortfeasor could achieve immunity from indemnity claims based on vicarious liability by unilaterally settling with the plaintiff. The majority’s decision at this late date to extend the reach of section 877.6(c) to include vicarious liability indemnity claims conflicts not only with the plain meaning of that section’s words, but also with subdivision (f) of section 875, which prohibits any construction of section 877.6(c) impairing indemnity rights existing at the time of its enactment.
III. The Rule Adopted Will Not Promote Settlement
A vicariously liable defendant may seek an early full-value settlement with the plaintiff (anticipating reimbursement from the solvent fault-source tortfeasor) in order to limit the potential exposure, reduce litigation costs, and obtain the plaintiff’s cooperation in litigation of the indemnity claim.
Settlement provisions giving a settling defendant a veto over later settlements or requiring the plaintiff to dismiss causes of action against a fault-source tortfeasor will not be attractive to plaintiffs, who are certain to increase the amount required for settlement whenever such provisions are included. If the vicariously liable defendant is unwilling to pay the additional price there will be no settlement. Veto provisions have an added disadvantage in that, as this court has recognized, they make subsequent settlements with other defendants more difficult and thus “frequently result in unnecessary trials.” (Abbott Ford, Inc. v. Superior Court (1987)
The majority’s rule will encourage early settlement by tortfeasors seeking immunity from indemnity claims by vicariously liable defendants to whom their fault will be imputed, but this incentive to settle is fostered at the expense of equitable apportionment of loss since it leaves the vicariously liable defendant to pay all or part of the plaintiff’s remaining damages when in justice and equity that defendant should have full indemnity from the settlor. A defendant in this situation, deprived of recourse against a solvent party whose conduct is the sole basis of its liability, may well prefer to take its chances at trial rather than pay in settlement a claim it in good conscience believes should have been paid by another. (See Roberts, The “Good Faith” Settlement: An Accommodation of Competing Goals (1984) 17 Loyola L.A. L.Rev. 841, 929-930.)
Contrary to the majority’s assurances, the trial court’s inquiry into the good faith of the settlement will not adequately shield a vicariously liable
While the majority opinion does not preclude a trial court from withholding approval from a settlement if it finds the vicariously liable defendant has been “improperly” excluded from settlement negotiations this hardly remedies the problem; the majority’s suggestion that it does rests on the erroneous assumption that a party whose liability is strictly vicarious should contribute something in settlement even when the fault-source tortfeasor is solvent. The issue is not whether any defendant has been given a fair opportunity to participate in a settlement agreement but whether a solvent tortfeasor may shift any part of his own liability onto a vicariously liable defendant. In the context of the good faith determination this problem could be directly addressed by holding, as a matter of law, that a settlement which fails to provide for dismissal of vicarious liability causes of action based on the settlor’s conduct is not in good faith, but the majority expressly rejects this solution.
Because of its adverse effect on settlements by vicariously liable defendants, the majority’s rule will make full settlement of actions less likely, even though the rule may promote partial settlements between the plaintiff and the fault-source tortfeasor. If a claim for equitable indemnity based on vicarious liability survives settlement, on the other hand, the prospects of full settlement are favorable. The reasons why vicariously liable defendants are likely to enter into early full-value settlements have already been mentioned. As for the fault-source tortfeasors, their options are not confined, as the majority suggests, to declining settlement or settling without protection against equitable indemnity claims. To obtain both the benefits of settlement and complete immunity from equitable indemnity claims, the fault-source
A provision for dismissal of vicarious liability causes of action does not deter later settlements and it provides a clean and equitable solution in cases where a defendant is sued on both vicarious liability and fault theories, since only the vicarious liability causes of action need be included in the dismissal provision. A defendant against whom no vicarious liability causes of action remain will be more amenable to settlement of any remaining fault-based causes of action.
The majority notes that a vicariously liable defendant can bargain for dismissal of the plaintiff’s action against the fault-source defendant but it refuses to acknowledge that a fault-source defendant can likewise bargain for dismissal of vicarious liability causes of action. If it is reasonable to impose on the settlor the burden of obtaining a dismissal in favor of the remaining defendant in the one situation (i.e., where the settlor is vicariously liable), why is it not at least equally reasonable in the other (i.e., where the settlor is a fault-source tortfeasor)? Clearly the burden and expense of obtaining a dismissal in favor of the remaining party should be imposed on the party who committed the tort rather than on the one vicariously liable for it.
IV. A Settling Defendant’s Right to Pursue Equitable Indemnity Claims Is Not Unqualified
Although admitting the issue is not presented, the majority states it is “clear under existing precedent” that Far West had the right to pursue its indemnity claims against nonsettling parties after it had settled with the plaintiff in this action.
Were the issue presented, I would be inclined to hold that a settling defendant’s right to pursue a claim for comparative indemnity is not absolute but depends on whether the settlement amount substantially exceeds the settlor’s fair share of the plaintiff’s damages. The settlor’s right of indemnity against nonsettling defendants is inextricably bound up with the determination of the good faith of the settlement and should be resolved by the trial court as part of that determination. Where a settling defendant insists on the right to proceed against nonsettling defendants for indemnity to recoup the consideration given in settlement, a court might very well, depending on the circumstances, find the settlement not in good faith in respect to the nonsettling defendant from whom recoupment is sought. A
A tortfeasor who has settled for an amount within the reasonable range of his liability has no claim in equity to partial reimbursement from other defendants in the event plaintiff’s damages or the settlor’s percentage of fault is determined at trial to be less than anticipated. The settlor has bought his peace and limited his exposure and in return “can fairly be said to have contracted away the right to any benefits resulting from a determination that the settlement was ‘high.’ ” (Comment, Comparative Negligence, Multiple Parties, and Settlements (1977) 65 Cal.L.Rev. 1264, 1279.) Because a settlor is expected to pay less than if his liability were determined at trial (Tech-Bilt, supra, 38 Cal.3d at p.499), “low” settlements will greatly outnumber “high” settlements. Under basic notions of fairness and reciprocity, nonsettling defendants, who must make up the deficit caused by “low” settlements, should be freed from the threat of the settlor’s indemnity claims and allowed to retain the benefit of the occasional “high” settlement.
My views on this issue are similar to, although less extreme than, those finding expression in section 1, subdivision (d), of the Uniform Contribution Among Tortfeasors Act, which provides: “A tortfeasor who enters into a settlement with a claimant is not entitled to recover contribution from another tortfeasor whose liability for the injury or wrongful death is not extinguished by the settlement nor in respect to any amount paid in a settlement which is in excess of what was reasonable.” The commissioners’ comment to this subdivision states: “The tortfeasor who settles removes himself entirely from the case so far as contribution is concerned if he is able and chooses to buy his peace for less than the entire liability. If he discharges the entire obligation it is only fair to give him contribution from those whose liability he has discharged.” (12 West’s U. Laws Ann. (1975) p. 65, italics added.)
Permitting a settling party to pursue equitable indemnity against nonsettlors is logically justified in those instances where the settlor has paid more than his proportionate share of the loss. The clearest case is settlement by a party whose liability is entirely vicarious and who claims indemnity from the fault-source tortfeasor. As I have emphasized repeatedly, any payment by a party whose liability is wholly vicarious is an overpayment so long as the fault-source tortfeasor is solvent. Where the court making the good faith determination finds that the settlement constitutes an overpayment, the policies of equitable apportionment and encouragement of settlements will both be served by permitting the settlor to pursue equitable indemnity against nonpaying or underpaying tortfeasors.
Vicarious liability is fundamentally different from other forms of tort liability. A claim for indemnity based on vicarious liability is not a claim “based on comparative negligence or comparative fault” within the meaning of section 877.6(c) and is not barred by that section when asserted against a defendant who has settled. The rule adopted by the majority today, permitting a tortfeasor’s unilateral settlement to destroy a vicariously liable defendant’s right of indemnity, is not only unauthorized by law, it violates fundamental notions of fairness: “One whom the law holds to an absolute liability for the wrongful act of another has been injured just as really, even though indirectly, by that wrongful act as though his property had been struck by the other’s automobile in the first place. . . . [T]he right to indemnity in such circumstances . . . [is] supported by simple, fundamental tort law principles just as clearly as is the right to recover for injuries caused directly by the tortious act. Such indemnity is an imposition of liability for fault, and as such is designed to minimize the harshness of previously imposed liability without fault.” (Leflar, Contribution and Indemnity Between Tortfeasors (1932) 81 U.Pa.L.Rev. 130, 148.)
In this case, it is not seriously disputed that Far West was sued on a vicarious liability theory as well as various fault-based theories and that Far West’s indemnity cross-complaint against the D & S defendants, although hardly a model of clarity, adequately pleads a cause of action for total equitable indemnity sufficient to encompass a vicarious liability theory. Accordingly, as to that cause of action, the trial court erred in dismissing Far West’s cross-complaint following the settlement between the plaintiff and the D & S defendants. I would reverse the judgment of the Court of Appeal as to that cause of action.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
I adopt the majority opinion’s party name conventions.
Arriving at a workable definition of vicarious liability to guide parties and trial courts presents no great difficulty and is in any event required to effectuate section 876(b). The “intractable problem” to which the majority refers was the problem of defining the proper limits of total equitable indemnity after it was extended beyond vicarious liability to encompass the
The American Motorcycle opinion refers to its holding as having “modified” (20 Cal.3d at pp. 583, 591, 598, 607) or as “expanding” (id. at p. 603) the existing equitable indemnity doctrine. It also refers to “the partial indemnity doctrine that we adopt today” (id. at pp. 603-604, italics added; see also, id. at p. 603) and to “recognition of a common law right of comparative indemnity” (id. at p. 602, italics added; see also, id. at p. 603 [“recognition of a common law partial indemnity doctrine”]). Thus the effect of the holding was to recognize and adopt a rule (partial or comparative indemnity) as a new variation within an existing doctrine (equitable indemnity), which was thereby expanded and modified. This usage is consistent with the opinion’s express holding: “Accordingly, we hold that under the common law equitable indemnity doctrine a concurrent tortfeasor may obtain partial indemnity from cotortfeasors on a comparative fault basis.” (Id. at p. 608, italics added.)
The majority finds it implausible that a vicariously liable defendant would enter into a full-value settlement if the fault-source tortfeasor “is likely to be found 100 percent responsible” and asserts it is “much more likely that settlements will take the form of piecemeal contributions by individual defendants in some rough approximation to each defendant’s likely proportionate responsibility for the plaintiff’s damages.” (Ante, p. 811, fn. 11.) These statements reveal a fundamental misunderstanding about vicarious liability. Under section 876(b) the vicariously liable defendant and the fault-source tortfeasor are responsible to the plaintiff for the same pro rata share. Should the case proceed to trial the vicariously liable defendant would be assessed whatever comparative fault share is attributable to the tort for which vicarious liability is imposed. Consequently, the “rough approximation” of the vicariously liable
Unlike the majority, I think it improbable the vicariously liable tortfeasor will settle in reliance on the trial court’s power to withhold its “good faith” approval of a later settlement by the fault-source tortfeasor which fails to provide reimbursement for the vicariously liable defendant. Realizing the great pressure on trial courts to approve settlements, and the unlikelihood of appellate reversal of a good faith determination, vicariously liable defendants will prefer and probably insist on the certainty of a veto or dismissal provision before making a substantial settlement with the plaintiff.
Concurrence Opinion
As does Justice Kaufman, I concur in the majority’s opinion that a good faith settlement in conformity with Code of Civil Procedure section 877.6, as interpreted in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985)
I respectfully dissent, however, from the majority’s additional holding that a total indemnity claim based on vicarious liability is also barred by
1. Unfairness
The majority asserts that, “even when a nonsettling tortfeasor’s liability may be wholly vicarious or derivative in nature, it does not invariably follow that equitable considerations will, as a matter of law, always call for the total shifting of loss to the more directly culpable tortfeasor.” (Italics added.) Stated more clearly, the majority’s conclusion is that a defendant who shares no blame whatsoever must share in the loss, even when doing so is not necessary to ensure compensation for an injured plaintiff. The majority fails to explain why this result is necessary. Indeed, the only apparent premise for this conclusion is contained in a footnote. (See maj. opn., ante, at p. 813, fn. 13.) The unfortunate effect of the majority’s holding as to vicariously liable defendants is to elevate pragmatism over principle and expediency over equity.
The majority reasons that vicarious liability expresses a social policy favoring the shifting of loss from an injured plaintiff to a derivatively liable defendant. I agree there are sound reasons for such shifting, but the policy concerns that support vicarious liability are not present when the issue is how the loss will be apportioned among defendants. In this case, plaintiffs have been fully compensated, at least to the extent they were damaged by the defendants relevant to this appeal. There is no longer a need to protect plaintiffs. Fairness has been achieved as to them. The remaining question is whether it has been achieved among the settling defendants. It has not.
The majority also erroneously relies on Safeway Stores, Inc. v. Nest-Kart (1978)
The majority also states that, “a nonsettling vicariously or derivatively liable tortfeasor is, of course, in exactly the same position as any other minimally culpable tortfeasor. ...” Because there is no support for this conclusion, the majority offers none. There are many differences between a vicariously liable tortfeasor and other “minimally culpable” tortfeasors. As explained above, the most obvious difference is that the vicariously liable tortfeasor is responsible only for what another party has done. Other “minimally culpable” defendants are responsible for their own wrongdoing. Another difference is that a vicariously liable defendant, by definition, has done nothing intentional, whereas other minimally culpable defendants are often charged with intentional torts. Indeed, one of the most egregious results of the majority’s decision will be in those cases in which a vicariously liable defendant is precluded from seeking indemnity from an intentional tortfeasor whose acts have been the basis for suit against the vicariously liable defendant.
In short, the majority offers no sound reason why a vicariously liable defendant should be required to pay part of a plaintiff’s damages, yet be denied the opportunity to seek indemnity from the very tortfeasor who created, by his own active wrongdoing, the liability of the vicariously liable defendant. Such result has no basis in common sense or fairness.
2. “Good Faith” Settlement Practices
The majority optimistically presumes the potential unfairness to vicariously liable defendants will be eliminated by the requirement of section
Even if the majority were correct that a settlement by a directly liable defendant can be in good faith when it leaves something to be paid by the vicariously liable defendant, the factual premise of the majority’s presumption of fairness in the good faith determination is sound only if trial courts are especially solicitous of the rights of defendants whose liability is truly only vicarious. It is quite easy in many cases to plead and argue that a vicariously liable defendant also has some degree of direct liability, for example, negligent supervision of an employee who has caused an accident. There are also extreme pressures on our trial courts to dispose of as many cases as possible by settlement. In light of the potential for unfairness under the majority opinion, a trial court should carefully scrutinize such claims, and where a nonsettling defendant appears to be only vicariously liable, the trial court should require a compelling showing that the nonsetting defendant is liable on some other basis before approving a settlement that leaves any amount to be paid by that defendant.
The vicariously liable defendant’s counsel must also share in the responsibility for ensuring fairness. Counsel should conduct adequate discovery and be prepared at the hearing under section 877.6 to demonstrate that his client’s liability is only vicarious.
All statutory references are to the Code of Civil Procedure unless indicated otherwise.
In DeLeon v. Commercial Manufacturing & Supply Co., supra,
Such a case is not a remote possibility. “Liability under the doctrine of respondent superior extends to malicious acts and other intentional torts of an employee committed within the scope of his employment.” (2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, § 135, pp. 131-132.)