Regan Roofing Co. v. Superior Court

Dist., D0 Fourth 19464. Div. One. Jan. [No. 1994.] COMPANY, INC., al., Petitioners, REGAN ROOFING et v. COUNTY,

THE SUPERIOR COURT OF SAN DIEGO Respondent; al., KENN FINKELSTEIN et Real Parties in Interest.

Counsel Mclnnis, & Jeanne Rees Anna Fitzgerald, Sharkey, Frustaglio-Roppo, Glosser, Jr., and Daniel P. for Petitioners. Simpson-White No for appearance Respondent.

Gerard, Selden, II, Johnson, Osuch, & Selden Osuch Lawrence T. Lynde Traficante, Traficante, Brick Greco & Paul A. Scott A. Johnson and Jon S. Real Parties in Interest. Opinion Inc.,

HUFFMAN, J. Vince Regan Roofing Company, Petitioners Ramirez chal- doing (collectively Regan Roofing) business as Pacific Rebar certain 44 individual lenge aspects of a settlement reached between pretrial al., (Kenn homeowners devel- Finkelstein et and the collectively plaintiffs) homes, Leisure of Oceanside oper plaintiffs’ Technology Corporation 877.6,1 Pursuant to Code Civil Procedure section (developer). plaintiffs $2 for a obtained trial court of their settlement developer approval $5,000 and contribution indemnity million and a payment assignment Tech-Bilt, v. Inc. meaning as faith within the rights being good (1985) Woodward-Clyde Cal.Rptr. & Associates 38 Cal.3d [213 construction (Tech-Bilt). well as some other Roofing, P.2d Regan 159] subcontractors, were not and design parties tradespeople professionals, settlement, settlement as not being that plaintiff/developer opposed faith, inadequate an provided on the the settlement theory chiefly specified. unless statutory 1All are to the Code of Civil Procedure otherwise references to which the defendants would be amount of setoff or credit nonsettling obtained the entitled in the event that the plaintiffs judgments against trial or other nonsettlors after jury proceeding. this is the which has Roofing only nonsettling party petitioned

Regan the the trial court’s court for a writ of mandate to set aside approval settlement;2 does not it raises both the that the settlement general objection entitled, which set forth the amount of credit to should be adequately Regan to of settlement and a to three consideration challenge particular categories include funds were allocated. These three categories which settlement $360,000 (Civ. to emotional distress claims noneconomic allocated Code, $250,000 1431.2), (i.e., inves- allocated to costs investigative expert § $132,184.26 fees), (e.g., for recoverable litigation expenses tigation $2 settlement costs). The balance of the million fees and filing deposition $1,262,815.74, “all issues of construction was allocated to disputed payment, in will not receive offsets In addition to it claiming appropriate defects.” $5,000 the the value placed by Regan Roofing argues these categories, and contribu- assignment indemnity settling parties upon developer’s defendants, was too the nonsettling tion rights plaintiffs, low, or for double recovery unjust and creates the arbitrary, potential enrichment. (1993) recent this court in Erreca’s v. Court Superior opinion by had (hereafter Erreca’s), this court Cal.Rptr.2d [24 156] about the claims Roofing’s general

occasion to address many Regan include allocations settlements which by appropriateness pretrial or claims in the underlying to issues settling parties particular disputed lawsuit, We by nonsettling parties. reached in the absence of participation as settlement of indemnity rights the use of an assignment also discussed consideration, intangible such an valuing for and the proper procedure defendants, due nonsettling credit to asset and giving appropriate others, eventual plain- against any of settlement monies by to payment set (§ (a).) We shall now apply principles subd. tiff’s judgment. facts, new issues we have which several to this set of raises forth Erreca’s to address. not had the yet opportunity defendants, variety representing nonsettling Regan Roofing, the other 2In addition Tile; Metal; Inc.; T-Four Sheet Concepts, West Coast professions, are Concrete trades and Inc.; Inc.; Tile; Plumbing, Chilcote, Company; Oceanside Gage Irwin Construction Claude Steel, Inc.; Protection, Inc.; Reinforcing Corporation; Franklin Overhead Door Home Classic Inc.; Mirror, Plus, O’Strand, Inc.; Co.; Inc.; Glass and California Design G. Zoumaras S. Moore; Construction; Diego Ninyo & San and South Western Craig Allin Construction Inc.; argument, At oral Engineering. Plastering, and Gouvis Kennington Waterproofing; 30-32 there were some approved, the settlement was that at the time

parties estimated these, opposition including petitioners, filed that 22 of nonsettling parties. The record shows settlements; of discussion. purposes figure 22 nonsettlors we use As we will we conclude that the allocations made challenged explain, (emotional the various forth these set above settling parties categories costs, distress, had an eviden investigative litigation expenses) adequate in order to basis were reached adverse tiary appropriately proceedings that the valuation these settlement assets justify presumption placed upon Ford, 858, (Abbott (1987) was Inc. v. Court 43 Cal.3d Superior reasonable. 626, (Abbott Ford).) 741 There is substantial Cal.Rptr. P.2d 124] [239 in evidence to the trial court’s of the settlement those support approval U.SA., (1990) 220 Motor Sales Inc. v. Court (Toyota Superior respects. 864, Moreover, court’s 647].) the trial 870-871 Cal.Rptr. Cal.App.3d [269 However, of the was with respect resolution offset issue adequate. $5,000 of indemnity valuation assignment placed parties upon valuation, we and record a basis a this lacks factual such rights, support further the trial court to conduct proceedings grant petition require in an given an valuation such asset intangible for concerning appropriate settlement. Background and

Factual Procedural contractor and devel- general Between and was the developer Oceanside, of a 240-unit residential subdivision in California. Plaintiffs oper 24 of In in this action consist of individuals who reside in these homes. a number three consolidated against developer, allege complaints plaintiffs in in as brought of and defects their homes. also They construction design subcontractors, and to the case a number of and design parties professionals more) (and were same subcontractors and many design professionals relief, declaratory sued in its for by developer cross-complaint indemnity, cross-defend- contract and and these Many breach of warranty, negligence. construction schedule ants took the that the accelerated position developer’s most at the had caused problems property. and design with alleged along had complaints, they plaintiffs’ certain causes of theories and strict liability)

construction defect (negligence distress, and had of emotional action nuisance and infliction negligent for of action. on those causes for emotional distress based sought damages reached, an unsuccessful brought was the developer Before the settlement 437c, an order which (§ (f)) seeking subd. motion adjudication for summary unavailable in this property emotional distress damages would have declared motion, stated in part the trial court case. In its order damage denying the devel- between had a existed relationship that plaintiffs alleged special of emo- infliction for negligent and the such that plaintiffs oper recoverable, could properly and ruled that tional plaintiffs distress might no longer though developer a cause nuisance even maintain of action for had interest in the property. ensued,

Extensive of the defects at the discovery investigation homes were taken all depositions subcontractor and plaintiffs, pro- design fessional and dozens of personnel, witnesses. attended expert parties mediation conferences before court-appointed special master and a man- court, settlement datory conference before the trial but no global was reached. then The trial court ordered trial in that the would be conducted with phases, beginning and the plaintiffs, architect. Plaintiffs developer, then developer $2 reached this settlement in sum of an million plus assignment the developer’s This settlement was con- indemnity rights.3 that it tingent was upon finding entered into faith good pursuant 877.6, section and the developer for a accordingly applied finding good faith settlement. all the Virtually the motion nonsettling parties opposed 2, ante.) faith (See settlement or joined others. fn. opposition by

In faith support developer’s good ap- for application the wrote a letter counsel proval, plaintiffs’ attorney to all forth setting allocation to and language into the settlement incorporated agreement release to be executed. These allocations were based recommen- upon repair dations and cost estimates set out construction consult- by plaintiffs’ expert ant, Thomas letter Benke. The stated that the of allocation settlement monies other and consideration paid by the was as follows: developer $15,000.00

“a. ($360,000.00); home for emotional distress per $250,000.00 costs; “b. for investigative $132,184.26 “c. for recoverable court expenses; ' $1,262,815.74 “d. for all issues of construction defects.”4 disputed Plaintiffs’ further allocations the counsel’s letter the made and explained of of value as rights follows: assignment

“Each home is based in substantial part designated percent upon cost of the total for all homes. of the individual to relationship repair Allocations of based of construction defects consideration upon categories will Mr. be done on a rata basis Benke’s cost of pro again utilizing repair estimates. developer emerged reorganization proceedings 3The had and then from previously filed for (11 essentially had bankruptcy seq.), except court 1101 et and no assets insurance § U.S.C. coverage, which was disputed. showing a plaintiffs’ 4We have document opinion attached as A to this appendix per on a home basis. paid by developer of settlement

breakdown consideration to of “Questions have arisen as the valuation of the assignment also causes of The has been [developer’s] assignment action plaintiffs. $5,000.00 valued at for of settlement.” purposes reference their Benke’s incorporated by expert Plaintiffs’ counsel’s letter 7, 1993, had at his cost estimate of on which he been May questioned this as B Mr. Benke’s We have attached to deposition. appendix opinion defects at the which included thirteen summary of various property, stucco, doors, roofs, étc.), of architectural defects categories (e.g., chimneys, costs well five items relating repair as of noncontractors’ categories inspec- architectural and construction (e.g., engineering plans permits, tions, and, categories five and moving living expenses) finally, walls, drains). Plain- defects drainage (e.g., retaining footings deepened tiffs’ letter had to use one agreed counsel’s further stated that the parties costs, Benke, for the four 1A for total repair estimates alternative repair rata to be made of the settlement determining allocations purposes pro 1A, costs for alternative also consideration. total estimate these $5,610,971.5 an item for of flatwork was including cap one-foot (grading), In further faith settlement approval, support application that its would be stated estimated developer experts necessary repairs $583,538. the amount of raised the settle- objections response 877.6, (§ further the allocations (a)(2)), ment subd. the explained developer made as follows:

“The in makes rata to each of the allocation this case a distribution pro done homes based the cost of twenty-four repair by plain- upon estimate[s] or While does not the tiffs’ Thomas Benke. expert, [developer] accept adopt Benke, it is estimates of it was utilized allocation because Mr. repair and house breakdown of by damages. based an issue issue house upon by most in this The same issue was utilized case. designation by experts addition, his regarding “In Mr. Benke was extensively deposed repair have the basis thorough understanding estimates and all should parties allocations, A with them or not. regardless they agree his of whether therefore, framer, how much as a or can determine such roofer subcontractor by to their subtrade individual home and money particular was each paid the house of issues and percent- Mr. Benke’s house breakdown utilizing by each allocated to individual home. age C, individual home cost as an illustration of Benke’s appendix 5We have also attached

estimates, figures showing particular Akin the use of preliminary estimate for the residence under alternative particular that house various The total estimate for for most these defects. $233,238. 1A was “This formula allows two million dollars in consideration monetary calculation, paid to a mathematical by [developer] susceptible based an issue issue upon by breakdown of alleged costs of Given the repair. involved, of the issues in this case and the number of complexity it parties is difficult to conceive of a better method to allocate the monies paid. Moreover, the allocation a share of fairly apportioned potential liability [developer].” to the to the developer’s reply settlement further objections explained $5,000

that a value had been placed upon assignment indemnity rights and stated that basis for that valuation included the plaintiffs, fact that the had direct actions their most of plaintiffs through complaint and design subcontractors involved professionals litigation, were to add the as direct defendants.6 seeking remaining parties Developer also that the who were argued design subcontractors professionals to contractual causes had declined to its tender of subject indemnity accept indemnification, defense and and had thus far considered request value, to be of little which led the to value indemnity rights settling parties However, them at a low no declaration figure accordingly. addressing basis for that valuation in terms such as cost to prosecute indemnity actions, claims, on the or likelihood of collection of probability prevailing was submitted in of that valuation. any judgment support $2 first should obtain a full million Nonsettling parties argued they credit eventual since the had against any plaintiffs’ judgment, developer paid (§ (a).) sum. subd. also that an breakdown They complained inadequate (emotional had been distress and construc- given among damages categories defects, tion as well as the costs categories). investigation litigation view, their should have been made dám- among allocations specifically trade, defendant, or to enable more offsets to be age by precise categories, calculated. discus- on the faith settlement a good spirited

At the hearing application, noted that it was on the allocation issues. The court first sion was held and insurance had been maximized that the coverage satisfied developer’s several of settlement assets had been marshaled. Although that all available of settlement that a allocation argued nonsettling parties particular trade, made as to a of the consider- should be by percentage consideration so, not be court declined to do that it would stating possible ation paid, defect cases if such precision settlements construction complex reach to broken out that the settlement was Plaintiffs’ counsel pointed were required. hearing faith join remaining parties granted to as defendants was at the 6That motion motion. defect, and exact ceramic down house and was as some trades (e.g., per by metal, tile), could not as to others sheet which include (e.g., roofing, pot but shelves, etc.). The admitted that a defect such as a developer’s attorney could have been caused the mass finish by grader, crack drywall possibly framer, those or the but stated that issues painter, grader, drywaller, be the settling could not then resolved by parties. in the

The ruled an allocation had been made settle- court that adequate plaintiffs’ ment and that the offsets eventual potential against any judgment formula to be the nonsettlors could calculated a mathematical against with the trade used on the cost estimate accordance particular plaintiffs’ The made a similar on the of settlement ruling involved. court category for that a mathematical damages, stating consideration emotional distress be made with a allocation to the along particular calculation could liability for found charged eventually responsible defendants with nonsettling for The court stated that those damages. responsible emotional distress any share, not bear a rata and that those pro emotional distress would damages to any would and would not be entitled liability be released from responsible reserve on the setoff in a future The court declined to jurisdiction judgment. after emotional distress until category amount of allocation and offset to the trial, at the a that the allocation to that of was type proper finding settlement stage.7 costs, the found that the fees expert

On the issue of court investigative at the were properties incurred for the of defects discovery purpose costs, settlement purposes. recoverable were proper ballpark figure (Tech-Bilt, 499.) The a break- court refused to give 38 Cal.3d or trial litigation down that incurred for investigative of costs were arguably as of defects. discovery purposes only, opposed then of the valuation the assignment court turned issue counsel ar- Roofing’s as Regan settlement consideration. indemnity rights $5,000 insuffi- was assignment completely that the valuation of the gued cient, possibility and that such an assignment rights represented cause also their own negligence because the had recovery plaintiffs double The court assured the subcontractors. majority of action occur, that “insofar not a double recovery that it would permit counsel recovery would a situation of double create such assignment Regan and unenforceable.” find it’s an illegal agreement will Court the it emotional one of the reasons had settled counsel to the court that 7Plaintiffs’ observed way try to those it some creative court instructed to find claims was because the had distress claims, on the witness plaintiffs crying it 44 expressly did not want have as the court stated stand.

1700 counsel then that the should Roofing’s argued assignment rights given the value as the at same trial to that potential recovery pursuant assignment or, alternative, in the that the was valueless. Plaintiffs’ assignment rights counsel that he would that the was worth responded stipulate assignment but that he it it to take because had been offered to him. He nothing, agreed that the various subcontractors had refused to honor their explained contrac- that, circumstances, tual under the he a indemnity agreements thought $5,000 estimate of value was fair. The court The court then agreed. approved the settlement as in faith under the Tech-Bilt standards. being good filed this for writ of mandate to

Regan Roofing petition challenge stayed of the settlement. We issued an order to show cause and approval trial date.

Discussion In (supra, this court’s recent Erreca’s 19 published opinion 1475), we established by discussed the two Cal.App.4th competing policies (1) sections 877 and 877.6: of costs sharing among parties equitable fault; (2) (Tech-Bilt, at of settlements. 38 supra, encouragement 494-496.) at Sections that “while together provide Cal.3d 877 877.6 pp. off the of other defendants to seek right faith settlement cuts good defendant, contribution or from the settling comparative indemnity in their ultimate liability defendants obtain return a reduction nonsettling Ford, 872-873.) (Abbott Cal.3d at Section supra, 43 plaintiff.” pp. (a) (as thus to reduce claims other joint opposed subdivision operates (In (N.D.Cal. 1992) several) re Piper F.Supp. tortfeasors. Aircraft 1189, 1192.) Erreca’s, in Alcal we adhered to the set forth & guidelines Roofing (1992) Insulation v. Court Superior Cal.App.4th Cal.Rptr.2d [10 844] alloca (Alcal), faith of a settlement that includes establishing “At a min issues. That court stated: tions among particular disputed imum, of a settlement must court explain confirmation seeking party whom, with the dollar amount of who has settled and to all other parties: allocated, settlement, how it is allocated between if settlement is any each included, has been what consideration nonmonetary parties, issues and/or consideration.” nonmonetary to the settlement value and how the parties 1129.) (Alcal, that the in Erreca’s the considerations we added Alcal guidelines,

To those and to to the court of a settlement must explain confirmation seeking party valuations allocations and basis for evidentiary other parties all

1701 sufficiently reached in a made, that allocation was demonstrate and must was reached valuation that the manner to adversarial justify presumption Ford, 1495-1496; Abbott at (Erreca’s, supra, pp. reasonable. however, hearing the court that 879.) We Cal.3d at emphasized, supra, on hearing evidentiary an was not to conduct faith motion required the good to allocation, wide discretion accorded but instead had been the basis for the nature, challenges to any extent and the procedure” applicable control “[t]he (43 Cal.3d the settling party. on the settlement by to the valuation placed 879-880, 23.) fn. pp. to a vastly these guidelines

We now have the apply opportunity Erreca’s, a vastly involving was different factual situation than presented Erreca’s, A, B, attached.) In (See settlement. appens. more complex 1475, and between soils allocation made was simply 19 Cal.App.4th soils issues, all nonsettling one of parties, and there was only group nonsoils contrast, of categories with four major here we are dealing defendants. flatwork), which most of costs and (i.e., issues architectural,drainage, repair Also, soils of nonsettling instead of one group have numerous subcategories. who different defendants, defendants represent we have some 22 nonsettling Moreover, 2, ante.) dealing instead of (See and fn. design trades professions. (the homeowners associa- as in Erreca’s with a discrete group plaintiffs the settlement proceeds who would up and class split tion representatives), among in this case divides settlement proceeds the settlement internally, fit into is difficult to this 24 involved homes. Although complex the Alcal following we believe that by faith” methodology, the “good partic- validity petitioners’ we can determine Erreca’s guidelines settlement. this ular challenges components

I Consideration Settlement Overall Allocation of only extends not faith “The statutory requirement which operates well to allocation but as of the overall settlement amount (Knox from the setoff. of the settlement [Citations.]” exclude any portion Cal.Rptr. (1980) Cal.App.3d [167 Los County Angeles v. it claims that Here, defendant 463].) nonsettling Regan Roofing Benke cost of repair and the from the settlement to determine is not possible in the event receive will eventually of offset it what amount estimate lists a estimate Benke cost it. The a judgment against recover plaintiffs attic, structur (roofs, possibly defects chimneys, of roof-related number house. The repair monies were allocated per al), as to which some settlement engineering plans, architectural (e.g„ estimate items in cost costs 1702 construction, also would

inspections and during moving living expenses) (See defendant, others. be attributed to the presumably among appen. roofing B, however, attached.) some of the other that Regan complains Roofing, costs, do such defect as of the architectural categories, many drainage be not directed thus seem to seem to be defects and would roofing toward eventu- excluded from offset would any Roofing that as a nonsettlor Regan be entitled to ally receive. test the to exclude a good

To faith of these allocations which operate of the settlement from the setoff to individual portion nonsettling available defendants, the overall is whether the settlement is “grossly dispro inquiry to the settlor’s fair share” and thus to portionate not subject approval by Ford, (Abbott 874-875.) court. 43 Cal.3d pp.

“Evaluation of the allocation of settlement is committed parties’ proceeds to of in the the sound discretion the trial court faith settlement good approval The court on its own and the process. may rely expertise opinions experts a of the or faith of a determination bad settlement. reaching good However, the not be able than make simply court to do more may [Citation.] estimate, a value should any challenge agreement’s assigned best not as to a be defendant a minitrial interpreted giving challenging right nature, on extent and the valuation issue. ‘The the procedure regarding any left to such is the discretion trial challenge court.’[Citation.] U.SA., (1990) v. 220 “In Motor Sales Inc. Court Toyota Superior 878, 864, 647], court footnote observed Cal.Rptr. Cal.App.3d [269 ‘. . contested . factual or determinations made on issues findings any are or tentative and for the solely purposes evaluating liability a the date such valuation.’ faith of settlement proposed good review, a italics.) trial court’s determination of On appellate (Original issues will of a the resolution of factual involving faith settlement (Erreca’s, supra, if substantial evidence. upheld supported [Citation.]” 1489-1490.) at pp. Cal.App.4th of the value of knowledge have most settling

Since parties settle, to an are make required claims are they attempting they various claims, subject those various among allocation of settlement proceeds cases analogous made. This situation is of the showing court approval is consideration or where noncash contingent which are payments settlement (1991) 227 (Arbuthnot Corp. Relocation v. Service Realty settlement. paid Moreover, 682, an 135].) where alloca Cal.Rptr. 689-690 Cal.App.3d [278 or which will the ultimate setoff affect tion made of proceeds is future will receive nonsettling judgment, defendant credit that allocation not be effect unless it was the may given presumptive product (Peter (1992) of adverse Associates v. negotiation. Culley Superior & Court 624].) 1497-1498 Cal.Rptr.2d [13 standards, these we look to the record to determine Applying whether there is and a adversarial evidentiary basis for the support proper allocations defect made that were here. Plaintiffs’ estima among categories tor Benke was about his cost estimate and it was available to all the deposed for examination. The trial court was with that parties information presented $583,538, for cost estimate was while cost developer’s repairs plaintiffs’ $5,610,971 $11,283,246. (alternative 1A) estimates from ranged to repair The court had the information that the own cost estimator developer’s placed its share of proportional defects at 10 to 20 since it had not percent, the actual work on the performed but should bear some property responsi as the bility contractor and general cost estima developer. Regan Roofing’s tor allocation of fault at 15 placed while the developer’s percent, estimator fault at between plaintiffs’ placed 17.8 and 35.7 developer’s The percent. submitted a declaration developer’s attorney referring developer’s insurance and its coverage problems bankruptcy proceedings. developer $2 the court that it had available a represented million maximum contribution to settlement. The court thus had a number of facts from which evidentiary to reach an evaluation of the settlement. Erreca’s, 7, supra, 19 at 1498-1500 footnote we pages discussed the issue of the time for a credit a appropriate setting future potential judgment based We upon consideration. observed that, consistent with the reasoning Southern Cal. Gas Co. v. Superior (1986) 1030, 320], Court 1036 Cal.App.3d Arbuthnot Cal.Rptr. [232 690-691, v. Relocation Realty Service at Corp., supra, Cal.App.3d pages the credit or offset to be accorded a defendant should nonsettling normally reached, be fixed at the time settlement is since the issue of the case, credit is of the overall part faith determination. In this rather than good certain numbers for the fixing upon award of credit to the various nonsettling defendants, the trial court found that since the showed that settling parties the allocation of consideration based of construction defect categories upon basis, estimate, be done on a should rata the Benke cost of pro using repair a mathematical formula could then be determine the various applied defendants’ nonsettling offset. The court declined to a breakdown of require the settlement consideration trade or that the mathemat- by stating by party, ical calculation rata using formula would be pro adequate.

To evaluate this exercise of discretion and these factual findings by court, trial we first that the used four of defects recognize major categories Benke in his cost estimate will have some inevitably degree overlap between trades and design For as the attor profession. example, plaintiffs’ stated, a sheet metal contractor be ney found to have some might responsi shelves, bility roofing, pot boxes or other fireplace Similarly, categories. defect, crack, such as particular drywall might grading, attributable Nevertheless, or even at framing, drywall, painting. inquiry trial, faith settlement is not where good the same as the at stage inquiry of allocation could we are complete precision be achieved. Since presumably settlement, with a in which the dealing pretrial factual or determi findings tentative, nations made on contested issues of or are liability made solely faith of purposes evaluating a settlement as U.SA., Court, the date of the valuation Motor (Toyota Sales Inc. v. Superior 9), fn. we Cal.App.3d must a broader necessarily apply and more standard for faith of a permissive evaluating good settlement as to such allocation. To require to make a of settling parties complete explanation their rationale for the allocation of settlement consideration or to set forth a factual matrix the allocation trade showing or defendant would serve by by this, to settlements in discourage pretrial matters such as due to the complex of such a difficulty making precise at the settlement showing stage. Instead, what should be of the is that furnish required settling parties they to the court and to all an a parties of rational basis for evidentiary showing the allocations made the credits must also show that proposed. They they reached these allocations and credit in an of proposals atmosphere appropri- ate adverseness so that the that a reasonable presumption may applied Ford, (Abbott valuation 879.) was reached. supra, 43 Cal.3d at p. settlement should a of the settlor’s represent rough approximation propor- tionate well as a that a settlor in liability, recognition should less pay (Tech-Bilt, settlement than after a 499.) trial. at supra, 38 Cal.3d Another factor to this situation is that adding these complexity plaintiffs association, have sued rather than as a class or for individually, damages homes; defendants, these 24 if the matter to trial the goes against nonsettling verdicts for the for each home will have presumably, special be reached and it will not be all the verdicts possible lump plaintiffs’ Instead, the offsets. it seems that together purposes calculating credit will have to be made for each nonsettling calculations separate defendant, of defects at each house. considering particular types factors, all these we was believe trial court

Considering justified that the use of the rata formula to allocate settlement concluding pro consideration of defects was an the various among categories adequate resolution of the credit faith or offset issue at the settlement good stage Erreca’s, As we noted in proceedings. at 7, footnote “Determination of page the credit issue to the extent verdict, cannot possible be deferred until after eventual any jury because the entire settlement must be determined to be in faith as to both settling (Italics added.) defendants. nonsettling To the ex [Citation.]” here, tent the court’s instructions possible use of the rata concerning pro formula are an resolution of the adequate credit issue at this stage, may be used nonsettling defendants for calculating rough approximation of their potential and their liability exposure settlement consequent posture. certain, While the formula is not at present it represents resolution certain, offset issue which is capable being made since the amount of consideration, home, types defects each and the number defendants can all be nonsettling determined and analyzed.8 We that after recognize future trial of claims plaintiffs’ defendants, the trial nonsettling court have to take may evidence to calculate defendants, the offsets due those distinguishing various defect among However, categories. at the pretrial stage, used are rough categories for the adequate task. when we Accordingly, the standards of Alcal apply allocation, and Erreca’s to this we find that the settlement faith passes good muster under Tech-Bilt insofar as the overall offset issue is concerned.

II Emotional Distress Damages next Regan Roofing that the allocation in argues the settlement of $360,000 claims, to the 44 emotional plaintiffs’ distress at approximately $15,000 involved, each of the 24 per houses was and disproportionate arbitrary. Specifically, Regan Roofing that under complains Civil Code illustration, give suppose defendants, 8To an plaintiffs go against nonsettling to trial 20 including Regan Roofing, plaintiffs’ special and recover 24 verdicts on their direct claims (not indemnity) varying (see A, according proof. amounts Akin appens. As to the home C), $250,000 settlement, (Recall suppose is recovered. that in percent Akins received 4.1 $67,445 $10,250 of the paid: including amount not damages, emotional distress plus for $5,419.60 investigative A].) litigation costs and for appen. Regan costs To calculate [see credit, $8,314 roofs, Roofing’s $651 one notes that the developer paid as to Akin for for chimneys (all items). $75 Roofing for Regan get attics roof-related would a credit in Akin, (there, plus that latter sum as to repair 'Ao of “non-contractors items” costs $13,757), Ill, plus (see investigation litigation 'Ao of the expenses pt. costs and listed above $10,511.20 However, post) for a total only. drainage credit of for the Akin house as to the distress; II, (and categories flatwork pt. as well as all other architectural items emotional see post), no categories credit would be accorded adequately because those are not related to roofing. 1431.2, section it aas tortfeasor will not be joint allowed offset any against distress, future for these judgment noneconomic for damages emotional since that section now that for noneconomic provides liability damages several, should be rather than This joint.9 the law “abolished the change rule of and several joint for ‘non-economic liability as defined damages’ (b)(2) 1431.2], subdivision Code section and retained the joint [Civil several rule for ‘economic liability as defined in damages’ subdivision (b)(1). 268, (1992) (Espinoza v. Machonga 272- [Citation.]” 498], omitted.) fn. Cal.Rptr.2d addressing proper [11 setoff to be a defendant due to a given nonsettling settlement that includes both noneconomic and economic the court in v. Ma damages, Espinoza chonga, supra, “Section explained: 1431.2 that the provides responsibility for the noneconomic of the allocated each defendant portion damages Therefore, shall be several and not joint. each defendant is solely responsible Thus, for his or her share of the noneconomic damages. portion settlement attributable to noneconomic is not to setoff. To damages subject would, effect, do otherwise cause in settlement to be treated money paid as if it was as a on paid joint This could not be done liability. [szc] properly a verdict and we see no basis it should be done on a settlement.” why v. (Espinoza 276-277.) at Machonga, supra, 9 Cal.App.4th pp. 1191-1193, The court in In re Piper Aircraft, at supra, F.Supp. pages 877, reached a similar conclusion by discussing of section relationship (a), subdivision and Civil Code section 1431.2. The court found no inherent conflict between the rationale of Civil Code section policy 1431.2 and the 877, (a) of section subdivision requirements setoff to providing tortfeasor a future nonsettling due to a settle- judgment, preverdict stated, ment or award. The court “Both statutes seek to ensure the fair (In and the distribution of loss.” re apportionment equitable 1192.) Piper Aircraft, of section primary purpose tortfeasors, (a) subdivision is to reduce claims other but against since joint 1431.2, of enactment Civil Code section for noneconomic liability (In is not incurred damages but re jointly, only severally. Piper Aircraft, 1193.) at The court thus section that no supra, p. construed 877 providing credit should be a to tortfeasor for given nonsettling by pretrial payment 1986, part Responsibility 9Civil Code section 1431.2 was enacted as of the Fair Act of 1431, (8 (1994 Proposition pocket supp.) known as 51. West’s Civ. Code and § historical note, 58.) 1431.2, (a) statutory p. provides Civil Code section subdivision as follows: “In death, personal injury, damage, wrongful action for property upon principles or based of fault, comparative liability damages of each defendant for non-economic shall be several only joint. only and shall not be Each defendant shall be liable for the amount of non- damages proportion economic allocated to that defendant in direct to that defendant’s fault, percentage separate judgment against and a shall be rendered that defendant for amount.” 1707 (In others settlement of noneconomic claims. re damages Piper Aircraft, 1189.)10 supra, 792 F.Supp.

To whether this allocation to the emotional analyze distress cate to exclude this gory, settlement from a setoff to the operating portion defendants, (Knox was in faith nonsettling v. Los County Angeles, 837), we look to the factual and Cal.App.3d procedural First, of this settlement. background theories of plaintiffs pled nuisance and infliction negligent of emotional distress and the against developer, efforts to have those developer’s claims of motion for disposed summary were adjudication unsuccessful. The had also received plaintiffs instructions claims, from the trial court that had to find a they creative these way try since the court was not to allow each individual to come going plaintiff court on the witness cry stand. At the settlement hearing, plaintiffs’ counsel stated that such the trial court was one of the pressure by reasons that the to settle these plaintiffs agreed claims. of emotional distress availability damages cases property damage

is a of some subject (See, the Courts of dispute among Salka Appeal. e.g., Hills, v. Dean Homes Inc* Beverly v. (Cal.App.); Cooper Superior (1984) 1008, Court 746].) Even assum Cal.App.3d Cal.Rptr. [200 context, such a claim ing may be made in the construction properly defect it would run arguably only against who had a relation developer “special of some kind with ship” the homeowner who from the bought developer, would not run subcontractor or design professionals. however,

The relevant on this at the settlement inquiry point is not stage, of a enduring viability plaintiff’s particular but theory recovery, instead a reasonable evaluation of potential exposure based on the liability Here, circumstances of that case. those circumstances included the denial of claims, motion for to strike those as well as the summary adjudication court’s comments on the trial for such claims. potential problems course,

Of emotional distress are and indi- damages subjective extremely nature, $15,000 vidualistic in and the settlement allocation of home per Piper Aircraft, supra, used in In re 10The particular procedure F.Supp. case, factually complex and make special involved the efforts of a master to take evidence Regan Roofing factual determinations of economic and noneconomic amounts. However, argues evidentiary an hearing procedure required reasoning such is here. Piper there, hinge upon particular fact-finding does not and we decline to procedure used Ford, supra, (See Abbott require a minitrial on the valuation of such in settlement. 879-880, 23.) pp. at 43 Cal.3d fn. 30, (S035772); *Reporter’s granted Review July Note: December review dismissed 1994, District, Appeal, Appellate cause transferred to Court of Second Division Four. emotional However, distress is somewhat in admittedly nature. arbitrary such arbitrariness does offer, not faith of such a settlement destroy so as it is within the reasonable long range for that potential liability claim. The fact that an motion on this opposed issue had been precise brought hearing shows that the were adverse in interest on parties this issue, and their valuation of this settlement particular thus should component (Abbott Ford, given presumption reasonableness. supra, 43 Cal.3d at 879.) In evaluating faith parties’ good this allocation of reaching the trial court proceeds, was to use its discretion and its required and was expertise, required make a factual finding that such an award was decision, reasonable. On substantial evidence review of such a we cannot say this record lacks a solid basis for the of the settlement in approval this even it regard, though to reduce operates the amount of setoff available to defendants to that nonsettling extent. v. (Espinoza Machonga, supra, 9 276-277.) at Because this evaluation pp. was made at settlement no or minitrial negotiations, is on the valuation evidentiary hearing required Ford, (Abbott 879-880, 23; issue. at fn. see In re supra, pp. Piper Aircraft, 1191-1193.) F.Supp. is not on pp. petition this persuasive issue.

Ill Costs and Investigative Litigation Expenses $250,000 This of settlement consideration category consists of for expert fees incurred as costs investigation of defects concerning discovery residences, $132,184.26 at the plaintiffs’ as litigation expenses.11 consideration, to this form Regan Roofing objects of settlement con there is no evidence to such an tending into these support allegation catego ries, and that there will complaining be no fair offset accorded to the claims, from nonsettling defendants these categories. its support Regan settlement, that since Roofing this is a there is no argues pretrial yet and, further, under section that under the costs statute prevailing party 1033.5, (§ (b)(1) (2)), “[fjees subd. & it is not to award as costs proper litigation expenses 11The which up category make this of settlement consideration were set forth plaintiffs’ attorney his declaration as follows: Filing $ and motion fees 352.20 54,759.75 $ Deposition costs 2,384.21 process $ Service of Witness fees (Defendants 12,155.82 fees) $ deposition Models, blowups, 54,989.22 $ photocopies of exhibits $132,184.26 Total

1709 not ordered experts the court” by or in “[investigation expenses preparing 1033.5, (§ (b)(1) case for trial.” (2).) subd. & We shall discuss two categories costs separately.

First, $250,000 on the fees allocated to the experts’ costs investigation the record category, shows plaintiffs’ attorney’s declaration states that that amount less than one-half represents total plaintiffs’ expert expenses 1033.5, to date. Although first it glance seems that section subdivision (b)(1) would not an award of costs for permit such non-court-ordered expert fees, it must be remembered that this is a settlement pretrial allocating settlement consideration into various It would be categories. to view proper $250,000 this expert expense damages due for a of the portion cost which is an repair, measure of on appropriate damages cases based Code, 3333; to real damage (Civ. Townhomes, property. Raven’s Cove § 783, Inc.v. Knuppe Development (1981) 114 Co. Cal.App.3d 801-802 [171 334]; Witkin, see Cal.Rptr. Torts, 6 (9th 1988) of Cal. Law Summary ed. 1462, 934-935; pp. § Christiana (1990) CommunityBuilders Orndorff v. 683, 193]; Cal.App.3d also see Cal.Rptr. Carlson v. [266 Industries E. L. 691, Murphy (1985) Co. Trucking 331].) Cal.App.3d Cal.Rptr. [214 case, any party’s forbearance from an award of seeking litigation costs constitute may consideration legal for settlement. (Armstrong World Industries, Inc. v. Superior (1989) Court 215 Cal.App.3d 957 [264 39].) Here, Cal.Rptr. the trial court found that the expressly investigative costs was in the figure Tech-Bilt as recoverable ballpark costs. To evaluate court, that determination the trial we need not make an in-depth survey the law of Instead, costs vis-a-vis for such an allocation. the proper at the inquiry faith is whether approval stage this particular item of settlement consideration had a reasonable basis and was evidentiary reached in an which was atmosphere adversarial appropriately rise to give that a presumption reasonable valuation was reached. This portion settlement meets those standards.

Moreover, we do not understand why that it Regan Roofing argues would not be entitled to an offset for this item of settlement particular consideration, or for its costs. In the companion, litigation developer’s mandate, and plaintiffs’ response this petition writ of concede they there is little that the question would receive an offset for nonsettling parties allocated, the costs as based the trial court’s statement at the upon hearing that it would not allow double Like this settlement. recovery through asset, other intangible settlement costs and are not tied necessarily expenses to a otherwise, particular defendant unless since the incurred stated plaintiffs these expenses in settle their case as a whole. These prosecuting particular ment items do not such as would be represent subject noneconomic damages II,

to the rule (see ante.) of Civil Code section 1431.2 Nor pt. does the fact trial, that there made, has been no and no formal costs award has been yet mean that an offset could not be appropriate allowed for these expenses paid Industries, Court, in settlement. World Inc. (Armstrong Superior v. supra, 957.) rata, at Such an offset would Cal.App.3d p. be pro according defendants, number of nonsettling of the credit. purposes setting On the issue of recoverable court more need be expenses, nothing said other than one of the costs items identified in the plaintiffs’ attorney’s declaration, i.e., “[mjodels, (a blow-ups, of exhibits” photocopies $54,989.22 item) to be a might appear cost item in questionable of light 1033.5, section subdivision (a)(12), models and of exhib allowing blowups its and of exhibits as costs “if were photocopies they reasonably helpful course, aid the trier of fact.” Of no trier of fact has ever had the opportunity to assess the case strength before this plaintiffs’ pretrial However, was reached. were in plaintiffs justified the case as preparing trial, it were though and the going of a settlement with the fortuity pretrial should not defeat the developer to recover these cost in plaintiffs’ right items Industries, Court, settlement. World (Armstrong Inc. v. Superior conclusion, 957.) at these items of Cal.App.3d settlement consideration were evaluated the trial court as properly an having adequate evidentiary Thus, basis and as entitled to the of reasonable being valuation. presumption has no merit this petition respect. IV Assignment Indemnity Rights of

A Factual Background settlement, For counsel for purposes plaintiffs and valued developer $5,000. the assignment of the causes of action for developer’s indemnity cross-defendants, Such could be all of the indemnity sought against possibly which includes most of the defendants.12The nonsettling potential recovery $2 that such an cause action could would be the indemnity represent (not million in settlement consideration paid by developer including $5,000 valuation for this At the on the assignment rights). hearing settlement, $5,000 faith of the the court and counsel discussed the valuation defendant; however, 12Regan Roofing petitioner is a cross-defendant as well as a Vince cross-defendant, doing only having Ramirez business as Pacific Rebar not been named is plaintiffs’ complaint. this concluded that placed upon assignment rights, essentially figure was somewhat would that the arbitrary; plaintiffs stipulate assignment $5,000 was worth but stated that seemed to as fair an rights nothing, estimate In the filed to the various any. developer’s opposition objections settlement, to the faith the reason the low valuation of given the first, that assignment rights of was the had their own direct plaintiffs action the against most of subcontractors so that the pending, cross-complaint and, second, were not that in rights valuable none of the comparison had subcontractors to defend and agreed the under the indemnify developer clauses, contractual and had not as that the indemnity yet acknowledged had value. The indemnity subcontractors continued blame the rights any accelerated construction schedule for the bulk developer’s of the construc- tion defects at the property.

B Settlement Recovery Consideration: Double Issues It well is settled that an of assignment indemnity rights may constitute valuable noncash (Southern consideration for settlement. Cal. Gas Court, Co. v. Superior 1034-1037.) supra, at The value Cal.App.3d pp. of such rights be determined the time assigned may at of settlement by (Id. declaration by 1036.) or expert testimony. at a credit in p. Alternatively, favor of nonsettling defendants for amounts recovered any eventually the by ordered, the plaintiffs through rights be as the assigned may as long assigned an rights theories) versus insurer on bad (e.g., faith are to be required (Ibid.) with due pursued diligence. lcal,

In A 1121 at the supra, court about Cal.App.4th page spoke the the assignment by its the roofer to developer indemnity rights against the and stated plaintiff, that without added information not it could deter mine the “whether assigned rights merely [plaintiff’s] duplicated existing here, rights roofer.” To this some expand upon concept possibility “double on recovery” settlements in approval partial may arise potentially several contexts. the discussed in terms of double problem is Principally, somehow recovery assignment from contractor’s or resulting developer’s situation, this rights by illustrated indemnity plaintiff. typical case, caused, is that defects construction have are may usually been caused, been have contractor as alleged general by negligence well as the as in of subcontractors or this negligence designers. Typically, case, the have contractor will included indemnification general provisions De contracts which he the subcontractors designers. by engaged on nature the indemnitor pending of these contractual may provisions, own liable for indemnification for caused his damage negligence, only undertake to contractor as to its or he also may indemnify general Court, (See v. Superior Peter & Associates Culley negligence. filed, Further, 1492.) once are cross-complaints equitable also be contractor. indemnity may alleged, e.g., by general event, contractor or has a contrac- to the extent developer subcontractor, it constitutes a tual or equitable right indemnity against will claim for reimbursement of the contractor or have developer If of a with the incurred in favor of a plaintiff. part plaintiff then has two theories of contractor its assigns indemnity rights, plaintiff from subcontractors: the first be based subcontrac- recovery may upon based own active which the second is negligence damaged plaintiff; tor’s dual of indemnity. the contractor’s of This assigned rights possibility upon of “double has caused courts to ruminate about the possibility recovery Alcal, 1128.) (See, at e.g., supra, Cal.App.4th p. recovery.” 1502-1503, Erreca’s, at we were pages presented 19 Cal.App.4th valuation indemnity rights with an that the of assigned argument improper issue, with the double We dealt at some recovery. length would lead to of action a subcontractor against that because the direct cause concluding were indemnity rights separate and that derived from the of assignment action, (Id. at should not be a concern. pp. causes of “double recovery” should 1503-1504.) We that the of such assignment rights properly explained in consideration of settlement be viewed “as the transfer of a valuable asset cash, securities, valuable asset which should be treated like other (e.g., any such as a different of indemnity rights, real or of type property, assignment carrier) of purposes an insurance for faith cause of action against a bad of indemnity rights merely represents a credit. Such assignment setting action, which be trans- in may of a of chose variety assignment particular of which of any public policy without violation ferred and recovered upon 1503.) (Id. at we are aware. p. [Citation.]” area, we ad in difficult this

To avoid double recovery problems valuation close attention to proper monished trial courts to give (1) an action, of requiring chose in importance emphasized assigned consideration allocation of settlement basis for each evidentiary adequate are claimed to which the nonsettlors of for area particular anof liable, reached in negotiations that the allocation was (2) a showing reasonable of rise to a presumption adverse nature give appropriately valuation, (3) an award accurate of credit to the nonsettlors in connec 1504.) tion with the (19 faith settlement at good approval. p. The value an such should be placed assignment credited upon rights on against any eventual the nonsettlors the same claims as judgment i.e., action, were settled direct not settling parties, plaintiffs’ any 1503.) at This indemnity recovery assignment {Id. through rights. p. said, we should resolve concerns about procedure, “adequately potential [ ] double for if the settlement reached was recovery ascertaining purposes (Id. 1504.) faith.” reflection, continued we confirm

Upon our initial approach this matter sound, Erreca’s was is no as there of “double under possibility recovery” these circumstances. The direct action for and the negligence derivative action for A who constitute indemnity wholly independent rights. plaintiff recovers soils negligent compaction from soils subcontractor directly and who then recovers sums additional from that subcontractor by way twice, assignment the contractor’s has not recovered indemnity rights and the subcontractor only has once. This is because paid indemnity is based the contractor he has paid for what recovery upon making whole If the it is not plaintiff. plaintiff because the subcontractor has profits paid twice, but because the the chose in the purchased action from plaintiff at a contractor good such accusations of “double price.13 Accordingly, obtained a who an a recovery” by claim at plaintiff purchases indemnity discount miss the is no mark. There double and we not recovery should about it. worry $500,000, example damage 13Letus consider an the above. all of Assume total soils of contractor, the by negligence. damage, caused The for the subcontractor’s liable same settles $300,000 with plaintiff assigns against the and his the indemnity rights subcontractor. $100,000. are rights good These valued at the faith settlement In with hearing at accordance $400,000 opinion, any our the then Erreca’s subcontractor is entitled to a credit $500,000 judgment in the subsequent plaintiff. favor of If the recovers full plaintiff $100,000. the

judgment, subcontractor will thus owe an If the then plaintiff additional $300,000 in recognition assigned agreement, plaintiff recovers full of the indemnity will have $700,000 ($300,000 obtained a total of from the which resulted from the contractor settle $300,000 ment, indemnity agreement, from the subcontractor based on an assigned the and $100,000 $500,000 negligence judgment additional as the between the the difference of $400,000). $200,000 duplicate recovery, credit of There is no the extra represents however: plaintiff good bargain indemnity the benefit to the the making purchasing of in contractor’s rights. unjust is to be noted transaction the imposes consequences upon It that this no $500,000 he damage paid subcontractor: has been found liable for in the of and he sum has $400,000 ($300,000 $100,000 only by way indemnity the claim of and the difference between fact, $500,000 $400,000 subcontractor, credit). judgment the in the has benefited assignment process, obligation, from the his the result of which was to reduce somewhat $100,000 gratuitously, by virtue of in valuation of the chose action. c Application Authority of In of the valuation of this evaluating appropriateness parties’ contribution, of as a settlement we assignment type indemnity rights apply the same standards for faith of the valuation as determining good any other allocation of settlement monies. the trial court should Specifically, examine whether there is an basis for the valuation and evidentiary adequate whether it was reached in an of such adverseness as to rise atmosphere give (Erreca’s, valuation was made. supra, that a reasonable presumption 1495-1496.) will its discre at The trial court then 19 Cal.App.4th pp. apply The settlement tion in whether the is determining showing adequate. parties’ range all an amount within the reasonable should components represent (Id. 1496-1497.) valuation Although defendant. at liability settling pp. include some estimation extrap settlement asset must necessarily olation, be made normally the valuation of should assigned indemnity rights for the faith showing at the time of settlement as overall part Co., 1036.)14 at (Southern supra, Cal.App.3d settlement. Cal. Gas court such a determination the trial by an court Finally, appellate reviewing factual determinations should evidence standard to the substantial apply U.SA., Motor supra, Cal.App.3d made the trial court. Sales (Toyota 871.) at p.

What, then, when an expert are the criteria which should applied a value for such an or the in their declarations set forth assignment parties 1497-1499, Erreca’s, we discussed pages rights? a valuation. Considering three criteria to be considered such particular the par that the assignment represents, maximum entitlement to indemnity entitlement based on a discount to that maximum ties then may assign them, claims, on and the of prevailing cost to prosecute probability difficult, more on a on them. It be might likelihood of collecting judgment in connection rather than strict liability for to negligence example, prove The extent of the assignor’s potential with an assigned indemnity right. the It could serve to reduce the value of assignment. fault might comparative actually had intention of any whether the assignees also be considered to their only whether they pursue such or indemnity right, preferred pursuing direct own rights. have as refused to yet provide the indemnitors because

Simply potential to is no reason of the indemnity rights or indemnity assignor defense rights for assignment on the of may decline to set a value 14Alternatively, the trial court diligence due assigned rights with assignees pursue may require but purposes, credit Co., (Southern supra, 187 Cal. Gas good approval. faith in order to receive note, however, 1036.) poses a risk of substantial procedure that the latter Cal.App.3d p. at We final of the entire case. delay resolution

assume that such are rights inherently valueless. because indem- Similarly, a different nity rights than the direct claim represent primary right there is not between plaintiffs, necessarily any these two causes duplication Alcal, (See 1128; Erreca’s, of action. at supra, Cal.App.4th p. supra, 1503-1504.) no firm pp. can be Although guidelines estab- lished as to the value of an proportional assignment rights compared that it potential recovery that should represents, not proportion represent in order to be within the “peanuts” (Tech-Bilt, Tech-Bilt ballpark. supra, 38 499.) Cal.3d at Because a valuation of the proper is indemnity rights to accord necessary credit to the appropriate defendants nonsettling suffer, eventual any plaintiffs’ judgment they more than may guesswork or choice of a arbitrary value particular is required. Erreca’s, we found that a 20 percent assignment valuation was rights Here, $5,000

supported by proper evidentiary showing. val uation of $2 this potential million claim .0025 indemnity represents percent of the potential indemnity All we have in recovery. of the valuation support $5,000 is plaintiffs’ counsel’s letter stating that the valuation had been reached, without evidence or supporting and an offered explanation, stipu lation at the that these hearing are valueless. We indemnity rights completely have been given no information about the additional cost to plaintiffs defendants, these prosecute claims indemnity against the nonsettling any them, on probability or likelihood on prevailing on a collecting $5,000 on judgment them. It be that the valuation may an accurate represents However, assessment when all the relevant factors are considered. without value, more information about the we are unable assignment to make a reasoned evaluation of it. therefore,

On this particular for writ of point, mandate has petition not, however, merit. The trial court will to set aside required this entire defect, faith settlement because of this if it takes remedial appropriate action. We remand the matter trial court to receive and consider evidence about the valuation appropriate of this assignment rights. It may be that the total settlement consideration or remains the changes same. We determine that this settlement in only this form does not contain an currently valuation of adequately supported assignment indemnity rights.

Disposition The is petition granted with directions to the trial court to vacate its ruling the settlement unless trial court receives and evi- approving considers dence it to enabling set an accurate valuation of the of assignment rights, of an purposes setting nonsettling credit for the defendants. appropriate Todd, J.,P. Acting concurred.

1716 FROEHLICH, I concurin the in all I write majority opinion respects. J. both to difficult of the separately highlight aspects to voice majority as to certain reservations inferences which be made might from it. The I central theme derive from the is that settlements are to be majority opinion settlements of construction defect cases will encouraged; partial multiparty not occur unless the defendants can achieve the faith settling settlement good insulation later claims which is Code of Civil Proce- provided by 877.6; dure1 section whether a settlement “within is the ball- determining is and cannot be a matter park” highly subjective subject significant and that if the trial court evidences its own faith and precision; industry in terms of an evaluation of allocations made independent settling of will its exercise discretion not be disturbed. The trial court did parties, this case for its treatment of the value of the of (except assignment we hence affirm that decision. indemnity rights) Our affirmance confirmed a substantial allocation of settlement proceeds to “emotional distress We also affirmed the we took in damage.” position (1993) Erreca’s v. Superior Cal.Rptr.2d Court 19 1475 Cal.App.4th [24 156] (hereafter Erreca’s) a reasonable valuation of the chose action requiring an I comment on these of wish to constituting assignment indemnity rights. two facets the majority opinion. Valuing Assignment Indemnity Rights

I. be in There seems now no about the that to “good dispute proposition faith” an must value and allocate all elements of approved (see (1986) v. Superior the settlement Southern Cal. Gas Co. Court 187 1030, Erreca’s, 320]; Cal.App.4th Cal.App.3d Cal.Rptr. [232 1500.) (Alcal recent others Our Erreca’s & opinion, among Roofing (1992) Insulation v. Court Superior Cal.Rptr.2d [10 844] foremost) makes it clear that the assignment indemnity rights being constitutes the transfer of an asset which must be valued and an accounting nonsettling light therefor rendered in the credit allocation to defendants. contained in section subdivision for credit specific requirements nature of the chose (a), this conclusion is difficult to unusual challenge. however, rise, to most gives peculiar practical in action for indemnity I review some of the practical with valuation. will first associated problems valuation, recommendation that and then will conclude with the problems to the contrary) off our recent stance (notwithstanding we would be better no value to the allocating assignment. in which the the nonadversarial setting

The first arises from difficulty A to be typical problem. value is achieved. This case appears specified. unless otherwise statutory 1All references of Civil Procedure are to the Code

1717 consideration is established for the settlement monetary principal payment which, case, inas this constitutes close to the maximum the general contrac (whether tor or has the reason of lack of developer insurance capacity by otherwise) or One of the coverage pay. seriously factors motivating settlement is the contractor’s impelling to terminate ability thereby litigation costs. While the contractor have a cause of action for may good indemnity subcontractors, its frame of mind is not conducive to continued against The chose in action is there litigation. its claim represented by indemnity fore not in mind uppermost its as a Adverse bargaining chip. negotiating exist, do not and the on in action positions valuation the chose put not, therefore, (Peter does achieve the status of correctness. presumptive 1484, Culley (1992) & Associates v. Superior Court 1498 [13 624].) Cal.Rptr.2d

From the plaintiff-assignee’s view there is point everything gain to lose a low nothing by determining value for the If a value is assignment. settlement, to be allocated to the it must be set at the time of the assignment, and should not be until a later delayed date. The that valuation suggestion can be until delayed (made is realized on the claim recovery indemnity Court, 1030, Southern Cal. Gas v. 1036) Co. Superior Cal.App.3d is unworkable. Not would such a course of action only deprive remaining of credit nonsettling parties knowledge necessary intelligent but it negotiations, would effectively benefit the nullify any plaintiff might derive If defendants are to assignment. receive full credit nonsettling claim, for whatever as the they ultimately result of the pay indemnity is from plaintiff precluded of his of the profit by way assign- acceptance ment.2

There are other with the treatment of problems accepted assign indemnity ments. The faith policy underlying settlement release provisions section 877 et is that settlements be can seq. encouraged, should sufficiently encouraged defendant from only by immunizing settling further his The litigation among codefendants. cross- deprivation of the codefendants is complaint rights justified by requirement they credit, them, obtain as an offset to final for the judgment Ford, (Abbott amounts Inc. v. Superior defendant. paid by early-settling 626, Roberts, (1987) 124]; 43 Cal.3d 741 P.2d Court Cal.Rptr. [239 (1984) Faith An Competing Good Settlement: Accommodation Goals 841, 891.) Hence it the nonsettling is to credit Loy.L.Rev. necessary if the 2Referring example majority opinion, contained footnote 13 of the value of realized, were until it receive a indemnity postponed claim was the subcontractor would it, $300,000 $300,000 coupled already by plaintiff credit for which with received based $500,000 payment liability. cash would exceed the upon the contractor’s settlor, defendant with the amount paid the to the extent by relates payment to the claim for which the two are liable. jointly with this problem applying to the principle assignment indemnity is that rights or actual in any alleged defect the should rights theoretically work to the (such of the subcontractor advantage defects as denial of defense, refusal to coverage, lack of insurance insol- provide coverage, subcontractor, However, etc.). vency the more defects asserted the by subcontractor, the less valuable the at the time would of its right appear in assignment, reduction of the ultimate credit to the resulting nonsettling therefore, subcontractor. His final which is increased factors by liability, otherwise would work to lessen it. The reverse of this would be that picture of the solvent subcontractor with insurance who can good likely pay ultimate claim. This will increase the valuation of the claim at indemnity settlement, time of the in faith credit resulting against greater and hence a lower net the subcontractor.3 plaintiff’s judgment payment by A reasonable can be made that the of these theories argument illogic would be rectified of a rule credit for by denying any adoption assign- ment of The subcontractor will credit indemnity rights. for all cash get (or payments consideration other than the made indemnity assignment) to the That same sum will measure the maximum plaintiff. obligation he may have to in indemnification of the contractor. In the pay we have example $500,000 $300,000 been using judgment would be reduced contractor, $200,000. cash for a net paid by obligation plaintiff $300,000 If the subcontractor is then in he required pay indemnity, has $500,000. the amount he owes: simply paid justifiably By giving credit for the assumed value of the we indemnification skew and confuse rights greatly the transaction.

The reason for this somewhat unintended credit unexpected seemingly asset, is that the item the credit is not a computation providing typical not even a chose in action. It is a chose in action which has a mirror typical (as double To the it is it our effect. extent valued results image—a per Erreca’s in a credit to the subcontractor claim of the against any opinion) but to the extent it is realized in the action the credit plaintiff’s plaintiff; vanishes. If the chose in action is valued at its full or as suggested potential, Court, Superior Southern Cal. Gas Co. v. Cal.App.3d 3Using figures opinion: hypothetical majority from our in footnote 13 of the $100,000 $200,000, indemnity If the value of the claim be raised from the subcontractor $500,000 $300,000 (the judgment paid by the contractor plaintiff’s receives a credit of $200,000 $300,000 assignment) pays only and the valuation of the related to the separate indemnity claim. receives an unmerited the subcontractor its ultimate figure recovery, (a credit for the cash settlement by he a “double” credit benefit because gets action). In such credit for the chose the contractor and an identical claim.4 indemnity the winds the only situation subcontractor up paying zero, If, hand, be valued at the on the other the claim should assigned the direct plaintiff’s no credit for the claim as against subcontractor receives and course credit in of the plaintiff’s recovery also of no terms recovery, used, Thus, if the based on the claim. in the assigned example previously claim, $500,000 the assigned is and no credit value is to the given recovery $200,000 (the the balance of the direct judgment subcontractor pays $500,000 $300,000 pay- less the credit for the contractor’s cash judgment $300,000 claim. ment) and also for satisfy indemnity is liable to the assigned $500,000 has for in and he The subcontractor has been found liable damages $500,000 in has resulted.5 damages—no injustice paid claim is a value given In To the extent the summary: assigned indemnity the it reduction of in the section 877.6 is of hearing productive unjustified liabil- and unwarranted limitation on the subcontractor’s plaintiff’s recovery value, no then has If the claim is assigned indemnity given plaintiff ity. must face the recovery full and subcontractor potential prospect be We latter result to be what we should seeking. full That seems liability. herein, and most have not said this in of the authorities cited any particularly Erreca’s. not recent in We are bound to follow say we did it in our opinion therefrom, in at least so early clear and hence do not now depart precedent however, merit, If are others have any this these views found to game. and in in this future will a direction abstruse wisdom work change perhaps of settlement law. challenging area Damage

II. Valuation Emotional Distress $360,000 trial an allocation of accepted, court and we have approved, I emotional distress. am concerned for noneconomic identified as damages which this because it to be one deprives about allocation appears $500,000 by the a cash previous example, assuming damage payment 4In our total and $300,000, indemnity claim which is valued assignment with an of the contractor $300,000, $600,000 recovery any plaintiff direct receives credit subcontractor a $300,000, action, thus only upon indemnity or pays based chose the claim assigned full of the claim. inequitably benefiting from the valuation not noted, has also presumably example, this that the subcontractor respecting 5It is to be early-settling contractor. might he seek from any cheated of benefit otherwise been might the subcontractor subject defense indemnity plaintiff claim the is assertion contractor, recovery a full on hypothetically assume against the when we have hence has no defense which the indemnity posited claim we have subcontractor situation claim. credit, since Civil Code section 1431.2

subcontractors of a potential for non-economic shall be several only provides “liability nature of the shall not be nonadversarial joint.”6 Assuming essentially above, of settlement as I have discussed there would allocation proceeds, into “emotional distress” cate- reason to overload consideration this every result, is there will be a tendency Since all that is gory. required “ballpark” subcontractors of credits. deprive is, however, defect in this allocation of settle- There a more fundamental I realize that in this case the to emotional distress damage. ment proceeds had made and lost motions for summary judgment designed defendants were from the case. These claims therefore remove emotional distress claims bona fide bargaining chips for at trial and constituted ripe presentation that these allocated. concern with this is My which value was properly not and hence should claims should not have survived summary judgment distress with the majority available for allocation of value. My have been an recent case authority approving is that it credence very opinion gives (see maj. in a construction defect case damage of emotional distress award ante, 1707, a as to “dispute” where the references majority opn., p. of such damage). availability Hills, Inc.* Beverly (Cal.App.). v. Dean Homes The cited case is Salka unwarranted, has now Court since the Supreme concern is my

Perhaps However, 30, in (Dec. (S035772)). my of this decision review granted it in is and wrong by citing decision the case the Court of Appeal’s opinion review) in a (even published opinion Court’s pending noting Supreme it dignity. without adverse comment we give claim, defect damages. for construction and simple, was a pure Salka water, standing flooding, soils caused compaction grading

Improper and walls. The trial to floors and resulting damage in the house dampness referee, of cost of in terms damage repair a who found was conducted before $50,000 for value, award of in made an in addition and diminution affirmed on award was the emotional distress On appeal emotional distress. investment homes are their most important that since the ground people’s that foreseeable it is clearly living arrangement, to their personal pertain in plaintiff predict. Each is difficult to concept practice would work 6Exactly how this $15,000. direct subsequent In a of some for emotional distress received an allocation this case con not be compensation received previously could this against subcontractors how action to determine jury requiring an instruction the defendant demand sidered? Could not portion homeowner and the by plaintiff experienced amount of emotional distress total the total as then evaluated jury If a actions? by particular defendant’s thereof caused misconduct, to reduce obliged would not the court to the subcontractor’s identical previously paid? by award the amount 28, 1994, to Court transferred and cause July Note: Review dismissed *Reporter’s District, Four. Division Appellate Appeal, Second will in emotional distress. in the home result caused defect a negligently as the foreseeability key liability, focused solely upon court thus Salka emotional dis- which excludes considerable authority ignoring persuasive cases. damage damage property as a component tress (1984) v. Court Superior in the field is Cooper The clear authority 746], that there is which states flatly “[n]o Cal.Rptr. Cal.App.3d [200 damage, out of solely property distress arising . . for emotional recovery . or intentional of some preexisting relationship absent a threshold showing that “emotional (Id. 1012.) recognized court Cooper at While the p. tort.” (in a loss” evokes sentimental distress out of loss arising property tractor), it refused to counte- caused a runaway case to a home damage that “reasonable advising on grounds, nance recovery policy must be liability of a defendant’s limitations on the extent and remoteness Witkin, in 6 1013.) with (Id. approval is cited Cooper maintained.” 218, 856, Torts, 1988) section (9th pages Law ed. of California Summary has allowed recovery case that “No California the text adding unless there was damage, out of property emotional distress arising solely intentional tort.” or relationship threshold of some showing preexisting Court Superior v. Mr. Witkin’s conclusion. Smith research confirms My (a case (1992) legal malpractice 1033 Cal.Rptr.2d 10 Cal.App.4th 133] [13 that the court affirmed were sought) in which emotional distress damages where the mental suffering a recovery “mere will not support negligence the economic to injury in only tortious conduct has resulted defendant’s (1992) Bank in Branch v. (Id. 1040.)7 at Our own court p. plaintiff.” Homefed in the rule set forth originally restated 6 Cal.Rptr.2d 182] [8 815], that dam- (1977) Cal.Rptr. Quezada v. Hart 67 Cal.App.3d [136 either cases involving physical are limited to for emotional suffering ages the defendant. by wrongdoing or intentional injury plaintiff impact in Bank, this 800) position We reiterated (Branch v. Homefed 1149, 1162 (1992) [8 6 Cal.App.4th Auto Assn. Devin v. United Services rule that negligence 263], . . it is the general that “. stating Cal.Rptr.2d emotional an award of harm does not support monetary which causes only (Italics in original.) damages.” distress recovery it makes is that in my opinion, in the approach,

The defect Salka conster- worry, how great determination just a factual upon dependent be, as it be, to be foreseen or may may over the event and distress nation be even rule would that its court indicates 1040 the Smith page the same 7In footnote on Cooper for the stands “To the extent Cooper, saying that in than that stated restrictive more recovery for support to relationship suffices preexisting a mere existence of proposition we injury, only in economic results negligent conduct suffering where another’s mental decline to follow it.” disagree and a It is to note that the referee in Salka affects particular plaintiff. interesting Thus, to wife but none to husband. plaintiff awarded plaintiff a defendant must not consider only objectively apparently, potential that of his but also must conform negligence, foreseeable consequences which will depend upon consideration to variable subjective consequences future of a sensitivity particular plaintiff. not, contend, trend I in with the current This is harmony policy philosophy The clearest enunciation of this field set forth Court. this by Supreme 865, 771 (1989) v. La 48 Cal.3d 644 Cal.Rptr. is found Chusa Thing [257 court limitations on recoveries the negligence P.2d In discussing policy 814]. not a useful it clear that alone is injury said “. . . is foreseeability inflic- restriction on the of the [negligent or meaningful scope ‘guideline’ reliance It is apparent tion of emotional action. ... distress] on recover, is and thus a to duty, right alone in foreseeability injury finding In order intangible injury. when the are for an damages sought not adequate of a defendant’s out of all degree to avoid limitless liability proportion without which it is to insure imposing and against impossible negligence, right whom the risk is spread, costs on those among unacceptable (Id. at distress must be limited.” caused emotional recover for negligently 663-664.) pp. nature of reac- sensitive court’s emphasis upon peculiarly Salka not, reasonable will I suggest, provide any to one’s home damage

tion if the distress damages. Particularly limitation to claims for emotional reaction of the be measured subjective entitlement to is to damage in which emotional distress limitation to the situations there is no plaintiff, a defendant’s conduct. Those us nature can be foreseen from of a severe too well how of law know only in the formerly practice or presently mistake. loss can become over his attorney’s distressed a client home. one’s can be as distressing damage business family certainly Bank, in Branch v. are limitless. As we said Similar examples Homefed 801, from injury resulting at “The consequential supra, page not Recovery distress is compensable. loss in terms of emotional economic loss damage property, as the result of distress and unhappiness for worry, conduct is when the defendant’s is not of a or loss of money permitted job elsewhere, is but ‘emotional distress As has been stated merely negligent. ’ (1977) 66 Cal.App.3d v. Perez of the human condition.” “part [Fuentes money, or 163, by anyone property Loss Cal.Rptr. 275].] [136 mental anguish. will normally produce wages, loss certainly expected ’ ‘ [ibid., in this world” is seldom attainable emotional tranquillity “Complete (136 Cal.Rptr. (1977) 67 Cal.App.3d v. Hart Quezada quoted from finding distress resulting inevitable 815)] for the . . . . Recovery however, is, limited to economic tortfeasor victim of a negligent oneself the malice, or or injury impact, a fiduciary duty, physical breach of loss unless circumstance, can be shown.” extreme or unusually outrageous some other Bank, 801.) (Branch v. Homefed taken as inferential will not be that our majority opinion

It is hoped emotional distress recovery of a doctrine potential acceptance losses, of my concurring and I write this portion based on economic in cases will make sure that it not. opinion principally Appendix A Appendix B Appendix C

Case Details

Case Name: Regan Roofing Co. v. Superior Court

Court Name: California Court of Appeal

Date Published: Jan 21, 1994

Citation: 27 Cal. Rptr. 2d 62

Docket Number: D019464

Court Abbreviation: Cal. Ct. App.