Far West Financial Corp. v. D & S Company

EAGLESON, J., Concurring and Dissenting.

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) 38 Cal.3d 488 [213 Cal.Rptr. 256, 698 P.2d 159], bars a claim for total equitable indemnity against a settling defendant when the indemnity claim is based on theories of “equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault” as is provided by section 877.6, subdivision (c).¹

I respectfully dissent, however, from the majority’s additional holding that a total indemnity claim based on vicarious liability is also barred by section 877.6, subdivision (c). I agree with Justice Kaufman’s analysis that the majority’s interpretation of section 877.6 is incorrect on this point (see Kaufman, dis. opn., pts. I and II), but I write separately to emphasize an even more fundamental flaw in the majority view—its basic unfairness.

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) 21 Cal.3d 322, 330 [146 Cal.Rptr. 550, 579 P.2d 441], in which the court discussed the application of equitable indemnity principles in the product liability context and found that liability could be apportioned among multiple tortfeasors even if one or more of the tortfeasors were responsible under the doctrine of strict liability. There are at least three reasons why that case does not support the majority’s reasoning as to vicariously liable defendants. First, a strictly liable defendant is directly liable to the injured plaintiff whereas a vicariously liable defendant is only derivatively liable. Second, a strictly liable defendant is an active tortfeasor, i.e., he is responsible for his own conduct. A vicariously liable defendant, however, is a passive tortfeasor whose liability is based only on another party’s wrongdoing. Third, a strictly liable defendant may be at “fault” to some degree. Despite the characterization of strict liability as being liability without fault, it is often stated that strict liability, at least in some forms, does have a fault component. (DeLeon v. Commercial Manufacturing & Supply Co. (1983) 148 Cal.App.3d 336, 350 [195 Cal.Rptr. 867]; Balido v. Improved Machinery, Inc. (1972) 29 Cal.App.3d 633, 640 [105 Cal.Rptr. 890]; see generally 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 1244, pp. 679-680.)² A vicariously liable defendant, however, is without true fault.

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.³

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 877.6 that the trial court must find a settlement to be in good faith for it to operate as a bar to indemnity actions against the settling defendant. As a matter of law and logic, however, when there are two defendants—one directly liable and the other only vicariously liable—a settlement by the directly liable defendant can be in good faith under section 877.6 only if the settlement leaves nothing to be paid by the vicariously liable defendant. The majority refuses to state this proposition as a matter of law, claiming that there may be cases when a loss shifting is appropriate. As explained above, the loss shifting favored by the majority is not appropriate unless necessary to ensure compensation to an injured plaintiff, and the majority fails to offer a single reason why loss shifting is appropriate when the plaintiff is fully compensated and the issue is only fair apportionment among defendants. Because the majority does not propose a rule that will ensure fairness when the “good faith” determination is made, it is incorrect for the majority to state that such determination will itself ensure fairness to the vicariously liable defendant.

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.

If the trial courts and defendants’ counsel are diligent, perhaps they can mitigate or even avoid the potential unfairness sanctioned by the majority.

1 All statutory references are to the Code of Civil Procedure unless indicated otherwise.

2 In DeLeon v. Commercial Manufacturing & Supply Co., supra, 148 Cal.App.3d 336, 348, the court explained, “Dean Prosser has not overlooked this melding of legal theory [of strict liability and fault]. In reference to product design, he notes that it is one of ‘two particular areas in which the liability of the manufacturer, even though it may occasionally be called strict, appears to rest primarily upon a departure from proper standards of care, so that the tort is essentially a matter of negligence.’ (Prosser, Law of Torts (4th ed. 1971) p. 644, fn. omitted.) [fl] Similarly, in Balido v. Improved Machinery, Inc., supra, 29 Cal.App.3d at p. 640, the court observed that in deficient design cases ‘strict liability and negligence claims merge.’ ”

3 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.)