Reliance Electric Co. v. Superior Court

Citations: 190 Cal. App. 3d 369; 237 Cal. Rptr. 1; 1986 Cal. App. LEXIS 2429Docket: B023610

Court: California Court of Appeal; November 25, 1986; California; State Appellate Court

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A petition for a writ of mandate was filed challenging a court order regarding a settlement in a personal injury case involving a malfunctioning cargo crane at the Port of Los Angeles. The plaintiff, injured when a cargo container fell on his truck, sued the City of Los Angeles and Reliance Electric Company, which had designed and manufactured electrical controls for the crane. Marine Terminals Corporation, the crane's operator and the plaintiff's employer, was not sued but had provided a hold-harmless agreement to the City. The City filed a cross-complaint for indemnity against Reliance and the crane's manufacturer, based on a contractual agreement. 

In 1986, the City tendered its defense to Reliance, which denied reimbursement of defense costs. After the plaintiff settled the case, with Reliance contributing 75% of the settlement amount, the City refused to abandon its indemnity claim against Reliance. Reliance sought court approval for the good faith of the settlement and requested the dismissal of the City's indemnity claim. The court approved the settlement as made in good faith but did not dismiss the City's indemnity claim, leading Reliance to petition for a writ to compel dismissal. The court ultimately determined that Reliance's petition should be granted.

Reliance requested a writ of mandate to compel the trial court to dismiss the City’s indemnity claim. The court previously ordered the City to respond to this petition. The City presented three arguments: 

1. It claimed its cross-complaint was not barred by settlement or California Code of Civil Procedure sections 877 and 877.6.
2. It argued that its claim for reimbursement of defense costs under section 1021.6 was also not barred by these sections.
3. It contended that the trial court abused its discretion in approving the good faith of the settlement.

The court found these arguments unpersuasive. 

Regarding the first argument, the court emphasized that once a settlement is approved, sections 877 and 877.6 discharge liability for contribution among tortfeasors and bar further claims for equitable comparative contribution or indemnity. The City argued it was not a tortfeasor, its claim was for complete indemnity (not addressed by the sections), and that section 1021.6 allows for defense cost reimbursement. However, the court noted that a cross-claim for total indemnity, similar to partial indemnity, requires that the defendant has paid more than its share of a judgment. Since the City had not paid anything to the plaintiff and the settlement eliminated its liability, there was no basis for the indemnity claim.

For the second argument, the court acknowledged that sections 877 and 877.6 do not explicitly extinguish the right to seek attorney’s fees under section 1021.6. However, the court concluded that the approval of the settlement, which released the defendant from liability, meant the City could not pursue a fee award, as such fees would typically arise from adjudication rather than settlement. 

The court indicated that the relationship between the City and Reliance was insufficient to support the indemnity claim, reaffirming that the City’s cross-claim lacked merit based on the relevant legal standards.

The statute mandates that for a claimant to prevail on a claim for implied indemnity, the trial court must review the evidence, and the claimant must obtain a judgment on the merits or be found free of fault. Due to a settlement, these conditions cannot be met unless the court chooses to try the personal injury case, which is unlikely given the court's priorities. The City expresses concern over the unfairness of preventing an innocent defendant from seeking reimbursement for legal fees. The longstanding principle dictates that parties bear their own legal fees unless specified by agreement or statute, and this is not overridden by newer doctrines advocating equitable loss distribution. The California Supreme Court has emphasized that settlements should have finality to encourage the resolution of tort claims without further litigation.

The City challenges the good faith of the settlement, claiming Reliance sought to evade its obligation to cover the City's legal fees. However, the trial court had discretion to approve the settlement. The court must assess any potential collusion or misconduct that could harm nonsettling defendants. An extraordinary demonstration of such misconduct is needed to reject a settlement where a party is dismissed without payment. Reliance was not accountable for the City's insurer allowing defense costs to exceed the suit's value, nor did the evidence support the City's claim of being blameless. The City owned the malfunctioning crane and had some inspection responsibilities, yet it failed to demonstrate how the defect related to the accident or its prior inspections. Reliance, focused on the settlement's proportionality, was under no obligation to prove the City's fault. The burden of proof rested with the City under section 877.6, subdivision (d). This situation warrants the issuance of a peremptory writ.

A peremptory writ of mandate is issued, directing the respondent court to vacate its October 14, 1986 order, which ruled that the real party in interest could proceed under section 1021.6 of the Code of Civil Procedure, and to dismiss the real party's cross-complaint entirely. The court determined that further issuance of an alternative writ would not clarify any issues since the case was fully briefed. The stay imposed on October 28, 1986, is dissolved. 

Section 1021.6 allows for the awarding of attorney's fees to a party prevailing on a claim for implied indemnity if specific conditions are met, including the indemnitee's lack of fault in the principal case. In addition, the City has filed its own writ petition challenging the settlement's good faith approval, and the court notes that it need not resolve whether the City’s indemnity claim survives the settlement due to its status as a crane owner. The court distinguishes the City’s situation from that of a blameless strictly liable retailer or vicariously liable employer.