Beach Front Construction Company Inc et al vs Ply Gem Pacific Windows Corporation et al

Case Number

19CV01517

Case Type

Hearing Date / Time

Fri, 11/17/2023 - 10:00

Nature of Proceedings

Good Faith Settlement

Tentative Ruling

(1) For all reasons discussed herein, the motion of Ply Gem Pacific Windows Corporation (Ply Gem) contesting the application for determination of good faith settlement filed by Homer T. Hayward Lumber Company (Hayward) is continued to December 15, 2023.

(2) On or before November 20, 2023, Hayward shall file and serve a copy of the settlement agreement discussed herein together with the affidavit or declaration required by this ruling.

(3) On or before November 29, 2023, Ply Gem shall file and serve a supplemental moving brief, if appropriate, in accordance with this ruling.

(4) On or before December 6, 2023, Hayward shall file and serve its response to any supplemental brief that may be filed by Ply Gem in accordance with this ruling.

(5) No party shall file any additional papers not authorized by this ruling.

(6) The court will issue a ruling on the application for determination of good faith settlement filed by Hayward on August 31, 2023, at the time the court issues its ruling on the motion of Ply Gem as further discussed herein.

Background:

On March 21, 2019, plaintiffs Beach Front Construction Company, Inc. (Beach Front), and Uptown Center, LLC (Uptown) (collectively, plaintiffs) filed their original complaint in this action against defendants Ply Gem Pacific Windows Corporation (Ply Gem) and Homer T. Hayward Lumber Co. (Hayward) alleging six causes of action: (1) breach of contract; (2) breach of express warranty; (3) breach of implied warranty of merchantability; (4) product liability— design defect; (5) product liability—manufacturing defect; and (6) negligent misrepresentation. (Complaint, ¶¶ 8, Prod. L-4, Prod. L-5, Prod. L-6 & Attachments BC-2, BC-2a.) As alleged in the complaint:

Ply Gem and Hayward (collectively, defendants) are, respectively, a commercial manufacturer and supplier of vinyl clad slider and casement windows at issue in this litigation (the windows). (Compl., ¶ Prod. L-1, Prod. L-4; Attachment BC-2a.) On March 23, 2016, plaintiffs purchased the windows from Hayward. (Compl., ¶¶ 7.g, BC-1; Attachment BC-2 & Exh. A.) The windows were installed at the Uptown Center Project (the project) owned by Uptown and located at 3328 Spring Street in Paso Robles, California (the property). (Comp., ¶ BC-1, Attachment BC-2 & Exh. A.)

Within several months of installation, plaintiffs noticed that the windows were leaking in numerous locations permitting water and moisture to enter and collect on the interior of residences and structures at the property. (Compl., Attachment BC-2a.) The water leaking caused the sills and surrounding framing and structures to rot, caused trim to fail and fall, caused warping, and caused the window glass to break. (Compl., Attachments BC-2 & BC-2a.) Ply Gem had received complaints for similar defects in their vinyl clad windows in 2014. (Compl., Attachment BC-2.) Though defendants represented that the windows were safe and reliable, defendants failed to inspect or test the windows in their anticipated environments before selling the windows to the public. (Compl., Attachments BC-2 & BC-2a.)

On July 12, 2019, Ply Gem filed its answer to plaintiffs’ complaint, generally denying its allegations and asserting sixty-five affirmative defenses. Also on July 12, 2019, Ply Gem filed a cross-complaint for indemnity and contribution against defendants fictitiously named as Roes 1 through 100.

On August 1, 2019, Hayward filed its answer to plaintiffs’ complaint, generally denying its allegations and asserting twenty-one affirmative defenses.

On October 31, 2019, Hayward filed its cross-complaint for indemnity and contribution against Ply Gem.

On December 26, 2019, Ply Gem filed its answer to the cross-complaint of Hayward, generally denying its allegations and asserting sixty-eight affirmative defenses. Also on December 26, Ply Gem filed an amendment to its cross-complaint identifying Hayward as defendant Roe 1.

On February 10, 2020, Hayward filed its answer to the cross-complaint of Ply Gem, generally denying its allegations and asserting eighty-seven affirmative defenses.

On August 31, 2023, Hayward filed a notice of settlement that was reached between it and plaintiffs (the notice of settlement). Also on August 31, 2023, Hayward filed its application (the application) for an order determining that the settlement entered into between Hayward and plaintiffs was made in good faith, dismissing with prejudice all pending claims and cross-complaint against Hayward, and barring any future claims for equitable contribution or indemnity.

In support of the application, Hayward submits the declaration of its counsel, Andrew J. Mallon, who declares that, based on a repair estimate, plaintiffs claim that the property will require repairs in the amount of $768,053.75. (Mallon Decl., ¶ 5; Notice of Errata (Errata), Exh. B.) Hayward was insured up to $1,000,000 for the subject loss. (Id. at ¶ 9.)

On June 7, 2023, the parties attended a mediation with Keith Koeller of JAMS. (Mallon Decl., ¶ 6.) Thereafter, through the mediator, the parties continued to engage in settlement discussions. (Ibid.) Counsel for plaintiffs and Hayward communicated with each other and the mediator on multiple occasions to settle this matter. (Ibid.) On August 14, 2023, counsel for plaintiffs and Hayward negotiated at arm’s length to secure a settlement. (Ibid.)

The settlement agreement between plaintiffs and Hayward provides that Hayward, through its insurance carriers, shall issue payment to plaintiffs in the total amount of $175,000 in exchange for a full and complete release of all claims against Hayward, including a waiver under Civil Code section 1542, and a dismissal with prejudice of the complaint against Hayward. (Mallon Decl., ¶ 7.) Each party to the settlement is to bear their own costs and fees. (Ibid.)

By entering into the settlement, Hayward does not admit to any liability arising out of or relating to the present lawsuit or incident but seeks to avoid potential liability it could face had the matter proceeded to trial, and to avoid further fees, expenses, and costs associated with defending itself in this lawsuit. (Mallon Decl., ¶ 8.)

On September 18, 2023, Ply Gem filed a motion (the Ply Gem motion) contesting Hayward’s application on the grounds that Ply Gem is not liable for plaintiffs’ injuries and damages, that Hayward’s liability to plaintiffs is greater than the settlement amount, and that Hayward is solely responsible for all of plaintiffs’ damages. Therefore, Ply Gem argues, Hayward’s settlement with plaintiffs is grossly disproportionate to Hayward’s liability in this matter.

The Ply Gem motion is opposed by Hayward.

Analysis:

Upon proper notice, “[a]ny party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors….” (Code Civ. Proc., § 877.6, subd. (a)(1).)

As an alternative to the noticed motion procedure, “a settling party may give notice of settlement to all parties and to the court, together with an application for determination of good faith settlement and a proposed order. The application shall indicate the settling parties, and the basis, terms, and amount of the settlement. The notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service. Proof of service shall be filed with the court.” (Code Civ. Proc., § 877.6, subd. (a)(2).) Within 25 days after the notice of settlement, application, and proposed order are mailed or within 20 days after personal service, “a nonsettling party may file a notice of motion to contest the good faith of the settlement.” (Ibid.) “

If no party objects to an application or motion for determination of good faith settlement, the “barebones” motion or application setting forth “the ground of good faith, accompanied by a declaration which sets forth a brief background of the case is sufficient. If the good faith settlement is contested, section 877.6, subdivision (d), sets forth a workable ground rule for the hearing by placing the burden of proving the lack of good faith on the contesting party. Once there is a showing made by the settlor of the settlement, the burden of proof on the issue of good faith shifts to the nonsettlor who asserts that the settlement was not made in good faith.” (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261-1262; Code Civ. Proc., § 877.6, subd. (d) [“[t]he party asserting the lack of good faith shall have the burden of proof on that issue”].)

Among the grounds asserted in the motion, Ply Gem contends that it is unable to fully evaluate the factors that the court must consider as set forth in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499,because Hayward has not provided a copy of the settlement agreement at issue, or to determine if the settlement at issue between Hayward and plaintiffs is in good faith.

Court records reflect that the settlement agreement at issue is not attached to the notice of settlement, the application, or the opposition to the Ply Gem motion filed by Hayward in this matter. In its papers opposing the Ply Gem motion, Hayward does not address Ply Gem’s contention in this regard nor does Hayward provide factual or legal argument demonstrating that it may properly refuse to disclose the settlement agreement which Hayward contends was made in good faith.

“[A] written settlement agreement need not be executed and presented as long as the court and all the parties are timely advised of the important terms of the settlement.” (Alcal Roofing & Insulation v. Superior Court (1992) 8 Cal.App.4th 1121, 1127.) However, in a contested case, the settlor is not excused “from making available to nonsettlors and the court the details of the settlement.” (Alcal Roofing & Insulation v. Superior Court (1992) 8 Cal.App.4th 1121, 1127 [also noting that “a party may not both seek confirmation of a settlement agreement and withhold it from nonsettling defendants on grounds of confidentiality”].)
 

Moreover, while the parties are free to maintain the confidentiality of their settlement agreement, “they may not claim a privilege of nondisclosure when they move to confirm the good faith of their settlement under section 877.6. In California, ‘[e]xcept as otherwise provided by statute: ... [¶] (b) No person has a privilege to refuse to disclose any matter or to refuse to produce any writing, object, or other thing.’ [Citation.]” (J. Allen Radford Co. v. Superior Court (1989) 216 Cal.App.3d 1418, 1423-1424.)

A party contesting a good faith settlement must be allowed to review the settlement agreement “in order to attempt to meet its statutory burden of proof on the issue of lack of good faith.” (J. Allen Radford Co. v. Superior Court (1989) 216 Cal.App.3d 1418, 1424 [concluding the trial court erred in refusing to permit party asserting lack of good faith to review the settlement agreement at issue].) Even if the “important terms” of a written settlement agreement are revealed, on a contested motion, the parties may not withhold the settlement agreement. (Mediplex of California, Inc. v. Superior Court (1995) 34 Cal.App.4th 748, 753.)

For all reasons discussed above, and giving consideration to concerns of due process, the court will continue the hearing on the Ply Gem motion to permit Hayward to produce to Ply Gem and file with the court a copy of the settlement agreement at issue for Ply Gem and the court’s review. On or before November 20, 2023, Hayward shall file and serve a copy of the settlement agreement referenced in the notice of settlement and application, together with an affidavit or declaration setting forth information sufficient to sustain a finding that the agreement is as claimed by Hayward.

On or before November 29, 2023, Ply Gem shall file and serve a supplemental moving brief, if appropriate, identifying any new factors identified by Ply Gem that demonstrate lack of good faith based on the terms of the settlement agreement. Ply Gem shall not reargue any matters raised in the Ply Gem motion or raise any additional matters or issues that could or should have been raised in the Ply Gem motion. To the extent that Ply Gem includes in a supplemental moving brief any matters that do not constitute new matters or that could or should have been raised in the present Ply Gem motion, the court will disregard these matters.

On or before December 6, 2023, Hayward shall file and serve its response to any supplemental brief that may be filed by Ply Gem.

The parties in this action shall not file any additional papers not authorized by this ruling. The court will address the remaining grounds asserted by Ply Gem at the time the court issues its ruling on the Ply Gem motion and the application.