Filed 6/29/99
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
BRITZ, INC.,
F030476
Plaintiff and Appellant,
(Super. Ct. No. 516679-0)
v.
DOW CHEMICAL COMPANY et al., OPINION
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Fresno County. Lawrence J.
O’Neill, Judge.
Frame & Matsumoto and Ted R. Frame for Plaintiff and Appellant.
Hardin, Cook, Loper, Engel & Bergez, Gennaro A. Filice III and Nicholas D.
Kayhan for Defendant and Respondent Dow Chemical Company; Sedgwick, Detert,
Moran & Arnold, Stephen Jones, Anthony J. Anscombe and Kirk C. Jenkins for
Defendant and Respondent Shell Oil Company; Landels, Ripley & Diamond and
Stephen C. Lewis for Defendants and Respondents Occidental Chemical Corporation,
Occidental Chemical Holding Corporation and Occidental Petroleum Corporation.
-ooOoo-
*Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified
for publication with the exception of part 2. of Discussion.
A joint tortfeasor settles with the plaintiff, obtains a good faith settlement
determination, is dismissed from the case and dismisses its cross-complaint for indemnity
against its codefendants. Subsequently, the codefendants settle with the plaintiff and,
after notice to the joint tortfeasor, obtain good faith settlement determinations. Can the
joint tortfeasor then pursue a separate action for indemnity against its former
codefendants? We hold it may not.
FACTS
In 1990, the cities of Fresno, Clovis, Dinuba and Reedley sued Shell Oil Company
(Shell), Dow Chemical Company (Dow), Occidental Chemical Corporation (Occidental),
Britz, Inc. (Britz) and other parties in separate San Francisco Superior Court actions
alleging the defendants had contaminated their drinking water supplies with the
agricultural pesticides DBCP (1, 2, dibromo-3-chloropropane) and EDB (ethylene
dibromide). Dow, Shell and Occidental manufactured the chemicals; Britz and other
parties sold them to farmers. The cities alleged that Britz, unlike most of the other retailer
defendants, sold DBCP after it was banned by the State of California in 1977. Britz
cross-complained for indemnity against Dow, Shell and Occidental in the City of Fresno
action.
In 1994, Britz settled with the cities, agreeing to pay $1.3 million with no
admission of liability. The court determined the settlement was in good faith pursuant to
Code of Civil Procedure section 877.6,1 and the cities dismissed Britz from the actions.
Britz then dismissed its cross-complaint in the San Francisco action and filed this action
against Dow, Shell and Occidental (the manufacturers) seeking indemnity for the amount
it had paid to settle with the four cities.
1Further statutory references are to the Code of Civil Procedure unless otherwise
indicated.
2.
Eventually, the manufacturers settled with the cities and obtained good faith
settlement determinations. Britz was notified of the motions and hearings. It appeared
and opposed the good faith determination regarding the settlement with the City of
Fresno, but did not appear at the hearings regarding the settlements with the other cities.
Thereafter, Britz filed a first amended complaint seeking indemnity, declaratory relief and
damages for fraud and negligent misrepresentation based on essentially the same
allegations of wrongdoing by the manufacturers alleged in its original complaint for
indemnity. The trial court took judicial notice of the good faith settlement determinations
made in the San Francisco actions and sustained the manufacturers’ demurrer to Britz’s
complaint. The court concluded that Britz’s claims were barred by the good faith
determinations. Britz appeals from the subsequent dismissal of its action.
Britz contends (1) because it was no longer a party to the San Francisco actions
when the court ruled on the manufacturers’ good faith settlement motions, those
determinations do not bar its claims in this action; and (2) section 877.6 does not bar its
claims for fraud and negligent misrepresentation. Neither contention has merit.
DISCUSSION
In reviewing the sufficiency of a complaint against a general demurrer, we treat the
demurrer as admitting all material facts properly pleaded, but not contentions or
conclusions of law or fact. When court records which the court may judicially notice
provide ground for objection to a complaint, a demurrer on that ground is proper. (Evid.
Code, § 452, subd. (d); Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1119-1120.)
1. The good faith settlement determinations barred Britz’s claims for indemnity.
A good faith settlement bars other joint tortfeasors from further claims of
indemnity against the settling tortfeasor.
“A determination by the court that the settlement was made in good
faith shall bar any other joint tortfeasor … from any further claims against
the settling tortfeasor … for equitable comparative contribution, or partial
or comparative indemnity, based on comparative negligence or comparative
fault.” (§ 877.6, subd. (c).)
3.
Britz acknowledges it is an “alleged joint tortfeasor,” but contends section 877.6,
subdivision (c) applies only to parties to the action at the time the determination is made.
Because it was no longer a party when the manufacturers settled with the cities and
obtained the good faith determinations, Britz claims that section 877.6, subdivision (c)’s
bar does not apply to its claims. Britz argues it is entitled to another hearing to challenge
the good faith determinations even though it appeared and opposed the good faith
determination as to the settlement with the City of Fresno and was noticed but chose not
to contest the determination as to the other settlements.
While there is no case law directly on point, a case from this court is instructive.
In Singer Co. v. Superior Court (1986) 179 Cal.App.3d 875, we held that section 877.6,
subdivision (c) did not entitle a manufacturer, joined as a defendant after a determined
good faith settlement between plaintiffs and a codefendant, to a separate hearing on the
good faith of the settlement in connection with its cross-claims against the codefendant.
Although section 877.6, subdivision (a) referred to the entitlement of “parties” to a
hearing on the good faith issue, section 877.6, subdivision (c) barred “any other joint
tortfeasor” from further claims against settling tortfeasors for contribution and indemnity.
Additionally, section 877.6 was enacted to implement section 877, which used language
consistent with a legislative intent that a settling tortfeasor’s discharge encompasses
claims of all other joint tortfeasors whether or not named as parties. (179 Cal.App.3d at
p. 889.) However, due process required that a nonparty, whose potential liability was
known or should have been known at the time of the good faith of the settlement, be
given an opportunity to be heard on the good faith of a settlement. If sections 877 and
877.6 were not so interpreted, they would deprive the nonparty of a significant property
right without due process of law. (Singer Co. v. Superior Court, supra, at pp. 881, 890-
891; accord, Rankin v. Curtis (1986) 183 Cal.App.3d 939, 950 (dis. opn. of Staniforth,
Acting P.J.) [a nonparticipating, uninvited, unserved defendant or cross-defendant is not
barred from seeking indemnity from the settling parties].)
4.
Britz’s contention focuses on jurisdiction rather than due process. Britz submits
when a party is dismissed from the action or when it voluntarily dismisses its action, the
court loses jurisdiction to act in connection with the party. The former party becomes a
stranger to the action. (2 Witkin, Cal. Procedure (4th ed. 1996-97) Jurisdiction, § 317, p.
890; 6 Witkin, supra, Proceedings Without Trial, § 272, p. 692.) Thus, Britz was a
stranger to the San Francisco action after the cities dismissed it from the action and it
dismissed its cross-complaint against the manufacturers. It remained a nonparty despite
notice of the good faith hearings. Notice does not substitute for proper service, a
prerequisite to jurisdiction. (2 Witkin, supra, § 122, p. 663.) Britz concludes, there is no
suggestion in section 877.6 or its legislative history that the Legislature, in enacting
section 877.6, intended to abrogate the statutory requirements of jurisdiction and service
of process. Britz’s arguments reflect a misunderstanding of sections 877 and 877.6.
Section 877, subdivision (b) provides “Where a release, dismissal with or without
prejudice, or a covenant not to sue or not to enforce judgment is given in good faith
before verdict or judgment to one or more of a number of tortfeasors claimed to be liable
for the same tort, … [¶] … [i]t shall discharge the party to whom it is given from all
liability for any contribution to any other parties.” While section 877 refers to liability for
contribution, the legislative policy underlying the provision makes it equally applicable to
claims for partial or comparative indemnity by joint tortfeasors. The Supreme Court has
noted, few things would better frustrate section 877’s policy and discourage settlement of
disputed claims than knowledge that a settlement lacked finality and would lead to further
litigation with joint tortfeasors, and perhaps further liability. (American Motorcycle Assn.
v. Superior Court (1978) 20 Cal.3d 578, 604.) Thus, section 877, as interpreted by the
Supreme Court—not the San Francisco Superior Court—deprived Britz of the right to
seek indemnity from the manufacturers once they settled in good faith with the cities and
were dismissed from the actions. Moreover, nothing in section 877 required that the court
have jurisdiction over all “the tortfeasors claimed to be liable for the same tort” in order
5.
for the manufacturers’ good faith settlement to discharge them from indemnity liability
from those tortfeasors.
Similarly, section 877.6, subdivision (c) prescribes a substantive right of discharge
from liability. The subdivision is a codification of the American Motorcycle Assn. v.
Superior Court principle set forth above. (Shane v. Superior Court (1984) 160
Cal.App.3d 1237, 1245.) The San Francisco court’s good faith determination formalized
the manufacturers’ right of discharge from liability claims by joint tortfeasors. It did not
make any direct order as to Britz or adjudicate any issue in the Fresno action. And, like
section 877, nothing in section 877.6, subdivision (c) required that the court have
jurisdiction over “any other joint tortfeasor” in order for the good faith determination to
bar its claim for indemnity. That Britz was not a party at the time of the good faith
determination is irrelevant so long as it was given notice and an opportunity to challenge
the determination. (Singer Co. v. Superior Court, supra, 179 Cal.App.3d at p. 881.)
Because Britz was not a party and no longer under the jurisdiction of the San
Francisco court, the court could not make any order as to it. For example, the San
Francisco court could not declare that Britz’s Fresno action was barred by the good faith
determination for the manufacturers. (Shane v. Superior Court, supra, 160 Cal.App.3d at
p. 1243.)2 However, in determining that the manufacturers settled in good faith, the San
Francisco court did not make any determination regarding Britz’s indemnity claims in this
action. The court’s good faith determination merely enabled the manufacturers to assert
section 877.6, subdivision (c)’s bar by way of general demurrer in this action. (Shane v.
Superior Court, supra, at p. 1245.)
2Contrary to Britz’s assertion, Shane held that the court lacks jurisdiction to declare that a
settlement in the underlying action bars a pending claim in another action. It did not hold that a
section 877.6 determination does not bar a claim asserted in an separate action which is not
before the court for adjudication. Shane implied the settling tortfeasor could raise section
877.6’s bar to the other tortfeasor’s claim in the separate action by way of demurrer. (Shane v.
Superior Court, supra, 160 Cal.App.3d at p. 1250.)
6.
Britz selectively cites language from Singer Co. v. Superior Court, supra, 179
Cal.App.3d 875 in support of its position. It notes that Singer rejected the settling party’s
argument that “important policy considerations dictate that a trial court’s determination a
settlement is in good faith be binding on all joint tortfeasors whether or not they are
parties at the time of the determination and regardless of the knowledge of the settling
parties.” (Id. at p. 891.) In addition, Singer stated, “[f]ailure to bring into the good faith
settlement determination any likely defendant as a necessary party will have the usual
effect—the judgment cannot bind the absent party” (id. at p. 892) and “[the] argument
that the goal of settlement will be frustrated if a good faith adjudication is not binding on
all later-named defendants, regardless of their absence from the litigation at the time of
the good faith adjudication, has lost much of its viability with the Supreme Court’s
decision in Tech-Bilt[, Inc.] v. Woodward-Clyde & Associates [(1985)] 38 Cal.3d 488.”
(Id. at p. 893.) Britz concludes, the “parallel in the pending action is obvious.”
The parallel is obvious only to Britz. First, Britz was not a party to the San
Francisco action at the time of the good faith determination not because it had not yet
been named in the action, but because it had dismissed its cross-complaint for indemnity
in that action and filed this action seeking the same relief. Second, unlike the joint
tortfeasor in Singer who had no notice or opportunity to contest the good faith
determination, Britz had both. The due process right to be heard is satisfied when a party
is informed the matter is pending so he or she can choose whether or not to contest it.
(Bradshaw v. Park (1994) 29 Cal.App.4th 1267, 1278.) Third, to the extent the cases are
parallel, the similarities repudiate Britz’s position. Singer states that a settling tortfeasor’s
section 877.6, subdivision (c) discharge encompasses claims of all other joint tortfeasors,
whether or not named as parties, provided the barred joint tortfeasor is provided a right to
be heard on the good faith of the settlement. (Singer Co. v. Superior Court, supra, 179
Cal.App.3d at pp. 889-890.)
Britz also cites Regal Recovery Agency, Inc. v. Superior Court (1989) 207
Cal.App.3d 693 as analogous. It is not. There, three joint tortfeasors settled serially with
7.
plaintiff Mosher. The first two entities that settled had their settlements confirmed as
made in good faith. The third entity, Regal, who at the time faced no cross-complaints,
did not. The Mosher case was dismissed. Thereafter, the first settling defendant sued
Regal for indemnity. Regal sought a good faith determination in the Mosher suit. The
court refused to hear the matter because the suit had been dismissed and the court had no
jurisdiction. Regal then sought a good faith determination in the indemnity (Regal) action
but the court refused to hear it, believing it had no jurisdiction to resolve the issue of good
faith settlement in the Mosher case. The appellate court disagreed. Regal’s settlement
fell within the provisions of section 877, and section 877.6 did not place any time
constraints on the court’s jurisdiction to make a good faith determination. The Regal
court had the jurisdiction and the duty to determine whether the settlement should be
confirmed as in good faith. (Regal Recovery Agency, Inc. v. Superior Court, supra, at pp.
694-695.)
Britz asserts the San Francisco court was in the same position as the Mosher court
because the court had lost jurisdiction over Britz. And the Fresno court, like the Regal
court, was the proper court to make the good faith settlement determination as to Britz.
Not so; the San Francisco court had the jurisdiction and the duty to determine the good
faith of the manufacturers’ settlement with the cities. The issue properly was determined
in that court as to all joint tortfeasors who had notice and an opportunity to be heard
regardless of whether they were parties to the action at the time.
One of the purposes underlying section 877.6 is to ease court congestion by
providing an incentive to settle the entire underlying litigation. (Singer Co. v. Superior
Court, supra, 179 Cal.App.3d at p. 891.) Permitting early settling joint tortfeasors to
bring a separate indemnity action and relitigate the issue of good faith settlement in a
court unfamiliar with the underlying action would contravene that purpose.
In summary, when the manufacturers settled the cities’ actions in good faith,
section 877 discharged them from liability for indemnity to any joint tortfeasor. When the
court determined the settlement was made in good faith, section 877.6, subdivision (c)
8.
barred Britz’s claims for indemnity against the manufacturers. That Britz was not a party
at the time of the determination is irrelevant so long as it was given notice and an
opportunity to challenge the determination. (Singer Co. v. Superior Court, supra, 179
Cal.App.3d at p. 881.) The San Francisco court did not have to have jurisdiction over
joint tortfeasor Britz, and the manufacturers were not obligated to bring Britz back into
the San Francisco action as a party for the good faith determination in order to assert
section 877.6, subdivision (c)’s bar in this action to Britz’s indemnity claim. Thus, the
trial court correctly sustained the manufacturers’ demurrer to the indemnity causes of
action.
In the alternative, Britz contends that only the good faith determination in the City
of Fresno case bars its claims because it did not appear or contest the good faith
determination of the manufacturer’s settlement with the other three cities. Therefore, the
general demurrer did not lie to part of its indemnity causes of action. This argument fares
no better than the first. As set forth above, sections 877 and 877.6, subdivision (c) barred
Britz’s indemnity claims against the manufacturers regardless of whether Britz appeared
and contested the determinations. Further, because Britz had notice of the proceedings
and an opportunity to be heard, its failure to participate did not offend due process or
entitle it to a separate hearing. All four good faith settlement determinations are
enforceable against Britz. Thus, Britz’s claim that the general demurrers were properly
directed only at the Fresno settlement is incorrect.
2. The fraud and negligent misrepresentation claims are also barred.*
The purpose of section 877.6 is to bar claims against a settling tortfeasor and
thereby promote settlement. Allowing a joint tortfeasor to bring an affirmative claim for
damages that is actually an artfully pleaded claim for indemnity contravenes the purposes
of the statute. (Cal-Jones Properties v. Evans Pacific Corp. (1989) 216 Cal.App.3d 324,
*See footnote, ante, page 1.
9.
327.) Therefore, in determining whether section 877.6, subdivision (c) bars a cause of
action, the trial court must ferret out those claims that are in fact claims for indemnity.
(Cal-Jones Properties v. Evans Pacific Corp., supra, at pp. 327-328; accord, Norco
Delivery Service, Inc. v. Owens-Corning Fiberglas, Inc. (1998) 64 Cal.App.4th 955, 964.)
In Cal-Jones, following the sale of a condominium, the buyers sued the sellers and
the broker alleging both had represented the condominium to be 1,500 square feet when
they knew the actual size was 1,000 square feet. (Cal-Jones Properties v. Evans Pacific
Corp., supra, 216 Cal.App.3d at p. 326.) The sellers cross-complained against the broker
alleging the broker had breached her fiduciary duty by not advising the buyers of the true
size of the property. The broker settled the buyers’ claims and moved for a determination
of good faith settlement and dismissal of the sellers’ cross-complaint against her. (Id. at
p. 327.) The court noted that the sellers’ entitlement to indemnification rested on their
ability to prove that the broker breached her fiduciary duty. They had not alleged any
additional basis for their claim to equitable indemnity. Thus, the sellers’ breach of
fiduciary duty cause of action was in effect a claim for indemnity. (Id. at pp. 328-329.)
In determining whether a nonsettling defendant’s affirmative damages cross-
complaint is really a disguised indemnity claim, the court looks at the substance of the
claim in relation to the plaintiff’s claim against the joint tortfeasors. If the damages
sought by the joint tortfeasor are those that the court would consider in determining the
settling tortfeasor’s proportionate liability, the cross-claims are indemnity claims
regardless of whether they purport to state another cause of action. (Cal-Jones Properties
v. Evans Pacific Corp., supra, 216 Cal.App.3d at p. 328.)
In its indemnity claim, Britz alleged the manufacturers represented to it that DBCP
was environmentally safe when it was not, Britz reasonably relied on those
representations, Britz was without fault in the cities’ actions and the manufacturers were
actively at fault. As a result, the manufacturers were obligated to indemnify Britz for the
$1.3 million it paid the cities to settle those actions.
10.
In its fraud claim, Britz points to specific instances when the manufacturers made
the alleged representations that DBCP was safe and further alleges the manufacturers
knew their representations were false, they concealed the truth from Britz and they
intended to deceive Britz. Britz relied on the representations in purchasing DBCP from
the manufacturers. As a result of the fraudulent statements, Britz was named as a
defendant in the cities’ actions and compelled to pay $1.3 million to settle the litigation.
In its negligent misrepresentation claim, Britz claims the manufacturers made the alleged
misrepresentations without any reasonable ground for believing them to be true. It
incorporates the causation and damages allegations of the fraud claim.
The San Francisco Superior Court, in determining whether the manufacturers had
settled in good faith with the cities, had to consider the manufacturers’ potential liability
to Britz for indemnity. (Cal-Jones Properties v. Evans Pacific Corp., supra, 216
Cal.App.3d at p. 328, citing Far West Financial Corp. v. D & S Co. (1988) 46 Cal.3d
796, 816, fn. 16.) The court necessarily considered the basis for Britz’s claims: that the
manufacturers were the active wrongdoers who deceived the purportedly innocent Britz
into selling a dangerous product. Under this scenario, the manufacturers should have
indemnified Britz fully. (See, e.g., Civ. Code, § 1792.) In fact, Britz opposed the
manufacturers’ motion for a good faith determination regarding their settlement with the
City of Fresno on the ground Britz was an innocent retailer whose liability was purely
vicarious.
Britz’s indemnity and fraud claims are based on the same allegations that (1) the
manufacturers misrepresented to the innocent Britz that DBCP was environmentally safe
when it was not; (2) Britz reasonably relied on the representations; and (3) as a result,
Britz had to pay $1.3 million to the cities to settle the underlying litigation. All three
claims rest on the manufacturers’ failure to correctly represent the danger of DBCP. As
such, the fraud causes of action are in substance indemnity claims.
Britz contends its situation is distinguishable from that in Cal-Jones Properties v.
Evans Pacific Corp. In Cal-Jones the alleged breach of fiduciary duty claim constituted
11.
constructive fraud, whereas Britz alleged actual fraud. Britz submits, Cal-Jones does not
bar a cause of action for actual fraud. In fact, the Cal-Jones court noted that the plaintiff
did not plead actual fraud or allege a factual basis for such a finding. (216 Cal.App.3d at
p. 328.)
Britz misreads Cal-Jones. Cal-Jones held that one indication that a purportedly
affirmative claim is actually a claim for indemnity is that the claim seeks the same
compensatory damages as the indemnity claim. (Cal-Jones Properties v. Evans Pacific
Corp., supra, 216 Cal.App.3d at p. 328.) The sellers responded by pointing out their
claim for breach of fiduciary duty also sought return of the broker’s commission. The
court stated the sellers could not seek return of the commission because they had not
alleged fraud, a necessary allegation to a claim for return of the commission. (Id. at p.
329.) Cal-Jones did not hold that a purported fraud claim cannot be barred by section
877.6, subdivision (c). (And see Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38
Cal.App.4th 1337, 1355 [fraud cause of action dismissed as a disguised indemnity claim,
but judgment reversed because good faith finding not supported by substantial evidence].)
Because Britz’s fraud causes of action are in effect claims for indemnity, they too
are barred by the good faith settlement determinations and section 877.6, subdivision (c).
DISPOSITION
Judgment affirmed. Costs to respondents.
____________________________
Thaxter, J.
WE CONCUR:
_______________________________
Dibiaso, Acting P.J.
_______________________________
Vartabedian, J.
12.