Determining Good Faith Settlements under California CCP § 877.6(a)(2).

Introduction and Purpose

When multiple parties are sued for the same harm, California law encourages settlements while ensuring fairness to all defendants. A “good faith” settlement determination under Code of Civil Procedure § 877.6 allows one defendant to settle with the plaintiff and be protected from contribution or indemnity claims by other defendants, provided the court finds the settlement was made in good faitheldorado.courts.ca.gov. This procedure balances the policy favoring settlements with the need for equitable allocation of liabilitylaw.justia.com. Historically, at common law a settlement with one joint tortfeasor released all others from liability, discouraging partial settlementscontractors.uslegal.com. California addressed this by enacting CCP § 877 in 1957, which allows a settling tortfeasor to reduce the plaintiff’s claims against others by the settlement amount rather than extinguishing themcontractors.uslegal.com. Later, after adoption of comparative negligence, the Legislature added CCP § 877.6 to bar contribution or partial indemnity claims against a settling tortfeasor, but only if the settlement is determined to be in “good faith”contractors.uslegal.com. In short, § 877.6 provides a mechanism for courts to scrutinize settlements between a plaintiff and one or fewer defendants to ensure they are not grossly unfair to non-settling partiescontractors.uslegal.comcontractors.uslegal.com.

The intended audience for this analysis is legal professionals – attorneys and law students – seeking a detailed understanding of how good faith settlement determinations work. The discussion is a detailed legal analysis, including statutory framework, procedural steps, the judicial standards (the Tech-Bilt factors), burden of proof, and recent case law interpretations. Recent decisions are included to illustrate how courts apply § 877.6 in practice, ensuring the content is up-to-date and comprehensive.

Statutory Framework of CCP § 877.6(a)(2)

California CCP § 877.6 outlines the procedure for obtaining a court’s determination that a settlement was made in good faith. The statute applies in any action where “it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt”eldorado.courts.ca.gov. Under subdivision (a)(2), “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.”eldorado.courts.ca.gov In other words, a defendant who settles with the plaintiff can petition the court for a ruling that the settlement was made in good faith. The application must identify the settling parties and the settlement’s terms and amount, and the statute specifies that the “notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service”eldorado.courts.ca.gov, ensuring that all other parties receive formal notice.

Once a settling party files this application, any non-settling party may contest the settlement’s good faith by filing a motion (a “motion to contest good faith”) before the court’s determinationeldorado.courts.ca.goveldorado.courts.ca.gov. If no party objects within the time allowed, the court may approve the settlement as being in good faith by default. If an objection is filed, the court will hold a hearing to evaluate the settlement’s fairness. Under subdivision (b), the court may decide the issue on the basis of affidavits/declarations and any counter-affidavits, without a full trial, unless it deems additional evidence or live testimony necessaryeldorado.courts.ca.gov. This streamlined process avoids lengthy mini-trials on the settlement’s validity while still giving everyone a chance to present evidence. Notably, any party to the action (not just the settling defendant – for example, a co-defendant who anticipates settling) can request a good faith determination, and even plaintiffs have standing to move for such determination in some cases, since they have an interest in finality of the partial settlementcontractors.uslegal.com.

Procedure for Obtaining a Good Faith Settlement Determination

The typical steps for securing a good faith settlement order are as follows:

1. Settlement & Application: A defendant (or other party) who reaches a settlement with the plaintiff files a Notice of Settlement and Application for Determination of Good Faith Settlement with the court, as provided by CCP § 877.6(a)(2)eldorado.courts.ca.gov. This application should detail the parties to the settlement, the amount and terms of the settlement, and include a proposed order for the court to sign. The applicant must serve all other parties with these documents by personal service or certified mail (return receipt requested)eldorado.courts.ca.gov. Courts strictly enforce this notice requirement to ensure due process, although minor technical defects in service might be excused if no prejudice resultseldorado.courts.ca.gov.
2. Notice Period: Other parties are given an opportunity to respond. Typically, a non-settling defendant who wishes to object must file a motion contesting the good faith of the settlement before the hearing date (often within 25 days of mailing of notice, under California Rules of Court or local rules). If no opposition is filed, the court may presume the settlement is in good faith and enter the order by default. If an opposition (motion to contest) is filed, the determination becomes a contested issue for the court to resolveeldorado.courts.ca.gov.
3. Burden of Proof: Once the settling party makes an initial showing of the settlement’s terms and good faith (typically by describing the settlement and background facts in the application), the burden shifts to the opposing (non-settling) party to prove the settlement was not made in good faitheldorado.courts.ca.gov. The statute explicitly provides that “the party asserting the lack of good faith shall have the burden of proof on that issue.” (CCP § 877.6(d))eldorado.courts.ca.gov. Courts have described settlements as presumptively made in good faith – it is up to the challenger to produce evidence of collusion, fraud, or other unfairnesscontractors.uslegal.com.
4. Evidentiary Showings: In a contested hearing, the parties present their evidence typically through declarations, expert opinions, and other documents rather than live witnesses. The opposing party should file declarations or affidavits laying out reasons the settlement is not in good faith (e.g. that the amount is far too low relative to the settlor’s share of liability, or evidence of collusive behavior)eldorado.courts.ca.gov. The settling party may then file counter-declarations to refute those claims and bolster the settlement’s fairnesseldorado.courts.ca.gov. The trial court’s review must be based on a sufficient evidentiary basis – it will consider the declarations, documents, and facts available at the time of settlement to make an informed decisioneldorado.courts.ca.gov.
5. Court’s Determination: The court evaluates the settlement in the context of the entire case, applying the legal standard (discussed below) to decide if the settlement was made in “good faith.” If the court finds it was in good faith, it will issue an order granting the application. If the court finds a lack of good faith – for example, that the settlement amount is so unreasonably low as to suggest collusion – then the settling defendant loses the statutory protection (and the settlement might even be at risk of unwinding, since the key incentive for the settlor was protection from further claims). In practice, settlements that appear prima facie reasonable are usually approved; only egregiously low or collusive settlements tend to be denied.eldorado.courts.ca.gov
6. Appellate Review: A unique aspect of § 877.6 is the method of review. The statute states that a party aggrieved by a good faith determination may petition for a writ of mandate (an extraordinary writ) to challenge the ruling, before trial concludes (CCP § 877.6(e)). This means such orders are generally not immediately appealable like final judgmentstvalaw.com. The California Supreme Court has treated the writ procedure as the exclusive avenue for review of a good faith settlement decision in most casestvalaw.com. (After final judgment, a party who failed to seek a timely writ might be foreclosed from challenging the good faith ruling on direct appeal – an issue that has seen some debate in recent case lawtvalaw.comtvalaw.com.) The prudent course for a non-settling defendant who loses a good faith motion is to promptly file a writ petition. Trial courts have broad discretion in this context, so appellate courts will disturb a good faith finding only upon a clear showing of abuse of discretionlaw.justia.com.

What Constitutes “Good Faith”? – The Tech-Bilt Factors

California courts interpret “good faith” under § 877.6 by considering whether the settlement is within the reasonable range of the settling defendant’s proportional share of liability, in light of the facts and circumstances of the caseeldorado.courts.ca.gov. The seminal California Supreme Court case Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 established the non-exhaustive factors that guide this inquiryeldorado.courts.ca.goveldorado.courts.ca.gov. Under Tech-Bilt, a court should consider several key factors when evaluating a settlement’s good faith:

• Approximate Liability and Recovery: A rough approximation of the plaintiff’s total likely recovery and the settling defendant’s proportionate liability for that damagelaw.justia.com. Essentially, how much is the settling party potentially on the hook for, compared to others? The settlement amount should be in line with this estimated share.
• Settlement Amount: The amount paid in the settlement, relative to the above approximationlaw.justia.com. A steep discount might be acceptable, but a token payment from a heavily liable defendant would raise red flags.
• Allocation among Plaintiffs: The allocation of the settlement proceeds among multiple plaintiffs (if applicable)law.justia.com. This ensures one plaintiff isn’t favored to the unfair detriment of others (though in a single-plaintiff case this factor may not apply).
• Discount for Early Settlement: A recognition that the settling tortfeasor should pay less in settlement than if found liable after a triallaw.justia.com. Settlements inherently involve a discount – the law expects a settling defendant will pay less than their worst-case trial judgment, because they avoid the risk and cost of trial. Good faith does not require an almost equal payment; it allows a reasonable discount to encourage early resolutioneldorado.courts.ca.goveldorado.courts.ca.gov.
• Financial Conditions and Insurance Policy Limits: The financial condition of the settling defendant and their insurance coverageeldorado.courts.ca.govlaw.justia.com. A defendant with minimal resources or low insurance limits might justifiably settle for less than their proportional share because that’s all that is realistically available. The court can consider if the settlement, though low, represents the settlor’s honest maximum contribution.
• Existence of Collusion, Fraud, or Tortious Conduct: Whether there is any evidence of collusion, fraud, or an intent to injure the interests of non-settling defendants in the making of the settlementeldorado.courts.ca.govlaw.justia.com. For example, a “sweetheart” deal where the plaintiff and one defendant conspire to pin liability on others (perhaps by a disproportionately low settlement that undercuts the others’ position, or an agreement to shift blame) would lack good faitheldorado.courts.ca.gov. The court will invalidate settlements that appear to be aimed at harming non-settling parties or are the product of collusive behavior.

These Tech-Bilt factors are not exclusive; the court may consider any other pertinent circumstances. For instance, if multiple defendants are settling at once, the court can look at their combined contribution to ensure the total is within a reasonable range. The overriding principle is that the settlement should not be “so far out of the ballpark” of what’s fair, relative to the settling defendant’s share of liability, that it would be inconsistent with the equitable objectives of the statuteeldorado.courts.ca.gov. In other words, while a settling party is not required to pay their exact pro-rata share of damages, the amount should not be grossly disproportionate to their estimated fair shareeldorado.courts.ca.goveldorado.courts.ca.gov. As one court put it, “a ‘good faith’ settlement does not call for perfect or even nearly perfect apportionment of liability… What is required is simply that the settlement not be grossly disproportionate to the settlor’s fair share.”eldorado.courts.ca.gov.

Additionally, practical considerations inform the analysis: The evaluation is made based on information available at the time of settlement, not aided by hindsighteldorado.courts.ca.gov. Courts acknowledge that before trial, the parties have uncertainty about liability and damages, and a settlement reflects that uncertainty. A deal that seemed reasonable when made won’t be judged in bad faith merely because a later trial (or evidence) reveals it to be a very good bargain for the settlor.

Burden of Proof in Contesting Good Faith

As noted, once a settling defendant invokes the statute by applying for a good faith determination, the settlement is presumptively in good faith, and the burden shifts to the objecting party to prove bad faitheldorado.courts.ca.gov. Section 877.6(d) explicitly states the challenger “shall have the burden of proof” on lack of good faitheldorado.courts.ca.gov. In practical terms, this means the non-settling defendant opposing the motion must convince the court that, considering the Tech-Bilt factors, the settlement is so unreasonably low (or tainted by misconduct) that it falls outside the “ballpark” of fairnesseldorado.courts.ca.gov. The California Supreme Court in Tech-Bilt envisioned that the opposing party “should be permitted to demonstrate, if [they] can, that the settlement is so far ‘out of the ballpark’… as to be inconsistent with the equitable objectives of the statute.”law.justia.com If they make such a showing, the court may determine the settlement was not in good faithlaw.justia.com.

Importantly, all joint tortfeasors have a right to notice and a hearing on the good faith issue (even those not formally named in the lawsuit at the time of settlement)contractors.uslegal.com. California law treats a good faith determination as a matter of due process for other tortfeasors, since it cuts off their contribution rightscontractors.uslegal.com. However, if no one objects, or if the objections lack merit or evidentiary support, the court will readily find the settlement was made in good faith. The procedure is designed to be efficient: the moving party typically does not have to prove good faith in the first instance beyond presenting the basic facts of the settlement – the onus is on the challenger to prove absence of good faith.

Courts often say they will not second-guess the parties’ agreement with “hindsight bias,” and any reasonable settlement within a broad range of proportionality will pass muster. The trial judge has considerable discretion in weighing the evidence and factors. On review, an appellate court will only overturn a good faith determination for a clear abuse of discretion (meaning no reasonable judge could have reached that conclusion)law.justia.com. In exercising this discretion, the judge may draw on their own experience and even consider expert opinions to estimate the settling defendant’s potential liabilitylaw.justia.com. As the Supreme Court said in Tech-Bilt, the determination is left to the trial court’s discretion, to be exercised in view of the statute’s equitable goalslaw.justia.com.

Effects of a Good Faith Settlement Determination

Obtaining a good faith settlement order has powerful consequences for the parties:

• Bar on Contribution and Indemnity: Once a court determines a settlement was made in good faith, CCP § 877.6(c) provides that this bars any other joint tortfeasor or co-obligor from bringing further claims against the settling party for equitable comparative contribution or for partial/comparative indemnity based on comparative negligence or faulteldorado.courts.ca.gov. In simple terms, the non-settling defendants cannot sue the settling defendant to recover any portion of damages they might end up paying to the plaintiff. All cross-claims by co-defendants for equitable indemnity or contribution against the settlor must be dismissed following the good faith orderlaw.justia.comlaw.justia.com. This protection is the key benefit that incentivizes defendants to settle early – they gain peace from the litigation as long as the settlement was in good faith.
• Offset/Reduction of Plaintiff’s Claims: Under CCP § 877(a), a good faith settlement also reduces the plaintiff’s claims against the remaining defendants by the amount of the settlement or by the amount of the settling defendant’s equitable share of liability, whichever is greater, depending on the circumstanceseldorado.courts.ca.gov. Typically, in California, a dollar-for-dollar offset is applied: the judgment against non-settling tortfeasors will be reduced by the amount paid by the settling tortfeasoreldorado.courts.ca.gov. This prevents the plaintiff from obtaining a double recovery and ensures the overall liability is equitably distributed. (Notably, the plaintiff’s recovery is reduced only by the settlement actually paid, not necessarily the settling defendant’s proportionate fault – so a plaintiff who settles on the cheap with one defendant cannot later have another defendant pay the difference for that settling defendant’s fair sharecontractors.uslegal.comcontractors.uslegal.com. The policy encourages plaintiff to get a reasonable amount from each liable party.)
• Dismissal of Cross-Complaints: After a good faith finding, any cross-complaints for contribution or comparative indemnity against the settling defendant are typically dismissed with prejudice by the court’s orderlaw.justia.com. For example, in Cahill v. San Diego Gas & Electric Co. (2011), one defendant’s $25,000 settlement was deemed in good faith, and the trial court accordingly dismissed the cross-complaint for equitable indemnity filed by a co-defendant against that settling defendantlaw.justia.comlaw.justia.com. The settling party is effectively removed from the case (except that they must still comply with the settlement agreement toward the plaintiff).
• Claims Not Barred – Contractual Indemnity: It is important to note the scope of the bar in § 877.6(c). The statutory language bars claims for contribution or comparative indemnity, which are forms of equitable indemnity arising from shared tort liability. However, California courts have clarified that a **good faith settlement does not bar a separate claim for express contractual indemnity that a non-settling party may have against the settling partylaw.justia.com. For instance, if two defendants had a contract in which one agreed to indemnify the other for certain losses, that contractual obligation can survive and be enforced despite the good faith settlement – because it is based on the contract, not on comparative negligence principles. The rationale is that § 877.6 addresses equitable sharing of loss among tortfeasors, not independent contractual dutieslaw.justia.com. (Implied contractual indemnity, by contrast, is generally viewed as a species of equitable indemnity and thus would be barred as wellcasemine.com.) Therefore, a settling party cannot use § 877.6 as a “free pass” to escape a liability it explicitly agreed by contract to beardailyjournal.com. In practice, courts will allow claims for express indemnity to proceed notwithstanding a good faith settlement, whereas all non-contractual indemnity claims (including contribution and implied indemnity) are cut offlaw.justia.com.
• No Further Contribution to Plaintiff: Naturally, once a defendant settles and is found in good faith, that defendant also cannot be forced to contribute further to any judgment the plaintiff obtains against the others. The flip side is that the plaintiff, having released the settling defendant in exchange for the settlement, generally cannot pursue additional money from that defendant even if the court later determines at trial that the settling defendant was “more at fault” than what the settlement reflected. The settlement – if in good faith – finalizes that party’s involvement, both as to plaintiff’s claims and co-defendants’ claims. This finality is a cornerstone of § 877.6’s encouragement of settlementslaw.justia.comlaw.justia.com.

Recent Case Law and Judicial Interpretations

California courts continue to refine and apply the good faith settlement principles in various contexts. Key points from recent case law include:

• Broad Discretion of Trial Courts: Recent appellate decisions reaffirm that trial judges have broad discretion in deciding good faith settlement motions, and their determinations will be upheld if supported by substantial evidencelaw.justia.com. As long as the judge considers the Tech-Bilt factors and the evidence, an appellate court will not second-guess the precise valuation. For example, in Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, the Court of Appeal emphasized that a trial court’s finding of good faith carries great deference: “In the context of section 877.6, ‘[t]he trial court is given broad discretion in deciding whether a settlement is in “good faith”… and its decision may be reversed only upon a showing of abuse of discretion.’”law.justia.com. This means only if the settlement is manifestly outside the range of reasonableness will a reviewing court step in. It underscores that the trial court’s familiarity with the case positions it best to weigh the settlement’s fairness.
• “Out of the Ballpark” Standard: Courts have fleshed out what it means for a settlement to be out of the ballpark. A challenger must do more than show the settlement is low; it must be so unreasonably low in view of the settlor’s expected liability that it suggests an improper motivation or unfair resulteldorado.courts.ca.gov. In practical terms, California decisions have held that a settlement that is within the reasonable range of the settlor’s proportionate share at the time of settlement will be upheld, even if at trial the verdict against that settlor might have been much larger. Conversely, where evidence shows a settlor paid a token amount and left an insolvent co-defendant carrying massive exposure, courts have found lack of good faith (as in some notorious “sweetheart” deals from the past). The burden remains on the objector to provide such evidence.
• Multiple Defendants and “Ballpark” Allocation: In complex cases with many defendants, courts look at the relative liabilities. The 2011 case PacifiCare of California v. Bright Medical Associates, Inc. highlighted that a court must consider not only the settling defendant’s potential liability to the plaintiff, but also its share of liability relative to other defendants in the caseeldorado.courts.ca.goveldorado.courts.ca.gov. Similarly, TSI Seismic Tenant Space, Inc. v. Superior Court (2007) 149 Cal.App.4th 159 noted that the court should consider the settling tortfeasor’s culpability vis-à-vis the other tortfeasors for the same injuryeldorado.courts.ca.goveldorado.courts.ca.gov. This ensures that one defendant doesn’t escape with a low settlement by unfairly shifting the blame to others. Each defendant’s situation is considered on its own facts – a minimally liable defendant can settle for less, but a primarily liable one cannot disproportionately foist the burden on co-defendants.
• Settlements with Unnamed Parties: California law allows a good faith determination even if the settling party was not formally a defendant yet. For instance, a party who anticipates being named can proactively settle and seek a good faith ruling to preempt being brought into the casecontractors.uslegal.com. The courts have recognized the due process rights of any potential joint tortfeasor to participate in the hearing (such as by intervening to oppose, if they believe the settlement prejudices them)contractors.uslegal.com. A recent example might be construction defect cases where a subcontractor settles before being named, but other defendants can still contest the settlement’s good faith if it might cut off their contractual indemnity rights (which, as noted, generally aren’t cut off, but they might argue collusion).
• Procedure on Appeal – Writs vs. Appeals: A very current issue (as of 2023–2024) has been whether a party who misses the short timeline for writ review can later appeal a good faith determination after final judgment. The statute (§ 877.6(e)) implies that only writ review is available, and some appellate courts have dismissed late appeals as non-allowabletvalaw.com. The California Supreme Court granted review in In re Pacific Fertility Cases (2022) 78 Cal.App.5th 568 to resolve whether a post-judgment appeal is ever permissible, but that case was settled and dismissed in 2023 without a decisiontvalaw.com. Until this is clarified, the safe approach for practitioners is to treat the writ of mandate as the exclusive remedy: file a timely writ petition if you want to challenge a good faith ruling, rather than waiting for a final judgmenttvalaw.com. Recent appellate court attitudes (e.g., Armstrong Townhomes, LLC v. Milgard Mfg., 2023, and CBM Investments, Inc. v. Royal Business Bank, 2023) show a trend of strictly enforcing the writ-only review, often dismissing appeals as untimely or impropertvalaw.comtvalaw.com.
• Good Faith in Federal Court: Although § 877.6 is a state law, federal courts in California (in diversity cases) often apply it or a similar analysis as a matter of California’s substantive policy. Federal district courts have granted good faith settlement motions to bar third-party claims, referencing the Tech-Bilt factorsmgkflitigationblog.com. For example, a federal court may approve a good faith settlement under § 877.6 to dismiss cross-claims in a multi-defendant diversity case, promoting the same policies of encouraging settlements. Recent federal decisions emphasize that an opposing party must show the settlement is “so far out of the ballpark” to overcome the presumption of good faithmgkflitigationblog.com, echoing California courts.

In summary, the doctrine of good faith settlements under CCP § 877.6 remains a vital part of California multiparty litigation, and recent cases continue to reinforce the principles of fairness, judicial discretion, and encouragement of settlements that underlie the statute.

Conclusion

A determination of good faith settlement under CCP § 877.6(a)(2) is a crucial tool in California civil practice for resolving complex multi-party disputes. It allows defendants to settle with confidence that they will not be dragged back into the case by co-defendants, as long as their settlement is within the realm of fairness. The courts evaluate good faith by considering the Tech-Bilt factors – essentially asking whether the settlement is proportional to the settling party’s share of potential liability and free of collusion or fraudeldorado.courts.ca.goveldorado.courts.ca.gov. The burden falls on any objecting parties to prove a lack of good faith, and judges have wide discretion in making the calleldorado.courts.ca.govlaw.justia.com. When a settlement is confirmed as made in good faith, the benefits are significant: the settling defendant is discharged from contribution or equitable indemnity claims by others, and the plaintiff’s claims against the remaining defendants are reduced accordinglyeldorado.courts.ca.goveldorado.courts.ca.gov. This mechanism protects the integrity of settlements and promotes the dual goals of equitable risk distribution and prompt, peaceful resolution of disputeslaw.justia.com.

For attorneys and insurance professionals, understanding the good faith settlement process is essential. It informs strategy during settlement negotiations – for instance, knowing what might be considered “too low” or suspect – and it guides how to respond if a co-defendant strikes a deal that appears unfair. The law does not require a settling defendant to pay a perfect share, only a reasonable one, and recognizes practical considerations like limited resources and litigation riskseldorado.courts.ca.goveldorado.courts.ca.gov. With recent cases upholding the flexibility of trial courts and the emphasis on writ review for challenges, the framework of CCP § 877.6 continues to function as the California Legislature intended: encouraging good faith settlements that fairly allocate liability and streamline litigationlaw.justia.com. In a landscape of often lengthy and costly multi-party litigation, the good faith settlement determination remains a powerful incentive for parties to resolve claims efficiently, without sacrificing the equitable rights of those who choose not to settle.

Sources: Good faith settlement statute and case law interpretations (Cal. Code Civ. Proc. § 877.6; Tech-Bilt, Inc. v. Woodward-Clyde & Assoc. (1985) 38 Cal.3d 488; Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939; Pacific Clay Products v. Chandler (1982) 119 Cal.App.3d 1; City of Grand Terrace v. Sup. Ct. (1987) 192 Cal.App.3d 1251; PacifiCare of Cal. v. Bright Med. Assoc. (2011) 198 Cal.App.4th 1451; etc.)eldorado.courts.ca.govlaw.justia.com, with recent developments on appellate proceduretvalaw.comtvalaw.com and scholarly analysis of settlement fairnesseldorado.courts.ca.goveldorado.courts.ca.gov.