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Copper Mountain Inc. v. Poma of America Inc.2/6/1995
alifornia Supreme Court in Tech-Bilt, Inc. v. Woodward-Clyde & Assoc., 38 Cal. 3d 488, 698 P.2d 159, 213 Cal. Rptr. 256 (Cal. 1985). Under the holding in Tech- Bilt, a court attempting to determine the good faith of a settlement is to engage in an analysis considering the following factors:
a rough approximation of plaintiff's total recovery and the settlor's proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, . . . a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial[,] . . . the financial conditions and insurance policy limits of settling defendants, as well as the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. Id. at 166-67. Specifically with regard to the settlement amount, the Tech-Bilt court indicated that the fact alone that a settlement does not reflect a "ballpark" range estimate of the defendant's liability establishes an absence of good faith:
The party asserting the lack of good faith, who has the burden of proof on that issue . . . should be permitted to demonstrate, if he can, that the settlement is so far "out of the ballpark" in relation to these factors as to be inconsistent with the equitable objectives of the statute. Such a demonstration would establish that the proposed settlement was not a "settlement made in good faith" within the terms of section 877.6. Id. at 167. Thus, Copper contends the trial court erred in not allowing Copper the opportunity to prove that the settlement amount (a $75,000 loan) was not within the reasonable range of Poma's proportionate share of liability for Stubbs' injuries.
Copper argues that we are obligated to adopt the Tech-Bilt approach in light of the directive of section 13-50.5-106 that the provision shall be interpreted "to make uniform the law of those states that enact it." Contrary to Copper's contention, however, the Tech-Bilt reasonable range test does not command the support of a majority of jurisdictions that have considered this particular issue. Rather than reflecting a consensus, courts which have interpreted the UCATA's good faith provision are sharply divided as to which is the appropriate test to apply. We thus reject Copper's contention that we are obligated to adopt the Tech-Bilt approach. With no definition provided by the statute itself, our determination of which test is appropriate is guided by the legislative history of the UCATA, the decisions of other jurisdictions which have adopted it, and relevant public policy in Colorado.
The Tech-Bilt analysis has come under considerable criticism both for its potentially negative impact on the policy encouraging settlement (see, e.g., Noyes v. Raymond, 28 Mass. App. Ct. 186, 548 N.E.2d 196 (Mass.App.Ct. 1990) (noting that the uncertainty and expense involved in defending settlements against proportionality claims reduce a defendant's incentive to enter into a settlement); Mahathiraj v. Columbia Gas of Ohio, Inc., 84 Ohio App. 3d 554, 617 N.E.2d 737 (Ohio App. 1992) (same)), and for the additional burdens it creates for trial courts in conducting evidentiary hearings to determine a party's likely proportionate liability. See, e.g., Smith v. Texaco, Inc., 232 Ill. App. 3d 463, 597 N.E.2d 750, 755, 173 Ill. Dec. 776 (Ill. App. 1992) (noting that Illinois courts have "consistently rejected challenges to good faith based upon alleged disparities between the value of settlements and settling tortfeasors' relative culpability . . . recognizing that settlements may be substantially different from the results of litigation because damages are often speculative and
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