Bayview Hunters Point Residents v. Tetra Tech EC, Inc.

Background

The plaintiffs sought approval of a settlement with Lennar Corporation and Five Point Holdings, LLC, referred to in the order as the Homebuilder defendants. Tetra Tech defendants were not parties to the proposed settlement. The court had previously denied preliminary approval of a proposed class settlement involving the Homebuilder defendants’ $5.4 million payment, while allowing the parties to submit a renewed request addressing the identified problems.

The Homebuilder defendants later filed a request for a good-faith settlement determination under California Code of Civil Procedure sections 877 and 877.6. A good-faith determination can protect a settling defendant from contribution or comparative-indemnity claims by another joint tortfeasor. Tetra Tech objected, arguing in part that the settlement resulted from collusion and did not reasonably reflect the Homebuilder defendants’ potential share of liability.

Court’s analysis

The court identified evidence that plaintiffs and the Homebuilder defendants entered written common-interest agreements after the earlier settlement proposal was rejected. The court said the record showed that the agreements were expressly directed at pursuing claims against Tetra Tech and the United States. It also noted that, after the agreements, plaintiffs filed a sixth amended complaint that substantially narrowed their claims against the Homebuilder defendants, removed class allegations against them, and deleted a $1 billion damages demand.

The proposed settlement required the Homebuilder defendants to pay $5.4 million. After a $1.4 million deduction for plaintiffs’ attorneys’ fees, the expected net fund was $4 million for approximately 6,500 plaintiffs. The court described the releases as covering virtually any past, present, or future claim connected to Hunters Point, including claims unrelated to the case. It also criticized an indemnity provision that could require plaintiffs to pay damages, costs, and attorneys’ fees arising from claims by releasing parties and related persons or entities.

The court further stated that plaintiffs’ counsel had acknowledged at the hearing that he might not have adequately advised clients about the release and indemnity provisions or disclosed the common-interest agreements. The court concluded that the settlement’s one-sided terms, the agreements between supposedly adverse parties, and the reduction of the claims against the Homebuilder defendants supported a finding that the settlement was a tactical maneuver aimed at compromising Tetra Tech’s rights. The court also found that the parties’ failure to assess potential damages prevented a meaningful comparison between the settlement and the Homebuilder defendants’ possible proportionate liability.

Minors’ compromises

The plaintiffs separately sought approval of compromises involving minor plaintiffs’ claims against Lennar and Five Point Holdings. The court applied the requirement that each minor’s net recovery be fair and reasonable in light of the case facts, the minor’s particular claim, and recoveries in similar cases. The proposed recovery was approximately $600 per minor, but plaintiffs’ counsel did not address average recoveries in similar cases or otherwise provide a basis for finding the proposed payments fair and reasonable.

Disposition

The court denied approval of the Homebuilder defendants’ request for a good-faith settlement determination. It also denied the plaintiffs’ motion to approve the minor plaintiffs’ compromises.