Xiaolin Tom Wu v. Wenxiao Wang, et al.

with Code of Civil Procedure section 1005, subdivision (b) for a hearing on the issue of the good

faith of a settlement entered into by the parties. (Code Civ. Proc., § 877.6, subd. (a)(1).)

Code of Civil Procedure sections 877 and 877.6 are designed to further two equitable

policies: (1) encouragement of settlement; and, (2) equitable allocation of costs among joint

tortfeasors. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 498-499

(Tech-Bilt).)

In determining whether a settlement is in good faith, the Court should consider affidavits

served with the motion and any counter-affidavits filed in response, and any other evidence the

Court receives in its discretion. (Code Civ. Proc., § 877.6, subd. (b).) The Court’s inquiry may

include whether the amount of the settlement is within the reasonable range of the settling

tortfeasor’s proportional share of comparative liability for plaintiff’s injuries. The factors to be

considered are:

(1) A rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability; (2) The amount paid in settlement; (3) The allocation of settlement proceeds among the plaintiffs; (4) A recognition that a settlor should pay less in settlement than he would if he were found liable after trial; (5) The financial conditions and insurance policy limits of settling defendants; and, (6) Whether collusion, fraud, or tortious conduct aimed to injure the interests of non-settling defendants, exists.

(Tech-Bilt, supra, 38 Cal.3d at p. 499.)

The evaluation of the settlement for practical purposes is based on the information

available at the time of the settlement. (Ibid.)

The burden initially lies with the party opposing the good faith settlement to show that

the settlement is unreasonable. (Code Civ. Proc., § 877.6, subd. (d).) The opposing party must

demonstrate that the settlement is far “out of the ball park” in relation to factors stated above so

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as to be inconsistent with the equitable objectives of the statutes. (Tech-Bilt, supra, 38 Cal.3d at

pp. 499-500.) If such is demonstrated, then the burden shifts to the settling party seeking good

faith confirmation to produce substantial evidence to counter the claim that the settlement is

inequitable. (Mattco Forge, Inc. v. Arthur Young & Co. (1995) 38 Cal.App.4th 1337, 1350-

1352.)

Bad faith is not established by showing that a settling defendant paid less than his/her

theoretical proportionate or fair share based on a reasonable projection of plaintiff’s damages and

settling defendant’s comparative fault. (Tech-Bilt, supra, 38 Cal.3d at 499.) The reason is that

such a rule would unduly discourage settlements as damages are often speculative and the

probability of legal liability for them is often uncertain or remote. (Ibid.)

Furthermore, a particular settlement may be in good faith even if it is for a sum grossly

disproportionate to the damages prayed for in the complaint, if it is not disproportionate to what

the trial court might have considered the probable recovery of the plaintiff from the settling joint

tortfeasor. (Long Beach Memorial Medical Center v. Superior Court (2009) 172 Cal.App.4th

865, 874.) A disproportionately low settlement figure is often reasonable in a case where the

joint tortfeasor is relatively insolvent, uninsured or underinsured. (Tech-Bilt, supra, 38 Cal.3d at

p. 499.) A settlement in such a case for the defendant’s liability insurance policy limits may be

approved as in good faith. (Ibid.)

Finally, a judicial determination that a settlement was made in good faith shall bar any

other joint tortfeasor from any further claim against the settling tortfeasor for equitable

comparative contribution or partial or comparative indemnity based on comparative negligence

or fault. (Code Civ. Proc., § 877.6, subd. (c).)

Analysis:

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Wu seeks to settle his claims against Zang and Leaspring for $550,000.00.

The moving parties through their respective counsel assert the settlement constitutes a

good faith settlement under section 877.6 because there have been good faith settlement

negotiations between Wu, Zang, and Leaspring, there has been no collusion between Wu, Zang,

and Leaspring in those settlement negotiations, and such a settlement contemplates a rough

estimate of Zang’s and Leaspring’s proportionate share of responsibility for Plaintiff’s purported

damages in this matter. (Wong Decl. ¶¶ 2-4; Rorie Decl. ¶¶ 2-4; and FitzGerald Decl. ¶¶ 2-6.)

In his opposition, Wang argues that there is a fundamental conflict between California’s

good faith settlement statute and the state’s comprehensive community property regime that

grants the family law division of this court with exclusive jurisdiction over the issues raised in.

this motion. Wang further argues that the defendants benefiting from this motion, Zang and

Leaspring, seek court approval to settle a community property debt unilaterally-without the non-

settling spouse’s consent and without protecting the non-settling spouse’s interests, and with the

explicit intent to take an assignment of the claim to pursue the non-settling spouse individually in

the shoes of the Plaintiff.

The burden is on Wang, as the party asserting lack of good faith, to prove that issue.

(Code Civ. Proc., § 877.6, subd. (d).) To meet that burden, Wang must show that the settlement

is so far “out of the ballpark” in relation to the applicable factors that it is inconsistent with the

equitable objectives of sections 877 and 877.6. (Tech-Bilt, supra, 38 Cal.3d at pp. 499-500; City

of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1261–1262.) Wang does not

do so.

Wang’s Opposition does not meaningfully address the Tech-Bilt factors and in fact

completely ignores those factors. It does not provide a competing valuation. It does not explain

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why $550,000.00 is grossly disproportionate to the settling parties’ potential liability. It does not

establish collusion. It does not show fraud. It does not show tortious conduct directed at Wang.

Instead, Wang asks the Court to deny the motion based on alleged family law issues

between Wang and Zang. Those issues do not decide whether the civil settlement before this

Court was made in good faith.

The settlement amount is $550,000.00. Plaintiff alleges damages exceeding $1.16 million

arising from his investment in the Fairborn Hotel, including allegations that Defendants sold the

hotel for $1.3 million and returned only approximately $140,000 to Plaintiff. The settlement

therefore reflects a substantial compromise of disputed claims, contested liability, and litigation

risk.

The settlement was reached after arm’s length negotiations following a day long

mediation before the Honorable James P. Gray (Retired). The settling parties stipulated that the

settlement is fair, reasonable, within the “ballpark” of potential liability, and not collusive.

The Tech-Bilt factors are satisfied. The amount paid is substantial. The settlement reflects

a compromise of disputed claims. The proceeds are being paid to Plaintiff as the alleged injured

party. Wang is not required to pay anything under the settlement. Wang remains free to contest

his own liability and assert his own defenses. There is no evidence of collusion, fraud, or tortious

conduct aimed at injuring Wang’s interests.

In their reply, the moving parties correctly assert that Wang’s opposition depends on a

series of mischaracterizations. First, Wang contends that the motion improperly seeks to

adjudicate community property rights. It does not. In fact, the monies being paid to Plaintiff will

effectively reduce a loan obligation that far exceeds the amount Plaintiff will receive as a result

of the settlement. The Motion does not seek a ruling that any asset is community property,

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separate property, or subject to division in the family law court. Further, Wang offers no

authority for the proposition that Plaintiff’s right to settle his claims should be placed on hold

indefinitely pending resolution of separate family law proceedings. Such a result would unfairly

prejudice Plaintiff and frustrate the policy favoring settlement. Nor does Wang provide

admissible evidence that the settlement terms dispose of community property or that community

property assets are being used to fund any portion of the settlement payment. Wang’s argument

rests on speculation and family law issues between Wang and Zang, not on any showing that this

civil settlement was made in bad faith.

Second, Wang contends that the Motion would authorize Zang to transfer Leaspring

Commercial Corporation or community property funds. It does not. No such order is requested.

Third, Wang contends that the motion interferes with the family law court’s jurisdiction.

It does not. A good faith settlement determination under Code of Civil Procedure section 877.6

does not allocate marital debts, divide marital assets, or determine reimbursement rights between

spouses. The former spouses remain free to seek determination of their respective community

property rights and obligations through the family court.

Fourth, Wang contends that the settlement is improper because Plaintiff may assign

claims. That issue is not before the Court. The Court is not being asked to adjudicate the validity,

enforceability, scope, or effect of any assignment. Nor is the Court being asked to decide

whether Wang has defenses to any future assigned claim.

Fifth, Wang suggests that the Motion somehow eliminates his ability to defend himself. It

does not. Wang remains free to contest his own liability, assert defenses, and raise any

appropriate family law arguments in the proper forum.

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In short, none of these arguments establishes lack of good faith under Code of Civil

Procedure section 877.6.

This civil action and the family law proceeding are distinct matters governed by separate

procedural frameworks and involving different legal issues. While the family court may

ultimately characterize and divide marital assets, that does not provide a legal basis to prevent or

delay a good faith settlement determination in this separate civil action.

The cases cited by Wang are distinguishable. Askew v. Askew (1994) 22 Cal.App.4th 942,

Glade v. Glade (1995) 38 Cal.App.4th 1441, McMillin v. Eare (2021) 70 Cal.App.5th 893, and

In re Marriage of Schenck (1991) 228 Cal.App.3d 1474 concern civil orders or judgments that

interfered with a family court’s ability to characterize, divide, or control marital property. That is

not what is occurring here.

The present motion seeks only a statutory good faith settlement determination in a civil

action involving monies that were loaned and or invested by Plaintiff, which Plaintiff now seeks

to partially recover through settlement. It does not prevent the family law court from later

addressing any marital property, reimbursement, allocation, or debt-characterization issues

between Wang and Zang. It does not decide whether any debt is community or separate. It does

not decide how responsibility for any debt should be allocated between spouses.

Wang also admits that the parties separated in 2016. To the extent any funding issue is

even relevant, California law recognizes that earnings and accumulations of a spouse while

living separate and apart are the separate property of that spouse. (Fam. Code, § 771, subd. (a).)

Wang has not presented admissible evidence showing that the settlement is being funded with

community property assets, much less evidence sufficient to defeat a good faith settlement

motion.

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Even if Wang believed community property was being misused, the proper forum for that

objection would be the family court. Family Code section 2040 and related family law remedies

provide mechanisms for addressing alleged transfers, dissipation, reimbursement, credits,

sanctions, or allocation issues. Those remedies do not convert this civil good faith settlement

motion into a family law proceeding.

Wang may raise his family law arguments in the family law proceeding. They do not

establish that this civil settlement was made in bad faith.

Therefore, the Court grants Wu, Zang, and Leaspring motion for determination of good

faith settlement.

Movant to give notice.

Dated-

____________________________ Judge

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