1 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIA 2 FRESNO DIVISION
4 In re ) Case No. 18-11651-B-11 ) 5 GREGORY JOHN te Velde, ) ) 6 Debtor. ) ) 7 ) ) 8 RANDY SUGARMAN, CHAPTER 11 ) TRUSTEE, ) Adv. Proc. No. 19-01033 9 ) (Consolidated by Doc. #94 for Plaintiff, ) trial purposes only) 10 ) v. ) DCN: DLF-2 11 ) IRZ CONSULTING, LLC; aka IRZ ) 12 CONSTRUCTION DIVISION, LLC, ) ) 13 Defendant. ) ) 14 ) ) 15 IRZ CONSULTING, LLC, aka IRZ ) CONSTRUCTION DIVISION, LLC, ) 16 ) Third-Party Plaintiff, ) 17 ) v. ) 18 ) U.S. FARM SYSTEMS; 4 CREEKS, ) 19 INC.; JOHN FAZIO dba FAZIO ) ENGINEERING; DARI-TECH, INC.; ) 20 LASER LAND LEVELING, INC.; MAAS ) ENERGY WORKS, INC.; GEORGE ) 21 CHADWICK dba GEORGE CHADWICK ) CONSULTING; VALMONT NURTHWEST, ) 22 INC.; and NUCO BUILDING SYSTEMS ) UTAH LLC, ) 23 ) Third-Party Defendants. ) 24 ) ) 25
26 REPORT AND RECOMMENDATION ON GEORGE CHADWICK dba GEORGE CHADWICK CONSULTING’S MOTION FOR ORDER ESTABLISHING GOOD FAITH SETTLEMENT 27
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2 Steven Alfieris, DIAS LAW FIRM, INC., Hanford, CA, for George Chadwick dba Chadwick Consulting, Third-Party Defendant. 3 Benjamin P. Tarczy, MILLER NASH LLP, Portland, OR, for IRZ 4 Consulting, LLC, Defendant/Third-Party Plaintiff.
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6 RENÉ LASTRETO II, Bankruptcy Judge: 7 8 INTRODUCTION 9 Third Party Defendant George Chadwick dba Chadwick 10 Consulting, Inc. (“Chadwick”), moves for an order: (a) 11 establishing that Chadwick settled the adversary proceeding in 12 good faith with chapter 11 liquidating trustee Randy Sugarman 13 (“Plaintiff” or “Trustee”), (b) barring cross-complaints against 14 Chadwick by granting Chadwick a full release of all claims with 15 a waiver of the provisions of Cal. Civ. Code § 1542 wherein each 16 side shall bear its own attorney’s fees and costs, and (c) 17 dismissing this case with prejudice as to Chadwick. 0F1 18 Third Party Plaintiff IRZ Consulting, LLC (“IRZ”) timely 19 filed written opposition. 1F2 20 Chadwick replied. 2F3 21 This motion was filed on 28 days’ notice pursuant to Local 22 Rule of Practice (“LBR”) 9014-1(f)(1). At the December 20, 2022 23 hearing, the court took the matter under submission and 24 indicated that it would issue a report and recommendation for de 25 novo consideration by the District Court because the outcome of 26 this motion is dispositive as to Chadwick’s involvement in this
27 1 Mot., Doc. #579. 2 IRZ’s Mem. P. & A., Doc. #609. 28 1 proceeding.4 For the reasons stated below, the court recommends 3F 2 that this motion be GRANTED. 3 4 BACKGROUND 5 The underlying facts in this case are largely undisputed. 6 In contrast, substantial disputes exist concerning liability for 7 the damages to the bankruptcy estate asserted by the liquidating 8 trustee. 9 This case derives from the chapter 11 bankruptcy of Gregory 10 John te Velde (“Debtor”).5 Before filing, Debtor owned and 4F 11 operated several large dairies spanning thousands of acres of 12 land across the Western United States. In late-2015, Debtor 13 hired IRZ to provide construction management services for the 14 construction of a new dairy operation in Boardman, Oregon 15 colloquially referred to as Lost Valley Farm (“LVF”). IRZ, in 16 turn, hired subcontractors to perform certain services. Chadwick 17 was not one of these subcontractors; instead, Chadwick was hired 18 by Debtor directly, and later by Plaintiff Trustee. 19 Debtor’s goal was to build a waste disposal system at the 20 LVF dairy that would separate solids from usable effluent. The 21 fully filtered effluent was to be used to irrigate adjacent 22 land. However, the operation failed, and an environmental 23 catastrophe followed, which ultimately became a substantial 24 factor in Debtor’s filing of a chapter 11 bankruptcy case in 25 2018. 26 /// 27 4 Civ. Mins. (Dec. 12, 2022), Doc. #623. 28 1 Chadwick was hired for two tasks. First, Chadwick was to 2 perform a hydrogeologic characterization to estimate where 3 monitoring wells should be drilled to comply with the Oregon 4 Department of Agriculture’s (“ODA”) guidelines for Debtor’s 5 Confined Animal Feeding Operation (“CAFO”) permit.6 The purpose 5F 6 of the investigation and models was to determine flow 7 directions, pathways, and rates of groundwater flow, potential 8 receptors of groundwater, potential contaminates, and the extent 9 of contamination in the sub-surface environment.7 6F 10 Second, in working with the ODA, Chadwick took the lead on 11 monitoring water contamination in various monitoring wells 12 drilled around the dairy site. 13 After Debtor filed chapter 11 bankruptcy, Plaintiff was 14 appointed as liquidating trustee.8 He proposed and confirmed a 7F 15 Plan of Reorganization in November 2019 (the “Plan”).9 Plaintiff 8F 16 hired Chadwick to continue groundwater monitoring and reporting 17 for CAFO compliance. Chadwick did not file a proof of claim in 18 the bankruptcy case. 19 Plaintiff filed this adversary proceeding in 2019 objecting 20 to the claim filed by IRZ and asserting claims related to 21 alleged construction defects in the waste system, which resulted 22 in approximately $19 million in damages.10 9F 23 IRZ subsequently filed a third-party complaint against nine 24 third-party defendants, including Chadwick, asserting claims for 25 6 Edmonds Decl., Doc. #584. 7 Hydrogeological Characterization and Modeling, Geosyntec Consultants, 26 https://geosyntec.com/practices/contaminated-site-assessment-and- cleanup/hydrogeological-characterization-and-modeling (visited Jan. 9, 2023). 27 8 Bankr. Docs. #841; #850. 9 Bankr. Doc. #2975 28 1 negligence, contribution, and indemnity.11 10F 2 After being served with IRZ’s third-party complaint, 3 Chadwick moved to dismiss himself for IRZ’s failure to state a 4 claim upon which relief can be granted pursuant to Fed. R. Civ. 5 P. (“Civ. Rule”) 12(b)(6).12 IRZ opposed.13 Chadwick’s motion was 11F 12F 6 denied based on allegations that Chadwick provided assistance to 7 determine feasibility of the design of the wastewater management 8 system, prepared the groundwater monitoring plan, supervised 9 construction of several wells on the dairy, and prepared a 10 survey that was part of the process for environmental 11 certification and ODA review.14 Chadwick promptly filed an 13F 12 Answer.15 Litigation, including discovery, ensued. 14F 13 Recently, Chadwick entered into a Settlement Agreement and 14 Release of Claims (“Settlement Agreement”) with Plaintiff on or 15 about September 6, 2022, a copy of which was included with this 16 motion as an exhibit.16 Plaintiff has authority under the Plan to 15F 17 settle litigation related to claims without notice and without 18 bankruptcy court approval.17 16F 19 Under the settlement, the parties agreed that there were no 20 claims against Chadwick, and Chadwick will be dismissed from 21 this action.18 The parties agreed to a “walk-away” settlement to 17F 22 allow Chadwick to avoid spending his funds preparing and serving 23 a motion for summary judgment, and so that the Plaintiff can 24
25 11 Third-Party Compl., Doc. #163. 12 Mot., Doc. #194. 13 Opp., Doc. #222. 26 14 Civ. Mins. (June 5, 2021), Doc. #237; Order, Doc. #241. 15 Answer, Doc. #251. 27 16 Settlement Agreement, Ex. A, Doc. #582. 17 Plan ¶ 6.8, Bankr. Doc. #2975. 28 Ex. A 1 avoid spending his funds opposing the same.19 The Settlement 18F 2 contained a broad mutual release between Plaintiff and Chadwick 3 over claims “relative to the Dispute.” The mutual release 4 included unknown claims under Cal. Civ. Code § 1542. 5 As evidence of good faith, Chadwick presented the 6 declarations of (a) Plaintiff, (b) LVF dairy General Manager 7 Joel Edmonds, and (c) Chadwick’s attorney Michael A. Dias. 8 Plaintiff’s declaration describes the formation of the 9 Settlement Agreement:
10 - On August 31, 2022, Plaintiff participated in mediation with Chadwick, which resulted in the Settlement Agreement. 11 - Plaintiff and Chadwick agreed that there were no claims against Chadwick, and therefore he should be dismissed from 12 this action. - The release and covenant not to sue were negotiated and 13 intended by the parties to release Chadwick from claims of the Debtor’s estate and all parties related to the LVF 14 dairy, including indemnity and contribution claims arising from any claim brought by Plaintiff against third parties, 15 such as IRZ, for their role in LVF dairy. - At no time did Plaintiff find any fault with Chadwick’s 16 work. In fact, Chadwick performed work for Plaintiff while LVF dairy was readied and sold. 17 - Chadwick continued to perform the groundwater monitoring and associated reporting that was required by the ODA- 18 approved groundwater plan and reporting required by the CAFO permit, and also prepared hydrogeologic 19 characterization reports for LVF dairy, which were a necessary component of the dairy’s regulatory compliance. 20 - Plaintiff believes the Settlement Agreement represents a good faith arms-length resolution of the litigation against 21 Chadwick and saves both Chadwick and Plaintiff from incurring additional attorney’s fees should Chadwick file a 22 motion for summary judgment.20 19F 23 Since all of IRZ’s claims against Chadwick are derivative 24 of Plaintiff’s claims against IRZ, Chadwick requests to be 25 dismissed from this lawsuit.21 20F 26 ///
27 19 Id. at 2. 20 Sugarman Decl., Doc. #583. 28 1 CONTENTIONS 2 Chadwick contends that the Settlement Agreement with 3 Plaintiff meets the requirements of a “good faith” settlement 4 set forth in Cal. Code Civ. Proc. (“CCP”) §§ 877 & 877.6.22 21F 5 Additionally, under applicable Oregon law, Chadwick contends 6 that IRZ has failed to plead its claims for negligence, 7 indemnity, and contribution. Since judicial policies favor 8 approval of the Settlement Agreement, the Settlement Agreement 9 meets the requirements of CCP § 877.6, and the Settlement 10 Agreement will not impose hardship on IRZ, Chadwick requests 11 this motion to be granted. Id. 12 In response, IRZ argues that this motion should be denied 13 for multiple reasons.23 Specifically, (i) the Settlement 22F 14 Agreement between Plaintiff and Chadwick was not in good faith 15 under the standards set forth under California law, (ii) the 16 settlement is not supported by consideration and is therefore 17 void, (iii) Chadwick’s proportionate share of liability does not 18 suggest good faith, (iv) the amount paid in settlement does not 19 suggest good faith, (v) a settlor paying nothing in settlement 20 does not suggest good faith, (vi) the existence of collusion, 21 fraud, or tortious conduct aimed at injuring non-settling 22 defendants does not suggest good faith, (vii) the potential 23 liability for indemnity to IRZ does not suggest good faith, 24 (viii) Chadwick’s affidavits do not support that he has no 25 liability, and (ix) Chadwick’s references to Oregon law are a 26 procedurally inappropriate motion for summary judgment. 27 22 Id. 28 1 Chadwick replies, (i) IRZ cannot meet its burden of proof 2 on its assertion of the lack of good faith, (ii) the Settlement 3 Agreement accurately reflects Chadwick’s proportionate share of 4 liability and demonstrates good faith, (iii) consideration 5 exists in the form of mutual release of claims, (iv) 6 consideration is sufficient because Chadwick is waiving any 7 right to future benefit from this bankruptcy case, (v) 8 Chadwick’s declarations are relevant, and (vi) although 9 California law applies with respect to approval of the 10 settlement, Oregon law is applicable to substantive claims, and 11 therefore relevant to this motion.24 23F 12 13 DISCUSSION 14 Good faith determination 15 Even though the substantive claims in this case involve 16 Oregon law, both parties agree the good faith determination 17 should be decided under California law.25 CCP § 877 requires any 24F 18 settlement cutting off the right of contribution by non-settling 19 defendants to be executed in good faith. Fed. Sav. & Loan Ins. 20 Corp. v. Butler, 904 F.2d 505, 511 (9th Cir. 1990). CCP 877 21 provides, in relevant part:
22 Where a release, dismissal with or without prejudice, or a covenant not to sue or not to 23 enforce a judgment is given in good faith before verdict or judgment to one or more of 24 a number of tortfeasors claimed to be liable for the same tort, or to one or more other co- 25 obligors mutually subject to contribution rights, it shall have the following effect: 26
27 24 Reply, Doc. #620. 25 At the hearing, Chadwick’s counsel also argued that the Settlement 28 1 (a) It shall not discharge any other such party from liability unless its terms so 2 provide, but it shall reduce the claims against the others in the amount stipulated by 3 the release, the dismissal or the covenant, or in the amount of the consideration paid for 4 it, whichever is greater.
5 (b) It shall discharge the party to whom it is given from all liability for any contribution 6 to any other parties. 7 CCP § 877(a)-(b). 8 The Ninth Circuit has held that the procedures contained in 9 CCP § 877.6 for making a motion for a “good faith” settlement 10 determination are not binding on federal courts, but the 11 provisions do create a “substantive” law that must be applied in 12 an action in the federal courts to which California substantive 13 law applies. Butler, 904 F.2d at 511 (“[N]othing is to prevent 14 the district court from granting a motion for an early 15 determination of the good faith question. In fact, it makes 16 eminent good sense to do so.”); see also Trujillo v. Crescent 17 Jewelers, No. 99-55914, 2000 U.S. App. LEXIS 30235 (9th Cir. 18 Nov. 29, 2000); Medina v. Argent Mortg. Co., No. C05-02905 HRL, 19 2007 U.S. Dist. LEXIS 48312 (N.D. Cal. June 27, 2007). 20 CCP § 877.6 provides, in relevant part: 21 (b) The issue of good faith of a settlement may be determined by the court on the basis of 22 affidavits served with the notice of hearing, and any counteraffidavits filed in response, 23 or the court may, in its discretion, receive other evidence at the hearing. 24 (c) A determination by the court that the 25 settlement was made in good faith shall bar any other tortfeasor or co-obligor from any 26 further claims against the settling tortfeasor or co-obligor for equitable comparative 27 contribution, or partial or comparative indemnity, based on comparative negligence or 28 comparative fault. 1 CCP § 877.6(b) & (c). 2 Though procedural, the Ninth Circuit has determined that it 3 “makes eminent sense” for a good faith determination under this 4 statute to be made by a federal trial court. Butler, 904 F.2d at 5 511. The party asserting the lack of good faith has the burden 6 of proof on that issue. CCP 877.6(d); Tech-Bilt, Inc. v. 7 Woodward-Clyde & Assocs., 38 Cal. 3d 488, 499-500, 698 P.2d 159, 8 166-67 (1985). However, the party seeking a good faith 9 determination has the initial burden of presenting a prima facie 10 case. 11 CCP § 877.6 requires complete notice to non-settling 12 parties as a prerequisite to a determination of good faith. 13 Assuming adequate notice is given, the California Supreme Court 14 has outlined four factors a court should consider in determining 15 good faith of a settlement, as well as two additional 16 considerations:
17 • A rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability. 18 • The amount paid in settlement. • The allocation of settlement proceeds among plaintiffs. 19 • A recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. 20 • The financial condition and insurance policy limits of the settling tortfeasor. 21 • The existence of collusion, fraud, or tortious conduct intended to injure the interests of the non-settling 22 parties. 23 Tech-Bilt, 38 Cal. 3d at 499-500, 698 P.2d at 167. These 24 statutes serve the policies under California law of sharing 25 liability among parties potentially jointly at fault, while 26 encouraging reasonable settlements. Id. at 494, 698 P.2d at 162. 27 /// 28 /// 1 A finding of good faith under CCP § 877 is a finding of 2 fact for the trial court to be made under the factors stated in 3 Tech-Bilt. See, Owen v. United States, 713 F.2d 1461, 1466 (9th 4 Cir. 1983) 5 The California Supreme Court has also stated that bad faith 6 is not necessarily “established by a showing that a settling 7 defendant paid less than his theoretical proportionate or fair 8 share.” Tech-Bilt, 38 Cal. 3d at 499, 698 P.2d at 166. “Such a 9 rule would unduly discourage settlements” because it would not 10 consider various unknown and speculative factors such as the 11 amount of damages, probability of legal liability, the solvency 12 of the defendant, and the risk of going through trial. Ibid. 13 1. Rough approximation of Plaintiff’s total recovery and 14 the settlor’s proportionate liability. A settling party’s 15 proportionate liability is one of the most important factors in 16 making a good faith determination. Toyota Motor Sales U.S.A. v. 17 Superior Ct., 220 Cal. App. 3d 864, 871, 269 Cal. Rptr. 647, 650 18 (1990). There must be “substantial evidence to support a 19 critical assumption as to the nature and extent of a settling 20 defendant’s liability . . .” Toyota Motor Sales, 220 Cal. App. 21 3d at 871, 269 Cal. Rptr. at 651 (substantial is not “any” 22 evidence; it must be “reasonable in nature, credible, and of 23 solid value, . . . [and] must actually be substantial proof of 24 the essentials which the law requires in a particular case.”) 25 (internal quotations omitted). 26 Here, Chadwick oversaw the installation of the alluvial 27 monitoring wells at the direction of the ODA and monitored the 28 groundwater and associated reporting required by the ODA 1 pursuant to Debtor’s CAFO permit.26 In contrast to the 25F 2 groundwater supply wells, the alluvial monitoring wells are 3 small in diameter (i.e., 2-inch), and are only used to measure 4 groundwater levels and water quality of the alluvial aquifer. 5 Post-bankruptcy, Plaintiff continued to use Chadwick’s services 6 to remediate and sell the LVF dairy.27 Since Chadwick was not 26F 7 involved in the construction or planning of the waste disposal 8 system, did not drill any wells, and was solely involved in 9 groundwater monitoring and reporting for CAFO permit compliance, 10 Chadwick contends that IRZ cannot proportion any liability to 11 Chadwick on its claims for negligence, contribution, and 12 indemnity brought under Oregon law.28 Therefore, Chadwick argues 27F 13 the $0.00 “walk-away” settlement is proportionate to his share 14 of liability. 15 IRZ responds that Chadwick’s proportionate settlement 16 amount is zero percent (0%) of Plaintiff’s claimed $18.8 million 17 dollars in damages.29 Chadwick has conceded that he provided 28F 18 hydrogeologic characterization and groundwater monitoring, 19 including oversight on the installation of alluvial monitoring 20 wells, and preparing a groundwater monitoring plan relied upon 21 by Debtor for the LVF dairy. Meanwhile, Plaintiff’s claims are 22 based on the allegation that the water management system of the 23 dairy failed.30 If, based on Chadwick’s involvement with the 29F 24 dairy, he is found to be one percent (1%) liable, then his 25 liability would be $188,000, which vastly exceeds the $0.00
26 26 Sugarman Decl., Doc. #583; Edmonds Decl., Doc. #584. 27 Sugarman Decl., Doc. #583. 27 28 Chadwick’s Mem. P. & A., Doc. #585; Reply, Doc. #620. 29 IRZ’s Mem. P. & A., Doc. #609. 28 1 settlement. Since substantial evidence supporting a critical 2 assumption as to the nature and extent of Chadwick’s liability 3 has not been provided, IRZ contends this factor supports denial 4 of this motion. 5 Chadwick replies that IRZ has not, nor can it, proportion 6 any liability to Chadwick.31 Plaintiff accepted the Settlement 30F 7 Agreement, which demonstrates that Plaintiff has estimated 8 Chadwick’s proportionate liability to be zero. Plaintiff found 9 no fault in Chadwick’s work at any time, including when he 10 engaged Chadwick to continue monitoring the groundwater during 11 the pendency of the sale.32 31F 12 Moreover, Chadwick contends that IRZ has not plead, 13 discovered, disclosed, or otherwise established that the 14 services performed by Chadwick were in any way connected to the 15 failure of the LVF dairy’s failed waste-water management 16 system.33 IRZ addresses the hydrogeologic characterization and 32F 17 groundwater monitoring performed by Chadwick as required by and 18 under the supervision of the ODA, but IRZ has not made any 19 connection between that characterization and monitoring to the 20 failure of the waste-water management system. Further, IRZ 21 ignores that groundwater monitoring is different than dairy 22 waste-water management, and IRZ has not explained how Chadwick’s 23 supply and installation of four alluvial monitoring wells is 24 relevant to the failure of the waste-water management system. 25 The complaint alleges nearly $19 million dollars in alleged 26 damages, but there is no basis from Plaintiff that can be
27 31 Reply, Doc. #620. 32 Sugarman Decl. ¶ 8 at 3, Doc. #583. 28 1 construed as evidence of possible recovery. Plaintiff’s and his 2 general counsel’s experience has never been presented to the 3 court as “in depth” in litigation matters concerning dairy 4 construction processes. In fact, Plaintiff has special counsel 5 representing him in this litigation. 6 Though Mr. Sugarman certainly had much time observing the 7 damage the failed system caused, his declaration suffers from 8 foundational problems with respect to Chadwick’s pre-petition 9 services.34 That said, Plaintiff hired Chadwick post-bankruptcy 33F 10 to continue his work while Plaintiff endeavored to bring the 11 dairy into compliance with ODA’s demands. Mr. Sugarman does have 12 personal knowledge of Chadwick’s post-petition services. He has 13 opined his finding of no fault with Chadwick’s work, and likely 14 would not want to continue using Chadwick’s services if there 15 were issues about his performance. 16 Chadwick also includes the declaration of Joel Edmonds, the 17 General Manager of LVF dairy, in support of this motion. As 18 General Manager, Mr. Edmonds had the opportunity to work with 19 Chadwick during the time he performed the groundwater monitoring 20 and associated reporting required by the ODA and CAFO permit, 21 and such work product was “impeccable.”35 Chadwick monitored 34F 22 water quality and water wells, which required running numerous 23 tests on the water for nitrogen concentrations and other 24 parameters. Chadwick did not drill any wells.36 35F 25 Unlike other third-party defendants, Chadwick was on the 26 periphery of the dairy and physically far away from it. Chadwick
27 34 Sugarman Decl., Doc. #583. 35 Edmonds Decl. ¶ 2 at 2, Doc. #584. 28 Id. 1 did not prepare the final lagoon design, did not design the 2 irrigation plan, was not retained to design lagoons, did not 3 design lagoons, did not design piping for waste pipes, did not 4 design the overflow pipes relates to the effluent, and did not 5 design the overflow drains related to the effluent system. 6 When pressed at the hearing, IRZ was unable to say with any 7 specificity anything Chadwick did or did not do that could have 8 contributed to failure of the waste-water management system. IRZ 9 did not allege that Chadwick failed to report on anything with 10 respect to water quality, nor that such reporting directly or 11 indirectly resulted in the system’s failure. IRZ repeated prior 12 arguments that allowed the third-party complaint to survive 13 Chadwick’s motion to dismiss, but such arguments were previously 14 presented pre-discovery and are less persuasive now. Since then, 15 it has become clear that Chadwick’s planning pertained to 16 monitoring only, rather than to the design, planning, or 17 installation of the system, and Chadwick’s alluvial wells were 18 separate monitoring wells that did not affect the operation of 19 the system itself. 20 Meanwhile at the hearing, Chadwick’s counsel clarified that 21 Chadwick was not testing the effluent leaving the dairy. The 22 path of the effluent and its effect on the groundwater was a 23 critical component of the dairy’s compliance with the CAFO 24 permit. Obviously, the dairy did not comply with the CAFO 25 permit, but there does not appear to be any evidence that 26 Chadwick had any hand in that. Since Chadwick was not involved 27 in either the design, planning, installation, or operation of 28 the waste-water management system, it seems far-fetched that he 1 would have any liability unless he failed to properly report 2 what his monitoring revealed, and such failed reporting 3 contributed to failure of the system itself. IRZ could not point 4 to any specifics. 5 This contrasts Chadwick’s situation from the other third- 6 party defendants who were part of the design and operation of 7 the waste-water management system itself. The only area that may 8 be questionable is whether Chadwick was asked to opine whether 9 the hydrogeologic characterization of the groundwater flow made 10 the dairy site improper for such a large operation. Chadwick’s 11 attorney was unable to tell the court whether Chadwick had any 12 involvement of that sort. But nothing in IRZ’s presentation 13 suggested Chadwick was so involved. 14 The inquiry is the proportionate liability of the settling 15 party estimated by a reasonable person at the time of the 16 settlement. Torres v. Union Pac. R.R. Co., 157 Cal. App. 3d 499, 17 508, 203 Cal. Rptr. 825, 831 (1984). Based on the evidence at 18 the time of the Settlement Agreement, it appears that Chadwick 19 had no liability since he was not involved in the design, 20 construction, or operation of the waste-water management system; 21 instead, he merely monitored the groundwater. 22 Under CCP § 877.6(d), IRZ has the burden of proof on the 23 lack of good faith issue. IRZ has presented no proof 24 establishing Chadwick’s potential proportionate share of 25 liability. The lack of proof is a flaw in IRZ’s position. 26 2. Amount paid in settlement: IRZ says that the amount paid 27 in settlement does not suggest good faith.37 Relying on Mattco, 36F
28 1 IRZ contends here that Chadwick’s $0.00 settlement is not within 2 the reasonable range of its share of the $18.8 million in 3 liability alleged by the Plaintiff. Mattco Forge, Inc. v. Arthur 4 Young & Co., 38 Cal. App. 4th 1337, 1351, 45 Cal. Rptr. 2d 581, 5 589 (1995), reh’g denied, 39 Cal. App. 4th 1210 ($250,000 6 settlement out of a $39 million claim (0.006%) was not within 7 the reasonable range or “ballpark” of the settlor’s share of 8 proportionate liability). Since paying nothing is the smallest 9 amount a party could pay in settlement, IRZ claims the 10 Settlement Agreement’s terms do not suggest good faith. 11 Chadwick replies that Mattco is distinguishable. In Mattco, 12 a plaintiff contractor had its suit dismissed because they 13 fabricated estimate sheets to increase damages. Mattco, 38 Cal. 14 App. 4th at 1354, 45 Cal. Rptr. 2d at 591. The court ordered 15 Mattco to pay $1.4 million in sanctions or the matter would be 16 dismissed. Mattco entered into a mutual release and sued its 17 accounting firm. The good faith settlement in question was 18 between Mattco and its own attorney for malpractice, and the 19 court refused to approve the good faith settlement because the 20 allegations against the settlement included fraud. Id. at 1357, 21 45 Cal. Rptr. 2d at 593. The issue in Mattco was the 22 sufficiency, or lack thereof, of the evidence that the 23 settlement was in the “ballpark” of the proportionate liability. 24 Additionally, the proportionate liability issues in Mattco were 25 secondary to claims of actual fraud in rejection of the good 26 faith of the settlement. 27 But here, Chadwick presented a declaration from LVF dairy’s 28 General Manager that suggests Chadwick was likely not liable. 1 Chadwick has set forth an evidentiary basis for the settlement. 2 The settlement was reached in an adversarial manner, after the 3 third-party complaint was litigated, and after a mediation.38 37F 4 The fact that Chadwick is paying nothing should not 5 control. The settlement may be in good faith even if it is for a 6 sum grossly disproportionate to what the trial court might have 7 considered the probable recovery from the settling joint 8 tortfeasor. Kohn v. Superior Court, 142 Cal. App. 3d 323, 327- 9 28, 191 Cal. Rptr. 78, 81-82 (1983). 10 3. Allocation of settlement proceeds among plaintiffs: 11 Allocation of settlement proceeds is inapplicable because 12 Plaintiff Trustee is the only plaintiff here. If there were 13 other plaintiffs, allocation would be inapplicable because the 14 settlement is $0.00. 15 4. Recognition that a settlor should pay less in settlement 16 than if found liable at trial: Chadwick believes that he and 17 Plaintiff have each performed a reasonable risk analysis of 18 potential outcomes.39 Chadwick characterizes IRZ’s position as 38F 19 obfuscating the nature of settlement agreements generally. The 20 Settlement Agreement accomplishes the two objectives of CCP 21 § 877.6: equitable sharing of costs among the parties at fault 22 and encouragement of settlements. 23 Citing Tech-Bilt, IRZ acknowledges that a party settlor 24 should pay less in settlement than it would if it were to be 25 found liable after a trial, but that such recognition should not 26 extend to the “extreme” that a settlor should pay nothing in 27 38 Dias Decl., Doc. #581; Sugarman Decl., Doc. #583. 28 1 settlement.40 Tech-Bilt, Cal. 3d at 499, 698 P.2d at 166. 39F 2 The court must also consider not only the settlor’s 3 potential liability to the Plaintiff, but also its proportionate 4 share of culpability as among the parties alleged to be liable 5 for the same injury. TSI Seismic Tenant Space, Inc. v. Superior 6 Court, 149 Cal. App. 4th 159, 166, 56 Cal. Rptr. 3d 751, 756 7 (2007). 8 It does not appear that any of the third-party codefendants 9 have a problem with Chadwick’s settlement. None have appeared in 10 opposition, which suggests that none of the non-settling third- 11 party defendants would seek indemnity against Chadwick. See, 12 Long Beach Mem’l Med. Ctr. V. Superior Court, 172 Cal. App. 4th 13 865, 875, 91 Cal. Rptr. 3d 494, 502 (2009) (comparative 14 indemnity); TSI Seismic Tenant Space, 149 Cal. App. 4th at 167, 15 56 Cal. Rptr. 3d at 756-57 (implied indemnity). Additionally, 16 Chadwick’s counsel has indicated that Chadwick is retired and 17 has no insurance, so he is not a “deep pocket defendant.” If 18 Chadwick was in fact not responsible, his settlement would not 19 be injurious to the interests of other third-party defendants or 20 to IRZ. Long Beach Mem’l Med. Ctr., 172 Cal. App. 4th at 875-76, 21 91 Cal. Rptr 3d at 502-03. 22 5. Financial condition and insurance policy limits of 23 settling defendants: A good faith settlement can account for 24 limitations arising from the financial condition and insurance 25 policy limits of settling defendants. Tech-Bilt, 38 Cal. 3d at 26 499-500, 698 P.2d at 166-67. As noted above, Chadwick’s counsel 27 indicated at the hearing that Chadwick is retired, has no
28 1 insurance, and has paid over $130,000.00 in legal fees so far. 2 The lack of insurance coverage suggests a compromise in a 3 smaller sum should be within the “range of reasonableness.” 4 6. The existence of collusion, fraud, or tortious conduct 5 intended to injure the interests of the non-settling defendants: 6 The existence of collusion, fraud, or tortious conduct aimed to 7 injure the interests of non-settling defendants is the final 8 determining factor enumerated in Tech-Bilt. Techbilt, Cal. 3d at 9 499, 698 P.2d at 166. Here, the settlement was reached in an 10 adversarial manner after the third-party complaint was 11 litigated, and after a mediation. This suggests a lack of 12 collusion. Chadwick’s attorney, Michael A. Dias, declares that 13 no collusion occurred during the negotiation of the Settlement 14 Agreement.41 40F 15 On the other hand, IRZ alleges the existence of collusion, 16 fraud, or tortious conduct aimed to injure its interests as a 17 non-settling party.42 IRZ compares this matter to Mattco, where 41F 18 the plaintiff did not bring an action against the settling 19 party, and the settling party was only involved through a cross- 20 complaint by a non-settling defendant. Mattco, 38 Cal. App. 4th 21 at 1353, 45 Cal. Rptr. 2d 590. Ultimately, the Mattco court 22 found that the disproportionately low settlement was aimed at 23 injuring the non-settling defendants’ interests. 24 As in Mattco, Chadwick and Plaintiff here do not have 25 claims against each other, and Chadwick is only involved through 26 IRZ’s third-party complaint. The purpose of the Settlement 27 41 Dias Decl., Doc. #581. 28 1 Agreement, as in Mattco, is to allow Chadwick to “avoid the 2 costs of litigation” in its action with IRZ.43 In effect, 42F 3 Chadwick is avoiding its defense against IRZ without IRZ’s 4 consent to dismiss. Though procuring a dismissal of IRZ’s claims 5 through a third party, such dismissal is based on the merits of 6 Plaintiff’s claim and the probability that Chadwick will not be 7 found liable due his lack of involvement in the planning, 8 installation, or operation of the waste-water management system. 9 Moreover, IRZ has failed to specifically identify any such 10 collusion, fraud, or tortious conduct. No affirmative evidence 11 of collusive interaction has been presented. The evidence 12 appears to establish very little interaction between Chadwick’s 13 counsel and Plaintiff. 14 In sum, Chadwick has set forth an evidentiary basis for the 15 settlement, which justifies the presumption that a reasonable 16 valuation of the claim against Chadwick was reached. See, 17 Erreca’s v. Superior Court, 19 Cal. App. 4th 1475, 1495-96, 24 18 Cal. Rptr. 2d 156, 170 (1993). Having met his prima facie 19 burden, we turn to whether IRZ has met its burden of proof under 20 CCP § 877.6(d). The court finds IRZ has not. 21 Under CCP § 877.6(d), the party asserting the lack of good 22 faith shall have the burden on that issue. IRZ is required to 23 show that the Settlement Agreement is so far “out of the 24 ballpark” in relation to the factors set forth in Tech-Bilt and 25 its progeny as to be inconsistent with the equitable objectives 26 of the statute. Horton v. Superior Court, 194 Cal. App. 3d 727, 27 735, 238 Cal. Rptr. 467, 471 (1987); Rutgard v. Haynes, 61 F.
28 Ex. A 1 Supp. 2d 1082, 1086 (S.D. Cal. 1999) (finding settling defendant 2 did not have “an integral or primary role” in prosecuting the 3 case that led to malicious prosecution claim). IRZ has provided 4 no declarations and has presented nothing except argument about 5 how settling the case with no payment is bad faith. But IRZ 6 could not even articulate how Chadwick was responsible for any 7 part of the damage. 8 9 Consideration 10 IRZ’s next objection to the Settlement Agreement is lack of 11 consideration.44 All contracts require consideration to be 43F 12 legally enforceable. “Consideration is present when the promisee 13 confers a benefit or suffers a prejudice.” Prop. Cal. SCJLW One 14 Corp. v. Leamy, 25 Cal. App. 5th 1155, 1165, 236 Cal. Rptr. 3d 15 500, 508 (2018), citing Steiner v. Thexton, 48 Cal. 4th 411, 16 420-21, 106 Cal. Rptr. 3d 252, 259-60, 226 P.3d 359, 365-66 17 (2010). Here, IRZ argues that Chadwick provides no benefit to 18 Plaintiff under the Settlement Agreement, so the Settlement 19 Agreement lacks consideration and is void. IRZ notes that no 20 claims against Plaintiff are being released and Chadwick is not 21 required to do anything at all, so he is neither conferring any 22 benefit to Plaintiff, nor proffering a detriment to Chadwick. 23 Instead, the parties have agreed to “walk away” from this action 24 despite having no claims against each other. In effect, they 25 have agreed that Chadwick may walk away from its defense against 26 IRZ without IRZ’s consent, says IRZ. 27 ///
28 1 Moreover, IRZ says that the attorney’s fees provision 2 within the Settlement Agreement cannot constitute a benefit 3 granted as a waiver of costs because Plaintiff has not sued 4 Chadwick and they are not adverse parties. Since Chadwick cannot 5 be considered a “prevailing party” in any future judgment 6 against Plaintiff, Chadwick cannot waive a right that he does 7 not have—specifically, the right to fees and costs as a 8 prevailing party. 9 Chadwick replies that the Settlement Agreement was entered 10 into by Chadwick and Plaintiff after an arm’s length good faith 11 negotiation with the intent to resolve “any and all past, 12 present, and future claims which are, were, or could have been 13 asserted by or between them . . . which could have been filed 14 arising out of or related to the Disputes.”45 44F 15 IRZ’s claim that Plaintiff and Chadwick have no claims 16 against each other disregards that IRZ’s allegations are 17 derivative of Plaintiff’s complaint against IRZ.46 Under the 45F 18 Settlement Agreement, Chadwick is expressly waiving and 19 releasing any future claims that may arise against Plaintiff. 20 Chadwick insists such release is neither hollow nor illusory. 21 Additionally, Chadwick contests that he “is not required to do 22 anything at all as a result of this agreement” because he is 23 foregoing any remedies he may hold, now or in the future, 24 whether or not those claims are meritorious. Chadwick has not 25 and will not file a proof of claim in this bankruptcy as a 26 creditor, lienholder, or any other party with standing to make 27 45 Reply, Doc. #620, citing Settlement Agreement at 1, ¶ F. 28 Id. 1 such claim. In contrast to the other third-party defendants, 2 Chadwick will never receive any benefit from this bankruptcy 3 case. Valid consideration exists because Chadwick has waived any 4 right to future benefit should facts later arise showing a 5 potential benefit to Chadwick. 6 “[S]urrender of a possibly meritless claim which is 7 disputed in good faith is valid consideration. The rationale of 8 these cases is that parties who settled in order to avoid 9 litigation should be given the benefit of their bargain.” Murphy 10 v. T. Rowe Price Prime Reserve Fund, Inc., 8 F.3d 1420, 1423 11 (9th Cir. 1993). As noted above, Chadwick did not file a proof 12 of claim in this bankruptcy case. He has paid over $130,000.00 13 in legal fees so far. The “walk away” settlement results in 14 waiver of any possibility of filing a claim or recovering fees, 15 which suffices as valid consideration. 16 17 Applicable Oregon Law 18 Chadwick argues that the settlement resolves all claims 19 asserted by IRZ under Oregon law. 20 Negligence 21 “[W]hen a plaintiff does not join a tortfeasor as a 22 defendant, the comparative negligence statutes permit the named 23 defendant to file a third-party complaint against the 24 tortfeasor.” Lasley v. Combined Transp., Inc., 351 Or. 1, 21-22, 25 261 P.3d 1215, 1227 (2011), citing Or. Rev. Stat. (“ORS”) 26 § 31.600(3). Such “third-party defendant will not be liable to 27 the defendant but, potentially, will be liable to the 28 plaintiff.” Id. at 22. As noted above, Chadwick was not retained 1 by IRZ. Chadwick was hired by Debtor and by Plaintiff to 2 supervise installation of alluvial groundwater monitoring wells. 3 Chadwick did not contract with IRZ or perform services on IRZ- 4 owned property. Therefore, Chadwick contends that IRZ’s claim of 5 negligence is derived from the Trustee’s claims against IRZ, so 6 the settlement agreement between Trustee and Chadwick resolves 7 IRZ’s negligence claim against Chadwick.47 46F 8 IRZ responds that Chadwick’s arguments are inappropriate, 9 irrelevant, and, in effect, a dispositive motion for summary 10 judgment under a different name.48 47F 11 The court disagrees. IRZ attempts to reverse the burden of 12 proof. Chadwick’s involvement in the ill-fated dairy waste 13 project was as a tangential monitoring professional. IRZ has not 14 established any factual or legal basis for Chadwick’s 15 responsibility for the damages alleged in this case. No evidence 16 of Chadwick’s culpability has been presented by IRZ. This 17 analysis supports a finding that the Settlement Agreement was 18 executed in good faith because there is no evidence that 19 Chadwick’s probable, proportionate share of liability exceeds 20 the settlement amount. 21 22 Indemnity 23 To prevail on a cause of action for indemnity, “the 24 claimant must plead and prove that (1) it has discharged a legal 25 obligation owed to a third party; (2) the defendant was also 26 liable to the third party; and (3) as between the claimant and 27 47 Chadwick’s Mem. P. & A., Doc. #585. 28 1 the defendant, the obligation ought to be discharged by the 2 latter.” Rains v. Stayton Builders Mart, Inc., 359 Or. 610, 640, 3 375 P.3d 490 (2016), quoting Eclectic Inv., LLC v. Patterson, 4 357 Or. 25, 33, 346 P.3d 468, 472 (2015), opinion adhered to as 5 modified on recons., 357 Or. 327, 354 P.3d 678 (2015). 6 Chadwick claims IRZ failed to plead the existence of an 7 independent contractual relationship between IRZ and Chadwick. 8 Since privity of contract between IRZ does not exist, Chadwick 9 contends that IRZ’s derivative indemnity claims against Chadwick 10 are resolved by this settlement. 11 IRZ responds, potential liability for indemnity to a non- 12 settling defendant is an important consideration for determining 13 whether to approve a settlement by an alleged tortfeasor.49 TSI 48F 14 Seismic Tenant Space, 149 Cal. App. 4th at 166, 56 Cal. Rptr. 3d 15 at 756. The Settlement Agreement results in Chadwick sharing 16 none of the liability alleged here. If, for example, Chadwick 17 was found 90% liable for Plaintiff’s $18.8 million dollar damage 18 claim, he would not be required to pay anything in damages. IRZ 19 says there must be substantial evidence to support a critical 20 assumption as to the nature and extent of its liability, and 21 Chadwick cannot show substantial evidence that it is not liable 22 for indemnity in this action. 23 A defendant may, as third-party plaintiff, “serve a summons 24 and complaint on a nonparty who is or may be liable to it for 25 all or part of the claim against it.” Civ. Rule 14(a)(1) 26 (emphasis added). “A third-party claim may be asserted under 27 [Civ.] Rule 14(a) only when the third party’s liability is in
28 1 some way dependent on the outcome of the main claim or when the 2 third party is secondarily liable to defendant. The basis of the 3 third-party claim may be indemnity, subrogation, contribution, 4 express or implied warranty, or some other theory.” SCD RMA, LLC 5 v. Farsighted Enters., Inc., 591 F. Supp. 2d 1141, 1145 (D. Haw. 6 2008) (emphasis added; citations omitted). This policy is 7 designed to “promote judicial efficiency by eliminating the 8 necessity for the defendant to bring a separate action against a 9 third party who may be derivatively liable to the defendant for 10 all or part of the plaintiff’s original claim.” Kim v. Fujikawa, 11 871 F.2d 1427, 1434 (9th Cir. 1989). 12 “To require a defendant who raises an indemnity cross-claim 13 to plead and prove actual discharge of a judgment before the 14 judgment is entered against the defendant raising it would 15 contravene the purpose and destroy the usefulness of the cross- 16 claim rule.” Kahn v. Weldin, 60 Or. App. 365, 371-72, 653 P.2d 17 1268, 1272-73 (1982). 18 Oregon law no longer provides for joint liability of 19 multiple tortfeasors. “[T]he Oregon Legislative Assembly has 20 instituted a system of comparative fault in which (1) the trier 21 of fact allocates fault and responsibility for payment of 22 damages between the parties; and (2) each tortfeasor is liable 23 for damages attributable to only its own negligence.” Eclectic, 24 357 Or. at 35-36, 346 P.3d at 474 (“Oregon’s comparative fault 25 system eliminates the need for judicially created indemnity in 26 situations like this one-in which a defendant is liable, if at 27 all, for only the damages that resulted from its own 28 negligence[.]”). 1 Rains involved strict products liability, which is treated 2 differently than negligence with respect to indemnity and 3 contribution. See also, Wyland v. W.W. Grainger, Inc., 2015 U.S. 4 Dist. LEXIS 76156, at *6 (D. Or. June 11, 2015) (“[T]he Oregon 5 Legislature set product liability apart from all other tort 6 claims covered by comparative fault.”). 7 When ORS § 31.610 applies, common law indemnity is not 8 available. Eclectic, 357 Or. at 330, 354 P.3d at 679. “Thus, in 9 the circumstances presented here—in which ORS § 31.610 applies, 10 joint tortfeasors are liable only for their own negligence, and 11 a jury determines the relative fault and responsibility of each 12 tortfeasor—a judicially created claim for common-law indemnity 13 is unnecessary.” Ibid. 14 IRZ’s indemnity claim does not initially appear to be 15 applicable under Rains because (1) this case does not involve 16 claims of strict products liability, and (2) ORS § 31.610 17 applies to the negligence claims. However, Trustee’s second 18 cause of action against IRZ is for breach of contract under the 19 September 30, 2015 written work order and November 17, 2015 20 agreement.50 ORS § 31.610 only applies to indemnity for 49F 21 negligence causes of action, so indemnity may still be available 22 for contractual liability.
23 [The claim] cannot simply be an independent or related claim but must be based upon 24 plaintiff’s claim against defendant. The crucial characteristic of a [Civ.] Rule 14 25 claim is that defendant is attempting to transfer to the third-party defendant the 26 liability asserted against [the defendant] by the original plaintiff. The mere fact that the 27 alleged third-party claim arises from the same
28 1 transaction or set of facts as the original claim is not enough. 2 3 Stewart v. Am. Int’l Oil & Gas Co., 845 F.2d 196, 200 (9th Cir. 4 1988), quoting 6 Fed. Prac. & Proc. § 1446 at 257 (1971 ed.). 5 But Chadwick was not hired by IRZ. Chadwick was first hired 6 by Debtor, and later by Plaintiff. Since no privity of contract 7 exists between IRZ and Chadwick, it appears that indemnity 8 liability for breach of contract is also unavailable, which 9 supports the finding that the Settlement Agreement was executed 10 in good faith because there is no evidence that Chadwick’s 11 probable, proportionate share of liability exceeds the 12 settlement amount. 13 14 Contribution 15 Under ORS § 31.800(1), contribution is available when two 16 or more persons are liable in tort for the same injury to 17 property. The right of contribution exists even if judgment has 18 not yet been entered against any of them. Since Trustee asserted 19 a claim for negligence against IRZ for construction defects, IRZ 20 has asserted a negligence claim against third-party defendants, 21 including Chadwick, for those same defects. 22 When the Oregon legislature changed its comparative 23 negligence scheme in 1995 to eliminate joint and several 24 liability, claims for contribution were modified as well. 25 ORS § 31.610. The Oregon Supreme Court in Lasley stated:
26 [U]nder Oregon’s current comparative negligence scheme, no tortfeasor is liable for 27 more than its percentage of fault, and that percentage of fault is determined in the 28 1 plaintiff. ORS [§] 31.610(2); ORS [§] 31.805. A defendant cannot bring a contribution action 2 to seek a different determination of its percentage of fault. A contribution action 3 serves only to permit a defendant who has “paid more” than its “proportional share of 4 the common liability” to obtain contribution from another person who is also liable for the 5 same injury or death. ORS [§] 31.800(2). 6 Lasley, 351 Or. at 19, 261 P.3d at 1226. “[M]uch like 7 contribution, a claim of common-law indemnity is unnecessary and 8 unjustified ‘in cases . . . in which jurors allocate fault’ 9 pursuant to [ORS] § 31.605, which allows a party to pose special 10 questions to a fact-finder as to each party’s degree of fault.” 11 Wyland v. W.W. Grainger, Inc., 2015 U.S. Dist. LEXIS 76156 at *6 12 (D. Or. June 11, 2015). 13 Plaintiff asserted a negligence claim against IRZ for 14 construction defects and IRZ asserted a third-party negligence 15 claim against Chadwick and other third-party defendants for 16 those same construction defects. Since Chadwick’s use of 17 alluvial wells to monitor groundwater levels and quality was 18 unrelated to the construction defects, Chadwick insists that 19 IRZ’s derivative claim of contribution is resolved by this 20 settlement agreement. 21 As with negligence, Chadwick’s role in the waste-water 22 management system was as a tangential monitoring professional. 23 No evidence of Chadwick’s culpability has been presented by IRZ, 24 so Chadwick’s probable, proportionate liability appears to be 25 zero based on this record. This supports a finding that the 26 Settlement Agreement was executed in good faith. 27 /// 28 /// 1 Good faith settlement under Oregon law 2 ORS § 31.815 (formerly § 18.455 and renumbered in 2003) 3 provides:
4 (1) When a covenant not to sue or not to enforce judgment is given in good faith to one 5 of two or more persons liable in tort for the same injury to person or property or the same 6 wrongful death or claimed to be liable in tort for the same injury or the same wrongful 7 death:
8 (a) It does not discharge any of the other tortfeasors from liability for the injury or 9 wrongful death unless its terms so provide; but the claimant’s claim against all other 10 persons specified in ORS 31.600 (2) for the injury or wrongful death is reduced by the 11 share of the obligation of the tortfeasor who is given the covenant, as determined under ORS 12 31.605 and 31.610; and
13 (b) It discharges the tortfeasor to whom it is given from all liability for contribution to 14 any other tortfeasor.
15 (2) When a covenant described in subsection (1) of this section is given, the claimant 16 shall give notice of all of the terms of the covenant to all persons against whom the 17 claimant makes claims. 18 ORS § 31.815. 19 Application of the law has two requisites. First, direct 20 evidence of good faith. State by State Acci. Ins. Fund Corp. v. 21 Barkman, 101 Or. App. 20, 26, 789 P.2d 8 (1990). Second, it 22 requires notice to all persons against whom the claimant makes 23 claims. McCarthy v. Hensel Phelps Constr. Co., 64 Or. App. 256, 24 259, 667 P.2d 558 (1983). Though good faith is a question of 25 fact, Oregon courts have not yet defined good faith in the 26 settlement context.51 Id. 50F 27 51 Neither party has provided any controlling Oregon authority to the 28 1 There is no dispute that Chadwick has provided proper 2 notice. 3 Chadwick provided evidence of good faith. The declarations 4 supporting the motion have been summarized above. The evidence 5 is there was no known problem with Chadwick locating the 6 alluvial wells or his monitoring of the groundwater connected to 7 the failure of the waste management system. IRZ presented no 8 facts contesting this—only vague speculation. Plaintiff himself 9 hired Chadwick to assist in the post-petition phase of the 10 project to help satisfy the ODA’s requirements and demands 11 during the misfortunate failure of the dairy waste system and 12 ensuing administration of the property. 13 14 Supporting Affidavits 15 Lastly, IRZ contests Chadwick’s declarations in support of 16 the motion as lacking personal knowledge of Chadwick’s work on 17 this project.52 The declarants, Attorney Michael A. Dias, 51F 18 Plaintiff Trustee Randy Sugarman, and General Manager Joel 19 Edmonds are individuals who were not involved in the operations 20 of the farm during the relevant time period, and thus IRZ claims 21 the declarations should be considered irrelevant as to any 22 determination of Chadwick’s liability. 23 Chadwick replies that IRZ has failed to define the 24 “relevant period.”53 On the contrary, Chadwick was hired by 52F 25 Plaintiff to work for him while the dairy was being remediated 26 for sale. And though Joel Edmonds became involved in the dairy 27 52 IRZ’s Mem. P. & A., Doc. #609. 28 1 post-petition, he managed its operations while Chadwick was 2 still performing groundwater monitoring services. Thus, both 3 Plaintiff and Edmonds have first-hand knowledge of the 4 groundwater monitoring and reporting performed by Chadwick, as 5 | well as the requirements by the ODA to maintain the CAFO permit. 6 | Attorney Dias’ declaration authenticates the Settlement 7 | Agreement and how it was reached. 8 The court agrees that the three declarations are all 9 relevant. Further, the declarations are dispositive in the 10 absence of contrary evidence submitted by IRZ. 11 12 CONCLUSION 13 Chadwick has set forth an evidentiary basis for finding 14 that the Settlement Agreement was executed in good faith. IRZ 15 has failed to meet its burden of proving the Settlement 16 | Agreement was executed in bad faith. Accordingly, the court 17 recommends the District Court GRANT the motion. 18 The court will issue a subsequent order setting deadlines 19 for objections to this proposed report and recommendation to be 20 | heard in District Court before the Honorable Ana de Alba. 21 22 Dated: Jan 17, 2023 By the Court 23
25 ené Lastreto II, Judge United States Bankruptcy Court 26 27 28
1 Instructions to Clerk of Court Service List - Not Part of Order/Judgment 2
3 The Clerk of Court is instructed to send the Order/Judgment or other court generated document transmitted herewith to the 4 parties below. The Clerk of Court will send the Order via the BNC or, if checked , via the U.S. mail. 5
6 Tracy A. Agrall 246 W. Shaw 7 Fresno CA 93704
8 Steve Alfieris 502 West Grangeville Blvd 9 Hanford CA 93230
10 Hagop T. Bedoyan 7647 N. Fresno Street 11 Fresno CA 93720
12 Michael Brown 1809 West Main Street, Suite H 13 Visalia CA 93291
14 D. Gary Christensen 3400 U.S. Bancorp Tower 111 S.W. 5th Ave 15 Portland OR 97204
16 Paula C. Clark 502 West Grangeville Blvd 17 Hanford CA 93230
18 Ronald A. Clifford 1100 Town and Country Rd., Ste 1250 19 Orange CA 92868
20 Michael A. Dias 502 W Grangeville Blvd 21 Hanford CA 93230
22 Anthony Dutra 425 Market Street 23 26th Floor San Francisco CA 94105 24 Mark F. Enenbach 25 First National Tower #3700 1601 Dodge St 26 Omaha NE 68102
27 David A. Foraker 111 SW 5th Ave #3400 28 Portland OR 97204 1 Vanessa Triplett Kuchulis 111 S. W. 5th Ave #3400 2 Portland OR 97204
3 Sanford R. Landress 3400 U.S. Bancorp Tower 4 111 SW 5th Ave Portland OR 97204 5 John H. MacConaghy 6 645 First St., West, Suite D Sonoma CA 95476 7 Randy Sugarman 8 583 1st St W Sonoma CA 95476 9 Aaron Moore 10 1600 West St. Redding CA 96001 11 James J. Niemeier 12 First National Tower, Suite 3700 1601 Dodge Street 13 Omaha NE 68102
14 Kyle D. Sciuchetti 111 SW Fifth Ave #3400 15 Portland OR 97204
16 Lindy H. Scoffield 3043 Gold Canal Dr #100 17 PO Box 269127 Sacramento CA 95826-9127 18 Shanon J Slack 19 2030 Main Street Suite 1300 20 Irvine CA 92614
21 Randy Sugarman 583 1st St W 22 Sonoma CA 95476
23 Benjamin P. Tarczy 111 SW Fifth Avenue, Suite 3400 24 Portland OR 97204
25 Duncan C. Turner Badgley Mullins Turner PLLC 26 19929 Ballinger Way NE #200 Seattle WA 98155 27 28 1 Scot M. Tyler 100 N. Tryon St #4700 2 Charlotte NC 28202
3 Kurt F. Vote 265 E. River Park Circle, Suite 310 4 Fresno CA 93720
5 Riley C. Walter 265 E. River Park Circle Suite 310 6 Fresno CA 93720
7 Brianna J. Wellman 111 SW Fifth Ave #3400 8 Portland OR 97204
9 Neal L. Wolf 425 Market St 26th Fl 10 San Francisco CA 94105
11 Tracy Hope Davis Gregory S. Powell 12 U.S. Trustee’s Office 2500 Tulare St #1401 13 Fresno CA 93721
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