Far West Financial Corp. v. D & S Company , 46 Cal. 3d 796 ( 1988 )

Opinion

ARGUELLES, J.

Californiahas adopted a variety of statutes to promote the voluntary settlement of litigation. One of these provisions, section 877.6, subdivision (c) of the Code of Civil Procedure,¹ provides that when a defendant in a tort action enters into a settlement agreement with the plaintiff and the trial court determines that the settlement was made in “good faith,” the trial court’s good faith determination “shall bar any other joint tortfeasor from any further claims against the settling tortfeasor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” The issue presented here is whether, under this statutory scheme, a defendant who has entered into a good faith settlement remains vulnerable to a claim by a nonsettling defendant for “total equitable indemnity,” or whether such a claim is covered by the statute and is barred by the good faith settlement.

The great majority of Court of Appeal decisions which have addressed this question have concluded that a claim for total equitable indemnity, like other equitable indemnity claims, is barred by a good faith settlement.² A few Court of Appeal decisions, however, have ruled that a claim for total equitable indemnity survives such a settlement.³ We granted review to resolve this conflict.

As we shall explain, in light of both the legislative history and the fundamental purposes of section 877.6, subdivision (c), we agree with the majority of Court of Appeal decisions that the statute must properly be interpreted as barring nonsettling tortfeasors from pursuing a claim for total equitable indemnity against a defendant who has entered into a good faith settlement. A contrary conclusion would leave a defendant who has entered into a good faith settlement vulnerable to further litigation and additional liability in many cases and would thereby substantially impair the statutory objective of promoting voluntary settlements. Furthermore, as we shall see, this interpretation of the provision does not place a unique or undue burden on the rights of defendants seeking total equitable indemnity, for the interests of such defendants—like the interests of all other defendants who may potentially be harmed by a proposed settlement agreement—may be properly protected through the trial court’s determination of whether the proposed settlement agreement satisfies the statutory “good faith” requirement.

Because the Court of Appeal in the case at bar correctly interpreted, the statute, we affirm the judgment.

I

In 1972, Far West Financial Corporation, a real estate developer involved in the financing and developing of condominiums in Los Angeles County,⁴ entered into a contract with D & S Company, Inc. (D & S), a general contractor, for the building of a condominium project, the Studio Village Townhouse Development, in Los Angeles County. The project was apparently completed in the mid-1970’s.

Shortly after the completion of the project and the sale of the condominiums to private owners, a number of defects in the common areas of the project appeared. In response to complaints by the homeowners, Far West, the developer and seller of the units, made some repairs. In October 1976, the Studio Village Homeowners Association (hereafter the Association or plaintiff) and Far West entered into a settlement and release agreement in which Far West agreed to make a number of additional specified repairs and to pay the Association $22,750 in return for the Association’s agreement to release Far West from any further liability for defects in the project.

Several years later, after a heavy rainstorm season in 1977-1978, many additional, serious defective conditions—which had previously been latent—became evident, affecting the roof, ground drainage, underground plumbing, area lighting, building settlement, painting and exterior of the project. In response to the appearance of these serious defects, the Association filed the present action in December 1979 against Far West, D & S, and numerous subcontractors, engineering firms and architects who had worked on the project.

The Association’s third amended complaint, filed in October 1980, sought to set aside the earlier release agreement between the Association and Far West and sought recovery against various defendants on theories of (1) fraudulent concealment of the defects at the time of the initial settlement agreement, (2) negligent and intentional misrepresentation, (3) strict liability, (4) breach of express and implied warranties, (5) negligence, and (6) fraud and deceit.

In July 1981, after answering the complaint, Far West filed a cross-complaint against D & S and various Doe defendants, seeking either “complete indemnification from or partial contribution from” those defendants. Far West claimed that D & S had exercised complete control over the construction of the project and that if there were any deficiencies in the construction, such defects were directly attributable to D & S or to the subcontractors D&S had hired and supervised. Thereafter, D & S and a number of the other defendants filed their own indemnity cross-complaints against each other and against Far West.

During the summer of 1983, one of the defendants, structural engineers who had worked on a portion of the underground construction, settled with plaintiff for $100,000. On motion the trial court found the settlement in good faith and dismissed the cross-complaints against that defendant.

In early 1984, Far West and plaintiff entered into a settlement agreement under which Far West paid plaintiff $315,000 outright and provided a sliding scale guaranty of an additional $35,000 recovery, in return for plaintiff’s agreement to release Far West from any further liability. On Far West’s motion, the trial court found the settlement to be in good faith and dismissed the numerous indemnity cross-complaints which were then pending against Far West. Although the actions against Far West had been dismissed, Far West continued to pursue its own cross-complaint against the remaining defendants seeking indemnification of the $315,000 it had paid to plaintiff. It is clear under existing precedent that Far West had the right to continue to seek indemnification in this manner (see, e.g., Sears, Roebuck & Co. v. International Harvester Co. (1978) 82 Cal.App.3d 492, 496 [147 Cal.Rptr. 262]; Bolamperti v. Larco Manufacturing (1985) 164 Cal.App.3d 249, 255 [210 Cal.Rptr. 155]), and no party challenges Far West’s indemnity claim in this respect.

In August 1984, in accordance with the suggestions of a settlement judge at a voluntary settlement conference, D & S and a number of subcontractors (hereafter sometimes referred to as the D & S defendants) entered into a settlement agreement (hereafter sometimes referred to as the D & S settlement) with plaintiff under which the D & S defendants agreed to pay plaintiff $450,000 in return for a release of plaintiff’s claims against them. The settlement agreement was conditioned on (1) the trial court’s determination that the settlement was in good faith and (2) the dismissal of all outstanding cross-complaints against the D & S defendants.

On September 4, 1984, the D & S defendants moved for an order under section 877.6 declaring the settlement agreement in good faith and dismissing all of the cross-complaints pending against them. On September 14, Far West filed a partial opposition to the D & S defendants’ motion; in that opposition, Far West did not challenge the good faith nature of the D & S settlement, but simply opposed the D & S defendants’ request for an order dismissing Far West’s cross-complaint for indemnification against such defendants. Far West contended that under section 877.6 a good faith settlement does not operate to bar a claim for complete or total indemnity, as contrasted with a claim for partial indemnity or contribution, and it maintained that its cross-complaint sought total indemnity from D & S and the other defendants who were parties to the $450,000 settlement. On that same date, September 14, 1984, Far West also filed a separate motion, seeking leave to file a second amended cross-complaint in which it proposed to add claims for express contractual indemnity and implied contractual indemnity to its previous claim for “complete indemnification ... or partial contribution.”

The D & S defendants’ motion for a good faith determination came on for hearing on September 21, 1984. After considering the parties’ contentions, the trial court—without specifically passing on Far West’s motion for leave to file an amended cross-complaint—found the D & S settlement to be in good faith and dismissed all of the cross-complaints, including Far West’s cross-complaint, against the settling defendants. Two weeks later, on October 4, the trial court heard and denied Far West’s request for leave to file an amended cross-complaint, noting the belated nature of the request. On October 15, the court entered a formal order finding the D & S settlement in good faith and dismissing all cross-complaints against the parties to that agreement.

Far West appealed the dismissal of its cross-complaint, contending, inter alia, that insofar as the cross-complaint embodied a claim for total equitable indemnity it could not be extinguished by a good faith settlement and should not have been dismissed. The Court of Appeal, while noting the conflict in prior Court of Appeal decisions on the issue, found the position reached in the majority of decisions persuasive and followed those decisions in concluding that even if Far West could properly maintain an action for total equitable indemnity on the facts of this case, such a claim was properly barred by the trial court’s determination that the D & S settlement agreement was a good faith settlement within the meaning of section 877.6.

As noted, we granted review to resolve the conflict in the Court of Appeal decisions on this question.⁵

II

A.

Section 877.6, subdivision (c) provides in relevant part that when an alleged tortfeasor enters into a settlement agreement with the plaintiff “[a] determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor . . . from any further claims against the settling tortfeasor . . . for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Italics added.)⁶

Far West contends that because the statute does not expressly refer to claims for “total indemnity,” the provision should not be interpreted to prohibit a nonsettling party, who may be only vicariously or derivatively liable for a plaintiff’s injury, from pursuing a claim for total equitable indemnity against a directly or primarily responsible tortfeasor, even if a trial court has found that such a tortfeasor’s settlement with the plaintiff satisfies the “good faith” requirement of section 877.6. The D & S defendants, in turn, contend that the terms “equitable comparative contribution, or partial or comparative indemnity” in section 877.6, subdivision (c), were intended to refer to the entire spectrum of claims pursued under California’s current common law equitable indemnity doctrine, and that, in light of both the history and purposes of the provision, no distinction may properly be drawn between claims for total equitable indemnity and all other claims for equitable indemnity so as to leave defendants who have entered into good faith settlements subject to claims for total equitable indemnity.

As the division in the past Court of Appeal decisions on this subject suggests (see fns. 2, 3, ante), the language of section 877.6 is, on its face, reasonably susceptible to either of the suggested interpretations. Although the statute does not expressly refer to “total indemnity” claims, the section does expressly apply to “partial or comparative” indemnity claims; if the Legislature clearly intended the section to apply only to claims seeking partial indemnity, the reference to “comparative” indemnity could be viewed as superfluous. In context, the issue before us cannot properly be decided by reference to the “plain language” of the statute itself.⁷ Rather, to resolve the question, it is necessary to consider the background and legislative history of the provision and to assess which interpretation is most compatible with the legislative purposes of the measure.

B.

In Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488 [213 Cal.Rptr. 256, 698 P.2d 159] (hereafter Tech-Bilt), we reviewed the common law and statutory background of section 877.6, subdivision (c) at some length and explained that, in large part, the provision represents a codification of the principles established by this court’s decision in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 [146 Cal.Rptr. 182, 578 P.2d 899] (hereafter American Motorcycle). (See Tech-Bilt, supra, 38 Cal.3d at pp. 493-496.) Accordingly, we turn initially to the American Motorcycle decision.

In American Motorcycle, the court addressed, inter alia, the broad question of what effect, if any, the adoption of comparative negligence principles in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393] should have on California’s preexisting common law equitable indemnity doctrine which permitted one tortfeasor to completely shift its liability for an injury to a more culpable tortfeasor under some circumstances. (American Motorcycle, supra, 20 Cal.3d at pp. 591-598.) After examining the origins of the equitable indemnity doctrine and the courts’ largely unsuccessful struggle to frame an appropriate test “for determining when the relative culpability of the [tortfeasors was] sufficiently disparate to warrant placing the entire loss on one party and completely absolving the other” {id. at p. 594), the American Motorcycle court ultimately concluded that “the existing California common law equitable indemnity doctrine—while ameliorating inequity and injustice in some extreme cases—suffers from the same basic ‘all or nothing’ deficiency as the discarded contributory negligence doctrine and falls considerably short of fulfilling Li‘s goal of ‘a system under which liability for damage will be borne by those whose negligence caused it in direct proportion to their respective fault.” {Id. at p. 591.) As a consequence, the court held in American Motorcycle that “the current equitable indemnity rule should be modified to permit a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.” (Id. at p. 598.)

At the same time as it modified the common law equitable indemnity doctrine to permit partial indemnity on a comparative fault basis, the American Motorcycle court recognized the necessity of dealing with the question of how a tortfeasor’s right to pursue a claim for partial or comparative indemnity against another tortfeasor would be affected when the tortfeasor from whom indemnity was sought entered into a settlement agreement with the plaintiff. Relying on the provisions of section 877, subdivision (b)— which dealt with the effect of a settlement in the related area of contribution between tortfeasors—as reflecting a strong state policy in favor of promoting settlement of claims, the American Motorcycle court concluded that while “section 877, by its terms, releases a settling tortfeasor only from liability for contribution and not partial indemnity, . . . from a realistic perspective the legislative policy underlying the provision dictates that a tortfeasor who has entered into a ‘good faith’ settlement [citation] with the plaintiff must also be discharged from any claim for partial or comparative indemnity that may be pressed by a concurrent tortfeasor.” (Italics added.) (20 Cal.3d at p. 604.) Quoting the observations of the then-recent Court of Appeal decision in Stambaugh v. Superior Court (1976) 62 Cal.App.3d 231, 236 [132 Cal.Rptr. 843], that “\f]ew things would be better calculated to frustrate [section 877’s] policy, and to discourage settlement of disputed tort claims, than knowledge that such a settlement lacked finality and would lead to further litigation with one’s joint tortfeasors, and perhaps further liability,” the American Motorcycle court emphasized that that observation was “as applicable in a partial indemnity framework as in the contribution context.” (Italics added.) (American Motorcycle, supra, 20 Cal.3d at p. 604.) Accordingly, the American Motorcycle court held that, under its decision, a tortfeasor who entered into a good faith settlement with a plaintiff would be free from any claim for partial or comparative indemnity. (Ibid.)

Although nothing in American Motorcycle suggests that the decision, in modifying the preexisting all-or-nothing equitable indemnity doctrine, intended to create a wholly new legal doctrine, separate and distinct from the old total equitable indemnity doctrine, Far West relies on a footnote in Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal.3d 322 [146 Cal.Rptr. 550, 579 P.2d 441], a decision handed down a few months after American Motorcycle, supra, 20 Cal.3d 578, to support its claim that “total equitable indemnity” and “comparative equitable indemnity” are separate legal concepts and should not be treated similarly for purposes of section 877.6, subdivision (c).

In Safeway Stores, a patron who had been injured by a defective shopping cart sued Safeway and the manufacturer of the cart on negligence and strict product liability theories; the jury found both defendants liable, and apportioned 80 percent of the liability to Safeway and 20 percent to the manufacturer. On appeal, the principal issue before the court was whether “the comparative fault principle . . . should be utilized as the basis for apportioning liability between two tortfeasors, one whose liability rests upon California’s strict product liability doctrine and the other whose liability derives, at least in part, from negligence theory.” (21 Cal.3d at p. 325.) The Safeway Stores court recognized that some commentators had suggested that there was “a fundamental doctrinal obstacle” to the application of the comparative fault principle in this context “in that no logical basis can be found for comparing the relative ‘fault’ of a negligent defendant with that of a defendant whose liability rests on the ‘no fault’ concept of strict product liability.” (Id. at p. 331.) Nonetheless, the Safeway Stores court—relying on the then-recent decision in Daly v. General Motors Corp., supra, 20 Cal.3d 725, 742, which had concluded that comparative fault principles should apply in assessing the liability of a strictly liable defendant to a negligent plaintiff—rejected the objections to the application of the comparative indemnity doctrine in this context, explaining that “the suggested difficulties are more theoretical than practical” (Safeway Stores, supra, 21 Cal.3d at p. 331), and pointing out that “experience in other jurisdictions demonstrates that juries are fully competent to apply comparative fault principles between negligent and strictly liable defendants.” (Ibid.)

In the course of the Safeway Stores opinion, the court observed in a footnote that “[i]n the instant case the jury found that Safeway was itself negligent in failing to safely maintain its carts, and thus Safeway’s liability is in no sense solely derivative or vicarious. Accordingly, we have no occasion to determine in this case whether the comparative indemnity doctrine should be applied in a situation in which a party's liability is entirely derivative or vicarious in nature. [Citations.]” (Italics added.) (21 Cal.3d 322, 332, fn. 5.) Far West relies heavily on the emphasized language as suggesting that the comparative indemnity doctrine may be distinct from the total indemnity doctrine, and as leaving open the question whether the pre-American Motorcycle total equitable indemnity doctrine, rather than the comparative indemnity doctrine, should apply to a case in which one tortfeasor’s liability is entirely derivative or vicarious in nature. Although this footnote may provide some oblique support for Far West’s position, the footnote clearly did not purport actually to decide whether the total indemnity doctrine had survived the American Motorcycle decision (supra, 20 Cal.3d 578) as a distinct doctrine, and certainly did not address the further question—the question at issue in the present case—whether an action for total equitable indemnity would be impervious to the effect of a good faith settlement.

Less than two years after the Safeway Stores decision, our court, in the course of an opinion which considered when an action for comparative indemnity accrues, did speak directly to the question of whether the American Motorcycle decision (supra, 21 Cal.3d 322), intended the comparative indemnity doctrine to constitute the basis for a new legal claim, distinct from the pre-American Motorcycle total equitable indemnity action. In People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744 [163 Cal.Rptr. 585, 608 P.2d 673], we explained; “[T]he American Motorcycle decision clearly reveals that this court did not purport to create a wholly new equitable indemnity action resting on a different theoretical basis than the pre-American Motorcycle equitable indemnity doctrine. • . . [H] [In American Motorcycle] we concluded that in order to bring the California equitable indemnity doctrine into line with its historical and theoretical foundations ‘the current equitable indemnity rule should be modified to permit a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.’ Thus, American Motorcycle did not establish a new cause of action separate and distinct from the traditional equitable indemnity action, but simply modified the all-or-nothing aspect of the pre-American Motorcycle doctrine to permit partial indemnification in appropriate cases.” (26 Cal.3d at pp. 756-757 [citations omitted].)

Thus, People ex rel. Dept. of Transportation, supra, 26 Cal.3d 744, makes it clear that after American Motorcycle, supra, 20 Cal.3d 578, there are not two separate equitable indemnity doctrines in California, but a single “comparative indemnity” doctrine which permits partial indemnification on a comparative fault basis in appropriate cases. To be sure, there is nothing in either American Motorcycle or People ex rel. Dept. of Transportation which suggests that it would necessarily be improper, in a comparative indemnity action, for a trier of fact to determine that the facts and equities in a particular case support a complete shifting of a loss from one tortfeasor to another, rather than, for example, a 60 percent/40 percent or 95 percent/5 percent division of the loss. (Cf. E. L. White, Inc. v. City of Huntington Beach (1982) 138 Cal.App.3d 366, 373-377 [187 Cal.Rptr. 879].)⁸ Even when such a total shift of loss may be appropriate, however, the indemnitee’s equitable indemnity claim does not differ in its fundamental nature from other comparative equitable indemnity claims. Accordingly, we think the Court of Appeal in Standard Pacific of San Diego v. A. A. Baxter Corp., supra, 176 Cal.App.3d 577, 587-588, properly analyzed the teaching of People ex rel. Dept. of Transportation, supra, 26 Cal.3d 744, when it observed that “ [comparative equitable indemnity includes the entire range of possible apportionments, from no right to any indemnity to a right of complete indemnity. Total indemnification is just one end of the spectrum of comparative equitable indemnification.”

In July 1980, just a few months after the decision in People ex rel. Dept. of Transportation was rendered, the Legislature enacted section 877.6. The provision established an orderly procedure to permit a trial court to determine, prior to trial, whether a settlement entered into by one of a number of tortfeasors was made in good faith, and, in subdivision (c), codified American Motorcycle’s holding that when such a settlement is determined to be in good faith, the settlement absolves the settling defendant of any further liability for “equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” Although we have found nothing in the legislative history of section 877.6 which indicates whether or not the Legislature had our then-recent decision in People ex rel. Dept. of Transportation, supra, 26 Cal.3d 744, specifically in mind when it enacted the measure, there is no indication that the Legislature intended to distinguish some equitable indemnity claims from others or intended to leave a defendant who had entered into a good faith settlement vulnerable to a claim for total equitable indemnity.⁹ In light of the clear explanation in People ex rel. Dept. of Transportation that the American Motorcycle decision did not create a new, separate and distinct subclass of equitable indemnity claims but simply modified the traditional doctrine to permit a sharing of loss on a comparative fault basis, it appears reasonable to interpret the reference to claims for “equitable comparative contribution, or partial or comparative indemnity” in section 877.6, subdivision (c), as embodying the entire spectrum of potential equitable indemnity claims. Thus, the background and legislative history of the provision support the interpretation of the statute adopted in the majority of past Court of Appeal decisions.¹⁰

C.

Furthermore, the purposes which underlie section 877.6, subdivision (c) strongly support an interpretation which would include a claim for total equitable indemnity within the claims that are barred by a good faith settlement. In Tech-Bilt, supra, 38 Cal.3d 488, and more recently in Abbott Ford v. Superior Court (1987) 43 Cal.3d 858 [239 Cal.Rptr. 626, 741 P.2d 124], we explained that the good faith settlement provision of this statute was intended to further two separate objectives: “[1] the encouragement of settlements and [2] the equitable allocation of costs among multiple tortfeasors.” (Tech-Bilt, supra, 38 Cal.3d at pp. 498-499; Abbott Ford, supra, 43 Cal.3d at pp. 871-872.) As Abbott Ford indicates, we have not attempted to rank these objectives in a fixed hierarchy but instead have stressed the importance of attempting to harmonize these goals (43 Cal.3d at p. 872, fn. 15), emphasizing that the dual purposes of the provision “would be disserved by an approach which emphasizes one to the virtual exclusion of the other.” (Tech-Bilt, supra, 38 Cal.3d at p. 499.) As we shall see, in this context the two statutory objectives can be harmonized only by including claims for total equitable indemnity within the aegis of section 877.6, subdivision (c).

1.

To begin with, it is evident that the statutory objective of promoting settlement agreements would be impaired by an interpretation of section 877.6, subdivision (c) which leaves a tortfeasor who has entered into a good faith settlement vulnerable to further liability for total equitable indemnity. As noted above, in American Motorcycle this court specifically recognized that “ ‘[f]ew things would be better calculated ... to discourage settlement of disputed tort claims, than knowledge that such a settlement lacked finality and would lead to further litigation with one’s joint tortfeasors, and perhaps further liability.’ ” (American Motorcycle, supra, 20 Cal.3d 578, 604 [quoting Stambaugh v. Superior Court, supra, 62 Cal.App.3d 231, 236].) That observation is obviously no less true when the “further litigation” which a settling defendant may face is a claim for total equitable indemnity than when the claim is one for contribution or for partial equitable indemnity. Thus, there seems little doubt that the exclusion of claims of total equitable indemnity from the reach of section 877.6, subdivision (c) would create a substantial obstacle to settlement in cases in which a defendant who is contemplating settlement is faced with a claim for total indemnity.

Although Far West does not seriously take issue with the above proposition,¹¹ it seeks to minimize the effect that its proposed interpretation would have on the settlement of claims generally, arguing that the exclusion of claims for total equitable indemnity from the reach of section 877.6, subdivision (c) would affect only a small proportion of cases and that in such cases it is essential to permit an “innocent” tortfeasor to obtain total indemnity, notwithstanding any good faith settlement, if the second statutory objective—the fair apportionment of loss among multiple tortfeasors—is to be achieved. For a number of reasons, this argument is not persuasive.

First, we cannot agree that an exception for claims for total equitable indemnity will, as a realistic matter, affect as few cases as Far West suggests. As a review of the numerous recent decisions on this issue attests, claims for total indemnity have been made, and undoubtedly will continue to be made, by nonsettling tortfeasors in a wide variety of contexts, with nonsettling tortfeasors frequently characterizing their potential liability as merely “derivative” or “vicarious” in relation to the allegedly more direct malfeasance of the settling tortfeasor.¹² Although if such total indemnity claims were permitted to proceed to trial the settling defendant might well ultimately succeed in defeating the claim for total indemnity in most instances by demonstrating that the nonsettling tortfeasor’s liability was not merely vicarious or derivative, such success would be but a Pyrrhic victory as far as the settlement process is concerned. As explained above, the very fact that the total indemnity claim remained to be litigated despite a good faith settlement would have already taken its toll in discouraging the potential indemnitor from entering into a settlement agreement with the plaintiff in the first place.

Furthermore, even when it is clear from the relationship of the settling and nonsettling defendants that the nonsettling defendant is vicariously or derivatively liable for the acts of the settling defendant, that factor alone still provides no assurance that a total shifting of loss is warranted under equitable indemnity principles. To begin with, there are many instances in which a defendant who is vicariously liable for another’s acts may also bear some direct responsibility for an accident, either on the basis of its own action—for example, the negligent hiring of an agent—or of its own inaction—for example, the failure to provide adequate supervision of the agent’s work. In addition, even when a nonsettling tortfeasor’s liability may be wholly vicarious or derivative in nature, it does not invariably follow that equitable considerations will, as a matter of law, always call for the total shifting of loss to the more directly culpable tortfeasor. As the court explained in Safeway Stores, supra, 21 Cal.3d 322, in discussing the application of equitable indemnity principles in the product liability context, “even in cases in which one or more tortfeasors’ liability rests on the principle of strict liability, fairness and other tort policies, such as deterrence of dangerous conduct or encouragement of accident-reducing behavior, frequently call for an apportionment of liability among multiple tortfeasors.” (21 Cal.3d at p. 330. See, e.g., Ford Motor Co. v. Robert J. Poeschl, Inc. (1971) 21 Cal.App.3d 694, 699 [98 Cal.Rptr. 702] [suggesting that circumstances of that case warranted apportionment of loss between manufacturer and retailer of a defective product], discussed with approval in American Motorcycle, supra, 20 Cal.3d 578, 595-597.)¹³

As discussed above, in the American Motorcycle decision our court reviewed past judicial attempts to formulate a satisfactory standard for determining under what circumstances liability should be totally shifted from one tortfeasor to another, and found that the task had been largely a futile one. {American Motorcycle, supra, 20 Cal.3d at pp. 594-595.) Far West’s proposed interpretation of section 877.6, subdivision (c) would reintroduce the intractable problem of attempting to define, through a general formula, the appropriate occasions for total equitable indemnity, one of the key problems which the adoption of comparative indemnity was intended to overcome. Because of the uncertainty and lack of clarity inherent in any such formula, if we were to adopt Far West’s interpretation of section 877,6, subdivision (c), the practical result would be that in many, if not most, cases a tortfeasor who was contemplating settlement with the plaintiff would have to realistically anticipate that even if its settlement agreement were found in good faith, it would still face continued litigation on a cotortfeasor’s total indemnity claim.

Thus, contrary to Far West’s suggestion, we believe that, as a practical matter, its proposed interpretation of the statute is likely to discourage settlements in a wide range of cases.

2.

Furthermore, even if it were possible to confine the antisettlement effect of its proposed interpretation of the statute to cases in which the nonsettling defendant was in fact entitled to 100 percent indemnity, the second prong of Far West’s argument—i.e., that a claim for total indemnity must survive a good faith settlement if the statutory goal of a fair apportionment of loss is to be achieved—is also flawed. This contention fails to take adequate account of the nature of the trial court’s “good faith” determination under section 877.6 as explained in this court’s decision in Tech-Bilt, supra, 38 Cal.3d 488, and the role which the good faith determination plays in furthering the fair-apportionment objective.

In Tech-Bilt, we disapproved a number of earlier Court of Appeal decisions which had indicated that a settlement agreement should be found in good faith for purposes of section 877.6 so long as the settling parties had not engaged in any “tortious conduct” toward the nonsettling parties (see, e.g., Dompeling v. Superior Court (1981) 117 Cal.App.3d 798, 809-810 [173 Cal.Rptr. 38]), concluding instead that “[a] more appropriate definition of ‘good faith,’ in keeping with the policies of American Motorcycle and the statute, would enable the trial court to inquire, among other things, whether the amount of the settlement is within the reasonable range of the settling tortfeasor’s proportional share of comparative liability for the plaintiff’s injuries.” (Tech-Bilt, supra, 38 Cal.3d at p. 499.) Accordingly, Tech-Bilt held that in determining whether a settlement was made in good faith for purposes of section 877.6, a trial court should consider, among other factors, whether the amount paid in settlement bears a reasonable relationship to—or, in more colloquial terms, is “in the ballpark” of—the settlor’s proportionate share of liability. (Tech-Bilt, supra, 38 Cal.3d at pp. 499-500.)¹⁴

As we explained in our recent decision in Abbott Ford, supra, 43 Cal.3d 858, 874: “By requiring a settling defendant to settle ‘in the ballpark’ in order to gain immunity from contribution or comparative indemnity, the good faith requirement of sections 877 and 877.6 assures that—by virtue of the ‘set-off’ embodied in section 877, subdivision (a)—the nonsettling defendants’ liability to the plaintiff will be reduced by a sum that is not ‘grossly disproportionate’ to the settling defendant’s share of liability, thus providing at least some rough measure of fair apportionment of loss between the settling and nonsettling defendants.”

Thus, under Tech-Bilt, supra, 38 Cal.3d 488, a vicariously or derivatively liable tortfeasor, like any other minimally culpable tortfeasor, is afforded substantial protection against harm from an unfair settlement between a more culpable tortfeasor and the plaintiff. If the more culpable tortfeasor settles with the plaintiff before the vicariously liable tortfeasor, and if the settlement does not require the more culpable tortfeasor to bear its fair share of the loss, the trial court can find that the settlement is not in good faith and, as a consequence, the settlement will not bar the less culpable tortfeasor from pursuing its equitable indemnity claim against the more culpable tortfeasor.¹⁵

In similar fashion, if, as in this case, an allegedly vicariously liable tortfeasor has already settled with the plaintiff in order to limit its potential liability and has continued to pursue its indemnity claim, the allegedly less culpable tortfeasor retains the right to challenge the good faith of any subsequent settlement by the allegedly more culpable tortfeasor. In assessing the good faith of any such subsequent settlement pursuant to the TechBilt factors, the trial court must properly consider, inter alia, whether the proposed settlement is within the reasonable range of the settling tortfeasor’s total proportional liability, taking into account the settling tortfeasor’s potential liability for indemnity to the allegedly vicariously liable tortfeasor as well as its remaining liability to the plaintiff. (See Standard Pacific of San Diego v. A. A. Baxter Corp., supra, 176 Cal.App.3d 577, 589.)¹⁶ If the trial court determines that the proposed settlement is not within the reasonable range of the settling tortfeasor’s proportional liability and would leave the less culpable tortfeasor to bear an unfair share of the loss, the trial court may withhold its good faith imprimatur, and the less culpable tortfeasor will be able to proceed with its equitable indemnity claim.¹⁷

It is true, of course, that under the Tech-Bilt approach a nonsettling tortfeasor may be left to bear some portion of the plaintiff’s loss, even in situations in which, if the indemnity claim had gone to trial, the trier of fact might have concluded that the equities supported a total shifting of loss to the more culpable tortfeasor. This follows from Tech-Bilt's recognition (1) that a settlement may be found in good faith even if the settling tortfeasor does not pay a sum precisely commensurate with its proportionate share of liability (Tech-Bilt, supra, 38 Cal.3d at p. 499) and (2) that it is appropriate that a settling defendant “pay less in settlement than he would if he were found liable after a trial.” (Ibid.)

In this regard, however, a nonsettling vicariously or derivatively liable tortfeasor is, of course, in exactly the same position as any other minimally culpable tortfeasor, and the minor departure from a theoretically precise allocation of loss which the statute sanctions is simply the price that nonsettling defendants uniformly bear to promote the settlement of litigation. By contrast, if we were to adopt the interpretation of section 877.6, subdivision (c) sought by Far West, exempting tortfeasors claiming total indemnity from the effect of a good faith settlement, we would not further the objective of achieving a fair apportionment of costs among all tortfeasors as Far West suggests, but rather would simply create an unfair and arbitrary distinction between those tortfeasors who should equitably bear only a minuscule portion of the loss and those who should equitably be permitted to shift all of the loss. The purposes of section 877.6, subdivision (c) do not support such a distinction.

III

In sum, in light of the judicial background, the legislative history and the statutory purposes of section 877.6, subdivision (c), we conclude that a tort defendant who has entered into a good faith settlement within the meaning of section 877.6, subdivision (c) is absolved of any further liability for all equitable indemnity claims, including claims seeking total equitable indemnity.

The judgment of the Court of Appeal is affirmed.

Lucas, C. J., Mosk, J., Broussard, J., and Panelli, J., concurred.

1 Unless otherwise stated, all section references are to the Code of Civil Procedure.

2 City of Sacramento v. Gemsch Investment Co. (1981) 115 Cal.App.3d 869 [171 Cal.Rptr. 764]; Turcon -Construction, Inc. v. Norton-Villiers, Ltd. (1983) 139 Cal.App.3d 280 [188 Cal.Rptr. 580]; Kohn v. Superior Court (1983) 142 Cal.App.3d 323 [191 Cal.Rptr. 78]; Lopez v. Blecher (1983) 143 Cal.App.3d 736 [192 Cal.Rptr. 190]; Standard Pacific of San Diego v. A. A. Baxter Corp. (1986) 176 Cal.App.3d 577 [222 Cal.Rptr. 106]; IRM Corp. v. Carlson (1986) 179 Cal.App.3d 94 [224 Cal.Rptr. 438]; Horton v. Superior Court (1987) 194 Cal.App.3d 727, 739 [238 Cal.Rptr. 467],

3 Huizar v. A hex Corp. (1984) 156 Cal.App.3d 534 [203 Cal.Rptr. 47]; Angelus Associates Corp. v. Neonex Leisure Products, Inc. (1985) 167 Cal.App.3d 532 [213 Cal.Rptr. 403].

4 Far West Financial Corporation is a holding company incorporated in Delaware and licensed to do business in California. Far West Savings and Loan Association, the successor in interest to State Mutual Savings and Loan Association, is a California subsidiary of Far West Financial Corporation and is engaged in the business of financing and developing condominiums. Both entities have been joined as defendants in this action and, for convenience, both will be referred to collectively as Far West.

5 In addition to rejecting Far West’s contention with regard to the effect of a good faith settlement on a claim for total equitable indemnity, the Court of Appeal rejected Far West’s claim that the trial court had abused its discretion in denying Far West’s motion for leave to file a second amended cross-complaint to add claims for implied and express contractual indemnity. The Court of Appeal determined that the trial court properly found that Far West had provided no adequate explanation for its eleventh-hour request for leave to amend and that Far West’s delay had prejudiced the other parties who had spent considerable time and effort in negotiating a settlement agreement with knowledge only of Far West’s prior cross-complaint.

Far West’s statement of issues in its petition for review did not seek review of this aspect of the Court of Appeal’s ruling and, under the circumstances, we see no reason to disturb the Court of Appeal’s conclusion. As a consequence, we have no occasion in this case to determine whether an indemnity claim resting on an implied contract theory or arising from an express indemnification agreement is barred by a good faith settlement. We note that there is a split in Court of Appeal decisions with respect to the implied contractual indemnification question (compare IRM Corp. v. Carlson, supra, 179 Cal.App.3d 94, 109-110 [claim barred] and Stratton v. Peat, Marwick, Mitchell & Co. (1987) 190 Cal.App.3d 286, 292 [235 Cal.Rptr. 374] [same] with County of Los Angeles v. Superior Court (1984) 155 Cal.App.3d 798, 803 [202 Cal.Rptr. 444] [claim not barred] and Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985) 164 Cal.App.3d 1227, 1239 [211 Cal.Rptr. 172] [same]), and the issue is presented in another matter currently pending in our court. (Bay Development Ltd. v. Superior Court, S000888.)

6 In an amendment effective January 1, 1988, the Legislature has extended the reach of section 877.6, subdivision (c) to co-obligors on a contract debt, providing that a good faith settlement by one co-obligor bars any further claim by any co-obligor against the settling party. (Stats. 1987, ch. 677, § 3, p._.) The amendment has no application to this case.

7 Contrary to the suggestion of the Court of Appeal in Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra, 167 Cal.App.3d 532, 541, there is no legitimate basis for concluding that an indemnity action between a vicariously or derivatively liable tortfeasor and a directly liable tortfeasor is not encompassed within section 877.6, subdivision (c) on the theory that such an action is not “based on comparative negligence or comparative fault.” As our court made clear in Daly v. General Motors Corp. (1978) 20 Cal.3d 725, 736 [144 Cal.Rptr. 380, 575 P.2d 1162]—in holding that comparative fault principles could appropriately be applied to reduce the liability of a strictly liable defendant when a plaintiif’s negligence had contributed to the injury—the terms “comparative negligence” or “comparative fault” “do not, standing alone, lend themselves to the exact measurements of a micrometer-caliper, or to such precise definition as to divert us from otherwise strong and consistent countervailing policy considerations.” (20 Cal.3d at p. 736.) Indeed, in Daly itself, we suggested that “the term ‘equitable apportionment or allocation of loss’ may be more descriptive than ‘comparative fault.’ ” {Ibid.) Thus, we have never viewed the “comparative fault” terminology as so restrictive as to exclude the equitable allocation of loss between vicariously and directly liable tortfeasors. Accordingly, we reject the Angelus court’s conclusion that the wording of section 877.6, subdivision (c) unambiguously excludes claims for total equitable indemnity from the reach of the provision.

8 In E. L. White, supra, 138 Cal.App.3d 366, the Court of Appeal concluded that after American Motorcycle a vicariously liable tortfeasor could still obtain total indemnity from a concurrent tortfeasor; the E. L. White court was not faced with the question, and did not decide, whether a vicariously, liable tortfeasor could seek such indemnity from a tortfeasor who had entered into a good faith settlement.

9 As initially introduced on March 20, 1980, Assembly Bill No. 3425, 1979-1980 Regular Session, which ultimately became section 877.6, did not contain any provision which addressed the substantive effect of a good faith determination, but simply established a procedure by which any party to an action could obtain a hearing on the good faith issue prior to or at the commencement of the trial of the action.

The first version of section 877.6, subdivision (c), was added to the bill in the Assembly on May 7, 1980, and provided simply that the good faith determination would relieve the settling tortfeasor from further claims for “equitable comparative contribution based on comparative negligence or comparative fault.” From the Legislative Counsel’s Digest of the bill, it appears that the drafters intended by this language simply to codify the effect of a good faith settlement agreement under “[ejxisting law,” i.e., the American Motorcycle decision (supra, 20 Cal.3d 578).

Section 877.6, subdivision (c), was further amended in the Senate on July 1, 1980, but there is nothing in the legislative history to suggest that the expansion of the language to encompass “any further claim ... for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault,” was intended to have any effect other than to more closely track the language used in the. American Motorcycle decision. The Legislative Counsel’s Digest continued to describe the bill as simply “specifying] that any party has a right to contest the issue of the ‘good faith’ of a settlement at a noticed hearing” and did not suggest that the language of subdivision (c) was intended to alter existing law on the effect of a good faith settlement.

10 The decision in Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290 [216 Cal.Rptr. 443, 702 P.2d 601], is not contrary to this conclusion. The issue in Mesler was whether a plaintiff who had settled with a subsidiary corporation retained the right to proceed against a nonsettling parent corporation which allegedly was the alter ego of the subsidiary. Unlike this case, no party in Mesler was attempting to seek an additional recovery from a defendant who had entered into a good faith settlement with the plaintiff, and the Mesler court consequently had no occasion to consider the effect of the provisions of section 877.6, subdivision (c), or to address the two lines of Court of Appeal decisions that are at issue in this case.

In the course of its decision, the Mesler court referred in passing to section 875, subdivision (f), one of the provisions of the contribution statute enacted in 1957, which states that “[t]his title shall not impair any right of indemnity under existing law.” In context, it appears that section 875, subdivision (f), was simply intended to ensure that the 1957 legislation, affording joint tortfeasors a right to contribution, was not interpreted to deprive a tortfeasor of any right to indemnity it enjoyed under the then-existing law.

With the advent of the comparative indemnity doctrine in American Motorcycle, supra, 20 Cal.3d 578, and the subsequent adoption of section 877.6, subdivision (c), it appears clear that the Legislature contemplated that section 877.6, subdivision (c), the more recent provision which is specifically addressed to the comparative indemnity context, would govern the effect of a good faith settlement agreement on post-American Motorcycle equitable indemnity claims.

11 Justice Kaufman’s concurring and dissenting opinion does suggest that an interpretation of section 877.6 which exempts total equitable indemnity claims from the reach of a good faith settlement will actually promote the settlement of cases. The opinion reaches this surprising conclusion by postulating that such a rule would induce vicariously liable tortfeasors to enter into early “full-value” settlements with plaintiffs by providing assurance to such tortfeasors that their right to seek total equitable indemnity would remain intact. The argument on this point is flawed on two levels.

In the first place, it is unrealistic to expect that an allegedly vicariously liable defendant, who believes that a solvent directly liable tortfeasor is likely to be found 100 percent responsible for an injury, will often be willing to enter into a “full-value” settlement with a plaintiff. In contemporary multi-party litigation, it is much more likely that settlements will take the form of piecemeal contributions by individual defendants in some rough approximation to each defendant’s likely proportionate responsibility for the plaintiff’s damages. In such a setting, the rule proposed by the opinion would clearly have a significant anti-settlement effect, for any defendant facing a claim for total equitable indemnity is unlikely to be willing to go forward with the settlement if he will remain potentially responsible for additional liability even if the trial court finds that his contribution to the settlement is “in the ballpark” of his fair share of liability.

Second, in the event an allegedly vicariously liable tortfeasor does wish to proceed along the lines suggested by Justice Kaufman—i.e., if he does wish to enter into an early “full-value" settlement with the plaintiff—there is nothing in the present opinion which would preclude such a tortfeasor from including in the settlement agreement a provision in which the plaintiff—who, by hypothesis, has received a “full-value” settlement—agrees to dismiss his action against the directly liable tortfeasor. Such a dismissal would permit the settling vicariously liable tortfeasor to pursue his total equitable indemnity claim without any risk of encountering a subsequent good faith settlement between the directly liable tortfeasor and the plaintiff. Thus, any alleged pro-settlement benefits which Justice Kaufman suggests his rule would produce are equally available under the interpretation of the statute which we adopt.

12 In City of Sacramento v. Gemsch Investment Co., supra, 115 Cal.App.3d 869, for example, the city—which owned fruit trees adjacent to, and possessed an easement over, a public sidewalk—sought total equitable indemnity from the owners, lessees and sublessees of the property when it was joined as a defendant with those parties in a suit by a plaintiff who had slipped and fallen on fruit seeds on the sidewalk. In Kohn v. Superior Court, supra, 142 Cal.App.3d 323, a real estate broker and salesman, who had been sued by one of his customers for failing to disclose fire damage in a house, sought total equitable indemnity against a termite inspector and a contractor who had repaired the fire damage. In Lopez v. Blecher, supra, 143 Cal.App.3d 736, plaintiff, a Good Samaritan, was injured as the result of the negligent operation of two different vehicles, and the owner of one of the vehicles sought total equitable indemnity from the driver of the other vehicle. In IBM Corp. v. Carlson, supra, 179 Cal.App.3d 94, a tenant sued for injuries which he suffered when his hand went through a glass shower door, and the landlord sought total equitable indemnity from both the manufacturer of the door and the contractor who had installed the door.

13 Justice Kaufman, relying on section 876, subdivision (b), maintains that a vicariously liable party is in an entirely different category than any other defendant seeking total equitable indemnity. Section 876, subdivision (b), however, contains no suggestion that a vicariously liable party’s indemnity claim is different in kind from any other equitable indemnity claim or that such a claim, unlike all other claims for total equitable indemnity, is immune from the effect of a good faith settlement under section 877.6, subdivision (c). Enacted in 1957 as part of California’s initial contribution legislation, at a time when all equitable indemnity claims involved loss shifting rather than loss sharing, section 876, subdivision (b) provides no support for Justice Kaufman’s argument that section 877.6, subdivision (c) should be interpreted to draw a distinction between different types of total equitable indemnity claims.

Nor does the nature of vicarious liability indicate that the Legislature must have intended—despite the absence of any language in section 877.6, subdivision (c) indicative of such intent—to draw a distinction among total equitable indemnity claims. In many instances— for example, strict product liability—tort law places “direct” liability on an individual or entity which may have exercised due care in order to serve the public policies of a fair allocation of the costs of accidents or to encourage even greater safety efforts than are imposed by the due care standard. (See, e.g., Greenman v. Yuba Power Products, Inc. (1963) 59 Cal.2d 57, 63 [27 Cal.Rptr. 697, 377 P.2d 897, 13 A.L.R.3d 1049].) As a leading text on torts explains, the modern justification for vicarious liability closely parallels the justification for imposing liability on the nonnegligent manufacturer of a product: “What has emerged as the modern justification for vicarious liability is a rule of policy, a deliberate allocation of risk. The losses caused by the torts of employees, which as a practical matter are sure to occur in the conduct of the employer’s enterprise, are placed upon that enterprise itself, as a required cost of doing business. They are placed upon the employer because, having engaged in an enterprise, which will on the basis of all past experience involve harm to others through the torts of employees, and sought to profit by it, it is just that he, rather than the innocent plaintiff, should bear them; and because he is better able to absorb them, and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large.” (Prosser & Keeton on Torts (1984) § 69, p. 500 [fns. omitted]. See also 5 Harper et al., The Law of Torts (2d ed. 1986) § 26.1, pp. 5-8 & fns. 12 and 14, § 26.5, pp. 17-22.)

Thus, the fact that a tortfeasor’s liability is vicarious does not necessarily distinguish him from other tortfeasors nor does it indicate that the public policies on which tort liability rests justify special dispensation from the good faith settlement rules applicable to other tortfeasors.

14 The Court of Appeal decisions which hold that a claim for total equitable indemnity survives a good faith settlement were decided before Tech-Bilt, and assumed that a vicariously or derivatively liable tortfeasor had no means of challenging, at the good faith hearing, a settlement in which a clearly culpable defendant attempts “to buy peace too cheaply at the expense of codefendants who are merely vicariously liable.” (Angelus Associates Corp. v. Neonex Leisure Products, Inc., supra, 167 Cal.App.3d 532, 542; Huizar v. Abex Corp., supra, 156 Cal.App.3d 534, 539, 542. See also City of Sacramento v. Gemsch Investment Co., supra, 115 Cal.App.3d 869, 879 (Paras, J., dis.) [referring to derivatively liable tortfeasor as “remedyless”].) The assumption on which these cases were premised is clearly no longer viable in light of the Tech-Bilt decision.

15 Contrary to the implications in the concurring and dissenting opinions, nothing in this opinion is intended to foreclose a trial court from concluding, on the facts of a particular case, that a proposed settlement agreement is not in good faith either because an allegedly vicariously liable tortfeasor has been improperly excluded from settlement negotiations or because such a tortfeasor has not been included within the settlement agreement. At the same time, we do reject the suggestion that a proposed settlement agreement may never be found to constitute a good faith settlement unless it provides for the total dismissal of any cause of action as to which a nonsettling defendant claims to be only vicariously liable. We believe the trial court which presides over the good faith settlement hearing is in the best position to determine, based on the circumstances of the particular case, whether the terms of a proposed settlement are unfair to a nonsettling defendant who claims that its liability is only vicarious in nature.

16 The facts of Tech-Bilt, supra, 38 Cal.3d 488, make it clear that the trial court’s good faith determination must take into account the settling tortfeasor’s potential liability for indemnity to a cotortfeasor, as well as the settling tortfeasor’s potential liability to the plaintiff. In TechBilt, the settling tortfeasor faced no direct liability to the plaintiff because the statute of limitations on the plaintiff’s action against that tortfeasor had expired; the settling tortfeasor, however, was still subject to an indemnity action by a nonsettling tortfeasor who had been timely sued by the plaintiff. In Tech-Bilt, we concluded that an agreement between the plaintiff and settling tortfeasor which purported to absolve the settling tortfeasor from all liability without any payment on its part was not a “good faith” settlement within the meaning of section 877.6 and would not operate to bar the nonsettling tortfeasor’s indemnity action. (38 Cal. 3d at pp. 501-502.) Since the no-payment settlement would not have been unfair if we had confined our view to the settling tortfeasor’s potential liability to the plaintiff—because of the statute of limitations the settling tortfeasor’s likely liability to the plaintiff was zero—the result in Tech-Bilt necessarily turned on the fact that the settlement was unfair when the effect of the settlement on the nonsettling tortfeasor’s indemnity claim was taken into consideration.

17 As noted above, in this case Far West did not challenge the terms of the D & S settlement agreement at the good faith hearing and never urged the court to withhold its good faith determination until the D & S defendants agreed to assume all or a substantial portion of the sum which Far West had already paid to the plaintiff.