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Civil Litigation -
Special Situations Good Faith Settlement Determination

Northern California Civil Litigation Information

Cases involving multiple defendants have special procedures which relate to settlements between the plaintiff and one of the defendants. In cases with multiple defendants, it is not uncommon for a defendant to file a "cross-complaint" against another defendant for "equitable indemnity," or "equitable contribution." In filing such a cross-complaint, the defendant (who is now also considered a cross-complainant) alleges that another party is responsible and liable for the plaintiff's damages.

If a defendant reaches a settlement agreement with the plaintiff, that plaintiff must also take steps to ensure the he is not left exposed to another defendant's cross-complaint for equitable indemnity. The settling defendant wants to be completely dismissed from the lawsuit after settling with the plaintiff. He does not want to be forced to continue incurring attorney's fees and costs and perhaps paying additional money to a non-settling defendant who has cross-complained against him.

To avoid this problem, a settling defendant must obtain a "good faith settlement determination" from the court. A settlement is said to be in "good faith" if, in the court's opinion, the settlement is fair in light of all the circumstances of the case. There are several factors which the court will consider in deciding whether a settlement is in good faith or not.

The practical effect of a good faith settlement determination is to bar any non-settling party's cross-complaint for equitable indemnity against the settling defendant. A good faith settlement determination is a court order issued after either a stipulation or agreement among all the parties, or a hearing on the circumstances relating to the settlement. If a non-settling party believes the settling party is not paying its fair share of the potential liability, then the non-settling party may oppose the settling's defendant's request for a good faith determination.

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