City of San Jose v. Price Waterhouse

• Citation: 990 F.2d 1256,1993 WL 102598
• Decision Date: 23 March 1993
• Docket Number: No. 91-16489,91-16489
• Parties: NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. CITY OF SAN JOSE, Plaintiff-Appellee, v. Price WATERHOUSE, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1256

990 F.2d 1256

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

CITY OF SAN JOSE, Plaintiff-Appellee, v. Price WATERHOUSE, Defendant-Appellant.

No. 91-16489.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 4, 1993.

Decided March 23, 1993.

Before ALARCON, RYMER and T.G. NELSON, Circuit Judges.

MEMORANDUM ^*

On September 20, 1984, San Jose ("City") brought action against Price Waterhouse and thirteen securities dealers, claiming that the dealers had entered into numerous high risk investments contrary to city policy and that Price Waterhouse, the City's independent accounting firm, had breached its audit contract and its professional duties in failing to report the transactions to the Mayor and the City Council. The City suffered losses of approximately sixty million dollars when it liquidated a portion of its investment portfolio.

The City settled with all thirteen securities dealers, eleven prior to trial, and two after verdicts were returned. The jury returned a verdict of $517,669 against Price Waterhouse, which included $73,650 for auditing fees paid by the City. Price Waterhouse appeals the district court's failure to allow an offset of the jury verdict with the previous settlements. As this case involves the clear application of law to the facts established at trial, we apply the de novo standard of review. See Federal Sav. and Loan Ins. Corp. v. Butler, 904 F.2d 505, 510 (9th Cir.1990) (reviewing de novo whether the district court properly construed state law regarding offset under § 877). ¹

The claims against Price Waterhouse were pendent to federal securities claims against the securities dealers, thus California law is applicable. In the absence of relevant California law, we rely on several pertinent cases from this and other circuits.

Price Waterhouse relies on two theories: (1) Cal.Civ.Proc.Code § 877 ² and (2) the common law principle of one satisfaction for one injury. We affirm the district court's holding that Cal.Civ.Proc.Code § 877 is inapplicable when contract claims are mixed with tort claims. See County of Los Angeles v. Superior Court of Los Angeles County, 155 Cal.App.3d 798, 803 (Cal.Ct.App.1984) (Section 877 "appl[ies] only to joint tortfeasors"), overruled on other grounds by Bay Dev., Ltd. v. Superior Court of San Diego, 791 P.2d 290 (Cal.1990) (en banc). Section 877 is therefore inapplicable to the instant case.

The City is entitled to only one satisfaction for a single injury. See Franklin v. Kaypro Corp., 884 F.2d 1222, 1231 (9th Cir.1989), cert. denied, 111 S.Ct. 232 (1990). An offset is available where the settlement and the jury verdict represent common damages. See Singer v. Olympia Brewing Co., 878 F.2d 596, 600 (2d Cir.1989), cert. denied, 493 U.S. 1024 (1990). The district court held there was an insufficient basis for finding that the damages awarded were common, and denied Price Waterhouse's motion for an offset.

The district court erred in concluding that Price Waterhouse failed to make a prima facie showing of entitlement to an offset under the single satisfaction rule. There is some commonality in damages. The Complaint alleges that Price Waterhouse and all of the securities dealers were responsible for losses associated with San Jose opens entered into and for longer-term securities purchased by the City. Price Waterhouse was charged with being responsible for part of the same portfolio for which the settling securities dealers were responsible.

At trial, the City limited Price Waterhouse's exposure to September 13, 1983 to May 22, 1984, a time period also encompassed in the Complaint against the securities dealers. During this period, Price Waterhouse was alleged to be responsible for all of the portfolio decline, as were the dealers. There was an overlap, therefore, of at least a portion of the damages claimed against Price Waterhouse, and the burden then shifted to the City to demonstrate that the settlements did not overlap the same portion of damages for which Price Waterhouse was held responsible. Complete commonality was not required in order to shift the burden to the City. See U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1262 (10th Cir.1988) ("[i]f the defendants make [a showing that the plaintiff settled claims with others on which the non-settling defendants were found liable at trial], the burden then shifts to the plaintiff to prove that, under the terms of its agreement with the settling defendants, the settlement did not represent common damages with the jury award").

The City argues that there can be an offset for settlements only when the full amount of a plaintiff's damages have been litigated and decided. While the City's contention is consistent with the general principles underlying the single recovery rule and finds some support in Milicevich v. Sacramento Medical Center, 155 Cal.App.3d 997 (1984), the question here is not whether the City has actually recovered damages in excess of compensation for the full injury it has suffered, but rather, which party--the City or Price Waterhouse--bears the loss when the full measure of the City's damages has not been ascertained and the precise allocation of these damages among Price Waterhouse and its co-defendants is uncertain. See Singer, 878 F.2d at 599-600 (rejecting plaintiff's argument that where a plaintiff may be entitled to more damages from one defendant than from another, the one satisfaction rule should require that the settlement be deducted, not from the amount to be recovered under the judgment but from the highest amount of "provable...