Velsicol Chemical Corp. v. Davidson, PEST-A-WAY
| Decision Date | 16 May 1991 |
| Docket Number | 21446,Nos. 21147,PEST-A-WAY,s. 21147 |
| Citation | 811 P.2d 561,107 Nev. 356 |
| Parties | VELSICOL CHEMICAL CORPORATION, an Illinois corporation, Appellant, v. Ernest DAVIDSON, Darlene Davidson, Individually and as Guardians Ad Litem of Sherene Davidson and Ernest Davidson, Jr., and Their Minor Children, Respondents. VELSICOL CHEMICAL CORPORATION, an Illinois corporation, Appellant, v. BILL BECKMYER'SCORPORATION, a Nevada corporation, Respondent. |
| Court | Nevada Supreme Court |
Jolley, Urga, Wirth & Woodbury and Jay Earl Smith and Troy Everett Peyton, Las Vegas, Spriggs & Hollingsworth and Paul Gaston, Washington, D.C., for appellant.
Johns & Johns, Las Vegas, for respondents Davidsons.
Barker, Gillock, Koning, Brown & Earley, Las Vegas, Cozen & O'Connor and John L. Choate, Columbia, S.C., Laxalt & Nomura, Las Vegas, for respondent Beckmyer.
This appeal involves a challenge by a non-settling defendant to the district court's approval of a settlement between a co-defendant and the plaintiff. Appellant, Velsicol Corporation (Velsicol), claims that the district court failed to consider certain factors in finding that the settlement was made in good faith.
NRS 17.245 requires a settlement to be a "good faith" settlement, but gives little guidance in applying this standard. This court has never discussed the meaning of "good faith" as it is used in NRS 17.245. Velsicol argues for an interpretation consistent with California law which requires a hearing on good faith and the consideration of specific factors. Based upon the difference between the California statute and the applicable Nevada statute, we refuse to adopt the California rule. The determination of good faith in this situation should be left to the trial court, and the trial court's decision should not be disturbed absent an abuse of discretion.
Despite claims asserted in its brief, Velsicol fails to show that the trial court abused its discretion in finding that the settlement was made in good faith. Accordingly, we affirm the decision of the trial court.
In 1979, respondent, Pest-A-Way Corporation (Pestaway) applied Termide, a pesticide produced by appellant, Velsicol Corporation, to the partially constructed home of respondents, Ernest and Darlene Davidson (Davidsons). The soil treatment guarantee states that the Termide was "power sprayed" into the soil.
Four years later, after the Davidsons had their home inspected, Thomas Smigel of the Nevada Department of Agriculture determined that the Termide had been improperly applied at the Davidson home. In September of 1984, the Davidsons filed a verified complaint with the Nevada Department of Agriculture alleging misuse of the Termide which resulted in continued illness to the Davidson family.
A hearing officer of the Department of Agriculture found that Termide was applied to the Davidson residence by broadcast spraying and that such an application was not contrary to the product's labeling and therefore not improper. The hearing officer also found that a specific instruction prohibiting broadcast spraying of Termide was not added to the Termide label until mid-1980.
Subsequently, the Davidsons filed a complaint in district court alleging injuries resulting from their exposure to Termide. The Davidsons' complaint alleged that Pestaway improperly applied the product to the crawlspace under their home, that the product was unsafe for its intended use and that inadequate warning was provided regarding application to crawl spaces.
In January of 1990, Pestaway reached a settlement with the Davidsons agreeing to pay the Davidsons $50,000.00 (later raised to $55,000.00). On February 6, 1990, Pestaway moved for a determination that the settlement was made in good faith and for certification of the settlement pursuant to NRCP 54(b). After briefs were filed by all parties, the trial court entered an order certifying the settlement and subsequently entered an order dismissing the Davidsons' action against Pestaway with prejudice. On appeal, Velsicol challenges the district court's orders.
Appellant contends that the following factors should have been considered by the trial court in determining good faith: (1) the settling defendant's insurance coverage and financial condition; (2) the relative potential liability of the parties; and (3) the reasonable range of settling defendant's liability.
NRS 17.245 addresses the legal effect of releases and settlements. The statute specifically provides that a release is given effect when it is given in good faith. 1 The settlement entered into by Pestaway and the Davidsons resulted in the release given to Pestaway by the Davidsons. This case ultimately amounts to a dispute over the definition of "good faith" as it is used in NRS 17.245. Velsicol contends that the district court failed to take into consideration certain facts and thereby defined "good faith" too narrowly. We disagree.
Velsicol's contention that certain factors must be considered by the court in approving a settlement relies upon the California rule found in Tech-Bilt, Inc. v. Woodward-Clyde & Assoc., 38 Cal.3d 488, 213 Cal.Rptr. 256, 698 P.2d 159 (1985) and Commercial Union Ins. Co. v. Ford Motor Company, 640 F.2d 210 (9th Cir.1981) (applying California law). In Tech-Bilt, the California Supreme Court held that the dual objectives of the contribution statute are "equitable sharing of the costs among the parties at fault, and second, encouragement of settlements." Tech-Bilt, 213 Cal.Rptr. at 259, 698 P.2d at 163 (citations omitted). Quoting from River Garden Farms, Inc. v. Superior Court, 26 Cal.App.3d 986, 997, 103 Cal.Rptr. 498 (1972), the Tech-Bilt court took an expansive view of "good faith" finding that Lack of good faith encompasses many kinds of behavior.... Thus, formulation of a precise definition of good faith is neither possible nor practicable. The Legislature has here incorporated by reference the general equitable principle of contribution law which frowns on unfair settlements, including those which are so poorly related to the value of the case as to impose a potentially disproportionate cost on the defendant ultimately selected for suit.
Tech-Bilt, 213 Cal.Rptr. at 260, 698 P.2d at 163 (emphasis in original).
The court held that the policies of contribution would be disserved by an approach which emphasized the policy of encouraging settlement to the exclusion of equitable allocation of costs among tortfeasors. Id. at ---, 698 P.2d at 166. Finally, the Tech-Bilt court concluded that a trial court must consider "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." Id.
In construing NRS 17.245 the United States District Court for the District of Nevada agreed with the California rationale and held that:
Factors to be considered by the Court in assessing whether a settlement is in good faith is [sic] the amount paid in settlement, the allocation of the settlement proceeds among plaintiffs, the insurance policy limits of settling defendants, the financial condition of settling defendants, and the existence of collusion, fraud or tortious conduct aimed to injure the interests of non-settling defendants.
In re MGM Grand Hotel Fire Litigation, 570 F.Supp. 913, 927 (D.Nev.1983). The court in MGM concluded that the primary factor in determining good faith is the price of the settlement. Id. at 928. This court has never addressed this issue. The federal court was forced to interpret the good faith requirement and apparently assumed that Nevada would follow the rule adopted by California.
The California Code of Civil Procedure Section, which the court interpreted in Tech-Bilt, provides more specific direction than the Nevada statute with respect to determination of good faith. 2 The California statute mandates a hearing on the issue of good faith while the Nevada statute is silent on the...
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