Abbott Ford, Inc. v. Superior Court

Phyllis Smith (plaintiff) was injured when a wheel came off a used van that was being driven by Ramsey Sneed and crashed into the windshield of Smith’s station wagon. Smith and her husband sued Sneed, Abbott—the car dealer who sold the van to Sneed—Ford, the manufacturer of the van and the station wagon, and Sears, which had serviced the van three months before the accident. Abbott proposed a settlement of $2.5 million to Ford and Sears and offered to cover 70 percent. They declined, contending that their clients had only minimal, if any, liability. Abbott’s insurer revealed that it agreed to enter a sliding-scale settlement agreement with the Smiths, guaranteeing them $3 million in recovery in return for the Smiths’ agreement that if they recovered $3 million or more from Ford and Sears, Abbott would have zero liability. Abbott asked the trial court to declare that its agreement with the Smiths was in good faith and to dismiss all claims against Abbott for indemnity or contribution. Ford and Sears opposed the motion, arguing that such agreements cannot constitute good faith under California code of civil procedure, § 877.6 and that the settlement price was potentially grossly disproportionate to Abbott’s fair share of the damages. The trial court denied Abbott’s request. The appellate court found that the agreement was reached in good faith. Ford and Sears appealed.