Commercial Union Insurance Company v. Ford Motor Company

John Meyers sued Ford Motor Company and Haberfelde Ford, Inc., a Ford dealership, for damages. He alleged that he sustained injuries proximately resulting from defendants’ negligence in the manufacture, sale and service of his car. He also asserted that both defendants breached implied warranties of safety. Immediately prior to trial, Meyers dismissed Ford as a defendant believing that he stood a better chance for recovery if Ford’s expert witnesses did not testify and that there was scant likelihood of recovery against Ford. Meyers won and Haberfelde’s insurer, Commercial Union Insurance Co., paid $2,875,-000 in settlement of the $3,250,000 judgment.

Commercial Union then instituted the instant diversity suit against Ford for equitable indemnification. Ford defended on the basis of Cal.Code of Civ.Proc. § 877, which states:

Ford claims its dismissal by Meyers was in good faith and that, as a dismissed party under § 877, it is not liable to Commercial Union for indemnification. Commercial Union counters that the dismissal was not a good faith settlement but rather a calculated tactical maneuver to which § 877 does not apply. The district court found in favor of Ford.

Reviewing…