On May 1, 2025, the United Stated District Court for the Northern District of California evaluated a settlement agreement between a long-time generator of hazardous substances, an innocent plaintiff, and the Department of Toxic Substances Control (“DTSC”), and found that it met the requirements as a good faith agreement under both the California Code of Civil Procedure and the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).  See Maxim L Properties v. Moyer Products, Ind., 2025 WL 1261419.  The court ruled that a settlement agreement that, among other things, accounts for the “rough approximation” of liability is generally satisfactory in both California and under CERCLA.

The subject property in Maxim had significant soil and groundwater contamination resulting from pesticide and solvent use.  Moyer Products, Inc. (“Moyer”) owned and operated a pesticide fertilizer business on the Property for 35 years, from 1947 to 1982.  From 1982 to 2002, the Property changed hands several times before being bought by Maxim L Properties (“Maxim”).  Upon learning of the contamination, Maxim sought to rescind the purchase and was awarded a judgment of recission ab initio by default.  Thus, Maxim was deemed, as a matter of law, never to have owned the Property.  However Maxim  continued to lease the Property through its affiliates, who conducted drilling operations on the Property, and to pay the existing mortgage and all taxes.  In 2012, DTSC initiated an Enforcement Order for Corrective Action against 60 potentially responsible parties (“PRPs”), including Moyer and Maxim.  Pursuant to a Consent Order between DTSC and 40 of the 60 PRPs,  including Moyer, these parties investigated the Property and developed a study of remedial approaches, called the Corrective Measures Study (“CMS”).  Moyer contributed $1.5 million of the $3 million spent in developing the CMS, which estimated that remediation would cost between $1.32 million to $2.4 million.

Also in 2012, Maxim filed suit against Moyer and other PRPs for contribution, injunctive relief and damages under CERCLA, the Resource Conservation and Recovery Act (“RCRA”), the California Hazardous Substance Account Act (“HSAA”) and other state law principles.  Each of the defendants filed cross-claims, counterclaims and third party claims against other PRPs. 

After several years of mediation and settlement discussions, Maxim, Moyer, and DTSC reached settlement agreements, with the following terms:

• • Moyer agreed to pay $1,700,000 into a qualified settlement fund (“QSF”) that Maxim would set up within thirty days of a determination of good faith.
  • The QSF would finance the remediation at the discretion and direction of DTSC.
  • Maxim could apply to DTSC for reimbursement of recoverable costs up to $160,000.
  • Maxim and its affiliates, Moyer, and DTSC agreed to dismiss all claims, crossclaims, and counterclaims against one another and release all past, present, and future claims relating to the contamination at the Property, including a covenant not to sue by DTSC.

The parties jointly moved for a determination of good faith in accordance with the California Code of Civil Procedure sections 877 and 877.6, which govern settlement amongst joint tortfeasors.  Courts in California typically apply the “Tech-Bilt” factors when conducting a good faith inquiry to determine that the settlement is proportionate, which include (1) an approximation of plaintiff’s total recovery compared to the settlor’s proportionate liability; (2) the amount paid in settlement; (3) the allocation of settlement proceeds among plaintiffs; and (4) a recognition that the settlor should pay less in settlement than he would if he were found liable after a trial.  To oppose a motion for good faith settlement, an opposing party must demonstrate that the settlement is “so far out of the ballpark” in relation to the Tech-Bilt factors to render it inequitable.

The court stated that the Tech-Bilt factors largely comport with the settlement analysis under CERCLA, which includes incentives aimed at fostering settlement without “further complicating already complicated litigation” and requires the terms to be “fair, reasonable, and consistent with CERCLA’s objectives.”  CERCLA, the court clarified, was intended to promote the timely cleanup or hazardous waste sites, ensure that polluters are held responsible for cleanup, and encourage settlement through specified contribution protection.  Due to the similarities in the applicable analyses, the court states that it would be “difficult to envision a settlement that is in ‘good faith’ but not fair, reasonable, and adequate, or vice versa.”

The Non-Settling Parties that opposed the motion for good faith settlement included several generators that collectively contributed the remaining $1.5 million to fund the CMS, but did not reach settlement terms with Maxim.  The Non-Settling Parties disputed the good faith of the settlement under the California Code on the basis that its terms were disproportionate, illusory and that Maxim and Moyer colluded against the Non-Settling Parties.  More specifically, the Non-Settling Parties alleged that DTSC’s involvement in the settlement is a suggestion of bad faith; Moyer should be responsible for 100% of the investigation and remediation costs; Plaintiff provided no consideration in exchange for the release of claims against it; Moyer did not provide an exact accounting of insurance coverage; and the Non-Settling Parties were excluded from negotiation.  In addition, the Non-Settling Parties argued that the settlement contravened the policy objectives of CERCLA by failing to establish terms of the QSF trust, which they alleged would lead to delays.

The court first determined that DTSC’s involvement in the settlement—namely, DTSC’s release of claims against Moyer and Maxim —did not indicate bad faith.  Noting that parties to a good faith settlement need not be limited only to the parties in the operative complaint, the court recognized that DTSC’s regulatory action was fundamental to the scope of the parties’ liability to each other.  As the parties’ damages were based primarily on the costs of implementing the DTSC-enforced remedial activities and the settlement funds were set up to be administered by DTSC to implement remedial activities, the court found the release from DTSC was not inequitable.

The court next addressed the “most important” factors – the amount paid in settlement in proportion to the approximate liability of the settlers.  The court found that Moyer’s $1.7 million contribution from insurance coverage to the QSF, assuming plaintiff obtained the maximum possible reimbursement of $160,000, would fund 64% of the remediation if the costs totaled the high end of the range ($2.4 million).  Coupled with Moyer’s $1.5 million (50%) contribution to the cost of development of the CMS, the court found that Moyer’s total outlay reflected its “rough” share of liability as owner and operator of the Property for 35 years.  The court was not persuaded by the Non-Settling Parties’ argument that Moyer was solely responsible for the contamination and should therefore pay 100% of the costs of investigation and remediation,  finding while Moyer may have been responsible for the majority of the contamination, there was evidence of contributory fault by dozens of other generators in the 2013 Consent Agreement.  The court further noted that the Non-Settling Parties themselves contributed $1.5 million to the CMS, “a significant contribution that likely would not have been made if they had minimal liability” and that “a settlor should pay less in settlement than he would if he were found liable after trial.” 

The court then considered whether the settlement was “illusory” because Plaintiff was acting only as a “passive middleman” by establishing the QSF, which Non-Settling Parties contended did not constitute consideration in exchange for the release of claims against it.  The court found that the settlement was not “illusory” because the settlement funds would not go to Maixm but rather would be used for remediation of the property, with the main benefit to Maxim being the “end of years-long costly litigation[.]”  Maxim was giving up the right to bring suit for activities related to the current contamination at the Property, as well as Plaintiff’s right to appeal the determination of the recoverable costs. 

Looking at the allocation of settlement proceeds, the court considered the fact that while Plaintiff preserved the option to apply for $160,000 in recoverable costs, the remaining 91% of the funds benefitted the Non-Settling Parties by funding a clean up for which they remain liable.  Notably, the court found that the parties’ initial proposed settlement was not equitable because Moyer proposed to pay $1.7 million directly to Maxim, thereby leaving the Non-Settling Parties and other PRPs to contend with the full cost of remediation.  Accordingly, the court concluded that the settlement, by lessening or eliminating the costs that the Non-Settling Parties would otherwise have to contribute, was neither grossly disproportionate nor illusory.

The court then considered whether Moyer acted in bad faith by not disclosing a precise accounting of its insurance coverage.  Because the court determined that the settlement was proportional and no evidence suggested that Moyer was hiding assets, an exact accounting was not necessary to exhibit good faith.  With respect to any alleged collusion, the court held that good faith does not require Non-Settling Parties to be involved in “every step of the negotiations;” regardless, the court pointed out that the Non-Settling Parties were present for years of mediation and multiple settlement conferences, and failed to submit comments or objections to the settlement agreement during the public comment period.

Lastly, the court determined that the settlement was not inconsistent with CERCLA’s policy objectives.  While the Non-Settling Parties argued that DTSC would have trouble delegating the remediation tasks to any of the remaining generators thereby causing delays, the court concluded that such “dire predictions” were not reflected by the terms of the settlement agreement.  The agreement provided that the QSF must be set up to receive payment within 30 days of a determination of good faith and did not require DTSC to delegate remedial action at all.  As a result, the settlement agreement was deemed to “push[] the cleanup effort forward, not backward,” making it fair, reasonable, and consistent with the policy objectives under CERCLA.

The court ultimately provides a blueprint analysis under California law and CERCLA that promotes settlement amongst liable parties by allowing rough approximation of liability and facilitates the involvement of state agencies to resolve future claims. 

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