## Facts

- Phyllis Smith was seriously injured when a wheel detached from a used 1979 Ford Econoline van and struck her station wagon’s windshield.
- Smith and her husband sued multiple defendants, including the van’s driver (Ramsey Sneed), Abbott Ford, Inc. (the dealer that sold the van), Ford Motor Company (manufacturer), and Sears (a servicer of the van).
- Abbott proposed a multi-defendant settlement contribution plan that Ford and Sears declined.
- Abbott and the plaintiffs entered a “sliding-scale recovery agreement” in which Abbott’s insurer guaranteed the plaintiffs $3 million, while Abbott’s ultimate payment could decrease (potentially to zero) depending on how much the plaintiffs recovered from nonsettling defendants at trial.
- Abbott sought a “good faith” settlement determination under California Code of Civil Procedure §§ 877 and 877.6 to bar contribution and equitable indemnity claims by nonsettling defendants.

## Issues

1. Whether sliding-scale (Mary Carter–type) agreements are exempt from, or incompatible with, the “good faith” settlement requirements of Code of Civil Procedure §§ 877 and 877.6.
2. Whether the Abbott–plaintiffs sliding-scale agreement satisfied the Tech-Bilt good-faith standard as a matter of law, requiring an order approving it and barring nonsettling defendants’ contribution and equitable indemnity claims.

## Decision

- The court held that sliding-scale agreements are not exempt from §§ 877 and 877.6 and must satisfy the statutory good-faith requirement.
- The court held that Tech-Bilt supplies the governing framework for assessing good faith in sliding-scale agreements.
- The court declined to hold the agreement was in good faith as a matter of law and concluded the trial court did not abuse its discretion by denying good-faith approval on the record presented.
- The court rejected the appellate determination that the settlement necessarily met Tech-Bilt and preserved the trial court’s role to evaluate proportionality and potential unfairness to nonsettling defendants.

## Legal Principles

- A settlement receives §§ 877 and 877.6 protection (including a bar on contribution and equitable comparative indemnity claims) only if it is made in “good faith.”
- Tech-Bilt governs the good-faith inquiry, including: a rough approximation of total damages, the settling party’s comparative share, the settlement amount, allocation among plaintiffs, recognition that settlement may be discounted from expected trial exposure, financial/insurance constraints, and absence of collusion, fraud, or tortious conduct aimed at nonsettling parties.
- Sliding-scale settlements are neither per se valid nor per se invalid; they require case-specific review under Tech-Bilt.
- Because sliding-scale structures can realign incentives and increase the risk of collusion or disproportionate shifting of liability, trial courts must scrutinize such agreements for fairness to nonsettling defendants within the Tech-Bilt factors.
- Appellate courts should not lightly substitute a categorical or “as a matter of law” determination for the trial court’s fact-intensive good-faith assessment.

## Conclusion

The California Supreme Court held that sliding-scale settlements are subject to §§ 877 and 877.6 and must be evaluated for good faith under Tech-Bilt, but it refused to compel approval of Abbott’s agreement because the record did not establish good faith as a matter of law and the trial court’s denial fell within its discretion.


Abbott Ford, Inc. v. Superior Court, 43 Cal. 3d 858 (Cal. 1987)