By Steven G. MehtaSteve Mehta







The California Court of Appeal recently ruled in the decision Vidrio v. Hernandez that there is no obligation to negotiate in good faith.  

In Vidrio, the case involved an automobile accident where there appeared to the trial court to be no issue of liability and simply a matter of the amount of damages.  According to the trial court, Mercury insurance made an offer of $1,000 which the trial court deemed to be inappropriate.  The trial court then had a hearing where it cited to the Los Angeles County local rule requiring good faith settlement negotiations at mandatory settlement conferences.

The trial court found that the insurance company acted in bad faith in coming to the settlement hearing and issued sanctions. The court of appeal, however, disagreed with the trial court’s ruling and reversed the ruling.  The Vidrio court explained and ruled as follows: 

  • No statute authorized the imposition of sanctions against a nonparty insurer for its purported failure to participate in good faith in a mandatory settlement conference. 
  • Although Local Rule 7.9(d) provided for the mandatory attendance at a settlement conference of “all persons whose consent is required to effect a binding settlement.”  However, nothing in that rule requires the parties, once present, to negotiate with each other.
  • “In sum, even were we to agree with the trial court’s assessment of the conduct of counsel and the adjuster, the failure to increase a settlement offer or to otherwise participate meaningfully in settlement negotiations violates no rule of court and is not a proper basis for an award of sanctions.   “[a] court may not compel a litigant to settle a case, but it may direct him to engage personally in settlement negotiations, provided the conditions for such negotiations are otherwise reasonable’”].)  Hernandez filed an appropriate settlement conference statement; her lawyer and Mercury attended the conference and participated in it. While the trial court’s frustration at the parties’ lack of movement is understandable, no more was required.”    

 Many times it can be frustrating to parties when such conduct occurs.  But there are things that can be done to try to prevent such a situation as in Vidrio.   Although, as the saying goes, you can lead a horse to water, but you can’t make it drink.  You can, however, make the horse very thirsty.  The following techniques may help you with a recalcitrant party:


  •  Prior to negotiations, ask the party to commit to negotiating in good faith in writing
  • Make sure all appropriate investigation and discovery that is necessary to convince the other party of its risk has been done
  • Find out who the real decision makers are and try to make them come to be settlement conference.
  • Offer a “high-low” range for negotiations as a condition to entering into negotiations
  • Find out the reasons behind the decision to not negotiate.  In other words, “why.”
  • Evaluate your alternatives to a negotiation to consider whether or not negotiation is your best alternative.

If you would like a copy of this decision, please feel free to contact Steve Mehta and ask for the specific decision to be emailed to you.