Robert Dorroh v. Deerbrook Ins Co

MEMORANDUM

Cedar Sol Warren and Robert and Barbara Dorroh appeal the district court’s denial of their joint motion to join Warren into the action asserting a bad faith claim against insurer Deerbrook. We have jurisdiction under 28 U.S.C. § 1291 based on the collateral order exception recognized in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47 , 69 S.Ct. 1221 , 93 L.Ed. 1528 (1949). Because we conclude that the district court erred when it determined that Warren had no interest left in the bad faith claim, we vacate and remand.

As a matter of law in California, purely personal claims are not assignable. Murphy v. Allstate Ins. Co., 17 Cal.3d 937 , 132 Cal.Rptr. 424 , 553 P.2d 584, 587 (1976). Although the bad faith claim was scheduled and initially part of the bankruptcy estate, the Bankruptcy Code “does not authorize the bankruptcy trustee to sell or assign assets that are nonassignable under applicable state law.” Baum v. Duckor, Spradling & Metzger, 72 Cal.App.4th 54, 71 , 84 Cal.Rptr.2d 703 (1999) (emphasis added). Therefore, when the bankruptcy trustee assigned Warren’s bad faith claim to the Dorrohs, the trustee could only transfer the economic property…