Fifteenth RMA Partners, L.P. v. Pacific/West Communications Group, Inc. (In re Pacific/West Communications Group, Inc.)

We must decide whether under the California Commercial Code (CCC or the Code) as it existed prior to July 1, 2001, a creditor with a security interest in another’s personal property, including general intangibles, and all proceeds thereof, can attach its interest to the proceeds of a commercial tort claim, despite the Code’s prohibition against “[a] transfer in whole or in part of any claim arising out of tort.” Cal. Com.Code § 9104(k) (1997). The bankruptcy court held that it could, and the district court affirmed the ruling. Because we hold that the California legislature intended to change the law, effective July 1, 2001, by significantjy altering the statute so that from that date forward a party could attach its security interest to tort proceeds, we hold that the law prior to the change prohibited such an attachment. We therefore reverse.

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Pacific/West Communications Group, Inc. (PacWest), a public relations firm, became involved in a dispute with one of its major clients, the California Department of Transportation (CalTrans), that eventually resulted in a 1997 lawsuit in the California court system. PacWest’s complaint contended that CalTrans breached contracts…