Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_11-cv-02120/USCOURTS-caed-1_11-cv-02120-9/pdf.json

Parties Involved:
Allstate Insurance Company
Defendant
Deerbrook Insurance Company
Defendant
Barbara Dorroh
Plaintiff
Robert Dorroh
Plaintiff
Cedar Sol Warren
Plaintiff
David F. Wurst
Plaintiff

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UNITED STATES DISTRICT COURT

 EASTERN DISTRICT OF CALIFORNIA

ROBERT DORROH AND BARBARA

DORROH, Trustees of the Bankruptcy

Estate of Cedar Sol Warren,

Plaintiffs,

v.

DEERBROOK INSURANCE

COMPANY, a wholly-owned subsidiary of

ALLSTATE INSURANCE COMPANY,

Defendant.

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CASE NO. 1:11-CV-2120 AWI GSA

ORDER RE: MOTION FOR

RECONSIDERATION

(Docs. 93 and 94)

I. History

In March 2000, third party Cedar Warren (“Warren”) and Robert Dorroh were involved in

a car accident. It is undisputed that Warren was at fault and Robert Dorroh became paralyzed as

a result. Warren was covered by Defendant Deerbrook Insurance (“Deerbrook”) with a relevant

policy limit of $15,000. Dorroh was on his way to work and applied for workers’ compensation;

his workers’ compensation carrier is third party Superior National Insurance Company

(“Superior”). In July 2000, Plaintiffs Robert and Barbara Dorroh (“Dorrohs”) requested that

Deerbrook settle their claim against Warren for $15,000. Deerbrook agreed to the settlement. 

Before Deerbrook issued a check to the Dorrohs, Superior contacted Defendant. Superior

claimed a potential lien on any insurance payout. Deerbrook told the Dorrohs it would issue a

check that named both the Dorrohs and Superior. The Dorrohs responded that the workers’

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compensation claim had been denied; workers’ compensation was ultimately awarded in 2003

after a trial. In 2000, the Dorrohs demanded that the check be made payable solely to

themselves. The parties could not come to an agreement. 

The Dorrohs filed suit against Warren in March 2001. In 2007, Warren filed for

bankruptcy in the District of Oregon; Warren listed a bad faith claim against Deerbrook as an

asset in his bankruptcy filing. The Dorroh’s suit against Warren was subject to an automatic stay

which was later lifted to liquidate the claim. The case went to trial and the Dorrohs were

awarded $16,520,169.65 in May 2008; the judgment became final in 2009. In April 2011, the

trustee in Warren’s bankruptcy (“Trustee”) filed this suit against Deerbrook for breach of

contract and breach of the covenant of good faith and fair dealing. Doc. 1. In July 2011, the

Dorrohs and the Trustee came to an agreement whereby the claim was assigned from Warren to

the Dorrohs in exchange for $215,000 and a promise not to execute the judgment against Warren. 

On September 19, 2011, the Dorrohs substituted in as plaintiff in this case in place of the

Trustee. Doc. 26. In December 2011, the case was transferred from the District of Oregon to the

Eastern District of California. Warren’s bankruptcy was closed and the Trustee was discharged

on May 9, 2012. 

Warren made a motion to substitute himself into this case as a plaintiff to pursue claims

against Deerbrook that are personal to him, and could not be brought by the Dorrohs. Doc. 69. 

On September 21, 2012, Magistrate Judge Austin denied the motion. Doc. 81. On October 4,

2012, the Dorrohs and Warren executed a second assignment returning the personal claims to

Warren. Doc. 93, Part 2, Ex. D. On October 5, 2012, the Dorrohs and Warren filed a joint

motion to substitute in Warren as a plaintiff to pursue those personal claims. Doc. 93. 

Simultaneously, Warren filed an “Objection to the Non-Dispositive Order of the Magistrate

Judge Hon. Gary S. Austin.” Doc. 94. The court interpreted this objection as a request for

reconsideration. The two motions are considered together as they deal with the same subject

matter. Deerbrook opposes both motions and they were taken under submission without oral

argument. 

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II. Legal Standards

Fed. Rule Civ. Proc. 72(a) allows a party to serve and file objections to a Magistrate

Judge’s nondispositive order, to be decided by the District Judge. In the Eastern District of

California, this type of objection is treated as a motion for reconsideration by the assigned

District Court Judge. See Local Rule 303. 

When filing a motion for reconsideration, Local Rule 230(j) requires a party to show

“what new or different facts or circumstances are claimed to exist which did not exist or were not

shown upon such prior motion, or what other grounds exist for the motion.” The court reviews a

motion to reconsider a Magistrate Judge’s ruling under the “clearly erroneous or contrary to law”

standard set forth in 28 U.S.C. § 636(b)(1)(A). See also Fed. Rule Civ. Proc. 72(a). “A finding is

‘clearly erroneous’ when although there is evidence to support it, the reviewing court, after

reviewing the entire evidence, is left with the definite and firm conviction that a mistake has been

committed.” United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948); see also Anderson v.

Equifax Info. Services LLC, 2007 WL 2412249, *1 (D. Or. 2007) (“Though Section

636(b)(1)(A) has been interpreted to permit de novo review of the legal findings of a magistrate

judge, magistrate judges are given broad discretion on discovery matters and should not be

overruled absent a showing of clear abuse of discretion”). Motions to reconsider are committed

to the discretion of the trial court. Rodgers v. Watt, 722 F.2d 456, 460 (9th Cir. 1983). 

III. Discussion

The court agrees with Deerbrook that the joint motion to substitute Warren in as a

plaintiff is “nothing more than a thinly-disguised motion for reconsideration” of Magistrate

Judge Austin’s denial of Warren’s motion to substitute. Doc. 96, 11:4-5. Thus the joint motion

and Warren’s motion for reconsideration will be considered together, as a motion for

reconsideration. 

Judge Austin ruled that Warren’s motion must fail as he had assigned all his claims to the

Dorrohs without reservation of any personal claims. Doc. 81, September 21, 2012 Order, 6:19-

21. Warren has no interest left in this litigation. Judge Austin’s ruling is based primarily on

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Purcell v. Colonial Ins. Co., 20 Cal. App. 3d 807 (Cal. App. 2nd Dist. 1971) and Cain v. State

Farm Mut. Auto. Ins. Co., 47 Cal. App. 3d 783 (Cal. App. 1st Dist. 1975), two cases dealing with

the assignment of rights against an insurance company. In Purcell, the court did not allow the

assignor to bring a separate suit against the insurance company for personal injury based on a

wrongful failure to settle: “He assigned that cause of action to the Reichs in clear and

unequivocal language. In so doing the plaintiff simply waived any claim for purely personal

damages that...he might have been able to recover had he brought the action himself. He could

not split the cause of action.” Purcell v. Colonial Ins. Co., 20 Cal. App. 3d 807, 814 (Cal. App.

2nd Dist. 1971), citations omitted. In Cain, the court allowed both the assignor and assignee to

bring claims against the insurance company in one suit, noting that the assignor had specifically

reserved the right to sue for “any cause of action for physical injuries sustained as a result of the

failure to settle.” Cain v. State Farm Mut. Auto. Ins. Co., 47 Cal. App. 3d 783, 790 (Cal. App. 1st

Dist. 1975). The court had found that “At common law, a partial assignee had no legal standing

to sue; the underlying rationale was that the original creditor could not split his cause of action

and sue the debtor in two actions, and he could not bring about the same result by assigning part

of the claim to another and subjecting the debtor to two suits by different plaintiffs. Enforcement

of a partial assignment of a claim was permitted in equity, however, by the process of requiring

joinder of all interested parties; i.e., the assignor and all partial assignees.” Cain v. State Farm

Mut. Auto. Ins. Co., 47 Cal. App. 3d 783, 794-95 (Cal. App. 1st Dist. 1975). Judge Austin read

the two cases as presenting a consistent rule that permitted joinder of a partial assignor/assignee

when there was a reservation of claims and disallowing joinder where the assignment was total

with no such reservation. In this case, the assignment was as follows:

Pursuant to the Order of the Bankruptcy Court authorizing this Assignment, a copy of

which is attached hereto, David F. Wurst, Trustee of the bankruptcy estate of In re Cedar

S. Warren; United States Bankruptcy Court, District of Oregon, Case No. 07-60674-fra7,

irrevocably assigns to Robert and Barbara Dorroh of all the bankruptcy estate’s claims

that it may have, or hereinafter may acquire, against Deerbrook Insurance Company

(‘Deerbrook’) based on Deerbrook’s alleged failure to comply with the implied covenant

of good faith and fair dealing, including but not limited to those with respect to settling

claims by the Dorrohs against the debtor, Cedar Warren (‘Debtor’) within the available

policy limits, and provision of the Debtor’s defense in the matter, Dorroh v. Warren,

Superior Court, County of Tuolumne, Case No. CV 48013 (The ‘Claims’). This

assignment is absolute and not for purposes of security. David F. Wurst, Trustee makes

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no warranty concerning The Claims, express or implied.

Doc. 69, Part 7, July 13, 2011 Assignment. Judge Austin found that “when the trustee of

Warren’s bankruptcy estate assigned all claims to the Dorrohs, including a single cause of action

for a failure to settle within policy limits, Warren waived any claims for purely personal

damages.” Doc. 81, September 21, 2012 Order, 6:19-21. 

The Dorrohs and Warren first argue that the holding of Purcell and Cain is that an

assignor and assignee must pursue a joint suit against the insurance company rather than

attempting separate suits. Doc. 94, Warren Brief, 6:8-7:11. They also argue that the assignment

in this case took place after the suit was initiated as opposed to Purcell in which the assignment

predated the suit. Doc. 93, Part 1, Joint Brief, 4:18-23. They do not address the distinction Judge

Austen drew, between a complete assignment and an incomplete assignment with a reservation

of personal claims. They do not explain how their assertions are inconsistent with Judge

Austen’s ruling. The Dorrohs and Warren fail to explain why Judge Austen’s ruling is wrong,

instead focusing on a separate holding of the Purcell opinion. The court reads the law as

requiring both a reservation of claim and joinder in a single suit to effect partial assignment. 

The Dorrohs and Warren have a second argument based upon bankruptcy law. 

They posit that Purcell can be distinguished because in that case, the insured individual assigned

away his own rights; in this case, the Trustee assigned away rights on his behalf. Doc. 94, Warren

Brief, 4:5-10. Since the Trustee was the party that assigned the claims to the Dorrohs, the effect

of a complete assignment differs. The Dorrohs and Warren argue that “a Trustee does not have

the power or authority to ‘waive’ property rights....[11 U.S.C.] Section 554(d) tells us that there

are only three things that a Trustee can do with the property of an estate- administer it, abandon

it, or keep it as property of the estate.” Doc. 93, Part 1 Joint Brief, 5:8-22. They argue that the

claims either reverted to Warren himself (as abandoned by the Trustee) or were assigned to the

Dorrohs (in which case they were reassigned back to Warren by the Dorrohs). Doc. 93, Part 1,

Joint Brief, 6:2-6. However, they provide no case law that discusses this issue; there is no

statement that a bankruptcy trustee can not waive a right. Instead, the Seventh Circuit has found

that “bankruptcy trustees regularly make use of releases and waivers in administering bankruptcy

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estates, and such decisions do not always amount to ‘abandonment’ of estate property. Rather,

the giving of a release in exchange for some action by the debtor (in this case, the turning over of

one million dollars worth of property), as part of a generally beneficial compromise settlement,

may be the most efficient and fair means of administering the estate.” Hoseman v.

Weinschneider, 322 F.3d 468, 475 (7th Cir. 2003). In this case, the Trustee administered the

estate by assigning Warren’s claims against Deerbrook to the Dorrohs in exchange for a sum of

money and a promise not to execute any judgment against Warren; as part of this exchange

certain claims (including the purely personal claims) were waived. In the absence of case

authority that discusses waiver/non-waiver of personal claims when a bankruptcy trustee assigns

away all claims, Purcell is not distinguished. 

IV. Order

The Dorrohs’ and Warren’s motions to substitute in as plaintiff/reconsideration are

DENIED. 

IT IS SO ORDERED. 

Dated: January 16, 2013 

0m8i78 SENIOR DISTRICT JUDGE

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