November 22, 2009

Nelson v. Exxon Mobil: Punitive Damages Claims Can Be Assigned

This published opinion could be headed for the California Supreme Court.

The opinion addresses whether the right to recover punitive damages is assignable under California law. The Court of Appeal (Third Appellate District) held that the right to recover punitive damages is assignable if that right arises from a cause of action that is assignable. The court observed that causes of action arising from an injury of a personal nature (e.g., slander, assault, malicious prosecution) are not assignable. But the injury in this case was groundwater contamination, an injury to real property. The court observed that claims for injury to real property are transferred with the property when title passes from one owner to another. Accordingly, the court concluded that a property owner could assign its right to seek punitive damages in connection with injury to the property.

The court acknowledged that several other cases, including California Supreme Court cases, contain language suggesting that the right to seek punitive damages is never assignable. But the Court of Appeal said the results in those cases could be harmonized with the new rule announced in this opinion. Nevertheless, the result in this case is inconsistent with the plain language of other published opinions, which makes a strong case for Supreme Court review.