Jason Eugene Deocampo; Jesus Sebastian Grant; Jaquezs Tyree Berry, Plaintiffs-Appellees,
Jason Potts, individually, and in his capacity as a Vallejo Police Officer; Eric Jensen, individually, and in his capacity as a Vallejo Police Officer, Defendants-Appellants, and Jeremy Patzer, individually, and in his capacity as a Vallejo Police Officer, Defendant.
and Submitted May 10, 2016 San Francisco, California
from the United States District Court for the Eastern
District of California William B. Shubb, Senior District
Judge, Presiding D.C. No. 2:06-cv-01283-WBS-CMK
Byrne Conley (argued), Gibbons and Conley, Walnut Creek,
California; Noah G. Blechman and James V. Fitzgerald, III,
McNamara, Dodge, Ney, Beatty, Slattery, Pfalzer, Borges &
Brothers LLP, Walnut Creek, California; Claudia M. Quintana,
Deputy City Attorney, City of Vallejo, Vallejo, California;
Cuevas Curry (argued) and John L. Burris, Law Offices of John
L. Burris, Oakland, California, for Plaintiffs-Appellees.
MacNevin Jee, James R. Touchstone, and Martin J. Mayer, Law
Offices of Jones & Mayer, Fullerton, California, for
Amici Curiae California State Sheriffs' Association,
California State Police Chiefs' Association, and
California Peace Officers' Association.
Before: John T. Noonan, Kim McLane Wardlaw, and Richard A.
Paez, Circuit Judges.
panel affirmed the district court's denial of a Rule 60
motion for relief from judgment, and agreed with the district
court that neither a judgment against individual City of
Vallejo police officers for excessive force nor a subsequent
attorney's fee award in favor of plaintiffs was
discharged by the City of Vallejo's bankruptcy
filed this action against Vallejo police officers and others
asserting excessive-force and other constitutional claims
under 42 U.S.C. § 1983 and state law. Subsequently,
Vallejo filed for Chapter 9 bankruptcy and the district court
stayed the § 1983 action. After Vallejo's plan for
adjustment of debts was confirmed by the bankruptcy court,
the district court lifted the stay in the § 1983 action,
and a jury returned a verdict, finding that the officers used
excessive force and awarding plaintiffs $50, 000 in
compensatory damages and attorney's fees under §
1988. The officers moved for relief from judgment, asserting
that the judgment and fee award were effectively claims
against the City of Vallejo that were subject to adjustment
under the bankruptcy adjustment plan.
panel noted that under California law, Vallejo was generally
obligated to indemnify its employees for claims against them
arising from their employment. The panel held that
California's indemnification statutes did not render a
judgment or concomitant fee award against an indemnifiable
municipal employee a liability of the municipal employer for
purposes of adjusting or discharging the debts of a Chapter 9
debtor. The panel further held that the bankruptcy
court's plan confirmation did not release any debtor but
the City of Vallejo and did not expressly encompass claims or
judgments against the City's employees. Accordingly, the
panel held that the judgment in the § 1983 action was
the officers' personal liability, not Vallejo's. The
panel emphasized, however, that its conclusion that the
judgment was against the officers personally, and not
Vallejo, did not relieve Vallejo of its obligation to
indemnify the officers under California law.
WARDLAW, Circuit Judge
municipality's bankruptcy plan of adjustment
automatically discharge a judgment against individual
officers for excessive force by operation of a California
statute generally requiring public entities to defend and
indemnify their employees for actions within the scope of
many a city in the wake of the 2007-08 financial crisis, the
city of Vallejo, California found itself burdened by mounting
debts as its tax base shrank. In 2008, Vallejo responded by
petitioning for Chapter 9 bankruptcy, a form of relief
available only to municipalities. Some two years after the
bankruptcy court confirmed Vallejo's debt-adjustment
plan, a federal jury found that two police officers employed
by Vallejo used constitutionally excessive force when they
arrested Jason Eugene Deocampo. In accordance with the
verdict, the district court entered a judgment for money
damages against the officers in their personal capacities,
and awarded Deocampo his attorney's fees.
California law, Vallejo is generally obligated to indemnify
its employees for claims against them arising from their
employment. We hold that where, as here, the plan confirmed
by the bankruptcy court did not expressly encompass claims or
judgments against the city's employees, the
indemnification statutes do not subject such claims or
judgments to adjustment by operation of law nor by the fact
of the public employment itself. We affirm the district
court's denial of the officers' Rule 60 motion for
relief from judgment, and agree with the district court that
neither the judgment nor attorney's fee award was
discharged by Vallejo's bankruptcy proceedings.
Vallejo police use excessive force against Deocampo.
March 28, 2003, at approximately 8:00 p.m., Deocampo, Jesus
Sebastian Grant, and Jaquezs Tyree Berry (collectively,
"Plaintiffs") suffered a violent encounter with
police officers employed by Vallejo. According to Plaintiffs,
this encounter began when Officers Jason Potts and Jeremy
Patzer stopped Berry on the street. With no justification,
they kicked and slammed him to the ground, causing him to hit
his head on a wooden fence. Deocampo and Grant approached the
officers, asked why they were attacking Berry, and informed
them that their actions were wrong. Officer Potts told them
to go away, and Deocampo complied by walking away from him.
Officer Potts followed Deocampo, and shoved him. Officer
Potts and a third officer, Eric Jensen ("the
Officers") beat Deocampo with their batons, and refused
to stop even when he raised his hands in the air and said he
would leave. The Officers also pepper-sprayed and beat Grant.
Plaintiffs were falsely arrested and charged with resisting,
delaying, and obstructing the police.
March 30, 2006, Plaintiffs filed this action against Vallejo,
Vallejo's chief of police, the Officers, and Patzer.
Plaintiffs asserted excessive-force and other constitutional
claims against the Officers and Patzer under 42 U.S.C. §
1983; Monell claims against Vallejo and its chief of
police, see Monell v. New York City Dep't of Soc.
Servs., 436 U.S. 658 (1978); and various state-law
causes of action. On July 24, 2007, the parties stipulated to
the dismissal with prejudice of Plaintiffs'
Monell claims and of Vallejo and its chief of police
Vallejo petitions for bankruptcy.
on May 23, 2008, Vallejo filed for Chapter 9 bankruptcy. This
was, at the time, one of the largest municipal bankruptcies
in history, and California's largest since Orange County
filed for bankruptcy in 1994. See Alison Vekshin
& Michael B. Marois, Bankrupt Vallejo, California,
Approves Restructuring, Bloomberg (Dec. 1,
to the City of Vallejo, a number of converging forces
rendered the city insolvent and necessitated its bankruptcy
filing. Vallejo derived most of its revenues from property
taxes, sales taxes, assessments, and fees. See In re City
of Vallejo, No. 08-26813-A-9, 2008 WL 4180008, at *2
(Bankr. E.D. Cal. Sept. 5, 2008), aff'd, 408
B.R. 280 (B.A.P. 9th Cir. 2009). "Recent adverse
economic conditions" caused Vallejo's revenues to
decrease. Id. These conditions included not only
those predictably associated with the financial crisis, but
such contingencies as the closure of a Wal-Mart that had been
a large source of sales tax revenue; the loss of shared
revenue from a Six Flags/Marine World after Vallejo's
ownership interest in the amusement park was bought out; and
the unexpected retirement of several police officers and
firefighters, who became entitled to millions of dollars in
unbudgeted retiree payouts. Id. at *2, *5.
implemented austerity measures, including cutting funds to
its senior center, library, parks, symphony, and convention
and visitors bureau; using vehicles and equipment well beyond
their expected lives; and reducing employee rolls by 87
full-time positions. Id. at *3.
Vallejo's "ability to provide minimal levels of
service to its residents and provide for their basic health
and safety" was seriously threatened. Id. at
*5. Pension obligations and benefits due under collective
bargaining agreements with several unions could not easily be
adjusted. Id. at *3. California laws made it
difficult for Vallejo to raise taxes or borrow funds. As the
Bankruptcy Appellate Panel noted, "Proposition 13 capped
property tax rates to 1% of full cash value. Proposition 218
limited Vallejo's ability to raise any other taxes
without a majority vote. Article XVI, section 18 of the
California Constitution also restricted its ability to borrow
funds." In re City of Vallejo, 408 B.R. at 286
& n.7. Over the objections of several creditors, the
Bankruptcy Court for the Eastern District of California found
Vallejo eligible to file a Chapter 9 petition, and the
Bankruptcy Appellate Panel affirmed. Id. at 299.
was not alone among cities severely affected by the 2007-08
financial crisis. 2008 and the years since have witnessed a
small but impactful resurgence in municipal bankruptcy
filings. While most have been commenced by special-purpose
districts, such as hospital, utility, or sanitation
authorities, several cities have filed for Chapter 9
protection, including San Bernardino, California; Stockton,
California; Hillview, Kentucky; and Detroit, Michigan.
See Bankrupt Cities, Municipalities List and Map,
Governing (last updated Aug. 21, 2015).
have criticized the very concept of municipal bankruptcy as
it is codified by Chapter 9 for a variety of reasons,
including that it harms creditors and makes future lending
unattractive, and that it hamstrings more flexible state-law
solutions. See Omer Kimhi, Chapter 9 of the
Bankruptcy Code: A Solution in Search of a Problem, 27
Yale J. Reg. 351, 384-85 (2010) (advancing the former
argument); Michael W. McConnell & Randal C. Picker,
When Cities Go Broke: A Conceptual Introduction to
Municipal Bankruptcy, 60 U. Chi. L. Rev. 425, 494-95
(1993) (advancing the latter). Yet experts have warned that
the surge in municipal bankruptcies that began during the
financial crisis may not be over. See, e.g., William
C. Dudley, President & Chief Exec. Officer, Fed. Reserve
Bank of N.Y., Opening Remarks for the Chapter 9 and
Alternatives for Distressed Municipalities and
Workshop (Apr. 14, 2015),  (opining that, while high-profile
bankruptcy filings like Detroit's "have captured a
considerable amount of attention . . . they may foreshadow
more widespread problems than what might be implied by
current bond ratings").
case law construing Chapter 9 is scant, and this appeal
confronts us with a novel legal issue, of the kind that often
surfaces when changing social and economic conditions awaken
dormant statutes. But Chapter 9 has awakened, and we do not
presume further ...