Deocampo v. Potts
| Decision Date | 08 September 2016 |
| Docket Number | No. 14-16192,14-16192 |
| Citation | 836 F.3d 1134 |
| Parties | Jason Eugene Deocampo; Jesus Sebastian Grant; Jaquezs Tyree Berry, Plaintiffs–Appellees, v. 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. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Austin 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; for Defendants–Appellants.
Ayana Cuevas Curry (argued) and John L. Burris, Law Offices of John L. Burris, Oakland, California, for Plaintiffs–Appellees.
Krista 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.
WARDLAW
, Circuit Judge:
Does a 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 their employment?
Like 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.
Under 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.
On 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.1
On 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, 98 S.Ct. 2018, 56 L.Ed.2d 611 (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 as defendants.
Subsequently, 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, 2010).2
According 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 (9th Cir. BAP 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.
Vallejo 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
. Nevertheless, 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, 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.
Vallejo 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).3
Scholars 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)
(); 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 States Workshop (Apr. 14, 2015),4 (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”).
Our 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 disputes over its interpretive and practical complexities will remain long at rest.
On May 30, 2008, one week after Vallejo's initial bankruptcy filing, Defendants filed a notice stating that this action was automatically stayed pursuant to 11 U.S.C. § 362
. The district court—perhaps recognizing the oddity that Vallejo's bankruptcy could automatically stay an action in which Vallejo was no longer a party, and neither the plaintiffs nor the defendants were debtors—ordered the “non-bankrupt parties [to] show cause why this action should not be stayed in its entirety....” In response, the parties stipulated in writing that Vallejo's bankruptcy filing triggered an automatic stay “pursuant to 11 U.S.C. Section 362,” though they did not elaborate as to...
To continue reading
Request your trial
-
Lyda v. City of Detroit (In re City of Detroit)
...for “willful and malicious injury” from discharge); 901(a) (excluding application of 11 U.S.C. § 523 ); see also Deocampo v. Potts , 836 F.3d 1134, 1140 n.10 (9th Cir. 2016). Plaintiffs' constitutional rights are inviolable; but the remedies available to them in the chapter 9 setting are no......
- Pauluk v. Savage
-
In re Coalinga Reg'l Med. Ctr.
...to enforce or implement court ... rules ....Though this authority is substantial, it is not without limits. Deocampo v. Potts, 836 F.3d 1134, 1143 (9th Cir. 2016).10 Detroit is relied upon by Debtor and limited or distinguished by Committee, Beckman, and UST. Detroit held that § 1102(a)(1) ......
-
Víctor J. Salgado & Assocs. Inc. v. Cestero-Lopategui
...that mandatory indemnity policies were dispositive on the automatic stay issue. See id. at 73 n.10 ; see also Deocampo v. Potts, 836 F.3d 1134, 1144 n.13 (9th Cir. 2016) (noting that courts have "ruled that an indemnity obligation triggers the automatic stay provisions of 11 U.S.C. §§ 362(a......
-
Prisoners' Rights
...medical director in individual capacity and involvement in official roles does not protect from personal liability); Deocampo v. Potts, 836 F.3d 1134, 1142-43 (9th Cir. 2016) (for suit filed against the official in personal capacity, but monetary damage can only be against official’s pe......
-
Third-party Relief for Municipal Debtors: 'necessity' in the Chapter 9 Context
...injunctions affecting third parties under 11 U.S.C. § 105 (2012)). 23. In re Dow Corning Corp., 280 F.3d at 657-58.24. Deocampo v. Potts, 836 F.3d 1134, 1143 (9th Cir. 2016) (holding that its reasoning in In re Lowenschuss precluding third-party relief in chapter 11 "does not apply in Chapt......