Bankruptcy Won’t Topple Excessive-Force Suit

     SAN FRANCISCO (CN) — The Ninth Circuit found Thursday that the city of Vallejo cannot escape a $50,000 judgment against its police officers for excessive force because the judgment was not discharged by city’s 2008 bankruptcy.
     Plaintiffs Jason Deocampo, Jesus Grant and Jaquezs Berry sued three Vallejo officers in 2006 over a violent encounter three years prior.
     Officers Jason Potts and Jeremy Patzer stopped Berry on the street and began kicking him and slamming him to the ground without justification. After Deocampo and Grant questioned the officers’ actions, Potts and a third officer, Eric Jensen, beat Deocampo with their batons and pepper-sprayed Grant.
     While the men’s excessive force lawsuit was pending in district court, the Vallejo City Council — citing falling property values and tax receipts and a $16 million budget deficit — voted unanimously in May 2008 to declare the city bankrupt.
     Vallejo, 25 miles northeast of San Francisco, was the first major metropolitan area in California to file for bankruptcy since Orange County did so in 1994. Vallejo was not alone among the cities severely affected by the 2007-2008 financial crisis, with Detroit, Michigan, and Stockton, California, filing bankruptcy petitions thereafter.
     The excessive force case was stayed pending resolution of the city’s Chapter 9 bankruptcy, a form of relief available only to municipalities. The bankruptcy was confirmed in 2011.
     Following a trial in 2013, the jury found that the Vallejo officers had used excessive force against Deocampo and awarded him $50,000 in compensatory damages. The court subsequently awarded him costs and attorney fees.
     U.S. District Judge William Shubb refused the officers’ request for relief from the judgment, finding that the damages were not discharged by Vallejo’s bankruptcy because they stemmed from claims against the officers in their personal capacities rather than against the city.
     A three-judge panel of the Ninth Circuit on Thursday upheld Shubb’s decision, noting that this will not likely be the last time it must deal with cases arising from a city’s bankruptcy.
     “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,” Circuit Judge Kim Wardlaw wrote on behalf of the panel. “But Chapter 9 has awakened, and we do not presume further disputes over its interpretive and practical complexities will remain long at rest.”
     The panel rejected the officers’ argument that the damages awarded against them were subject to the bankruptcy plan’s adjustment schedule, which would reduce the claim’s value to 20 to 30 percent of the judgment.
     “Of course it was Vallejo, not the officers, that declared bankruptcy and adjusted its debts, and the judgment was entered against the officers solely in their personal capacities,” Wardlaw said.
     Although California law requires Vallejo to indemnify its employees for claims arising from their employment, this does not render a personal-capacity suit against a state employee as one against the state, Wardlaw said.
     “Deocampo is entitled to enforce the judgment against the officers personally, but he has no right to enforce it directly against Vallejo or its property,” the judge said.
     The officers were not listed as creditors in the bankruptcy, nor did the officers file any proofs of claims in the bankruptcy proceedings, Wardlaw noted.
     “For these reasons, the judgment remains undischarged, unadjusted, and untouched by Vallejo’s bankruptcy,” she said.
     Wardlaw dismissed concerns that denying the officers relief from the $50,000 judgment would have dire consequences, including dissuading police from performing their duties or deterring others from becoming police officers.
     “These concerns are misplaced. The officers will not be required to pay the judgment out of their own pockets. Our conclusion that the judgment is against the officers personally, and not Vallejo, does not relieve Vallejo of its obligation to indemnify the officers under California law,” the judge said.
     The city became obligated to indemnify the officers when it undertook their defense in 2013, after the confirmation of the bankruptcy plan.
     “Our decision thus does not unsettle the commitment of California municipalities to indemnify their employees, nor should it chill legitimate law enforcement activity,” Wardlaw said.
     The parties did not immediately respond to a request for comment.

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