F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

J A S O N E U G E

N E D E O C A M P O ; J E S U S S E B A S T I A

N G R A N T ; J A Q U E Z S T Y R

E E B E R R Y , Plaintiffs-Appellees
,

v

.

J A S O N P O T T S , individually
, and in his capacity

as a Vallejo Police Officer; E R

I C J E N S E N , individually
, and in his capacity

as a Vallejo Police Officer,

Defendants-Appellants
,

and

J E R E M Y P A T Z E R , individually , and in his capacity

as a Vallejo Police Officer, Defendant. N o. 14-16192

D.C. No. 2:06-cv-01283- W B S-CMK

OPI NI ON

A ppeal from the United States District Court for the Eastern District of California W illiam B . Shubb, Senior District J udg e, Presiding

Arg ued and Submitted May 10, 2016 San F rancisco, CaliforniaD E O C A M P O V

. P O T T S

2

F iled September 8, 2016

B efore: J ohn T. Noonan, Kim McL ane W ardlaw, and Richard A. Paez , Circuit J udg es.

Opinion by

J udg e W ardlaw

SUMMARY *

Civil Rights/Bankruptcy

The panel affirmed the district court’s denial of a Rule 60 motion for relief from judg ment, and a g reed with the district
court that neither a judg ment ag ainst individ u a l C ity o f Vallejo poli c e officers for ex cessive force nor a subsequent attorney ’s fee award in favor of plaintiffs was discharg ed by the City of Vallejo’s bankruptcy

proceeding s.

Plaintiffs filed this action ag ainst V allejo police o ff i cers and others asserting e x cessive-force and other constitutional claims under 42 U.S.C. § 1983 and state law. Subsequently
, Vallejo filed for Chapter 9 bankru p t cy and the district court stay ed the § 1983 action. After Vallejo’s plan for adjustment of debts was confirmed by t h e bankruptcy court, the district
court lifted the stay in the § 1983 action, and a jury r eturned

a verd i c t , finding that the officers used ex cessive force a nd awarding plaintiffs $50,000 in c ompensatory damag es a nd
attorne y ’s fees under § 1988. The o fficers moved for relief from judg ment, asserting that the j u d gment and fee award

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.D E O C A M P O V

. P O T T S 3

were effectively claims ag ainst the City of Vallejo that were subject to adjustment under the bankruptcy adjustment plan.

The panel noted that under California law, V allejo was g enerally o blig ated to indemnify its employ ees for c laims
ag ainst them arising from their employ ment. The p anel h eld that California’s i n d e m n ification statutes did not render a judg ment or concomitant fee award ag ainst a n indemnifiable municipal e mploy ee a liability of the municipal employ er for
purposes of adjusting or d ischarg ing the debts of a Chapter 9 debtor. T h e panel further held that the bankruptcy court’s plan confirmation did n ot release any debtor but the City o f Vallejo and did not ex pressly encompass claims or judg ments ag ainst the City ’s employ ees. According ly
, t h e panel h eld that the judg ment in the § 1 9 83 action was the officers’ personal liability
, not Vallej o ’s

. The panel emphasiz ed, however, that its conclusion that the judg ment was a g ainst the officers personally
, and not Vallejo, did not relieve Vallejo o f its oblig ation to indemnify the officers under California law.

COUNSEL

Austin B y

rne Conley (arg

ued), Gibbons and Conley
, Walnut C r e ek, California; Noah G

. B lechman and J ames V. F itz g erald, I I I
, McNamara, Dodg e, N ey , B eatty , Slattery
, P f alz er, B org es & B rothers L L P, W alnut Creek, Califor n i a; Claudia M. Quintana, Deputy City Attorney
, City of Vallejo, Vallejo, California; for Defendants-Appellants.

Ay ana Cuevas Curry (arg ued) and J ohn L

. B urris, L aw Offices of J ohn L

. B urris, Oakland, California, for PlaintiffsAppellees.D E O C A M P O V

. P O T T S

4

Krista MacNevin J ee, J ames R. Touchstone, and Martin J

. May er, L aw Offices of J ones & May er, F ullerton, California, for Amici Curiae California State Sheriffs’ Ass o c i a tion, California State Police Chie fs’ Association, a nd California Peace Officers’ Association.

OP INION

W A RDL AW , Circuit J udg e:

Does a municipality ’s bankruptcy plan of a d j ustment automat i c a lly discharg e a judg ment ag ainst individual officers for e x cessive force by o peratio n of a California
statute g enerally r equiring public entiti e s to defend a nd indemnify their employ ees f or actions with i n the scope o f their employ

ment?

L ike man y a city in the wake of the 2007–08 financial crisis, the city of Vallejo, California found itself burdened b y

m o u nting debts as its tax base shrank. I n 2008, V al l e j o responded by petitioning for Chapter 9 bankruptcy
, a f orm o f relief available only to municipalities. Some two y ears after the b a nkruptcy c ourt confirmed Vallejo’s d ebt-adjustment plan, a f ederal jury fou nd that two police officers employ ed by Vallejo used constitutionally ex c e ss i v e force when they arrested J ason Eug ene Deocampo. I n a c c o rdance with the verdict, the d ist r ict court entered a judg ment f or money damag es ag ainst the o fficers in their personal capacities, a nd awarded Deocampo his attorney ’s fees.

Unde r C a lifornia law, Vallejo is g enerally oblig ated to indemnify its employ ees for claims ag ainst them arising from their employ

ment. We hold that whe r e , a s here, the p lanD E O C A M P O V

. P O T T S 5

confirmed by the bankruptcy c ourt did not ex p r e s s ly
encompass claims or judg ments a g ainst the city ’s employ ees, the indemnification statutes do not subject such claims o r judg ments to adjustment by o p e r ation of law nor b y the fact of the public employ

ment itself. We affirm the distr i ct court’s denial o f the officers’ Rule 60 motion for relief from judg ment, and ag ree with the district court tha t neither the judg ment nor attorney ’s fee award w a s discharg ed b y Vallejo’s bankruptcy

proceeding s.

I.

A. Vallejo police use excessive force against Deocampo.

On March 28, 2003, at approx imately 8:00 p.m., Deocampo, J e sus Sebastian Gran t , a n d J aquez s Ty r ee B erry (collectively
, “Pla i n t iffs”) suffered a violent encounter with police o fficers employ ed by Vallejo. According to Plaintiffs, this encounter beg an when Officers J as o n P otts and J eremy Patz er stopped B erry on the street. W ith no justification, they kicked and slammed h im to the g r ound, causing him to hit his head on a w ood e n f

e n ce. Deocampo and Grant approached the o fficers, asked wh y they were attacking B erry , a nd informed them that their ac t i o n s were wrong

. Officer Potts told them to g o away , and Deocampo c o m p l i ed by walking
away from him. Officer Potts f ollow e d D e ocampo, a

nd shoved him. Offic e r P o t t s and a third officer, Eric J ensen (“the O fficers”) beat Deocamp o with their batons, a nd refused to stop even when he raised his hands in the air a n d said he would leave. The Of f icers a lso pepper-spray

ed a ndD E O C A M P O V

. P O T T S

6

beat Grant. Plaintiffs were falsely arrested a nd charg e d with resisting
, delay

ing
, and obstructing the police. 1

On March 30, 2006, Pla intiffs filed this action ag ainst Vallejo, Vallejo’s c hief of police, the Officers, and Patz er. Plaintiffs asserted ex cessive-force and other consti t u tional claims ag ainst th e Officers a nd Patz er under 42 U .S.C. § 1983; Monell claims ag ainst Vallejo and its chief of police,

s ee Monell v. New Y

ork City Dep’t of Soc. Servs.
, 4 3 6 U

. S

. 658 (1978); a

nd various state-law causes of action. On J uly 24, 2007, the p arties stipulated to the dismissal with prejudice of Plaintiffs’ Monell claims and of Vallejo and its chief o f police as defendants.

B. Vallejo petitions for bankruptcy.

Subsequently
, on May 2 3, 2008, Vallejo filed for Chapter 9 bankruptcy

. T his was, a t the time
, o ne of the larg e st municipal bankruptcies in history
, and Cal i f o rnia’s larg e st

s ince Orang e County filed for bankruptcy in 1994. See Alison Vekshin & Mi c h ael B

. Marois, Bankrupt Vallejo, California, A

p p r o ves Restructuring
, B loomberg ( D ec. 1, 2010). 2

According to the City of Vallejo, a number of converg ing forces rendered the ci t y insolvent and necessitated its

1 T h e crim in al ch arg es ag ain s t P l a i n t i f f s w ere u ltim ately d ism issed

. Calif o rn ia’ s tw o

- y ear statu te o f lim itatio n s f or p erso n al in

j u ry actio n s w as to lled w h ile t h e crim in al ch arg es ag ain st P lain tif f s w ere pen d i n g

. S

ee Cal. Civ . P ro c. Co de § 3 35 .1 ; Cal. Go v ’ t Co d e § 9 4 5 .3

.

2 Ava ila b le at h ttp : / / w w

w .b lo o m b erg .co m /n ew s/articles/2 0 1 0

- 1 2

- 01 /

v a l l e jo

- a p p r o v e s

- p l a

n

- t o

- ex it- calif

orn ia- s- b ig g e s t

- b a

n k r u p t c y

- s i n c e

- 1 9 9 4

.D E O C A M P O V

. P O T T S 7

bankruptcy filing

. Vallejo derived most of its revenues from property tax es, sales tax es, a s s e s s m e nts, and fees. See In re City o f Vallejo
, No. 08-26813-A-9, 2008 W L 4180008, at *2 (B ankr. E.D. Cal. Sept. 5, 2008), aff’d
, 408 B .R. 280 (B .A.P. 9 th Cir. 2009). “Recent adverse economic conditions” cau s e d Vallejo’s revenues to decrease. Id. These conditions included not only those predictably a ssociated with the financial crisis, b u t such c onting encies a s the closure of a W a l-Mart that h a d b ee n a larg e source o f sales tax revenue; the loss of s h a r e d revenue from a Six F lag s/Marine W orld after Vallejo’s ownership interest in the amusement park was bough t out; and the u nex pected retirement of several police officers and firefig hters, who beca m e entitled to millions o f dollars in unbudg eted retiree pay outs. I d. at *2, *5.

Vallejo implemented a usterity measures, including cutting f unds to its senior center, library
, parks, sy mphony
, and convention and visitors bureau; usin g vehicles a nd equipment well bey ond their ex p e c ted li v es; and reducing employ e e r o l l s by 87 full-time positions. Id. at *3. Nevertheless, V allejo’s “ability to provide minimal levels o f service to its residents and provide for their basic health and safety ” w as seriously t h r e a tened. Id. at *5. Pension oblig ations and benefits due under collective barg aining
ag reements w ith several unions could not easily be adjusted. Id. at *3. California laws made it difficult for Vallejo to raise
tax es or borrow funds. As the B ankruptcy Appe llate Panel noted, “Proposition 1 3 c a

pped p roperty tax rates to 1% of full cash value. Proposition 218 limited Vallejo’s ability to raise
any other tax es without a majority vote. Article XVI
, section 18 of the California Constitution also restricted its a bili t y to borrow funds.” In re City of Vallejo
, 4 08 B .R. at 286 & n.7. Over the objections of se v eral c reditors, the B ankruptcy Court for the Eastern District of California found V allejoD E O C A M P O V

. P O T T S

8

elig ible to file a C h a p t e r 9 p etition, and the B ankruptcy Appellate Panel affirmed. Id. at 299.

Vallejo was not alone a m o n g cities severely a ffected b y t h e 2007–08 financial crisis. 2 008 and the y ears since h a v e witnessed a small but impactful r e s urg ence in municipal bankruptcy filings

. W h ile most have been commenced b y specia l

- p u rpose districts, such as hospital, utility
, o r sanitation authorities, several cities have filed for Chap t er 9 protection
, including San B ernardino, California; Stockton, California; Hillview, Kentucky ; and Detroit, Michig an. See Bankrup t C ities, Municipalities List and Map
, Governing (last updated Aug

. 21, 2015). 3

Scholars have criti c i z e d the very concept of municipal bankruptcy as it is codified by Chapter 9 for a v ariety o f
reasons, including that it harms creditors and m a k e s f uture lending unattractive, and that it hamstr i n gs more flex ible state-law solutions. See Omer Kimhi, Chapter 9 o f t he Bankruptcy Code: A S

olution in Search of

a Problem
, 27 Yale J

. Reg

. 351, 3 84–85 (2010) (advancing the former arg ument); Michael W

. McConnell & Randal C. Picker, W hen Cities Go Broke: A Conceptual Introduction to M unicipal Bankruptcy
, 60 U. Chi. L

. Rev. 425, 494–95 (1993) (advancing the latter). Yet ex p erts h ave warned that the surg e in municipa l bankruptcies that beg an during the financial crisis may not be

over. See, e.g. , W illiam C. Dudley
, President & Chief Ex ec. Officer, F ed. Reserve B ank of N.Y., Opening Remarks for the Chapter 9 and Alternatives for Distressed Municipalities a nd

3 Ava ila b l e a t h ttp ://w

w w .g o v ern i n g .co m

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u n icip al- cities

-
co u n ties- b an k

ru p tcies- an d

- def

au lts.h tm l.D E O C A M P O V

. P O T T S 9

States W orkshop (Apr. 14, 2015), 4 (opining that, while hig h

profile bankruptcy filing s like Detroit’s “have captured a

c o n siderable amount of a ttention

. . . they may foresha d o w

more widespread p roblems than w hat mig ht be implie d b y current bond rating s”).

Our case law construing Chapter 9 i s scant, and this appeal confronts us with a novel leg al issue, of the kind that often surfaces when chang ing social and economic conditions awaken dormant statutes. B ut Chapter 9 has awakened, and

we do n o t presume f

urther disputes over its interpretive a nd practical complex ities will remain long at rest.

C. Vallejo’s bankruptcy fil i n g r esults in a stay of Deocampo’s lawsuit.

On May 30, 2008, on e w e e k after Vallejo’s initial bankruptcy filing
, Defendants filed a notice stating that this action was a

utomatically stay ed pursuant to 11 U.S.C. § 362. T h e d istrict court—perhaps recog niz ing the oddity that Vallejo’s b ankruptcy c ould automatica l l y s tay an action in which Vallejo was no long er 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 stay ed in its en t irety

. . . .” I n r esponse, the parties stipulated in writing tha t Vallejo’s b ankruptcy filing trig g e red an automatic stay “pursuant to 1 1 U.S.C. Section 362,” thoug h

4 Ava ila b le a t h t tp s://w

w w .n ew y o rk f ed .o rg /n ew sev en ts/sp eech es/2 0 15 / d u d 1 5 0 41 4 .h tm l. Cf. a l

so Cla ire Sh

u b i k
, L au ra Ho ro w itz & T h o m as Gin sb erg , To u g h Decisio n s a n d Limited O p tio n s : Ho w Ph ila d

elp h i a a n d Oth er C ities a re Ba la ncin g Bu d

g ets in a Time o

f Recessio n , P ew 2 f

ig .1 (2 0 0 9) (su rv ey i n g 1 3 m aj or cities an d f in d in g t h at 1 2 h ad an n

u al d ef icits, 8 o f w h ich ex ceed ed 1 0 p ercen t o f th e city ’ s g en eral f

u n d ).D E O C A M P O V

. P O T T S

10

they did n ot elabora t e as to why

. O n Aug u st 5, 2008, the district court entered the parties’ jointly submitted stipulation and proposed order, an d s t a y e d the proceeding s. T h e case would remain stay ed for more than four y ears.

About a week after h is case was stay ed, Deocampo filed

a proof of claim in Vallejo’s pendi ng bankruptcy proceeding s. This stated that the amount of his c l a i m was $300,000, and the basis for the claim was “Personal I njury .” 5 The O fficers did n o t f i l e a ny proofs of claim in the bankruptcy proceeding
, for ant icipated indemnity
, defense costs, or otherwise; nor did Vallejo’s bankruptcy court filing s list the Officers or any other employ ees as potential creditors on the basis of defense or indemnification oblig ations.

5 D e o cam

p o ’ s p ro o f o f claim in th e Vallej o p ro ceed i n g s w as

u n n ecessary an d w ith o u t leg al ef f ect, b ecau se h is law su it w as ag ain st th e Of f icers in th eir p erso n al—n o t o ffi cial—cap acities, an d an y j u dg m en t ag ain st th em w o u ld b e a d eterm in atio n o f th eir l iab ility
, n o t Vallej o ’ s. W e d o n o t fa u l t D eo cam

p o ’ s co u n sel f

o r f ilin g th e p ro o f o f claim
, h o w ev er, g i v e n th e u n certain ty in th is area o f law at th at tim e, an d w e rej ect th e Of f icers’ arg u m en ts to th e co n trary

. If Deo cam p o ’ s co u n sel h ad n o t f

iled

a p ro o f of claim in V allej o ’ s b an k ru ptcy p ro ceed in g s o n th e g ro u n d th at

an y j u d g m en t ag ain st t

h e Of f icers w as n o t V allej o’ s d eb t, an d h ad

co u n sel’ s leg al j u d g m e n t n o t to d o so b een w ro n g , co u n sel w o u ld h av e risk ed f orf eitin g Deo cam

p o ’ s ab ility to co llect o n th e j ud gm e n t. S ee 1 1 U.S.C. § § 5 2 4 (a), 94 4 ; F ed

. R. B an k r. P. 3 0 0 3 (c)(2 ) (in a Ch ap ter 9
p ro ceed in g , “ [a]n y cred ito r

. . . w h o s e claim or in terest is n ot s ch ed u led

o r sch ed u l ed as d isp u ted
, co n tin g en t, o r u n l iq u id ated sh all f

ile a pro of of claim o r i n terest w ith in t h e tim e p rescrib ed

. . . an y cred ito r w h o f ails to d o so sh all n o t b e treated as a cred ito r w ith resp ect to su ch claim f o r th e p u rp o s es o f v o t in g an d d istrib u tio n ”). T h e ch o ice to f ile a p ro o f o f claim
, o n th e o th er h an d , d id n ot create an y risk o f h arm —at w o rst, it w o u ld b e

a n u llity

. W e th eref

o re declin e to in f

er f ro m co u n sel’ s p recau tio n ary f ilin g in th is u n settled area o f th e law an y co n cessio n or j u dicial ad m i ssio n th at a j u d g m en t ag ain s t th e Of f i cers w o u l d b e a p erso n al liab ility o f Vallej o

.D E O C A M P O V

. P O T T S 11

D. Vallejo’s plan o

f adjustment is confirmed by the bankruptcy court.

Subsequently
, Vallejo fil e d a Second Amended Plan for the Adjustment of Debts (“Plan”) with the bankruptcy court. Vallejo anticipated that, under that Plan, litig a tion c laimants would r ecover approx imately 20 to 3 0 percent of the value o f
any claims below $500,000. On Aug ust 4, 2011, the bankruptcy court entered an order c onfirming the Plan, which became binding o n

all creditors on November 1, 2011.

E. Deocampo’s lawsuit against the officers is r e instated following Vallejo’s bankruptcy plan confirmation.

The district c ourt lifted the stay o n P l a intiffs’ case on Aug ust 24, 2012. F ollowing a 13-day trial, the jury r eturned

a special verdict in favor of Deocampo. The jury found that the Officers had unreasonably seiz ed D eo c a m po by using

ex c e ssive f

o rce ag ainst him during the course o f the arrest. I t a w arded Deocampo $5 0
, 0 0 0 in compensatory d amag es. On Aug ust 23, 2013, the district c o u r t e n t e r ed judg ment in accordance w ith the jury verdict

. 6 The court subsequently awarded Deocampo costs and attorney ’ s fees under 4 2 U .S.C. § 1988.

The O fficers then moved for relief f rom judg ment pursuant to F e deral Rule of Civil Procedure 60(b). They contended the judg ment a nd fee aw a r d (collectively
, the “J udg ment”) we r e e ffectively claims ag ainst Vallejo that

were subject to adjustment under the Plan. T he district court

6 Deo cam p o d i d n o t prev ail o n h is o th er claim s ; Gran t an d B erry f ailed
to p rev ail o n an y claim ; an d Of f i cer P atzer w as f

o u n d n o t l iab l e as to an y claim

.D E O C A M P O V

. P O T T S

12

denied the Rule 60(b) motion, r easoning that, becau se Deocampo soug ht and obtained relief ag ainst the Officers in only their personal, r ather than official, capacities, t he J udg ment was not discharg ed by Vallejo’s bankruptcy

. The Officers timely

appealed. 7

II.

W e have jurisdiction under 28 U.S.C. § 1291. W e r eview for an a buse of discretion the district court’s d ecision to deny

a Rule 60(b) mo tion, and review de novo any q u estions o f law und e r l y i n g the decision to deny the motion. Lal v

. California , 610 F .3d 518, 523 (9th Cir. 2010).

III.

A. Chapter 9 bankruptcy.

The Constitution e mpowers Cong ress to establish “uniform L aws on the subject of B ankruptcies throug hout the U nited States.” U.S. Const. art. I
, § 8, cl. 4. Cong ress fi r s t entered the field of municipal bankruptcy in the 1930s, when, confronted by

the Great Depression, it enacted the precursor
t o C h a pter 9. See Puerto R ico v

. F ranklin Cal. Tax-Fr e e Trust
, —U.S.—, 136 S. Ct. 1938, 1 944 (2016). I n the late 1970s, also a time o f eco n o m ic h ardship for local

7 T h e d istrict co u rt th en aw ard ed D eo cam p o su p p lem en tal atto rn ey ’s f ees f o r th e tim e sp en t o p p o sin g th e Ru le 6 0 (b ) m o tio n an d litig atin g th e

o rig in a l m o tio n f

o r f ees. T h e Of

f icers co n ten d th at th is aw ard
, lik e th e J u d g m en t , is su

b j ect to ad j u stm en t u n d er th e P lan

. Ho w ev er, b ecau se th e Of f icers d id n ot am en d th eir p rio r n o tice o f ap p eal o r sep arately ap p eal th e

su p p lem en tal f

ee aw ard
, w e lack j u risd ictio n to rev iew it. S ee Hu n t v. City

o f Lo s An g eles
, 6 3 8 F.3 d 7 03
, 7 19 (9 t h C ir. 2 0 1 1 ); Fed

. R. A p p

. P

. 4 (a)(1 )(A ).D E O C A M P O V

. P O T T S 13

g overnments, Cong r ess enacted the most recen t major overhaul to Chapter 9

. See generall y Kimhi, supra , at 366–69. The House Report o b s e r v ed that “the term ‘bankruptcy ’ in its strict s e n s e is really a misnomer for a [ C] hapter 9 case.” H .R. Rep. No. 95-595, at 2 63 ( 1 97 7 ). Thus, a lthoug h the “g e n e r a l policy underlying ” Chapter 9 is
to g ive the municipal debt o r “a breathing spell from d ebt collection efforts in order that it c an w o r k o u t a repay ment plan w ith its creditors,” the municipal debtor, 8 unlike others, “cannot liquidate its a ssets to satisfy it s creditors totally a nd finally .” Id. F urther, “there are no involuntary [ C] hapter 9 cases,” id. at 394, and Chapter 9 proc e e d ing s may be commenced only by a municipality that “desire s to effect a plan to adjust [ its] debts” and files a voluntary p e tition to do
so, with authoriz ation from the state. 11 U.S.C. §§ 109(c)(4), 3 0 1
, 9 21. 9 I t is not necessary that a ll or even a majority o f creditors consent to a municipal plan of adjustment. 11 U.S.C. § 109(c)(5). F or a plan to be confirmed, the bankruptcy court must find, inter alia
, that “the plan is in the best interests of creditors and is feasibl e.” 11 U .S.C. § 943(b)(7).

W h e n a Chapter 9 debtor’s plan h as been confirmed b y the bankrupt cy court, and certain other procedural requirements have b een fulfilled, see 11 U.S.C. § 9 43(b), the debtor is g enerally

discharg ed from debts that have not been

8 T h e B an k

ru p tcy C o d e d ef

in es “ m u n icip ality ” to m ean a “p o l i tical

su b d iv isio n o r p u

b lic ag en cy o r i n stru m en tality o f a State.” 1 1 U.S.C. § 1 0 1 (4 0 ).

9 S ee a lso 1 1 U.S.C. § 9 0 4 (p ro v id in g th at, u n less th e m u n icip al d eb to r

co n sen ts o r its p lan so p ro v id es, th e co u rt can n o t “ in terf ere w i t h ” a

m u n icip al d eb to r’ s p o litical o r g o v ern m en tal p o w ers, p ro per t y or

rev en u es, o r u se o r en

j oy m en t o f in co m e- p ro d u cin g p ro p erty ).D E O C A M P O V

. P O T T S

14

“ex c epted from discharg e b y the p lan o r order confirming the plan.” 1 0 11 U.S.C. § 944(b), (c)(1). The discharg e :

(1) voids any judg ment a t a n y time obtained,
to the e x tent th a t such judg ment is a determination of the p e rsonal liability of the debtor with r espect to a n y debt discharg ed under section

. . . 944

. . . of this title, whether

or not discharg e of such debt is waived; [ and]

(2) operates a s an injunction ag ainst the

commenceme n t or continuation of an a ction, the e mploy

ment o f process, or an act, to

c o l lect, recover or offset any such d ebt a s a personal liability of the debtor, whether or not discharg e of such debt is waived.

11 U.S.C. §§ 524(a)(1)–(2), 901.

10 No r i s th e d eb t o r d isch arg ed f ro m d eb ts o w ed to en tit i e s t h at h ad

n eith er n o tice n o r actu al k n o w led g e o f th e case b ef

o re co n f i rm atio n of th e p lan

. 11 U.S.C. § 9 4 4 (c)(2 ). Ho w ev er, th e ex cep tio n s to d isch arg eab ility
set f o rth b y 1 1 U.S.C. § 5 2 3 (a), i n clu d in g th e ex cep tio n th at ren ders n o n

d isch arg eab l e d eb t arisin g f ro m “ w illf

u l an d m alicio u s in

j u ry ,” id

. § 5 2 3 (a)(6 ), d o n o t ap p ly i n a C h ap t e r 9 b an k ru p tcy

. S ee V.W

. ex rel. Ba rb er v

. City of Va llejo
, No

. C IV. S- 1 2- 1 6 2 9
, 2 0 1 3 W L 3 9 9 2 4 0 3
, at

* 2

– 3 (E.D. Ca l

. A u g

. 2
, 2 0 13 ) (o p in in g th at th is is a “ so m ew h at

su rp risin g , in d eed , alarm in g resu lt”).D E O C A M P O V

. P O T T S 15

B. The Plan did not adjust or discharge the Judgment against the Officers.

1. California’s statutory

indemnification framework.

The Officers do not contend that Vallejo’s b a n kruptcy discharg e wiped out the J udg ment a g ai n s t them entirely

. Rather, it is their position that the claim for which Deocampo filed proof i n Vallejo’s bankruptcy proceeding s was subject
to the Plan’s adjustment schedule, reducing the claim’s value
to 20 to 30 p ercent of the J udg ment. The Offic e rs contend
t h a t, to the ex tent the J udg ment p urports to create a n oblig ation distinct from that adjusted claim, the confirmation of the Plan discharg ed and rendered this oblig ation v oid. See 11 U.S.C. §§ 524(a)(1)–(2), 944(b)–(c).

Of course, it was Vallejo, not the Office r s , t h a t declared bankruptcy a

nd adjusted its debts, and the J udg ment was entered ag a inst the Officers solely in their personal capacities. The Officers arg u e, however, that the J u d g ment was broug ht within the a mbit of the Plan by the California Government Code, which broadly requires pub l i c entities like Vallejo to indemnify their employ e e s in litig ation arising f r o m the employ e es’ performance of official duties. The Officers rely principally u

pon Section 825 of the Government Code, which in relevant part provides:

[ I ]f an employ ee or former e mploy e e of a public e n t i ty requests the public entity to defend him or h er a g ainst any c laim or action
ag ainst him or her for an injury arising out of

an act or omission o ccurring within the scope of h is or her employ

ment as an employ ee o f the public entity and the request is made inD E O C A M P O V

. P O T T S

16

writing not less than 10 d a y s b efore the day o f trial, a nd the employ ee or former em p loy ee reasonably cooperates in go od faith in the defense o f the claim or action, the public

e n tity shall pay any judg ment b a sed thereo n

or any c ompromise or settlement of the claim

or acti on to which the public entity has
ag reed.

Cal. Gov’t Code § 825(a). 1 1

Section 8 2 5 requires the p ublic entity to indemnify its employ e e for compensatory damag es awarded under 42 U.S.C. § 1983 and a ttorney ’ s fees the employ ee is ordered
to pay under 4 2 U.S.C. § 19 8 8

. See W illiams v. Horvath
, 548 P.2d 1125, 1 132–34 (Cal. 1 9 7 6 ) (en banc). Other California Government Code provis i o n s require the public entity to p rovide for its employ ee’s d e f ense ag ainst an i n d e m nifiable action upon the employ ee’s request, a nd authoriz e the employ ee to c o mpel his or her e mp loy e r to make a ny required defense o r indemnification pay ments, o r to reimburs e the employ ee for any such pay ments the employ e e has already

made. See Cal. Gov’t Code §§ 825.2, 970.2, 995, 996.4. I n d e e d
, less than three weeks before the trial, the Vallejo City Attorney wrote to the Officers, stating that the City had undertaken their d e fense and would indemnify

them for any damag es.

11 C alif o rn ia Go v ern m en t Co d e Se c t i o n 8 2 5(b ) sets f o rth ad d itio n al
req u irem en ts f

o r th e in d em

n i f icatio n o f p u n itiv e o r ex em p lary d am ag es

aw ard ed ag ain st a p u

b lic em p lo y ee. T h ese req u irem en ts d o n o t ap p l y in th is case b ecau se th e j u

ry aw ard ed o n ly

co m p en sato ry d am ag es.D E O C A M P O V

. P O T T S 17

The Officers advance two related arg uments why Vallejo’s statutory indemnification oblig ations subjected the J udg ment to adjustment u nder the Plan. F irst, they arg ue that, by operation o f law, the J udg ment is Vallejo’s liability rather than their own. Second, the O f f i c e rs arg ue that, even if the J udg ment is deemed one ag ainst them personally rather than V allejo, there is “such identity ” between Vallejo a n d themselves that adjustment of the J udg ment “fall[ s ] within the lang uag e or intent of the P l a n

. ” W e address these
arg uments in turn.

2. The J u dg ment ag a inst the Officers was not a personal liability of Vallejo.

The Officers a

r g ue t h a t the California indemnification provisions rendered the J udg ment a personal liability o f Vallejo. W e disag ree.

I t is a basic precept of Section 1983 liti ga t ion that a judg ment ag ainst a g overnment o fficial in his personal capacity leads to the imposition of l i a b i lity “ag ainst the individual defendant, rather than ag ainst the entity that employ s h i m.” Kentucky v. Graham
, 473 U.S. 159, 167–68 (1985). Thus, “an award of damag es ag ainst an official in his personal capacity can be ex ecuted only ag ainst the official’s personal assets.” I

d. at 166.

W e have held that, for purposes of the Eleven th Amendment, the indemnification oblig ation imposed b y California Gover n ment Code Section 825 does n ot render a person a l

- capacity suit a g ainst a state employ ee one ag ainst the s t a te, and so sovereig n immunity does not ex tend to the employ e e. Demery v. Kupperman
, 735 F .2d 1139, 1 147 (9th Cir. 1984); see also Ashker v. Ca l

. D ep ’ t of Corr.
, 112 F .3dD E O C A M P O V

. P O T T S

18

392, 395 ( 9th Cir. 1 9 9 7 ); cf. Ronwin v. Shapiro
, 657 F .2d 1071, 1074–75 (9th Cir. 1981). Rather, the statute c reates a “purely intramural arrang ement between a st ate a nd its officers,” b ecause if a plaintiff “prevails on the merits, the
court will n ot be ordering the state to do any thing ; it will only be ordering the official to p ay d amag es. I f the state official desires indemnification under the state statute, he must bring suit in a state court.” Demery
, 735 F .2d at 1147–48.

W e find the Demery line of cases p ersuasive with respect to the matter a t hand. I t is true that these c as e s a d d ressed disputes over the scope of sove r e i gn immunity rather than bankruptcy discharg e. However, the Officers’ contention that the reach o f t hese cases must be c a bined to sovereig n immunity is belied by the thoug htful and g enerally applicable approach with which these c ases analy z e th e attribution o f liability between public entities and their offi c ers. This approach is equally applicable here. The J udg ment e mbodies the jury ’s determination, by a preponderance of the evidence, that the Officers, acting in their personal capacities, seriously injured Deocampo while a cting under the color of state law,

as w ell a s a concomitant Section 1988 f ee aw a r d t hat Cong r ess has seen fit to a utho riz e for injuries of this nature. D e o c ampo is entitled to enforce the J u dg ment a g ainst t h e Officers personally
, but he h a s no rig h t to enforce it directly
ag ainst Vallejo o r its p roperty

. G raham
, 473 U.S. at 166. Vallejo may be oblig ated by statute to indemnify the Officers for the amount o f t h e J udg ment, but this “purely intramural
arrang ement” does not alter the fact that the J u d g ment itself is bindin g o n t he O fficers and the Officers alone. Demery
, 735 F .3d at 1147–48.

Therefore
, w e hold that California’s indemnification
statutes do not render a j u dg ment or concomitant fee awardD E O C A M P O V

. P O T T S 19

ag ainst a n indemnifiable municipal employ ee a liability of the municipal employ er f

or p urposes of adjusting or discharg ing the debts of a Chapter 9 debtor. The J udg ment is the Officers’ personal liability , not Vallejo’s.

3. The Plan does not effect a third-party adjustment o r discharg e of the Officers’ judg ment debts.

Alternatively
, the O fficers arg ue that, even i f t he J u d gment is not Vallejo’s debt by operation of law, t h e indemnity statutes create such identity between Vallejo’s interests and their own that the J udg ment i s actually ag ainst the debtor and is thus subject to the Plan.

Other Circuits have he ld that a debtor’s Chapter 11 bankruptcy plan may operate to discharg e the debts o f c ertain non-debtor third parties, provided the bankruptc y court has “accepted a

nd confirmed [ this discharg e] as an integ ral part of reorg aniz ation.” In re A.H. Robins Co.
, 880 F .2d 6 9 4, 702 (4th Cir. 1 9 89) (quoting Republic Supply Co. v. Shoaf
, 815 F .2d 1046, 1050 (5th Cir. 1987)). W e have rejected this construction o f the B ankruptcy Code. While the bankruptcy
court h as broad powers to “ issue any order, process, o r judg ment that is necessary or appr o p r i ate to carry out the provisions of this title,” 11 U .S.C. § 105(a), it cannot confirm

a plan that does not comply with applicable Code provisions. 11 U.S.C. § 1129(a)(1). I n g eneral, 11 U .S.C. § 524(e) provides that “discharg e of a debt of the debto r does not affect the liability of any other entity on, or the property o f

a ny other e ntity f

or, such debt.” Thus, w e have “re p e a t ed l y held, w i thout e x ception,” that, in a Chapter 11 proceeding
, “§ 524(e) precludes bankru p t c y courts from discharg ing the liabilities of non-debtors.” In re Lowenschuss
, 67 F

. 3 d 1394, 1401 (9th Cir. 1995) (citations omitted).D E O C A M P O V

. P O T T S

20

However, as the Officers point o ut, Chapter 9, unli ke Chapter 11, does not incorporate S e c t i on 524(e). 11 U .S.C. § 901. As such, the r a t ionale relied upon b y Lowenschuss does n ot apply in Chapter 9 p roceeding s. W e have not previously addressed the question of w hether, in a proceeding
to w hic h Section 524(e) does not a pply
, Section 105 authoriz es a bankruptcy court to confirm a plan t h at e ffects the adjustment or discharg e o f the debts o f n o n -debtor third parties. W e need not, and do not, answer this question here. B ecause the Plan does not, by its terms, purport to effect the third-party discharg e advocated by the Officers
, w e do not opine o n the p ower of the bankruptcy court to confirm a hy pothetical plan that does so.

The Plan makes no ex press reference to indemnification

or the discharg e of claims ag ainst V a l lejo employ ees. I n asserting that the Plan nevertheless c o n templated the discharg e of such claims, the Officers rely upon open-ended, boilerplate lang uag e. T h e Plan provides that, fo l l o w ing its effective date, all “Claims” are fully d ischarg ed, “whether
ag ainst the City

or any of its properties, assets or interests in property .” The Plan defines “ C l aim” to mean “a claim
ag ainst t h e City or the property of the City within the meaning o f section 101(5) o f the B ankruptcy Code.” 1 2 The

12 Sectio n 1 0 1(5 ) p ro v i d es:

T h e term “ claim ” m ean s—

(A) r i g h t to p ay

m en t, w h eth er o r n o t su ch rig h t is red u ced to j u d g m en t, liq u i d ated
, u n liq u id ated
, f

ix e d
, co n t in g en t, m atu red
, u n m atu red
, d isp u ted
, u n d isp u ted
, leg al, eq u itab le, secu red , o r u n secu red ; o rD E O C A M P O V

. P O T T S 21

O f f icers arg ue that, b roadly construed, this lang ua ge encompa s s e s the J u d g ment, and a b road construction is
necessary to further the B a nkruptcy Code’s p olicy o f providing debtors with a fresh start.

The Officers confuse the breadth of the B ankruptcy Code’s definition of “claim” with the breadth of the discharg e

or adjustment effected by a particular plan, including o ne that recites t h e s t a tutory d e f inition. 1 3 An ambig u ity in a bankruptcy plan drafted by a deb t or is construed ag ainst the debtor. I n re Brawders
, 503 F .3d 856, 867 (9th Cir. 2 007); Miller v

. U

nited S t a t e s , 363 F .3d 999, 1005–06 (9th Cir. 2 0 0 4 )

. Relatedly
, “ a

ny ambig uity may also reflect that the
court that orig inally confirmed t he plan did not make any final determination o f the matter a t issue.” In re Brawders
, 503 F .3d at 867. The Circuits that have permitted Chapter 11

(B ) rig h t t o an eq u i t a b l e r em ed y f o r b reach of
p erf o rm an ce if su ch b reach g iv es rise t o a r i g h t to p ay m e n t , w h eth er o r n o t su ch rig h t t o an eq u itab le

rem ed y is red u ced to j u d g m en t , fix ed
, co n tin g en t,

m atu red
, u n

m atu red
, d isp u ted
, u n d isp u ted
, secu red , o r

u n secu red

.

13 T h e Of f icers rely u

po n sev eral cases in w

h ich co u rts ru led th at an in d em n ity o b lig atio n trig g ers th e au to m atic stay p ro v isio n s o f

1 1 U.S.C. § § 3 6 2 (a) & 9 2 2

. Ho w ev er, t h e d isch arg e p ro v isio n s are n arro w er th an th e au to m atic stay p ro v i si o n s, t h e b ro ad reach o f w

h ich f u rth ers th eir
p u rp o s e to f

reeze th e statu s q u o at th e tim e a petitio n is f iled , en su re th at all claim s ag ain st th e d eb to r w i ll b e b ro u g h t in a s in g le f o ru m , an d p ro t ect cred ito rs b y p ro v id in g f

o r th e ord erly ad m in istratio n o f claim s. S ee Hillis Mo to r s, In c. v. Ha w. Au t o

. Dea lers’ Ass’n
, 9 9 7 F.2 d 5 8 1
, 5 8 5 (9 th Cir. 1 9 9 3 ). A m o n g o th er d if

f eren ces, th e stay p ro v isio n s “ d o [] n ot co n tain

su ch lim itin g co n cep ts as ‘ p erso n al liab ility o f th e d eb to r.’ ” In re Mu n o z , 2 8 7 B .R. 5 46
, 5 5 4 n .8 (B .A .P

. 9 th Cir. 2 0 0 2 ) (q u o tin g 1 1 U.S.C. § 5 2 4 (a)(2 )). T h e dist rict co u rt co rrectly d eterm in ed th at th e au to m atic stay cases d o n o t co n tro l t h e o u tco m e o f th e Of

f i cers’ Ru le 6 0 (b ) m o tio n

.D E O C A M P O V

. P O T T S

22

plans to r elease non-debtors h ave required that the release be

ex p ress, see In re Ap

p l e w o od Chair Co.
, 203 F .3d 914, 919 (5th Cir. 2000) (per c u riam), and that it be supported b y “specific factual finding s,” s ee Behrmann v. Nat’l Heritage Found.
, 663 F .3d 704, 712–1 3 (4th Cir. 2011). W hile we

reserve judg ment on the validity of an ex press third

- p a r t y release in a Chapter 9 proceeding w ithin our jurisdiction, we observe that at least two larg e munici p a l i t ies that have filed for bankruptcy
, Detroit and San B ernardino, have included in their proposed plans the ex press d ischarg e of c laims ag ainst indemnifiable employ ees. See In re City of Detroit
, 524 B .R. 147, 265 (B ankr. E.D. Mich. 2014); 1 4 Third Am. Plan for the A d j u s tment of Debts of the City of San B ernardino, Cal., at 5 5

– 5 9, In re City of San Bernardino (B ankr. C.D. Cal. fil e d J uly 29, 2016) (No. 6:12-bk-28006-MJ )
, Dkt. 1880. 1 5 Thus, when Vallejo filed the Plan, it was not bey ond fathom that it should propose a putative third-party release. Vallejo simply failed to include such a proposal.

14 D etro it’ s p ro p o sal o f t

h is th ird

- p arty disch arg e d i d n o t resu lt in its

au to m atic co n f

i rm atio n , u n d ersco rin g th e criti c al ro le b an k ru p tcy co u rts p lay in ad j u d icatin g w

h eth er a p lan s h all b e co n f irm ed

. S ee In re City o

f Detro it
, 5 2 4 B .R. at 2 6 5

– 6 7 (su stain in g Sectio n 1 9 8 3 j u d g m en t cred ito rs’

o b j ectio n to a Ch ap t er 9 p lan th at ex p ressly released i n d em

n if i ed o f f icers b ecau se “[ t ] h e r eco rd is d ev o id o f an y ev id en ce su g g estin g th at th e ad d itio n al p ro tectio n o f a th ird

- p arty release f o r t h ese o f f icers is n ecessary to th e City ’ s ef

f icien t an d ef

f ectiv e f u n ctio n in g , to its rev italizatio n , o r to th e su ccess o f

its p lan ”).

15 Ava ila b le a t h t tp ://w

w w .sb city .o rg /h o m e_ n av /ch ap ter_ 9

_ b an k ru p tcy / d ef au lt.asp

. Bu t cf. Katy Stech
, S a n Bern a rd in o Ba n kru

p t cy Pla n W

o uld S h ield Po lice fro m Cla ims
, W all St. J

. (A p r. 1 8
, 2 0 1 6 ), h t t p : / / www. ws

j

. c o m / a r t i c l e s / s a n

- b e r n a r d i n o -b a n k r u p t c y- p l a n

- wo u l d

sh ield

- p o lice- f

ro m

- claim s

- 1 4 61 0 1 7 9 6 5 (d escrib in g ob j ectio n to th is f eatu re o f San B ern ard in o’ s p rev io u s p ro p osed p lan f i led b y p lain tif f s in
p o lice ex cessiv e- f

o rce law su i ts).D E O C A M P O V

. P O T T S 23

The Plan does not e x p r e ssly release any debtor but Vallejo. The bankruptcy court’s Plan confirmation order, a nd the minute order it incorporates, make no re f e r ence to indemnity or third-party d ischarg e. These orders c annot reasonably be construed to set forth a judicial finding that third-party discharg e or adjustment was an “integ r al p ar t o f

reo r ga n i z a t ion.” I

n re A.H. R o bins Co.
, 880 F .2d at 702 (citation omitted). F or these reasons, th e J udg ment remains undis c h arg ed, unadjusted, and untouched by Vallejo’s bankruptcy

.

4. The consequences of affirming the d e n i a l of Rule 60(b) relief.

On appeal, the O fficers and various law enforcement association amici make a third, policy -oriented arg ument that deny ing the Officers relief from jud gm e nt would have dire
consequences. They are concerned that a ruli n g in f avor o f Deocampo will inject uncertainty into the scope of indemnity
coverag e, d e moraliz e officers, and dissuade them from

z ealously performing their duties, o r deter them from even becoming police officers. These c oncerns are mi s p l aced. The Officers w ill not be required to pay the J udg ment out o f their own po c k e ts. Our conclusion that the J udg ment is
ag ainst the Officers personally
, a nd not Vallejo, does not relieve Vallejo of it s o b l ig ation to indemnify the Officers under California law. A lthoug h the O fficers d i d n o t file proofs of claim in the b ankrup t cy proceeding s, and V allejo did not list them as creditors, it was n ot necessary f or them to h ave done so to preserve their rig ht to stat u t o r y indemnification.

Critically
, under Califor n i a law, the event g iving rise to the Officers’ claim for indemnification is Vallejo’s provisionD E O C A M P O V

. P O T T S

24

of a defense for the O f

ficers, not the alleg ed injury inflicted by the Officers or the plaintiffs’ f iling of a lawsuit. See Rivas

v. City of Kerman
, 13 Cal. Rptr. 2d 147, 150 (Ct. App. 1992),

as modified (Nov. 23, 1 9 9 2 ) (construing Cal. G ov’t Code § 825). Here, Vallejo undertook the O fficers’ defense on J uly 18, 2013, after the confirma t i o n of the Plan. 1 6 B ecause this tri ggering event occurred after the discharg e , Vallejo’s indemnification oblig ation is a post-p e t i tion debt that is not subject to adjustment, discharg e, or the b ankr u ptcy injunction

. S

e e O’Loghlin v. Cty. of Orange
, 2 29 F .3d 871, 874 ( 9th Cir. 2 0 0 0 ). The Plan also committed Vallejo to “continue to operate pursuant to the City Charter, t he Constitution of t h e State of California and o ther applicable laws,” and thereby ex cepted from discharg e any § 825 claims. See 11 U .S.C. § 944 ( c )( 1 ). Our decision thus does not unsettle the commitment of C a l ifornia municipalities to indemnify their employ ees, nor should it chill leg itimate law enforcement activity

.

All of the practical consequences of our decision fall upon Vallejo rather than the Officers. T h e O f f icers acknowledg e

as much in their b riefing
, which is reple t e with concerns about “the c omplete subversion of the g oal s o f bankruptcy
reorg aniz ation,” and unsecured judg ment c re d i t ors cutting ahead of others more senior in priority in a plan o f adjustment. W hile we do not speculate w hy the Officers a re

16 In th e J u ly 1 8
, 2 0 1 3 letter, t h e V a l l e j o City A tto rn ey w

ro te to th e Of f icers, “ T h e City o f V a l l ej o h as u n d ertak en y o u r d ef en se an d w i l l
rep resen t y ou r in terests in th is law su it. In ad d itio n , sh o u ld an y d am ag es

aw ard b e ren d ered ag ain st y ou , th e City of V allej o w ill in d em n if y y o u f or

su ch d am ag es. T h e City o f Vallej o beli e v e s t h at y o u w ere actin g in th e

co u rse an d sco p e of y o u

r em plo y m en t d u rin g th e in cid en t, an d acco rd in g ly

w o u ld p ay f

o r th e d am ag es w

h ich stem f

ro m y o u r a c t i o ns d u

rin g th e arrest.”D E O C A M P O V

. P O T T S 25

so solicitous of these matters despite lacking any skin in the bankruptcy g ame, we note that, thoug h Vallejo has not been

a p arty to this action since 2007, Vallejo furn i s h e d the Officers’ defense, and Vallejo’s City Attorney
, a mong others, continues to r epresent them on appeal. L ike the misp l a ced

concern with the demorali z a t i o n of law enforcement, these additional, structural concerns lack f orce. W e need n ot weig h policy considerations here to g lean the pl a i n m e a n ing of the bankruptcy an d s tate statutes dictating the outcome of this

a p peal. W e note, however, that, were it appropriate t o consider policy
, the policies of satisfy ing the g oals o f bankruptcy and ensuring that our law e nforcement officers can effectively

perform their jobs are not the sole policies in play

. Deocampo’s position is supported by t h e s i g nificant public policies of (1) holding accountable state a ctor s w ho misuse their p o s i tions of power to violate the constitutional and human r ig hts of their fellow ci t i z ens; and (2) f ully redressing

the harms they

have caused to their victims.

IV.

Even if Chapter 9 clears a path for some municipal debtor
to discharg e or adjust the j u d gment debts of its indemnified employ e es in bankruptc y , V al l ejo is not that debtor, and the Plan is n ot that path. The Officers are not entitled to relief from judg ment, and th e d i s t rict court properly d enied their Rule 60(b) motion.

AF F IRMED.