Jason Deocampo v. Jason Potts
836 F.3d 1134
9th Cir.2016Background
- In 2008 the City of Vallejo filed Chapter 9 bankruptcy and later confirmed a Plan of Adjustment that discharged certain city debts; the Plan made no express provision releasing or adjusting liabilities of city employees.
- Plaintiffs sued Vallejo police officers (personal-capacity §1983 excessive-force claims); Vallejo and Monell claims were dismissed earlier; the suit was stayed during Vallejo’s bankruptcy.
- Deocampo filed a proof of claim in the municipal bankruptcy; the officers did not file proofs of claim and Vallejo’s filings did not list officers as creditors for indemnity.
- After the Chapter 9 Plan was confirmed and the stay lifted, a jury found the officers personally liable and the district court entered judgment and awarded attorney’s fees to Deocampo.
- The officers moved under Rule 60(b), arguing the judgment/fees were effectively debts of Vallejo subject to adjustment or discharge by the confirmed Plan; the district court denied relief.
- The Ninth Circuit affirmed, holding California indemnity statutes do not transform a personal-capacity judgment into the municipality’s debt absent an express plan provision or clear legal conversion.
Issues
| Issue | Deocampo's Argument | Officers' Argument | Held |
|---|---|---|---|
| Whether California indemnity law (e.g., Gov’t Code §825) makes a personal-capacity §1983 judgment a liability of the municipality for Chapter 9 discharge purposes | Judgment is against the individual officers; indemnity does not convert the liability into the city’s debt | California indemnification makes the judgment effectively Vallejo’s liability and thus subject to adjustment/discharge under the Plan | Held for Deocampo: indemnity statutes create an intramural obligation but do not convert a personal-capacity judgment into the debtor-municipality’s liability for Chapter 9 purposes |
| Whether Vallejo’s confirmed Plan, by its boilerplate language, discharged or adjusted the officers’ personal judgments as claims "against the City or the property of the City" | Plan language and broad definition of "claim" encompass indemnity exposure and thus discharge/adjustment | Plan contains no express third-party release; ambiguity construed against debtor; no finding that third-party discharge was integral to reorganization | Held for Deocampo: Plan did not expressly or implicitly discharge or adjust the officers’ personal liabilities |
| Whether a bankruptcy court in Chapter 9 can discharge non-debtor third parties absent explicit plan language and findings | (Not argued by Deocampo) | Officers invoked circuits allowing third-party releases in Chapter 11 and argued Chapter 9 should permit similar results | Court declined to decide the broader question but ruled Plan here did not effect any third-party discharge; noted §524(e) (precluding non-debtor discharge) does not by its terms apply to Chapter 9 |
| Whether the officers are entitled to Rule 60(b) relief vacating the judgment because the judgment was discharged by Vallejo’s bankruptcy | Judgment remains valid and collectible only against officers; no basis for Rule 60(b) relief | Judgment was effectively discharged and Rule 60(b) relief is warranted | Held for Deocampo: Rule 60(b) relief denied; judgment and fees remain undischarged against officers |
Key Cases Cited
- Kentucky v. Graham, 473 U.S. 159 (establishes that a personal-capacity damages award is against the individual, not the state)
- Demery v. Kupperman, 735 F.2d 1139 (Cal. indemnity statute creates intramural obligation and does not convert personal-capacity suit into one against the state)
- In re Lowenschuss, 67 F.3d 1394 (Chapter 11 precedent that §524(e) prevents discharge of non-debtors’ liabilities)
- In re A.H. Robins Co., 880 F.2d 694 (discusses third-party releases in reorganization and conditions for treating non-debtor releases as integral)
- In re Brawders, 503 F.3d 856 (ambiguities in debtor-drafted plans are construed against the debtor)