Jason Deocampo, et al v. Jason Potts, et al

Filing

FILED OPINION (JOHN T. NOONAN, KIM MCLANE WARDLAW and RICHARD A. PAEZ) AFFIRMED, Judge: KMW Authoring, FILED AND ENTERED JUDGMENT. [10115868]

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Bloomberg

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Bankrupt Vallejo, California, Approves
Restructuring

by Alison Vekshin and Michael B. Marois

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December 1, 2010 — 9:42 AM PST
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Cars drive down Georgia Street in the old town section of Vallejo,oCalifornia. Photographer: Erin Lubin/Bloomberg
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The city council of Vallejo, California, approved a five-year plan to exit the state’s
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largest municipal bankruptcy since Orange County sought court protection in 1994.
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Vallejo, which slashed its police and fire departments by more than 40 percent after
running out of money, aims to pay down $195 million in unfunded pension
obligations, trim retiree health-care premiums, curb benefits for new workers and
create a reserve fund. The budget blueprint approved unanimously yesterday will be
a component of an exit plan to be presented to a U.S. bankruptcy judge.
“Is it a perfect plan? No,” council member Marti Brown said. “This is a road map.
The roads on the map look like mostly tertiary roads, and we’re going to need fourwheel drive for some time. But it’s a map, and it’s more of a map than I think we’ve
had in a while.”
The one-time U.S. Navy town of about 120,000 on San Francisco Bay sought
protection from creditors under Chapter 9 of U.S. bankruptcy law in May 2008 after
the recession eroded tax revenue and unions rejected wage cuts. Chapter 9 allows
municipalities to reorganize debt rather than liquidate.

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“This five-year plan looks out and says basically we will be treading water for five
years,” Phil Batchelor, the interim city manager, told the council.

Unsecured Creditors
The plan allocates $5 million for unsecured creditor claims, which include those held
by employees and retirees. About $50 million of debt is supported by the city’s
general fund, its main account. Under the five-year plan, Vallejo would defer
principal payments until 2013, then resume paying bond debt at about $1 million a
year.
Most of the outstanding principal, about $46 million, is held by Union Bank NA,
according to Susan Mayer, the city’s assistant finance director. The bank is a unit of
San Francisco-based UnionBanCal Corp., part of Mitsubishi UFJ Financial Group
Inc., Japan’s biggest listed bank. Bank spokeswoman Jane Yedinak didn’t
immediately return a call.
“The plan doesn’t have a lot of money for
general unsecured ,creditors, and the
2016
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general eptem
unsecured creditors are owed many
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the exit plan, said in an interview. “Every
dollar that goes to pay creditors is a dollar
that doesn’t go to fix a pothole or to help
hire another police officer.”

Orange County
Cities and towns rarely go bankrupt. Vallejo’s filing was the biggest in California
since Orange County in 1994, then the largest in U.S. history. Orange County, whose
population of 3 million makes it the sixth-largest county in the U.S., lost $1.7 billion
from a $7.6 billion investment pool when bets on interest rates soured.
“People are hopeful that we’re taking charge of what’s been happening in Vallejo,”
council member Michael Wilson, 41, said in a telephone interview before the
meeting. “I would hope that over the next five years that we might be able to increase
the service levels we provide to our community, especially with our police
department, fire department, the money we could put into roads.”

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A September 2034 bond the city issued in 2003 traded at 93 cents on the dollar Nov.
18 to yield an average 6.74 percent, according to Municipal Securities Rulemaking
Board data compiled by Bloomberg.

Fewer Police
The city expects revenue of $65.5 million next fiscal year, and $68.2 million by 2015.
Spending is projected to be $66.4 million next year, rising to $67.6 million in the
same period.
Vallejo shrank its police force to 90 officers this year from 155 in 2003, a decline of
42 percent that eliminated most crime-prevention programs, Batchelor said.
“The quality-of-life crimes are the things that we don’t have the manpower to deal
with,” Mat Mustard, a detective and president of the Vallejo Police Officer’s
Association, said in a telephone interview. “To be honest with you, that’s horrible.”
The plan calls for the city to spread out its unfunded pension costs over 30 years. It
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would do so by paying a higher amount than what it owesrfor 20 first three years
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“They did what theycampto v to slice things down to an affordable level,” Jon
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Schotz, co-founder and chief investment officer at Saybrook Capital LLC in Santa
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Monica, California, who oversees more than $300 million in municipal bonds, said
in a Nov. 19 telephone interview.

Shuttered Shipyard
“Every stakeholder or everyone that has a claim or is impacted by this is going to yell,
scream and stomp to try to get their way, and we’ll see how strong the city’s spine is
when it comes to defending this plan,” Schotz said.
The fiscal road map will be included in a proposal the city must submit to U.S.
Bankruptcy Judge Michael McManus in Sacramento by Jan. 18.
In 1996, the U.S. Navy shut down its Mare Island shipyard, the service’s oldest West
Coast base, dealing a blow to the city’s economy. Home prices in Solano County,
which encompasses Vallejo, fell 26 percent in the year through March 2008, and
sank a further 6.8 percent from December 2008 through September 2009, according
to San Diego-based market researcher DataQuick Information Systems.

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Before Vallejo, the last California municipality to seek protection from creditors was
Desert Hot Springs in 2001. The city, about 110 miles (177 kilometers) east of Los
Angeles, went bankrupt because of a legal judgment it couldn’t pay.
The case is In re City of Vallejo, 08-26813, U.S. Bankruptcy Court, Eastern District of
California (Sacramento).
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2016
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Bankrupt

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Cities, Municipalities rList
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Many local igovernments across the U.S. face steep budget deficits as they struggle to pay off
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debts accumulated over a number of years. As a last resort, a select few filed for bankruptcy.
Governing is tracking the issue, and will update this page as more municipalities seek
bankruptcy protection.
A federal judge recently approved Detroit's plan to pay off about $7 billion in debt. Detroit
previously became the largest U.S. city ever to file for bankruptcy in 2013.
Overall bankrupt municipalities remain extremely rare. A Governing analysis estimated only
one of every 1,668 eligible general-purpose local governments (0.06 percent) filed for
bankruptcy protection from 2008 through 2012. Excluding filings later dismissed, only one
of every 2,710 eligible localities (not all states permit governments to file for bankruptcy)
filed since 2008.
The majority of filings have not been submitted by bankrupt cities, but rather lesser-known
utility authorities and other narrowly-defined special districts throughout the country. In
Omaha, Neb., more than a dozen sanitary districts have filed for bankruptcy, accounting for
nearly a quarter of all Chapter 9 filings since 2010.

Case: 14-16192, 09/08/2016, ID: 10115868, DktEntry: 46-2, Page 8 of 22
It's also important to note that only about half of states outline laws authorizing municipal
bankruptcy. View our bankruptcy laws map for each state's policies.
List of Bankruptcy Filings Since January 1, 2010
All Municipal Bankruptcy Filings: 51
General-Purpose Local Government Bankruptcy Filings (9):
-- City of Hillview, Ky.
-- City of Detroit, Mich.
-- City of San Bernardino, Calif.
-- Town of Mammoth Lakes, Calf. (Dismissed)
-- City of Stockton, Calif.
-- Jefferson County, Ala.
-- City of Harrisburg, Pa. (Dismissed)
-- City of Central Falls, R.I.
-- Boise County, Idaho (Dismissed)
LAST UPDATED: Aug. 21, 2015

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Municipal Bankruptcies Map tts,
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The map below eoca all municipalities filing for Chapter 9 bankruptcy protection since
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2010,c
along with local governments voting to approve a bankruptcy filing.
Cities, towns and counties are shown in red. Utility authorities and other municipalities are
displayed in gray. Click a marker to view details of each filing. Multiple municipalities have
filed for bankruptcy in some cities, such as Omaha, Neb., so not all markers are visible
without zooming in on the map.
Please note that some listed municipal bankruptcy filings have been dismissed, as indicated.

Map

Satellite

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Map data ©2016 Google, INEGI Terms of Use

Detroit Bankruptcy
States without laws authorizing municipal bankruptcies often allow for different measures
providing financial relief. In Michigan, seven cities and school districts have emergency
managers, and another three are under consent agreements. View our map and story about
the state's efforts to turn around the distressed municipalities.
Other Detroit Coverage:
Detroit Files for Chapter 9 Bankruptcy

2016
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10 People Who Could Help Save Detroit ed o
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Detroit's Recovery Plan Increases Default Risks, Says Moody's
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RELATED CONTENT
Things You Didn't Know About Detroit's Historic Bankruptcy
Nathan Bomey, author of a new book on the largest Chapter 9 filing in U.S. history, reveals the
unsung heroes and true timeline of the event.

The 2014 Takeaways from State and Local Finance
A look back at four of this year's trends in public finance.

Exiting Municipal Bankruptcy Only a Step in Road to Recovery
Many cities that declare bankruptcy ultimately emerge from it in a year or two. But regaining the trust
of their citizens is a long-term proposition.

Judge Clears Detroit's Way for Exiting Historic Bankruptcy
A federal judge on Friday approved a plan to end Detroit's historic Chapter 9 bankruptcy, giving the
Motor City an unprecedented shot at recovering from decades of economic despair and municipal
mismanagement that left the city awash in debt and struggling to provide basic public services.

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Case: 14-16192,San Bernardino Bankruptcy10115868, DktEntry: Claims - WSJ 20 of 22
09/08/2016, ID: Plan Would Shield Police From 46-2, Page

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http://www.wsj.com/articles/san-bernardino-bankruptcy-plan-would-shield-police-from-claims-1461017965

U.S.

Families who have sued the California city for brutality, excessive force object to the
protection

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San Bernardino, Calif., has proposed that individual police officers shouldn’t be held liable for claims the city is able to
discharge during bankruptcy. PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS

By KATY STECH
April 18, 2016 6:19 p.m. ET
The city of San Bernardino, Calif., wants to shield individual police officers from liability
for settlements and pending lawsuits over alleged incidents of brutality and excessive
force as it attempts to emerge from bankruptcy protection.
A clause outlining protections for city employees, including its 250-person police
department, was buried in San Bernardino’s latest plan to exit bankruptcy protection,
which was filed last month.
The bankruptcy-court judge will consider this request, along with other aspects of the
plan, in a hearing scheduled for April 27. The outcome of that hearing will help
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Case: 14-16192,San Bernardino Bankruptcy10115868, DktEntry: Claims - WSJ 21 of 22
09/08/2016, ID: Plan Would Shield Police From 46-2, Page
determine how much longer San Bernardino will remain mired in bankruptcy

protection, which it entered in August 2012 after a collapse in housing prices led to a
shortfall in tax revenues.
Families who are suing the San Bernardino police department filed an objection with
the bankruptcy court last week that said the current plan would unfairly “cloak the
third-party actors responsible for the egregious conduct.” The city is facing 112 lawsuits
that seek compensation for injuries and deaths allegedly caused by its police officers
and employees, according to documents filed in U.S. Bankruptcy Court in Riverside,
Calif. Some police officers were also named in lawsuits that were filed under civil-rights
law.
Under the plan to exit bankruptcy, the city has proposed paying a fraction of the money
promised under settlements. Lazaro Fernandez, a lawyer who represents several
families involved in lawsuits, said in the filing that he wants the power to sue individual
police officers for the amounts left unpaid by the city.
Mr. Fernandez’s clients include a family slated to get $575,000 after suing police over an
April 2007 shooting. Siblings of Cedric James May Jr., a 22-year-old man6
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by an officer in August 2009, are waiting on a $200,000 payment.
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San Bernardino officials didn’t respond.too
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argue that if police officers became liable for payments due to the lawsuits, they could
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ask the city to make those payments. If the city was forced to make payments, that
would hurt its finances.
“Exposing officers and employees to liability for harms committed while at work would
expose officers and employees to often ruinous liability simply for doing their jobs,” the
officials said in a March 30 filing. “The city will be forced to pay such claims one
hundred cents on the dollar, which the city cannot afford to do.”
Bankrupt cities have the power to cut payments they have promised to Wall Street,
retired workers and other creditors. But when it comes to claims involving past
misconduct of city employees, the law is murky.
Judge Meredith Jury, who is presiding over the San Bernardino bankruptcy case, admits
as much.
“There is no precedent that binds me in a decision on that,” Judge Jury said in
December.

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Case: 14-16192,San Bernardino Bankruptcy10115868, DktEntry: Claims - WSJ 22 of 22
09/08/2016, ID: Plan Would Shield Police From 46-2, Page
The issue is rarely raised in bankruptcy courtrooms. Fewer than three dozen cities,

counties, towns or villages have successfully used the bankruptcy code to fix financial
problems over the last three decades.
A judge overseeing Detroit’s bankruptcy rejected a similar request to protect police
officers. But it is unclear whether any other municipalities have been able to
successfully shield their employees from claims as San Bernardino is attempting.
Unclear language in the plan approved for Vallejo, Calif., in 2011 has triggered several
court battles.
Several Vallejo police officers who have been accused of using excessive force that killed
Michael White in June 2010 contend that the city’s bankruptcy shields them from
judgments. A federal judge scheduled a jury trial for September.
A man awarded $50,000 by a jury against two Vallejo police officers involved over a 2003
incident is scheduled to argue in May before the Ninth U.S. Circuit Court of Appeals that
he can still collect the judgment despite the city’s bankruptcy.
Write to Katy Stech at [e-mail]
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Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved
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