In re City of Stockton

OPINION ON MOTION FOR LEAVE TO INTRODUCE EVIDENCE RELATING TO NEUTRAL EVALUATION PROCESS UNDER CALIFORNIA GOVERNMENT CODE § 53760.3(q)

This case of first impression involves the boundaries, the interplay, and the common ground between federal law and state law in the context of the confidentiality requirement in California’s new statute channeling a municipality through a neutral evaluation process before filing a chapter 9 case to adjust debts under the U.S. Bankruptcy Code.

Upon filing this chapter 9 case, the City of Stockton filed the instant motion invoking the part of California Government Code § 53760.3(q) that authorizes a bankruptcy judge to lift the shroud of confidentiality from the pre-filing neutral evaluation for the limited purpose of establishing the City’s eligibility for chapter 9 relief. This court accepts the invitation only with respect to the one chapter 9 eligibility element for which state law provides the rule of decision and otherwise declines because state evidence law does not govern evidence in federal court on issues when federal law provides the rule of decision.

Nevertheless, federal policy encouraging settlement also favors preserving…