Giuliani Joins Alex Jones in Defamation-to-Bankruptcy Pipeline

Rudolph Giuliani’s bankruptcy bears striking similarities to that of right-wing conspiracy theorist Alex Jones, who recently learned that filing for bankruptcy won’t necessarily eliminate debts stemming from defamation rulings.

Giuliani, the former New York mayor who led efforts to overturn the 2020 presidential election, filed for Chapter 11 in the Southern District of New York bankruptcy court on Thursday. He faces $148 million in judgments stemming from his discredited campaign to keep Donald Trump in the White House. Giuliani’s bankruptcy will give him some breathing room from debt collection efforts. But Jones’ recent losses in his own Chapter 11 case have shown that damages stemming from findings of “willful and malicious injury” aren’t easy to wipe out.

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The Infowars host’s filing comes a few months after a bankruptcy judge found Jones can’t use bankruptcy to avoid paying $1.1 billion he owes families of the Sandy Hook Elementary School massacre victims for airing lies about them on his talk show.

Giuliani is likely to face the same challenges in seeking to discharge his debts.

“Rudy Giuliani’s filing is just the latest in a defamation-to-bankruptcy pipeline,” said Christopher D. Hampson, a bankruptcy professor at the University of Florida Levin College of Law. “Unfortunately for Mr. Giuliani, bankruptcy is not a magic wand.”

Read More: Alex Jones Loses, Cardi B Wins on Flip Sides of Bankruptcy Law

Breathing Room

The bankruptcy filing came shortly after Judge Beryl A. Howell of the US District Court for the District of Columbia allowed 2020 Georgia poll workers Ruby Freeman and Shaye Moss to go after his assets immediately, after a jury ordered the $148 million in judgments.

But Giuliani’s bankruptcy means payouts to his creditors will be delayed, and could potentially lead to more costs for them.

Earlier: Giuliani Must Pay $148 Million for Smearing Election Workers

“Even if the poll workers prevail ultimately, Mr. Giuliani will have gotten months (at least) of extraordinary legal protection” due to the bankruptcy, Melissa Jacoby, a bankruptcy law professor at the University of North Carolina at Chapel Hill, said in an email.

The creditors could ask a judge to find that Giuliani can’t discharge his defamation debts, or try to dismiss his Chapter 11 for a lack of good faith, Jacoby said.

Still, it’s possible that a court could deem Giuliani’s case a legitimate use of the bankruptcy code, said Nicholas Koffroth, a bankruptcy attorney with Fox Rothschild LLP. He noted that Giuliani owes a lot of money to lawyers, state and federal tax agencies, and in other big-ticket litigation—not just the defamation damages.

The defamation damages make up the bulk of Jones’ debt.

Jones and ‘Bad Faith’

Bankruptcy courts have often found that debtors can’t use bankruptcy to discharge debts stemming from defamation findings, the way they can get rid of other types of debt. But it can be a complex analysis for a court because a judgment may not translate cleanly into the “willful and malicious” standard for rejecting debt discharges under federal bankruptcy law.

Juries in Texas and Connecticut ordered Jones last year to pay the Sandy Hook families a combined $1.4 billion in connection with his false claims that the 2012 massacre was a hoax. Jones filed for personal bankruptcy in December 2022 and recently proposed paying the families $55 million over 10 years.

Read More: Alex Jones Offers Sandy Hook Families $55 Million Over 10 Years

The hurdles Giuliani faces of bad faith, and whether his defamation debts can be forgiven, mirror those Jones has faced. A Texas bankruptcy judge found in October that about $1.1 billion of the $1.4 billion in judgments against Jones couldn’t be forgiven, despite his bankruptcy.

Nonetheless, R.J. Shannon of Shannon & Lee said that based on the judgment against Giuliani, Freeman and Moss have an even stronger case against him than the Sandy Hook families had against Jones—which is what should matter for the creditors to win.

“Giuliani loses either way, as he knew that his statements—even if true—would harm the women’s reputations,” Georgetown University bankruptcy law professor Adam Levitin said. “I have trouble seeing a state of the world in which Giuliani wins on the willful and malicious issue, so at best what bankruptcy gets him is a little breathing room to try to settle with the defamation victims and other creditors.”

‘Willful and Malicious’

If the bankruptcy isn’t initially tossed due to a bad faith finding, the big question will be: can Giuliani get rid of his debt from the civil judgment?

Freeman and Moss in their complaint said Giuliani defamed them as a result of his willful and malicious conduct. Howell entered a default judgment on liability against Giuliani for failing to keep and produce documents in discovery—just as Texas and Connecticut state courts did in the defamation cases against Jones.

That default judgment means the court accepted Freeman and Moss’ allegations that Giuliani committed defamation willfully and with malice, said Paul C. Watler, a Jackson Walker LLP partner.

If creditors pursue Giuliani to say he can’t have that debt forgiven, he could argue the willful and malicious standard requires fact-finding by a jury, not just a default judgment, Watler said. A bankruptcy judge would have to decide whether the findings in Giuliani’s civil suit mean it’s non-dischargeable, or whether a trial need to take place to determine that.

The problem facing Giuliani is that the bankruptcy judge overseeing Jones’ case dismissed that same argument in October.

In Jones’ case, a judge found the state courts’ defamation findings could stand, rejecting the talk show host’s calls for a retrial on most of the debt. For the remaining $300 million, Jones could ask for new trials to determine whether the nature of the remaining amounts are dischargeable.

Though Jones’ bankruptcy is proceeding in a different judicial district, it could still be informative in Giuliani’s case.

“The default judgment has the same force and effect as a jury verdict on liability,” Watler said. “In the end, I expect any lack of a jury finding on intent and malice ultimately will make no difference to dischargeability.”

The judgment in Giuliani’s case appears to include findings aimed at satisfying bankruptcy’s “willful and malicious” conduct requirement, Fox Rothschild’s Koffroth said. Giuliani engaged in “extreme and outrageous conduct” which “intentionally and maliciously” caused the poll workers to suffer severe emotional distress, the judgment said.

“This kind of language is certainly helpful in efforts to avoid relitigating the case in bankruptcy court,” Koffroth said.

The key issue will ultimately be whether the facts established in the judgment against Giuliani meet the “willful and malicious” test under federal law, said Bruce Markell, a Northwestern University law professor and former bankruptcy judge.

“As Alex Jones found out,” he said, “they often do.”

The case is Rudolph W. Giuliani, Bankr. S.D.N.Y., No. 23-12055, petition 12/21/23.