Bankruptcy Will Not Free Giuliani from the Freemans' Claim

Former United States Attorney and New York City mayor Rudolph Giuliani was found liable in a defamation case, brought by Atlanta poll workers, Wandrea “Shaye” Moss and her mother, Ruby Freeman, on December 14, 2023. Mr. Giuliani had been uncooperative in the case. Consequently, U.S. District Judge Beryl Howell determined that Giuliani was liable by default. Then, the jury had only to consider the amount of damages to impose.

In the end, Mr. Giuliani was hit with a verdict for $148 million, which consisted of, among other things, damages of $145,969,000.00, and attorney’s fees, costs, and interest of over $2 million, according to the text of the Judge’s opinion.

The New York Times (December 17, 2023) reported the damages breakdown as follows:

1. $75 million in combined punitive damages;

2. $33.1MM combined to the plaintiffs for compensatory damages;

3. $40MM combined to the Plaintiffs for emotional distress.

Crucially, Judge Howell stated the following in her ruling:

“It is further DECLARED that defendant’s conduct was intentional, malicious, wanton, and willful, such that plaintiffs are entitled to punitive damages.”

Final Judgment of December 18, 2023, Case No. Civil Action No. 21-3354 (BAH).

According to many statements and speculations in the press, Mr. Giuliani has been famously near broke for some time. For example, one of his attorneys is suing him for attorney’s fees of over $1 million. New York Times, September 19, 2023.

Given his overwhelming financial liabilities, it was almost inevitable that Mr. Giuliani would seek relief from his debts in bankruptcy. He filed for Chapter 11 bankruptcy protection on December 20, 2023 in the US Bankruptcy Court in the Southern District of New York.

In the Bankruptcy Court, Mr. Giuliani will not have the option of failing to fully identify all of his assets and debts. His bankruptcy petition could be dismissed, and he could face federal criminal charges for knowing misstatements or omissions.

?Furthermore, if the motivating factor for filing the bankruptcy was the $148 million judgment in favor of the Freemans, it may be that Bankruptcy Court does not offer relief from this particular debt to Mr. Giuliani.

11 USC section 523(a)(2)(C)(6) (the Bankruptcy Code) provides that there is no cancellation (“discharge”) of a debt that results from “willful and malicious injury by the debtor to another entity or to the property of another entity.” [emphasis added]

The Wex Legal Dictionary of Cornell University Law School’s Legal Information Institute defines entity as “a person or organization possessing separate and distinct legal rights, such as an individual, partnership, or corporation.” [emphasis added]

In other words, where a debt to a person is the result of malicious conduct, that debt is not going to be discharged by the bankruptcy.

Consequently, because the court has found that the debt owed to the Freemans was the product of malicious conduct, Mr. Giuliani cannot receive a discharge of the judgment awarded to the Freemans. He will continue to owe them every dime. Even assuming Giuliani has a Chapter 11 “Plan of Reorganization” approved, that only affects the timing of payment, and not the existence in full, of the Freeman’s $148MM judgment, because this debt is non-dischargeable. Footnote 1, “Chapter 11 - Bankruptcy Basics,” Administrative Office of the US Courts (2023).

It may be that the Freemans will 1) have to file an adversary complaint, so that a judge can declare the debt non-dischargeable; 2) have to renew the judgment if it is not paid after a number of years; and/or 3) be prepared to make claims against a Giuliani probate estate some years in the future.

But what is firm, at least for now, is that the court has held that Giuliani acted with malice against the Freemans. The Freemans’ judgment will not disappear in the Bankruptcy Court.

PRESENTED AS A COMMENTARY ON A MATTER OF PUBLIC INTEREST, AND NOT AS LEGAL ADVICE

Photo Attribution: Bankruptcy by <a href="https://www.nyphotographic.com/">Nick Youngson</a> <a rel="license" href="https://creativecommons.org/licenses/by-sa/3.0/"