(Photo by Drew Angerer/Getty Images)
Less than two hours before the hearing on his motion to convert his Chapter 11 reorganization into a Chapter 7 liquidation, Rudy Giuliani was back with another offer. What if the court just dismissed his bankruptcy outright?
It was the start of an exciting morning, in which Giuliani busted through the Zoom like the Kool-Aid man to shout that the lawyer for Atlanta poll workers Ruby Freeman and Shaye Moss was defaming him. He appeared to see no irony in declaring bankruptcy to get out from under a $148 million defamation verdict, and then turning around an accusing his victims of “highly defamatory” statements. (Leave aside the litigation privilege and, uh, literally every other thing.)
As in the Alex Jones case, the hearing before US Bankruptcy Judge Sean Lane laid bare the competing interests of the creditors, who include “the Freeman plaintiffs,” Dominion Voting Systems, and Giuliani’s former assistant Noelle Dunphy. The latter two have pending lawsuits, while the prior has an enforceable judgment for many times the value of Giuliani’s assets. They’re not all going to get the money, and so the ones with perfected claims would like to attach all his assets now.
The creditors committee has argued that the case should remain as a Chapter 11, while the Freeman plaintiffs urge the court to boot Rudy entirely. But that would leave nothing for Dominion, whose defamation suit is still in discovery, or for Dunphy, who is suing Giuliani in state court for assault and various labor violations. Of course those parties would prefer that the court retain jurisdiction and adjudicate their claims while a Chapter 11 trustee babysits the debtor to ensure he doesn’t loot the estate.
The hearing kicked off with a statement from Giuliani’s lawyer Heath Berger, who said that his client now agrees with the Freeman plaintiffs that the case should be dismissed. He insisted that the creditors would be better off pursuing their “state remedies,” rather than frittering away the entire estate on administrative fees. He also made the unsubtle suggestion that, if a trustee were appointed, his client would simply refuse to work at all.
Next up was Rachel Strickland of Wilkie Farr for the Freeman plaintiffs, who opened by acknowledging the reality that Giuliani filed for bankruptcy just a week after the Freeman/Moss verdict in a blatant attempt to stave off collections pending appeal without having to post a multi-million dollar supersedeas bond.
Giuliani “regards this court as a pause button,” she argued, calling the bankruptcy “a bad faith litigation tactic” with which the debtor “hasn’t even pretended to comply.” She warned that, if allowed to remain in bankruptcy, he’d continue his dilatory, deceptive filings, forcing the trustee to expend tremendous effort to find the money he’s squirreling away in his various businesses — something he’s acknowledged in his own pleadings. She evoked the specter of Judge Lane being forced to adjudicate the messy personal claims in Dunphy’s lawsuit: “The pleadings literally cite his Viagra usage. Your honor doesn’t want this case here.” And finally she warned that Giuliani’s continued refusal to comply with his disclosure requirements was going to result in something worse than fines.
“Unless your honor wants to entertain putting America’s Mayor in prison … I suggest you dismiss,” she said, twisting the knife.
It was then that the debtor began shouting about defamation and demanding to be heard by the court. Judge Lane promised he’d get his turn, and suggested that perhaps he’d like to take a break to confer with his counsel.
On behalf of the creditors’ committee, Akin Gump’s Phil Dublin urged the court to keep the case in Chapter 11 and appoint a trustee. Warning of a “race to the courthouse,” he predicted that cutting Rudy loose would inevitably lead to the Freeman plaintiffs getting it all, leaving nothing for anyone else.
But on rebuttal, Strickland suggested that Rudy’s continued defamation during the pendency of the bankruptcy counts as an administrative expense against the estate, so, under the absolute priority rule, the Freeman plaintiffs are going get paid first anyway. And furthermore, the administrative expenses of bankruptcy — where the forensic consultant employed to track down Rudy’s earnings has already racked up $400,000 in bills — mean “administrative claims will eat the corpus if this is done as a pure garage sale” under the aegis of the court.
In an unintentionally hilarious moment, Rudy’s lawyer Gary Fischoff pronounced himself “aghast” at this number. He then proceeded to express his client’s indignation that anyone would suggest he had or would fraudulently hide assets from the court and his creditors. Sadly, listeners did not get the chance to hear his client express such indignation himself.
At the end of the hearing, Judge Lane said he was inclined to dismiss and would issue his ruling from the bench at 1pm on Friday. That should leave plenty of time for the Freeman plaintiffs to file writs of attachment on Giuliani’s condos in Florida and New York before close of business.
Gentlemen, start your engines!
Giuliani Bankruptcy Docket [Via Court Listener]
Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.
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