Alex Jones loses, Cardi B wins due to downsides of bankruptcy law

At first glance, finding a thread connecting rapper Cardi B and conspiracy theorist Alex Jones may seem like an unlikely task.

But both could see their fortunes rise or fall by millions of dollars under a provision of federal bankruptcy law that goes largely unnoticed by the general public.

The judge Thursday said Jones can’t use bankruptcy To avoid paying $1.1 billion, he owes the parents of Sandy Hook massacre victims for lying about them on his talk show. It comes 13 days after Cardi B scored a major victory in her battle to receive nearly $3 million from a blogger who, among other things, falsely claimed the singer was a prostitute and had herpes.

In both cases, judges were asked to consider whether the alleged defamation constituted “willful and malicious infliction of injury,” one of the provisions of bankruptcy law that prevents someone from simply walking away from their debts.

The issue is not unprecedented, but the cases of Jones and Cardi B highlight the intersection of bankruptcy law, defamation and popular culture at a time when social media has turned everyone into a potential publisher who can be held accountable for their public statements. They also reinforce a quiet but important part of the law that debtors, creditors and attorneys should be aware of long before they end up in bankruptcy court.

“I don’t think people, when they defame others, think, ‘I could just file bankruptcy and get out of this,'” said Christopher D. Hampson, a professor of bankruptcy at the University. Florida. “But I think it’s underappreciated that bankruptcy doesn’t get people out of all that debt.”

“Intentional Act”

Unsettled debts at the end of a bankruptcy case are usually discharged, allowing the individual debtor to walk away. But there are exceptions to this exemption in the bankruptcy code that include certain tax claims, fraud, educational loans, divorce settlements, and debts involving willful and malicious tort.

Whether Jones’ lies met this definition was the central issue in his case.

Last year, state courts in Texas and Connecticut ordered a talk show host to pay Sandy Hook families $1.4 billion for defaming them by repeatedly claiming that the 2012 massacre was a hoax. Jones filed for personal bankruptcy in December.

But jurors in his government cases weighed only how much Jones and his Infowars show should pay, not whether his defamation reached the level of willful and malicious harm that would prevent him from paying off his debts. Jones and his lawyers disputed his comments they weren’t evil

but merely repeated the “general” views of many Americans.

In a ruling this week, Judge Christopher M. Lopez of the U.S. Bankruptcy Court for the Southern District of Texas said Jones would still face a $1.1 billion defamation judgment for his false claims about the elementary school shooting. Sandy Hook.

In two separate decisions, Lopez addressed a key question that has hovered over the bankruptcy since the beginning: whether the right-wing provocateur can avoid paying out a full payout to the families of shooting victims.

“There is an inference here of a premeditated and willful act intended to cause harm, rather than merely a deliberate act that results in injury,” the judge wrote.

The judge’s findings can be appealed, but for now it means Jones is still on the hook for most of his sentence. Without a settlement, Jones’ creditors could spend the rest of their lives trying to recoup their debt. Jones’ lawyers did not respond to Lopez’s decision, but Jones has appealed previous rulings in the case.

During an appearance on Infowars on Friday, Jones promised that appeals in his cases would “take years.” Whatever the results, he said he would not be able to pay off his debts in full.

“It does not matter; it’s all academic,” Jones said. “I don’t have a million dollars. My company has a few million, but that’s just to pay bills and buy groceries for the future. So we are literally devastated.”

The decisions weren’t a total loss for Jones. The judge found he may order new trials to determine whether more than $300 million of the $1.4 billion judgment can be justified.

Although bankruptcy courts have determined that defamation falls within the permitted exceptions, its analysis can be complex. The state court’s decision cannot clearly result in no dismissal, said Bruce Markell, a Northwestern University law professor and former bankruptcy judge.

A 1998 U.S. Supreme Court decision made it more difficult to prove intentional and malicious harm. Kawauhau Vs. Geiger solution.

In this case, a doctor accused of malpractice sought relief in bankruptcy court after he was ordered to pay compensation to one of his patients who lost a lower leg due to amputation. The High Court upheld an appeals ruling that the injury was unintentional and therefore the doctor’s bankruptcy allowed him to pay off the debt. According to experts, medical malpractice caused by negligence or recklessness is not “intentional and malicious infliction of harm.”

That has increased the risk that bankruptcy could be used “as an escape hatch from some very, very bad acts” — not just defamation, but acts such as sexual harassment and police brutality, said Melissa Jacoby, a bankruptcy law professor at State University. California. North Carolina.

It also increased the likelihood that an injured party would have to seek and win a second bankruptcy trial, especially since many state lawsuits may not consider the “willful and malicious” standard, as the Sandy Hook families discovered.

“If you get a summary jury verdict in state court, you may have to try the whole thing again in bankruptcy court,” Markell said.

Even if Jones is unable to pay off his defamation debts, his residence in Austin, Texas may allow him to retain some of his assets.

The Texas Constitution protects homesteads from forced sale, meaning Jones could still keep his primary home there. Texas is also one of two states that do not allow creditors to garnish wages on ordinary debts, although creditors can still freeze bank accounts. There are also exceptions for vehicles, retirement accounts and certain personal property.

“If in fact the bankruptcy worked correctly, then everything was included in the case and distributed,” Markell said. But these exceptions change the calculus, he said.

That’s why some call a creditor’s judgment a “hunting license,” Markell said, “because you’re just hanging on to the judgment, waiting until someone gets the money or gets an asset that isn’t exempt.”

Less resistance, less money

Cardi B, whose real name is Belcalis Marlenis Almanzar, had a much simpler path than her Sandy Hook parents.

A bankruptcy judge on Oct. 6 confirmed that the Grammy Award-winning artist could receive $3.4 million from entertainment blogger Latasha Transrina Kebe, also known as Tasha K. Cardi B won a federal jury verdict in Georgia last year after sue Kebe for libel, slander and invasion of privacy.

On her YouTube channel “unWinewithTashaK” and other social media sites, Kebe falsely accused Cardi B of having herpes and HPV and claimed the rapper was a prostitute, among other accusations, according to court filings.

The appeal decision was made after Kebe agreed not to challenge all but about $500,000 of her sentence. This means the rapper could seek $2 million in compensatory and punitive damages, $1.3 million in legal fees and more than $40,000 in post-judgment interest from Kebe.

It is unclear whether she will ever raise this amount. According to court records, the blogger filed for bankruptcy on May 25 after the rapper began collecting money from his employer, Google.

Kebe reported monthly rental income from her husband’s Georgia property of $9,850, and between January and June 2023, she earned approximately $27,157 from Meta, Google, PayPal, and MTV as a content creator.

Chad Van Horn, Kebe’s bankruptcy attorney, told Bloomberg Law that while they acknowledge the debts may be deemed undischargeable, they still intend to work out a workable payment mechanism for all creditors.

“The proposed plan is intended to provide the debtor with freedom from ongoing creditor harassment, give her peace of mind, focus on her career and allow her to make a meaningful distribution of debts to all of her creditors,” Van Horn said.

Inconsistent decisions

The question of whether defamation judgments can be forgiven in bankruptcy has been discussed previously. And as the cases of Jones and Cardi B show, the issue can be complex and lead to partial solutions.

Last year, a Dallas bankruptcy court granted Las Vegas entertainer and ventriloquist Terry Fator’s request to enforce a defamation judgment he won against his bankrupt mother, Marie Fator Sly.

Fator, an America’s Got Talent winner, won a $51,603 lawsuit against her, claiming she defamed him and tried to extort him after he became famous.

Based on Sly’s admissions and statements, the facts of the Nevada decision, and the letters sent by Sly, the case never even went to trial.

If the same parties have already had a full and fair trial on the same issues, and those issues are found to be willful and malicious, often the bankruptcy judge will agree with the creditor, said Seymour Roberts Jr. of Friedman & Feiger LLP. , who represented Fator.

But Roberts noted that if the pre-bankruptcy findings do not rise to the level of willful and malicious harm, or there are no specific findings, the case may have to be reconsidered.

“Litigators who prosecute defendants in state and federal court may not take the time to ask, ‘What do I need in my decision so that if this defendant files for bankruptcy, I will have an easier time getting… acquittal? Roberts said.

But not all such claims succeed in bankruptcy court.

Casey Anthony, who was found not guilty of murdering her 2-year-old daughter Caylee in a high-profile trial in 2011, avoided two defamation rulings after filing for bankruptcy in 2013.

One was from Zenaida Gonzalez, who accused Anthony of slandering her by accusing a nanny with a similar name of kidnapping her daughter in 2008.

A bankruptcy judge in Florida agreed to discharge Anthony’s debt because he said Anthony’s description of the nanny did not match Gonzalez and was not intended to harm Gonzalez.

In 2019, the bankruptcy court granted Anthony’s request to dismiss a separate defamation lawsuit brought by Roy Cronk, a meter reader who led the investigation into Caylee’s body and who Anthony’s lawyers said may have been a suspect in the toddler’s death.

The court said Anthony never personally said anything that would implicate Kronk with a crime, and any statements related to Kronk were made by her criminal defense attorneys.

Recent high-profile court decisions should serve as a reminder that bankruptcy can make defamation judgments more difficult for both debtors and creditors.

“If you don’t take into account the bankruptcy aspect – if you think it’s even remotely possible – I think it’s malpractice because it happens. People know these things happen,” Markell said.