Government

Alex Jones's Bankruptcy Lawyer Indignant That Sandy Hook Plaintiffs Aren't Grateful He Spared Them Their Day In Court

And if the facts and the law are against you, pound the table.

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Demonstrators Protests At Texas State Capitol Against Governor’s Stay At Home Order

(Photo by Sergio Flores/Getty Images)

“We’re turning to the bankruptcy courts to compel the plaintiffs to estimate the value of their claims in open court by discernible evidentiary standards,” Alex Jones’s lawyer Norman Pattis told the Wall Street Journal on Wednesday. “The plaintiffs have turned this litigation into a macabre morality play and have refused to negotiate in good faith. We hope they will show respect to the federal courts.”

Admitting that your client is placing three worthless companies into a sham bankruptcy for the express purpose of stopping a jury from assessing damages is a weird flex. But why should anything about this freak show be normal, right?

We are, after all, talking about a case where Jones sent his lawyers in to argue that he was too sick to be deposed at the very moment he was in studio broadcasting his show. His refusal to comply with discovery was so egregious that he got death penalty sanctions in two states. And on the eve of a jury trial to determine damages, he declared bankruptcy for three of the entities sued by the Sandy Hook plaintiffs — although not for himself personally or for his main company Free Speech Systems — effectively halting both civil suits.

And so perhaps we should not be surprised that US Bankruptcy Trustee Kevin Epstein filed this hair on fire objection to the emergency motion to appoint trustees for Jones’s proposed Litigation Settlement Trust, which he proposes to fund with $2.75 million of cash from somewhere, plus additional quarterly payments of $250,000 up to a total of $10 million if and only if the plaintiffs drop all their claims against him.

Why didn’t Alex Jones or FSS file for bankruptcy relief when Debtors did? They are both defendants in the same litigation as Debtors, and all of them have been found liable in those cases—in unliquidated amounts. Moreover, Debtors’ assets are estimated to be virtually nil for a case of this significance ($50,000), while Alex Jones and FSS are fully funding the administrative expenses of these bankruptcy cases without filing themselves. Why? It appears that Jones intends to leverage the bankruptcy filings of his holding companies to extend the automatic stays of pending litigation against Debtors to him and FSS, while he maintains full control of FSS and its assets going forward. Thus, this Motion to appoint the trustees for the Litigation Settlement Trust seems to be just the first step for Debtors to carry out Jones’s and FSS’s scheme of avoiding the burdens of bankruptcy while reaping its benefits.

Why, indeed! Isn’t the purpose of bankruptcy to allow a company that earns upwards of $50 million a year to place a handful of worthless LLCs in Chapter 11, dump whatever pittance they think they can get away with in there, and tell opposing parties “that’s all you’re getting, take it or leave it?”

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The 70 people who called in to listen to today’s hearing on the Chapter 11 petitions of Infowars, Infowars Health, and Prison Planet TV before US Bankruptcy Judge Christopher Lopez in Victoria, Texas were expecting fireworks. And we got them!

From the outset, everyone agreed that the emergency appointment of trustees was not happening — not least because the proposed trustees said they would not serve under the terms of the trust agreement worked out between Alex Jones and his various companies. Judge Lopez decided to table the issue, but he noted that he would be most uncomfortable authorizing a litigation settlement whose funding was entirely dependent on the good will of a non-party. What if Alex Jones simply decided to stop making the promised quarterly payments to the trust? Not that the conspiracy theorist podcaster would ever negotiate in bad faith, of course, but you simply can’t be too careful these days.

But then the attorneys for the Texas and Connecticut plaintiffs got up to argue that the bankruptcy shouldn’t be allowed to go forward at all, since it was clearly a ploy to escape liquidated damages in Connecticut, where a jury trial was due to take place later this year, and Texas, where trial was set for this coming Monday. And furthermore, three companies with no assets which appear to conduct no business at all are not appropriate vehicles for subchapter V bankruptcy under 11 U.S.C. § 101(51C), they insisted.

At which point Kyung Shik Lee, attorney for the supposedly bankrupt Jones entities, got up and ranted indignantly at the Sandy Hook plaintiffs that this was the first offer of money that they’d seen in ten years, and he’d heard nothing but complaints about his generous offer to pin their arms behind their backs and deny them their day in court.

The plaintiffs only filed their cases in 2018. Lest we forget, what happened ten years ago is that a gunman opened fire at an elementary school, killing 26 people. After which Mr. Lee’s client spent a year telling his deranged audience that the plaintiffs were simply pretending their children had been murdered, subjecting them to vicious harassment and death threats that forced at least one of them to go into hiding for his own safety.

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Nevertheless, Lee insisted that “bankruptcy code and courts are the appropriate vehicle” for resolving “a sad and complex situation” which was actually on the eve of being decided by a jury. In fact, he continued, the Sandy Hook plaintiffs should thank Jones for his “good faith effort here to do something constructive with the bankruptcy process,” since otherwise the Texas plaintiffs might get all the money by dint of getting to the courthouse first. There are “limited funds and we’re trying to maximize it so it goes to the plaintiffs” he huffed, seeming hurt and offended that someone might suggest he had anything but the purest motives.

It was quite a performance! Truly, Jones himself could not have done better.

It was only slightly undercut by testimony from Marc Schwartz, the proposed Chief Restructuring Officer, who told the court that the 2021 revenue for Jones’s main company Free Speech systems, the one he didn’t put into bankruptcy but which is now reaping the benefit of a delay in the lawsuits, was $56 million. Also that Infowars, whose “business” is holding the trademark for Jones’s company, never actually collected a royalty until about five minutes ago, when Schwartz told them he wasn’t going to lend his name to this project until they stopped sending the royalty checks to Jones directly.

And if the point was to convince the court that this was a very real bankruptcy and not just a litigation ploy, Schwartz’s testimony that Jones is the big earner and couldn’t possibly file for Chapter 11 without destroying his brand probably didn’t help.

In any event, Judge Lopez said that he couldn’t consider the Sandy Hook plaintiffs’ arguments in the absence of a motion, and the plaintiffs promised to get their emergency motions to dismiss and remand the claims to state court on the docket ASAP. The judge set a status conference for next Friday afternoon at 3pm, at which he promised to ask some pointed questions about how exactly these companies are qualified debtors under subchapter V. Plus any other motions which come up in the interim.

See you next week. Same batshit time, same batshit channel.

InfoW, LLC (22-60020) [Bankruptcy Docket, via Court Listener]
IWHealth, LLC (22-60021) [Bankruptcy Docket, via Court Listener]
Prison Planet TV, LLC (22-60022) [Bankruptcy Docket, via Court Listener]

Liz Dye lives in Baltimore where she writes about law and politics.

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