Rudy Giuliani can’t use bankruptcy to skip out on $150 million in defamation damages, federal judge rules

Giuliani’s bankruptcy case, which has been marked by disputes with creditors over repeated failures to produce thorough financial records, can no longer continue, Judge Sean H. Lane of the US Bankruptcy Court for the Southern District of New York ruled Friday. Giuliani’s lack of transparency and failure to make meaningful progress over the course of his Chapter 11 justify dismissing the case, said Lane.

“When confronted with complaints about a failure to satisfy the Bankruptcy Code’s obligations as to financial transparency, most debtors will respond by curing at least some—if not all—of the defects. By contrast, Mr. Giuliani has done nothing,” Lane said.

It remains to be seen how Giuliani will address mounting debts outside of bankruptcy and the resumption of lawsuits that were paused by his Chapter 11 case. Creditors, including two Georgia 2020 election workers who won a $148 million defamation judgment against Giuliani, will be forced back into civil court in an attempt to recover what they can.

Dismissing the bankruptcy is “in the best interests of creditors,” the judge wrote. “The plaintiffs in many of these matters have a right to a jury trial, making these cases better resolved outside the bankruptcy forum.”

He also prohibited Giuliani from refiling for bankruptcy for at least a year.

A spokesman for Giuliani, who earlier in the week consented to the election workers’ request to have the case dismissed, said in a statement that the proceedings were burdened with “voluminous and overly broad” demands that aimed to harm him and his businesses.

“We will continue to pursue justice and we are confident that—in the long run—our system of justice will be restored and the mayor will be totally vindicated,” he said.

The former Donald Trump lawyer filed for bankruptcy in December with $10.6 million in reported assets after being hit with a $148 million defamation judgment for falsely accusing the two Georgia poll workers of tampering with 2020 election ballots.

One of the election workers—Wandrea’ Arshaye “Shaye” Moss—sits on an official creditors’ committee that requested the appointment of a trustee to take control of Giuliani’s case. Moss, however, pushed to have the bankruptcy dismissed as the case dragged on.

Giuliani’s “uncooperative conduct” likely wouldn’t change with the appointment of a trustee, Lane said in his decision.

Prolonging the case with a “recalcitrant debtor” under the supervision of a trustee would likely cause an additional drain on funds available to pay creditors, the judge said. For a trustee, investigating claims that Trump and the Republican National Committee still owe Giuliani $2 million in outstanding legal fees “promise to be complex matters with uncertain outcomes,” said Lane.

Creditors could be left with nothing at the end of an even lengthier bankruptcy, he said.

“We are pleased the court saw through Mr. Giuliani’s games and put a stop to his abuse of the bankruptcy process,” Rachel Strickland, an attorney with Willkie Farr & Gallagher LLP representing the Georgia poll workers, said in a statement. “We will begin enforcing our judgment against him ASAP.”

The downfall

Giuliani’s collapse into bankruptcy marked a turn of fortunes following his successful career as a federal prosecutor, politician and later as a partner at major law firms purportedly earning up to $6 million a year. Giuliani ran into legal and financial troubles following Trump’s failed presidential reelection campaign in 2020, in which he led a Trump-backed legal bid to overturn voting results.

Giuliani’s efforts to cast doubt on the 2020 election outcome led to the suspension of his legal license, criminal indictments, and multiple high-profile defamation suits, including ones brought by voting machine companies US Dominion Inc. and Smartmatic.

He also faces sexual harassment and assault claims brought by his former employee, Noelle Dunphy, who sued Giuliani last year for $10 million and was later appointed to sit on the creditors’ committee.

“The bankruptcy court’s decision means that Ms. Dunphy’s case will go back to active litigation in New York State court,” Dunphy’s attorney, Justin Kelton of Abrams Fensterman LLP, said in a statement. “Ms. Dunphy intends to pursue her case aggressively, and we look forward to the day when we can present this case to a jury.”

While in bankruptcy, Giuliani unsuccessfully attempted to appeal the $148 million verdict for Moss and her mother Ruby Freeman.

Before the case was dismissed, Lane was asked to rule on whether Giuliani can use bankruptcy to discharge the defamation suit damages. A Texas bankruptcy judge ruled last year in a similar situation that right-wing conspiracy theorist Alex Jones couldn’t use Chapter 11 to avoid paying $1.4 billion in defamation-related judgments because bankruptcy law doesn’t allow the discharge of debts stemming from willful and malicious conduct.

Further complicating efforts to alleviate his financial burdens while in Chapter 11 protection, Giuliani was disbarred from practicing law in New York and had his WABC radio talk show canceled for continuing to discuss on-air his discredited theories about the 2020 election. He faced a creditor-led investigation into his recoverable assets and calls to sell his multi-million dollar residences in Manhattan and Palm Beach, Fla.

Giuliani is represented in his bankruptcy by Berger, Fischoff, Shumer, Wexler & Goodman LLP. A committee of unsecured creditors is represented by Akin Gump Strauss Hauer & Feld LLP. The Georgia election workers are represented by Willkie Farr & Gallagher LLP.

The case is In re Rudolph W. Giuliani, Bankr. S.D.N.Y., No. 23-12055, decision 7/12/24.

—Thomas Gleason contributed to this report.