Radio host Alex Jones met his day of reckoning when the bankruptcy court in Houston granted summary judgment in favor of families of children murdered at Sandy Hook elementary school. Bankruptcy Judge Christopher M. Lopez held that more than $1.2 billion in debt owing by Jones is nondischargeable for committing “willful and malicious injury.”
On some of the claims by the Sandy Hook families, Judge Lopez was unable to grant summary judgment. For the most part, though, Judge Lopez said he will hold trials on those claims to decide how much more debt is nondischargeable.
The Defamation Suits
Jones gained notoriety for stating on his radio show that the Sandy Hook school massacre was a hoax. Families of murdered students filed defamation suits in state courts in Connecticut and Texas against Jones and a company he owned, Free Speech Systems LLC. The defendants defaulted, and default judgments were entered in both states.
Before the trial on damages concluded in Connecticut and before the damages trial began in Texas, Free Speech Systems filed a Subchapter V petition in July 2022 in Houston.
Early in the Subchapter V case, Judge Lopez modified the automatic stay to allow the suits to proceed. In October 2022, a Connecticut jury awarded about $1.4 billion. The Texas suit resulted in a judgment for about $50 million.
In December 2022, Jones himself filed a petition in Houston under “ordinary” chapter 11 because the judgment gave him more than the $7.5 million debt cap for Subchapter V.
In Jones’ individual chapter 11 case, the Sandy Hook families filed a complaint alleging that the judgments were nondischargeable under Section 523(a)(6) as debts “for willful and malicious injury by the debtor to another entity or to the property of another entity.” The families filed motions for summary judgment based on the Connecticut and Texas state court judgments. Jones opposed.
Summary Judgment for the Connecticut Suit
The October 19 opinion is largely an exercise by Judge Lopez in applying Connecticut and Texas law on issue preclusion, formerly known as collateral estoppel.
Families of some of the murdered children had sued Jones and his company in Connecticut, while others sued in Texas. The courts in both states had granted default judgments in favor of the families for what Judge Lopez called “repeated violations of discovery orders.”
Following summary judgment, the Connecticut case proceeded to a jury trial on damages. One year ago, the Connecticut jury awarded the families $965 million in compensatory damages for defamation and emotional distress. The jury also awarded common law punitive damages in an amount to be decided by the state court separately.
Under a Connecticut unfair trade practices claim to be decided by the judge without a jury, the state judge awarded almost $322 million for common law damages for attorneys’ fees plus $150 million in punitive damages.
Judge Lopez addressed the elements of damage and the jury charges, one by one, to determine whether the families were entitled to summary judgment based on issue preclusion. Naturally, he said that intent is required to have been proven under Section 523(a)(6), because reckless or negligent behavior does not result in nondischargeability.
In Connecticut, Judge Lopez said that the allegations in a complaint are deemed admitted when a default judgment is entered based on discovery abuse. In the Connecticut complaint, he found “multiple well pleaded allegations” about Jones’ intent, “all of which are deemed admitted.”
In terms of issue preclusion, Judge Lopez said that the “findings about Jones’s willful and malicious injury to the Plaintiffs were also necessary to the judgment and the jury award of damages.”
On the bottom line, Judge Lopez found that the Connecticut plaintiffs were entitled to summary judgment on nondischargeability with respect to the jury award for the $965 million in compensatory damages. Likewise, he gave summary judgment for $150 million in punitive damages under the state’s unfair trade practices act.
However, Judge Lopez could not grant summary judgment on the $322 million in attorneys’ fees as common law punitive damages, because the jury could have found liability for a reckless act, which would not have been nondischargeable.
Summary Judgment for the Texas Suit
In Texas, the default judgments also amounted to an admission by Jones of the allegations in the complaints. As he did with the Connecticut suit, Judge Lopez dissected the admitted allegations in the complaint and the jury instructions given in the damages trial.
Judge Lopez decided there was “ambiguity” as to whether the jury awarded $44 million in damages to one set of parents “based on intentional acts only.” However, he could grant partial summary judgment based on admissions about willful and malicious injury.
Judge Lopez said that “there must be a trial about the damages stemming from the admitted allegations constituting a willful and malicious injury.” Rather than sending the case to the Texas court, Judge Lopez said, “This Court can handle the trial.”
“And to be clear,” Judge Lopez said, “this means that the Court will not retry Jones’s liability for intentional infliction of emotional distress.”
As to another set of Texas plaintiffs, there never had been a trial on damages. “So,” Judge Lopez said, “this case must proceed to trial about the amount of damages stemming from the deemed admitted willful and malicious injury Jones caused the Plaintiffs. And again, this Court can handle the trial.”
In other words, Judge Lopez said he was granting summary judgment “as to the finding of willful and malicious injury about defamation and intentional infliction of emotional distress, but [denying] the motion as to the amount of any damages.”
In sum, Judge Lopez granted summary judgment of nondischargeability for almost $115 million in favor of the Texas plaintiffs while calling for a damages trial regarding other willful and malicious injuries.
Note
There are nondischargeability complaints pending in the Subchapter V case of Jones’ Free Speech Systems. However, the courts are split on whether a corporate debtor in Subchapter V can be saddled with nondischargeable debts.
The Fourth Circuit held that corporate debtors in Subchapter V may not discharge debts “of the kind” specified in Section 523(a). Cantwell-Cleary Co. v. Cleary Packaging LLC (In re Cleary Packaging LLC), 36 F.4th 509 (4th Cir. June 7, 2022). To read ABI’s report, click here.
Bankruptcy Judge Craig A. Gargotta of San Antonio disagreed with Cleary and held that “corporate debtors proceeding under Subchapter V cannot be made defendants in § 523 dischargeability actions.” Avion Funding LLC v. GFS Industries LLC (In re GFS Industries LLC), 647 B.R. 337, 344 (Bankr. W.D. Tex. Nov. 10, 2022). To read ABI’s report on GFS, click here. The Fifth Circuit accepted a direct appeal in GFS in April. Briefing was completed in September, and the appeal is tentatively set for argument during the week of December 4.
Presumably, Judge Lopez will rule on the Free Speech Systems dischargeability complaints after the Fifth Circuit rules in Avion Funding LLC v. GFS Industries LLC, 23-50237 (5th Cir.).
Jones has the right to appeal the rulings by Judge Lopez when there are final orders or judgments. Even in the absence of a stay pending appeal, the presence of estate property in the two chapter 11 cases could forestall collection efforts by the Sandy Hook families for the time being.
The opinions are Wheeler v. Jones (In re Jones), 23-03037 (Bankr. S.D. Tex. Oct. 19, 2023); and Heslin v. Jones (In re Jones), 23-03035 (Bankr. S.D. Tex. Oct. 19, 2023).
Radio host Alex Jones met his day of reckoning when the bankruptcy court in Houston granted summary judgment in favor of families of children murdered at Sandy Hook elementary school. Bankruptcy Judge Christopher M. Lopez held that more than $1.2 billion in debt owing by Jones is nondischargeable for committing “willful and malicious injury.”
On some of the claims by the Sandy Hook families, Judge Lopez was unable to grant summary judgment. For the most part, though, Judge Lopez said he will hold trials on those claims to decide how much more debt is nondischargeable.