In my July 22 post titled, Giuliani Bankruptcy Case Drama Continues, I reported on the memorandum decision entered by the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granting the dismissal of Rudolph Giuliani’s Chapter 11 case. Judge Sean Lane had directed the parties confer over the terms of the dismissal order. Notwithstanding that Giuliani had been granted the relief he sought, namely the dismissal of his case, he failed to reach a deal as relating to the administrative expenses incurred during his case.
The lack of transparency in Giuliani’s financial disclosures and his recent spending resulted in questions concerning his near term ability to pay administrative expenses. The lack of progress provoked the ire of the Bankruptcy Court, with Judge Lane warning Giuliani that he could be required to appear in person to answer questions under oath concerning his finances.
On July 31, 2024, counsel for the Georgia election workers defamed by Giuliani, Ruby Freeman and Wandrea’ Arshaye Moss, filed a letter with the Bankruptcy Court reporting that the terms of dismissal had been reached and enclosed a revised dismissal order.
The Bankruptcy Court entered the dismissal order on Friday, August 2, 2024. The order requires Giuliani to immediately pay $100,000 towards the professional fees owed to forensic accounting firm Global Data Risk LLC (“GDR”). The balance of GDR’s fees and expenses are to be paid from the proceeds of the sale of either his New York city apartment or his Palm Beach, Florida condominium. GDR is being granted a valid and enforceable lien against both properties and shall have the right to foreclose on the properties if they are not paid within six months.
Giuliani’s bankruptcy case was originally filed on December 21, 2023. The filing of his case resulted in the stay of, among other things, proceedings by Freeman and Moss to enforce their defamation judgment and Giuliani’s appeal from that judgment. Giuliani’s bankruptcy filing delayed their efforts by seven and a half months in which he had to pay his bankruptcy counsel and caused GDR to incur extensive fees and expenses – estimated to be $400,000 – performing a forensic examination of his financial affairs.
Giuliani’s filings, which were criticized for their lack of completeness and candor, have provided some insights about his income and the sources from which creditor obligations may be satisfied. These include his launch of an organic coffee brand, “Rudy Coffee” in May. It has been reported that Giuliani reached a deal with Burke Brands LLC in late April 2024, which promised Giuliani 80% of the net sales and will likely earn the former mayor $5 on a 32-ounce bag, $10 on a 64-ounce mag, and $14.28 on a 76-ounce bag. Burke Brands filed its own Chapter 11 petition for reorganization in December 2022 and emerged from bankruptcy in May 2024. Burke Brands contended that the dramatic rise in the price of coffee beans had impacted its operations since it could not pass on large price increases to its customers, which include Costco and Sam’s Club. Burke Brands’ labels include Don Pablo, Subtle Earth Organic Coffee, and Pablo’s Pride. As part of its efforts to reorganize, Burke Brands sued several merchants cash advance (“MCA”) companies claiming that the transactions constituted usurious loans. That lawsuit was resolved by the MCA lenders reducing the amounts owed to them.
As condition of the dismissal, Giuliani is also prohibited from filing another bankruptcy case for one year. Giuliani now has little choice but to pursue his appeal from the defamation judgment and comply with his obligations to his judgment creditors and unsecured creditors under applicable law.