The Gateway Pundit Bankruptcy Dismissed as Bad Faith Filing

On July 25, 2024, Judge Mindy A. Mora of the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) entered a memorandum opinion and order dismissing TGP Communication, LLC’s (“TGP”) bankruptcy case as having been filed in bad faith.

TGP operates a far-right “news” website that lauds itself to be an alternative to mainstream media. TGP was originally formed and registered to do business in Missouri, where its sole member, James Hoft, then resided.

TGP was subject to multiple lawsuits arising from articles it publishing alleging election fraud perpetrated in the 2020 election by Georgia election workers Ruby Freeman (“Freeman”) and Wandrea’ ArShaye Moss (“Moss”) and, separately, about Dr. Eric Coomer (“Commer”), former director of product strategy and security for Dominion Voting Systems. While several reputable sources debunked what TGP reported, TGP has continued to stand by the accuracy of its reporting.

Freeman and Moss, collectively, and Dr. Coomer commenced lawsuits against TGP alleging the articles defamed them and destroyed their lives.

TGP has in place a $2 million media insurance policy. Prior to filing its bankruptcy case, TGP exhausted $700,000 of that coverage on defense costs to delay the prosecution of the defamation claims.

Shortly before Mr. Hoft and his twin brother, Joe Hoft, were to be deposed by Freeman and Moss, TGP registered to do business in Florida. One week later, on April 25, 2024, TGP filed for bankruptcy protection under Chapter 11 Subchapter V of the Bankruptcy Code in Florida.

At the time it filed for bankruptcy TGP had sufficient income to pay its debts as they became due. Mr. Hoft acknowledged in his testimony at the meetings of creditors and submissions to the Bankruptcy Court that the filing was not prompted by TGP’s immediate financial condition, but due to the pendency of the defamation lawsuits.

TGP’s’ filings, which included monthly operating reports attaching bank statements for accounts held in the name of Mr. Hoft alone or doing business as TGP, and his 341 meeting testimony, reflect that TGP had engaged in multiple pre-bankruptcy transactions outside of the ordinary course. These included purchasing a 2021 Porsche for Mr. Hoft to drive when present in Missouri, making a $800,000 loan to Mr. Hoft so he could purchase a condominium in Florida (which he titled in the name of another LLC), making a loan to Mr. Hoft’s brother, and making loans to Justice League of America, another entity owned and controlled by Mr. Hoft. The TGP website also solicited donations directly to Justice League of America. Notably, none of the loans were memorialized in promissory notes or pursuant to commercially reasonable terms.

Freeman and Moss moved to dismiss TGP’s bankruptcy case pursuant to Bankruptcy Code §§ 1112(b) and 305(a) or, alternatively, for relief from the automatic stay. Dr. Coomer joined in the motion and sought the same relief.

As observed in Judge Mora’s opinion,

Freeman, Moss, and Coomer believe that TGP’s schedules, statements of financial affairs, and actions to date, including TGP’s request to evade typical bankruptcy disclosure, reflect the use of bankruptcy as a pure litigation tactic.

In rendering its opinion, the Bankruptcy Court did not consider the truthfullnes of the allegedly defamatory articles or the merits of the defamation lawsuits. Instead, it constrained its analysis to “the purpose of chapter 11 as part of the Bankruptcy Code and TGP’s demonstration of good faith (or lack thereof) in seeking to use it.”

The Plan, as envisioned by TGP, which limits the amount required for distributions to TGP’s projected net income over three years, would do three things:
(i) restrict the total amount payable to the State Court Claimants to whatever TGP earns over the next few years, effectively capping whatever litigation damage
exposure that TGP now faces to an amount that TGP finds palatable, (ii) require the State Court Plaintiffs to share the future revenue allocated to the Plan with all other general unsecured claimants, thereby further limiting the State Court Plaintiffs’ potential recovery, and (iii) dilute the possible recovery for non-litigation general unsecured claimants by likewise requiring them to share the plan-allocated portion of TGP’s future revenue with the State Court Plaintiffs. . . TGP’s proposed Plan that mostly seeks to limit litigation exposure to its sole principal—and only that—looks a lot like bad faith.

The Bankruptcy Court found that dismissal was appropriate under both § 305(a) and § 1112(b) with all “the facts … support[ing] § 1112 dismissal also support[ing] § 305(a) dismissal.”

TGP published an article criticisizing the opinion in which it vowed to appeal from the dismissal order.

David’s Dicta: David Blansky and Dunn Law, P.A. were part of the team representing Freeman and Moss in the TGP bankruptcy case.

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