Sandy Hook parents will press to dismiss bankruptcy filing by Alex Jones companies

Lawyers for parents of children killed in the 2012 shooting at Sandy Hook Elementary told a judge Friday that they will seek an emergency ruling to dismiss bankruptcy filings by companies owned by Austin-based conspiracy theorist Alex Jones, arguing that the action was illegitimate.

"This is a situation where the first question for this court is: Is this proper?" lawyer Jon Beatty said during a Friday morning hearing in Houston. "Let me tell you, I think we have a sinister and unworthy purpose here."

Bankruptcy court, Beatty argued, should not be a vehicle that allows Jones and his InfoWars media system to thwart trials — like one that was to begin next week in Austin but was canceled by the bankruptcy action — that will determine how much money Jones and his companies owe for defaming the parents while calling the school shooting a hoax.

More: Alex Jones hit with $1 million for violating court orders in Sandy Hook lawsuits

U.S. Bankruptcy Judge Christopher Lopez said he would take up that motion, and any other claims, once they are filed.

Friday's hearing, the first since the bankruptcy petition was filed early Monday, offered no rulings but gave an initial glimpse into the latest venue in a four-year legal fight between the Sandy Hook parents and Jones.

Kyung Lee, Jones' bankruptcy lawyer, rejected accusations that there was a nefarious purpose behind turning to federal bankruptcy court. Instead, he said, the goal was to resolve "a sad and complex situation" and ensure that the maximum amount of money is made available to those who sued Jones.

"There is a good-faith effort here to try to do something constructive with this bankruptcy process," Lee told the judge.

Jones was sued in Travis County and in Connecticut, where the Sandy Hook shooting took place.

Cliff Walston, a lawyer for the Texas plaintiffs, said the lawsuits were about more than a dispassionate division of damage awards.

Jones and his companies reported $56 million to $78 million a year in revenue by touting products online and on his radio and internet shows, Walston told the judge.

More: New Sandy Hook lawsuit accuses Alex Jones of hiding millions of dollars in assets

"That's how he makes his money. He sells these products because he has an audience of millions and millions of people, and he has a very, very loud bullhorn with which to do it," he said. "These individual families do not have that kind of platform."

However, the families would have their own bullhorn if their lawsuits were allowed to proceed in the state courts "and Mr. Jones is held accountable for his conduct," Walston said.

"It's also about them having their day in court — and the emotional aspect that comes with that — and their right as the plaintiffs to have their claims heard by a jury of their peers," he added.

Other key details to emerge from the hearing included:

• A litigation settlement trust, contemplated as part of the bankruptcy to pay the defamation awards, would be funded with $9.8 million over five years from Jones and his main company, Free Speech Systems, chief restructuring officer Marc Schwartz told the judge.

More: Alex Jones lists $6.2 million in assets as judge adds new sanctions in Sandy Hook cases

The trust also would receive about $38,000 a month in royalty fees that will no longer be sent directly to Jones but will go to IWHealth, one of the companies that filed for bankruptcy. IWHealth owns the cash flow from royalties under an agreement with Youngevity, whose dietary supplements and other products are sold on the InfoWars website, Schwartz said.

• Two other Jones companies that filed for bankruptcy — InfoW LLC, whose name was recently changed from InfoWars LLC, and Prison Planet TV — make no money, have no cash and have no employees. The judge asked Lee to provide information in the future about why such companies would qualify for bankruptcy protection.

• Schwartz said Jones did not file for bankruptcy to preserve the value of his name.

"InfoWars is a product trademarked in the conspiracy theorist community, if you will, and Alex Jones' name is equally as prominent," Schwartz said, adding that they didn't want to "ruin his trademark, his fame and his ability to generate funds and sell merchandise to his people."

For the same reason, bankruptcy was not considered as an option for Free Speech Systems, which operates InfoWars and generates the bulk of revenue, Schwartz said.

• Friday's hearing was intended to address Jones' request to appoint trustees to run the litigation settlement trust, but a final version of the trust agreement was not yet ready.

Lopez set a status conference for 3 p.m. April 29 for updates on the trust agreement and any other matter raised in the coming week.

This article originally appeared on Austin American-Statesman: Sandy Hook parents will seek to dismiss bankruptcy by Alex Jones firms