By Dietrich Knauth
NEW YORK (Reuters) - A U.S. bankruptcy judge said Thursday that Rudy Giuliani could be headed for a "pyrrhic victory" in a dispute over whether he should sell his $3.5 million Florida condo.
U.S. Bankruptcy Judge Sean Lane said at a court hearing in White Plains, New York, that he would not immediately rule on creditors' attempt to force Giuliani, who is Republican former President Donald Trump's ex-lawyer, to list the property for sale, and he encouraged Giuliani and the creditors to work out a compromise.
Lane warned that creditors may escalate their efforts to control Giuliani's bankruptcy if their current request is denied, describing that as a possible pyrrhic victory in which someone wins a battle but loses a war.
"The debtor may succeed in fending off this motion,
only to be faced with far more draconian requests for relief in the future," Lane said.
Lane said Giuliani's creditors committee, composed of people and companies that have sued the former New York mayor, could escalate by asking for more traditional, but more extreme, bankruptcy remedies, like appointing a bankruptcy trustee to take control of Giuliani's assets or proposing their own plan for liquidating Giuliani's assets.
"This is a warning shot across the bow," Lane said of the creditors' demand.
Giuliani filed for Chapter 11 protection six days after a federal jury in Washington, D.C., found that he had defamed two former Georgia election workers through false accusations that they helped rig the 2020 election against Trump and awarded them $148 million in damages.
Giuliani has received limited permission to challenge the verdict, and he has asked a federal judge to rule in his favor or grant a new trial in the defamation lawsuit.
Giuliani's attorney, Gary Fischoff, said at Thursday's hearing that Giuliani's creditors do not have legal authority to force a sale of the Florida condo at this stage in the bankruptcy, and that Giuliani intends to live there after selling his $5.6 million New York apartment.
Rachel Biblo Block, the attorney representing the creditors, said that Giuliani will not have enough money to pay all of his creditors and keep a luxury home in Florida.
"The math doesn't work, you have to sell the Florida condo," Block said.
Even if Giuliani can succeed in reducing the $148 million defamation judgment by 95%, it would wipe out his remaining assets, and his other creditors deserve to be paid too, Block said.
Giuliani's creditors also expressed alarm at the high maintenance costs incurred at the Florida property, which far exceed the $8,416 per month that Giuliani estimated at the beginning of his bankruptcy.
Lane said Giuliani should work quickly to clear up any question about the actual cost of maintaining Florida condo, after creditors said he has already spent more than $160,000 on maintenance costs since September 2023.
"The numbers are sort of all over the place," Lane said. "The lack of financial information is a solvable problem, and it needs to be solved promptly."