Can Amber Heard declare bankruptcy in the Johnny Depp case?

Actress Amber Heard leaves the Fairfax County Courthouse on June 1, 2022 in Fairfax, Virginia. (Photo by Win McNamee/Getty Images.)

Amber Heard can’t easily use federal bankruptcy laws to avoid paying the actor millions of dollars Johnny Depp, but it might be able to use bankruptcy proceedings to slow down payments. That’s according to a law professor and expert on the subject who said the latter possibility was risky for Heard – if the Aquaman the actress chose this path.

A Virginia state court jury ruled on Wednesday afternoon that Heard again defamed Depp three times via a Washington Post editorial. While some have complained that the jury’s first finding of defamation involved a headline that Heard’s legal team claimed Heard never wrote, the bottom line is that the jury apparently did not believe most of Heard’s testimony and determined that Heard should pay Depp $10 million in compensatory damages and $5 million in punitive damages for defamation. The presiding judge immediately limited the award of punitive damages to $350,000 under a Virginia law that caps punitive damages to this amount.

The jury dismissed two of Heard’s counterclaims against Depp, but ruled that Adam Waldman, a lawyer who acted as Depp’s agent, defamed Heard only once. This decision resulted in a counter-award of $2 million in compensatory damages and no punitive damages owed by Depp to Heard.

Actor Johnny Depp waves to supporters from his vehicle as he leaves a Fairfax County courthouse on May 27, 2022 in Fairfax, Virginia.  Depp was not in the courtroom for the verdict, but he is believed to have watched the proceedings remotely from the UK.  (Photo by Alex Wong/Getty Images.)

Actor Johnny Depp waves to supporters from his vehicle as he leaves a Fairfax County courthouse on May 27, 2022 in Fairfax, Virginia. Depp was not in the courtroom for the verdict, but he is believed to have watched the proceedings remotely from the UK. (Photo by Alex Wong/Getty Images.)

The question is whether money will actually change hands. While Heard has promised to appeal the underlying legal decisions in the case, she probably cannot use bankruptcy law to protect herself from having to pay Depp, according to Bruce Markel, professor of bankruptcy law and practice at Northwestern Pritzker School of Law in Illinois. Markell is also a former bankruptcy judge.

The analysis begins with §523(a)(6) bankruptcy law. He says that a “payment” of debts under various other headings of the law “does not release an individual debtor from any debt. . . for willful and malicious harm by the debtor to another entity or to another entity’s property.

In other words, bankruptcy law protects individuals from the debts they incur, but it also protects certain people who have valid claims against the debtors. An alternative – where debtors could escape liability for intentional torts by simply filing for bankruptcy – would effectively neutralize large swaths of the legal system. As a general legal axiom, tort judgments are designed to force wrongdoers to pay for the injuries they inflict, and this premise cannot generally be avoided by bankruptcy.

“Most tort judgments based on negligence (car accidents, slips and falls, etc.) are dischargeable” in bankruptcy, Professor Markell noted. “Indeed, even cases of medical and legal malpractice are dischargeable.”

“What separates Heard’s case from ordinary tort cases is the finding of intent,” he continued. “Bankruptcy law does not allow for the discharge of most intentional offenses (assault, assault, etc.). Defamation occurs because of the required findings of malice or intent to injure another. »

“I think there are at least two reasons why bankruptcy would not be helpful to Ms Heard,” Professor Markell told Law&Crime via email.

His first rationale involves a little dive into the intent of Congress behind bankruptcy law (we’ve edited the answer ever so slightly):

Defamation damages (whether general or punitive) are generally considered non-dischargeable under the “willful and malicious” standard of section 523(a)(6). The Congressional history of “voluntary” indicates that it means “deliberate or intentional”. “Malicious” means knowingly or without cause or excuse; it does not require ill will or specific intent to harm. Paraphrase necklace on bankruptcymost courts have held that a wrongful act committed intentionally, which necessarily produces harm or which has a substantial certainty of causing harm and which is without just cause or excuse, is “willful and malicious” within the meaning of article 523(a)(6).

That standard would even cover general damages awarded to Mr. Depp. In other words, the standard for punitive damages is higher than that for willful and malicious damages; Although all punitive damages are generally considered to be intentional and malicious, not all willful and malicious damages are considered punitive damages. Thus, it is highly likely that the entire judgment, not just the punitive damages portion, will not be dischargeable. [in a hypothetical bankruptcy proceeding].

If that is correct, Ms. Heard would derive no real benefit from filing for bankruptcy. She is expected to pay the full compensation between Depp’s $10,350,000 in damages and her $2,000,000 award.

That would amount, as Law & Crime noted yesterday, to an $8,350,000 payment from Heard to Depp.

Professor Markell continued:

She [Heard] could obtain a procedural advantage by filing a chapter 11 in that it could offer to pay the indemnity over time, just as Texaco offered to pay Pennzoil’s damages [in the late 1980s] (Texaco was solvent, but could not pay [a] Over $10 billion in damages immediately, so he filed a Chapter 11 plan to settle the claim and pay it over time).

Some commentators have suggested that Heard might be able to use bankruptcy proceedings to avoid an award of compensatory damages, but would remain liable for an award of reduced punitive damages of $350,000. However, for the above reasons, Professor Markell disagrees with this assessment.

The second reason Markell said Heard is unlikely to benefit from the bankruptcy filing is as follows:

The second reason is speculative and relies on the last paragraph. If a person can pay his debts, he should. If Ms. Heard has the financial means to pay the judgment, filing for bankruptcy to delay or reduce payments could be considered bad faith (this theory is at play in the [Johnson & Johnson] talc case currently before Circuit 3d). But I have no idea of ​​Ms Heard’s current or future financial situation – or of Mr Depp’s desire to fully enforce the judgment. If he offered terms that fit Ms. Heard’s finances, the rationale for bankruptcy is much less. But that’s for the future.

Beyond questions about Heard’s financial situation, it remains to be seen whether Depp will actually attempt to collect the amount the jury has told him.

[Editor’s note:  this report has been updated with additional comments from Prof. Markell.]

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