By Mike Spector and Dietrich Knauth
(Reuters) -The parent of far-right conspiracy website InfoWars filed for U.S. bankruptcy protection on Friday as the company and its founder Alex Jones face up to $150 million in damages in a trial over longstanding falsehoods he perpetuated about the Sandy Hook elementary school massacre.
The bankruptcy filing by the InfoWars parent, Free Speech Systems LLC, would normally result in the trial and related litigation being halted. But Free Speech plans to ask a bankruptcy judge to allow the trial currently underway in Texas to continue and is seeking an emergency hearing on Monday, according to a court filing.
Nevertheless, Jones and his company could later attempt to use the bankruptcy proceedings, commenced in another Texas court, to limit the size of any damages a jury awards.
A bankruptcy filing by three other InfoWars entities in April proposed $10 million to resolve the litigation, far less than what the Sandy Hook families are seeking. The proposal contemplated legal releases shielding Jones and his company from the lawsuits in exchange for the payment.
The entities that previously declared bankruptcy - InfoW, IW Health and Prison Planet - voluntarily ended their cases in June after the Sandy Hook families dropped them as defendants in the defamation litigation.
Jones was found liable last year in lawsuits Sandy Hook families filed after he falsely claimed that the 2012 school massacre was a hoax.
The unusual judgments occurred after Jones defied court orders to turn over documents in the litigation. The cases were then teed up for trials to determine damages, with the first one now underway in an Austin, Texas courtroom.
Jones claimed the shooting, in which 20 children and six school employees were shot dead at the school in Newtown, Connecticut, was fabricated by gun-control advocates and mainstream media. Jones has since acknowledged the shooting happened.
Free Speech Systems believes it is in its best interests to continue the current damages trial because substantial resources have been spent on both sides, and the Sandy Hook plaintiffs would likely fight to keep the trial going despite the bankruptcy filing, W. Marc Schwartz, the company's restructuring advisor, said in a court filing.
The Sandy Hook families had opposed the previous April bankruptcy filing as a "sinister" attempt by Jones to shield his assets from liability.
Explaining the current bankruptcy filing, Schwartz said the Sandy Hook litigation resulted in InfoWars being shunned by significant internet, social media and financial institutions. The company's business suffered as a result, he said.
Mark Bankston, a lawyer representing Sandy Hook families, said he looked forward to continuing to put on his case for jurors, which is expected to include testimony as soon as Monday from the parents of one of the children murdered at Sandy Hook Elementary.
"Our clients are pleased that despite the bankruptcy, their trial will continue and that the jury will return a verdict," Bankston told Reuters in a text message. "Now, InfoWars is heading directly for its long awaited, reckoning."