Legal Battle Over Merit Street Media’s Bankruptcy
The Professional Bull Riders (PBR) has taken a significant step in its ongoing legal battle with Dr. Phil McGraw’s Merit Street Media, filing an emergency motion to compel the production of documents. This move comes as PBR accuses Dr. Phil of initiating a Chapter 11 bankruptcy filing in bad faith, aiming to avoid potential litigation and jumpstart a new media venture.
PBR claims that Merit Street owes it $181 million and argues that Dr. Phil orchestrated the Chapter 11 case to evade looming legal action. The league highlights that Dr. Phil founded Envoy Media just one day before Merit Street filed for bankruptcy, suggesting a strategic effort to transfer assets and avoid liability. This accusation is part of a broader concern that Merit Street and Peteski Productions, the network’s majority equity holder, are stonewalling discovery efforts to expedite financing approval.
The motion was filed on Wednesday in the U.S. Bankruptcy Court for the Northern District of Texas and was first reported by Debtwire. It precedes an August 19 hearing where the court will determine whether to convert the bankruptcy to Chapter 7, liquidate the assets, dismiss the filing, or approve debtor-in-possession financing.
The Independent has reached out to attorneys for both Merit Street and PBR for comment. While PBR believes conversion to Chapter 7 is in the creditors’ best interests, Trinity Broadcasting Network (TBN), formerly Merit Street’s largest shareholder, has requested the filing be dismissed. Merit Street recently filed a lawsuit alleging that TBN left the network over $100 million in debt, forcing it into bankruptcy.
Chapter 7 bankruptcy involves selling off a company’s assets, while other types allow for reorganization and continued operations. Less than two weeks after Merit Street filed for bankruptcy, Dr. Phil announced the launch of Envoy Media, a new media startup that mirrors the “anti-woke” approach of Merit Street. In a press release, Envoy Media stated it would include live, balanced news, original entertainment programming, and immersive viewer experiences, featuring shows by McGraw and Steve Harvey.
PBR contends that Merit Street and Peteski Productions are avoiding discovery to quickly get financing approved. According to PBR, Dr. Phil orchestrated the Chapter 11 filing to evade litigation over unpaid fees and transfer assets to Envoy Media. This is seen as an attempt to potentially avoid liability for any additional estate claims by rushing through the process.
In its motion, PBR notes that it has served dozens of document requests to Merit Street and Peteski in recent weeks to determine if the case was filed in bad faith, but has only received a fraction of the documents. Peteski has not responded to any requests, citing the lack of a protective order. Therefore, PBR is asking the court to compel the debtor and Peteski to immediately produce any withheld discovery, stating that it is necessary to establish whether the bankruptcy filing serves the best interest of all parties involved.
Sarah Foss, head of legal for Debtwire, told The Independent, “We haven’t yet heard Merit Street’s response to these allegations or to the pending motion to convert the case to a Chapter 7 liquidation or dismiss the case entirely.” She added that if the case is converted to Chapter 7, Merit Street will no longer be in control of the company’s business and assets, and a Chapter 7 trustee will take over, potentially bringing additional litigation against Dr. Phil.
Merit Street had initially omitted PBR from its list of 30 largest creditors, despite the chief restructuring officer admitting in court filings that the litigation from PBR over unpaid fees was a key reason for pursuing bankruptcy. While PBR CEO Sean Gleason was later appointed to the official committee of unsecured creditors, the most recent statement from the group shows that the committee has now dropped to just two members, according to an amended notice filed by the U.S. Trustee’s office.
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