Legal Battle Over Merit Street Media’s Bankruptcy
The Professional Bull Riders (PBR) has taken a strong stance against the bankruptcy filing of Dr. Phil McGraw’s Merit Street Media, filing an emergency motion to compel document production. The league claims that the Chapter 11 filing was made in “bad faith” and accuses Dr. Phil of orchestrating the process to avoid legal action while launching a new media venture.
PBR, which claims Merit Street owes it $181 million, argues that Dr. Phil created Envoy Media just one day before Merit Street filed for bankruptcy. This move is seen as an attempt to circumvent potential litigation and transfer assets to the new company. The motion was filed in the U.S. Bankruptcy Court for the Northern District of Texas and reported by Debtwire, an analytics firm.
The court is set to hold a hearing on August 19 to decide whether to convert the bankruptcy to Chapter 7, liquidate assets, dismiss the filing, or approve debtor-in-possession financing. During this time, PBR is pushing for the conversion to Chapter 7, claiming it would be in the best interest of creditors. However, Trinity Broadcasting Network (TBN), formerly Merit Street’s largest shareholder, has requested the filing be dismissed. Merit Street recently filed a lawsuit against TBN, alleging that the network left it with over $100 million in debt.
Chapter 7 bankruptcy involves selling off a company’s assets, whereas 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” focus of Merit Street. In a press release, Envoy Media stated it would include live, balanced news, original entertainment programming, and immersive viewer experiences, along with shows by McGraw and Steve Harvey.
PBR claims that Merit Street and Peteski Productions, the network’s majority equity holder, are stonewalling discovery efforts to avoid scrutiny. According to the motion, Dr. Phil orchestrated the Chapter 11 filing to evade litigation over unpaid fees and quickly transfer assets to Envoy Media. PBR also alleges that this strategy could help Dr. Phil and Peteski avoid liability for additional estate claims by rushing through the process.
In recent weeks, PBR has served dozens of document requests to Merit Street and Peteski, but only a fraction of the documents have been provided. Peteski has not responded, citing the lack of a protective order. As a result, PBR is asking the court to compel immediate production of any withheld discovery. The motion also highlights that the delay tactics from Merit and Peteski have left PBR unprepared to properly question witnesses, including Dr. Phil, who is scheduled for a deposition on August 14.
Sarah Foss, head of legal for Debtwire, noted that the bankruptcy court will rule on these issues during the August 19 hearing. She explained that if the case is converted to Chapter 7, Merit Street will no longer control its business and assets, with a Chapter 7 trustee taking over. This could lead to additional litigation against Dr. Phil. If the case is dismissed, previous litigation would continue as it was before the bankruptcy filing.
Merit Street had initially signed a four-year deal with PBR to air bull riding events on the network. However, PBR pulled its programming in November, citing unpaid fees. Since then, the league has sought $181 million in damages through arbitration, claiming breach of contract and reputational and financial damage.
PBR honored its contract with Merit Street, delivering on every performance metric and bringing over one million viewers to the network. However, Dr. Phil and his company allegedly reneged on the deal just five months into the agreement.
Merit Street initially omitted PBR from its list of 30 largest creditors, despite the fact that the chief restructuring officer admitted in court filings that the PBR litigation was a key reason for the bankruptcy. Although PBR CEO Sean Gleason was later appointed to the official committee of unsecured creditors, the committee has since dropped to just two members, according to an amended notice filed by the U.S. Trustee’s office.