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Gawker Media, which went into Chapter 11 to avoid paying a $140 million invasion-of-privacy verdict to Hulk Hogan, cant extend the bankruptcy courts protection to its founder, Nick Denton, likely triggering his own personal bankruptcy.
U.S. Bankruptcy Judge Stuart Bernstein Tuesday denied the request after a hearing in Manhattan. Denton, who started the online news and gossip company in his apartment in 2002, testified about how important he is to the health of the business. He also described the threat he perceives from Peter Thiel, the tech mogul who bankrolled Hogans case.
As has been reported, the Silicon Valley billionaire Peter Thiel has been funding a series of lawsuits against the company intended to deter critical coverage, Denton testified. Its been a drain on the companys energy and financial resources.
Denton told the judge he would file for personal bankruptcy if he didnt get the protection, and that he expected such a proceeding would be expensive given how other cases against Gawker have gone. The media company has already spent $13 million defending the Hogan suit, Denton said.
I expect my own personal bankruptcy will be anything but straightforward, he told the judge.
Disrupt Plan
Denton testified Tuesday that a personal bankruptcy could disrupt Gawkers plan to sell itself in an August auction, in which he would play a role marketing the company. Lead bidder Ziff Davis has agreed to bid $90 million and keep Denton on if it wins the auction.
Im the founder of the company, he said, when asked whether Gawker could survive without him. I founded it out of my apartment and I know where all the bodies are buried.
He testified that 15 parties have signed nondisclosure agreements -- a sign of serious interest -- since the Ziff Davis offer was announced and that he expects active bidding.
Denton is leading the effort to find a buyer, Gawkers president and general counsel, Heather Dietrick, told the court.
He knows the industry better than anyone in the company, she said.
Maximum Bid
Gawkers lawyers argued that if Denton is forced into personal bankruptcy, he wouldnt be able to ensure that the auction raises the maximum amount possible.
But Bernstein said Tuesday that if Denton files bankruptcy to protect himself from more legal attacks, he would still be able to help Gawker reorganize.
Hogan sued Gawker and Denton in Florida after the site published excerpts from a sex tape featuring the former pro wrestler. The jury found for Hogan, prompting Gawker to enter bankruptcy in June.
Public Policy
Public policy interests are also at stake, Gawkers lawyers had argued in court papers.
According to Gawker, Thiel has had it in for the company since 2007, when it outed him as gay. Thiel, who co-founded PayPal, has since publicly acknowledged that hes gay and called Gawkers now-defunct blog Valleywag the Silicon Valley equivalent of al-Qaeda. In a New York Times interview, he described his backing of Hogan and other litigants as a philanthropic way to help those who cant afford to defend themselves against press attacks and intrusions.
Blocking the lawsuits against Denton would temporarily prevent a billionaire with a personal vendetta from using the legal system to further his campaign against the debtors and their employees, Gawker said in a court filing.
Hogans lawyers argued against the relief, saying Denton isnt running day-to-day operations at Gawker and isnt instrumental to the business. They cited the numerous professionals hired to guide the company through bankruptcy while Denton is spending his time blogging, Tweeting, and providing interviews.
Ongoing Campaign
Gawker countered that Denton is working triple duty marketing the business and minimizing the impact of the ongoing campaign to destroy the company and its employees.
For now, Hogan is unable to collect from Gawker because his claims are temporarily halted during bankruptcy. That gives the company time to appeal the verdict while arranging a sale. If Gawker loses on appeal, sale proceeds would go to creditors -- including Hogan.
In a statement after the judge announced his decision, Denton said he remained focused on the sale.
As Ive said, Peter Thiels vendetta against my company may well require me as well as the company to file for bankruptcy protection until the Florida appeals court can rule on the extraordinary $140 million judgment, he said. This story will conclude with Gawker Medias popular brands sheltered under new ownership and the importance of a free and critical press reaffirmed by the courts.
The case is In re Gawker Media LLC, 16-11700, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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