Corporations that publish tabloids and disseminate yellow journalism are vulnerable to incurring one or more massive judgments that may threaten their financial viability. This can happen to a Pennsylvania business or to one in another state, and if the judgment is big enough, bankruptcy protection may be needed. In recent years, yellow journalism has appeared online and the risk of an extreme judgment being entered is a factor for those companies. One such company is Gawker, an online news feed that suffered a $140 million judgment in a defamation lawsuit filed by the professional wrestler, Hulk Hogan.
In a move that is not unusual under the circumstances, Gawker filed a Chapter 11 bankruptcy to try and reorganize for purposes of retiring the massive judgment. When a judgment is recorded and it goes unpaid, the property of the debtor may be sold at the behest of the judgment creditor. The filing of a bankruptcy initiates an automatic stay that at least temporarily holds up the execution on the judgment, and allows the debtor to come up with alternative fund-raising and other potential remedies.
For one thing, the filing of the bankruptcy may give the company a chance to negotiate a settlement with the holder of the judgment. A major twist to the Gawker bankruptcy is that billionaire Peter Thiel has reportedly been funding numerous companies to go after Gawker ever since the publication outed him as gay in 2007. He also funded Hulk Hogan to pursue his defamation suit leading to the judgment.
Another complexity in the case is that Ziff Davis media has agreed to submit a stalking horse bid of $90 million to purchase Gawker at an auction scheduled for later this year. These competing dynamics have led to a statement of guidelines pronounced by the bankruptcy judge so that unfairness does not permeate the process and so that each participant will have equal access to participate in bidding. In Pennsylvania and all other jurisdictions, a complex business bankruptcy must be spearheaded on behalf of the debtor company by an experienced and seasoned business bankruptcy firm.
Source: Bloomberg, “Gawker Can’t Shield Founder From Hulk Hogan Sex-Tape Verdict“, Tiffany Kary and Steven Church, July 19, 2016