Gawker Media, which went into Chapter 11 to avoid paying a $140 million invasion-of-privacy verdict to Hulk Hogan, can’t extend the bankruptcy court’s 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 Hogan’s 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. “It’s been a drain on the company’s energy and financial resources.”
Denton told the judge he would file for personal bankruptcy if he didn’t 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.
Denton testified Tuesday that a personal bankruptcy could disrupt Gawker’s 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.
“I’m 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, Gawker’s president and general counsel, Heather Dietrick, told the court.
“He knows the industry better than anyone in the company,” she said.
Gawker’s lawyers argued that if Denton is forced into personal bankruptcy, he wouldn’t 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 interests are also at stake, Gawker’s lawyers had argued in court papers.
Exclusive insights on technology around the world.
Get Fully Charged, from Bloomberg Technology.
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 he’s gay and called Gawker’s 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 can’t 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.
Hogan’s lawyers argued against the relief, saying Denton isn’t running day-to-day operations at Gawker and isn’t 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.”
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 I’ve said, Peter Thiel’s 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 Media’s 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).