The fraught bankruptcy proceedings for Dr. Phil McGraw’s “anti-woke” Merit Street Media have taken another dramatic turn as his broadcasting partner is suing the company and McGraw for fraud and breach of contract.
The lawsuit filed by the Trinity Broadcasting comes just a month after Merit Street filed for bankruptcy and sued the Christian television network, accusing TBN of “sabotage” because it “reneged on its obligations and abused its position as the controlling shareholder of Merit Street.”
Meanwhile, the countersuit by TBN – which was filed in Texas court Tuesday – comes as Dr. Phil and his production company Peteski attempted to halt the Chapter 11 proceedings for the year-old Merit Street, claiming the legal costs of going bankrupt were too expensive.
The effort to halt the bankruptcy follows the Professional Bull Riders accusing Dr. Phil of engaging in a “bad faith” Chapter 11 filing as the bull-riding league tries to collect on the $181 million it claims is owed to them by Merit Street.
“The response to TBN legitimately and lawfully defending itself from Peteski and McGraw’s bad-faith attacks is to cry foul because they do not like the true facts that they themselves now regretfully put at issue before this Court, revealing McGraw’s true illicit intent and wrongful conduct which he self-described as a ‘gangster move’ and as ‘11th-hour poker,’” TBN and its attorneys state in the complaint.
“TBN now asserts its affirmative claims against Peteski and McGraw related to the years-long fraudulent scheme that they developed and executed to fleece TBN, a not-for-profit corporation, to enrich McGraw, his associates and affiliates,” the lawsuit alleges. “TBN is confident that the truth will set it free, and result in Peteski and McGraw being held accountable for their reprehensible conduct.”
Merit Street has accused TBN of failing to live up to the terms of their agreement, specifically citing the inability to secure national television distribution for the Dr. Phil-led channel.
“These failures by TBN were neither unintended nor inadvertent,” Merit Street alleges in its complaint. “They were a conscious, intentional pattern of choices made with full awareness that the consequence of which was to sabotage and seal the fate of a new but already nationally acclaimed network.”
However, TBN – which at one point owned 70 percent of Merit Street – counters that it was McGraw who created a “false sense of urgency” when he approached the broadcaster about cutting ties with CBS and starting up his own network. All the while, TBN alleges, the MAGA-boosting TV psychologist lied about viewership numbers, advertising revenues, back catalogs and production costs in order to quickly secure a highly lucrative $500 million, 10-year deal from the network.
“Among other things, McGraw falsely represented to TBN that CBS would pay him $75 million per year to renew his contract and TBN must (1) immediately sign some form of binding agreement with Peteski and (2) immediately pay him $20 million as a gesture of good faith to show TBN’s ability to pay and commitment to the deal,” the complaint states. “Anything less, McGraw claimed, would be a ‘deal killer.’ TBN relied on McGraw’s false assurances and proceeded with the requested urgency.”
Dr. Phil, who had hosted a syndicated television show for roughly 20 years at that point, also told Trinity that he “wanted to change networks because of what he perceived to be CBS’s censorship,” explicitly saying: “I don’t want snot nose lawyers telling me what I can and can’t say on TV.”
McGraw also allegedly said that he was looking to move his show from California to Texas, where TBN is located, in order to lower production costs by avoiding California regulations and cutting payroll by ridding himself of union-based employees. At the same time, in order to further entice Trinity into a deal, Dr. Phil represented that he owned the entire 21-year media library for his syndicated show and that TBN would have access to it at no additional cost.
However, according to the complaint, McGraw hired dozens of employees from his previous show despite the agreement to slash production costs. On top of that, TBN alleges, Peteski – which owned the other 30 percent of Merit – failed to make payments on its interest in the company.
While the agreement called for Dr. Phil to produce 160 90-minute episodes of his new primetime show to be aired on Merit Street, TBN claims McGraw never made good on that promise, instead keeping the program in its current hour-long format.
A spokesperson for McGraw, meanwhile, stated that the host recorded 214 new episodes of Dr. Phil Primetime, adding that “to say otherwise is absolutely false.”
Elsewhere in the complaint, Trinity claims that McGraw demanded more money – despite TBN already expending tens of millions of dollars establishing his show on the new network – after the broadcaster asked to use the library content to fill out airtime on Merit Street.
“This, among other things, prompted TBN to press McGraw to live up to his representation that he would contribute the Dr Phil Show library to Merit Street,” the lawsuit states.
“Despite his previous representations, McGraw and his attorneys at Manatt informed TBN for the first time that McGraw would not contribute any old episodes of the Dr. Phil Show to Merit Street for Peteski’s 30% or otherwise,” the complaint continues. “Instead, McGraw brazenly demanded that TBN pay him $100 million to obtain a 50% interest in the media library.”
As for Merit Street’s bankruptcy, which was filed last month, TBN says the Chapter 11 proceedings weren’t approved by its board members while accusing McGraw of plotting to use the bankruptcy to start a new media venture and snag the license for his show.
Meanwhile, the bankruptcy judge presiding over the case said on Tuesday that the Chapter 11 proceedings will continue for now, adding that the court will decide on September 2 whether to dismiss the filing or convert it to a Chapter 7 bankruptcy.
“The judge has initially sided with Trinity Broadcasting Network and Professional Bull Riders, stating that Merit Street is at fault for delaying the case by resisting discovery and it is therefore not going to fund what Trinity and PBR call a “giant litigation war chest” for the company’s professionals,” Sarah Foss, Head of Legal at Debtwire, explained to The Independent.
“The discovery resistance may be tied to reputational concerns from Dr. Phil, and what might be revealed in text messages or emails that come out in the discovery process,” Foss continued, adding: “Notably, the judge overseeing the bankruptcy denied a request from Merit Street’s bankruptcy counsel, Sidley Austin, to withdraw from the case before that hearing, despite being owed $3.7m in unpaid legal fees and a lack of funds to pay the lawyers for their work representing the company at the hearing.”
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