A federal bankruptcy judge has temporarily voided the Phoenix Suns’ announced media deal with Gray TV, ruling that it violated the incumbent regional sports channel’s rights under the bankruptcy statute. Diamond Sports, the parent company of Bally Sports Southwest, is in Chapter 11 bankruptcy. Here’s what you need to know:
- On April 28, the Suns announced an agreement between the franchise, local television company Gray and streamer Kiswe. That deal is voided under Bankruptcy Judge Christopher Lopez’s decision, which he read from the bank.
- While Bally Sports Southwest no longer had games to broadcast as part of its deal with the Suns, it had a right of first refusal to fulfill a possible new agreement to which the Suns committed.
- Diamond and the Suns must negotiate whether the bankrupt regional sports company has the right to seek a replacement deal, and Judge Lopez ordered that process to be expedited as the Suns have argued that uncertainty over where their games will be broadcast , could affect their financial prospects next season.
how did we get here
Under the Bankruptcy Act, a debtor’s assets — in this case, Suns’ RSN agreement with Diamond — are frozen or remain pending a reorganization plan. Judge Lopez ruled that this violated the automatic stay, despite the Suns’ argument that they had merely reached a preliminary media agreement.
“What I find is that the Suns are saying one thing outside of this court and another thing inside this court,” Lopez said after a nearly five-hour hearing, with the first two hours consumed by ultimately fruitless settlement talks between the parties.
In court, the Suns and Gray argued that their deal was conditional on a pre-emption resolution. But Lopez noted that such language was not included in the initial communications the Suns sent to Diamond on April 19, and it was only after Diamond protested in a series of letters that the basketball team added a line to the April 28 press release added, in which the media deal was announced. The agreement was subject to the approval of the incumbent regional sports channel.
“There is no real response to (Diamond’s) letters dated April 25 or April 27, instead the Suns are launching a total media blitz about the new deal and praising its benefits,” he said.
Diamond’s attorney, Brian Hermann von Paul, Weiss, argued, using the term “insidious,” that the Suns were essentially trying to trick Diamond with the 19/19 media agreement notification. It had five days from notification to exercise its right of first refusal. It was a line of argument that Judge Lopez agreed with.
“This is undisputed, the Suns have sent Diamond Arizona a letter informing them of what we will call an offer from Gray and Kiswe,” Lopez said. “I would like to note and record that the attached document…does not state that the Agreement gives Diamond, Arizona any rights under the existing Agreement. This language, which we now know, was intentionally left out.”
The Suns argued in newspapers this week that they had not broken the Diamond contract and in any case, RSN would stand little chance of competing as the new Gray/Kiswe deal would limit the team’s potential viewership of 800,000 under Bally Sports would increase to 2.4 million. But in a dispute on Tuesday, Hermann said the rights fee paid by the Suns to Diamond was more than the amount agreed with Gray and that the right of first refusal allowed Bally Sports to match a lesser offer. The Suns countered that the additional free TV exposure would allow the team to charge more for sponsorships.
What’s next?
Either way, the parties, Diamond and the Suns, must enter into a dispute resolution process to settle their differences over whether the incumbent RSN can compete with the annulled Grey/Kisme deal. If the Suns won that verdict, it could revive the media deal now in place.
Judge Lopez denied Diamond’s motion for damages against the Suns but reserved the right to reconsider it. He also ruled that Gray and Kiswe had not broken the bankruptcy law.
Suns and Mercury CEO Josh Bartelstein said in a statement later Wednesday that the teams are “excited to continue to provide our fans with the best possible experience and to make our games accessible to all.” He added that they are “committed to working together to find a fair resolution that is in the best interests” of their fans, community and players.
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(Photo: Kate Frese/NBAE via Getty Images)
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