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Peter Thiel helped bring down Gawker by secretly funding litigation by Hulk Hogan over the publishing of a sex tape. Now, in a twist of fate, the administrator of Gawker’s bankrupt assets is considering selling its potential legal claims against Thiel to a third party and arguing in court that Hogan stands to benefit and he should be all for it.
In advance of a bankruptcy hearing on Thursday, the parties are discussing those potential prima facie claims, specifically the ongoing hunt for evidence to support such a lawsuit against the Silicon Valley billionaire.
Just before Thanksgiving, Thiel filed an objection.
On Wednesday, Gregg Galardi, an attorney for the administrator, responded.
“While Thiel complains of the ‘Plan Administrator’s decision to sell the subject claims,’ a cursory review of the source to which Thiel points reveals that no such decision has yet been made, merely considered,” states a reply brief. “The Wall Street Journal article cited in the Thiel Objection quotes the Plan Administrator for the unremarkable fact that the ‘sale of these possible legal claims is being considered to maximize the value of Gawker Media’s remaining assets for the benefit of stakeholders.’”
If such a lawsuit proceeds against Thiel, the administrator has suggested it could yield “millions if not tens of millions of dollars.”
In November 2016, Hogan (aka Terry Bollea) arrived at a settlement agreement with Gawker to resolve his legal battle over the sex tape. The ex-wrestler not only got $31 million, but also a share of distributions from a contingent proceeds creditor account. As such, Hogan theoretically becomes a beneficiary if a third party steps up to buy those Thiel claims. It’s a point that was made at an earlier hearing by U.S. Bankruptcy Court Judge Stuart Bernstein, and it’s now being echoed by the administrator.
“Indeed, it was the potential value of the Thiel Claims that prompted the Court to suggest to Bollea’s counsel that Bollea should ‘be all for’ the Plan Administrator’s request for a Rule 2004 examination,” writes Galardi, referring to the discovery proceeding. “After all, Bollea would receive a large recovery from any proceeds from the Thiel Claims pursuant to the Debtor’s confirmed chapter 11 plan of liquidation.”
Thiel objects not only to the sale of claims against him, but also how he’s being elbowed out of the sales process for Gawker’s remaining assets, which includes the flagship site, Gawker.com. In his pre-Thanksgiving filing, Thiel’s attorney argued that the administrator had lost sight of fiduciary duties.
“By wrongly excluding Mr. Thiel, the most able and logical purchaser, from the sale process on specious grounds, maintaining selective secrecy over that process, and insisting on proceeding with expensive and unwarranted discovery against him concerning alleged claims that are now being marketed to third parties, the Plan Administrator will only depress the value to be achieved in any sale,” stated Thiel’s court papers.
It’s possible that Thiel would like to acquire Gawker.com to rid the site of old articles once and for all, as has been speculated. Or maybe Thiel wants to spend money to buy claims against him and avoid becoming a defendant in a lawsuit.
Regardless of the answer, the administrator defended the process.
Arguing that no contractual or fiduciary duties are owed to Thiel, Galardi also tells the bankruptcy judge, “[T]here is simply nothing wrong or improper about excluding Thiel from the sale process at the present time. Thiel has refused to provide any written indication of interest for the Gawker Assets or the Thiel Claims. Second, the Plan Administrator is pursuing a sale of the Gawker Assets in the manner that, in his business judgment, is most likely to maximize recoveries to the remaining estate beneficiaries. Thiel’s only connection to the Gawker Assets is funding a campaign of litigation against the Debtors premised on his desire to destroy the business forever. So, Thiel’s statement that he is the most ‘able and logical purchaser’ and that he should be treated ‘like any other prospective bidder’ strains credibility, especially in the face of his continued resistance to Court approved discovery regarding the actions he took to destroy the very business he now seeks to own.”
It’s added that Thiel’s participation is more likely to hurt prospective bidding rather than really maximize value.
“Indeed, the Plan Administrator’s concern that Thiel’s involvement in the bidding process may chill bidding stems not only from Thiel’s conduct towards the Debtors prepetition, but also from his attempts to negotiate a release for himself,” writes Galardi, later adding, “Given Thiel’s long history of vindictive conduct against the Debtors and the fact that his interests are plainly adverse to those of the estate while the Thiel Claims are being investigated, the Plan Administrator has legitimate concerns regarding Thiel’s participation in the sale process. The Plan Administrator has therefore sensibly decided not to include Thiel in the confidential portion of the sale process of the Gawker Assets unless and until (i) Thiel makes a bona fide offer to settle the claims, (ii) the Plan Administrator has sufficient information to determine the value of those claims, or (iii) the claims against Thiel are resolved.”
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