to Be Liquidated After Being Excluded From Univision Sale

Nick Denton -Getty-H 2016
Gustavo Caballero/Getty Images for Showtime

If there's to ever be a rebirth for, it won't happen through Univision.

On Friday, it was revealed in bankruptcy papers that the sale of various Gawker Media properties to Univision for $135 million didn't include the domain name and content of the company's flagship website. The debtors are now seeking confirmation for a liquidation plan that includes the sale of upon the expiration of a non-compete with Univision.

Hundreds of pages have been filed in connection with this liquidation plan, which contemplates how to distribute the Univision money plus other lingering assets. The plan is not only complicated by an ongoing court dispute with Hulk Hogan (aka Terry Bollea), who got a $130 million judgment against the company and may have to survive an appeal to collect; there's also the relationship between the company and its officers as well as between Gawker Media and Gawker Hungary, a foreign affiliate that owned the proprietary publishing and discussion software that Gawker used. Further, Gawker Media has been the recipient of multimillion-dollar bank loans that have allowed operations to continue during trying times. Those financiers have secured claims as well.

The debtors are now trying to navigate this morass with description of how the estate is going to be liquidated.

A bankruptcy judge will need to confirm the plan after creditors vote, and before that happens, there's talk in the debtors' papers of favorable appellate decisions during the pre-trial stages of Hogan's invasion-of-privacy suit over a publishing of his sex tape.

"Although there is a judgment against Gawker Media, the Bollea Judgment, that state law judgment is not merely subject to an appeal of factual findings in that case," states the liquidation papers. "Instead, the Bollea Judgment is in the unusual posture of being based on a ruling that Gawker Media publication was not speech protected under the First Amendment, when two other courts ... have already ... ruled against the plaintiff on that same key legal issue. Consequently, a similar appellate ruling on that same legal issue would likely result in a reversal of the Bollea judgment, or at least a significant reduction of that judgment ... [T]he bankruptcy court can take into account the particular posture of the case solely in connection with weighting the fairness of the Plan Settlements."

The so-called centerpiece of the liquidation plan involves resolving intercompany disputes that Gawker Media estimates could cost $9 million to 12 million litigating.

Among the biggest potential conflicts is how much Gawker Hungary obtains from the Univision sale. The papers describe how much has been allocated to the foreign subsidiary.

"These economic agreements that Gawker Media and Gawker Hungary arrived at reflect an approximate allocation of the value of assets of two-thirds of the value attributable to Gawker Hungary assets, and one-third of the value attributable to Gawker Media assets," states the liquidation papers. "The Debtors believe that this allocation continues to reflect the relative value attributable to Gawker Hungary, on the one hand, and Gawker Media, on the other, as of the closing of the Unimoda Sale. The six major brands sold to Unimoda (Jalopnik, Jezebel, Deadspin, Lifehacker, Gizmodo and Kotaku) reflect the value of the URLs, trademarks, brands and other intangible assets that Gawker Hungary owns."

The Committee of Unsecured Creditors, comprised of Hogan and others who have asserted claims over Gawker Media articles, has recently retained foreign lawyers and has pushed for discovery to investigate how money has flowed at the company. Even if Hogan prevails in upholding the judgment at an appeals court, he may need to argue that Gawker Hungary is an "alter ego" of Gawker Media in order to fully collect on a Florida court's judgment.

The liquidation plan also speaks of more controversy potentially beckoning including the possibility that Nick Denton and other officers at Gawker could face claims of breaching fiduciary duties. The Committee appears to have suggested such claims exist, but the debtors say it hasn't been spelled out. An investigation is underway, according to the papers, and Gawker is proposing contributing $2 million for a settlement.

There's no word of the timing of a sale of to increase the amount of money in the debtors' coffers for distribution. The terms of the Univision non-compete are unclear, though it's known that Denton made a two-year non-compete with the company. In announcing the Univision sale, Denton told staffers that he had tried to sell with no luck. Depending on how the appeal goes, there could be more interest down the line.