Dr. Phil's media company ordered to liquidate in bankruptcy case

DALLAS - A federal bankruptcy judge on Tuesday converted Merit Street Media's Chapter 11 bankruptcy to a Chapter 7 case after arguments to either dismiss or convert the bankruptcy.

Judge Scott Everett called the case an "anomaly" saying it arrived in court in "complete liquidation mode."

What they're saying:

"Before bankruptcy, after wresting control of the company away from TBN, Phil McGraw decided to pull the plug on the financially distressed Merritt Street and move the business to a new company," Everett said. "The debtor fired nearly all its employees on the first day of the case and immediately sued Trinity. All that's left is litigation, and the sale of a media library, and not much else."

Television psychologist Dr. Phil McGraw launched Merit Street Media in April 2024, after ending his two-decade run of Dr. Phil on CBS. The company filed for bankruptcy in July.

Merit Street proceeded to fire nearly all of its employees. McGraw's production company Peteski Productions agreed to pay the former Merit Street employees a month later, according to FOX News.

McGraw launched Envoy Media, which would deliver essentially the same content as Merit Street, the day prior to filing for bankruptcy.

What they're saying:

"There never has been even a pretense of a rehabilitation or reorganization," Everett said.

Everett pointed to messages sent by McGraw that he was looking to get rid of Trinity Broadcasting and become the sole board member of Merit Street in what McGraw called a "gangster move."

The judge's decision also affects the Professional Bull Rider's Association, who signed an agreement with Merit Street for distribution.

PBR joined Trinity Broadcasting in objecting to the bankruptcy filing by claiming Merit Street filed for bankruptcy to avoid legal trouble from going back on a deal to air the league's programming. PBR pulled their programming from the network after saying they were never paid. They claim Merit Street owes them $181 million.

Text messages between McGraw and investor Jamie Ribbon appear to show Ribbon giving McGraw advice on how to gain controlling interest in Merit Street from Trinity Broadcasting.

"Again, this is Mr. Ribbon giving Mr. McGraw specific messaging points, praising TBN and Mr. Crouch's parents and persuading TBN to do the stock swap, all while knowing that Mr. McGraw was working on the project of getting rid of TBN," Everett said.

Everett said in a text exchange the night before McGraw filed for bankruptcy, McGraw told Ribbon that he intended to file a lawsuit against Trinity Broadcasting and that the bankruptcy filing would erase the claim PBR made against them and clear the distribution debt from Trinity Broadcasting.

McGraw later claimed that Ribbon's investment would be returned regardless of how the court ruled in the bankruptcy case. A text exchange about the agreement was later deleted from McGraw's phone and found during discovery.

What they're saying:

"At this point, and notwithstanding, able council for the parties, the Chapter 11 case is a broken, three-legged stool," Everett said. "The first leg is Mr. McGraw, who deletes unfavorable text messages he doesn't want me to see, who vows to pay favored creditors no matter what the court does, and who vow to wipe out unfavored creditors."

"The second leg is Mister Broadbent, who worked for Mr. McGrath's newly created company after the petition date without pushing back. And who didn't give me honest and direct answers to direct, simple questions," Everett said. "And the third leg is a creditors' committee, half composed of the Ribbons, who enjoy a favorable payment guarantee from either Mr. McGraw or the debtor, no matter what the court does, and who enjoy the right, under the proposed plan, to supervise litigation."

McGraw's attorneys indicated they would file a stay of the court's decision.

"We are filing an immediate appeal. We take great exception to the court’s improper assertions regarding the alleged destruction of evidence, which simply did not happen. We will not let this stand given all that Dr. Phil and Peteski Productions have done to protect Merit Street employees, distributors, and other interested parties and to resolve this unfortunate situation," a Peteski spokesperson said. "Today’s ruling found that Dr. Phil became the sole director of Merit Street long after the company became overwhelmed by debt thanks to Trinity Broadcasting’s mismanagement.  Dr. Phil is proud of his efforts to help Merit Street through this process but is also pleased that he can now devote his time and energy to his new network, Envoy."

In a statement, PBR praised the court's decision.

"Dr. Phil’s Merit Street Media reneged on its agreement with PBR after just five months for no valid reason, and then Dr. Phil attempted to skirt obligations a second time through a bankruptcy scheme the court called an ‘anomaly,’ a PBR spokesperson said. "We’re grateful they did not allow it. We look forward to continuing this process, which thanks to today’s ruling, will be overseen by an impartial trustee, to recover what we’re owed by Dr. Phil and his company."  

Dr. Phil's media company files for bankruptcy

Merit Street Media filed for bankruptcy in July while simultaneously filing a breach of contract lawsuit against business partner, Trinity Broadcasting Group.

McGraw agreed to provide Merit Street with new episodes of the "Dr. Phil Show," specials and other content, while Trinity Broadcasting contributed distribution and production services, according to the lawsuit.

Merit Street accused the Christian broadcasting company of saddling Merit Street with unsustainable debt and "doing so either without notice or in direct violation of promises not to do so."

What they're saying:

"This lawsuit arises out of a sad but oft told story: one side lived up to its commitments but the other, the Defendant [Trinity], did not. Moreover, these failures by [Trinity] were neither unintended nor inadvertent. 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," the complaint, filed in conjunction with the Chapter 11 bankruptcy filing in U.S. Bankruptcy Court for the Northern District of Texas, stated.

The bankruptcy filing lists both estimated assets and liabilities in the $100–$500 million range. Merit Street is seeking damages, legal costs, and "further relief as the Court may deem just and proper."

Trinity Broadcasting filed a countersuit that claimed McGraw's production company, Peteski, executed a scheme to defraud Trinity Broadcasting and "creating a false sense of urgency" when McGraw approached them to start a new network.

Editor's note: The headline of this story has been adjusted to clarify that Dr. Phil was not a party in the case.