Gawker Media has taken the first steps toward cementing its $31 million settlement with ex-professional wrestler Hulk Hogan after a bankruptcy judge gave the defunct media company permission to solicit votes on its liquidation plan.
Judge Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the debtor's disclosure statement outlining the plan at a Thursday hearing. Gawker's settlement with Hogan, born Terry Gene Bollea, would not become official until after its creditors voted to accept the plan and Bernstein granted final approval at a confirmation hearing scheduled for Dec. 13.
Gawker revealed it had settled with Hogan when it updated its disclosure statement on Wednesday. He forced the company into bankruptcy on June 10 after winning a $140 million judgment against it in March in a Florida state court on an invasion of privacy lawsuit. Gawker.com had published a portion of a sex tape of Hogan having sex with Heather Clem, the wife of radio host Todd "Bubba the Love Sponge" Clem and refused to remove the video.
Under the settlement, Hogan would receive $31 million in cash and a pro rata share of any proceeds generated from the sale of the now-shuttered Gawker.com domain. Hogan also would waive certain claims against Gawker Media founder Nick Denton and A.J. Daulerio, the author of the story that contained the video, Gawker counsel Gregg M. Galardi of Ropes & Gray said at Thursday's hearing.
"Some people will say we're paying Mr. Bollea too much," Galardi said. "Mr. Bollea has told us we're paying him too little."
"It's a good settlement," Bernstein joked in response. "Nobody's happy."
Hogan's suit against Gawker was financed surreptitiously by Peter Thiel, a billionaire entrepreneur whom Gawker.com outed as gay in 2007. Two other clients of Hogan's Thiel-backed lawyer, Charles Harder of Harder Mirell & Abrams, also stand to gain financially from the settlement.
Freelance writer Ashley Terrill would receive $500,000 in cash. She sued Gawker Media for defamation after Gawker published a story about her allegedly being harassed by one of the co-founders of dating app Tinder in retaliation for her investigation into the company.
Shiva Ayyadurai, a scientist who claims to have invented email, would receive $750,000 in cash. He sued Gawker Media for libel after Gawker wrote a story saying he was not the inventor of the communications platform.
No judgment has been entered in favor of either Terrill or Ayyadurai, who would waive their claims to proceeds from any sale of Gawker.com.
As it stands, Gawker's liquidation plan would pay off all $36 million in unsubordinated, unsecured claims using the remaining proceeds from the debtor's $135 million sale of substantially all its assets to Univision Communications. The projected claims figure does not include any potential unsecured claims from the remaining defamation suits the debtor faces, all of which Gawker disputes.
Univision purchased the entirety of Gawker's blog portfolio, save for its namesake site, after winning an Aug. 16 bankruptcy auction. It placed ex-Gawker.com staffers at websites such as Deadspin and Gizmodo.
Gawker filed for Chapter 11 protection on June 10 after a Florida state court denied its request for a stay of the judgment in favor of Hogan. The website initially had sworn to fight to overturn the ruling before opting to settle.
"Yes, we were confident the appeals court would reduce or eliminate the runaway Florida judgment against Gawker, the writer of the Hogan story and myself personally," Denton said in a post on his personal website. "And we expected to prevail in those other two lawsuits by clients of Charles Harder. ... But all-out legal war with Thiel would have cost too much, and hurt too many people, and there was no end in sight."
Denton filed for Chapter 11 protection on Aug. 1 to protect himself from a $10 million personal liability he faced as part of the Bollea judgment.