Dr. Phil Loses Major Ruling in Bankruptcy Case

Dr. Phil’s media company is being forced to liquidate. Per Entertainment Weekly, the famed talk show host cannot keep the bankruptcy of his media startup Merit Street Media in Chapter 11 bankruptcy, per a Texas judge’s recent ruling. 

Now, the company will move forward as a Chapter 7 liquidation, and a trustee will oversee both the sale of Merit Street Media’s media library and litigation over whether Trinity Broadcasting breached its contract with the company, which ultimately led the company to bankruptcy court. 

Merit Street was established by Peteski Productions, Dr. Phil McGraw’s production company, and Christian broadcast company Trinity Broadcasting Network. The company filed for Chapter 11 in July, citing financial problems and alleging that TBN had reneged on more than $100 million of financial responsibilities. TBN countersued.

During proceedings, it was uncovered that Dr. Phil deleted a text message that was part of discovery in the case, which reflected negatively on his part for the case. “Mr. McGraw’s actions violated not only the discovery order…but also a broader principle that the debtors, board members, or de facto officers or agents should not destroy property of the estate to help them in pending litigation,” the judge said.

Under the guide of a Chapter 7 trustee, “creditors can have faith that the process will play out fairly and neutrally,” the judge noted. “Dismissal, on the other hand, would allow Mr. McGraw to pay his favored creditors and not pay his unfavored creditors, as his own deleted text makes clear he wants to do. Dismissal would also allow the debtor or friendly creditors to file another bankruptcy case in a different jurisdiction to try to get different rulings that favor Mr. McGraw and his interests, including on the pending sanctions motion that I’ve yet to rule on,” he added.

The judge also believes Chapter 7 is in the best interests of the creditors in the estate. Dr. Phil’s attorney plans to appeal the ruling.