Gawker Media

Gawker Media LLC was a Delaware limited liability company at 114 Fifth Avenue in New York City that published seven websites, Gawker, Deadspin, Lifehacker, Gizmodo, Kotaku, Jalopnik and Jezebel, on a publishing platform owned by its Hungarian sister company Kinja Kft. Its parent, Gawker Media Group, Inc., was a Cayman Islands corporation. All three entities filed petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York on June 10 and June 12, 2016, after a Florida jury returned a verdict against Gawker Media in Bollea v. Gawker.¹

Corporate Structure and Finances

William D. Holden of Opportune LLP, the chief restructuring officer, stated in his first-day declaration that the six brands other than Gawker accounted for approximately 85 percent of revenue, that the sites had a global readership above 90 million (approximately 50 million in the United States), and that the company had revenue of approximately $49.9 million in 2015, most of it from advertising. Kinja Kft., at Andrassy ut 66 in Budapest, owned the platform and the intellectual property that Gawker Media licensed, and employed approximately two dozen people in Hungary. The heads of the five departments (sales, technology, editorial, legal and operations) reported to Nick Denton.¹

Denton was the single largest shareholder of Gawker Media Group as of the petition date. The declaration named the other shareholders as US VC Partners LP, a family trust, current and former executives and employees, and other members of the founding team, and referred to a list of equity holders attached to the chapter 11 petition. The company had issued Series A and Series B preferred shares and common shares.¹

Funded debt of approximately $21.2 million consisted of two secured loans. On September 24, 2012, Gawker Media entered a loan and security agreement with Silicon Valley Bank for a term loan of $7,666,666.67 and a letter of credit of $5,302,066.00; about $6,222,222 of the term loan was outstanding at the petition date. On January 21, 2016, Gawker Media Group entered a second lien credit agreement with US VC Partners LP, a Delaware limited partnership, for a term loan of $15,000,000, all of which remained outstanding. Denton executed security, pledge and guaranty agreements for both facilities. Gawker Media also owed Kinja $13 million on two promissory notes dated January 10, 2014 ($8 million) and January 10, 2015 ($5 million), and owed its parent $250,000 on a note dated October 7, 2015.¹ The plan supplement later listed claims on a $200,000 promissory note for funds that Gawker Media Group had lent Denton on June 7, 2016 among the causes of action reserved against him.²

The declaration listed pending suits over published articles with aggregate damages alleged or awarded of more than $250,000,000: Bollea v. Gawker ($140.1 million awarded); Huon v. Denton, No. 11-cv-03054 (N.D. Ill.) (at least $100 million sought); Terrill v. Gawker Media, No. 16-CV-00411 (S.D.N.Y.) (at least $10 million); a defamation suit in Multnomah County, Oregon ($74,000); Ayyadurai v. Gawker Media, No. 16-CV-10853 (D. Mass.) (at least $35 million); and a suit in Fresno County, California. The company maintained nine insurance policies, including errors and omissions and directors and officers coverage, at annual premiums of approximately $342,000.¹ The U.S. Court of Appeals for the Seventh Circuit decided Huon v. Denton, No. 15-3049, on November 14, 2016, in an opinion by Judge Ann Claire Williams. It held the defamation claim over the title and content of the Jezebel article properly dismissed, and reversed the dismissal of the claim over third-party user comments, finding that Meanith Huon had adequately alleged that Gawker employees helped create at least some of the comments, and reinstated his false-light and intentional-infliction claims, which had been dismissed only because the defamation claim failed.³

Valleywag and Peter Thiel

On December 19, 2007, Valleywag, the company's Silicon Valley blog, published an item by Owen Thomas titled "Peter Thiel is totally gay, people."⁴ In an open letter to Peter Thiel published on Gawker on May 26, 2016, Denton quoted Thomas's text as "Peter Thiel, the smartest VC in the world, is gay. More power to him." Denton wrote that Max Levchin had told him in 2007 that Thiel was concerned about the reaction not in Silicon Valley but among investors in his hedge fund from places such as Saudi Arabia, and had warned of the retribution Thiel would exact if a story about his personal life was published.⁵

BuzzFeed News reported in February 2018, citing two sources for the Sicha meeting and quoting Denton, that Thiel met the former Gawker editor Choire Sicha in May 2008, having been introduced by the lawyer Eddie Hayes, that Thiel pledged $250,000 to the Committee to Protect Journalists in late June 2008 (the report quoted the committee's 2008 annual report), and that he met the Gawker editor Ryan Tate in August 2009. The same report stated that Aron D'Souza, an Oxford-educated Australian lawyer whom Thiel's inner circle called "Mr. A," proposed to Thiel in the spring of 2011 that lawyers be hired to sue Gawker, and that D'Souza then acted as a middleman between Thiel and the law firm of Charles Harder. BuzzFeed reported that Harder had no direct contact with Thiel before the 2016 trial, citing earlier Forbes reporting and a source close to a founding partner of the firm. A Thiel spokesperson declined an interview request and D'Souza did not return calls, emails or a message sent by the reporter.⁶

The Hogan Publication and the Florida Litigation

On October 4, 2012, Gawker.com published an item by A.J. Daulerio under the title "Even for a Minute, Watching Hulk Hogan Have Sex in a Canopy Bed is Not Safe for Work but Watch it Anyway," with a video excerpt of one minute and 41 seconds from a recording of Terry Bollea in the bedroom of the radio host Bubba Clem. A 30-minute video had been delivered to Daulerio at Gawker in September 2012. Bollea sued Denton, Daulerio and the Gawker entities in the Sixth Judicial Circuit in Pinellas County, Florida, No. 12012447-CI-011, for invasion of privacy by intrusion upon seclusion, publication of private facts, violation of the Florida common law right of publicity, intentional and negligent infliction of emotional distress, and violation of section 934.10 of the Florida Statutes.⁷ A federal action, Bollea v. Gawker Media, LLC, No. 8:12-cv-02348 (M.D. Fla.), carries a filing date of October 15, 2012 on the CourtListener docket.⁸

Charles Harder, then at the Los Angeles firm of Wolf, Rifkin, Shapiro, Schulman & Rabkin, filed the suit for Bollea in October 2012 and moved his client to a new firm, Harder Mirell & Abrams, formed at the beginning of 2013, according to BuzzFeed News.⁶ Gawker Media and its affiliates, as debtors, asserted in October 2016 that Gawker had disclosed the terms of its insurance coverage during the Bollea case and that Bollea then voluntarily dismissed his claim for negligent infliction of emotional distress, the claim that would have required Gawker's insurer to pay for its defense and any judgment, a sequence the Debtors cited to a May 23, 2016 New York Times report.⁴

On May 19, 2015, Gawker Media and its counsel Gregg Thomas sued the Federal Bureau of Investigation and the Executive Office for United States Attorneys, No. 8:15-cv-01202 (M.D. Fla.), for records under the Freedom of Information Act related to the Bollea suit. The action produced documents, transcripts and audio and video recordings generated or obtained by the FBI during its investigation of an extortion attempt against Bollea; DVDs seized by the FBI of Bollea in the Clem bedroom were held under seal by the state court judge. On October 21, 2015, that court ordered discovery into whether Gawker Media, Denton or Daulerio had given sealed transcripts or recordings to The National Enquirer or Radar Online, which published articles in July and August 2015 describing sealed discovery. Denton, Daulerio and Gawker Media appealed that order to the Florida Second District Court of Appeal (No. 2D15-5035); the appeal was stayed by the bankruptcy.⁷

Trial began on March 1, 2016. On March 18 the jury returned a verdict of liability and compensatory damages of $115 million against Denton, Daulerio and Gawker Media, jointly and severally; on March 21 it awarded punitive damages of $15 million against Gawker Media, $10 million against Denton and $100,000 against Daulerio. The court entered judgment with a permanent injunction on June 7, 2016, and Denton, Daulerio and Gawker Media noticed an appeal on June 10 (No. 2D16-2535).⁷ The bond to stay execution pending appeal was $50 million for each defendant. The Holden declaration stated that the trial court refused to reduce the cash bond or accept stock or other collateral in its place, and that the judgments became available for execution on June 10, 2016.¹

On May 24, 2016, Forbes published a report by Ryan Mac titled "This Silicon Valley Billionaire Has Been Secretly Funding Hulk Hogan's Lawsuits Against Gawker,"⁴ which CNBC summarized as reporting, citing unnamed sources, that Thiel had funded Bollea's litigation.⁹

Chapter 11 and the Sale of the Operating Assets

Gawker Media LLC filed on June 10, 2016, and Gawker Media Group and Kinja Kft. (later styled Gawker Hungary Kft.) on June 12, in No. 16-11700 (SMB) before Judge Stuart M. Bernstein. Holden served as chief restructuring officer and, under the plan confirmed on December 22, 2016, as Plan Administrator.¹⁰ The Plan Administrator for the Debtors was represented by Ropes & Gray.¹¹ On August 1, 2016, Denton filed a personal petition (No. 16-12239), and Bollea began collection proceedings against Daulerio, obtaining an order on August 17, 2016 that transferred to Bollea Daulerio's rights of indemnity against Gawker Media and Gawker Media Group.⁷

At an auction on August 16, 2016, Ziff Davis, LLC opened with a stalking horse bid of $90 million. UniModa, a division of Univision, submitted the highest bid, $135 million in cash plus non-cash consideration. The court approved the sale by order of August 22, 2016, and it closed on September 9, 2016. The buyer excluded the gawker.com content, domain name, trademark and related intellectual property, which remained in the estates.⁷ On September 15, 2016, UniModa, LLC filed a certificate of amendment changing its name to Gizmodo Media Group, LLC.¹²

The Settlements and the Harder Trust Account

The Debtors and Bollea signed a term sheet on October 27, 2016 and a settlement agreement on December 9, 2016. Gawker Media, Gawker Hungary and Gawker Media Group agreed to pay Bollea $31,000,000 within three business days of the effective date, by wire to the Harder Mirell & Abrams LLP Attorney Client Trust Account at City National Bank in Beverly Hills. Bollea's allowed claim for distributions from a "Gawker Media Contingent Proceeds Creditor Account" was set at $84,000,000; the account was to be funded with 45 percent of the net proceeds of any sale of the gawker.com assets and 45 percent of the net proceeds of third-party claims prosecuted by the Plan Administrator.⁷

The agreement barred sale of the gawker.com assets to Denton or any insider without Bollea's written consent and barred new gawker.com content mentioning Bollea, his family or his attorneys while the assets remained unsold. It required removal of the October 4, 2012 post and the delivery and deletion of the 1:41 video, the 30-minute video and all other recordings and transcripts of the Clem bedroom recordings, with deletion confirmed at Bollea's expense by ATX Forensics, LLC. The Debtors undertook to support stipulations and requests directing the FBI, the Tampa Police Department, the United States Attorney's Office, the Hillsborough County State Attorney's Office and the retired Judge James R. Case to deliver or destroy their copies. Punitive damages against Denton and Daulerio were excluded from the settled claims. If the Debtors pursued their pending Rule 2004 motion, paragraph 18 barred them from seeking from Bollea or any third party discovery about Bollea, including discovery about litigation funding or finance.¹⁰

The agreement also described a second Bollea suit, filed May 2, 2016 in Pinellas County (No. 16-002861-CI) against Gawker Media, the talent agency Don Buchwald & Associates, Cox Radio, Keith M. Davidson and his firm Keith M. Davidson & Associates, P.L.C., and five other defendants named in the agreement, for intentional interference with contractual relations and advantageous business relationships and intentional infliction of emotional distress. The agreement stated that the settlement payment was not compensation for the damages Bollea sought from those defendants in that suit.⁷

The plan supplement filed on November 30, 2016 included settlement agreements with Shiva Ayyadurai for $750,000 and with Ashley Terrill for $500,000. Each directs payment to the plaintiff in care of Charles J. Harder, to the same Harder Mirell & Abrams LLP Attorney Client Trust Account at City National Bank, with the same routing number and account number given in the Bollea agreement. The three payments total $32,250,000.² Under the Ayyadurai and Terrill agreements the Gawker entities could seek discovery only of litigation financing agreements and non-privileged Harder retainer agreements relating to those plaintiffs' suits.¹⁰ The court confirmed the plan on December 22, 2016, and it became effective on March 17, 2017.¹⁰¹¹

The Rule 2004 Investigation of Peter Thiel

On October 11, 2016, the Debtors moved under Bankruptcy Rule 2004 for discovery from Thiel, Harder and his firm. The motion asserted that Thiel had reportedly provided more than $10 million for the litigation; that the New York Times of May 26, 2016 had quoted him as saying his course was "less about revenge and more about specific deterrence," as calling the effort "one of my greater philanthropic things that I've done," and as saying he did not "expect to make any money from this. This is not a business venture"; and that Harder's firm represented Bollea, Terrill and Ayyadurai. It added that the plaintiff in Huon v. Denton had told a federal court on June 17, 2015 that he was "getting support from Hulk Hogan's lawyers in California," and that Ayyadurai had told Forbes that "to the best of [his] knowledge" he was not receiving financial support from Thiel.⁴

The motion also recited the timing of demand letters from Harder's firm: one on June 9, 2016 to Gawker Media seeking removal of a story about Donald Trump's hair treatments, sent for one client; four on August 22, 2016 to Univision, the day of the sale order, for four separate clients; one on September 1, 2016 about stories on Ayyadurai; and two on September 7, 2016, two days before closing. It stated that Thiel had published a New York Times opinion piece on August 15, 2016, the day before the auction, saying he would "support [Mr. Bollea] until his final victory."⁴

Thiel and Thiel Capital LLC, represented by Skadden, Arps, Slate, Meagher & Flom,¹⁰ objected on April 18, 2017 that the motion rested on supposition drawn from press reports and was brought to harass, and stated that settlement discussions between Thiel and Denton had been productive.¹³ Harder, represented by Chadbourne & Parke, objected that he was opposing litigation counsel, that the discovery threatened attorney-client privilege and work product, and that the Plan Administrator was invoking Rule 2004 to pressure Thiel; Bollea objected that the settlement agreements limited the discovery.¹⁰ In a memorandum decision of June 28, 2017, Judge Bernstein wrote that "Thiel has acknowledged that he financed the Bollea Litigation," granted the Plan Administrator discovery from Thiel and Harder on Thiel's relationship with Harder and potential causes of action including prima facie tort, held that the objections based on the viability of a prima facie tort claim were premature, and noted that Harder "did not represent Thiel; he represented Bollea, Ayyadurai and Terrill." He denied without prejudice a second request for discovery about Scott Sonnenblick, whom the Debtors had described as hired by an "unidentified Silicon Valley billionaire," presumably Thiel, "in an attempt to purchase Gawker Media in January 2016"; the court found that Thiel's connection was speculative. The decision recorded that the Bollea, Ayyadurai and Terrill settlements limited the discovery obtainable.¹⁰

The order authorizing subpoenas was entered on December 4, 2017, and the Plan Administrator served subpoenas on Thiel, Thiel Capital, Harder and his firm on December 14, 2017.¹¹¹⁴ On January 10, 2018, Thiel submitted a bid for the gawker.com assets. On February 9, 2018, the Thiel parties moved to extend the discovery deadlines, and on February 13 the Harder parties joined that motion, stating that their document production and privilege log would not be completed by the dates in the order.¹¹¹⁴

On April 24, 2018, Thiel, Thiel Capital, the Debtors and the Plan Administrator signed a release agreement. Thiel and Thiel Capital agreed not to pursue or fund actions against any buyer or licensee of the gawker.com assets, or against the Debtors or their current or former employees and contractors over those assets, and not to take part in or fund any participant in the sale process, "except that the Thiel Parties may continue to fund Mr. Bollea." They also agreed not to fund actions to remove the Gawker web archives from the internet. The parties exchanged general releases, the gawker.com assets were to be sold without the claims against the Thiel parties, and the Plan Administrator was to terminate the 2004 investigation and withdraw the subpoenas with prejudice. The Plan Administrator stated that Thiel's participation in an auction might have a chilling effect on bidding.¹¹

Gizmodo Media Group responded on May 10, 2018, through Williams & Connolly, that it did not oppose a resolution but that the covenant covered only the gawker.com assets, leaving the Thiel parties free to fund claims against Gizmodo Media Group and against three former Gawker writers and contractors over articles published before the September 9, 2016 closing, litigation it described as pending.¹² Judge Bernstein approved the release agreement on May 17, 2018.¹⁵

Denton's Bankruptcy and Settlement with Bollea

On October 24, 2016, Bollea filed a complaint in Denton's personal bankruptcy seeking a determination that the judgment against him was not dischargeable (No. 16-ap-01248).⁷ Fortune reported on March 23, 2017 that a settlement filed the previous Wednesday provided for Bollea to drop the $10 million punitive damages claim against Denton, on condition that the deal would be off if Denton turned out to have been involved in the leak of recordings to The National Enquirer and Radar Online, which Denton had sworn he was not. According to the report, Denton represented that he held no copies of the original tape, agreed not to ask anyone tied to Bollea about "litigation financing," and was poised to emerge with $15.4 million based on court documents listing the value of his share of Gawker Media. Fortune quoted Denton telling the New York Post: "As far as I'm concerned, my decade-long involvement with Peter Thiel is over. Other journalists can pick up that particular chalice."¹⁶

The gawker.com Assets After the Estate

At an auction on July 12, 2018 at the New York offices of Ropes & Gray, Bryan Goldberg of Bustle Digital Group bought the gawker.com assets; Reuters reported the price as $1.35 million.¹⁷ Bustle Digital Group relaunched Gawker in July 2021 with Leah Finnegan, who had worked at the original Gawker, as editor in chief. In February 2023, the company announced that it was suspending operations of Gawker, with Goldberg writing in a staff memo that "we have to prioritize our better-monetized sites."¹⁸