A federal judge overseeing the bankruptcy case of Sinclair Broadcast Group’s Diamond Sports business has blocked a deal that would bring Phoenix Suns basketball games to free broadcast television.
Action on a motion filed last week by Diamond Sports, Judge Christopher Lopez agreed that the deal struck between the Phoenix Suns and Gray Television in April violated an earlier contractual agreement between the pro sports team and Diamond Sports.
The contract said Diamond Sports had the rights to enter a competitive bid if the Phoenix Suns solicited an offer from a different party while Diamond Sports still had telecast rights to the games. That contract is still in effect, despite Diamond Sports filing for Chapter 11 bankruptcy in March.
Last month, the owner of the Phoenix Suns announced it had reached a deal with Gray Television to move its regular seasons games to KTVK (Channel 3), a Phoenix-area television station, and the newly-formed Arizona Family Sports and Entertainment Network. The deal also involved the women’s basketball team Phoenix Mercury, and involved a third party that would have created a subscription streaming product for viewers who wanted to watch live games over the Internet.
The deal enraged officials at Diamond Sports, who complained that they were not given advance notice that the Phoenix Suns were soliciting offers from Gray Television and argued that the agreement violated a clause in its contract that gave Diamond Sports right of first refusal.
Diamond Sports ultimately filed a complaint in the same federal court that is overseeing its ongoing Chapter 11 bankruptcy case, arguing that the deal should be blocked based on various contractual violations.
Attorneys for the Phoenix Suns responded by claiming that the deal with Gray Television and the streaming developer Kiswe weren’t exclusive, and that Diamond Sports could still negotiate rights to the games for carriage on Bally Sports Arizona, one of about two dozen regional sports networks operated by Diamond Sports.
Lopez didn’t buy that argument. In a one-page order issued on Wednesday, the judge said the deal between the Phoenix Suns and Gray Television violated a provision of federal bankruptcy law that gives debtors an automatic stay from any collection or forfeiture efforts by their creditors. In doing so, the judge ultimately found that the deal between the Phoenix Suns and Gray Television was an attempt to circumvent that stay.
“The Suns shall continue to perform and comply with their obligations under the [pre-existing] agreement in all respects,” Lopez wrote. “All terms of the replacement offer and/or the replacement agreement that impede on any rights [Diamond Sports] has under the agreement in any way are void.”
Lopez said his order to void the agreement between the Phoenix Suns and Gray Television didn’t apply to Phoenix Mercury games. That agreement, presumably, is still in effect.
The judge said a hearing will be scheduled in the future to determine if the Phoenix Suns and Gray Television owe Diamond Sports any legal fees for the matter.
