The bad year continues to get worse for digital news company, Gawker Media. On June 10, 2016, Gawker Media filed for Chapter 11 bankruptcy protection. This occurred following a decision to uphold the $140 million award to Hulk Hogan for invasion of privacy. By filing for Chapter 11, the company postpones paying creditors, including awarded court judgments, until the sale of the company. It also gives the company time to reorganize and restructure. It is uncertain whether the founder and CEO of Gawker, Nick Denton, will be protected from personal liability by the filing or if he will forced to file personal bankruptcy to prevent the seizure of his personal assets.
Ziff Davis, the digital publisher of AskMen, PCMag, and Computer Shopper, opened up the bidding for Gawker assets with a $100 million offer, without assuming Gawker’s liabilities. Other companies can bid on the company until June 27. And an auction will be held if necessary on July 29, 2016. A hearing to approve the sale is currently schedule for August 3, 2016.
Gawker will be able to stay open during the bankruptcy proceedings. Cerberus Capital Management L.P. agreed to loan Gawker $22 million. This will allow Gawker to continue paying its employees and vendors. Without the cash, Gawker would have had to liquidate its business.
Hulk Hogan sued Gawker after the site posted a sex video of Hogan and his best friend’s wife. A jury in Florida awarded Hogan $55 million in economic injuries, $65 million in emotional distress, and $25 million in punitive damages. More controversy arose when it came to light that Peter Thiel, billionaire founder of PayPal and Facebook board member, funded Hogan’s lawsuit against Gawker. In 2007, Gawker outed Thiel for being gay in a blog post.
Gawker’s filing triggers more public debate about freedom of speech and the ethics of third-party funded lawsuits. The site known for its “wry tone and take-no-prisoners approach” in deciding to sell is an “acknowledgement that its future as an independent news organization was in doubt.” Even the Attorney General of New York, Eric Schneiderman, discussed the drawbacks of Gawker filing for bankruptcy. On Twitter, Schneiderman wrote “freedom of the press is a cornerstone of our nation. Like them or note, sad to see NYC media giant @Gawker forced to the brink.”