The Diamond Sports Group is now going on the offensive against its parent company, the Sinclair Broadcast Group.
Per the Baltimore Sun, Diamond is “seeking unspecified monetary damages” in the suit and is alleging misconduct in a variety of ways.
Here are the specific allegations of misconduct from the Sun’s story.
The lawsuit accuses Sinclair of receiving about $1.5 billion as a result of alleged misconduct, including fraudulent transfers of assets, unlawful distributions and payments, breaches of contracts, unjust enrichment and breaches of fiduciary duties.
The transactions being challenged go back to 2019 when Sinclair bought the then-Fox Sports RSNs from Disney. Disney acquired the RSNs in its purchase of Fox’s entertainment assets in 2017 but was forced to divest by the Justice Department in 2018.
Diamond is challenging a series of transactions between Sinclair and Diamond that occurred after Sinclair acquired the former Fox Sports regional sports networks from Disney for $10.6 billion in 2019.
“Diamond Sports Group is seeking to vindicate its rights and protect the value of the Diamond bankruptcy estate, including by recovering value from Sinclair Broadcast Group that was improperly transferred from Diamond prior to its filing for bankruptcy in March 2023,” a spokesperson for Diamond said in a statement.
The complaint alleges that the transactions were unfair to Diamond and designed to benefit Sinclair. They include a management services agreement between the Sinclair Television Group subsidiary and Diamond as well as a transaction in November 2020 in which Bally’s Corp. acquired naming rights to the regional sports networks.
Additional plaintiffs include Sinclair Television, Sinclair executive chairman David Smith, Sinclair CEO Chris Ripley, and Bally’s Corp, who bought the naming rights to the RSNs in 2020.
Per Next TV, Bally’s inclusion related to “how Sinclair has profited from the $100 million Bally naming rights deal with Bally’s Corp. ”
Sinclair denies the allegations.
“The defendants believe the allegations in this lawsuit are without merit and intend to vigorously defend against plaintiffs’ claims,” Sinclair said in a filing with the Securities and Exchange Commission late Friday.
But that’s not Diamond’s only lawsuit! They’re also suing JPMorgan Chase “for recovery of money in a fraudulent transfer.”
The bank was subpoenaed in bankruptcy court last month by Diamond’s attorneys. JPMorgan Chase bought over $1 billion in preferred equity of Diamond Sports when Sinclair bought the RSNs, and many of those shares were bought back following the sale by Sinclair. The final payment of $190 million came three business days before Diamond missed payments to creditors, tripping a 30-day grace period that eventually ended in the Chapter 11 bankruptcy filing.
Next TV has more on that lawsuit.
In February, with Diamond about to enter bankruptcy, Sinclair paid JP Morgan $190.2 million, a transaction that nearly made the investment bank whole on the $1.025 billion in preferred equity units it purchased back in 2019 to help Sinclair buy the Fox-owned RSNs that became Bally Sports.
The plaintiffs contend that even though Sinclair knew the bankruptcy would wipe out all equity in Diamond Sports, including its own, it manipulated the payment schedule so that JPMorgan was nearly made completely whole on its investment.
In a bankruptcy process that has been, to put it mildly, messy, Diamond suing Sinclair has somehow added another layer of grime to the operation. This chaotic series of events doesn’t seem like it has an end in the near future, either.