Gawker Media LLC, the online publisher ordered by a U.S. court to pay former professional wrestler Hulk Hogan $140 million over the publication of a sex tape, filed for Chapter 11 bankruptcy on Friday and plans to sell itself at auction.
The move will intensify public debate in the United States over the role of big money in media lawsuits. Billionaire investor Peter Thiel, an early backer of Facebook and a co-founder of PayPal had bankrolled Hogan's lawsuit.
Media company Ziff Davis LLC already has an agreement to buy Gawker for a little less than $100 million, according to people familiar with the matter. However, a bankruptcy auction will ensue, likely at the end of July. If no other bidders step up with better offers, Ziff Davis will become Gawker's new owner.
"There's a tremendous fit between the two organizations, from brands to audience to monetization," said a spokesman for Ziff Davis. "We look forward to the possibility of adding these great brands — and the talented people who support them — to the Ziff Davis family."
Nick Denton, the founder of Gawker, said in a prepared statement that he was "encouraged" by the agreement from Ziff Davis.
Gawker has vowed to appeal the verdict in the Hogan lawsuit. In a post-trial hearing in St. Petersburg, Florida on Friday, a judge allowed Gawker to postpone having to pay the $140 million judgment. But the judge required that Denton and fellow defendant A.J. Daulerio, the site's former editor-in-chief, put up their shares as collateral for the postponement.
Denton has 45 million shares, representing about a 30 percent stake in the company, said Michael Berry, an attorney for Gawker. He had to sell shares to fund legal expenses to fight Hogan's lawsuit, Berry said.
Daulerio put up 5,900 shares, Berry said.
"They are willing to put their money where their mouth is," Berry said.
Another hearing in the case is scheduled for July 6.
Gawker lists Hogan, whose real name is Terry Bollea, as its largest creditor in the bankruptcy filing.
Gawker filed a separate lawsuit in bankruptcy court on Friday asking the judge to stop the legal actions against Gawker and Denton while the company reorganizes in bankruptcy.
The lawsuit states that Denton could be forced to file for personal bankruptcy himself, preventing him from running Gawker and executing a sale.
If it wins the Gawker auction, Ziff Davis, whose gaming and consumer technology websites include AskMen, Computer Shopper and Geek.com, would significantly expand its internet portfolio, gaining websites such as Gizmodo, Lifehacker, Kotaku, Jalopnik, Deadspin and Jezebel.
In March, a six-person jury awarded $60 million to Hogan, 62, for emotional distress and $55 million for economic damages, after Gawker published in 2012 a one minute, 41-second edited video clip featuring him having sex with the wife of his then-best friend, the radio shock jock Bubba the Love Sponge Clem.
The jury then slapped another $25 million in punitive damages on Denton.
"We have every intention to continue to pursue our judgment against Gawker and to hold them accountable for violating Mr. Bollea's privacy whether it be in the bankruptcy court or any other court," David Houston, an attorney for Hogan, said in a statement on Friday.
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