A federal judge has ordered the bankruptcy of Dr. Phil McGraw’s failed television network business, Merritt Street Media, to be changed to Chapter 7 liquidation, saying it will benefit creditors including Trinity Broadcasting Network and Professional Bull Riders.
Merritt Street was founded as a joint venture between TBN, a nonprofit Christian broadcaster, and McGraw’s Petesky Productions. Merritt filed for Chapter 11 bankruptcy protection on July 2, 2025 due to financial difficulties. At the same time, Merritt Street sued TBN, alleging breach of contract and alleging that TBN “abused its position as controlling shareholder.” TBN subsequently countersued McGraw for alleged fraud.
Judge Scott W. Everett of the U.S. Bankruptcy Court for the Northern District of Texas said in a hearing Tuesday announcing the ruling that through a Chapter 7 liquidation, creditors can “trust” that the trustee will be fair and impartial in selling the Merritt Street assets. Everett said that would be preferable to dismissing the Chapter 11 case, which would result in McGraw paying “favored creditors,” meaning TBN and PBR, rather than “adverse creditors.” He also said a Chapter 7 would provide a better outcome for creditors than the appointment of a Chapter 11 examiner or a Chapter 11 trustee.
Everett said he has “never seen” a case like Merritt Street Media. The bankrupt company was controlled by a party (i.e., McGraw) who hired several of the former company’s remaining employees and formed a new company (Envoy Media) that planned to acquire the debtor’s remaining assets. McGraw’s Petesky Productions was a creditor proposed as a debtor in Merritt Street’s bankruptcy filing. Mr. McGraw had been named Merritt’s sole director.
“Mr. McGraw believed he was in charge,” Everett said.
In his opening comments discussing the case, Mr. Everett said, “This Chapter 11 lawsuit is unusual,” adding that his view was that Merritt Street’s business, which was “completely dead” at the time of the bankruptcy filing, “never made any pretense of being revived or reorganized.” In Chapter 7 bankruptcy, a company is dissolved and its assets are sold to repay creditors.
Court documents said McGraw was working as a partner at Merritt Street to “eliminate TBN” and was carrying out a “gang move” to make TBN a non-controlling shareholder in the company. McGraw formed a new company, Envoy Media, after filing for Chapter 11 bankruptcy on Merritt Street. According to evidence presented in court, he said the bankruptcy would “wipe out” claims against Merit by TBN and former content licensor PBR.
TBN also filed a motion imposing sanctions on Petesky for failing to provide requested documents. In his ruling, Everett found that McGraw deleted “unscrupulous” text messages in which he described his strategy to “wipe out” TBN and PBR’s claims through Merritt Street bankruptcy. Everett said McGraw apparently did it to avoid being presented at trial and violated the judge’s order.
In a statement to Variety, a spokesperson for McGraw’s Petesky Productions said, “We are immediately appealing. We take exception to the court’s unreasonable claim regarding the motion to destroy evidence, which did not occur. Dr. Phil and Petesky Productions “Given all that the company has done to protect Merritt Street’s employees, distributors, and other stakeholders, and to resolve this unfortunate situation, we will not let this stand. Today’s ruling confirms that Dr. Phil is now the company’s sole director.” Long after Trinity Broadcasting’s mismanagement left Merritt Street insolvent, Dr. Phil is proud of his efforts to support Merritt Street through this process and is now happy to be able to devote his time and energy to his new network, Envoy. ”
Mr. Everett was ruling on a motion filed by TBN and related party TCT Department seeking an emergency order: Dismiss Merit’s Chapter 11 lawsuit. Change it to Chapter 7 liquidation. or appoint a Chapter 11 receiver to oversee Merritt’s reorganization. Additionally, PBR, which has a $181 million claim against Merritt Street, filed a partial agreement in support of TBN and TCT’s motion. PBR is owned by TKO Group, the parent company of WWE and UFC. The company had signed a deal to license the bull riding program to Merit TV in mid-2024. PBR terminated its contract with Merit in November 2024 due to non-payment by Merit.
TBN General Counsel John Casoria said in a statement: “TBN appreciates the court’s time and effort to hear the facts, get the truth, and provide a detailed account of what happened. TBN looks forward to bringing this matter to a close with a Chapter 7 trustee at the helm.”
“Dr. Phil’s Merritt Street Media terminated its contract with PBR without just cause after just five months, and Dr. Phil then attempted to avoid the obligation a second time through a bankruptcy plan that the court called ‘extraordinary’,” PBR said in a statement Tuesday. I’m glad they didn’t allow that. Thanks to today’s ruling, we look forward to continuing this process, overseen by an impartial trustee, and recovering what Dr. Phil and his company are owed. ”
Mr. Everett noted that Mr. Petesky agreed to dismiss Merritt Street’s Chapter 11 bankruptcy. The judge assumed this was because Mr. Petesky and Mr. McGraw wanted to refile for bankruptcy in another jurisdiction.
TBN also filed a counterclaim against Dr. Phil, alleging that he “absconded” from the Christian Broadcasting Company and engaged in a scheme to “enrich” himself and “his associates and associates.” The lawsuit seeks unspecified monetary damages.
After gaining fame as a guest on Oprah Winfrey’s talk show, Dr. Phil launched his own daytime show with support from Winfrey’s Harpo Productions. He officially launched Merit Street Media in April 2024, claiming at launch to reach more than 80 million households with a programming lineup centered around the “Dr. Phil Primetime” talk show.
According to TBN, McGraw was looking to sign a deal with Trinity as a possible production and distribution partner for “The Dr. Phil Show” in 2022, replacing CBS. On January 10, 2023, TBN entered into a binding letter of intent with Petesky to form Merit Street Media. Under the agreement, Merritt Street will be owned 70% by TBN and 30% by Petesky.
However, according to TBN, Petesky falsely told Trinity that “CBS was selling out its ad inventory for ‘The Dr. Phil Show'” and that the new show McGraw would produce for TBN would be a 90-minute show instead of the then-current 60-minute show in order to increase overall ad revenue through a longer show format. Additionally, Petesky told TBN that the then-$68 million annual production cost for “The Dr. Phil Show” would be reduced by at least 40 percent through cost-cutting measures, including relocating all related production operations from California to Texas, not bringing the show’s current personnel to Texas, and “eliminating unionized employees and benefits and reducing overall headcount.”
However, by June 2024, Petesky and McGraw “had not produced a single 90-minute episode, let alone the 160 episodes required by the (contract), and based on the production schedule, clearly had no intention of producing any ‘new content’ as required by the (contract) during the remaining weeks of the production calendar,” TBN’s lawsuit alleges. Meanwhile, Trinity’s lawsuit alleges that although TBN “has made available its complete library of content” to fill Merritt Street’s 24-hour broadcast schedule as needed, “McGraw and/or management hired at his direction have rejected most of TBN’s programming.” McGraw and Petesky “instead insisted that Merritt Street enter into lucrative distribution deals with McGraw’s friends, including Steve Harvey, Nancy Grace, Chris Harrison, and Lauren Zima,” to the “detriment of TBN (and Merritt Street),” according to the complaint.
In a court filing, Petesky disputed TBN’s claim that McGraw never produced any of the episodes of “Dr. Phil Primetime” promised under the joint venture agreement. Petesky’s attorneys argued that, “From the outset of this bankruptcy case, both companies (TBN and PBR) embarked on a ‘press strategy’ primarily motivated by inflammatory rhetoric that they knew would be picked up by the press, and as expected, it did. The effect of this was not only to insult and defame Petesky and Dr. McGraw, but also to devalue the debtors.”
On August 1, 2024, TBN notified McGraw that it was acceptable to increase Petesky’s ownership share in Merritt Street from 30% to 70% (which would reduce TBN’s ownership share from 70% to 30%), provided the parties addressed “a number of outstanding transaction points,” according to TBN’s lawsuit. But “McGraw never intended to take any action beyond the initial stock exchange,” according to the complaint. “In fact, unbeknownst to TBN, McGraw described his plan on August 3, 2024 as a ‘gang move’ to reduce TBN to more than a ‘reluctant minority investor role’ in Merritt Street,” according to TBN’s lawsuit. (In Mr. Petesky’s Aug. 12 filing in bankruptcy court, Mr. McGraw’s attorney said the “gang move” comment was “made by misrepresenting an email (from Dr. Phil) that was improperly and illegally accessed from a server that TBN hosted for the debtor as part of its contractually obligated services.” The attorney did not provide context for the “gang move” comment.)
Merritt Street’s Chapter 11 filing this summer came as a surprise to TBN because it “still controls two of the three directors on Merritt Street’s board” and had not approved the bankruptcy filing, the station said in its complaint.
The day before Merritt Street filed for bankruptcy, Petesky and McGraw formed a new company, Envoy Media Company, as described in Trinity’s complaint. “At the same time that they were allegedly negotiating with TBN to reorganize Merritt Street, McGraw and Petesky were planning to form a new company, Envoy, to replace Merritt Street,” TBN’s lawsuit states. The day after Merritt Street filed for Chapter 11, all but six of Merritt Street’s remaining employees were fired. Meanwhile, “TBN has reason to believe that former Merritt Street employees and contractors are providing services for Envoy,” the lawsuit alleges.
