Gawker Media LLC plans to set aside at least $5.5 million from the sale of its websites to fund a continuing legal battle with former professional wrestler Hulk Hogan, a feud the company says it intends to win.
In court papers filed Friday in Manhattan, Gawker asked a bankruptcy judge to approve an outline of a liquidation plan that would wind down what remains of the former internet publisher.
The plan includes funding for an appeal of a $130 million judgment owed to Terry Bollea, Hulk Hogan’s real name. The judgment forced the company and its founder into bankruptcy earlier this year.
“Gawker Media believes that the Bollea judgment will be reversed or, at a minimum, substantially reduced on appeal,” lawyers for Gawker said in court papers filed Friday.
In court papers, Gawker says that it is protected by the First Amendment and points to the fact that Mr. Bollea lost when he initially sued Gawker in federal court.
A spokeswoman for Mr. Bollea declined to comment Monday.
Earlier this year, a Florida jury awarded Mr. Bollea $115 million plus another $15 million in punitive damages stemming from a sex tape Gawker published in 2012. Gawker and its founder, Nick Denton, along with former Gawker editor A.J. Daulerio are jointly liable for the $115 million portion of the judgment.
Mr. Denton, a British-born journalist who founded Gawker out of his apartment in 2002, was found to be personally liable for an additional $10 million and filed for personal bankruptcy in August.
Attempts to settle the lawsuit and the bankruptcy are continuing but haven’t been fruitful, court papers show. In a recent podcast with “Longform,” Mr. Daulerio said he rejected a settlement offer from Mr. Bollea’s lawyers, calling it “atrocious.”
“I am not settling,” he said. “In the meantime, I will be hassled for the $115 million that I have to pay back until the appeals process reverses it.”
Since filing for bankruptcy, Gawker sold off most of its assets to a unit of Univision Communications Inc., which renamed them Gizmodo Media Group. The $135 million salenudged Gawker’s editorial operations out the reach of the defamation lawsuits brought by Mr. Bollea and others.
The corporate shell left behind in bankruptcy, which is still called Gawker Media, must repay its debts and resolve continuing litigation. Court papers show gawker.com, the embattled site that published Mr. Bollea’s sex tape, wasn’t included in the Univision deal and is still up for sale to raise additional money for creditors.
Under Gawker’s proposed bankruptcy plan, none of its unsecured creditors will be repaid until the legal battle with Mr. Bollea is resolved.
Silicon Valley billionaire and investor Peter Thiel, who was outed as gay in 2007 by a Gawker site, has acknowledged financing Mr. Bollea’s legal campaign, which shows no signs of relenting.
Last week, lawyers representing Mr. Bollea and other Gawker Media creditors asked Judge Stuart Bernstein, who is overseeing both Gawker’s and Mr. Denton’s bankruptcies, to authorize a probe into transactions conducted by the online-media company before its bankruptcy filing in June. A hearing is slated for later this month.
Gawker’s request for approval of its debt-repayment blueprint represents a significant step forward in chapter 11. If approved, the plan would be sent out to the company’s creditors, who are entitled to an up-or-down vote.
Gawker’s plan says votes would be due Dec. 5, and the company would return to court shortly after, on Dec. 13, to ask for final approval of the plan.