Judge Blocks Dr. Phil in Merit Street Bankruptcy, Orders Chapter 7 Liquidation

The Legal Battle Over Merit Street Media

A federal judge has ordered the conversion of a bankruptcy proceeding for Dr. Phil McGraw's Merit Street Media into a Chapter 7 liquidation, citing it as the best interest of creditors. This decision marks a significant turn in the ongoing legal battle between Merit Street and its partners, particularly Trinity Broadcasting Network (TBN).

Merit Street was established as a joint venture between TBN, a not-for-profit Christian broadcaster, and Peteski Productions, which is affiliated with Dr. Phil. The network filed for Chapter 11 bankruptcy protection on July 2, 2025, after encountering severe financial difficulties. Shortly thereafter, Merit Street sued TBN, alleging breach of contract and claiming that TBN had abused its position as the controlling shareholder. In response, TBN countersued McGraw, accusing him of fraud.

Why Chapter 7 Liquidation?

Judge Scott W. Everett of the U.S. Bankruptcy Court for the Northern District of Texas emphasized that a Chapter 7 liquidation would provide creditors with confidence that a trustee would manage the sale of Merit Street assets fairly and impartially. This approach, he argued, is preferable to dismissing the Chapter 11 case, which could allow McGraw to prioritize payments to his "favored creditors" over others. Additionally, Judge Everett noted that Chapter 7 would yield better results than appointing an examiner or a Chapter 11 trustee.

The judge described Merit Street's case as unique, highlighting that a bankrupt entity was controlled by a party—McGraw—who hired the few remaining employees and launched a new firm, Envoy Media, which aimed to acquire what remained of the debtor's assets. "Mr. McGraw believed he was calling the shots," Judge Everett stated.

A Complex Web of Allegations

In his initial comments, Judge Everett called the Chapter 11 case an anomaly, stating that there was no pretense of rehabilitation or reorganization of Merit Street's business, which he described as "dead as a doornail" when it filed for bankruptcy. Under Chapter 7, a business is dissolved, and its assets are sold to pay off creditors.

According to court documents, McGraw had expressed plans to remove TBN as a partner in Merit Street, referring to it as a "gangster move" to make TBN a noncontrolling shareholder. He also formed a new company, Envoy Media, after filing for Chapter 11 bankruptcy. McGraw claimed that the bankruptcy would "wipe out" the claims against Merit by TBN and Professional Bull Riders (PBR), according to evidence presented in court.

Sanctions and Misconduct

TBN filed a motion to impose sanctions on Peteski, alleging that they failed to produce requested documents. Judge Everett found that McGraw had deleted an "unflattering" text message in which he described his strategy to "wipe out" TBN and PBR's claims via the Merit Street bankruptcy. McGraw reportedly did so to avoid having it produced in the court proceeding, violating the judge's orders.

A representative for Peteski Productions did not immediately respond to a request for comment on the judge's ruling. The judge was ruling on a motion filed by TBN and related party TCT Ministries seeking an emergency order to dismiss Merit's Chapter 11 case, convert it to a Chapter 7 liquidation, or appoint a Chapter 11 trustee to oversee Merit's reorganization.

Financial Disputes and Contractual Issues

PBR, which has a $181 million claim against Merit Street, filed a partial joinder in support of the TBN and TCT motion. PBR, owned by TKO Group, parent of WWE and UFC, had entered into an agreement with Merit in mid-2024 to license bull-riding programming to Merit TV. However, PBR terminated its agreement with Merit in November 2024 after it was not paid by Merit.

Everett noted that Peteski had agreed to having the Chapter 11 bankruptcy case of Merit Street dismissed. The judge believed this was because Peteski and McGraw wanted to refile for bankruptcy in another jurisdiction.

Allegations of Fraud and Misrepresentation

TBN also filed a counterclaim against Dr. Phil, alleging he engaged in a scheme to "fleece" the Christian broadcasting company and "enrich" himself and "his associates and affiliates." That suit seeks unspecified monetary damages.

Dr. Phil rose to fame as a guest on Oprah Winfrey's talk show before launching his own daytime show with the backing of Winfrey's Harpo Productions. He officially launched Merit Street Media in April 2024, which at launch claimed to reach more than 80 million homes with a programming lineup anchored by the "Dr. Phil Primetime" talk show.

Contractual Disputes and Business Practices

According to TBN, in 2022, McGraw sought to strike a deal with Trinity as a potential network to replace CBS as a producing and distribution partner for the "Dr. Phil Show." On Jan. 10, 2023, TBN entered into a binding letter of intent with Peteski to create Merit Street Media. Under the agreement, Merit Street was owned 70% by TBN and 30% by Peteski.

However, TBN alleged that Peteski misrepresented to Trinity that "CBS was selling out the advertising inventories for the ‘Dr. Phil Show'" and that the new programming McGraw would create for TBN would be 90-minute shows, rather than the then-current 60-minute shows, to increase overall ad revenue through the longer show format.

Ongoing Legal Challenges

By June 2024, however, Peteski and McGraw had not produced a single 90-minute episode, let alone the 160 episodes required by the contract, and based on its production schedules, apparently had no intent to produce the "new content" required under the contract in the remaining weeks on the production calendar, the TBN lawsuit alleged. Meanwhile, despite TBN making its full library of content available to be used to fill Merit Street's 24-hour broadcast schedule as needed, "McGraw and/or the management team hired at McGraw's direction rejected most of the TBN programming," Trinity's suit alleged.

Peteski disputed TBN's claim that McGraw failed to produce any of the promised episodes of "Dr. Phil Primetime" under the JV agreement. Lawyers for Peteski claimed that both TBN and PBR entered into a "press strategy" fueled in large part by incendiary pleadings they knew would be picked up by the media.

New Company Formation and Employee Layoffs

On August 1, 2024, TBN informed McGraw that it would be amenable to increasing Peteski's ownership share in Merit Street from 30% to 70% (thereby decreasing TBN's ownership share from 70% to 30%) subject to the parties addressing "a multitude of outstanding deal points to be finalized," per TBN's lawsuit. But "McGraw never intended to perform any steps beyond the initial stock swap," according to the complaint.

One day before Merit Street filed for bankruptcy, Peteski and McGraw formed a new company, Envoy Media Co., as outlined in Trinity's complaint. During the same time they were allegedly negotiating with TBN to restructure Merit Street, McGraw and Peteski were making plans to create a new company, Envoy, to replace Merit Street, the TBN lawsuit said. The day after Merit Street filed the Chapter 11 case, all but six of the remaining Merit Street employees were laid off; meanwhile, "TBN has reason to believe that former Merit Street employees and contractors are performing services for Envoy," the lawsuit alleged.