Dr. Phil’s Merit Street Media and his wholly-owned company that is also the DIP lender — Peteski Productions have both filed motions seeking a stay pending appeal of Judge Scott Everett’s recent bench ruling finding cause to convert the case to Chapter 7.
In its stay motion, the debtor summarizes that after “months of severe financial distress and “mounting threats of litigation by creditors,” it decided — through its CRO, Gary Broadbent — to file for chapter 11 on 2 July 2025 because “it was in the best interest of Merit Street, its creditors, and other parties in interest.” The debtor further states that after filing bankruptcy, it negotiated a Chapter 11 plan that would provide unsecured creditors with a meaningful recovery that was more than what they could recover in a chapter 7.
The debtor avers that the UCC supported its Chapter 11 plan but two of its creditors — Trinity Broadcasting Network of Texas, Inc. (TBN) and Professional Bull Riders, LLC (PBR) — sought dismissal or conversion of the case and declined to participate in Chapter 11 plan negotiations. On 28 October 2025, the court issued a bench ruling finding cause to convert the case to chapter 7 but delayed entry of the conversion order after the debtor requested the opportunity to seek a stay of pending appeal prior to the appointment of a Chapter 7 trustee.
The debtor and Peteski assert in their motions for stay pending appeal that the following factors weigh in favor of granting a stay:
The debtor’s likelihood of success on the merits
The debtor cites to case law holding that “[w]here, as here, a case presents a serious legal question and the other stay factors weigh in favor of a stay, a stay is warranted if there is ‘substantial merit’ to the movant’s arguments.” The debtor contends that its arguments have “substantial merit,” outlining those arguments as follows:
- Based on the record and existing case law, the “continuing loss” standard does not apply.
- The court’s findings that the CRO was not a neutral fiduciary and failed in his duty of candor to the court “are not supported by the record.”
- “The Court’s conclusion that when [Dr. Phil] allegedly deleted a text message from his personal device, [Dr. Phil] intentionally destroyed estate property while acting in his capacity as a Board member or officer of Merit Street, is erroneous.”
With respect to the court’s finding of “continuing loss” sufficient to constitute cause for conversion, the debtor argues that the mere fact that the debtor’s professional fees exceed its operating revenues does not constitute a continuing loss to the estate, and that the court neglected to consider the fact that the debtor’s litigation claims could result in significant recovery for the estate.
The debtor also contends that the continuing loss prong is irrelevant if the debtor is not operating and “merely holds an intangible asset,” which is the case here where the debtor’s only assets consist of its media library and litigation claims.
Additionally, the debtor cites caselaw holding that the continuing loss argument fails if the debtor has sufficient funding to confirm a plan as is the case here where the debtor has DIP financing which, if approved, would allow it to confirm a plan.
The debtor further argues that the court incorrectly stated that “rehabilitation” under Section 1112(b)(4) requires “a debtor’s ability to restore the viability of its business,” citing case law holding that “rehabilitation… can include a Chapter 11 liquidation plan; otherwise, all Chapter 11 liquidating cases would be subject to dismissal for cause.”
With regard to the court’s finding that the CRO was not neutral because he was “doing [Dr. Phil’s] bidding for Envoy” and “it was not good business judgment for the CRO to ‘work for Envoy,’” the debtor argues that there is no evidence that the CRO worked for Envoy, received compensation from Envoy, or was involved in launching Envoy’s business.
The debtor states that with respect to the email string reflecting that the CRO was being kept apprised of Envoy’s activities, the CRO testified that he believed it was better for him to be kept in the loop about Envoy’s activities so that he could protect the debtor’s interests by, for example, preventing the improper transfer of any property from the debtor to Envoy. The debtor contends that the district court could find that the bankruptcy court erroneously found that this was not a reasonable exercise of the CRO’s business judgment.
The debtor further argues that the CRO had no conflicts in favor of Dr. Phil, asserting that “[he] had no incentive — financial or otherwise — to ‘do his bidding.’” The debtor maintains that the court’s own finding that the debtor was “dead as a door nail” when it filed Chapter 11 supports the debtor’s argument that the CRO decided to file for bankruptcy because it was in the best interest of the debtor and its creditors.
Addressing the court’s finding that the CRO failed in his duty of candor to the court, because the CRO’s answers to the Court’s questions at trial caused the Court to be concerned that the CRO “might be yielding to a demand from [Dr. Phil] to dismiss the case, to protect [Dr. Phil’s] interests, rather than put the bankruptcy estate in the hands of a neutral trustee,” the debtor asserts that that finding was also erroneous because “there is no evidence that [Dr. Phil] demanded that the CRO dismiss this case,” and “[t]o the contrary, the contemporaneous Special Committee minutes prepared by Merit Street’s counsel reflect that the CRO made that decision, with the input of [Dr. Phil] and Merit Street’s professional advisors.”
Specifically addressing the courts’ questioning of the CRO about whether he directly communicated with Dr. Phil about dismissal of the case, the debtor asserts that “[t]he Court appears to have understood the CRO’s answers to mean that there was never a discussion about dismissing the bankruptcy filing in the presence of [Dr. Phil].” However, the debtor maintains that “the CRO made clear in response to the Court’s question that there was, in fact, a Board meeting at which dismissal was discussed,” stating that “[t]here was never any attempt to hide that Board meeting or the topics of discussion that the CRO and others in attendance engaged in,” and pointing to two sets of corporate minutes that the debtor had marked as exhibits before trial, reflecting the CRO’s discussion of dismissal with other attendees present.
Additionally, the debtor avers there was nothing “unusual” about Dr. Phil attending a Board meeting where there are discussions about how the Chapter 11 was proceeding because he was a director of the debtor and he was also funding the Chapter 11 case through the DIP being provided by his company — Peteski.
The debtor argues that with regard to the court’s finding that Dr. Phil’s allegedly deleted text message constitutes cause, “[i]t is likely that the District Court will conclude that this finding is erroneous and inconsistent with the record, which instead supports a conclusion that the text at issue was sent in [Dr. Phil’s] personal capacity.” The debtor contends that Dr. Phil was not sending the text to Ribman, who was his “long-time friend,” to conduct the debtor’s business, and in the text Dr. Phil was offering to use his personal money to repay the Ribman trust, not the debtor’s funds. The debtor notes that if the district court concludes that this was an erroneous finding, “the text becomes irrelevant to whether the CRO authorized the filing in good faith.”
The debtor also argues that there is no evidence to support that the text was deleted after the bankruptcy filing, noting that the text was sent on 1 July, the day before the Chapter 11 was filed. The debtor further asserts that there is no evidence that the text had been intentionally deleted, suggesting that “[i]t makes little sense to delete the text sent to Mr. Ribman while not deleting the very same copy of the text sent contemporaneously to someone else — the text Peteski produced.”
Finally, the debtor argues that there is “substantial merit” to its argument that “unusual circumstances” do exist such that conversion would not be in the best interests of creditors and estate. The debtor stated that the court had “discounted the Plan” because of Dr. Phil’s text to Ribman offering to repay the Ribman trust, the fact that Ribman’s wife was one of the two members of the UCC. However, the debtor cites to counsel for the UST’s statement in court that “[the UST] considers the current [UCC] composition to adequately be representative and capable of serving as a fiduciary for all the unsecured creditors.” The debtor similarly points to the court’s discounting of the debtor’s liquidation analysis despite the fact that the credibility of Coley Brown of Portage Point, who prepared the liquidation analysis, was never questioned, and there was no evidence that Brown was beholden to Dr. Phil.
Peteski’s likelihood of success on the merits
Peteski asserts that TBN and PBR sought relief by arguing that (1) “the purported bad-faith actions of non-debtors led to a bankruptcy filing in bad faith, and there was no valid purpose for filing bankruptcy;” and (2) there was no corporate authority for the appointment of an independent director —- Gary Broadbent, and no corporate authority for him to file the Chapter 11 case.
Peteski contends that the court rejected the second argument regarding lack of corporate authority, and the bench ruling “implicitly rejected the first argument,” that the case was filed in bad faith and for no valid purpose because “nowhere” did the court find that the bankruptcy proceeding was filed in bad faith or there was no valid purpose for the filing. Peteski asserts that the court instead finds three other “cause” grounds that no party had argued,” and one “cause” that PBR only raised in a joinder, and Peteski maintains that “[n]one of these purported ‘causes’ have merit.”
Peteski argues that the court could not base its ruling on the bad-faith or no-valid-purpose grounds because there was no basis for finding those grounds in this case. Peteski instead avers that the debtor filed bankruptcy “as a final resort to address acute financial distress that [TBN] caused, exacerbated, and refused to remedy,” and maintains that the court never found otherwise.
Peteski argues that to the extent the four “causes” found by the court were introduced “late in the proceedings,” that is inconsistent with Bankruptcy Code Section 1112(b)(1)’s provision “for conversion only after ‘notice and a hearing’ on the ‘cause’ asserted.” Peteski further argues that these “causes” cannot justify dismissal or conversion, asserting that three of the four causes are “legally invalid.” Peteski contends that the examples of “cause” specified in Section 1112(b)(4) of the Bankruptcy Code reflect that “the paradigm is protection of the estate for the benefit of the creditors, such as continuing or substantial loss to the estate without a reasonable likelihood of rehabilitation or gross mismanagement of the estate.” Peteski argues that “[n]one of the grounds listed in 1112(b)(4) relate to the production or alleged destruction of information, or to the sort of neutrality or candor assessments” that are reflected in the court’s “cause” findings. Peteski maintains therefore that these grounds that were raised sua sponte by the court are unlikely to be sustained on appeal.
Peteski also argues that each of the court’s cause findings fails on the merits. Peteski states that the alleged destruction of one text that Peteski produced elsewhere “cannot stand” for multiple reasons. Peteski contends that the court’s ruling provides no authority supporting this as a ground for conversion and neither did TBN or PBR. Peteski also argues that there is “no evidence” to support this asserted “cause,” and “it is conclusively rebutted by the undisputed fact that the supposedly missing text was produced by Peteski.” Additionally, Peteski maintains that the court-ordered conversion functionally “operates as a sanction against Peteski,” but it is procedurally and substantively improper and unsupported by evidence and therefore likely to be reversed.
Addressing the “causes” the court found based on the CRO’s lack of neutrality and candor, Peteski states that the court’s ruling gives no authority supporting either of them as causes for conversion and neither did TBN or PBN.
Peteski argues that the finding of cause based on the CRO’s lack of neutrality fails because the ruling never states how such a finding could support “cause” under the Bankruptcy Code, and the purported evidence cited to support the finding is either not a part of the record, or the court misinterpreted it.
Peteski argues that the ruling never explains how the “lack of candor” finding could “possibly” support a finding of cause. According to Peteski, “[c]onverting (or dismissing) a case because a fiduciary’s testimony was deemed insufficiently ‘candid’ exceeds Section 1112(b)’s framework and collapses trial-management concerns into liquidation authority.”
Irreparable harm
The debtor asserts that there will be immediate, irreparable harm if the ruling is not stayed because upon entry of a conversion order, a Chapter 7 trustee is immediately appointed who will take control of the debtor’s estate and take actions that might be irreversible if the debtor’s appeal is successful. The debtor asserts that such actions could jeopardize the proposed plan which contemplates providing “tens of millions of dollars” in recovery to creditors exceeding what they would receive in a Chapter 7. The debtor argues that the liquidation analysis showing the level of potential recovery to creditors under the proposed Chapter 11 plan was prepared by Coley Brown of Portage Point, who “has never been alleged to be beholden to [Dr. Phil] and whose credibility was never questioned.” The debtor argues therefore that a stay should be granted to preserve the status quo so that creditors will be able to vote on the plan if the conversion order is overturned.
The debtor also argues that although it disagrees with the case law holding that once a Chapter 7 trustee is appointed, only the trustee can prosecute an appeal, there is a possibility that the debtor could be found to lack standing to appeal the conversion order under such precedent, and the loss of that standing would constitute “further irreparable harm sufficient to support a stay of the conversion order.”
Peteski argues that it and other creditors could be irreparably harmed without a stay because once a Chapter 7 trustee is appointed the trustee can dispose of the debtor’s assets without considering the debtor’s proposed Chapter 11 plan which would deny creditors the substantial recovery provided by the plan. Peteski points to the liquidation analysis attached to the plan, which reflects that in a Chapter 7 creditors would receive an estimated recovery between 3.4% and 11.5% versus the proposed Chapter 11 plan’s estimated recoveries of 29.5% and 37.7%. Peteski maintains that “[a] successful appeal…cannot unwind a Chapter 7 trustee’s liquidation transactions or effectuate the creditor-approved Chapter 11 Plan.”
Peteski also contends that irreparable injury can include the reputational harm caused by the court’s ruling that the debtor’s case should be converted. Peteski avers that “the reputational attacks on Peteski and [Dr. Phil], not to mention MSM and the CRO, are well-documented… [and] the damage to their reputations has been the intent of [Trinity] and PBR since even before they entered this bankruptcy proceeding.” Peteski argues that “[the bench ruling] has added fuel to that fire with the comments about [Dr. Phil].” Peteski submits that even if it wins the appeal, and there could be “a complete unwinding of the Chapter 7 trustee’s liquidation of assets that will have occurred during the appellate process,” there would be no way for Peteski and Dr. Phil to recover damages for the reputational harm caused by the ruling.
Peteski argues that “irreparable injury also includes the possible loss of a meaningful opportunity to vindicate appellate rights,” which could result if there is a Chapter 7 liquidation and TBN and PBR win on an argument that Peteski’s appeal has become equitably moot as a result.
Substantial harm to others
The debtor argues that “any potential harm to others [from a stay] is far from ‘substantial,’” asserting that “the only possible harm to the non-movants is temporary delay.”
Public interest
The debtor contends that the public interest factor militates in favor of a stay where “denying a stay would wipe out guaranteed recoveries for unsecured creditors,” and “[a] stay thus aligns with the public’s interest in maximizing estate value and avoiding the waste that would attend a conversion.”
Peteski contends that “the public interest in bankruptcy proceedings is to have an orderly administration of the debtor’s assets via their bankruptcy estate,” and without a stay, “the Plan will never be given an opportunity to work.” Additionally, Peteski asserts that “there is also significant public interest in the preservation of the integrity and efficacy of the appellate process, allowing a meaningful appeal to vindicate appellate rights.”
Balance of equities
Peteski argues that the “balance of equities” weighs in favor of the court granting a stay where the irreparable harm to Peteski and others if no stay is granted outweighs “any potential harm that Trinity or PBR might try to claim they suffer under a stay.”
Request for administrative stay to seek a stay in district court
In their motions, the debtor and Peteski both request that the court stay its conversion order pending appeal or, alternatively, to stay the order until the district court rules on the stay motion. They both assert that if the bankruptcy court denies their requests for a stay pending appeal, they will seek a stay pending appeal from the district court, and they therefore request that the bankruptcy court grant a stay to give the district court sufficient time to consider their stay requests.
The Chapter 11 docket can be found here.
