Diamond Sports sues Phoenix Suns & Mercury to stop efforts to form a new media outlet

Diamond Sports, the bankrupt regional sports channel giant, sued the Phoenix Suns and Mercury and their two media partners in bankruptcy court Wednesday morning, seeking to block the teams’ efforts to form a new media outlet. Diamond also filed an emergency motion for a stay to prevent the Suns’ efforts. Here’s what you need to know:

• The development comes less than a week after the Suns announced a partnership with Gray Television and Kiswe Mobile to create new distribution channels for Suns games starting in the ’23-‘24 season.
• Diamond’s move is not a surprise, as it met the Suns’ April 28 announcement with a statement that the move breached Diamond’s RSN agreement and bankruptcy law.
• Diamond, a company in Chapter 11 proceedings notified the Suns before announcing these issues and now claims tortious interference with Gray and Kiswe. Kiswe and Gray are streaming companies.
• Diamond is seeking for the court to void the Suns’ agreement, and award damages, possibly including punitive.

What they’re saying

“The Suns’ failure to comply with their contractual duties, and Diamond Arizona’s potential loss of approximately 70 games of NBA content provided by the Suns each season, puts Diamond Arizona’s business at significant peril, thereby directly threatening its ability to reorganize,” Diamond wrote in the emergency motion for a stay. “The Suns’ deliberate disregard of its contractual duties to Diamond Arizona is specifically the type of action the automatic stay is meant to protect against.”

What is next?

The reference to the “automatic stay” is the freezing of all contracts and pending litigation that occurs in bankruptcy. Diamond is not just asking the court to void the Suns’ new deals, but is suing the team and its two partners as well. These are called adversarial proceedings in bankruptcy court and, if they don’t settle, could lead to a bench-trial.

Suns’ representatives could not be reached immediately for a comment. Last week, Suns and Mercury CEO  Josh Bartelstein, responding to Diamond then, said in a statement, “Diamond’s position is totally inaccurate. We are moving forward with this deal and could not be more excited about what it means for our fans and our future.”

According to Diamond, while the Suns’ contract runs out after this season, it is still technically in place. Diamond has the right to first refusal in the event that the Suns decide to sign another contract. The details of those rights are redacted in Diamond’s filings with the court.

The week before the Suns announced the media deal, Diamond sent a letter to Gray and the Suns “demanding (a) that the Suns and Gray immediately cease and desist from entering into and announcing a new deal and (b) that the Suns comply with their obligations under the Agreement,” according to Diamond’s court filing. “Diamond Arizona made it clear in both letters that it viewed the actions of the Suns and Gray as a willful violation of the automatic stay, breach of contract by the Suns, and in Gray’s case, also a tortious interference with Diamond Arizona’s Agreement with the Suns.”

Many consider the Suns’ deal as a model for future team media deals. It combines local TV stations with streaming (Kiswe), and there is also a possibility of keeping RSN.

Photo by Kate Frese/Getty Images