Game on: Scout Media Can Pursue Discovery Against Jim Heckman
The college sports website network operator has accused its former chief executive of sabotaging its relationships with its team site publishers.
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College sports website network operator Scout Media has secured approval to pursue discovery against its founder and former chairman and chief executive, Jim Heckman.
Under the terms of an order to be signed by Judge Michael E. Wiles of the bankruptcy court in New York, Heckman will be required to turn over any documentation of any contact between him and anyone associated with the debtor since its bankruptcy proceedings began on Dec. 1, including email and phone records, if it exists.
Scout has accused Heckman of contacting the publishers who operate its college football and basketball team-specific sites and badmouthing the debtor to bidders to sow discord and derail its bankruptcy auction process.
"We've heard from various publishers that Heckman has been reaching out to them," debtor counsel Ericka F. Johnson of Womble, Carlyle, Sandridge & Rice said at a Wednesday hearing in Manhattan.
Scout had asked Wiles for permission to depose Heckman, but the judge declined to make a decision on doing so until after the documents were produced.
Heckman was fired in July for allegedly disregarding his duty to act as a faithful fiduciary to the company. He has vehemently denied any accusations of wrongdoing and said in a court filing he has not contacted any Scout publishers since his dismissal. Heckman has claimed that his firing was part of a takeover of the company by a cabal of Russian investors.
"We don't think a [discovery examination] or document production is necessary," said Heckman's lawyer, Robert D. Balin of Davis Wright Tremaine. "Because there's no evidence."
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Scout's auction is set to take place on Jan. 27. The company's most valuable asset may be the contracts it has with its network of more than 100 individual team-site publishers, who charge about $100 annually for access to reporting, analysis of high school athlete recruiting and popular message boards.
The debtor announced at the hearing that it is finalizing a $9.5 million stalking-horse bid from CBS (CBS) . CBS owns one of Scout.com's main competitors, 247Sports.com.
Since his ouster, Heckman has formed the basic structure of a new media venture, theMaven Network. Scout's former chief operating officer, chief technical officer and 12 of its digital engineers, who resigned en masse to protest Heckman's firing, have signed on. The company went public on the Pink tier of OTC Markets in November through a reverse merger with shell company Integrated Surgical Systems and is scheduled to launch in the first quarter of this year.
Scout claimed in court papers that Heckman has disrupted the bankruptcy auction process for the sake of driving the company's price down, possibly to make a bid himself. The debtor accused Heckman in court Wednesday of accessing proprietary information through a data site as recently as last Thursday.
Balin said the data site accusation was new to him but denied that Heckman was making a move for Scout's assets.
"By the way," Balin said. "He's not interested in bidding."
Scout was hit with an involuntary Chapter 11 petition on Dec. 1 by three creditors alleging nonpayment. It filed a voluntary petition a week later, listing assets and liabilities between $10 million and $50 million.
The debtor is operating with the aid of a $4.35 million debtor-in-possession loan from prepetition lender Multiplier Capital. Wiles gave the loan final approval Wednesday.
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