Two and a half months after a Fort Worth-based media startup backed by celebrity psychologist Dr. Phil McGraw abruptly shuttered and filed for bankruptcy protections, a highly anticipated legal hearing expected to decide the fate of the venture’s Chapter 11 petition began Tuesday at a federal courthouse in downtown Dallas.

Based on attorneys’ opening statements, the trial, like the high-stakes financial drama it aims to resolve, will be contentious.

“This case was not filed in good faith,” said Mark Moore, a Dallas-based lawyer representing Trinity Broadcasting Network, McGraw’s former distribution partner. “This case was filed as an artifice to reach a purpose.”

Moments later, James Ducayet, a Chicago-based lawyer representing McGraw’s Merit Street Media, acknowledged the obvious rancor between the parties while arguing that a Chapter 11 proceeding remained the best mechanism to ensure the venture’s massive debts could be paid.

“The reality is that this motion to dismiss or convert has kind of taken on a life of its own, and that’s unfortunate,” he said.

The legal drama dates back to early July, when Merit Street Media — McGraw’s troubled, year-old broadcast channel — abruptly filed for bankruptcy protections, claiming it owed hundreds of millions of dollars to creditors. Merit Street also simultaneously filed a suit against Trinity, the world’s largest Christian broadcaster, alleging the venture failed largely because the network had reneged on its partnership obligations. In the filing, Merit Street called TBN’s production services “comically dysfunctional.”

Days later in mid-July, McGraw publicly unveiled an entirely new media venture, called Envoy, that would feature content from talk show host Steve Harvey and “citizen journalists.”

The heated bankruptcy case centers around the legitimacy of Merit Street’s petition for Chapter 11 protections, which generally allow for an organization to reorganize its own finances.

While representatives for McGraw’s troubled entity claim the Chapter 11 attempt was an above-board, necessary attempt to make financial amends, Trinity and Professional Bull Riders argue the bankruptcy filing was a ploy by McGraw to protect his own interests as he pursued a new media venture.

Professional Bull Riders is Merit Street’s largest creditor, with $181 million in claims.

“The obvious intent,” Moore added in his opening argument, “was to abandon Merit Street Media, spin up Envoy, and move the assets from one to the other.”

Charles Babcock, a lawyer for McGraw’s company Peteski Productions, responded that such a narrative “defies logic,” maintaining that the Chapter 11 filing for Merit Street was in fact a last resort for a defeated enterprise.

“Dr. McGraw just turned 75,” he said. “He did not want to start all over again.”

While Trinity and Professional Bull Riders are largely aligned in the case, they are also pushing for different resolutions. Trinity — who also has a separate suit pending against Merit Street — wants to dismiss Merit Street’s bankruptcycase entirely, while Professional Bull Riders is pushing for a Chapter 7 distinction instead of Chapter 11, under which an independent trustee would be charged with liquidating Merit Street’s assets to determine how to pay creditors.

In addition to alleging Merit Street filed its bankruptcy petition in bad faith, the company’s adversaries are arguing that the entity, after structural changes imposed by McGraw, did not have the proper corporate authority to file to begin with.

Early court disputes on Tuesday also focused on the issue of the case’s discovery with a particular emphasis on a text message McGraw sent to a separate business partner and friend that elucidated the alleged ploy to “wipe out” the claims against Merit Street so McGraw could start the new venture.

While McGraw’s team recently turned over extensive discovery documents, and McGraw was recently deposed, the critical text message was not included. McGraw’s lawyers told the court it was an omission caused by the volume of content on McGraw’s phone, and a forensic search was being conducted.

In another late twist, on Monday, the day before the hearing began, McGraw’s team laid out a new payment plan under which Peteski Productions would allocate up to $17 million as part of an attempt to pay off lesser creditors, a move an attorney representing the unsecured creditors vehemently supported.

McGraw, approached in the hall outside the courtroom, declined to comment on the case, although he lamented that so much of the dispute had ended up in court. The hearing is expected to last a few days.

©2025 The Dallas Morning News. Distributed by Tribune Content Agency, LLC.