MANHATTAN (CN) — The owner of Sports Illustrated on Monday sued its former publisher Arena Group and Manoj Bhargava, the billionaire founder of 5-Hour Energy and Arena Group’s largest shareholder, for more than $48 million in “missed” payments.
In the 51-page suit filed in Manhattan federal court, Authentic Brands Group, Sports Illustrated’s parent company, claims Bhargava “behaved more like a gangster than a trusted business partner” when he weaponized Arena Group’s failure to make a licensing payment earlier this year.
Authentic Brands claims this was actually a deliberate effort by Bhargava to restart negotiations over the pair’s publishing agreement, which eventually led to the end of the licensing deal.
According to the suit, Bhargava “explicitly threatened to ‘go nuclear,’” holding the beloved sports brand hostage by firing its staff, refusing to turn over editorial content and posting “stolen content on competing websites.”
But even despite the “extreme damage” Bhargava had done to Sports Illustrated, Authentic Brands claims it continued to engage in good-faith negotiations to strike a new deal with Arena Group.
“Defendants, by contrast, doubled down,” Authentic Brands says.
The group claims Bhargava continued to press his unreasonable demands and then “took new steps to undermine the value and reputation” of Sports Illustrated when he deliberately mislabeled a 5-Hour Energy press release as a Sports Illustrated editorial piece.
“In short, defendants apparently believed that they could somehow get away with their flagrant contractual breaches and extreme bad faith and other misconduct if only they could make things bad enough for ABG to ‘cry uncle’ and surrender,” Authentic Brands claims.
But after March Authentic Brands struck a deal in March with a new publishing company, Minute Media, Authentic Brands says Bhargava refused to cooperate with the new licensee in transitioning their business, going as far as to shut down the websites prior to the start of the March Madness college basketball tournament.
“The timing of this action — right at the beginning of the NCAA men’s and women’s basketball tournaments, a particularly busy time for sports news outlets — shows Arena’s deliberate and unlawful torpedoing of SI’s web traffic and Google rankings to the benefit of Arena’s own properties,” Authentic Brands claims.
The lawsuit marks the latest road bump of Bhargava’s brief, yet tumultuous venture into the media industry. The 71-year-old took control of Arena Group last fall, when he paid $50 million for a 65% stake in the company and bought up its debt.
He has already sparked a number of lawsuits, however, including one from ex-Arena Group CEO Ross Levinsohn, who sued Bhargava last week. Levinsohn claims he was axed for raising concerns over a false press release and the plan to fire Sports Illustrated’s entire union.
In Monday's suit, Authentic Brands claims that Bhargava “took control of Arena through a series of shadowy corporate maneuvers, and with it, the management and operation of the SI business.”
“In less than five months, Bhargava’s new venture not only crashed and burned, but almost took SI down along with it,” Authentic Brands added.
Authentic Brands, represented by Kaplan Hecker & Fink, is seeking $48.75 million in damages for Bhargava’s supposed breach-of-contract. It also seeks an injunction barring Bhargava from “continuing to interfere with plaintiffs’ ownership of, and all other rights related to, SI.”
Arena Group did not immediately respond to requests for comment.
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