A judge voided the Phoenix Suns’ recently announced deal to change its local television broadcaster, ruling the agreement violated the rights of its current broadcast partner: the bankrupt owner of the Bally Sports brand of local sports channels.

US Bankruptcy Judge Christopher Lopez ruled the owner of the Suns and Women’s Basketball Association’s Mercury weren’t permitted to enter into new agreements with television channel owner Gray Television Inc. as well as a separate web streaming deal with Kiswe Mobile Inc. while Bally Sports owner Diamond Sports Group LLC tries to shed debt in Chapter 11 and work-out a potential path forward with the NBA, Major League Baseball and National Hockey League.

The Suns’ new deals with Gray and Kiswe violated the bankruptcy injunction protecting Diamond Sports that prevents leagues and sports teams from interfering with its existing broadcast rights during its Chapter 11 case, Judge Lopez said. Before announcing the deal on April 28, the Suns were warned the agreement would violate the injunction, known in bankruptcy court as the automatic stay, and deprived Diamond Sports of valuable rights, Diamond Sports lawyer Brian Hermann said in a hearing Wednesday.

“You don’t play around with the automatic stay,” Judge Lopez said.

The bankruptcy stay is one of the most powerful tools companies get when filing for Chapter 11, halting disgruntled creditors from taking action against a troubled business. For Diamond Sports, the stay prevents the professional sports leagues it partners with from unilaterally ending current broadcast deals with Bally Sports affiliates, giving the company time to craft plan for leaving Chapter 11.

Refusal Right

Existing terms included a right of first refusal that gave Diamond Sports the ability to match rival offers to retain the right to broadcast Suns games, Hermann said. The basketball team was free to negotiate competing broadcast deals, and could have reached agreement in principle with Gray and Kiswe, but couldn’t enter into a binding agreement, which they did late last month, he said.

The Suns, Gray and Kiswe said Wednesday they didn’t interfere with Diamond Sports, claiming that the new broadcast deals they struck weren’t actually binding contractual agreements but merely agreements in principle. Judge Lopez pointed out during the hearing that April 28 press releases sent by Gray and the Suns referred to the deal as agreements. Instead of responding to concerns Diamond Sports raised about the new deals, Judge Lopez said the Suns went on an “all out media blitz” promoting its agreements.

Judge Lopez didn’t rule against Gray or Kiswe and declined Wednesday to grant Diamond Sports’ request for additional damages.

C. William Phillips, a lawyer representing the Suns, said the team had frustrating negotiations last year that resulted in Diamond Sports rejecting a final offer from the team last October and the franchise’s obligations to keep exclusively negotiating with the Sinclair subsidiary ended in March. Lawyers for Gray and Kiswe said they respected Diamond Sports’ rights in bankruptcy and referred to a part of Grey’s press release saying the new deals were subject to approval by the NBA and WNBA “and any required resolution with the incumbent regional sports partner.”

The Suns said they needed to resolve the dispute ahead of the teams’ 2023-2024 season, which starts in October, and were concerned Diamond Sports was dragging its feet in negotiations, Phillips said.

Hermann said part of the reason the negotiation has dragged on is because the Suns were up for sale; Mat Ishbia, the chief executive officer of United Wholesale Mortgage, in December agreed to purchase a majority stake in the team.

The bankruptcy is Diamond Sports Group LLC, 23-90116, U.S. Bankruptcy Court for the Southern District of Texas.

(Corrects name of hockey league in second paragraph. A previous version corrected the spelling of Brian Hermann’s name.)