By Dietrich Knauth
NEW YORK (Reuters) - A U.S. bankruptcy judge on Wednesday blocked the NBA's Phoenix Suns from moving ahead with a television and streaming rights deal for its basketball games, saying the team violated the rights of its current broadcast partner, the bankrupt Diamond Sports Group.
The Phoenix Suns last month announced they would broadcast future games to television and online streaming through a partnership with Gray Television (NYSE:GTN) Inc and video technology startup Kiswe.
U.S. Bankruptcy Judge Christopher Lopez, however, ruled that the company could not yet move on from its existing contract with Diamond Sports Group, a bankrupt subsidiary of Sinclair Broadcast (NASDAQ:SBGI) Group that broadcasts games through its Bally Sports TV channels.
U.S. bankruptcy law protects debtors from having their contracts modified or terminated without their consent, and Lopez ruled that the Suns' new TV deal was void because it interfered with the Diamond Sports' contractual right to negotiate contract extension.
Lopez did not award Diamond Sports any monetary damages on Wednesday, but said that he would consider a request for damages at a later hearing.
The Suns' attorneys argued that its TV deal with Diamond expired with the end of the 2022-2023 regular season, and that the new deal would not interfere with Diamond's rights under its existing contract.
Lopez was not persuaded, saying that the Suns' "media blitz" touted the new contract as a done deal despite "one line in the press release" about the Diamond Sports bankruptcy.
"The Suns are saying one thing outside the court and another thing inside it," Lopez said.
Phoenix Suns CEO Josh Bartelstein said after the court hearing that the team would work toward "a fair resolution that will be in the best interest of our fans, our community, and our players."
Financial terms of the Phoenix Suns' contracts with Diamond Sports and with Gray TV were kept sealed in bankruptcy court.
Diamond televises games for nearly half of all teams in the National Basketball Association, Major League Baseball (MLB), and the National Hockey League.
Diamond filed for Chapter 11 protection in March with a proposal to cut $8 billion in debt.