Diamond Sports Sues Its Parent Company Sinclair

Diamond Sports Group, the struggling subsidiary of Hunt Valley-based Sinclair Broadcast Group that owns regional sports networks, has entered a legal fight with Sinclair as part of Diamond’s bankruptcy case.

The Baltimore Sun reports Diamond Sports, which is independently managed, filed a lawsuit under seal Wednesday in the U.S. Bankruptcy Court for the Southern District of Texas.

Diamond, a subsidiary Sinclair created to hold the 19 sports networks it acquired from The Walt Disney Co., filed for bankruptcy reorganization in March, burdened by more than $8 billion in debt.

The lawsuit accuses Sinclair of receiving about $1.5 billion as a result of alleged misconduct, including fraudulent transfers of assets, unlawful distributions and payments, breaches of contracts, unjust enrichment and breaches of fiduciary duties.

Diamond operates Bally

“The defendants believe the allegations in this lawsuit are without merit and intend to vigorously defend against plaintiffs’ claims,” Sinclair said in a filing with the Securities and Exchange Commission late Friday.

Diamond is challenging a series of transactions between Sinclair and Diamond that occurred after Sinclair acquired the former Fox Sports regional sports networks from Disney for $10.6 billion in 2019.

“Diamond Sports Group is seeking to vindicate its rights and protect the value of the Diamond bankruptcy estate, including by recovering value from Sinclair Broadcast Group that was improperly transferred from Diamond prior to its filing for bankruptcy in March 2023,” a spokesperson for Diamond said in a statement.

The complaint alleges that the transactions were unfair to Diamond and designed to benefit Sinclair. They include a management services agreement between the Sinclair Television Group subsidiary and Diamond as well as a transaction in November 2020 in which Bally’s Corp. acquired naming rights to the regional sports networks.

Besides Sinclair Broadcast Group, Diamond’s lawsuit names as defendants Sinclair Television; David D. Smith, Sinclair’s executive chairman; Christopher S. Ripley, Sinclair president and CEO; other executives; and Bally’s Corp.