Sports Illustrated’s owner sued the founder of 5-Hour Energy drink on Monday, accusing the entrepreneur of “lawlessness” in his convoluted attempt to take over the iconic magazine, of deliberately missing millions in payments to license the title and of interfering with its new publisher.
The suit brought by Authentic Brands Group claims Manoj Bhargava owes the intellectual property company $48.75 million in missed payments, and also seeks damages for infringing upon SI’s copyrights and trademarks, The New York Times reported.
Bhargava last year bought a controlling stake, including a large chunk of debt, in The Arena Group, which held the rights to publish the magazine. He then engineered the ouster of two senior executives, COO Andrew Kraft and president of media Rob Barrett, in what first appeared to be fallout from a scandal that saw the publication use artificial intelligence-generated content credited to fake authors.
CEO Ross Levinsohn was also soon pushed out the door, despite an earlier announcement that he would stay. Levinsohn last week sued, claiming he was fired after attempting to prevent Bhargava from breaking the law.
Bhargava, meanwhile, put himself in charge of the publication, named several allies to The Arena Group board, laid off scores of employees and threatened to discontinue Sports Illustrated’s print edition.
As a result, Authentic Brands revoked Arena Group’s license to the title in January and last month struck a new deal with Minute Media, publisher of The Player’s Tribune, FanSided, 90min and more.
Minute Media promised to restore the print magazine and rehire some of the stafffers who were laid off by Bhargava.
“In less than five months, Bhargava’s new venture not only crashed and burned, but almost took SI down along with it,” said the 51-page lawsuit, filed in U.S. District Court for the Southern District of New York.
The suit says that Arena Group had agreed to pay a $15 million annual fee for the rights to publish the magazine, but that Bhargava deliberately skipped the January installment of that fee so that the license would be terminated and he could lay off the staff, The Wall Street Journal reported.
He and The Arena Group also failed to pay Authentic Brands a $45 million termination fee when the license was revoked in February, the suit claims, and threatened to “go nuclear” in response to demands from the magazine’s owner, The Times reported.
The lawsuit states that Bhargava claimed he didn’t make the payments because Arena Group was insolvent and didn’t have enough money to make payroll.
One step he took was to shut down websites affiliated with SI after the Minute Media deal went through — one of the things the suit claims reflects Arena’s effort to “weaponize their obstinance.” He also interfered with the orderly transfer of the site’s data to the new publisher, the suit claims.
“Bhargava behaved more like a gangster than a trusted business partner,” Authentic Brands said.
It also charges that Bhargava misused SI’s intellectual property by applying its logo to sites affiliated with his companies, including publishing a press release for 5-Hour Energy that was labeled an SI editorial product, , which undermined “the value and reputation of the SI brand and business,” The Times reported.
Bhargava declined to comment to the outlets.