Billionaire John Paul DeJoria, the co-founder of Patrón and primary patron of Rokit, will no longer have to participate in bankruptcy mediation between a Rokit subsidiary, the NBA’s Houston Rockets and Formula 1’s Williams Grand Prix.
This week, Peter Mastan, the Chapter 7 trustee in the case of Able Events Inc., asked a federal bankruptcy court in California for DeJoria to “be excused from compulsory attendance.” This came after DeJoria had accused the trustee of misleading the court about his role in Rokit, the controversial conglomerate that had previously sponsored the Rockets, Team Williams and a number of other pro sports teams.
As Sportico previously reported, many of those sponsorships prematurely collapsed after Rokit ceased making good on its payments. The company subsequently put four of its subsidiaries into bankruptcy, include Able Events, thus inhibiting the efforts of the Rockets and Team Williams to recoup millions of dollars from those failed agreements.
Previously known as Rokit Marketing, Able Events filed its Chapter 7 petition in March 2022. The Rockets and Team Williams held creditors’ claims of $12.7 million and $31.4 million, respectively, based on what had already been determined in arbitration and court rulings.
In 2018, Able Events signed a four-year, $40 million agreement to become the Rockets’ first jersey patch sponsor. Rokit paid the NBA team an upfront fee of $9.75 million, according to court records, but then refused to pay anything after, claiming it had been misled about the extent of the arrangement. The Rockets took the matter to arbitration, where the team was awarded $11.9 million plus post-judgment interest of 5% per year.
Over the last two years, the Rockets sought to pursue discovery against Able Events in the bankruptcy case, but those efforts have been met with repeated delays. Earlier this year, the Rockets notified Able Events’ bankruptcy judge that it had domesticated its court-ordered judgment against Rokit in Los Angeles Superior Court and would instead pursue discovery in that proceeding.
Mastan, meanwhile, has exhibited his own skepticism about the way in which the Rokit “Group of Companies” is organized and who bears liability for it. The enterprise was cofounded by DeJoria—shortly after he sold Patrón to Bacardi Ltd. for $5.1 billion—and Jonathan Kendrick, a British former tire salesman who holds the title of Rokit chairman.
Originally focused on mobile phone technology, Rokit has since pursued a far-flung array of commercial endeavors including alcohol, music, movies, bicycles, tires and Wi-Fi infrastructure.
This week, Rokit announced that it would soon be collaborating with United American Indian Involvement, a nonprofit social services program, to build 150 low-cost homes for Native American senior citizens in California.
It is unclear how many of Rokit’s endeavors actually generate revenue, let alone profits. Former employees of the company have told Sportico that they were often left wondering whether straight-forward commercialism was even its intent.
DeJoria, though not an officer or executive in Rokit, has been involved in its business behind the scenes, according to multiple sources. For example, he was active in discussions that led to a 10-year, $60 million sponsorship agreement between Rokit and the Las Vegas Raiders. That deal, like those with the Rockets and Williams, fell apart prematurely.
Mastan told the bankruptcy court that the capital raising process for the Rokit companies effectively came down to Kendrick asking DeJoria for money “when he needed it.”
In May, the Rockets, Able Events and Mastan participated in a joint status conference, in which each of the parties signed off on a global mediation, though they differed on how that should take shape. Mastan contended that it should involve both Kendrick and DeJoria—“who was discovered to be one of the primary funding sources of the debtor, if not the sole funding source.”
Mastan went on to assert that “there are so many different (Rokit) entities that attempting to identify the relevant entities may be futile, especially since all of them appear to be uncapitalized (not undercapitalized. No capital.).”
Based in part on Mastan’s reasoning, the judge initially ordered DeJoria to participate along with Kendrick. However, on June 14, DeJoria filed a motion seeking to halt the mediation and for the trustee to be sanctioned. In his filing, DeJoria insisted that he had “no relationship whatsoever” with the subsidiary of the company he co-founded.
“The Trustee attempts to justify Mr. DeJoria’s participation in the mediation because he provided funds to an affiliate of the debtor,” the motion stated. “So what? Merely providing funds to an affiliate of the debtor does not give this Court jurisdiction over Mr. DeJoria.”
DeJoria’s attorneys further accused Mastan of seeking to “use the mediation process as a device to extract some money” from their wealthy client, calling it an “abuse of process.” Though Mastan later disputed that contention, he conceded the mediation process would be less productive with a “party who has no intention of voluntarily participating.”
While DeJoria might have been given a reprieve, at least for now, the former Rokit Marketing is under mounting pressure. Earlier this month, its Los Angeles-based law firm filed a motion seeking to immediately withdraw from the case “due to a breakdown in the attorney-client relationship.”
According to Levene, Neale, Bender, Yoo & Golubchik, Able Events had been “in breach of material terms” of its representation agreement.
“This court ordered the parties to attend a global mediation to try and resolve issues with the debtor,” the law firm wrote to the court. “However, if that mediation fails, the trustee and the other creditors have made clear that an adversary proceeding will very likely be commenced against the debtor and various other individuals or entities.”
Kendrick, who still must participate in the mediation, did not respond to an email request for comment.
For now, the bankruptcy court has ordered Able Events to show cause by next month as to why its Chapter 7 case shouldn’t be dismissed for violating local bankruptcy rules by failing to maintain legal representation. Were a dismissal to happen, the Rokit subsidiary would lose its bankruptcy protections, including the automatic stay of other pending litigation against it.
