Champerty, Gawker and Peter Thiel
It’s hard to pick a side in the Gawker-Thiel-Hogan lawsuit, reported today in Forbes, but the lawsuit and its outcome are a mere sideshow to the main story, which is that this case is a terrifying development for those of us who value a free, democratic media. What is most frightening about this lawsuit is that the press has always played a significant role in defending the small and powerless against the big and powerful. Gawker has played this role in its own tabloid style, but Thiel’s funding of this lawsuit shows how money can protect that power through third-party litigation funding.
Lawsuits like these can have a chilling effect on the rest of the media industry, said First Amendment expert Peter Scheer, as they may encourage other wealthy individuals to back litigation against media companies that run unflattering stories about them.
“That’s often the purpose of these cases,” said Scheer, the director of the First Amendment Coalition. “Winning is the ultimate chilling effect, but if you can’t win the case, you at least want the editors to think twice before writing another critical story about you.”
Champerty, as third-party litigation funding used to be called (and should probably be called again!) was formerly a crime, but the commercial litigation finance industry has been growing in recent years . It’s most commonly used as a form of speculation, in which “investors” seek potentially lucrative lawsuits, from which they receive a percentage, or as a means of protecting and expanding a company’s business. But the Thiel funding, coming as it does from a billionaire, is not an investment, but the settling of a personal vendetta against a media company by someone with the money to drive a company to ruin through litigation.
Generally, people avoid frivolous lawsuits because it often exposes them to as much scrutiny as those they sue, so what is significant about this case is that by funding Hogan behind the scenes, Thiel could get his revenge, escape exposure, and influence the outcome of the case. Hogan’s lawyers made decisions against Hogan’s best interests, withdrawing a claim that would have required Gawker’s insurance company to pay damages rather than the company itself–a move that made Nick Denton, Gawker Media’s founder and CEO, suspect that a Silicon Valley millionaire was behind the suit. Gawker Media may or may not survive the suit in which Hogan was handed down a judgement of $140 million, which the publisher has appealed.
My hope is that the high profile of this case will hasten legal reform. The ethical dodginess of this type of funding is well known–after all champerty was once illegal.
