Champerty, Gawker and Peter Thiel


It’s hard to pick a side in the Gawker-Thiel-Hogan lawsuit, reported today in Forbes. Billionaire Peter Thiel appears to be funding Hulk Hogan’s lawsuit against Gawker Media, 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.

Further Reading:

Gawker-Thiel-Hogan lawsuit article on Forbes

Why Denton thought Thiel was behind the lawsuit article on re|code

Arms Race: Law Firms and the Litigation Funding Boom article in American Lawyer

“There has always been discomfort about the role of money in the profession,” says Geoffrey Miller, co-director of New York University School of Law’s Center for Civil Justice. By adding investors to the litigation ecosystem, “are we losing something?” he asks. “Do we degrade our professionalism? Do we create in the public’s mind the sense that law is all about the money?”  Well, yes.

12 thoughts on “Champerty, Gawker and Peter Thiel

  1. I am more discomforted by the power of irresponsible media who have reach, voice, and money on their side, not to mention the 1st amendment. They can always publish whatever they want, but that comes with caveats — it should be true (truth is an absolute defense), not slanderous or libelous, and they have to be prepared to face the consequences when in their deliberate zeal to hurt people and get as close to the line of legal acceptability as possible (without considering morality), they make mistakes. Even then, the courts have a tendency to bend over backwards to protect 1st amendment rights, so they still have a lot of latitude.

    Litigation has become far too expensive, and is practically a drive-by sport in the US, which puts people who are truly harmed or irresponsibly targeted by organizations like Gawker at a distinct disadvantage. Getting redress is more about whether you can afford to fight than whether you were wronged. All Thiel has done is level the playing field — his motives are irrelevant. I won’t shed a tear for the demise of such a crass and frequently unfair “journal” as Gawker, if that is the eventual outcome.

    If there is a chilling effect on irresponsible “journalism”, I think that’s a good thing. Fair and decent publications have nothing to worry about.

  2. This issue is certainly clouded by the fact that it is Gawker that is being sued–and by Hulk Hogan. It’s not a model for responsible journalism. But a similar thing happened to Mother Jones:
    a different kind of publication, and one that strives to speak truth to power.

    If only Thiel’s efforts here really did level the playing field! As you point out, litigation and redress is the privilege of the rich.

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  4. Yes, but this case is not about speaking truth to power, or even about protected free speech. There is no protection (other than the cost of suing the press) for publishing sex tapes when the subject wasn’t even aware there was a camera present. The only reason to publish is prurience and/or to harm the individual for the commercial gain of the publication. No public interest was served by publishing this questionably obtained video.

    In addition to the 1st Amendment rights, the constitution also has been deemed to protect privacy rights and the right to seek redress. Hulk Hogan legitimately sought protection. The Mother Jones/VanderSloot case isn’t in the same category at all, and as I noted in my initial comment “the truth is an absolute defense” against defamation, and the courts held that Mother Jones published the truth. That’s what the 1st Amendment is designed to protect, and they rightly won the suit.

    An unspoken truth that underlies all of this is the outrageous cancer that litigation is on our society. It is crazily expensive, and lawyers create the rules to benefit themselves, not the people involved in disputes. Most of the time, that means the media can publish whatever it wants, because average people (me, for example) don’t have the means to challenge deep-pocketed organizations with myriad solicitors on retainer. The fact that someone as well known as Hulk Hogan needed financial support to sue tells you how much the deck is stacked in favor of the media.

    I don’t think there is anything wrong with putting a check on the media, and making them second-guess whether something is factual, truthful, in the public interest, and not about causing malicious harm with no other redeeming virtue. That’s what creates the counter-balance to media power, not Peter Thiel stepping up to protect everyone who has something unflattering published about them. Suits like this aren’t going to stop the Wall Street Journal or Washington Post or Mother Jones from publishing an expose detailing fraud, deceit, immoral behavior, etc., so where is the chilling effect?

    I’d also take issue with the characterization of Thiel’s involvement as “champerty”. Champerty is when a third party finances a lawsuit in order to share in the financial gain of a win. There is no evidence that Thiel is to get any share of the award, or that he was lending his name (as lords did in the middle ages when champerty was common) to add credibility to a fraudulent suit. These outcomes, as well as guarding against frivolous lawsuits, were the reasons champerty was illegal, which it would be very hard to argue was the case here. Rather, frivolous litigation is more often the direct result of ambulance-chasing lawyers who work on contingency fees — something that probably ought to be illegal.

    Anyway, it seems as though we agree more than we disagree, but I don’t have any trouble picking sides. Gawker was wrong, and deserved what they got. And I hate that they think it’s OK for them to fuzzify the real issues, and to wear the blanket of 1st amendment immunity, when this has nothing to do with that.

  5. Pingback: Silicon Valley billionaire Peter Thiel's attack on Gawker on behalf of Hulk Hogan is called "champerty," and it used to be illegal — Quartz

  6. Yes, we mostly agree Paul and thank you for your thoughtful comment. It makes me glad to see insightful comments on my blog again, and sorry I don’t have the time today to engage more deeply with it, but it speaks well on its own, and I have little to add.

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  10. Hi Caterina. Interesting statement about champerty. I’d never heard of that term before. But, this issue popped up in the financial crisis recently regarding wrongful foreclosures. I sued my bank but this type of lawsuit was very multi-faceted and not popular with most establishment types in government nor law firms who get most of their money from the business sector, which is a large segment of the attorney crowd. I, like many others, did not have the funding necessary to follow through with the various complexities. If a third party funding source were available, it would have most certainly been used to level the playing field. In protecting the first amendment rights of legit news orgs, your point makes sense but at large, I don’t know that making 3rd party lawsuit funding illegal would help to bring back balance in society that has been lost over the last several decades due to market power.

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