Peter Thiel's funding of Hulk Hogan-Gawker litigation should not raise concerns

http://www.washingtonpost.com/video/national/this-man-helped-hulk-hogan-smackdown-gawker-in-court/2016/05/26/67750fda-236f-11e6-b944-52f7b1793dae_video.html

A story in yesterday's New York Times revealed that Hulk Hogan's lawsuit against Gawker Media was financed by Peter Thiel, the billionaire founder of PayPal and an early investor in Facebook. Hogan, whose real name is Terry Bollea, sued Gawker for publishing a surreptitiously filmed video of the former professional wrestler having sex. Both Bollea and the woman involved were married to others at the time. A Florida jury recently found Gawker liable for violating Bollea's privacy and publicity rights and awarded him $140 million in damages.

Thiel's sponsorship of Bollea's suit - to the tune of $10 million - has generated some criticism. The Times article suggested that it "raised a series of new questions about the First Amendment as well as about the role of big money in the court system." Politico's Jack Schafer finds Thiel's financing "unsettling" because it means wealthy people could use the courts to "destroy a major digital publisher." Schafer concludes that Thiel has "done the impossible: He's made us sympathize with Gawker."

Thiel's conduct would likely have been a tort at common law a century ago. Today, it is well within the parameters of third-party involvement in lawsuits. The common law had numerous restrictions on people sponsoring or recruiting others for litigation. The "support of litigation by a stranger" to the case constitutes the common law crime and tort of maintenance; a related prohibition on "champerty" also prohibited similar conduct.

However, these common law doctrines have long since fallen into desuetude. They were gradually eroded by numerous developments, most saliently public interest litigation and the private provision of legal aid to indigents. Public interest and civil rights groups routinely look for plaintiffs and engineer "test cases" to develop legal principles. One of the final blows for the doctrine was the Supreme Court's decision in NAACP v. Button, 371 U.S. 415 (1963), holding Virginia's champerty and maintenance laws violated the First Amendment, because litigation - and the sponsorship of it - is a vehicle for expressing viewpoints.

Anyone who donates to the ACLU or a Legal Aid fund is basically underwriting third-party litigation. Most recently, private profit-motivated litigation finance has emerged as an industry in its own right, unburdened by any concern over the old common law rules.

The disappearance of champerty and maintenance (and the related barratry) doctrines has not been entirely a good thing in my view, but in practice no one is calling for their revival. By current standards, Thiel's funding should raise no eyebrows - unless one also wants to revisit public interest litigation, class actions and contingent fees.

Critics of Thiel's role in the Gawker case argue that it is particularly inappropriate because they think he is motivated by "revenge" over the gossip site's earlier publication of stories about his private life. But if the lawsuit is not frivolous, it is hard to see how the motivations of funders are relevant (or discernible). One would not say a civil rights organization could not accept donations from philanthropists angered by a personal experience with discrimination. All Thiel has done is cut out the middleman.

Indeed, Thiel's conduct fits into the "public interest" or "ideological" litigation paradigm. The writer of the Gawker story about Thiel specifically described his decision to publish the story as an ideological one. In an interview with the New York Times, he said he wrote about Thiel not simply because he thought it would be of public interest, but rather he thought that Thiel's "attitude" that his private life should remain so was "retrograde … and that informed my reporting."

Thus the controversy is one about principles and policy. Gawker is institutionally committed to revealing the private lives of public people. The question of how far the privacy rights of celebrities go is a legitimate one, and Gawker's anything-goes position is not without merit. But it is a legal and policy question. Thiel was in essence financing what he understood as public interest litigation on an issue of public concern. That he also may or may not have had feelings about it does not change that. Litigation funding is not reserved to Mr. Spock.

Schafer frets that this means wealthy funders can ruin media companies by financing litigation. Certainly many a company has gone broke as a result of litigation financed by third parties, and it is not obviously any better to bankrupt a company making life-saving medical devices than it is to do so with one purveying salacious celebrity stories.

In any case, to destroy a media company, it is not enough that litigation be financed. A court must also find the defendant liable, award damages and have it sustained on appeal. Thus concern about the ability to ruin media companies may in fact be better stated as objections to the nearly unlimited compensatory damages U.S. juries can award. One-hundred forty million dollars is a lot for a sex tape, and the majority of it was for non-pecuniary damages (emotional and punitive). Sixty million dollars is a wild amount to give a professional tough guy for emotional distress.

Or perhaps substantive privacy law protections in these areas are too broad. But in that case, billionaire financing may be a good thing, because by reducing incentive for plaintiffs to settle, it gives courts more opportunity to decide cases and thereby reform the law.

In a subsequent post, I will say a bit more about the substantive privacy issue and its relationship to massive shifts in vice laws over the past several decades.

[This post has been updated.]