Why We Shouldn't Stop Peter Thiel

“Microsoft is a nihilistic bet against tech innovation.” More Peter Thiel zingers below

In March, a Florida jury awarded wrestler Hulk Hogan $115 million in damages for claims relating to Gawker Media’s publication of a sex tape featuring Hogan and his friend’s wife.  In May, it was revealed that Hogan’s suit – and multiple additional lawsuits recently brought against the website – had been bankrolled by PayPal founder Peter Thiel in an effort to destroy Gawker as revenge for an article discussing Thiel’s homosexuality.   

It’s not easy to choose the good guy in this battle.  However, as the level of Thiel’s involvement became clear many commenters expressed concerned with the chilling effect of a prominent billionaire using the court system to pursue a personal vendetta against unwelcome media coverage. Wired magazine, for example, posted an article by Marcus Wohlsen titled “Gawker’s Bankruptcy is How a Free Press Dies, One VC at a Time.”   Wholsen laments that “[i]n the old days, billionaires might just buy their own outlets,” but today "engaging the press not in argument but in a legal war of attrition is apparently no longer taboo. Don’t like what you hear? Don’t speak up, just shut it down. The Voxes and Buzzfeeds of the world, the New York Timeses and WIREDs, can’t afford to think that somehow Gawker is a special case.”

Woe is us. The concern is easy to understand: Thiel is a public figure (a status he’s helped create by, among many other things,  jumping into national politics by donating heavily to Republican candidates), and the press has the right and duty to report on individuals of such stature and influence.  Even setting aside the free press angle, there’s something disturbing about the idea of a billionaire having the leverage to turn random strangers into legal grenades powerful enough to bring a quarter-billion dollar company to its knees.   

Yet as unsavory as the arrangement seems, what Peter Thiel has done is generally legal. If you’re wondering about the First Amendment, its restrictions apply to governments, not individuals like Thiel. Further, to allow lawyers to work for contingent fees or be paid by non-profits – without which many poor plaintiffs could never afford to bring claims – state laws generally permit individuals to finance a third party’s litigation. 

There are mechanisms to discourage the misuse of litigation; most every state has laws allowing a defendant to countersue for malicious prosecution.  Moreover, twenty-eight states – including Florida, where the Hogan case was venued – have laws authorizing “anti-SLAPP” motions, which allow a defendant to strike lawsuits designed to silence lawful activity, such as when a chemical factory brings a libel claim against a newspaper for reporting on a chemical spill. While the latter mechanism might seem perfect for Gawker's situation, unfortunately for the website, these defense actions are generally only available if the offending lawsuit lacks merit – if the underlying suit isn’t frivolous, it is irrelevant that the case is being funded by a benefactor intending to cause deliberate harm. 

Indeed, when it comes to the ethics of litigation funding, the state bar associations focus their attention on the relationship between the attorney and the party named in the case, worrying that the lawyer might be swayed by conflicting loyalties – the big legal no-no.  For instance, when the American Bar Association drafted a white paper on the issue of third-party litigation funding, it limited the working group’s scope to “the duties of lawyers representing clients,” and “did not consider social policy or normative issues, such as the desirability of this form of financing, or empirical controversies, such as the systemic effects of litigation financing on settlements . . . or the effect that alternative litigation finance may have on the incidence of litigation generally, or unmeritorious ('frivolous') lawsuits specifically.”  In other words, the ABA's concern in a third-party financing situation is that the attorney remain loyal to his client; broader issues created outside this relationship are not their concern.

So, we have a rogue litigious billionaire launching a million-dollar campaign to take down a media company because he’s upset with the way he’s covered. Seems problematic, if this catches on. Moreover the existing rules do little to prevent it. What do we do about it?  Do we do anything about it?

Personally I think Peter Thiel's worldview ranges from the terrible to the absolutely insane, and orchestrating a courtroom revenge campaign is the kind of thing a James Bond supervillain does to get his feet wet.  But, I have two other thoughts: 1) I'm going to wait until another megalomaniacal billionaire pulls this crap before I call it trend, and 2) this episode is the perfect opportunity to point out a truism: it is very, very hard to write rules that catch only what you want to stop. 

In particular, I’m having trouble thinking of any rule, statute or standard that would prevent Thiel from waging his vengeance campaign against Gawker but wouldn’t stop other activity that society generally finds acceptable, even beneficial. 

Let me throw out some other situations where third parties pay for litigation.  I mentioned contingency cases.  There are also companies, such as Burford Capital, that provide funding for litigation in exchange for a piece of recovery; I've had past clients consider them. Additionally many important civil rights cases were deliberately engineered or coopted to a larger purpose; for instance, Hollingsworth v. Perry, the case that invalidated California’s ban on same-sex marriage, was bankrolled by the American Foundation for Equal Rights and the plaintiffs were advised by counsel from the minute they walked in to obtain a marriage license, knowing it would be refused. 

With that in mind, if you find Thiel’s conduct distasteful, try to come up with a rule or standard prohibiting it that wouldn’t end up causing more harm than good. It might be more difficult than you think.

You might suggest the obvious move of broadening malicious prosecution or anti-SLAPP motions to include non-frivolous claims brought for an injurious purpose.  Such a standard, though, would be very difficult to measure and enforce, as it's extremely difficult to read a person’s subjective motivation, especially where much of the relevant evidence is likely to be protected attorney-client communications. Moreover, it’s hardly uncommon for a legal dispute to create ill will. If someone’s harmed you it’s pretty natural to wish him harm in turn, and attorneys often find themselves cautioning their clients not to let emotion get in way of litigation strategy or potential settlements. What percentage of malice would block a claim; if 20% of the reason I'm suing is purely out of hate, is that enough? It would be unjust to deny valid claims just because the injured plaintiff would be happy to see the defendant hurt.

Okay, you might say, but that’s irrelevant to the question of third party financing.  We’re worried about the benefactors’ ill will, not the plaintiff. Why couldn’t we have a rule prohibiting a third party from financing a lawsuit for a malicious purpose, regardless of the merit of the case? Well, first, the same difficulties in judging intent apply with a third party.  Moreover, we have to grapple with the fact that in some cases, our opinion of the ulterior motives can be subjective. 

Several years ago, for instance, the Department of Justice launched a series of initiatives referred to as “Operation Choke Point.” Essentially, the government hit banks and payment processors with investigations and subpoenas to pressure them to cease doing business with entities they found unsavory, particularly the payday loan industry. The goal was to “choke off” these industries by denying their access to critical financial services. Depending on where you’re sitting, you might see the program as a terrible scandal showing inappropriate government overreach, or a clever strategy to attack a scourge on America’s poor.

Again, it’s easy to call Thiel’s motivations petty and vindictive, but what if Gawker wasn’t a media company; what if the company manufactured cigarettes, or was a strong supporter of neo-nazis, or engaged in predatory mortgage lending and foreclosures? If a tenants-rights group was funding plaintiffs suing a crooked landlord for a pattern of wrongful evictions, tenants that had no other reasonable means to enforce their rights, would you want that landlord to challenge these cases, however valid, if he were able to show the tenants-rights group hated him and wished to force him out of the real estate business? 

That’s the problem with trying to stop Thiel’s behavior – the only lines between what he’s doing and behavior that you’d probably agree should be allowed are subjective, fuzzy, and difficult to measure.  If you give Gawker ammunition to stop Thiel's crusade, that ammo will eventually be turned on someone you support. 

So, while I think Peter Thiel is in many ways a terrible person, outside of public shame, I'm against any concrete call to action.  An open court system, unfortunately sometimes has to let in the wrong people.